NEW YORK -- As Congress and the Bush administration gear up for their annual September bout with the federal budget deficit, the folks on Wall Street who wager billions of dollars on the outcome are putting their money on the deficit.

The tumble in stock and bond prices of recent weeks partly reflects the conviction among the nation's private money managers that Washington will continue to display its chronic lack of political will to curb the flow of red ink, according to investment bankers and other financial analysts.

"The level of cynicism is terribly high, and with good reason," said Roger C. Altman, a former assistant Treasury secretary who now is vice chairman of the Blackstone Group. "The markets are anticipating failure {on the deficit}, and that's one of the reasons for the present weakness in all financial markets."

In the critical interplay between Wall Street and Washington, between those who manage the nation's private accounts and those who oversee its public funds, the dollars-and-cents judgment of the markets themselves is the decisive test of the policies crafted inside the Beltway.

But Wall Street also makes its views known in Washington through a multitude of other channels -- public and private -- that help shape and influence the debate over taxes and spending. The ties between the two arenas are close, as evidenced by the fact that many top government officials, including Treasury Secretary Nicholas F. Brady, worked in the financial industry for much of their careers. And to help assure that old memories don't fade, Wall Street helps to remind everyone with its generous and frequent contributions to political campaigns.

This year, while bemoaning once again the threat that the deficit poses to the U.S. economy, there are two fresh twists in the views that Wall Street is conveying to Washington.

First, now that President Bush has publicly dropped his "no new taxes" pledge, much of the financial community has passed the word quietly that it is willing to shoulder at least part of the burden by paying higher taxes, perhaps on income or energy use. The one new tax that the financial community unanimously and resolutely opposes is a proposed new levy on securities transactions, the source of its livelihood.

Higher taxes would be "a cheap price to pay to avoid a psychological catastrophe that would result if financial markets believe that the nation's finances are out of control," said Michael Duval, a New York investment banker with close ties to top officials in the Bush administration.

John H. Gutfreund, chairman of Salomon Brothers Inc., one of the nation's premier investment houses, agreed. "Wall Street, in its pragmatism, is more interested in a good business climate than it is in political ideologies," he said. "If you were to talk, privately, to the most intelligent and successful of the Wall Street leadership, I think you would find them, in a majority, prepared to pay for their share of citizenship."

The other big change in Wall Street sentiment is a growing feeling that, when it comes to budget-cutting, less is sometimes better than more.

Their push to err on the side of caution when trimming the 1991 budget stems from fear that a sharp cutback, by taking money out of the economy, could push a staggering economy into recession.

"Clearly, this is not the time for fiscal tightening," said Robert M. Giordano, a partner and director of economic research at Goldman Sachs & Co., another leading Wall Street investment house. "I think cutting the budget deficit in the abstract is a desirable goal, but we have circumstances which are not particularly conducive now to a major shift in fiscal policy."

Recession Jitters This view is sharply in contrast with past sentiments in the financial community, which normally has despaired that Washington never did enough to cut spending. The traditional view has been altered largely by the Persian Gulf crisis, which has added to recession jitters and general uncertainty over whether escalating fuel prices will push the economy into recession.

James R. Jones, chairman of the American Stock Exchange and a former chairman of the House Budget Committee, said Wall Street currently favors a "modest" deficit reduction package for the coming fiscal year, "with a commitment in the future to take a bigger bite."

Instead of a $50 billion cut in the deficit in fiscal 1991, as originally targeted, policy makers should aim for a reduction of between $25 billion and $35 billion, Jones said.

"There's a great deal of nervousness about the state of the economy," Jones said. "I think there's a general feeling that perhaps we shouldn't shake it up too much, with all this uncertainty."

This opinion is not unanimous. Some financiers still maintain that Washington would be wisest to make the largest cut it can. Altman, for instance, believes that the resulting fall in interest rates would more than offset the drag on the economy caused by a combination of higher taxes and lower spending.

Within American business, there is also major division over where the burden of new taxes should fall. While the financial community on Wall Street broadly supports some kind of energy tax, such a levy is anathema for most executives at industrial corporations that consume large amounts of energy.

"In general, businesses tend to support whatever taxes they don't pay," said a leading business economist, who asked to remain unidentified.

An exception is Paul H. O'Neill, chairman of Aluminum Co. of America (Alcoa), who shocked many industrial leaders by calling publicly in June for a federal energy tax of between $40 billion and $50 billion a year. That would translate into a $10-per-barrel tax on oil consumption, or a 40-cent-per-gallon increase in gasoline.

O'Neill, a former deputy director of the Office of Management and Budget, is a business leader with special influence in Washington. He has discussed the budget with Bush at Camp David, and other top administration officials regularly solicit his views.

O'Neill argues that an energy tax would have the multiple benefits of raising revenue, discouraging energy consumption and protecting the environment. "There are so many different ways that an energy tax makes sense that it's only unfortunate that we haven't had it for the last 15 years," O'Neill said in an interview.

But O'Neill has been discouraged by the splits within the business community over how to reduce the deficit and particularly by what he sees as narrow-minded opposition in some quarters to any kind of tax increases.

"It's a mistake to think that the business community is a monolithic body. I think there's a significant divergence within the business community on what to do" about reducing the deficit, he said.

A Crucial Condition For many business executives on Wall Street, there is a crucial condition for their support of higher taxes: The revenue must go only to trim the Treasury's shortfall and not to finance increased expenditures.

"Personally, I would support some level of tax increases if we knew that it was going to go to deficit reduction and not to additional spending," said Howard L. Clark Jr., chairman of Shearson Lehman Brothers Inc.

That same concern led investment banker Duval to predict that the markets' reaction to any budget package will depend largely on its provisions for curbing spending, both in the immediate future and for the long term.

"The real measure of the agreement will be on the spending cuts side and, very importantly, on structural changes on managing the budgetary problem," Duval said. A former special counsel to President Ford, who later served for seven years as a managing director at First Boston Corp., Duval speaks frequently with Brady and Federal Reserve Board Chairman Alan Greenspan.

The Public Position In public, the financial community's principal contribution to the budget debate has been its strident opposition to proposals floated that would add a 0.5 percent tax on securities transactions such as sales of stocks and bonds.

The Securities Industry Association, Wall Street's trade group, sent delegations to Brady and White House Chief of Staff John Sununu to lobby against the levy. They argued that such a tax would push down stock prices, hurt business confidence and encourage investors to shift more of their trading activity to lower-cost, foreign markets.

Investment bankers, asked how much influence they have on such issues in Washington, say that policy makers are sensitive to the potential impact of any measures on the financial markets. Other than that, they say, politicians see the financial community principally as a source of campaign contributions.

"I would say that Wall Street is fairly cynical. They {financiers} are looked upon as political contributors, normally of both parties, even in the same elections," said Gutfreund of Salomon Brothers.

"The communication between Washington and New York seems to me to be guided by money for campaigns," said Gutfreund, a well-known backer of Democratic candidates.

And what does Wall Street expect in return for its money?

"I guess what you expect is that you are now called on a first-name basis by those to whom you contribute," said Gutfreund. "It's 'Hi, Johnny.' That's what you get out of it. You get their ear."

Asked if Wall Street got legislators' votes as well, Gutfreund said, "I think not, because after all, we represent a very small minority of the population."