The deficit is dead. Long live the deficit.

Tomorrow, three months after signing the biggest federal deficit-reduction package in American history, the Bush administration will present the biggest deficit in American history. Tomorrow, exactly one year after promising to whittle down the gap between the government's spending and tax revenues to $25 billion for fiscal year 1992, the administration will present a 1992 budget with a deficit more than 11 times that size.

Never in the history of the republic have Americans paid so much just to keep creditors from pounding on the Treasury's doors. Soon, nearly $1 out of every $5 spent by the government will go to pay interest on past debts. This year, interest payments on the debt will equal 40 percent of all personal income tax receipts.

Even though this year's negotiations between Congress and the administration will zero in on spending targets and shy away from deficit numbers, the colossal nature of the deficit will remain the striking feature of the federal budget, looming like a politely ignored hippo in the congressional or White House cafeteriasand leaving policy makers with little room to tackle the country's ills.

The deficit also continues to cast a shadow over the economic and political landscape. Just as surely as the Vietnam War smashed the prevailing post-World War II consensus over American foreign policy, the decade of the 1980s destroyed the postwar consensus that governed fiscal policy.

And just as the Vietnam War made the United States look incapable of mustering its will in foreign policy, so has the deficit made the country look incapable of summoning its will in domestic affairs.

"We are constantly telling ourselves that peace is just around the corner," said David G. Mathiasen, a veteran of the Office of Management and Budget who is now an official at the General Accounting Office and who has listened to the perennial projections that deficits would soon disappear.

Tomorrow, as before, the administration will declare that the deficit is on a downward path and will reach a reasonable size within three or four years. Unique, one-time factors artificially magnify the deficit, administration officials say. Those factors -- the Persian Gulf War, the savings and loan cleanup, the recession -- will eventually disappear and the underlying, or "structural" deficit will come under control by 1995.

"Looking at the numbers, for the next couple of years we'll be running very large deficits and after that it should be coming down except for ... except for I don't know what, but it never has," Mathiasen said. "We seem to experience a constant set of large, unique events."

"In recent years there has been a new definition of what an acceptable budget deficit is," said Senate Budget Committee Chairman Jim Sasser (D-Tenn.). "We no longer talk about balanced budgets, we talk about deficits being an acceptable level of GNP."

But even by that measure, the imbalance in spending and revenues was never so great. From 1947 through 1980, despite divergent social and economic rhetoric, both Democrats and Republicans tacitly agreed that the federal deficit should never exceed 1 percent of the gross national product in time of prosperity; the average for the entire period was 0.86 percent. The theory was that the size of the deficit only mattered in relation to our ability to generate money to carry the debt load.

During the decade just ended, however, the deficit ranged as high as 7 percent of GNP. According to the Congressional Budget Office, the 1991 deficit -- a record $318 billion -- will come to 5.3 percent of GNP and the 1992 deficit will come to 4.7 percent -- and that does not include money needed to pay for Operation Desert Shield. Budget officials say that the Pentagon has taken to calling the war Operation Budget Shield.

"We're so far from the acceptable level there's no use arguing about what an acceptable level is," said Robert D. Reischauer, director of the nonpartisan CBO.

The bipartisan fiscal policy collapsed with the inauguration of the Reagan administration and its anti-government attitude, and with that began a decade of illusion. It was an era that turned the Democrats into a party of fiscal scolds and the Republicans into the party of fiscal libertines.

"John F. Kennedy ... used to say, 'To govern is to choose,' " said Sen. Daniel Patrick Moynihan (D-N.Y.). Instead, lawmakers have avoided choices.

"It was a curious statement on the part of the Democratic Party that we could not resist the temptations of more government and more programs and more interest group pacification," Moynihan said.

At the same time, Republicans were fostering the illusion that lower taxes would generate greater revenues and thus dispense benefits without sacrifices.

At a recent meeting of the National Association of Homebuilders, former Reagan budget director David Stockman admitted that he told his president that the 1981 tax cuts would so stimulate the economy -- with a boost in tax revenues -- that the budget would be balanced by 1984. "It's clear we missed that target by a country mile," he said.

Others allege that Reagan and his aides never believed that tax cuts would keep the budget in balance, but that they thought they could use big deficits to force cuts in social spending.

"The conservatives had developed a brilliant strategy, which was instead of fighting programs one by one they would starve the beast by creating a permanent fiscal crisis. They did," said Moynihan.

What even the most cynical Reagan budget aides could not foresee, they now concede, was the possibility that the electorate could tolerate, and the economy sustain, such big deficits.

Big deficits became the ultimate victimless crime of the 1980s.

Asked whether the Reagan administration should bear responsibility for leading the country into its deficit quagmire, Stockman said, "I think it bears a fair share."

But Stockman added that Congress and the American people were in cahoots with the administration because they wanted the goodies in the budget -- services and entitlements -- without paying taxes. "Congress was a co-conspirator," Stockman said, "and the American public was a co-conspirator, in the broadest sense."

Even after last year's decision to raise taxes and cut spending, many lawmakers still doubt that Americans appreciate just how much more needs to be done to bring the budget in balance.

"What bothers me is that we're still not being honest about ourselves and about our problem," said House Budget Committee Chairman Rep. Leon E. Panetta (D-Calif.). "It's almost a yawn that we're now approaching $300 billion deficits."

To be sure, it is possible to exaggerate the size of the problem for several reasons:

The recession has inflated the deficit by about $50 billion. But because private sector demand for credit falls during an economic slowdown, the government will not have trouble borrowing money.

A large chunk of spending -- about $100 billion in the current fiscal year -- goes to straightening out the savings and loan industry. That money does not drain out of the economy, but goes right back into the pockets of individuals with deposits at thrift institutions. Therefore, that spending has little economic impact, economists say.

Much of the savings from last year's deficit-reduction package show up only after this year.

In the past, the accumulated government debt has been bigger as a percentage of GNP. At the end of World War II, the U.S. government debt was bigger than the entire GNP. Now, even though the country's debt by 1993 will approach $4 trillion, about four times as big as it was in 1980, that will still be roughly only 70 percent of GNP.

But statistics can lie and the last figure fails to note that because of historically high interest rates, the annual burden of interest payments on the government's debt has never been higher. As a percentage of GNP, it is running around 3 percent.

The resulting syndrome resembles, on a smaller scale, the problem that plagues Third World countries: Citizens labor to pay for past consumption and serve their creditors, rather than invest in their own future.

"The deficits of the 1980s would be less alarming if they had been used for investment purposes," Reischauer said.

All that is a drag on the economy, and it comes at a time that many economists believe the United States should be running budget surpluses to save up for the burden the rapidly growing elderly population will place on the country early in the next century.

Michael Boskin, chairman of the president's Council of Economic Advisers, is one of those economists, but he said last year's rancorous $492 billion, five-year deficit reduction agreement was the most that could be done at once without seriously damaging the economy.

Democratic lawmakers agree, but in the face of record deficits they are worried. Panetta said: "I just hope that while we are bailing out water with the budget agreement that the ship isn't sinking."

The explosion in debt under Republican watch has turned on its head the politics of the budget.

"Historically, the traditional Democratic view was that a modest and controllable and acceptable amount of deficit spending was a stimulus and healthy," said Sasser. "What happened in the 1980s was Keynesianism run amok. Reagan became the super Keynesian of all time."

The GOP, the traditional party of fiscal conservatism, is now a deficit apologist. Meanwhile, Democrats who once viewed deficits as a way to expand government social programs, now see them as threats to the people the programs once benefited. "There has been almost a flip-flop in the way Republicans handle the deficit issue and in the way Democrats handle the deficit issue," said Panetta.

Sen. Paul Simon (D-Ill.), a liberal Democrat who has supported a constitutional balanced budget amendment, argues that deficits effectively redistribute income from the middle class to the wealthy and foreigners since it is mainly the wealthy and foreigners who buy government bonds and receive the interest while the middle class bears the tax burden.

Robert J. Shapiro of the Progressive Policy Institute, a Washington-based Democratic think tank, is also challenging the old assumption that deficits are progressive. "They used to be," he said, "but the shift in government spending to interest payments has shifted money away from programs. ... It has frozen the will of the government and its ability to come up with progressive policies and carry them out.

"If members {of Congress} didn't have to spend all their time on the deficit, they might have the will, the imagination and even the money for coming up with these initiatives."