In the wake of the Iraqi offer to withdraw from Kuwait, which could be the first step toward a quick end to the war, the Bush administration's economic plans, based on such a scenario, merit a close look.

The prospect that the recession, if peace should really come about, would end by mid-year, has been the basis of the spectacular run-up in Wall Street, despite day-by-day bad news in the real economy and the well-advertised possibility of a bloody ground war.

The stock market, sometimes the nation's most accurate leading indicator, looks beyond current events. But skeptics question whether Wall Street -- and the administration -- have looked far enough down the road.

The bull-marketeers are betting that consumer and business confidence will immediately re-emerge after the war is over, lubricated by declining oil prices and low interest rates.

There can be little doubt that the war's end, when it comes, will bring a sense of relief, generating a positive effect on the economy: Consumers, who have been holding back in buying big-ticket items or spending money on vacations, will loosen up to a substantial extent.

Cheaper oil will assure low inflation -- economist Henry Kaufman predicts that the consumer price index could be increasing at a rate of only 3.0 percent to 3.5 percent by the end of the year -- thus encouraging the Federal Reserve Board to continue its easy money policy.

Kaufman said after the Friday Iraqi peace feeler that he wouldn't be surprised to see the discount rate, now 6 percent, dip to 5 percent, and fixed mortgage rates go down to 8.5 percent once the war is over.

But peace -- and a quick end to the recession -- would still leave the economy to contend with the fundamental problems that began to weaken it even before Saddam Hussein's invasion of Kuwait last August. In the annual report by the Council of Economic Advisers, Chairman Michael J. Boskin conceded that "the economy has some long-run issues and challenges before it, if it's to remain the world's leading economy."

Unsolved long-term problems include the credit crunch, the weakness of financial institutions, huge corporate debt, a record budget deficit, the need for funds to repair the nation's infrastructure -- airports, highways, bridges, tunnels and so on -- and trade frictions with Europe and Asia. Easier money will moderate the problems faced by the banking industry, but an overnight recovery is not a prospect.

The administration's economic forecast, as contained in its Budget and Economic Report, acknowledged that such underlying problems must be addressed. Boskin, for example, referred to the need to expand private and public investment for a wide variety of purposes to stimulate economic growth "over the next decade and more." These included highway refurbishment, entrepreneurial activity and industrial research and development.

Boskin and Budget Director Richard Darman were also eloquent on the need to do something about America's faulty educational system. Darman's summary chapter of the budget noted that while we spend more money per student than almost all other countries, "the average performance of American elementary and secondary school students on internationally administered tests is disgracefully low."

Unfortunately, Bush's economic team produced no serious government game plan to cope with the multiple long-range problems it identified. (Even for the critical short-term need to restore the economy to positive economic growth, the Bush administration merely prayed for a short war, and left the rest to the Federal Reserve, to which it assigned a major share of the blame for the downturn.)

For solutions to long-term problems, the Bush administration side-stepped concrete proposals, leaning heavily on "market- oriented" solutions. A central theme of the economic report is that the "government's role in the economy should be limited."

Although the Bush approach is more subtle than the cruder "get the government off our backs" credo of the Reagan administration, it comes down to the same thing. It raises a concern that the ideological bias of Bush and his advisers can get the nation into a jam as it comes to the end of the war and the need to restore America's competitive position in the global economy.

The CEA report paints an appealing picture of a modern American home chock-full of consumer goods such as "a microwave oven, a home computer, a videocassette recorder, many pharmaceuticals, nonstick cookware and numerous other products that did not exist" some years back.

Achievement of this idyllic state, says the report, requires a "reallocation of resources {that} occurs without government planning. The government took no action to guarantee that between 1985 and 1990, thousands of video-rental stores would open so that VCRs would have movies to rent."

It's a long leap from this gee-whiz adoration of privately supplied creature comforts for middle-class America to the conclusion that government's role should be limited. This is a mixed economy in which the public role is just as important as the private market that saturates households with consumer goods.

It was precisely because the government abandoned sensible regulation and supervision of the savings and loan institutions that it later had to become totally involved in their rescue. And we may be on the verge of making some of the same mistakes in revamping a troubled banking system.

If the government is serious about restoring the nation's infrastructure, as Boskin claims it is, that task can hardly be left to the private market without government involvement at the federal, state and local levels.

Some things can be handled only by government. Some things the market can do better. In a post-gulf war world, we ought to leave it that way. $RAY; Invalid basket name FI/WIRE