Eighteen months ago President Carter set up a special unit -- the Office of Special Counsel -- to protect and defend government whistleblowers. Now the OSC is out of business, at least temporarily. It is not for lack of business or interest, but because its budget has been mysteriously whacked.

At the moment, OSC does not have funds to continue operating through September, and furlough notices are being prepared for 119 staffers here and in the field.

The Office of Special Counsel and the Merit Systems Protection Board were created by the president's civil service reform law. Their mission: to serve as an independent arm to protect bureaucrats from being manhandled when they charge bosses with illegal, corrupt or wasteful actions.

During its short life, the OSC has done its job too vigorously, in the opinion of politicians who have been the target of whistle-blower complaints.

Most recently, the office stepped on some high level congressional toes when it accused the Small Business Administration of playing punitive musical chairs, shifting some district directors because of their political affiliation. SBA flatly denies the allegations.

As part of the budget review process, the OSC was told to expect a $1 million cut from the $4.5 million supplemental it requested to keep operating through the rest of this fiscal year. It ends Sept. 30.

But congressmen surprised the Special Counsel by cutting $2 million. Unless funds are restored, the staff may have to be put on furlough for September. All work would be frozen during a shutdown.

One school of thought has it that the OSC cuts are no worse than other agencies are taking this year from Congress. Cynics, however, believe the OSC is having its nose rubbed in the carpet until it learns there is a price -- survival -- for tackling some political windmills.

Whichever theory is correct, the budget-cutting action with its month-without-pay could result in a scattering of the staff, and produce a log-jam in pending whistle-blower complaints.