Outlandish interest rates are making it so costly to finance the government's debt that there is talk of slashing defense spending and Social Security to make room for more debt service. High interests rates, in turn, are being widely attributed to the size of the deficit. That is, the deficit expands because of the high interest rates, yet high interest rates are supposedly caused by the deficit.

A dismal vicious circle, if there were any truth to it. After all, this country has had deficits before, some much bigger than any we have in prospect. But never in U.S. history have we seen long-term interest rates like this. In the entire century, until 1968, high quality 30-year bonds rarely paid more than 5 percent.

In 1945, the federal deficit was over 22 percent of gross national product, and the national debt was 119 percent of a whole year's production; prime corporate bonds then sold at 2.6 percent. By contrast, the current deficit is a mere 1.9 percent of GNP, lower than last year, and next year will be lower than this. In relation to the economy, natinal debt is one-fourth as large as it was in 1945, yet prime bonds yield 14 percent. Deficits were about as large as today in 1958 and 1971, but bond yields fell in those years. In 1976, the federal deficit ballooned to 4.5 percent of GNP -- twice as large as today -- but interest rates came down and the economy expanded briskly.

National security and the well-being of retired people are being threatened by a theory that has no foundation in fact. yadministration economists have been led down this dangerous path by a handful of Wall Street economists, mainly Henry Kaufmann and Albert Wojnilower, who solemnly proclaim that the unprecedented collapse of the bond market is due to the possibility that the deficit might be a few billion higher than preferred.

Each time an administration spokesman expresses an agreement with this so-called "Wall Street view" -- blaming the bond market agonies on the budget while praising the Federal Reserve -- that signals yet another sell-of of bonds. It means there is still no attention being paid to monetary policy, the source of the dizzy spiraling of interest rates.

In 1945 and in other periods where seemingly huge deficits were added to the burdens of the economy, the people shouldered them easily at the lower interest rates. Why? Because they had confidence that the government would pay off individual bonds with equivalent goods. There was confidence in the currency, which the government guaranteed in real goods by pledging its convertibility into gold. Now there is no such guarantee, and the people, suspicious of continued monetary mismanagement, insist on highrisk premiums even or shrinking debt loads. This is the only one conceivable reason why people will not commit funds to the future except with a huge insurance premium; they simply do not trust the money.

If we go on seeking primitive Keynesian solutions to our monetary disorder, things can only get worse. The economy will deteriorate further, increasing the need for federal spending, depressing tax revenues and enlarging the staggering outlays for debt service.

The economists who would slash national defense and Social Security in the cause of rallying bonds should at least be asked to present historical evidence in support of their model of the world. President Reagan is disserved when he is pulled along this path without the slightest evidence linking bond yields to budget deficits.

Of course, there is no question but that the people expect the government to economize on spending, and where it can be done prudently, we will applaud withthe Wall Streeters. But the theory does double damage. It unnecessarily reduces needed defense outlays and support for our senior citizens and does absolutely nothing to help the economy does absolutely nothing to help the economy strengthen so that it can easily shoulder its debt burden. Currency reform and a credible gold-backed dollar will complement the administration's prudent tax and spending cuts. It is the only way to revive lending at low interest rates and bring the bond rally that we all desire as a sure sign that we can resume long-term building for the future.