WHY CAN'T OUR intelligence agencies do a better job of catching spies? Why do traitors seem to slip through their fingers and into the arms of the KGB? Is it a matter of incompetence in the intelligence community, which can be remedied by better police work? Or is it a more complicated problem?

The recent flurry of espionage cases suggests the need for tighter security. But it also shows that we won't be able to improve our spy-catching capability without significant costs -- both in spending for counterintelligence and diminished privacy and in civil liberties for government employes.

To put the matter bluntly: An America in which it would be easier to catch spies would be a different -- and in some important ways, less congenial -- place to live. Before we go marching off in that direction in the current spy mania, we should think carefully about the costs.

The Pelton and Howard cases provide good starting points. They illustrate the huge damage that spies can do -- and the difficulty of catching them before they spill the goods.

Ronald Pelton held a sensitive position with the National Security Agency. After falling into financial difficulties and filing for bankruptcy, he decided to sell out to the Soviet Union. He called the Soviet Embassy in January 1980 and was overheard through a lawful national-security wiretap. But he wasn't caught and prosecuted until his KGB contact, Vitaly Yurchenko, defected to the United States in 1985.

Why couldn't the FBI catch Pelton before the damage was done? How hard could it have been, armchair George Smileys might ask, for the FBI to have identified Pelton after that first call to the Soviet embassy, since his voice was recorded, he spoke unambiguously about his government employment, and information about his personal bankruptcy was already a matter of public record?

Or take the case of Edward Howard, the only known CIA officer turned Soviet spy. To critics, it reads like a chain of incompetent blunders.

When the CIA hired Howard, they knew of his previous use of drugs but accepted his assurances that he had broken the habit. Apparently the agency didn't know of his reputation as a drinker and womanizer, two additional classic indicia of potential KGB recruits. Howard completed his training as a CIA spy, but he failed a polygraph examimation administered prior to his assignment to Moscow. At that point the agency decided he was too great a risk and tried to reassign him to a less sensitive position. CIA personnel officials undertook a deeper inquiry into Howard's background, found out about his drinking, and recommended that he be fired.

The FBI apparently didn't know about Howard until Yurchenko defected last year, well after Howard was fired in the early 1980s. The Bureau then began a full investigation. It is possible that his telephone was tapped. It is clear the FBI interviewed him one day, staked out his house that evening, followed him to work the next morning, maintained a close physical surveillance throughout the day and evening, and "lost" him during the night. Some might see a "Keystone Cops" analogy and criticize the FBI for letting Howard get away. Others blame the CIA for failing to tell the FBI about their "problem child" when they first decided he was a security risk.

Clearly the efficiency of the intelligence community's personnel-security program and the FBI's counterintelligence program can be improved. But the simplistic suggestion that these cases show the bankruptcy of our security programs overlooks important factual, legal and public policy issues.

Take, for instance, the practical problems of turning the fruits of a wiretap into useful information. It is widely known, though not officially acknowledged, that our government listens in on telephone conversations to and from certain foreign government facilities in the United States. Among the thousands of daily calls to foreign government establishments, comparatively few are of genuine interest. Moreover the intercepted conversation, by itself, is often an inadequate lead. In Pelton's case, the information contained in the first intercept suggested suspicious conduct by an unnamed government employe, but it would have been virtually impossible to have identified Pelton by that intercept alone.

Why not, then, take the daily tapes and screen them against an electronic library containing the "voice prints" of all government employes who have national security "codeword" clearances? It sounds plausible, but it's probably a technical impossibility. Voice recognition technology has not developed to the point that it is possible to automate comparisons of a single recorded conversation with a library of voice samples to produce reliable identifications. Like fingerprint comparisons, voice comparisons are most useful when there is a fairly small universe of known voices to be compared with a single unidentified voice.

More than 110,000 individual employes and contractors have codeword clearances. The daily number of recorded conversations with foreign establishments is also in the thousands. A comparison of all those conversations with all those possible samples is beyond the limits of today's technology, and even further beyond the budget limits imposed by Gramm-Rudman-Hollings.

What about simpler physical surveillance of Pelton's 1980 visit to the Soviet embassy? It's likely that he was observed entering the embassy and photographed by the FBI. But the chances are less than 50 percent that the photo clearly revealed his face, and even a good photograph would have been hard to match with existing employment photos of the 110,000 Americans who have codeword clearance. An FBI tail of Pelton from the embassy might well have identified him, but we have to assume that the KGB did its job of concealing his departure.

What about Pelton's financial vulnerability? The Washington Post ran a story a week ago describing CIA and NSA employes who, like Ronald Pelton, have filed for bankruptcy. Doesn't the government know what The Post knows about employes who have filed for bankruptcy?

The answer is a qualified no. Even in the area of national-security employes, the government is not a very efficient collector of personnel information. The problems are the same mundane ones that every employer faces: time, money, the danger of demoralizing employes by intruding on their privacy. The government also has additional legal constraints not placed on private employers.

Over the past several decades, our society has become increasingly sensitive to the rights of privacy and freedom from unwarranted government intrusion. Congress enacted the Privacy Act in 1978 to prevent such excesses. That law forbids a federal agency from maintaining records about individuals, including its own employes, unless the need for those records is clearly established and authorized by law. The act inhibits agencies from obtaining information about employes even from public sources. The president's Executive Order on Intelligence Activities also imposes significant legal and bureaucratic limitations on counter-intelligence programs.

These legal restraints don't ban the intelligence agencies from collecting financial information about their employes. But they don't make it easy.

Beyond the questions of feasibility and legality are some basic constitutional issues. We live in a society built on freedom and rightfully dedicated to preserving that freedom. We ought not jump too rapidly to embrace full-scale security investigations of all national-security employes whose behavior profiles suggest a potential for going over to the dark side. Think through the consequences for a moment.

Again let's use the Howard case. Assume the CIA had told the FBI that it was discharging Howard because he was an unacceptable security risk. What should the Bureau have done? At that time the FBI would have known only that an American citizen, a former government employe with knowledge of sensitive national-security matters, had been identified as a "security risk." There was no evidence of past or imminent espionage activity.

Should the FBI have put Howard on a national security "watch list"? Should they have opened a full counterintelligence investigation, placing him under constant physical, and perhaps electronic, surveillance? Many Americans would question such police-state tactics, even if they increased the likelihood of preventing Howard's disclosures to the Soviet Union.

But surely, others might reply, the FBI could have used less intrusive techniques to keep track of Howard after he left the agency. Surely it should have been possible in today's information age to know of his visits to Vienna (a favorite KGB site for contacting their spies) and his growing collection of kruggerands. Existing technology could indeed help the FBI collect such information. Airline computers could be programmed to kick out the foreign itineraries of selected individuals; banks similarly could provide financial information on selected customers.

Both of these collection techniques are simple technologically. But what of the costs to privacy? And, again, what would the FBI have done with the information if it had it? Should Howard have been held in "preventive detention" -- held against his will -- until his classified knowledge became too stale to be harmful? The legal answer is certainly no.

Should the FBI have run a "false flag" operation, setting up an elaborate scheme in which an American posed as a KGB officer and induced Howard to disclose classified information -- so that he could be prosecuted and locked up? This approach has been followed successfully in other cases. Used selectively it is an important weapon in the counterintelligence arsenal. Used excessively it becomes a tool of entrapment and harassment.

Turn then to Pelton. Certainly we can change the system to focus more carefully on the telltale signs of economic distress that can lead to espionage. We could, and probably should, modify our background investigation and reinvestigation procedures to inquire about financial difficulties. Our systems have been too slow to change in this area.

We need to understand the new generation of spies better, especially their seemingly crass motivation. Current security investigation procedures are largely based on the experiences of the 1940s, '50s and '60s when the "normal" employe-turned-spy was an ideologue with mis-aligned commitments. Based on those experiences, we still ask a potential employe's friends and neighbors questions designed to probe political views. But the recent rash of cases teaches us that the spy of the '80s is attracted primarily by cold, hard cash. Certainly we should use that knowledge to refine our security checks and look for signs of financial insecurity.

Again the tension between freedom and security emerges. Suppose we make the necessary legal and regulatory changes to obtain periodic financial reports from intelligence community employes. What should we do with reports that show financial stress? Should we use them supportively, as part of an enhanced employe counselling program, or should we turn them over to the security office? Should invocation of the protection of bankruptcy laws be a sign of vulnerability to Soviet inducements or a sign of recovery from financial distress and reduced risk of espionage? The answers to these questions will be difficult and may vary from case to case. But in order to make such choices you must first have the information -- and that's likely to raise an uproar from civil libertarians, and government employes themselves.

When it comes to spies, Americans hate the disaease. But we hate the cure, as well. Think back for a moment about the polygraph debate. Security and intelligence professionals have long advised that professional use of the polygraph is one of the best tools to deter and detect disloyal employes. But the suggestion touches some very raw nerves. When the secretary of state threatens to resign rather than undergo a polygraph examination, for example, it's clear that we are touching on deeply-held values. What message do we send to our valuable, loyal and essential public servants if we begin to delve into their private financial affairs? Will we encourage loyalty or discourage employment?

The current spy mania raises questions about whether our approach to security is fundamentally flawed. In my view, it isn't. The real lesson of the recent wave of spy cases is that our counterintelligence system works, despite its flaws. No system will ever prevent Americans from spying for foreign powers. What we can hope for is to reduce the risk of such espionage cases and increase the chances of catching the traitors. And in most cases, we're succeeding.

We are uncovering more spies today, in part, because our system has been improved. We are prosecuting more cases because we have developed better rules for espionage trials and because policymakers in the last two administrations have decided that prosecution is a useful tool of counterintelligence tradecraft. Criminal trials won't eliminate spies, any more than they will eliminate drug dealers or prostitutes, but they will have a deterrent effect on enough employes to be worth the effort.