THE DEMOCRATIC leadership did a little screeching -- that's what leaders are for -- and the factions of the party now seem to have broken their deadlock on the budget. The moderate document to which House and Senate conferees have agreed is a sensible plan on the merits, provides shelter for the party against both the charge of tax-and-spend and the charge that it is soft on defense, and is a solid starting point from which to bargain with the president if he ever chooses to come out and play. Both houses should gratefully adopt the resolution and get on with the business of carrying it out.

The sticking point during the month the Democrats spent in conference was defense. They more or less split the difference, but sensibly. There are always two defense budget numbers -- spending authority, which speaks to the defense program of the future, and outlays or actual spending in the coming fiscal year. The habit the past several years has been to keep the authority or future figure relatively high but the outlay figure low. The virtue was that members could then vote simultaneously for a strong and cheap defense. The defect, of course, is that in doing so they only exacerbated the problem for the next fiscal year, because defense policy had still not been tailored to fiscal reality. The new compromise does the opposite. To satisfy the House, the conferees came down relatively hard on authority and future obligations, while to satisfy the Senate they were relatively generous on the outlay side. That's the right way to move from rapid buildup to plateau, because it's more gradual. And understand what is being voted for defense: $290 billion in outlays versus $158 billion in fiscal 1981. That's close to a doubling in seven years.

The Democrats would restrain both domestic spending and defense, add a modest tax increase and -- on the basis of current economic assumptions -- reduce the deficit about $40 billion from the $180 billion expected this year. That's substantial progress, about all the economy can stand. Indeed, not even all of this may be achievable if interest rates turn up and growth is disappointing. The deficit is so high that the government has lost all maneuvering room. Fiscal policy is much more the prisoner of the economy than an instrument for influencing it. That is why this budget is important, why it is urgent to work the deficit down. The issue is whether, in a mechanical as well as philosophical sense, the country can recover self-control.

The congressional Republicans sat out this first round of the budget process, along with the president. The idea was to force the renascent Democrats to declare themselves, which was fair enough -- but now they've done that. The interesting question is what the Republicans next do as Congress takes up the implementing legislation to carry out the budget resolution. Do they continue sitting idly by -- or do they return to the government?