THE CHIEF EXECUTIVE in his last term in office is adamant that the budget can be balanced by lower spending. No way he'll approve more taxes, he says. The legislators in both chambers in the nation's biggest capital dissent, but they have a hard time getting up the courage to vote higher taxes. But finally they do. And the chief executive signs it. This isn't a scenario for a break in the fiscal deadlock in Washington. The capital in question is in Austin, Texas, and the chief executive who signed the $5.5 billion tax increase to balance a $38.3 billion state budget is Republican Gov. William Clements.

There are lessons here for Washington. One is that fiscal reality has to be attended to sooner or later. Some will say that Texas, like other states, was forced to a tax increase by a requirement that its budget be balanced. But there are always ways -- accounting gimmicks, business forecasts, borrowing -- to get around that. What happened in Texas is that elected officials decided there were worse things for voters than a tax increase. Government serves useful functions, and even in a state with a tradition of minimal government, Texans realize that spending on education, transportation and basic services is essential to private-sector growth.

There comes a point below which you can't slash spending without rending valuable governmental institutions. There's room for argument as to just where that point is. But in Texas, even Gov. Clements seemed to agree that it comes somewhere above the level of the revenues that would be generated without higher taxes. The same is true of the federal government: serious harm will be done, either to vital services or to the economy, unless taxes are raised to reduce the deficit to tolerable size.

Among many administration supporters it is an article of faith that governmental decisions are best made at the state and local level and that, given a choice, voters will insist on lower tax rates. But these two propositions come into conflict when you consider Texas. And Texas is only one of several dozen states that have decided to raise taxes this year or last.