"WE'RE REALLY addressing the stark realities," House Minority Leader Bob Michel said as the budget talks between administration and congressional representatives recessed the other day. No, they're not -- not the administration, not either party in Congress. The evidence is that they've all been thinking small-bore when they should have been thinking large. They'll cut a deal, but the more they quibble, the less significant their accomplishment is likely to either seem or be.

The market sent them all a mighty message last month. The country has been living beyond its means; the people, mostly foreigners, who have been financing the binge won't do it anymore, not with the same liberality, not without exacting a higher price. Everyone agrees now that we have to retrench, even the president. But everyone has continued to want the other fellow to blink first. The Republicans want to keep taxes down and defense spending up; the Democrats want to protect domestic programs. Neither side has had the courage to tackle Social Security.

So they've been nickel-and-diming one another. In a trillion-dollar budget they've been only a couple billion dollars apart in each of the three main categories -- taxes, domestic and defense. They've been fighting for marginal advantage in a game of inside budgetball that only they will ever know the score of. The press release has been as much at stake as the programs.

They'll only get to about $23 billion real this way. Especially given the tender loving estimating that always accompanies these exercises, they ought to go higher. Thirty billion real would be about right -- no gimmicks, forceful as to the deficit, not so forceful as to threaten the economy. To get there without asset sales or other bells and whistles, they all need to lift their sights. In particular, the tax increase and domestic spending cuts they are considering both need to be enlarged. The way to do the spending cuts is to squeeze the fifth of the budget that is Social Security. That can be most fairly done by subjecting a larger share of Social Security benefits to the income tax or, lacking that, by holding next year's benefit increase a couple of points below inflation -- not simply delaying its effective date. The other tempting domestic targets -- the alphabet soup from EDA to SBA -- are mostly too small to matter.

On the tax side the assorted minor provisions in the House Ways and Means Committee and Senate Finance Committee bills should be anchored with a major increase, in the gasoline if not the income tax. Then you'd have credible deficit reduction. The members quail at this. The irony is that they would be much more praised than punished for it at the polls. They underestimate the crisis -- and the voter.