PAUL SIMON, leading in some Iowa polls and trailing only Gary Hart in others, has as good a chance as anyone to win the Iowa precinct caucuses Feb. 8. Yet he is on the defensive out on the stump. The reason is his unwillingness, until this week, to speak the dread T word. Mr. Simon's desire for a balanced budget has been so great that he's the only Democratic presidential candidate who supports the balanced-budget constitutional amendment gimmick. But until his speech at Drake University Tuesday he refused to face up to the fact that his pledge to balance the budget in three years, barring recession, would certainly require additional taxes.

At Drake he finally owned up to the obvious. Or close to it: he still professes to believe that he can erase the deficit by cutting Pentagon spending $20 billion (possible, but not necessarily a terrific idea), reducing unemployment through a lowering of the trade deficit (the only problems are that unemployment is already pretty low and no one knows how to lower the trade deficit) and lowering interest rates (which presumably can be done by issuing an executive order). But if those things don't work, Mr. Simon says, he would back "new revenues as a last resort." None of the words in that phrase starts with a T, but you get the idea.

Some of Mr. Simon's tax ideas are worth considering. For example, he'd raise the cigarette tax 10 cents and increase the top tax rate for individuals earning more than $100,000 a year. He'd also embrace the oil import fee already endorsed by Richard Gephardt and Gary Hart, which gives an unnecessarily large windfall to oil producers. The trouble -- apart from the dubious merit of some of this -- is that altogether these taxes (with the high rate at the often-suggested 38 percent) yield only about $38 billion. That plus the $20 billion in Pentagon cuts and the hot air about cutting the trade deficit and interest rates add up to a lot less than the $140 billion Mr. Simon says will be necessary. "The real question," says Mr. Simon's opponent Bruce Babbitt, "is why this otherwise decent public servant is willing to tell the American people that he is going to balance the budget in three years when it is perfectly obvious that he won't." A good question, to which what Mr. Simon says is not a good answer.