With a clear statement that "both the size of the deficit problem and the need for a package that can be enacted" require "tax revenue increases," President Bush has met one of the challenges testing his leadership.

To be sure, "tax revenue increases" is a deliberately fuzzy phrase. For the moment, it begs the question of whether Bush will endorse a tax increase on personal or corporate income. And his new position may require the Democrats to agree, as an offset, to a capital-gains tax reduction.

But it is a new position, with potential political risks for Bush and the Republican Party. In the face of his famous "read my lips -- no new taxes" pledge, it wasn't easy for Bush to issue a statement that many in his own party will read as a withdrawal of a useful political commitment.

Bush's words were almost desperately needed. They open up the possibility for restoration of the American economy and of America's strength -- and will be warmly applauded at next month's economic summit.

On the phone from his office in Albany, New York Gov. Mario Cuomo -- potentially one of Bush's 1992 opponents -- said he applauds Bush's action: "It may have been a little late, but better late than never. Now, what's needed is simultaneity and swiftness. There should be no finger-pointing from the Democrats. They should go into a room {with the Republican side} and make a deal on tax increases and spending cuts, and then go outside and announce it all together -- in a chorus."

Bush's decision was based on a hard-nosed assessment that the deficit problem had ballooned beyond expectations, not only because of the S&L fiasco but because economic growth has stumbled. Taxable corporate profits are down, in part -- as New York economist Henry Kaufman points out -- because of the growing dependence in the past few years on junk-bond financing: all of that high-interest flow is subtracted from business' tax payments.

To be sure, it remains to be seen what Bush has in mind. "Additional tax revenues" can mean many things, and Press Secretary Marlin Fitzwater in an agile performance kept reporters guessing. It isn't certain how far beyond his earlier commitment to consider $13 billion in revenue enhancements, including "user fees," Bush is willing to go. But both House Speaker Tom Foley and Senate Majority Leader George Mitchell said flatly that Bush had agreed to "tax increases," not simply "tax revenue increases."

In all probability, Bush is thinking more about excise or "sin" taxes rather than an income-tax boost. Cuomo suggested to me that the budget summit would do well to consider a tax directed at upper-income brackets, but with assurance to wealthy taxpayers that revenue will be devoted to reducing the budget deficit. Kaufman chips in with a warning that the economy is too fragile to try to hit the Gramm-Rudman $64 billion target. Getting down from a $180 billion deficit to about $120 billion this year would be enough.

If Bush has finally opened the door to a major tax increase, the easy political interpretation will be that the Democrats, by persistently demanding that Bush take the lead, have won a major victory. But in that case, the Democrats will be out of excuses on the tax issue and under pressure to come up with their own deficit-reduction proposals. These should include not only tax increases but reforms in entitlement programs as specified in Bush's new statement. Citizens must now demand statesmanship from Democratic leaders in Congress.

Like Bush, the Democrats have been waffling on the tax issue, even in the wake of the S&L crisis. That debacle has made plainer than ever that there is no way of solving the nation's financial mess without higher taxes.

So far, the Democratic Party leadership has ignored suggestions by Ways and Means Committee Chairman Dan Rostenkowski for an overall deficit-reduction package, including the same elements cited by Bush. Also ignored are specific tax proposals by banker Felix Rohatyn and Rep. John LaFalce (D-N.Y.) for an income-tax surcharge to pay off the bulk of the bailout bill in five years.

Now, Bush may have put the monkey on Democratic backs. They can follow Cuomo's advice and seek a joint result designed to avert political blame. But they will have to advance the process at least as far as Bush now has.

"Now is not the time to insist on being clever," says Cuomo. "Thirty-seven of the states are in trouble. The middle class and the poor are getting killed. Nobody wins when the country goes down."