IN SUBSTANTIVE, as distinct perhaps from political, terms, George Bush's no-new-taxes campaign pledge was a mistake. Now he is extricating himself about as gracefully as he can. In acknowledging yesterday that "tax revenue increases" are among the measures necessary to reduce the deficit, he did the right thing. In refusing to say more than that they agree with the president in his new assessment, the Democratic leaders of House and Senate played it right as well; this is the wrong time to rub it in. For both sides, the hard part is just beginning.

It's been obvious since early in the Reagan years that the deficit was not going to be reduced substantially without a tax increase; not even Mr. Reagan, for all his caricaturing of big government, was ever able to identify or willing to support the necessary spending cuts to do the job. It's been equally obvious that, on taxes, the pummeled Democrats weren't going to go first. The president now gives them -- and perhaps some Republicans as well -- both political cover and a faint push in the right direction.

Now come the serious problems of which tax increases, which spending cuts and what mix of the two. A frequent estimate in the unsuccessful past has been that about half of deficit reduction should come through higher taxes and half through spending cuts, with about half the cuts in defense and half in domestic programs. That sounds at least like a reasonable starting place. The tax increases should help restore progressivity as well as revenue; both have been lost in the past 10 years. The defense cuts, as the president said yesterday, should be "orderly." His list of the steps to be taken began with "entitlement . . . reform"; if only in the interest of fairness, that ought to include some reduction in the net cost of Social Security, now a fifth of the budget. The "budget process reform," of which the president also spoke, ought not involve a major and lasting cession of fiscal power from the legislature to the president, as would occur, for example, with a line-item veto.

The deficit, in part through the interest costs it entails, inhibits the economy as well as the government. It has to be brought down. The president said yesterday that the budget negotiations will now resume -- he could have said start -- promptly with a view toward reaching substantive agreement "as quickly as possible." Every American should hope so.