IT IS common knowledge that the Budget Summiteers are looking about for a secluded rendezvous where they might resume their deliberations shortly after Labor Day. Partly to save on helicopters, but mostly for cautionary purposes, might I suggest the Willard Hotel? That is where, in an earlier building, negotiations broke down before the War Between the States broke out.

We have been drifting toward a not-dissimilar regional conflict for a decade now; it is time we woke up to this -- and to the fact that the budget is where the interests involved will be accommodated or where the conflict will intensify.

I came to the Senate 14 years ago, at a time when New York City was facing bankruptcy. We needed a federal loan. (We got it. And paid it back, with interest.) I thought it was time to pay more heed to the flow of funds between New York and Washington -- the "balance of payments," if you will, between taxes paid in to the federal treasury and expenditures received back.

There were some federal tabulations, but they all showed New York with a strong "balance-of-payments" surplus. This could not be so, I thought, and it wasn't. It turned out, for example, that New York was being "credited" with half the interest paid on the federal debt, and over 40 percent of the foreign aid. (The checks were processed through Manhattan banks.) I set out to clean up the ledger, and commenced a series of annual reports on the balance of payments between the states and the federal government. (The most recent was issued last month.) The picture for New York and the rest of the Northeast wasn't pretty to begin with, and it's a lot worse now.

Basically, there is a sustained flow of tax revenue away from the Northeast quadrant, toward the South and West. Year after year, almost every state in a region extending from Minnesota to Massachusetts, from the Canadian border down to the Ohio, has a balance-of-payments deficit with Washington. (In fiscal 1989, Maine was the exception.) This showed up even in the early 1980s, when the federal government was borrowing money to pay for programs that in turn produced federal outlays in particular states. Of late, however, these programs have shrunk, while interest on the debt has ballooned, with the result that the Northeast is paying more and more for less and less.

On a per-capita basis, New Jersey is the worst off, with a per-capita balance-of-payments deficit for 1989 of $2,621, followed by New Hampshire ($1,749), Delaware ($1,583) and Connecticut ($1,579). But in aggregate terms, New York takes the biggest hit. In 1980, the New York balance-of-payments deficit was $2.7 billion. By 1989 this had grown to $23.7 billion. These are nominal dollars. In constant dollars, the increase was sixfold. This drain on the state's local economy is bad enough, but worse is that New York is being blamed for what is being done to New Yorkers. Or rather, our beliefs are blamed. We are -- you guessed it! -- liberals.

On July 24, President Bush came to the Waldorf Astoria and fair to boasted about how bad things have gotten for New York during the recent spate of Republican presidencies.

Thus: "For 92 months, America has enjoyed peacetime economic expansion," including the creation of more than 22 million jobs, but all New Yorkers did not enjoy this good fortune. In fact, the president reported, "while most of America was growing and looking forward to the future, life in New York -- especially in the city -- was becoming more expensive, more difficult and more dangerous, regrettably, than ever before . . . . In the late '70s, a large airline centered in New York {American} didn't go out of business; it just decided to move south to Texas, taking more than a thousand jobs with it . . ." He went on to cite other examples of major businesses, including almost a third of the Fortune 500 companies based in New York, packing up and moving South. In the president's view, there was a reason for this: New York had become a "showcase of liberal policies" that had led to rampant crime and higher taxes. "Where the liberal mindset dominates, the net result has been the same: bad schools, dangerous streets, big deficits."

The attack on liberalism had been hard to take during the 1988 campaign. It is, after all, an honorable political tradition. (There used to be things called liberal Republicans!) But it is harder yet in 1990 -- the year the net cost of the S & L calamity began to sink in, along with the fact, surely known to a Texas president, that most of the bailout money will go to Texas.

To which a New York senator would add that the biggest single chunk of that money will come from New York.

Fifty-nine percent of the S & L bailout money between 1986 and 1989 went to Texas. This ratio will evidently persist over the next generation as the total cost moves toward the trillion-dollar mark.

Texas is first. New York, near the bottom -- 59 percent of the bailout money as against 0.1 percent. How did this happen? Partly because in the 1980s, the Federal Home Loan Bank Board was evidently determined not to know what was going on in the states. (Among the thrifts closed down in 1988, the initial point of insolvency was, on average, between mid-1984 and mid-1985.) And what was going on in the states?

The critical factor was the amount of supervision provided by state regulators over federally insured, but state-chartered, thrift institutions. Take, for example, those office buildings and shopping malls and resort complexes in which the S & Ls invested depositors' money. In New York, the Office of the Superintendent of Banking permitted direct investment in real estate ventures of no more than 10 percent of a thrift's assets. The balance sheets were watched month to month.

During the late '70s and early '80s, New York regulators forced 69 state-chartered institutions into mergers or takeovers when their financial difficulties first surfaced, before losses could mount. The result? One institution failed in New York between 1986 and 1989. It cost $59 million, which was more than covered by deposit insurance premiums of the other institutions.

That was activist government in the liberal tradition. Indeed, deposit insurance was a liberal idea. A New Deal program. But it was designed for insurance, not for gambling. And effective government regulation was its corollary.

None of that lily-livered over-regulating liberalism in Texas. In Texas, the thrift regulators (if that doesn't stretch the term too much) imposed virtually no practical limits on real estate speculation with federally insured dollars. Neither did California. Between them, they will get 72.5 percent of the bailout cost. The money goes to depositors, of course, but someday, somebody will occupy those office buildings in Houston which will previously have been paid for by Brooklynites. Our bill will come close to $3,000 per family for this decade alone. And so back to the Budget Summit. We have already learned that owing to the Middle East crisis and the rise in the price of oil (including Texas oil), we can't have an increase in energy taxes. This leaves us with only one Reagan administration tax proposal still on the table. Guess which? A limit on deductions for state and local income taxes. And guess which state has among the highest income taxes? New York. And which state has no income tax? Texas.

And so yet further back to that War Between the States. On July 1, 1862, President Lincoln signed the Revenue Act of 1862, the first national income tax, a 3-to-5 percent tax to finance the Union effort. Section 91 of that Revenue Act said that "all other national, state and local taxes . . . shall first be deducted" to determine a taxpayer's liability for the income tax -- and this under the most pressing emergency conditions our country ever has faced.

The then-chairman of the House Ways and Means Committee was Justin Smith Morrill of Vermont; reporting the tax bill, he explained that as a matter of simple logic the deduction would be necessary both to avoid double taxation and to preserve a principle of federalism:

"It is a question of vital importance that the General Government should not absorb all {the states' } taxable resources -- that the accustomed objects of State taxation should, in some degree at least, go untouched . . . . Otherwise, we might perplex and jostle, if we did not actually crush, some of the most loyal States in the Union."

The Bush administration, though, is getting very close to jostling if not actually crushing just those states with a tradition of active government and progressive taxation.

These states are not confined to the Northeast quadrant, but the political culture, if that is not too pretentious a term, originates there. In the course of the 20th century this tradition made its way to Washington, where it is embedded in hundreds on hundreds of federal programs that disproportionately and intentionally favor a particular region, a particular group in the population, a particular type of economic activity. The Bureau of Reclamation, black lung benefits, soybean price supports. Moreover, there is a national idea behind this aid to special interests, which is no more and no less than that we are all in this together.

It is this tradition that produces a roughly equal division between those states that give and those that get money from Washington. In fiscal 1989, 27 states received more in federal outlays than they paid in federal taxes. Which is fine, so long as the federal government does not adopt economic policies that singularly attack the economic viability of the donors. As, for example, denying the deduction of state income taxes. (Or another administration favorite, a stock transfer tax, the effect of which would be to transfer a huge chunk of the New York Stock Exchange to London.)

The aftermath of the deficit of the 1980s and the S & L collapse will be with us in one form or another for a generation. It will mean less growth, more strain. The least we can do is avoid economic warfare between the states over who will pay for it.

Daniel Moynihan is the senior senator from New York and co-chairman of the Northeast-Midwest Senate Coalition.