Mayor Barry announced the details of his latest plan to deal with the city's shortage of money Thursday. His announcement was a good thing. For the first time since the budget crisis became known in January, the mayor was clearly in charge, laying out the extent of the problem and what he thinks should be done to resolve it. In the past three and a half months, since the problem became public, straight talk of that kind has been lacking from the mayor. His performance Thursday was the first step for him in regaining the public confidence and in dealing with the biggest challenge yet to face the home-rule government.

But despite the mayor's candor on the city's prospective deficit, the plan he has outlined is not fully satisfactory. He is not doing enough. Specifically, more cuts need to be in the number of people working for the city government. Mayor Barry refuses to make large cuts in the bureaucracy, arguing that the reductions would result in human misery for the employees put out of work. He is right. But human misery will also come as a result of closed health centers, closed recreation centers and other steps being taken instead of reducing the payroll.

The mayor also points out that reducing the size of the work force would not immediately result in savings because of severance pay obligations and some other factors. Again, the mayor is correct. But it is also true that next year the city faces another prospective budget deficit of $71 million. Some savings would begin to accrue next year from cuts in the city payroll now. Reducing the bureaucracy -- on a large scale -- is a step the mayor should take.

A second problem with the mayor's plan concerns the city government's continued overspending. In January, the mayor estimated that agencies were overspending the budget by about $40 million. He now says that, if the full federal supplement were granted the District by Congress, the overspending would be taken care of. But earlier last week, Sen. Patrick J. Leahy (D-Vt.) told the mayor that the full payment will not be forthcoming. Cutbacks in agency spending, some announced in March, must be put into effect now, if the city is not to discover at the end of the fiscal year that it has even larger deficit than was anticipated.

In addition to asking for added taxes and a full federal payment, Mr. Barry is instituting a hiring freeze these reductions to save an estimated $50 million. The cuts, largely in human services, public safety and education, would directly affect poor people who need city services the most. But cuts must be made in these areas, which account for most of the city's spending -- or at least that part the mayor and City Council can control.

Still, program cuts can and should be made in other departments, including the mayor's office. Similarly, sacrifices could be made in the agencies of economic development and transportation.subsidies for Metro fares, for example, should not be continued in an effort to hold down the cost to those who use public transportation in the city.

In his speech Thursday, the mayor said this crisis can either separate a community or bring it together. Sacrifice and quick action are necessary from each of the city's public agencies and leaders. The mayor took a first step in that direction by openly telling citizens what action he is taking and pledging to do all he can to produce a balanced budget at the year's end.