Secretary of state George Shultz has been giving the Israelis very good advice on economic policy. In the talks last week on expanded foreign aid, he stuck to his position that any increase is going to have to be accompanied by fiscal reforms in Israel. By spending too much, borrowing too much and depending too heavily on foreign lending, the Israelis have got themselves into a genuinely dangerous place. But Israel's is not the only government that is currently spending too much, borrowing too much and depending too heavily on foreign lending. There's another and larger example much closer than the eastern end of the Mediterranean. The United States itself could benefit from Mr. Shultz's advice.

The differences between the Israeli and American economies are pretty obvious. In an illuminating essay recently published by the Institute for International Economics, Professor Stanley Fischer of MIT argues that Israeli policy has been crippled by fear of recessions. In the late 1960s, Israel successfully forced its inflation rate almost to zero by methods that sent its traditionally low unemployment up over 10 percent. The results, Mr. Fischer observes, were social demoralization, net emigration for the first time in Israel's history, and the political conclusion that Israel as a nation cannot afford unemployment.

For the next decade, successive governments kept employment high and wages rose rapidly. There was another attempt at restraint in 1980, but it was unpopular and, with elections coming, the government abandoned it in less than a year. Caught between its defense requirements and high social spending, Israel has increasingly resorted to inflation. Last fall, before the temporary freeze was imposed, the annual inflation rate was in four digits. Israel is now teetering on the edge of hyperinflation -- the spiral that destroys the currency altogether.

In this country, in contrast, there's less concern about unemployment than perhaps there ought to be. But the essential reason for the low inflation amidst rising incomes is that the United States can still borrow abroad to finance its large deficits. But no country's credit is infinite. When lenders begin to get anxious, the borrower's previously pleasant life suddenly gets much more difficult. The Israelis can plead the great strains of confronting hostile neighbors while founding a new country. Americans won't be able to plead much but the briefly appealing thought that you can live better if you don't pay your bills.

Mr. Shultz is right, unfortunately, in telling the Israelis that they are going to have to balance their accounts. Americans, also unfortunately, are going to have to do the same thing. Good American advice to other countries is being undercut by Americans' refusal to apply that same advice to their own economy.