If rising oil prices or increased unemployment occur, our current budget-cutting exercise could be the fiscal equivalent of taking one step forward and two steps back. . . . Deficits of $200 billion could become the rule. . . .

Budget deficits of this magnitude would have a profound economic and political effect. If we consider what has happened during the 1980s, two signposts stand out.

First, when President Reagan entered office, he inherited a deficit of less than $80 billion. Then, before the end of his first year in office, the country plunged into a serious recession. The country pulled out of that recession as a result of a time-tested government action -- deficit spending.

The Reagan tax cut pumped money into the economy, and the rapid rise in military spending created jobs in certain industries, although not at the rate of an equivalent outlay for nonmilitary projects. The deficit financed a recovery in a period of double-digit unemployment.

Now the question must be asked: What happens if we slide into a recession of similar magnitude while we have deficits of $200 billion a year?

The options to stimulate the economy available to President Reagan in his first term . . . are no longer practical. With deficits hovering near $200 billion a year, Congress simply will not go along with major tax cuts or spending increases. . . . Significantly, this would foreclose appropriations for a major jobs bill designed to counteract rising unemployment. Congress could find itself in a no-win situation. . . .

If we are to avert such a situation, we need a hard-nosed assessment of what the deficit will be in the next few years.