IN THE EARLY years of the Reagan administration the defense buildup drove fiscal policy -- some would say into the ground. Now the relationship has been reversed. Both houses of Congress have indicated they intend to keep the defense budget more or less level next year. Neither arrived at that position from some new assessment of defense needs; they are reacting to the deficit. Now come the Pentagon and Rep. Les Aspin, chairman of the House Armed Services Committee, asking in different ways that the members give some thought to the military consequences as well.

The Pentagon has sent a paper to the Hill on the implications of both House and Senate budget resolutions. It is always easier to vote for lower spending than for less defense. The services all have expansive plans; if the budget is not equally expansive, the plans will have to be curtailed. The paper seeks to make the members face up to the possible results. "Should we give up on the Army's effort to protect its ammunition resupply, the Field Artillery Ammunition Support Vehicle? Or its effort to protect its engineers with the M9 Armored Combat Earthmover? Should we end production of the Marines' close air support aircraft, the AV-88, or stop the Navy's effort to upgrade its only medium bomber, the A-6F program? Should the Air Force be directed to halt its C-17 program, so badly needed by our Commanders-in-Chief?"

The questions go on for several pages, together with warnings that "there is no 'free lunch': security will be weakened by cuts of this magnitude" and reminders of the payrolls and profits at stake ("For example, in recent years Connecticut has ranked first among the states in DoD purchases per capita"). All fair enough, and it is true: this is a major policy shift; there are a lot of choices to be made. But that is precisely what the Pentagon won't do: help Congress make them. It is still fighting the last war -- whether these cuts will occur -- when the question now is how. How is Mr. Aspin's concern.

It will be his job to help take the budget resolution the next step; his committee must draft a defense authorization bill, splitting dollars among programs. He has no qualms about cutting the president's budget but says that neither budget resolution gives the Armed Services committees quite enough room.

The defense budget is expressed each year in terms of both budget authority, or new permission to spend, and outlays, or actual spending. The first is a political or policy number; it points to how large the defense program is to be in the future. The second is an economic number; it is the one that bears on the deficit. Last year Congress took advantage of this complex accounting system to have it both ways: on outlays, the budget conferees agreed to defer to the House, whose figure was low, and on budget authority to the Senate, whose figure was high. In the context of the moment, that allowed everyone to vote simultaneously for a strong and cheap defense.

This year the same temptations exist. Mr. Aspin is urging his colleagues to set the two figures on a more rational basis. Over time there is no way to keep outlays low if budget authority is high. The right way to bring down outlays is slowly, by limiting budget authority and long-term costs. Try to reduce outlays too quickly and you end up ignoring these long-term questions in favor of paste-ups that don't last. You end up cutting readiness, which saves you money now, instead of thinning out procurement, which saves you money later.

Mr. Aspin says it's possible to cut the budget about as much as Congress wants and produce a rational result, provided it's carefully done. This year he'd like the conferees to do the opposite of last: approve a slightly higher spending figure than voted by the House, and a lower level of budget authority than voted by the Senate. The compromise would be driven by substance rather than politics. It's the right way to go.