The bond market is sending a warning to Washington, and the message is clear: The federal deficit matters.

For the last several years, the federal government has tried ineffectively to reduce its huge deficits, and it now appears to be giving up. Tax reduction fever is mounting.

At least five tax reduction plans are pending before Congress as legislators scramble to give tax breaks to the middle class, a borad band of the populace that includes almost everybody. This time, unlike in the 1980s, the barbecue will not be for the very rich alone. At the same time, proponents vow to keep the tax cuts "deficit-neutral" by reducing military spending, but neutrality is unlikely.

Tax cuts by themselves are not a bad idea. If they can be accompanied by spending cuts, they will benefit the country, for there is no doubt that hundreds of billions of dollars are being misspent. Wise, responsible use of financial assets would stop America's slide into mediocrity as a nation of empty office towers and vacant downtowns, of polluted nuclear sites, neglected infrastructure, and mismanaged insurance entities, of gleaming convention centers and decaying factories. An intelligent use of money has not been evident for decades.

The Bush administration and the Congress, the Senate and the House, Democrats and Republicans have begun to push for lower taxes for the middle class. All Washington is rushing to woo the populous middle ground to give the general citizenry something to cheer before Election Day in 1992.

Tax reduction for the middle class may be good politics for the short run, but tax cuts without real spending reductions are bad economics -- and bad politics -- for the long run.

The deficits of the federal government are rightly regarded as the reason productive investment has lagged, international markets have been lost, and American standards of living have been lagging in recent years. Reduce the deficits and we can get back on track, almost all responsible economists and politicians have agreed from the mid- 1980s on.

But now they are wavering.

Efforts to shrink the deficits have been so ineffective that Washington seems about to give up on keeping its accounts balanced. The deficit for fiscal 1992 is expected to come close to $350 billion, and that figure is not deterring the tax cutters.

A week ago Sen. Lloyd Bentsen, D-Tex., proposed a five-year $72.5 billion tax cut for taxpayers with children and retirement plans, and the Treasury bond market slumped. The bond market had been norvous in the wake of an unexpectedly large increase in consumer prices in September, and the Bentsen tax initiative made matters worse. Over the past week and a half, long-term Treasury bond yields rose from 7.85% to 8.12%, enough to take seriously.

Washington should heed this signal. The bond market gives good advice.

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