(FORTUNE Magazine) – -- By the time this issue of FORTUNE reaches readers, we hope that Congress and the White House will have agreed on a program to cut the budget deficit effectively enough to help calm the international securities and currency markets. But even if they have done that, it will be only a first step. What the nation needs -- and what the world is crying out for -- is a believable, practical program for the longer term, one that will progressively narrow the deficit over several years. One that will bring the budget into balance in the economically expansive years of the early 1990s. U.S. businessmen overwhelmingly hold that view, and they are anxiously looking for a program they can support. Calls for courageous political leadership have become cliche but are nonetheless correct. Few moments in recent years have presented such an opportunity for Kennedyesque ask-what-you- can-do-for-your-country leadership to rally the various constituencies in American society behind such a program. Almost nobody argues anymore that ''deficits don't matter.'' They do matter. They are distorting our economy, debasing our currency, and lifting our real interest rates. Even the diehard minority that disputes this opinion must now concede that in the world at large the deficit has become an ugly symbol of American flabbiness and profligacy, of our inability to control our own destiny. In the chancellories and counting houses from Tokyo to Bonn, the orthodox view is that Americans spend and consume too much, save and invest too little. This opinion -- like the deficit itself -- has been building for so long that rolling it back will require the U.S. to adopt a quite remarkable program. A plan of action credible enough that citizens not only of the U.S. but also of many other countries will believe in it. A plan long-range enough that savers and investors at home and abroad will be persuaded that it will not be overturned by the next election. A plan popular enough that most Americans will feel a vested interest in it. The program begins with a startling proposition: that the American people are far smarter, far more resilient, and far more willing to sacrifice than Congress or the White House gives them credit for. The people are wise enough to recognize that, just as a family cannot prosper if it continues to spend more than it earns, so a nation cannot prosper if it persists in consuming more than it produces. Yes, a family can make convincing arguments that it really should spend for all manner of nice things. Yes, Junior really should attend a private college instead of settling for the state university (or even taking off a year or two < to work and build some savings). Yes, it would be a terrific tonic to take two weeks in the sun in Hawaii. Yes, it would be worthwhile to invest in the first fur coat or the second home, or the third car or the fourth TV set. But -- and just about every family is wise enough to recognize this -- sooner rather than later the line must be drawn, the bill must be paid. As with a family, so it is with a nation. A strong argument can be made that it is beneficial for the nation to support ailing farmers, to subsidize the middle-class (and upper-class) elderly, to keep retired citizens of all kinds one step ahead of inflation. Surely the case is persuasive that the nation must have the most modern defenses, that its arsenals must have nothing short of the highest of high tech -- all in secure redundancy. And yet sooner rather than later, the line must be drawn, the bill must be paid, choices must be made. IN MAKING those choices, Americans are in a mood to accept any reasonable program that is equitable. So the primary decision is that budget cutting must affect, and require sacrifices by, almost all groups within the society. If any one group is singled out for the Big Hit -- the aged or the poor, the affluent or business -- the program will fall on the sword of unfairness. If all groups are to make their contributions, then all citizens must accept compromise. It would be wonderful if the budget deficit could be narrowed without raising taxes. Wonderful but impossible. Politicians of both parties demand more taxes as the price for less spending. Let us admit that some new tax measures will be necessary, but let us be sure that they are sensible and do not lead to yet another increase in spending. We should not lay debilitating new taxes on investment or saving. Nor should we raise taxes on corporations. That would only deter them from hiring when we need jobs and from modernizing when we need to sharpen our productivity and global competitiveness. Any new taxes should be leveled on consumption. In brief, Americans should be taxed less on what they put into the economy (in the form of work, savings, and investment) and more on what they take out (in the form of consumption). Raising federal taxes on cigarettes and whiskey could bring in over $3 billion a year and would barely dent the economy. Adding a dime to the gasoline tax would raise nearly $9 billion and would make some dent in the nation's $840- million-a-week bill for energy imports. ( Ideally, every dollar of additional tax revenue should be matched by two dollars of spending reductions. But how to get the government to live within its means? First, like the family, we must have a budget in the true sense of the word -- a spending limit that the President and Congress determine and then stick to by setting priorities. This system would require politicians to reject programs that are desirable but unaffordable. It would differ vastly from the present process of adding up all the desires and calling the result a budget. Steadily declining targets for the deficit must be set. If Congress cannot discipline itself to meet any given year's target with spending cuts, it should require itself to raise the money to close the gap with a temporary surcharge on personal income taxes -- 5%, 10%, whatever it takes. The surcharge would bite all taxpayers, though the affluent would be bitten hardest, since they pay at the highest rates. The most beneficial effect: The tax would dramatically remind voters of their representatives' spendthrift ways, prompting them to voice their consternation at the polls. Where must the bold cuts come? Defense, Social Security, and interest payments on the $2-trillion federal debt account for 62% of government spending. Interest rates are heading down, and that will help; they could decline further if the deficit declines further. Unwisely, President Reagan and Congress have declared Social Security sacrosanct. The ranks of the retired are rising, and they have to go out and vote. But ultimately the growth of Social Security benefits must be curbed, and this requires a limit on those ever-compounding cost-of-living adjustments. The best hope is to wait till next year -- after the election. Meanwhile intrepid politicians and business people must speak up for the absolute need to contain Social Security. THAT LEAVES defense as the great nut to crack immediately. FORTUNE several times has detailed cuts that would not strip the nation's security. What they come down to is that the U.S. cannot have a multitude of overlapping weapons systems -- such as two kinds of strategic bombers for penetrating the Soviet Union, in addition to a variety of missiles for the same job. Or oversize weapons systems, like 15 aircraft carriers and their support craft when 12 are plenty.

It cannot afford every gold-plated toy of high tech devised by scientists, demanded by generals, and lobbied for by contractors and labor unions. And Congressmen will have to deliver more bad news to some constituents. The U.S. must close dozens of surplus military bases and munitions factories kept open not to protect the country but to protect jobs. The most indefensible spending is that for Americans whose incomes are well above the median. Spending of all kinds on the poor -- for welfare, Medicaid, housing, and food -- adds up to $69 billion a year, just 7% of the total budget. Though workfare can trim that a bit, the poor need most of what they get. But spending for subsidies to farmers who have gross incomes above $100,000 a year amounts to over $8 billion. Medicare payments to people who are well off run into further billions. The nation no longer can afford these luxuries. Annual growth of spending to cover cost-of-living adjustments for retired veterans, civil service, the military, and others comes to nearly $1 billion. Surely these COLAs can be capped.

Eventually most federal transfer payments -- except for Social Security and other contributory programs -- must be subject to a means test. It is senseless for a person who retires with a plump pension to pay the same Medicare deductible as poorer citizens. Eventually, too, the nation must shift away from growth-retarding taxes on capital and investment and toward much more effective taxes on consumption. Just as the market crash and the heightened global outcry over the U.S. deficit may force the nation to take steps now that should have been taken years ago, so they may also move an aroused people to adopt sensible policies to enhance growth and employment for the years ahead.