(FORTUNE Magazine) – "The Republicans have won the deficit issue!" GOP polltaker Frank Luntz exulted recently. "What could be better?"

Losing the deficit issue, that's what. One of the perversities of politics is that elected officials often dread seeing their cherished legislative objectives actually become law.

When that happens, they have nothing new to promise and no way to distinguish themselves from their opponents. Republican pollster Tony Fabrizio terms this phenomenon "victory disease" and worries that his party has a bad case. Now that the Democrats have agreed to balance the budget, cut taxes, and restrain federal spending--all longtime GOP bumper stickers--what can Republicans criticize? The Republican Party hasn't been so bereft in victory since the Cold War ended. "I'm not convinced we as a party are prepared for this vacuum," Fabrizio laments.

The biggest beneficiaries of the agreement are President Clinton and, eventually, his Democratic Party. From now on, most budgetary battles will be waged on turf friendly to Democrats. Congress will no longer be consumed with finding ways to cut government spending--Republican territory--and will focus instead on how to allocate the revenue it has. As it happens, the programs Americans like best--education, health care, environmental protection--have all been staked out by Democrats and are central to their desire for federal activism.

The post-deficit world will be especially hostile to the Republicans' yearning for lower taxes. If the budget accord proves anything, it is that voters and their elected officials are determined to end the deficit. Anything that widens it, including tax cuts, is a move in the wrong direction. The only reason tax cuts are part of this deal is that sugar was needed to make Congress swallow the spending cuts needed to balance the budget by 2002. Another opportunity to mix the two won't come along anytime soon.

Future changes in government outlays, therefore, will likely be made at the margins. And in keeping with the zero-deficit consensus, they will have to be paid for. The first place some lawmakers will look is the list of things they like to call "corporate welfare." These range from export subsidies to tax incentives for ethanol. Robert Shapiro of the Progressive Policy Institute, a relatively conservative Democratic think tank, says the next several years will provide "the most conducive environment possible for an attack on industry subsidies." Corporate America: You've been warned!

Of course, Republicans don't walk away from the deal empty-handed. Far from it. The GOP has lobbied hard for more than a decade to enact the tax cuts included in the plan. Stockbrokers, homeowners, and investors alike can rejoice that the capital gains tax will be reduced on a broad range of assets. Social conservatives are grateful at the prospect of a $500 per child tax credit. And small-business owners, another Republican constituency, will celebrate a rollback in estate taxes. What's more, the future of tax policy isn't a dead end for Republicans. With the deficit no longer a perennial problem, they will be free to engage in unencumbered attacks on Americans' least favorite institution: the income tax. Newt Gingrich told NBC News that the budget plan "is simply the new launching pad for the next argument"--tax overhaul. Expect the GOP to talk a lot about it, especially the flat-tax alternative. But don't expect anything to happen unless the Republicans retake the White House in 2000.

The lawmakers debating the issue probably will be pretty much the same folks who serve in Congress now. One byproduct of the budget agreement is that incumbents will be harder to unseat. Says Democratic pollster Mark Mellman: "Very few Democratic challengers are going to beat Republican incumbents by accusing them of balancing the budget." And vice versa. A truce on the budget means the odds are strong that the GOP will keep control of Congress in 1998.

In the meantime, Congress will bicker over details, sometimes vociferously. But don't lose heart. The deficit's low level (about $70 billion this year), combined with the flourishing economy, makes reaching balance relatively easy. "They are basically letting the budget balance itself," says Rudolph Penner, a former director of the Congressional Budget Office.

Unfortunately, the tranquillity can't last. When annual deficits aren't an issue, longer-range shortfalls will come more clearly into view. The President and Congress will name a commission this autumn to study how to keep Medicare afloat. Social Security's problems will be addressed later. Anticipate heavy fighting--but not right away--over how to raise the money to get both jobs done. It's also probable the deficit will come back on its own. Even if the economy continues to expand, several fiscal sleights of hand in the plan are already casting doubt on whether 2002 will bring the nirvana of balance. One way or the other, declares GOP consultant Mike Murphy--almost wistfully--"the deficit will be back!"

REPORTER ASSOCIATE Wilton Woods