IN A LIFETIME FILLED with dramatic performances, last week's will certainly go down as one of the old actor's finest. Just as he promised to do all along, President Reagan sent 15,000 credit starved farmers back to the fields empty--handed when he vetoed a $1.8 billion agricultural aid bill, thereby condemning many of them to bank foreclosure. By so doing, he presented himself as the fearless guardian of taxpayer money, defending the treasury coffers from the raids of special interest groups.

Not that the move wasn't necessary. The government can no longer afford to subsidize an inefficient sector that more than anything else needs a heavy dose of the free market. If the deficit is ever to be tamed, Washington will have to say no to other groups, some deserving, others not. But it is the President's intentions that are in doubt. This week's veto was a token gesture of fiscal sobriety, another in a long series of instances where the President has found a specific and relatively weak group to bear the burden of his deficit. It's not that we object to his efforts to sort out government finances, it's that he's pursuing his objectives in an inequitable manner. And for as long as he refuses to prescribe at least one of the two remedies indispensable to curing deficit ills, namely, slower increases in defense spending and/or increased government revenues, Reagan can make no claim to being the champion of fiscal prudence.

Unless urgent action is taken, it's only a matter of time before the debt bomb explodes. The seriousness of the situation is often lost amidst the economic jargon. Technical disputes abound over the true extent of the problem, but almost everyone agrees that, despite phony supply-side arguments to the contrary, an increasing national debt fuels both high interest rates and an overvalued dollar. Aside from the fact that mortgage financing and business investments remain prohibitively expensive and will exert an increasing drag on the current recovery, high rates force the government to devote more and more taxpayer money to paying interest on the debt, thereby removing these funds from more productive uses. Furthermore, the major threat stemming from an overvalued dollar is that it makes American exports relatively expensive and foreign imports relatively cheap, thus injuring export-oriented American firms and our overall ability to compete in the world market. The end result; a loss of jobs here and an erosion of our standard of living.

Clearly, then, the gap between what government spends and what it takes must be narrowed if we want to see a healthy economy. Washington can achieve this necessary goal either by cutting spending, or by increasing revenue, or by a prudent combination of both. After four years of sustained attack on the welfare state, it should by now be no mystery which course Reagan favors. In its current budget proposal, the Administration hopes to reduce the deficit by $50--60 billion; $40 billion of that savings will come from domestic programs to which the President is ideologically opposed.

BUT THE WHITE HOUSE is rapidly exhausting its options on the spending front. In his first term, Reagan declared war on programs for the poor. Now he has turned his ax on middle class programs like student loans and Medicare. Even if the domestic hacking Reagan wants is actually done, though, huge deficits will still remain well into the next decade. And if this week is any indication, Senators will fight to protect the programs favored by the middle class voters they need in order to return to office. If it's spending the President wants to cut, it will have to be in defense or even more sensitive domestic categories, like Medicaid and social security, the areas he has pledged to leave untouched. And if he wants to continue his arms build-up (which we hope Congress can persuade him to modify anyway) somehow he has to find additional sources of revenue to finance it.

But there may be a way out of the logjam created by the Senate's refusal to accept the President's domestic proposals and Reagan's unwillingness to raise taxes or silence Cap Weinberger's endless pleas for more funds. Experts estimate that the various versions of a tax reform bill which closes loopholes in the current system could bring in as much as a $100 billion, half the current deficit, without increasing tax rates. The tax bills-Bradley/Gephardt for the Democrats, Kemp/Kasten for the Republicans, and the Treasury's as yet unapproved one for the Administration-have added attractiveness in that they are generally equitable and do not cater to any special interest group. Indeed, they are so similar in their fundamentals that the resulting legislation, if any, should satisfy just about everyone. If a good reform is passed, Congress won't have to vivisect any programs, Reagan won't have to raise taxes, and the public will finally see some indication that the deficit might shrink.

But Congress and the President must act soon. If the reforms don't bring the needed revenue and defense remains a sacred cow then taxes will have to be raised. In two years time, with elections around the corner, nobody is going to support a tax hike. For the sake of economic well-being, then, the deficit must be cut. The three ways of doing that are tax reform, tax hike, or fewer bombs. Take your pick. But do it now.