BUDGET AGREEMENT HOLDS FEW SURPRISES

So there is an agreement between the president and congressional leaders on spending and taxes. One that balances the budget by the year 2002, we're told. Perhaps this is what the American people had in mind when they sent back a Republican Congress to work with the first Democratic president to be re-elected in 60 years. In so doing, those voters had to know there would be no bold new departures, no pathbreaking initiatives.

First, the broad outline.

-- Republicans finally got the capital-gains tax reduction they have been seeking. The new rate will be cut to 20 percent from 28 percent, and middle-income rates to 10 percent from 15 percent. For assets held at least five years there are still further reductions.

-- For most homeowners there will be no capital-gains tax on the sale of a home in which the profit is below $500,000.

-- The Republican idea of a $500-per-child tax credit is in there too, with some Clintonesque twists: It will apply to families making as little as $18,000 annually who owe no income tax. Republicans were also able to guarantee that it will apply to single parents making as much as $75,000 and to two-earner couples making up to $110,000.

-- A further GOP victory is the extension of 100 percent deductibility of health insurance for the self-employed. Big companies have long enjoyed this.

-- Republicans also won an increase in the estate-tax exemption from the current $600,000 to $1 million over 10 years -- $1.3 million for small businesses and family farms. This should be nothing more than a way station on the path to total elimination of this punitive and unfair death tax.

-- There will be a host of new Individual Retirement Accounts.

-- A children's health-care initiative will be paid for by a phased-in, 15 cent-a-pack increase in cigarette taxes.

Overall, some taxes were cut by about $140 billion, while tax increases (mostly tobacco and air tickets) totalled about $50 billion for a net reduction of about $90 billion. Over five years, in a $1.6 trillion economy, this is pitifully small. The package also includes $40 billion in education tax breaks, mostly for the president's $1,500 Hope Scholarship tax credits. There is every reason to believe that these will insulate higher education from cost pressures and encourage officials in that sector to further jack up tuition and fees.

There is some good and much bad in this package. Spending demanded by the president to pay off his constituencies will rise faster as a result. Flawed also are certain key assumptions, first among them that there will be no recession over the five-year period, which would make the current lengthy expansion incomparably the longest ever.

Deferred are vital questions: When will the GOP find its sea legs in pushing for the simpler, fairer, flatter tax code it has so often declared to be its goal? The worst thing about this agreement is that it moves us toward more, not less, tax-code complexity. That reason alone will be enough for some principled Republicans to oppose it. Aside from that, left-wing Democrats appear to be left entirely out in the cold.

In the main, though, it is an incumbent-friendly agreement helpful to those who claim they are governing. Careful observers will note how far we have come from the days when a newly elected Clinton administration was raising taxes, proposing a bogus stimulus spending package and nationalized health care. From there to today's GOP-driven tax cuts -- however small -- is a long way indeed.