AS PRESIDENT-ELECT Clinton and Vice President-elect Gore look toward Jan. 20, they must confront the problem of reconciling their environmental rhetoric with economic reality. Much is promised: Al Gore's environmental commitment is unprecedented for a vice president and adds to pent-up pressures to address environmental concerns.

But this pressure comes during a flat economy and, thanks to Ross Perot, a heightened concern for our ballooning federal debt. These problems will seriously constrain the available options. As forest economist Randal O'Toole said, "the federal deficit has become the nation's No. 1 environmental threat."

We see a resolution in Senator Gore's book "Earth in the Balance." He links fiscal prudence with environmental concern when he proposes that "the first and most obvious changes involve the elimination of those public expenditures . . . that encourage and subsidize environmentally destructive economic activity." His position merits the support of both the National Taxpayers Union and Greenpeace. This opportunity was missed by the self-professed "fiscally conservative" administrations of the past 12 years.

But if the new administration is to successfully advance such reforms, it must have a strong and consistent messenger to forcefully articulate this vision.

Fortunately, one exists. The Council on Environmental Quality (CEQ) is an unused treasure. Created in 1970 by the National Environmental Policy Act (NEPA), it was to be the ecological equivalent of the Council of Economic Advisers, "to make and furnish . . . recommendations with respect to matters of (environmental) policy." But it never exercised a strong voice, and under the Reagan administration its funding was drastically cut. Rather than employing the CEQ as an instrument to advance reforms, the Reagan and Bush administrations simply shunted off, defunded and ignored it.

The CEQ is required by law to publish an annual environmental-quality report. This volume can be used to show innovative ways to address environmental problems. Many such opportunities exist.

For example, west of the 100th meridian, the federal government owns 50 percent of the land. These lands and waters are prime candidates for such reform. The growing field of environmental history documents the century plus of abuse which has plagued these lands as they were exploited by one constituency after another. The policies of government agencies were consistently rigged to benefit special interests. Heralded reforms only changed the channels of political control; they did not pull the plug.

Today the West suffers from the bureaucratic residual of the well-intentioned Progressive Era reforms of the late 1800s and early 1900s. Under the Progressive Era's model, modern science and technology were to advance the public interest. Federal agencies such as the U.S. Forest Service (1896) and the Bureau of Reclamation (1902) were created to provide omniscient, benevolent and far-sighted management.

But they didn't. In reality, these agencies led to a century of government mismanagement and special-interest plums. Here, as in Eastern Europe, socialized management has failed to meet high environmental or economic standards while eroding ethics of those who work in or deal with the agencies.

This is shown in virtually every government land-management agency: In the Northern and Central Rockies, Forest Regions 1 and 2, every forest lost money in fiscal year 1991, while the Forest Service promoted, through creative accounting and outright subsidies, clear-cutting on lands that would not be logged without government help.

The Bureau of Land Management short-changes wildlife and encourages overgrazing while charging far below market rates for livestock. The Mining Law of 1872 allows firms to acquire minerals with no royalties, and then claim the land for nominal sums. The Bureau of Reclamation and the Corps of Engineers subsidize the damming of free-flowing rivers to the benefit of a few politically powerful irrigation interests.

Politics distorts National Park Service management of sensitive ecosystems and leads to massive disturbances of supposedly protected areas. These are the predictable consequences of political management.

All of these abuses are ecologically and economically wasteful. They continue, of course, because the interests who benefit from these arrangements fight to maintain their favored status. They see their way of life threatened by reforms.

They are not paranoid. It is threatened, and should be. Most of these government programs are disguised welfare. But in the mountains and on the plains as elsewhere, welfare generates dependency, not wealth. A program's existence should not guarantee its continuance.

Perception of our fiscal crisis can drive these overdue reforms. By making users of federal lands, including recreation users, pay their own way, we can address both budgetary and ecological concerns. Hard-nosed analysis must be applied to other government programs as well. For example, government-subsidized coastal flood insurance, in addition to being a subsidy for wealthy home builders and buyers, increases seaside development in ecologically sensitive areas.

In this world of scarcity we should always combine environmental concern with economic awareness. The Council on Environmental Quality can articulate these visions. Just as the Council of Economic Advisers has at times provided a strong voice for innovative economic policy prescriptions, the CEQ can provide a strong platform for environmental reform. If the environmental promises of our new administration are to be honored, they must harmonize the environment with economic forces. The CEQ can explain and advertise the appropriate reforms.