EDITORIAL : HAPPY DAYS: A TAX CUT; CHEERS TO BOTH PARTIES FOR FINDING COMMON GROUND AND SHARING GOOD FORTUNE WITH MIDDLE-CLASS AMERICANS.

PRESIDENT Clinton and congressional Republicans have forged a historic budget agreement that balances the budget while providing Americans - especially the middle class - with their first major tax relief in 16 years.

While the agreement is a victory for bipartisanship, it is also a testament to the power of a booming economy. A surge of new revenue into the Treasury has lowered the deficit and allowed negotiators to increase the size of the tax cut - originally targeted at $85 billion over five years - to more than $90 billion.

Unless there is a last-minute glitch, the budget package would save $140 billion in projected spending over five years, lower estate taxes, slow the growth of Medicare and Medicaid, provide tax breaks for education, and raise the cigarette tax by 15 cents a pack by 2002.

Is there a cloud in this silver-lining era of an achievable balanced budget? There could be if lawmakers break their commitment to eliminate the deficit and instead embark on another era of government spending and irresponsibility.

For now, however, the strategy of sharing the wealth with the American people, a strategy that is coupled with a balanced budget in five years, is certainly reason to toast Washington.

And despite all the partisan fighting in the past few years, both sides are to be commended for holding fast to the major goal: seeking to end deficit spending while providing relief for middle-class Americans. To that end, Democrats and Republicans made major concessions.

Republicans gave ground so that the working poor who earn less than $25,000 and who do not owe taxes would receive the credit as a tax refund to offset Social Security and other taxes. The GOP had fought to limit the credit only to those who actually pay income taxes, but the White House said that would be unfair to many workers, such as teachers, firefighters and police officers.

Clinton also won his prized tax incentives for college tuition, a centerpiece of his 1996 re-election campaign. Negotiators settled on his $1,500 tax credit for the first two years of college tuition, as well as a 20 percent credit for the first $5,000 of student tuition costs in a four-year college.

While the GOP yielded to Clinton on the education issues, the president gave way to the Republicans on the capital-gains tax for investors, agreeing to reduce the levy on the sale of stocks, bonds and other assets from 28 percent to 20 percent for taxpayers in the highest income bracket and from 15 percent to 10 percent for those in the lowest.

And in the heart of the measure is a Republican-inspired child tax credit that begins at $400 next year for children 16 and under, and increases to $500 in 1999. In a compromise, families with incomes between $25,000 and $110,000 annually would receive the credit to offset income taxes.

So much for all this good news. In the near future, the debate must shift toward reforming entitlement payments, especially Medicaid and Medicare. Already, these programs account for 40 percent of the budget, and that percentage will skyrocket when the huge baby-boom generation begins drawing on the system.

The Senate tried to tackle Medicare reform this year, but its effort was rebuffed. Legislators have some time to be complacent, but not much.

For now, however, most Americans can revel in the politics of consensus and a robust, healthy economy.

Happy days are here again. Cheers.