WE are beginning to see the costs of hiring a finance minister who has to be trained on the job. What Mr. Martin has just declared, with the release of his economic "update" last week, is this: Everything I have ever believed about the economy, from deficits to inflation to industrial policy, was wrong. Everything I have ever said on these subjects until now was complete and utter flapdoodle.

Admitting one's mistakes is admirable, but it does not fill the passengers with confidence to hear the pilot announce, several hours into the flight, that he has just discovered where they are.

Yet thanks to the endless gullibility of the Canadian media, this belated embrace of Economics 101 - yes, I see it now: High deficits do lead to high interest rates - was treated as an important departure in policy. The Finance Minister allows that some day, when he gets around to it, he might like to balance the budget, and even his critics take it as a sign that the government is now seized of the need to get control of its finances.

Thus the outer limits of the possible, the Ultima Thule of fiscal policy, has been defined as a balanced budget. Mr. Martin has done his best to let everyone know how savagely difficult this will be; meanwhile, "massive cuts" are said to be needed even to meet his interim target of $25-billion in 1996-97. In short, the Finance Minister's understanding of fiscal matters has reached circa-1985 levels. It is gratifying to learn he now thinks the deficit is a problem. But the deficit isn't the problem any more; it's the debt. It was fine to aim for a balanced budget 10 years ago, but $300-billion in debt later, it's simply inadequate.

What does a balanced budget mean? Even if Mr. Martin followed the C. D. Howe Institute's advice and did it in four years, it would mean roughly this: $150- billion in taxes, for $105-billion in spending. That is, to balance its budget overall, the government would have to run a massive operating surplus to cover what will then be the $45-billion annual cost of interest on the debt. And to keep it balanced, the government would have to go on doing so. Three dollars in taxes for two dollars in services - this is balance?

And that's the rosy scenario. The debt has grown so large relative to the economy that any balance in the budget is precarious at best. The slightest twitch in interest rates is enough to launch the debt spiral again. We'll only really be safe when we have cut the debt down to size, and so reduced the cost of servicing it. That means pushing the budget into surplus, and soon, before the next recession blows the debt further out of reach.

You can see in this light just how trivial the Finance Minister's $25- billion deficit target really is, notwithstanding the claim that he must make $9.4-billion in cuts over two years to get there. (A good first step would be to ban the practice of summing cuts across years. This is akin to adding up the temperature on different days, and concluding that over the course of a week it was 120 below zero.)

Fully $3-billion of the $6.3-billion that Mr. Martin is allegedly over budget in 1996-97 is accounted for by the inclusion of a "contingency reserve." All he has to do is not spend this preposterously huge reserve, and he "cuts" $3-billion. He added another $1.3-billion by padding his interest-rate forecast. That leaves $2- billion to cut - out of total program spending of $119-billion. Piece of cake.

Why all the hype about this largely inconsequential target? Mr. Martin goes on at length about his "credibility" with Canada's lenders. In point of fact, capital markets are not terribly concerned with the precise figure for the deficit in any particular year. What matters is the trend. If Mr. Martin really wanted to convince them of his determination to turn that trend around, he wouldn't target a slippery thing like the deficit, dependent as it is on forecasts of inflation, interest rates and growth. He'd set targets for spending, over which he has much more control.

If the Finance Minister issued a plan to cut spending by 20 per cent over four years - the kind of cuts needed to reach surplus territory - does anyone think the markets would care if he missed this or that deficit marker en route? But since he doesn't want to cut spending, he sets straw- man deficit targets instead. To make the feat seem harder than it is, he puffs up his projections with billions in phony spending. And after such herculean efforts to meet his target have exhausted all avenues for cutting spending, well, that leaves tax increases - to balance the budget. For the real target, dear reader, is not the deficit, but you.