The Harambee House hotel on Georgia Avenue frequently is cited as symbol of federal spending at its worst -- a politically inspired project into which millions of dollars have been poured with little discernable impact.

The O Street Market, on the other hand, shows what government seed money can do to spur private development in the inner city -- simultaneously improving the community and creating jobs.

Ironically, both are products of the same federal bureauracy, the Economic Development Administration in the Department of Commerce.

EDA is now high on the hit list of agencies the Reagan administration says the government easily could get along without.

Office of Management and Budget Director David Stockman wants to slash the agency in half next year and kill it off the year after that.

Suburban Maryland and Virginia already are getting along without the EDA. They are too prosperous to qualify for help from the agency, whose mandate is to create jobs in areas of high and chronic unemployment.

The EDA does its job by giving grants for basic public improvements that will lead to private development, making or guaranteeing loans to businesses, and financing research.

By federal standards, it's a tiny agency: only 800 persons on the payroll, a $40 million operating budget and $624 million to hand out this year. p

The District of Columbia and local firms collected more than $8 million of the agency's program budget last year, but that's a deceptive number.

The EDA's annual report makes clear that the Beltway Bandits and assorted hangers-on got twice as much of the "local" money as the District government, businesses or agencies.

Almost $5.5 million went to District-based consultants, trade associations, and private nonprofit organizations for technical assistance grants -- the kind of stuff that makes a budget-cutter reach for the red pencil. For example:

A little $3,000 grant to the National Trust for Historic Preservation (What's that have to do with jobs?); $100,000 for the Council of Energy Resource Tribes (Why do Indians with oil wells need federal aid?); $210,000 to the International Downtown Executives Association (What's that?); and $250,000 to the American Institute for Municipal Research, Education and Training (AIMRET or alphabet soup?).

The EDA also poured $100,000 into the Metropolitan Washington Council of Governments (COG) for planning and gave the District planners almost as much. A full $1 million from the EDA financed part of the District's summer-jobs-for-youth program, the most successful weapon against the city's most pressing employment problem -- minority youth unemployment.

EDA money has become an important tool for the District's own economic development office, said local EDA staffer Chris Britton. In several cases the agency has made possible projects that otherwise might falter for lack of funds.

Next year the city expects to get $6 million from EDA which it will match with $4 million of its own money for capital improvement projects to provide the streets, sewers, lighting and the like that will pave the way for business projects in several areas, including the New York Avenue business corridor.

"The beauty of EDA is its simplicity and flexibility," said another local official familiar with the agency's operation. "They're willing to get involved in innovative projects that no one else wants to bother with."

The D.C. Convention Center got its start with an EDA grant. The money went to survey the meeting market to see whether there were enough events to fill up a building, to study convention facilities in other cities and to search downtown Washington for a site.

The EDA study "played a major role in the center decision," said Britton. "There was no other way to finance this study."

The O Street Market also got of the ground thanks to an EDA grant. The agency provided money to put a new roof on the historic market structure, the first step toward preventing further deterioration of the building.

Then the EDA arranged $1.8 million in government-guaranteed loans for minority developer James Adkins to complete renovation and reopen the now-thriving meat and food market.

Rejuvenation of the old market complex drew Giant Food to an adjacent site, giving the deteriorated Shaw neighborhood not only its old-fashioned food center, but a brand new supermarket, and more than 100 jobs.

Shelton Supermarket Inc., a minority firm, also used EDA loans to take over an abandoned A&P store on Capital Hill and maintain supermarket facilities. The Anacostia Economic Development Corp. has gotten major financial support from the agency.

But so has Harrambee House, which is not on anybody's list of government good deeds. EDA got invovled in the minority-hotel venture on orders of Maurice Stans, when he was secretary of Commerce.

Every year since then, Harrambee has gotten a loan or a grant from the EDA. This year's budget includes 609,000 to buy the junkyard next door to the hotel in hopes that cleaning up the neighborhood will make the Georgia Avenue hotel more attractive to customers.

Absent political pressure, the EDA's local track record indicates the agency has been successfully selective in doling out dollars. It refused to finance a D.C. Colisseum proposal from former D.c. Chamber of Commerce chief James Denson, who was forced out of that organization a short time later in a financial scandal. And the agency said "no thanks" to Auto-Train Corp. when that hopelessly mismanaged and now-bankrupt railrod asked for a loan guarantee.

Looking over its record for the last five years, the EDA turns out to have made a modest, but significant contribution to Capital commerce. There's certainly not enough scandal or waste to make a logical case for killing the agency.

But the massive budget cuts the adminstration is determined to impose go beyond the logic of whether a particular program works. This is the politics of imperatives. And the EDA doesn't have enough constituents to resist.