Once again, this city has proved its inability to distinguish between what it thinks should happen, and what in fact will happen. Until almost the last minute, the "informed" stories out of the White House were saying that President Reagan -- reluctantly, to be sure -- would propose to raise taxes in order to reduce staggering budget deficits in the range of $100 billion to $150 billion and even more.

All of his economic advisers told him that raising taxes was a fiscal necessity. Key Senate Republicans -- Majority Leader Howard Baker, Budget Committee Chairman Pete Domenici, Finance Committee Chairman Robert Dole, among others -- told him it was a political necessity.

But everybody (with one exception) was wrong -- not about the need for a mid-course correction in the Reagan program, but in their assessment of what the president would do. The exception was Rep. Jack Kemp (D-N.Y.), who shares the president's supply-side ideology and who never gave up his struggle to preserve the tax cut intact.

If you want "vintage" Reagan economics, there are two sentences in the State of the Union message that tell it all: "Raising taxes won't balance the budget. It will encourage more government spending and less private investment."

Thus, Reagan discarded the warnings that if he didn't boost government revenues, the economy would be wrecked. "I have no intention of retreating from our basic program of tax relief," he said in the State of the Union address.

Do not be misled into thinking that the highly-touted "New Federalism" program is anything but a diversion, a flossy distraction from the real economic problems of today. Even if this attempt to turn the clock back were to succeed, it wouldn't reduce federal deficits for the next three years by one thin dime, add to the GNP by the smallest decimal, or take a single person off the jobless roles.

Domenici and other conservative Republicans fear that with Reaganomics unaltered, the budget will remain out of control, with deficits well over $100 billion in the next few years, to the point where the congressional budget process will have to be scrapped as a meaningless, political embarrassment.

The Democrats, meanwhile, despite an effective televised film response to the State of the Union portraying Reagan as being unfair to the poor and elderly, have failed to come forward with an alternative action program. For example, Democrats don't espouse a federal jobs program to deal with rising unemployment. Reason: a jobs program would add to the deficit, and the deficit will be a key political issue this fall.

It is a sad commentary on the empty-handedness of the Democrats that they would rather not add to the deficit than deal head-on with the jobs issue. In this anniversary of the centennial of his birth, FDR must be turning over in his grave.

But Ronald Reagan believes there is at least one thing worse than deficits, and that is raising taxes. To drive this point home, Treasury Secretary Donald T. Regan made the astonishing statement to the Joint Economic Committee that borrowing to pay for the budget deficits is less "undesirable" than raising taxes to reduce the deficit.

You can search the State of the Union speech for a new commitment to balance the budget in 1985, 1990, or at any time in the future, and you won't find it.

The word the White House is now putting out is that the deficit for fiscal 1982 will be "less than $100 billion," rather than the $109-billion figure that earlier leaked out of the OMB. Then, there is to be a declining (rather than a rising) trend, with the red ink cut by approximately $10 billion in each succeeding year.

There is something slightly ludicrous about Republicans asking to be patted on the back for managing to keep federal budget deficits under $100 billion.

How will financial markets react? Don Regan predicts that the business world, having feared a $152-billion deficit for fiscal 1983, will heave a sigh of relief at something in the $85-billion to $90-billion range.

Even so, the markets will have to believe that the new numbers are something more than eyewash, and perhaps they will. Economic adviser Alan Greenspan, who has seen the more specific budget estimates that will be released Feb. 8, thinks that even after financial analysts make whatever adjustments are needed for "credibility," the deficits will look as if they can be digested.

But as conservative economist William J. Fellner of the American Enterprise Institute remarked to me: "If we see during the (fiscal) year that things are not shaping up (into lesser deficits), then we will have to do something about it by raising consumption taxes."

Secretary Regan claims that despite the enormous deficits that lie ahead, interest rates will come down, provided that the savings rate increases, and provided also that the Federal Reserve (the administration's current scapegoat) keeps the growth of the money supply at a steady, rather than erratic pace.

Time will tell whether Regan is right or wrong. Wall Street experts Henry Kaufman and Albert Woljinower think that interest rates, reflecting a greater total demand for money than the supply, will inevitably go up. Greenspan is more optimistic than he was a few months ago. He now thinks that "the markets are not looking to long-term supply-demand (to determine interest rates), but to the inflation premium."

"The markets are saying they've imposed as large a premium as they are going to impose" -- in other words, long-term interest rates will stop going up. But even if Greenspan is right, that's hardly good news. The nation needs interest rates to come down, not merely to stop going up.

One has to ask, in the end, how Reagan could toss out the advice of virtually all his economic and political advisers, risking a major national calamity. The answer, among those who know him best, like Washington Post reporter Lou Cannon, is that his close brush with death at the hands of an assassin last year convinced him to follow his own deeply-held beliefs and instincts, even when others suggest a more practical political course. If Ronald Reagan won't cut government down to size, he is said to ask himself, who will? When a president has such a deep sense of mission, neither his advisers nor logic count for much. One can only cross fingers and hope for the best.