The Reagan administration's annual economic and budget reports are full of gloating. We're reminded that the nation is in its "longest peacetime expansion." Unemployment is at its lowest point of the decade. Inflation is under control. Is Reaganomics in triumph? Not if you listen to the presidential campaign. Democrats are predictably critical. Even Republicans aren't so confident that they're simply promising "four more years."

What to believe? Forget Reaganomics. It's a slogan, not a policy. To Reagan's champions, it's wonderful: low inflation, a strong economic recovery. To his critics, it's awful: huge budget and trade deficits. Confusion is the message. Somehow this president missed his chance to mold public opinion. His legacy stops well short of being a set of ideas that commands popular understanding and support.

It's a great failing of the Reagan years. Our economic debate lacks any core ideas about the practical limits of government's economic powers. People believe in nothing -- but expect everything. There's great cynicism about the power of economists and economic theories. And yet, the public expects government to produce prosperity, higher living standards and job security. The paradox reflects a quarter century of false economic advertising.

Successive waves of economists exaggerated the potential of their theories. The Keynesians claimed that -- through clever tax and spending changes -- they could abolish business cycles. The monetarists argued that rigid control of the money supply would produce a stable, inflation-free economy. "Supply siders" contended that lower tax rates would increase economic growth so much that higher tax revenues would end budget deficits.

These unrealistic claims fostered a popular illusion. People began to believe that government policies create economic growth. For economists, the illusion was self-serving; it was their ticket to power. But in fact, the economy expands because businesses and individuals are striving to raise their profits and incomes. That's the essence of capitalism. Government policies can improve or impede the process. But the basic impulses for growth are largely spontaneous.

Dwight Eisenhower was the last president with sensible economic ideas. Unlike his successors, he didn't make wild promises. He feared inflation, fought to balance the budget and believed in private enterprise. In the 1950s, these notions were ridiculed as old-fashioned. But they have survived the test of time better than the elegant theories that followed. Keynesian economic policies -- adopted in the 1960s and pursued in the 1970s -- ignited inflation. Supply-side economics led to huge budget deficits.

Eisenhower wasn't duped into thinking that government created economic growth. His opposition to inflation and big budget deficits reflected his belief that bad policies might hurt confidence and damage the economy's capacity for growth. He resisted pleas for tax cuts and knew that periodic recessions were necessary to prevent inflation. There were three recessions in his years (1953-54, 1957-58 and 1960-61). Even so, his record compares favorably with anything since, as the accompanying table -- giving average inflation and unemployment rates -- shows.

President Reagan might have reestablished Eisenhower's common sense tradition. He muffed it. His convictions mirrored Eisenhower's: faith in the private economy; fear of inflation; a belief in balanced budgets. Where he followed these convictions, he succeeded. His record is far better than the table indicates. The high average unemployment reflects the severe 1981-82 recession that reduced inflation. Likewise, the inflation average is held up by the high inflation rates inherited from the 1970s.

But Reagan failed, because he abandoned his conviction and allowed the budget deficits to explode. The deficits will surely complicate the job of the next president. They may also hurt future living standards by reducing investment. Most important, Reagan's indifference to the deficits perpetuated the make-believe quality of our economic debate. If he didn't take these problems seriously, why should anyone else?

We need a public climate that tolerates unpopular actions that serve the nation's long-term interests. Eisenhower's convictions fostered such a climate. They made it possible to resist inflation. They made it possible to limit budget deficits. Eisenhower had three surpluses -- two more than in all the succeeding years -- and his deficits were mostly small. Once the faith in sound money and sound budgets became unfashionable, the political system was rudderless. It was swept along by every new intellectual fad.

Eisenhower's philosophy was not laissez-faire. As economist Herbert Stein has pointed out, Eisenhower didn't believe in passive government. In recessions, he let the budget slip into deficit. As the nation grew richer, he expanded government spending. But his basic convictions imposed limits on government. Not all desirable programs could be afforded immediately. Government couldn't create perpetual booms. Present self-restraint was necessary to protect the future.

Reagan squandered a chance to recast the economic debate. Little wonder there are such conflicting judgments on his economic performance. Government policies must rest on sound ideas that are widely understood. Mystifying economic theories will not do. Reagan might have defined the practical and possible. He might have restored a sense of discipline. Instead, he leaves a catchy phrase. In the end, Reaganomics is little more.

---ECONOMY SINCE EISENHOWER----

----------- INFLATION ---UNEMP.

1950s ---------- 2.1% ---- 4.5%

1960s ---------- 2.3% ---- 4.8%

1970s ---------- 7.1% ---- 6.2%

1980s ---------- 5.8% ---- 7.7%