LAUGHTER KNOWS no politics, but politics is a rich source of laughter. The Capitol Steps, a boisterous bipartisan bunch of Hill staffers, know this, so they spend their spare time performing musical satire, skewering political targets, regardless of affiliation.

The troupe's self-titled debut album was recorded live at the Shoreham Hotel's Marquee Lounge (Mark Russell's former haunt) shortly after the 1984 presidential election.

The self-penned material is catchy and clever, Mad-magazine-type spoofery set to familiar pop songs and show tunes. In addition to dropping a lot of well-known names, the Steps drop the bomb on nuclear defense in "Mutual Annihilation Society" and put a very funny financial spin on the "Annie" chestnut "Tomorrow," which in the Steps' hands becomes "To Borrow," a paean to the purchasing power of plastic. The group also forces its wit and will on melodies by Gordon Lightfoot ("The Wreck of the Walter Fritz Mondale") and Leonard Bernstein ("Mario"), among others.

Subtle it's not; funny it is. But without sight gags and other visual distractions, the record often exposes imperfections of voices and phrasing. The album is well recorded and enjoyable enough, and serves as a souvenir of the political times. But, like most comedy records, it wears out its appeal after one or two spins.

THE CAPITOL STEPS -- "The Capitol Steps" (self- released); appearing Friday at 8 at the Shoreham Hotel Marquee Lounge, to benefit United Cerebral Palsy.