SEN. KENNEDY believes that economic policy will be the winning issue in his campaign against President Carter. If the senator does well in the Pennsylvania primary Tuesday, it will probably have been in considerable part because economic distress was finally taking its political toll on the president.

What is the Kennedy alternative? It begins with direct intervention -- mandatory controls on wages and prices, and rationing of gasoline. He would maintain the controls for two or three years, using the time to cut taxes for greater investment and productivity. He isn't against a balanced budget, he said in an interview with Art Pine published in this newspaper today. His objection to the Carter policy is that it places too heavy a cost on the unemployed and on consumers.

The central point of the Kennedy plan is the tax cut that would stimulate investment and raise productivity. There is an interesting parallel here to some of the Republicans' thinking. Mr. Kennedy does not embrace anything so crude as the Kemp-Roth promise that a massive tax would promptly pay for itself, and much more, in a great burst of business expansion. Kemp-Roth is the Keynesian logic exaggerated to a degree that would have staggered poor Lord Keynes.Sen. Kennedy argues, more cautiously, that in an atmosphere of stable prices and lower taxes, people would save more, invest more and produce more. That rising production would, in turn, be his solution to inflation when the controls came off.

Something like that actually happened in the early 1960s. Those were the halcyon days of fast growth and low inflation to which everyone in American politics yearns to return. The debate isn't over its desirability, but only its possibility. The people who most deeply believe it possible are liberal Democrats and conservative Republicans. Unfortunately, it's the others -- the people in the middle, who consider the whole concept utterly unreliable -- who are correct. The high and sustained growth rates of the early 1960s were not the result of simply a tax cut, and simply cutting taxes cannot restore them. Incidentally, since no one really knows why American productivity has ceased to rise, it is dangerous to assume that anyone really knows how to remedy it.

To end inflation, the crucial questions have far less to do with technical economics than with social equity. How is the country to hold wage increases in line with productivity, when productivity increases are zero? How is the government to distribute real costs, like the rising price of foreign oil, when it means cutting into somebody's income? How is society to accomodate disruptive change, like greater foreign trade, that benefits most Americans but costs some their jobs? Neither Sen. Kennedy nor President Carter has met these questions satisfactorily. Until the country finds its way to better answers, the inflation will continue.