LATE LAST MONTH, a temporary special proscutor appointed under the 1978 Ethics in Government Act cleared Tim Kraft of allegations of cocaine use. Kraft, who stepped down as the manager of Jimmy Carter's reelection campaign last September when the allegations surfaced, expressed anger and frustration about the increased hardship and cost of defending himself once a special prosecutor was appointed, even though the allegations proved baseless.

The Kraft case followed by a year a similar investigation of alleged cocaine use by Carter White House chief of staff Hamilton Jordan. As in Kraft's case, the 1978 ethics act compelled Attorney General Benjamin Civiletti to request a special prosecutor, though he "had little confidence in the merit of the accusations." While finally exonerated, Jordan, like Kraft, incurred enormous legal fees and his reputation was unfairly tarnished.

The Kraft and Jordan cases raise serious questions about the wisdom and the fairness of the legislation to appoint a temporary special prosecutor to investigate allegations of wrongdoing by White House staff and high-ranking executive officials. They seem to confirm the pessimistic forecast of Edward Levi, President Ford's attorney general, who warned that within a short time of the law's enactment a crowd of special prosecutors would be scurrying around investigating trivia. The use or nonuse of cocaine hardly seemed to be the kind of official corruption or abuse of power which presumably motivated the legislation.

As a result, the special prosecutor legislation has slipped into special disrepute. Attorney General Civiletti "questioned the basic fairness of the law." Carter White House counsel Lloyd Cutler suggested major amendments. This newspaper and others have attacked it in a series of scathing editorials.

Any rush to judgment, however, should be slowed long enough for the Reagan administration and the Congress to consider the other side:

That the law was intended to be sweeping -- and for good reason.

That, despite the Jordan and Kraft cases, the experience of the Carter administration demonstrates the need to resort to special prosecutors frequently.

And that repeal of the law would invite the day when allegations against high-ranking officials of the administration in power are again investigated in a way that erodes public confidence in our system of justice.

There is a common misunderstanding about the special prosecutor legislation: the belief that it was designed to prevent any possible recurrence of a situation like Watergate. Consequently, when the statute becomes involved in cases bearing no resemblance to Watergate, it appears to be a loose cannon on deck, going off in unanticipated situations.

In fact, while the issue did arise out of Watergate, the 1978 legislation ultimately addressed a much more common situation: Congress found compelling evidence that the Justice Department always has difficulty investigating allegations of wrongdoing by high-ranking officials of the admnistration in power or of others close to the president.

The attorney general is well aware of the serious political fallout that can result from such investigations for the president who appointed him. As Watergate Special Prosecutor Archibald Cox has said, "the pressures, the divided loyalties are too much for any man, and as honorable and conscientious as any individual might be, the public could not feel entirely easy about the vigor and thouroughness with which the investigation was pursued. Some outside person is essential."

Thus, the special prosecutor legislation does not stem from the fear of a Justice Department corrupted, as in Watergate. Rather, it is premised on the view that even men and women of unquestioned integrity will encounter an unavoidable conflict of interest when faced with the challenge of investigating the president, or a person with close personal or political ties to the president. The impetus for the legislation (and continuing strong support) came from the American Bar Association.

The legislation recognized that the problem neither began nor ended with Watergate. In practically every recent administration, controversy has erupted. In the Eisenhower administration it was over Sherman Adams. There was Bobby Baker in the Johnson administration and Spiro Agnew in the Nixon administration.

With this record in mind, Congress in 1978 provided for the appointment of a temporary special prosecutor in cases judged inappropriate for Justice Department handling because the target was a high-ranking official of the president's administration. In such cases, the attorney general has up to 90 days to conduct a preliminary investigation; if he cannot dismiss the allegations as frivolous or insubstantial, he is required to apply to a three-judge panel for appointment of a special prosecutor whose jurisdiction would be defined by the court. Independence is guaranteed by the statute.

The Carter administration's experience demonstrates both the need for frequent resort to special prosecutors and the consequences when an administration resists their use. The last administration lost much of the public's confidence by wrestling futilely with exactly the kind of cases for which the special prosecutor legislation was designed.

In the summer of 1977, newspaper accounts reported a range of questionable banking practices by Bert Lance, the director of the Office of Management and Budget and President Carter's close friend and confidant.

Ultimately, Lance became the target of an investigation by the Senate committee that had confirmed him for OMB and the subject of at least four separate executive branch inquiries. A torrent of adverse publicity forced his resignation.

While the special prosecutor law was not on the books when the Lance case surfaced, the Carter administration had already endorsed its enactment, and nothing prevented the appointment of a special prosecutor. Yet the Justice Department insisted on handling the case (although Attorney General Griffin Bell stepped aside because of his close personal friendship and business dealings with Lance).

It didn't wash. The Carter administration could never credibly investigate Bert Lance. He was much too close, personally and politically, to both the president and the attorney general. The press and congressional Republicans attacked the pace and credibility of the investigation repeatedly.

Disclosures of Lance's dealings ended the Carter administration's honeymoon, but the case became a long-playing nightmare only after the decision not to appoint a special prosecutor.

In contrast, the episode over the Carter peanut warehouse demonstrates how well a special prosecutor can work in a sensitive case.

In March 1979, newspaper reports linked Bert Lance's national Bank of George with loans to the Carter family peanut warehouse. The reports also alleged that Billy Carter repeatedly had altered records and in 1976 pledged the same collateral twice to conceal a $500,000 deficit on a loan from Lance's bank. Lurking close to the surface was the more serious possibility that Lance's bank used the peanut warehouse as an illegal conduit to make loans or contributions to the 1976 Carter campaign.

Although the special prosecutor legislation had been enacted several months before, Justice Department higher-ups again strenuously resisted going that route, citing an exemption in the law that allowed Justice to continue ongoing investigations. Justice recognized that the sensitive nature of the case demanded some special treatment. But it suggested a special review panel within the department or the selection of a highly respected individual from the public sector to review the investigation. These suggestions unfortunately were reminiscent of the proposal by the Nixon White House to have Sen. Stennis authenticate the Watergate tapes.

The Republicans and the press had a field day. Amid mounting pressure, Attorney General Bell and Assistant Attorney General Phil Heymann retreated, and within several days, they announced the appointment of Paul Curran, a highly respected former U.S. attorney from New York (a Republican appointee), as a special counsel. They maintained, however, the Curran would need Justice approval to seek indictments or even to grant immunity to witnesses.

Another round of criticism began, led by Senate Majority Leader Robert Byrd. The whole point of having outside counsel was to reassure the public that the investigation would be searching and impartial; keeping Justice Department strings on Curran undercut that aim. Three days later, Bell and Heymann relented, giving Curran complete independence.

From that point on, the contrast to the Lance case that had dragged on endlessly was stark. Media attention to the peanut warehouse situation ceased almost instantly. Confident that the investigation was in good hands, the press and Congress were satisfied to wait for Curran's report.

Seven months later, Curran issued his report clearing President Carter and his brother of any criminal violations. The media accepted his findings, and the public followed suit. New York Times columnist William Safire, the administration's toughest critic, who won a Pulitzer Prize for his searing exposes on Lance, wrote, "Nobody can be cynical about a government which does this" -- an independent investigation including a deposition by the president. It is impossible to imagine that a Justice Department report could have received the same reception.

Bell's and Heymann's obvious reluctance to appoint a special prosecutor reflected the prevailing Justice Department attitude. The professional prosecutors at Justice have regarded the idea of special prosecutors as a total affront. Yet the special prosecutor legislation does not impugn the integrity of ability of any attorney general, or of any man or woman working in the Justice Department.

The law simply recognizes that no special arrangements by the Justice Department can provide the necessary assurance of independence when investigations involve high-ranking executive officials, or others close to the president.

Unfortunately, when reports of Billy Carter's dealings with the Libyan government reached Justice, Civiletti did not seek appointment of a special prosecutor. The statute did not require it, since it covers only those holding certain specified offices, but there were obvious difficulties involved in satisfying the public that a president's brother could be investigated fully and fairly.

The decision was costly. In October 1980, the special Senate committee investigating "Billygate" sharply criticized Civiletti for withholding crucial intelligence information from the attorneys handling the case, and for predicting to President Carter that no criminal proceedings would be instituted if Billy registered under the Foreign Agents Registration Act.

Ironically, the Billy Carter investigation--"honestly and conscientiously conducted," as the Senate committee stated -- demonstrated just how steadfast Justice Department professionals can be in their desire to apply the law even-handedly.

But advocates of the special prosecutor concept have never questioned the professionalism of the Justice Department. They have simply predicted that this professionalism would not be enough to carry the day in a particular class of sensitive cases. And it has not been.

Hamilton Jordan and Tim Kraft both may have suffered because the Justice Department had fought so fiercely against special prosecutors in earlier cases. The administration had signaled to the press and the public that appointing a special prosecutor was an extraordinary step to be avoided at all costs. To many, it implied probable guilt of wrongdoing. Jordan and Kraft may have twisted in the wind, unfairly, not because of the way the statute had been adminsitered.

The special prosecutor law isn't perfect; it could benefit from careful review. The plights of Jordan and Kraft justify concern. The statute represents Congress' conclusion that the value of having allegations against high-ranking executive officials investigated in a way that satisfies the public outweighs any hardship that might result to an individual who is subject to the special investigation.

Yet the hardship can be substantial, particularly when the press coverage of a case is blown out of proportion due to misunderstanding of what appointment of a special prosecutor means. In a case like Jordan's, reimbursement for attorney's fees can mitigate the hardship, without undermining the goal of the law.

However, other ideas for amendments which critics have suggested would be less desirable. For example, giving more discretion to the attorney general would be troublesome.

When wrongdoing by a person close to the president is alleged, crucial decisions on how to proceed with an investigation should be made by a special prosecutor, almost from the outset. Likewise, if the coverage of the statute were narrowed, to reach only offenses involving "abuse of federal office," for example, it would not have reached Bert Lance's questionable banking practices, or Spiro Agnew's accepting kickbacks while governor of Maryland (except for the fact that he continued receiving money while vice president).

What is probably needed more than any statutory amendments is an effort by the government and the media to put the appointment of special prosecutors in perspective.

This newspaper has expressed the fear that "appointment of a special prosecutor is likely to become a routine event" and urged that "special prosecutors ought to be saved for special cases." This misses the point. Congress has recognized that cases alleging criminal conduct by a high-ranking executive official are by definition "special cases." Under the circumstances, the public, the administration in power, and the target of the investigation all benefit if resort to a special prosecutor becomes a "routine event," which occurs expeditiously, as a matter of law, in certain cases.