MENACHEM BEGIN'S predictable reaction to President Reagan's Mideast initiative is based chiefly on two grounds: the danger it poses to Israel's security, and Washington's "aberration" from the Camp David formula.

In fact, the prime minister is more affronted by Reagan's challenge to his vision of an expanded land of Israel, but he is careful to disguise this salient issue. Israeli security and the Camp David format constitute the thrust of his argument.

It should be said, therefore, that both of Begin's assertions are ill-founded and, it is hoped, will not be given disproportionate weight by a majority of the Israeli people or by well-wishers of Israel in this country.

The Reagan proposal calls for a freeze on Israeli settlements on the West Bank. How much of a sacrifice would this entail in terms of Israeli security? How much security is provided by the settlements?

It should be recalled that, during the Yom Kippur War of 1973, the farmer-soldier outposts established by Israel on the Golan Heights were the first-security positions" to be evacuated or overrun by the Syrian army. So, for that matter, was the heavily reinforced "Bar-Lev Line" along the Suez Canal.

The current West Bank settlements are populated by fewer than 30,000 inhabitants. In a number of instances these dwellings are regarded by their Israeli owners primarily as financial investments for generous subsequent restituion if, as in the case of the Sinai, they are demolished by future treaty arrangement. In practical fact, the Jewish villages are intended less as a reassurance to Israel's generals than as a political concession to the religionists in Begin's coalition. Financially, they represent a drain on Israel's resources. Militarily, they are all but worthless.

Does the Reagan plan seek Israel's abandonment of other, purely military guarantees on the West Bank? By no means. With full American participation, those assurances are to be negotiated between representatives of Israel, Jordan, the West Bank itself and, if necessary, Egypt.

Interestingly enough, the Egyptian government shares Washington's sensitivity to Israel's legitimate security concerns. There is a remarkable consonance between the views of the Egyptian foreign ministry and those developed by the late Yigal Allon, foreign minister during Israel's most recent labor government. The "Allon Plan" anticipated a crescent of Israeli patrols along the Jordan River, in effect isolating a future West Bank entity from military contact with its eastern Arab neighbors. Cairo has privately accepted this concept.

Additionally, in order to assure demilitarization of the West Bank, Egyptian officials have studied the Austrian State Treaty of 1955, which contains sophisticated provisions for assuring the same goal. It is unlikely that safeguards for sterilizing a postage stamp enclave west of the Jordan will be less effective than those adopted earlier for the much larger Sinai, an area that once encompassed an Egyptian army of 750,000 men and a vast panoply of heavy equipment.

Yet it may be questioned whether a West Bank regime, operating under a Palestinian prime minister, would be capable of honoring its demilitarization obligations, especially if the prime minister were Yasser Arafat. Would not the intensity of Palestinian nationalism, the years of accumulated PLO rhetoric, transform the West Bank into a staging base for guerrilla infiltration under Soviet or Cuban "advisers"?

While the possibility cannot be altogether discounted, those who prophesy such a development as foreordained tend to ignore the First Law of Social Science: Never embark in quest of an idealistic motivation when a venal one is available.

Whatever the PLO chairman's notorious proclivity for attacking Israeli civilians, for ensconcing his irregulars in Beirut's most pitiably congested schools and hospitals, he is nothing if not shrewd -- and ambitious. He did not build a major political following in the Palestinian diaspora by functioning as a naif. If he were seated in Nablus as prime minister of his own West Bank government, receiving foreign ambassadors, traveling abroad to the accompaniment of 19-gun salutes, he is not likely to risk the liquidation of this apotheosis (nor his deputies their patronage appointments) by allowing his militia to fire rockets at El Al planes taking off from Ben-Gurion airport. Indeed, his regime's very proximity to Israel would transform it into a hostage mortally vulnerable to Israeli retaliation.

One must note also that an economic common market has developed between Israel and the West Bank during 15 years of Israeli occupation. That market will not disappear when Israel's military government is dismantled. Each day 120,000 West Bank and Gaza Arabs commute to jobs in integral Israel. Additional tens of thousands of their kinsmen are employed at home in Israeli-sponsored industrial and agricultural projects. A government that tampered with this economic nexus would risk serious unrest among its own constituents.

Perhaps the single most important security reassurance for Israel, however, is the constitutional option advocated by Reagan: the incorporation of the West Bank into a Hashemite confederacy.

This idea, of course, did not originate in the State Department. It has long been a tenet of Israel's Labor party, whose foreign policy specialists have rejected the notion of a Palestinian state not in fear of such an entity's potential strength, but rather out of concern for its anticipated endemic weakness.

Minuscule in area, emasculated militarily, dependent economically on Israel, this enfeebled organism would instantly become the focus of conflicting Arab imperialist ambitions: Jordanian, Syrian, Irawi. The ferment along Israel's eastern border ultimately would prove a more serious threat to the Jewish state than that posed by older, more traditional and stable Arab regimes.

The least dangerous solution of all, therefore, is the one long advocated by Labor's Abba Eban and Shimon Peres -- and now by George Shultz and Ronald Reagan. It is for a quasi-independent West Bank government to be locked into a preemptive Ausgleich with Amman, a bicephalous regime sharing a common frontier, a common economy, a common foeign policy -- but otherwise embracing separate and autonomous domestic personalities. By declaring his preference for this confederative blueprint, therefore, Reagan has deliberately and wisely transcended (but not transgressed) the negotiations that lie ahead under the Camp David formula in order to dissipate the single most persistent misgiving nurtured by Israeli and Pro-Israeli moderates.

In the longer run, finally, the enduring advantage of the Reagan initiative for Israel is the inducement it offers the Palestinians.

That inducement admittedly is not logistical. A Palestinian-Hashemite confederacy will not automatically deliver 2 million emigre Palestinians into the West Bank. Land, plant, and housing are still limited in this attenuated terrain. Conversely, the largest numbers of the Palestinians are already settled: in the West Bank and in Israel itself, in Gaza, in the Hashemite Kingdom across the Jordan, in the Levant and the Persian Gulf, and beyond the Middle East altogether.

To be sure, approximately one-fifth of their numbers, some 400,000 people, most of them now in Lebanon, Syria, and Jordan, remain entirely homeless and confined to refugee camps. It is these latter who will have to be provided for in large-scale agricultural/industrial projects on the West Bank. Presumably generous funding will be supplied by the United States and by other developed nations, as well as by Saudi Arabia, Kuwait, and Oman.

But for the rest of the Palestinian diaspora, the majority, it is not space that is required as much as status. The children and grandchildren of the original 1948 refugees are entitled to the dignity of formal citizenship, the juridical protection of a Palestinian passport, the opportunity to travel and work freely with assurance that they, too, can invoke the political and emotional talisman of a homeland. This, after all, is the status enjoyed by half a million Israelis (and, one may argue, millions of other Jews) who similarly live outside the borders of Israel.

Once the Palestinians share this status, the bitterest measure of their gall and frustration will have been diluted. Their more extremist political factions will cease gyrating as loose cannon among the traditionalist Arab nations. Delivered of this peril, the Saudis in turn can ease their post-Camp David quarantine against Egypt. Hereupon the Mubarek government may find it possible to unfreeze the Egyptian-Israeli treaty, enlarging it into a more authentic framework for diplomatic, economic, and military cooperation.

One final issue that should be disposed of is that of procedure. By submitting his own formula for the territories occupied by Israel, does Reagan violate the spirit of the Camp David format, which called for direct negotiations between the parties? He does not. In letters addressed to Jimmy Carter and appended to the Camp David accord, both Sadat and Begin confirmed their understanding that the United States would participate fully in all stages of the Palestinian automomy discussions. Similar letters were later incorporated in the Egyptian-Israeli peace treaty.

The decisive, indeed the indispensable, role played by the United States in jointly formulating the Camp David agreement and the subsequent peace treaty, in devising the plan for a multinational beffer force in Sinai, in sustaining the military balance of power between Egypt and Israel, and -- most recently -- in ensuring the departure of the PLO from Beirut, has been accepted gratefully by the Israeli government. Reagan's forthright involvement in the West Bank issue is entirely consistent with a pattern of American participation that Sadat and Begin themselves welcomed and encouraged, and that both statesmen regarded as a vital prophylaxis against Soviet intervention in the Middle East.

Plainly, there is no celestial contract warranting the success of Reagan's wider ambitions for Middle East peace. As a logical outgrowth of the original Camp David breakthrough, nevertheless, the president's courageous and imaginative proposal offers a better opportunity to resolve the Arab-Israeli impasse than any available alternative. It deserves the support of the Israeli and American peoples.