A LIVELY discussion continues over who is responsible for the impasse concerning the Reagan peace initiative in the Middle East. King Hussein, Yasser Arafat, Hafez Assad, Menachem Begin, King Fahd, Ronald Reagan and Yuri Andropov are all coming in for bits of the blame. But the discussion is sterile. The question of responsibility for failure may be an interesting intellectual exercise and, for the principals, a necessary political exercise. But it leads away from the essential question of the impact of failure. Who loses from the impasse, or, more to the point, who loses most? The Palestinians. What is for--say-- Americans a frustration, is for them a nail in the coffin of their hopes for a homeland.

Look how Mr. Arafat responded to the crisis brought on by his own unforgivable repudiation of his earlier agreement to let Jordan speak for Palestinians in peace talks with Israel. He jetted off to Stockholm and then to Sofia--two great nerve centers of Middle East politics, as you know--for propaganda tours, in the process turning his back on the funeral and memory of his assassinated moderate comrade, Issam Sartawi. He is now running around, waving his hands and saying this and that.

Mr. Arafat's performance is pathetic. Who still can take him seriously? A leader worthy of the name would realize he has made a colossal mistake, kicked away possibly the last chance for salvaging some part of the Palestinian political inheritance. He would realize he has virtually no cards left other than a readiness to piggyback on the one diplomatic process, the Reagan initiative, that can possibly deliver the goods. He would understand that his love of the process and the perks of exile politics has brought his cause to a dead end, that his enemies are concealing their contempt behind crocodile tears and that the people who are now the most fed up with him are his friends.

Secretary of State George Shultz took the right tack when he suggested that the PLO has forfeited the mandate to represent the Palestinians that it received from the Arab world in 1974. Perhaps it was a mistake for the Arabs to "give such power to a radical group," he said. What other conclusion can a serious person reach? For that matter, what other conclusion can be reached by Arabs, including Palestinians?

The logical place to look for an alternative spokesman for the Palestinians is among the people of the West Bank. They are relatively freer than Palestinians elsewhere of the terror that Palestinian gunmen direct at moderates in their ranks. They have an incentive--to end an oppressive occupation --that Mr. Arafat in his media-pampered escapist existence plainly does not feel. There are formidable difficulties in replacing the PLO. But how could a replacement not be an improvement?