PRESIDENT REAGAN has accepted an in- house recommendation to discipline mid-level CIA officials involved in the Nicaraguan rebel manual. A spokesman says the president will make no further comment. The manual, written chiefly to coach guerrilla fish how to swim in a civilian sea, contained some allusions to killing people. To say, with Mr. Reagan, that the furor over the manual was "much ado about nothing" is wrong. To penalize soldiers in the ranks and leave the CIA's top officers alone offends the first principle of responsibility.

The problem of the CIA's Nicaraguan operation is the policy, not the manual, which merely reflects the inadequacies of that policy. The purpose that the administration sold to Congress, interdiction of Salvador-bound arms, never matched the insurgents' purpose -- and who can blame them? -- of overthrowing the Sandinistas. The operations of the insurgents have in fact included instances of terrorism as well as conventional warfare. The very existence of the insurgency has tended to reinforce the current of administration policy favoring confrontation. Arturo Cruz, the leader of the Nicaraguan democratic opposition in whose name the administration claims to be acting, devastates that claim by complaining publicly that the hard line is "not helping" his cause.

Congress cut off funds for the contras under an arrangement that lets one house alone veto any administration attempt at renewal. Barring surprises, the Democrats' control of the House should ensure that no new funds will flow next year. There is a widespread suspicion that the administration will somehow manage to keep the contras in the field, by finding money beyond the scrutiny of Congress or by steering private or foreign funds. For a number of reasons, this would be a bad idea.

The administration argues that cutting off the Nicaraguan armed resistance would spur on Leninist forces and doom democratic ones. But the chances of that happening can be much reduced if the United States throws fuller support to another strategy, one relying on diplomatic, political and economic levers. Nicaragua is not already irretrievably gone: with all the advantages they assured themselves in their elections, the Sandinistas still won only 4 percent more of the vote than did Mr. Reagan. Mr. Cruz is not alone among those in opposition in seeing political space. That is the right if difficult way for Washington to go.