President Reagan's television speech and the Democratic response from Sen. George J. Mitchell (D-Maine) signaled a return to realism in foreign policy. But the realists have not captured the high ground on the budget debate, which represents their main challenge in domestic affairs.

It's an odd situation -- the contrast of pragmatism abroad and dogmatism at home. One or the other will ultimately prevail, and that will determine the character of Reagan's remaining time in office.

When it comes to realism about the folly of shipping arms to Iran, you can't do much better than Reagan's statement that ''I was stubborn in my pursuit of a policy that went astray.'' He said he respected an audience educated by the congressional hearings ''too much to make excuses.'' And he proved it by abandoning his old rationale about an ''opening'' to the Iranian ''moderates.''

Instead, he acknowledged that the two most vocal internal critics of his ill-fated policy, Secretary of State George Shultz and Secretary of Defense Caspar W. Weinberger, ''were right'' in saying that the American people would see ''this whole plan was an arms-for-hostages deal and nothing more.''

When Mitchell, the moralist of the televised hearings, came on to remind viewers that the ''major mistakes'' lay in policies ''personally approved, in writing, by the president,'' it was the Democrats' last effort to tattoo that responsibility where it belongs.

But with Reagan himself using the word ''mess'' to describe the policy, the Democrats really didn't have much left to say. As nearly as one can judge, Reagan has in fact taken the steps he talked about Wednesday night to be sure that the key members of his new White House staff understand the limits of their authority -- and his own desire to ''be informed and informed fully.''

That new White House team also seems to be steering him toward a consensus foreign policy emphasizing resolution of disputes, rather than ideological excursions.

To be sure, American ships are patrolling the Persian Gulf. But that has long been recognized as an area of vital national interest. Mitchell did not denounce Reagan's show-the-flag policy, lest Democrats be thought craven in the face of Iranian threats.

In Central America and U.S.-Soviet relations, the chastened Reagan appears to have found policies that command bipartisan support and offer some prospects of success.

Now he is almost certain to have a summit meeting later this year with Mikhail Gorbachev and an agreement to eliminate intermediate-range nuclear weapons. And it cannot have escaped notice in Moscow or on Capitol Hill that when he talked about the next steps after such a pact, he emphasized a deep cut in long-range missiles -- and said nothing about his ''Star Wars'' Strategic Defense Initiative.

As for Central America, Reagan again embraced the Nicaraguan peace plan of which Speaker Jim Wright (D-Texas) is the proud parent. The obstacles on the road to agreement there are huge, but it is a sounder policy premise than the maintenance of a mercenary army of ''contras'' in the face of huge skepticism here at home and, even more important, in Nicaragua and its neighboring countries.

The folks who are upset with Reagan on both the arms-control and Nicaraguan efforts are people to his right. But their rage is not much of a risk to him. However much Reagan may have been weakened by the Iran-contra affair, he's not going to be taken down by folks on the far-right fringe of his party.

They can't make him a villain even to their own constituency when he is battling for Judge Robert Bork's confirmation and the opportunity it represents to strengthen the conservative wing of the Supreme Court into the next century. It was significant that Mitchell, himself a former federal judge, did not respond to Reagan's lobbying for Bork. The Bork nomination is a potential party splitter for the Democrats, and after many of their quick-lip liberals popped off in opposition, the rest of them have clammed up.

Which leaves us with that hardy perennial, the budget deficit. Reagan's proposals are, once again, half-baked. He made a conditional offer to ''negotiate on every spending item,'' but said nothing, as usual, about the revenues to pay for the defense and domestic programs he supports.

The Democrats denounced him, rightly, as the prime culprit in the scandal of the runaway debt and said Reagan's plea for a balanced-budget constitutional amendment is a cop-out from making the hard choices now. And so it is. But it is no more artificial than the revival of the Gramm-Rudman-Hollings automatic, no-hands, budget-cutting machine many Democrats now offer as their version of salvation.

At the moment, neither side is showing much backbone, or discipline, or realism in attacking the budget deficits. If there was an air of wonderful make-believe to the Iran shenanigans, then there's an equally Oz-like quality to the current debate on the deficits