Well whaddya know. The collapse of the stock market was just "a long-overdue correction." So explained President Reagan at his press conference Oct. 22. Funny, no one around the White House mentioned that a correction was overdue before it happened. Until then, the soaring stock market was proof of the wisdom of Reaganomics.

But what is -- or rather, what was -- Reaganomics? There's some confusion on this point between the president and his loyal supporters. At his press conference, Reagan blamed our current impasse on "more than half a century" of Democratic domination in Congress. "They have followed, beginning with what they called the Keynesian theory, deficit spending. . . . I think I'd like to point out that Maynard Keynes didn't even have a degree in economics."

Reagan may reject the theory, but he has embraced the practice with a vengeance. During the six fiscal years he's been in charge, deficits have totaled $1.4 trillion, compared with $999 billion for the previous two centuries.

As usual, Reagan places the blame elsewhere. "I have repeatedly asked the Congress for less money and they have turned around and given more to spend." In fact, Reagan has proposed budgets totaling $3.14 trillion and Congress has given him budgets totaling $3.129 trillion -- $11 billion less than he has asked. The shape of those budgets was different: we spent more on social programs and less on defense than Reagan wanted. But total spending has been more or less exactly what he requested.

Yet even as the president inveighs against 50 years of Keynesianism, some conservatives -- most prominently, presidential candidate Jack Kemp -- defend his record as the brilliant flower of Keynesianism. Pseudo-populists of the right (joined, oddly, by some on the left) warn that the deficit scare is Herbert Hooverism. Reducing the deficit now, they say, especially by raising taxes, could cause a depression. FDR took office promising to balance the budget, but wisely did the opposite. What's needed is looser money and lower interest rates. Why, they ask, did the stock market boom during five years of growing deficits and collapse when the deficit went down by a third?

Let's answer that question with another question: if taxes are dangerous and our current deficits are harmless or even healthy, why stop here? Why not eliminate taxation, borrow it all, speed up the printing presses and really have a good time? Obviously there's a point at which such behavior becomes self-defeating. Once this is conceded, it becomes hard to maintain that we're not past that point.

Politicians may wish to believe that federal deficits are coming down, but the market is not so naive. Ostensibly the deficit dropped from $221 billion in fiscal 1986 to $148 billion in fiscal 1987. Of that drop, however, $20 billion reflected a one-time-only bonus from tax reform, mainly people cashing in their capital gains before the rate goes up. Next year the same factor will reduce revenues by $12 billion. Another $15 billion was saved this year through accounting tricks, such as pushing paydays into next year and selling off assets, including the right to collect on government loans. Selling off loans to reduce the deficit is like cashing in a CD to pay the Mastercard bill. It helps in the present but makes the future worse.

An honest figure for the 1987 deficit is more like $185 billion. The Congressional Budget Office projected deficits to stay about there for the next two or three years, and that was on pre-crash assumptions about steady growth with low inflation that look unlikely now. With Reagan advocating more asset and loan sales as preferable to raising taxes, the market is right to be unconsoled.

Hooverism? No. A reduced fiscal stimulus (i.e., smaller deficit) won't lead to a calamitous self-feeding contraction like the Great Depression because institutions like federal deposit insurance now exist to prevent a rout. However, there's no denying that higher taxes and lower government spending will depress economic activity and could cause or aggravate a recession. The problem is that, thanks to Reagan's deficits, the alternatives are even riskier.

If it weren't for a flood of foreign capital we long ago would have faced the choice between higher interest rates, which would have throttled the recovery, or printing money, which would have reignited inflation. We still face that choice, only in aggravated form because we now owe billions more a year on our past debts.

Since the beginning of 1987, foreign private investors have supplied no net new capital. The money has come, under duress, from foreign central banks, which have spent about $80 billion of their own reserves shoring up the value of the dollar. They won't keep this up. To keep attracting foreign capital we must either let the dollar sink, which means inflation, or raise interest rates, which probably means a recession. This is the classic dilemma of economic policy, which the supply-siders claimed to have abolished. But the smaller the deficit, the lower the dose of either medicine we have to take.

Poor Lord Keynes. The same crowd that blames him for the present mess is invoking his shade in their efforts to make things worse.