HEALTH AND HUMAN Services Secretary Otis Bowen has revived one of the worst ideas in town. He favors repeal of the Social Security earnings test, which limits what recipients can earn without having their benefits reduced. Why not repeal it, you might ask? Why penalize an older person whose only offense is that he may want or need to work? But the earnings test doesn't penalize the little guy in whose name it is traditionally opposed. Nor is it a small matter. On the contrary, repeal would cost billions that the government doesn't have, much of which would go to people who are quite well off.

The earnings limit this year is $8,160 for people age 65 to 70. For every $2 of earnings over that, benefits are reduced by $1, all the way to zero. Beginning in 1990 the reduction will be $1 for every $3 in earnings. The earnings limit rises automatically each year; it is indexed to wages in the general economy. The limit is lower for younger beneficiaries and beyond age 69 does not apply.

The arguments in favor of repeal are that the earnings test denies retirees benefits that they have earned, deprives society of needed and experienced labor, does its greatest harm to those in borderline circumstances who most need the extra money and is doubly unfair because so-called unearned income from savings and investments is not penalized. Proponents also say that part of the cost of repeal would be recaptured, mainly through extra Social Security and income taxes on the extra work and wages it would generate.

But Social Security was not created simply to reward old age. It has a much more specific purpose. It is not a savings but an insurance program against the loss of income on retirement. Like all insurance programs, it pays only if the thing insured against occurs. If a person does not retire or retire fully, retirement benefits are withheld, just as Medicare benefits are only paid if a person gets sick.

Repeal also comes cloaked as an effort to help the struggling, those of modest means. But much, perhaps most, of the money that would be released would go to those with incomes well above not just the average for the elderly, but the average for the country generally. These are typically people in rewarding occupations who want to go on working, not those who for economic reasons have to. Repeal would help more doctors than dishwashers.

The Social Security benefit structure is a delicate mix of what a beneficiary has paid in and what he needs. Repeal of the earnings test would alter both this mix and, as proponents well understand, the principles on which the system is founded. The change would not be healthy. Should the earnings test be eased a little to help retirees of modest means? Is that one of the early things to be done as the deficit comes down and a few funds become available? We don't know. But certainly there can be no justification for repeal. Dr. Bowen is reported to have reminded the White House that in an election year repeal or some affordable step in that direction would be good politics. Transparent would be a better word for i