LISTEN TO THE latest report from Defense Minister Yitzhak Rabin on Israel's way of dealing with Palestinian demonstrators. The policy, he said, is to use ''might, power and beating'' to suppress a run of protests which, when they were met by Israeli soldiers with guns, resulted in dozens of shooting deaths and much international criticism. Beatings, not bullets, is the new, ostensibly more humane and more effective policy.

Mr. Rabin's language is, as the Jerusalem Post put it and as he presumably intended, ''jarringly brutal.'' So is the policy. His government treats the demonstrations exclusively as an affront to law and order. That is a function every responsible government must perform. But it is a function that no responsible government will allow to divert it from a broad view of the causes of the disorder.

Mr. Rabin instituted a policy of the ''iron fist'' -- his word -- in the West Bank in 1985. Its purpose has been not simply to preserve law and order but to suppress any independent nationalistic expression by resident Palestinians. Meanwhile, Israeli authorities, with a halfheartedness reflecting their divisions and hesitations, sought out as interlocutors Palestinians who could speak for their community without also speaking for the PLO -- a mission impossible which has, predictably, failed. The last six weeks of violent and peaceful demonstrations illumine the failure, and the official turn to ''might, power and beating'' highlights it.

The Reagan administration is uncomfortable with Israeli handling of the disorders. But having failed to make more than a formal commitment to a political solution, it is poorly placed to do much about the result, and it wobbles back and forth between scolding Israel for its tactics and protecting Israel from Arab rage. The informed murmur that it is late in the day, Mr. Reagan's plate is full, the Israelis are divided, the Arabs are distracted by the Gulf war, and so on.

Surely the United States can do better. Surely it can find ways to convey that, although it is unprepared for a major diplomatic initiative at this time, it is deeply concerned not only with the tactics of the occupier but with the grievances of the occupied. The visit of Egyptian President Hosni Mubarak to Washington next week offers an occasion to make this point. It would be useful in American dealings with Arabs, and it would be welcomed by the Israeli opposition, which must contend with the government's constant and sometimes explicit taunt that, see, the Americans don't really care.