Ronald Reagan has defied the prophets. He enters the final year of his presidency not as a diminished lame duck but as the dominant figure on the domestic political scene. His policies not only define the present moment but shape the struggle to pick his successor.
It was not an idle boast when the president told officials of his administration last week that they had brought about ''a fundamental change of direction'' in government. From the tax tables to the arms control negotiating tables, Reagan has redefined the fundamental principles that guided two or more generations of government policy.
In place of progressive tax rates based on the ability to pay, the United States is moving toward a flat tax on earnings, at low rates, soon to be joined in all likelihood by a direct tax on consumption. In place of deterrence based on growing numbers of nuclear weapons, we have induced the Soviets to begin discarding offensive missiles; in time, we and perhaps they may have some kind of antimissile defenses.
With less notice but at least as large effect, Reagan has shifted the locus of domestic policy-making out of Washington and into the state capitols and city halls. Congress is increasingly frustrated, federal agency heads increasingly irrelevant. Meantime, governors and state legislators are exerting ever-greater initiative on education, economic development, resource and environmental management and other fields -- and enjoying the political benefits of the local-level activism people seem to approve.
The evidence of Reagan's impact can be found in many places. But perhaps the most dramatic proof of the ''fundamental change of direction'' came just one day after Reagan gave his executive branch colleagues their 1988 pep talk. The proof came from, of all people, Sen. Edward M. Kennedy, the last of the liberal lions of the 1960s, in a speech at the Woman's National Democratic Club.
''We stand now between two Americas,'' Kennedy said, ''the one we have known and the one toward which we are heading. The New Deal will live in American history forever as a supreme example of government responsive to the times. But it is no answer to the problems of today.''
Ted Kennedy was born the year Franklin D. Roosevelt was first elected president. For most of the 25 years he has served in the Senate, his agenda has been filling out the uncompleted portions of the New Deal, notably national health insurance. For him to say the New Deal is ''no answer to the problems of today'' is to concede the reality of the change Reagan has wrought.
But that does not, of course, guarantee that Reagan's own vision will direct the future. That is the large question at the center of the 1988 election, and it is why Reagan's performance and his accomplishments or failures this year may well be the most important determinant of its outcome.
The campaign has a long way to go, but the strong impression I have from voters of both parties in Iowa, New Hampshire and the South is that no one running has begun, even remotely, to imprint his own view of the nation's future on the public mind. Indeed, none of them -- including the current favorites on both sides -- has come close to defining that future.
So long as that remains the case, voters will, consciously or unconsciously, measure the aspirants by their adherence to, or deviation from, the Reagan model. He is the standard of comparison, both for those who want to see a change in direction and for those who are hoping for more of the same.
The testing will come in stages. Among Republican primary voters, the stronger their admiration for Reagan, polls and interviews show, the more likely they are to support his vice president, George Bush. Where Reagan is relatively weak, as in Iowa, Sen. Bob Dole's challenge to Bush flourishes; where Reagan is strong, as in New Hampshire and the South, Dole is battling uphill. Overall, Reagan provides the foundation on which the whole Bush candidacy rests.
The Democratic side is the mirror image. In Iowa, anti-Reaganism spurs the campaigns of Sen. Paul Simon and Rep. Richard Gephardt, who profess to be the strongest critics of Reaganism (even though each has cast some notable votes for budgetary or tax proposals central to Reagan's design). In New Hampshire and the South, the prevailing admiration for Reagan makes even Democratic activists more receptive to the message of people like Gov. Michael Dukakis and Sen. Albert Gore, who have moved much further from the New Deal in their approach to government and their agenda of issues.
At this point, Reagan and Reaganism are strong enough that Bush appears the favorite for the Republican nomination and the general election. But the recurrent ''time for a change'' psychology could reappear if larger majorities decide over the next few months that Reaganism represents the wrong path for the future.
That is why his administration's skill in managing the economy and in dealing with the Soviet Union may well decide this election. A strong close by Reagan, and the voters are not likely to repudiate him or his legatee.