In the Oval Office, Patrick Caddell is lecturing to an audience of one, his boss, on the positive value of negative campaigns.

It is September 1979, and President Carter is at 25 percent in the Gallup poll, which puts him 38 points behind Sen. Edward M. Kennedy.

"Politics is undergoing a change," Caddell recalls telling Carter. Caddell, the McGovern Wunderkind of '72 who is now older and richer, as the president's pollster, launches into a discussion of the lessons of the major campaigns of 1978. A Carter victory in 1980 must be a come-from-behind victory; so Caddell focuses upon the comeback victories of governors Hugh Carey of New York, Brendan Byrne of New Jersey and Ella Grasso of Connecticut.

"Negative campaigning worked in these elections, more so than ever before," Caddell explains. He means a "negative" strategy in which a candidate broadcasts his opponent's shortcomings even more than he emphasizes his own virtues.

"All of the winners who had to come back from behind to win did so on the basis of negatives campaigns. Given that, we can probably make our opponents the issue in 1980."

Caddell goes on to talk about Kennedy, and Carter listens attentively. Caddell is, after all, the closest thing Carter has to someone from the other side. In 1976. Caddell worked as pollster for both Carter for president and Kennedy for Senate.

"This has to be a general election-type of campaign. Even though it is just a primary election, people have to be made to face all of the complications that go into making an actual choice for the presidency: not just "Who do you like better" but 'who do you really want to sit in the Oval Office?'"

At one point, Caddell pointedly warns: "This campaign could get very bloody."

Kennedy and Carter, he explains, represent opposite strengths and weaknesses. Kennedy's strength is a public perception of his leadership capabilities; his weakness is the preception of personal characteristics associated with his private life. Carter's strength is his personal traits -- honesty, decency, trustworthiness. His weakness is the widespread public view that he lacks the abilities of leadership.

"There is no way that one of you can represent his own strength in a campaign without in effect attacking the other's weakness," Caddell says.

"So it could be very bloody. But at least our weakness is something we can do something about."

As he is saying that, Caddell recalls, "My mind was spinning -- how do we use the White House to do what we wanted to do?"

An inside glimpse of Carter and his advisers planning their 1980 campaign, revealed by internal memos and lengthy interviews, suggests this: Carter and his people seem more aggressive, thorough and practical at politics -- some call it handball -- than they appear to many to be at running government. They are obviously better prepared for the real contest of 1980 and its real contours than is their principal opponents for the Democratic nomination.

At the outset, they assume one of their greatest assets will be what they see as the aggressive capabilities of the president as a campaigner, out there among the people, winning them back to the fold. They will prove wrong about that. The unanticipated events in Iran reverse the script. Carter will make his comeback without going anywhere.

But Caddell is right about the "negative" nature of the campaign. Kennedy will emphasive Carter's alleged failures as a leader. The media coverage, plus subtle campaign advertising from Carter, will underline the questions about Kennedy's character.

Kennedy will deride Carter for the president's famous declaration of American malaise. Carter's TV messages, prepared by media adviser Gerald Rafshoon, will emphasized the president's personal qualities.

There is:

"President Carter. He's a solid man in a sensitive job."

Which will be escalated to:

"Husband, father, president -- he's done these three jobs with distinction."

And: "A man brings two things to a presidential ballot. He brings his record and he brings himself. Who he is is frequently more important than what he's done. In the voting booth the voter must weight both record and character before deciding. Often it's not easty. And this voter winds up asking -- 'Is this person I really want in the White House for the next four years?'"

The personal character question will contribute mightily to Kennedy's early defeats in the caucuses of Iowa and the primaries in New Hampshire, throughtout the South, and in Illinois. When Kennedy finally mounts a comeback of his own later in the campaign -- too late, in fact -- the Carter stragegists will come up with a new batch of "negative" ads that shift the focus directly back upon Kennedy's character as the issue. That will be sufficient to see Carter through the primary season.

It will be, just as Caddell was saying, "very bloody."

In September, the Carter White House was a decidedly down place.

Kennedy, having privately put the word to the president, was publicly puttin out the word that he would soon be running. The daily press summary and the weekly polls were bringing nothing but bad news. Carter's ratings were low and the spirit of his staff even lower.

"People around here were panicky," Hamilton Jordan recalls."That was something I had to fight internally. . .

One of the main jobs I had in the first few days was calming everbody down. Most of the people here had never been through a campaign before. They just didn't have the confidence I had in our ability to win the nomination."

Another of Carter's senior advisors remembers: "The White House was like the city morgue. It was very quiet and very depressing place."

However, before the Kennedy forces had even gotten around to the serious task of starting up a campaign, the Carter officials had already made most of their crucial initial strategy decisions. A number of these were made at a two-day political retreat last Aug. 19 and 20 at the spacious Easton, Md., home of Nathan Landow, a Maryland developer and friend of Jordan's. They proved to be crucial to Arter's success.

As the senior officials of the Carter White House and the Carter campaign committee filed into Landow's modern home of glass and old wood, each was given and affixed with the name of the designated adviser. The hooks were not to leave the meeting and were to be returned at its conclusion the advisers were told. To be leaked, it must be committed to memory.

Those meeting Aug. 19, a Saturday, included Jordan, the conference master; Tim Kraft, the campaign manager; Richard Moe, Vice President Mondale's chief of staff (a Mondale aide was carefully invited to every major campaign meeting), and two young aides who had prepared the agenda books, Tom Donilon, who would emerge at age 23 as the chief delegate counter for the campaign, and Tim Smith, the campaign counsel.

Sunday's arrivals included Jody Powell, Rafshoon, Evan Dobelle, Caddell, White House aides Phil Wise, Sarah Weddington and Rick Hutcheson, Mondale administrative assistant Jim Johnson and a number of the campaign committee's officials.

It was a watershed meeting for our campaign," one adviser later recalled.

Wise, White House appointments secretary, who ran Carter's Florida campaign in 1976, made a strong pitch for the need to go all out to win the Florida caucus and convention stray vote in the fall of 1979. These events are officially meaningless, but psychologically crucial, he argued; they have nothing to do with electing a single delegate to the convention -- but there will be a draft-Kennedy effort in Lorida and Carter cannot afford an early showing of defeat.

Jordan had already counseled Carter in a January 1979 memo that he could not afford an early defeats -- that the press would magnify them out of proportion. The Carter people concluded that Florida Gov. Bob Graham would be a Carter ally.

They agreed tht they would go all out to win the Florida caucus and straw vote. They would invest heavily in money and time -- Cabinet and White House officials would descend upon the state like crows in a cornfield. wAs a result, Carter staved off what could have been an embarrassing precampaign defeat winning by a margin that was in fact closer than it seemed.

Before the meetings adjourned, there was some tough talk and some tough decision making about money. It would prove to be perhaps the least titillating, but most important of the campaign's early decisions.

The Carter advisers were shown three campaign budget: a high level ($18 million), medium level ($15 million) and a low level ($12 million).

This opened what would be a campaign-long series of disputes between those who advocated increased spending for field operations, chiefly Kraft, and those who advocated increased spending for advertising, chiefly Rafshoon. In the months that followed, this dispute between Kraft and Rafshoon would be repeated frequently and would escalate in intensity.

The Carter officials were told there was no way they could reach even their mid-level budget goal unless they doubled, between Labor Day and Christmas, the amount of money raised between March and August. They decided to build a series of fund-raising events around the president's official announcement of candidacy.

They also decided to cut back sharply on spending -- especially on staff travel.

Both decisions proved to be crucial. In the week off Carter's December announcement alone, the campaign raised $2.5 million. Because of the fund-raising increases and spending cutbacks, says Smith, "We were in excellent financial shape in January 1980."

This put the Carter campaign in healthy contrast to the Kennedy campaign. The challenger, illserved by his advisers, would up spending himselff virtually out of existence in the first month of 1980 because of a series of poor management decisions or, often, no decisions at all.

Kennedy campaigned around the country in those days in a Taj Mahal of a jetliner and the plane sat grounded in Florida at a cost of $5,000 a day while Kennedy enjoyed his Christmas vacation. The Kennedy campaign housed itself in lavish offices in Illinois, and spent at least $50,000 to renovate its own Washington headquarters. From March to December 1979, the Carter campaign spent $2.8 million. The Kennedy campaign spent nearly as much in two months.

Through the fall, the president kept in touch with his campaign largely through weekly meetings that were never part off his officially disclosed schedule, but which were held at about 5:30 p.m. in the Treaty Room of the Old Executive Office Building, adjacent to the White House.

The president would nominally preside, but in fact Jordan directed the flow of discussion. "Hamilton was the facilitator," one senior adviser explained. Those attending included Rosalynn Carter, the vice president, Robert S. Strauss, Powell, Rafshoon, Caddell, Kraft and, at times. Weddington.

Throughout October and Jordan were invariably optimistic about the porspects for defeating Kennedy, even when the moods of most of those at the mid-levels of the White House were ranging from pessimism to panic.

During one meeting, the compaign advisers were talking about how tight the campaign budget was. "Don't forget, it has to last until June 3," one of them said. Jordan interrupted: "Ridiculous! We've got to go heavy at the outset. If we do, it'll all be over early."

On Oct. 21, Carter ventured into the heart of Camelot to address the dedication of the John F. Kennedy Memoraial Library in Boston. He had accepted the invitation during the summer, based on the advice of Jordan. Jordan's recommendation was based upon a hard calculation of 1980 politics, not 1960 sentiment. If Carter said he would be there, Jordan advised, Kennedy would not dare start up his formal campaign before then.

Carter, usually an unimpressive public speaker, gave a performance at the library dedication so strong that it impressed even the most skpetical of the Kennedy partisans.

On Nov. 4, the U.S. Embassy and its personnel in Tehran were seized. The nature of the Carter presidency changed markedly and so did the mood of those meetings in the Treaty Room.

"A change came over the president -- you could see it and you could feel it," said one of the regular attendees. "You could feel that he wasn't paying attention at times. Sometimes he would be just distant and sometimes he would interject to ask, 'How long is this meeting going to take?'"

But two days after the embassy in Iran was seized, Carter, still trailing badly in the polls, agreed to debate his opponents for the Democratic nomination -- an unprecedented move for an incumbent president.

On Dec. 29, with the Soviets having invaded Afghanistan, with the Iranian crisis continuing, but with Carter having overtaken Kennedy in the polls -- the president withdrew from the debate. His decision not debate would be made into an issue that would last the rest off the campaign -- Kennedy would see to that -- but it would not seriously hurt Carter.

Carter had declared at the time that he could not debate or campaign actively because the crises in Iran and Afghanistan required his constant attention and decisionmaking. And his aides put out an additional, profile-incourse explanation that Carter did this despite the pleas of his political advisers to press on with the debate for the good of the Carter campaign.

But that was not really the case.

One of his most senior advisers now concedes that, indeed, the crises along did not prevent Carter from debating. The president actually could have continued campaigning through January and into February, he says, which is when the negotiations with Iran reached a crucial stage that required frequent (almost daily) presidential consulation and decisions.

And other advisers concede that at least some of the president's political advisers were counseling then that there was a strong political case to be made for not debating or campaigning now that Carter had taken the lead in the polls. Caddell, Rafshoon and Powell are said to have held that view, while the top campaign officials, Strauss and Kraft, plus White House domestic policy chief Stuart Eizenstat, were urging Carter to go through with the debate. Jordan is portrayed as not having pressed strongly for Carter to debate, even though he is said to have feared that the Des Moines Register could cause political damage to Carter in the upcoming Iowa caucuses, if the president withdrew.

Ultimately, the decision was Carter's. But one senior advisers, in explaining the view of those who counseled that there was political advantage to pulling out of the debate, says:

"Things were going well for us in the polls. My argument . . . was that by being president, by leading, he could do more for himself than by campaigning . . . We had nothing to gain by Carter Debating."

And another senior adviser, asked what the central reason was for Carter's decision not to debate, offered a somewhat more succinct explanation He said:

"F--- the fat rich kid."

EPILOGUE: The preident's advisers decided to bolster public understanding of Carter's decision to withdraw from the debate with a bit of political gamesmanship. The idea, according to several senior advisers, was Powell's.

Powell wrote a memo to the president that was intended for public consumption. The two-page document, which was then leaked to The Los Angeles Times, outlined arguments of Carter's political advisers, supposedly urging him to go through with the debate in Iowa. It said that these were the consensus views of Powell, Jordan, Strauss, Kraft and Eizenstat.

(Powelll offers a minor variation; he says he initially wrote the document as a genuine internal memo and only then did he decide to leak it.)

For added measure, the leaked memo contained a penned notation in Carter's own handwriting, worded more formally than many of the president's comments that are intended strictly for in-house distribution.

Carter had dutifully written:

"I can't disagree with any of this, but I cannot break from my duties here, which are extraordinary now and ones which only I can fulfill.

"We will just have to take the adverse political consequencies (sic) and make the best of it. Right now both Iran and Aghanistan look bad, and will need my constant attention."

Later, asked about the orchestrated memo and the president's notation, Strauss said: "Well, it was somewhat overwritten."