Weary of inflation, crushing interest rates and slow growth, the American people elected Ronald Reagan in hope of constructive solutions. But as we near his inauguration, there is good reason to fear that the Reagan administration could be locking itself into policies that will bring only more of the same -- or worse.

Surrounded by apostles of laissez-faire monetarist economics, Reagan seems poised to unleash a repeat in the United States of the policies now under way in Margaret Thatcher's Britain. There, a mix of tight money, tax cuts for business and the investing classes, and a hands-off approach to wages and prices has resulted in a long-running recession, mounting social tension and scant evidence of any increase in business investment or production. Before his advisers take their ideological scalpels to the American body politic, we should reexamine the monetarist diagnosis of our stagflation problems.

Reagan's economists generally argue that we must deal with a demand-related inflation caused by government deficits, too-rapid growth in the money supply and easy credit. To curb this excess demand, Reagan is committed to maintaining the tight-money, high-interest policies of the Federal Reserve Board until they "wring out" the cash and liquidity that causes inflation. Meanwhile, in the private sector, Reagan's ideology calls for letting companies set whatever prices will clear the market while unions demand whatever wage increases their bargaining power allows. But what if the cause of inflation is not rising demand fueled by excess money? And with unemployment verging on 8 percent, and less than 80 percent of U.S. plant capacity being used, what grounds are there for arguing that demand is pulling inflation up?

What is driving our inflation isn't demand -- it is cost, and mainly the cost of wages running steadily above any gains in U.S. productivity. While the most optimistic projections of productivity increases are less than 2 percent in 1981, we are facing another round of labor settlements that could run upward of 12 percent. It is painful for a Democrat to bring this lesson home to a Republican president-elect: the gap between wage raises and productivity gains in our basic inflation rate.

Other costs too, particularly OPEC's energy price boosts, contributed to inflationary psychology in the 1970s. But the rise in unit labor costs has been fundamental, and there is nothing in the new administration's policies that even begins to address the problem. Instead, the monetarists' proposed remedies of tight money and high interest rates, as Lee Iacocca would be only too happy to explain, promise to discourage capital investment, slow growth, increase unemployment and ultimately raise the federal deicit. Thus, a policy designed to curb a demand-related inflation will actually exacerbate the cost-related inflation we are suffering from. High interest simply adds another category of cost to the economy's burdens.

Nor is there much chance of breaking inflationary psychology by just the "supply-side" solution of lowering taxes to business and investors. We have already lowered taxes to these sectors substantially in recent years. Thatcher's Tories in Britain have too. But generous tax breaks to business alone will not stimulate investment -- especially in an economy with so much slack. What has to be accomplished to make supply-side policies work is the creation of an environment in which businesses can look forward to profitable sales, increased demand and a genuine break in the drive of unions along an endless -- and futile -- game of "catch-up" with inflation.

For Reagan, that means thinking about the unthinkable: a major effort to involve labor and business in a new social compact coordinated by an activist government. As it stands, the tax cuts and tight-money policies that the incoming administration proposes are grossly biased toward the well-to-do. Labor will respond to them by struggling for the largest wage increases it can muscle, and the spiral of inflation will run on. What we must seek is a true accord between labor and management comparable to that achieved in Japan. There, in contrast to Britain, a spirit of understanding and mutual interest across the bargaining tables has led to low inflation, high investment, minimal unemployment and the most striking growth of any major economy in the world. Inflation, in short, is a social and political problem that cannot be solved by monetarist tinkering or a package of business tax breaks.

If we are going to endure a period of austerity, we must find a more equitable program. That means one of sacrifices for all -- not simply "incentives" to business and investors. Here are a few parameters of a program that would have a chance of working:

Limit wage increases. Much as he may prefer dodging this politically volatile issue, Reagan must come to realize that labor will continue to reach for the largest settlements possible. Insofar as these settlements surpass the rise in productivity, they form the base of our inflation. They can only be halted by Reagan's working with labor to develop a program on wage restraint, preferably by concensus, but, if need be, by law. Arbitrarily, let us say that the ceiling we shoot for is 5 percent annually for three years. At best, this might limit the base rate of inflation to 3-4 percent. We must have an incomes policy.

Focus tax breaks on workers. Since any wage-restraint program would require substantial sacrifice by labor -- and provide advantages for all businesses -- there must be compensation from government. Since there is a limit to total tax reductions, I would argue that we should target a major portion of our tax breaks to individuals who earn less than, say, $20,000 -- in recognition of the sacrifices the program asks of them. This, together with some flexibility for wage increases, would enable labor to keep within hailing distance of inflation.

Raise corporate taxes while increasing investment breaks. The nation cannot return to an aggressive approach to economic growth unless we reduce inflation. As a matter of justice, sacrifice from the business community is an essential concomitant to any restraint to the wage front by labor. There is little disagreement that we must stimulate investment and technology. They are essential to economic growth. There is also a basic understanding that we must stimulate and motivate entrepreneurialism and long-term investment strategies. We have, in the past decade, substantially reduced corporate and capital gains taxes. The nation must realize that there is just a limited amount the federal budget can absorb. If the federal government is to offer additional tax incentives, it is essential that businesses pay part of the price of reducing inflation and encouraging the supply side of our economy. Therefore, we must raise corporate taxes at the same time we offer the supply-side incentives. Thus, businesses that don't reinvest will pay part of theprice of our new economic thrust.

This, I argue, is rough and negotiable, but as the minimum program to snap inflationary expectations and, at the same time, encouraging investment, it would require balanced sacrifice by labor and business. It would reward productive investment, especially in manufacturing. And, unlike the nouveau-monetarist program that Reagan appears bent on, it acknowledges the wage spiral as inflation's deepest root.

It is ever so much easier to pretend that technical manipulation of monetary and tax policies will stall inflation and lead to a new wave of productive investment. Those policies not only misdiagnose inflation, but also represent a political cop-out. If we really want to stop inflation, the working people of this country have to be involved and have to be asked for sacrifices. They are simply not going to cooperate with any program that lavishes handouts to business while simultaneously squeezing interest rates so high that their children can't afford to buy a home.