Bruce Babbitt talks like a Sagebrush rebel, looks like columnist George Will and calls himself a liberal.

Babbitt, the Democratic governor of a conservative state, is Carry Nation on a crusade to reform drunken Washington with a plan that has been called "states' rights for liberals," a peculiar western counterpoint to the conservative Republican movement that swept fellow westerner Ronald Reagan into the White House and helped demolish a dozen liberal Democratic senators.

"My basic case against the federal government is that it is into everything, and in the process is destroying the vitality and independence of state and local governments while neglecting the things it ought to be doing," Babbitt says.

By his own initiative, Babbitt has made himself part of the growing debate over the future of the Democratic Party, and at 42 he is one of the young Democrats wrestling over a new definition of liberalism for the 1980s. Here is Arizona, however, some politicians say Babbitt has simply grabbed hold of the conservative mood in America to advance his own political ambitions.

His rhetoric puts him in bed with the Reagan and the western rebels, but Babbitt says he is in mighty disagreement with the conservatives in the Republican Party. Last year, he vetoed a Sagebrush Rebellion bill, and he thinks President Reagan's plan to turn welfare and a variety of other social programs back to the states is just dead wrong. Babbitt says the welfare program should be taken over completely by the federal government.

"Ronald Reagan's view is basically antigovernment," Babbitt says. "I support government -- at all levels."

He has come up with his own plan for revitalizing government at all levels, and Sunday he will take it to Washington in hopes of persuading the nation's governors to adopt it rather than Reagan's plan.

But the Harvard Law School graduate hasn't picked the most obvious symbols of big government to lead the march away from Washington. He would start not with social or regulatory programs, but with highways, local crime and education. "The reason I chose three is that they are at the very core of what state and local governments have done and done well for 200 years," he says.

And it is clear from his own proposals that he has less confidence in the states' ability to handle their affairs than his rhetoric suggests. His opposition to the Sagebrush Rebellion, which calls for the transfer of federally owned land back to the states, is based on his belief that the federal government has done a better job of protecting those lands than have the states. "It's a historic fact that when federal lands have been given to the states in the past, they wound up being dominated by special interests," Babbitt says.

Whether Babbitt has stumbled onto a formula that will attract a political following -- and perhaps make the West more hospitable to Democrats -- or is simply holding his finger in the air is a matter of debate in Arizona.

"He's coming on like Barry Goldwater the Third," said Burton Barr, the longtime Republican leader of the Arizona House of Representatives, who adds that Babbitt has grown more conservative and ambitious in the last six months.

"There's a national mood of moving to the right and it's more accentuated in the West," said Alfredo Gutierrez, the former Democratic leader of the state Senate. "And the governor has followed it."

Gutierrez described Babbitt as a political survivor who has effectively learned to use the language of the left and right in a state where booming growth has created a volatile politcal climate. But in "attempting to survive, he is a follower," Gutierrez said, "a pretty classy follower, but a follower."

Barr mixes his criticism with administration. Babbitt "has plenty of ability, he's bright, a hard worker and he gets involved. He's been the most aggressive governor we've had.

"I think he perceives this as a steppingstone to higher office. I see him as a young guy who has quite a political future if he doesn't step into a 10-foot hole."

Babbitt's record here, first as attorney general and now as governor, has been enviable. He was an aggressive attorney general who prosecuted the alleged killer of slain reporter Don Bolles, went after white-collar criminals, cracked down on land fraud and pushed consumer protection. As governor he forced the legislature to adopt one of the toughest water programs in the nation, an issue of critical importance in the West. And he is trying to do something to bring balance to a state that now has 80 percent of its population in just two counties.

Lately he has run into problems -- of a kind that suggest his political instincts need honing. He proposed a $35 million tax cut without first warning other Democrats who were telling constituencies there was no money available for certain programs.

Arizona is the only state that does not accept federal Medicaid funds, and the cost of indigent health care is bankrupting some counties in the state. Babbitt says he believes the state should take the federal money, but this month he proposed a health care bill that would give the entire responsibility to the state -- even though Republicans and Democrats in the legislature have introduced bills calling for federal funding.

Babbitt got interested in federalism after his unexpected ascension to the governorship of Arizona in 1978. Democrat Raul Castro gave up the office to become an ambassador and his successor died a few months later. Babbitt, as attorney general, was next in line, later winning election in his own right in the fall of that year. He was surprised by what he found. "Every area of state government took its program direction from the federal government," Babbitt says. "You go back and reread the Constitution and what emerges is that we've lost the idea of dual federalism."

Calling Democrats victims of the New Deal's success, Babbitt adds, "During the 1960s, a good idea got out of hand. It was fashionable that when anyone raised his voice, the answer was a federal grant-in-aid program. No one ever asks, is this a national interest?"

His theory sounds simple. Each level of government should do what it has historically done best. As Babbitt put it in a recent article in the New Republic, "Congress ought to be worrying about arms control and defense instead of potholes in the street. We just might have both an increased chance of survival and better streets."

Right now, Babbitt's drive to give states' rights a good name seems to be having more effect on him than on the federal system.