Reaganomics is in trouble, as Wall Street and congressional Republican leaders have conveyed to the president in no uncertain terms. New budget cuts with which to pacify financial markets will be exceedingly difficult to find. In this situation, what is the Democratic Party response?

According to The New York Times, "a beaming" Tip O'Neill, Democratic speaker of the House, said last week: "Republicans are fighting with Wall Street; Republicans are fighting themselves--I think I'll sit on the sidelines a while." And an authoritative source tells me that Senate Minority Leader Robert Byrd said in a closed caucus that Democrats should give President Reagan "time to hang himself."

This strategy--if you can dignify it by such a term--of sitting back and watching the country go to hell is obviously wrong for the nation. But it is also self-defeating for the Democrats. Fortunately for the nation's economic future, other Democrats are beginning to challenge this defeatist approach.

In this space last week, I complained that many prominent Democratic leaders, including presidential aspirants, were avoiding a "golden opportunity to jump all over Reagan and Reaganomics."

In the past few days, I have been hearing from some of those Democrats, and they make one good point: Even though there have been many statements of opposition to the Reagan tax bill and to his overall philosophy, they get little coverage in the press.

But unless someone wants to charge that there has been a conspiracy in the press to shut out criticism of Reaganomics, one has to conclude that these Democrats haven't been persuasive enough, until now, to get some attention--or that they have put forward few convincing, cohesive alternatives. And the suspicion, listening to O'Neill and Byrd, is that there is little instinct for a fight with a popular president.

The Democrats in control of the House abdicated their moral responsibility by trying to out-Reagan Reagan. As Rep. Morris Udall (D-Ariz.) says: "Many of my Democratic friends played a new round of a tired old game called, 'my tax cut is bigger than your tax cut.'" In the Senate, those Democrats willing to challenge Reagan could never get their act together.

I know that there was a point this summer when White House strategists thought they would have to settle for a 20 percent tax cut rather than a 25 percent reduction. And there was a feeling among a few of the administration's own economic advisers that it would be prudent to settle at the 20 percent level, a 5-10-5 percent cut over three years.

At that time, if the House Democrats had had unity and leadership, they might have extracted a compromise from the White House. But the Democratic leadership in the House wasn't anxious to stop Reagan. It caved, acquiescing in legislation that for all practical purposes wipes out the corporate income tax after a few years, slashes estate taxes to the bone, places a top rate of 20 percent on capital gains, and leaves the main burden of income taxation only on wages and salaries.

This stunning shift in the tax structure, setting up a vast redistribution of income from the less well-to-do to the rich, is hardly in the tradition of the Democratic Party. Now, Sens. Ernest F. Hollings (D-S.C.) and Bill Bradley (D-N.J.) have introduced a bill that would scale the 25 percent tax cut, scheduled to be 5-10-10 over three years, to a more modest 5-5-5 percent. It would leave the business tax cuts alone, except for repealing the huge breaks for the oil industry. These breaks are certainly unnecessary in view of price deregulation.

The Hollings-Bradley tax revision bill would recoup $4 billion in fiscal 1982, $21 billion in 1983, and $40 billion in fiscal 1984. Similar legislation is being introduced by Sen. Gary Hart (D-Colo.). In the House, a parallel "balanced budget bill" is being pushed by Udall, Wisconsin Democrats Henry Reuss and David Obey and others.

But to pursue a tax-restoration strategy, other Democrats must convince O'Neill, Byrd & Co. that their no-policy approach courts disaster. Failure to act responsibly ensures soaring budget deficits and permanent double-digit interest rates. In turn, that will force a meat-ax approach to social programs, and lead to new forms of taxation, such as value- added taxes, or excise taxes. This twin crunch will place the budget-balancing burden even more wickedly on those least able to bear it.