The Reagan administration downgraded the Freedom of Information Act yesterday as "a highly overrated instrument" for disclosing official misdeeds and urged Congress to adopt a wide-ranging set of restrictions on it for the sake of "effective government."

Testifying before a Senate Judiciary subcommittee, Assistant Attorney General Jonathan C. Rose offered a new set of restrictions and other changes that he said would make it far less expensive and burdensome to administer.

The proposed amendments, which critics said were much more drastic than they expected, would accord far more secrecy to law enforcement records, business data, and all types of records "concerning individuals" than they have under present law.

The administration bill would also change the definition of government records within the reach of the law so that it would no longer be able to touch "diaries, journals, telephone logs, desk calendars, or personal or research notes" that government officials often keep.

"Such materials are often nothing more than an extension of an individual's own memory," the Justice Department asserted in a section-by-section analysis of the bill. "No purpose of the Freedom of Information Act would be served by their disclosure."

Still another provision in the bill would whittle down the authority that federal courts have under current law to determine whether national security information was properly classified. It was the lack of that authority that led Congress in 1974 to change the original statute and enact a variety of rules that the administration is now seeking to dilute.

Under the bill Rose presented, which has been entitled "The Freedom of Information Improvements Act," the courts could order the release of classified documents only on a finding that the government's decision to keep them secret was "arbitrary and capricious."

The Justice Department argued that this would constitute little change from present practice anyway, since the courts are already obliged to give "substantial weight" to the "expertise" of the government agencies involved.

Under questioning by subcommittee Chairman Orrin G. Hatch (R-Utah), who introduced a similar bill of his own last week, Rose said the law was far from "an unmixed blessing," no matter what some of its defenders might say. The 1974 amendments, he said, were "adopted in an atmosphere of rather extraordinary post-Watergate and post-Vietnam concerns" and, he maintained, need to be reconsidered now in "a more balanced environment."

Rose argued that the Freedom of Information Act has been incorrectly touted as the "major source" of details concerning the Watergate scandal as well as CIA and FBI abuses of power that began coming to light in the mid-1970s. He said the disclosures really stemmed from corrective actions taken by the agencies themselves, investigations by Congress and the executive branch, and "substantial declassification" by government agencies of documents that they could have kept secret, FOIA notwithstanding.

"If material is properly classified, it is simply not releasable," Rose declared. The FOIA, he insisted, has been "highly overrated as an instrument of these disclosures when, in fact, it was not."

In addition to setting the stage for higher fees and relaxed deadlines for compliance, the bill would expand the exemption for investigatory records of law enforcement agencies by protecting all "information relating to an ongoing investigation or enforcement proceeding" instead of only that information that would "interfere" with the proceeding.

Records that "tend to" disclose confidential informants -- from undercover agents to local and state police departments -- would also be entitled to secrecy along with any information they might impart.

The bill would add several entirely new exemptions, including one that would allow the attorney general to prescribe secrecy "by regulation or order" for any records relating to investigations of "terrorism, organized crime or foreign counterintelligence."