"Inflation results from all that deficit spending," President Reagan told the nation last February. But does it?

Reagan is now leading his administration, many of its conservative backers, and congressional Republicans into an extraordinary political reversal on the issue of balancing the budget. A balanced budget, he said last week, is less important to the American people than bringing down inflation and interest rates. Apparently the president no longer believes that federal deficits are the source of inflation.

Meanwhile, as Republicans ready themselves to embrace unbalanced budgets for at least the rest of Reagan's first term, some Democrats are taking up the old conservative cry that the deficit should be narrowed and that the government should live more nearly within its means.

It would be little wonder if this political confusion were matched by widespread public confusion about whether a balanced budget should indeed be a prime objective of economic policy.

Economists generally agree that it should not.

The main arguments made against deficits are that they fuel inflation by boosting economic demand; that they threaten to crowd out the private sector from credit markets as the government borrows a large proportion of the available savings, and that they put pressure on the Federal Reserve to increase the money supply in an inflationary way, in order to ease the strain in the credit markets.

Each argument probably has some element of truth. But their importance depends crucially on what else is happening in the economy: whether it is stagnant or growing rapidly, whether private business is short of funds or liquid, whether the Federal Reserve is attempting to squeeze money growth or not. Variations in the budget deficit are inevitable and indeed helpful to the stability of the economy, most economists believe.

Reagan has recently argued that with the United States sliding into recession, the deficit is bound to grow this year and Congress should not try to offset it by increasing taxes. Minimizing the importance of the deficit is now politically convenient for the president.

But even Federal Reserve Board Chairman Paul A. Volcker, normally a keen advocate of closing the budget gap, last week conceded that it "may not be possible or desirable to offset temporary losses of revenue as a result of sluggish economic activity."

Other economists agree that during a recession, a budget deficit can help offset a weak private sector. The economic effect is different than in a boom time.

As the economy slows, the government's tax revenues fall automatically. People lose their jobs and companies make smaller profits, so that both individuals and corporations pay less tax than they would in good times. At the same time, the federal government's spending goes up as more unemployed people and their families qualify for government welfare programs.

Meanwhile, the private sector's demands for credit fall off as businessmen postpone investments that do not look so profitable, and firms run down their stocks as much as they can. Consumers may also try to save a little more against a rainy day. The larger budget deficit that recession automatically creates is thus more easily financed than it would be if the economy was growing rapidly.

Because of this, economists distinguish between the cyclical and structural components of the budget deficit, or, if there is one, surplus. They measure the structural budget balance by calculating what the deficit or surplus would be if the economy was running with high employment and little unused industrial capacity.

This measure is often called the high-employment budget deficit, or surplus. Because it is derived from the cyclical movements in the deficit caused by recession and increased unemployment, or boom and rising employment, it is a better guide to the underlying thrust of fiscal policy, and to the impact of the budget deficit in financial markets, than the unadjusted deficit numbers.

Until Reagan's recent conversion to unbalanced budgets, he and some other conservatives rejected the notion of the "high-employment budget." Deficits were bad in all circumstances, they argued. Reagan declared during the campaign, "We must have a balanced budget if we are to achieve a stable, productive national economy."

But now administration economists are making their own calculations of the high-employment budget deficit.

What worries some of them is that this shows a swing towards expansion in the coming years, even if Reagan wins further spending cuts. This year's recession and gloomy projections for the years ahead have added enormously to the deficits forecasted for the next three years. But they are not the only factor driving the numbers higher. Last summer's tax cut, together with expected increases in defense spending and some social programs, will widen the underlying structural deficit in 1983 and 1984.

Office of Management and Budget Director David A. Stockman and Volcker have warned publicly and privately that this will drive up interest rates, tend to undermine the Federal Reserve's efforts to fight inflation through tight money, and crowd out private-sector investment.

It is almost certainly true that larger budget deficits in the coming years would raise interest rates, although it is much less clear that they would be inflationary. Recent inflation has not been characterized by a rapidly growing economy with labor and capacity shortgages, and it is this kind of excess-demand inflation that budget deficits are accused of igniting or exacerbating.

A clash between fiscal and money policy would result from bigger deficits in the coming years, experts say. A rise in the deficit encourages the economy to grow faster.

But if the Federal Reserve limits the room for overall economic growth by holding down the increase in the money supply, then the fiscal boost to the economy will be short-circuited as interest rates climb.

It is this prospect that encourages many people to call for a combination of tax increases and further spending cuts to narrow the budget gap and reduce rates. But cutting the deficit would not transform the economy.

It would ease the pressure on interest rates by reducing total credit demands. But the boost to the economy from the lower interest rates would be offset by the reduction in demand from cutting federal spending or raising taxes.

Reagan, at the urging of supply-siders in the administration, has forsaken the balanced budget in order to preserve his tax cuts and the hope of a strong economic recovery. Treasury Secretary Donald T. Regan has argued that in a $4 trillion economy, as this country will be by 1984, a movement of a few billion dollars in the deficit makes little difference.

Most other economists believe that without further deficit-shrinking measures, the structural budget gap in 1984 will be too wide, especially in the context of a tight-money policy.

But they also generally agree with Regan that small swings in a deficit that is only a few percentage points of the gross national product are not significant, and that there is no special magic about balancing the budget.

It will be ironic if the most conservative president since the war, and one who has consistently stressed the importance of balancing the budget, ends up the one to dash the myth that this is the key to a sound economic policy.