In one sense, all that is happening here is that Robert Henry Michel, a Republican who has been in the House of Representatives for 13 terms, is in a surprisingly close race with G. Douglas Stephens who was 5 years old when Michel went to Washington.

But Michel is not your average congressman. He is the House minority leader, a self-described "good soldier" who dutifully and successfully has served as congressional captain of Reaganomics.

And Peoria has always symbolized something more than what it really is. That is particularly true this year in the 18th Congressional District as unemployment is 16 percent with Caterpillar Tractor Co. laying off thousands and the United Auto Workers on strike, their pup tents and oil drum fires ringing the massive Cat plants along the Illinois River.

Do the voters blame Reaganomics for this and do they hold Michel responsible?

He said his polls indicate that he has taken a narrow lead in the past two weeks.

"Aw shoot, I'm not worried, not now," he said.

Even before President Reagan made a campaign stop here Wednesday, a posse of journalists has been in and out of town.

"It's been a three-ring circus," said Mike Johnson, Michel's press secretary. "We've got these cameramen coming in here yapping away in Japanese and German all the time."

Along with TV crews from Japan, West Germany, Canada and Sweden, Life magazine, People magazine and CBS's Dan Rather (who left town in somewhat of a huff when he was unable to arrange an interview with Michel) have made the pilgrimage. The three major networks will have live coverage from Peoria on election night and they have asked Michel to be on their news shows the next morning.

In addition to Reagan and former president Gerald R. Ford, the highlight of whose trip here Friday was a recitation of golfing jokes Bob Hope tells about him, just about every politician who considers himself presidential timber has been here. This includes Walter F. Mondale, Howard H. Baker Jr. Morris K. Udall, Edward M. Kennedy and Alan Cranston.

The Democratic National Commmittee in Washington telephones Stephens' headquarters in the Odd Fellows Temple every few hours to see how things are going, and Michel is besieged with offers from his congressional friends who appreciate his accommodating nature and legislative skills to speak on his behalf.

Michel has turned down almost all their offers, realizing as press secretary Johnson put it: "In this election we need Joe Blow from Caterpillar talking up Bob Michel a helluva lot more than we need congressman so and so."

That was the paradox facing Michel when he got back here to campaign early this month. In Washington, his career was at its zenith, his respect and power never greater, but in Peoria a lot of people were angry.

The Reagan embargo on U.S. equipment for the Soviet natural gas pipeline, a sanction that Michel at first supported, cost Caterpillar at least 800 jobs and Fiat-Allis thousands more.

In his dealings with "Joe Blow" on the campaign trail, Michel has readily acknowledged that his district is suffering.

"Let's face it," he said, "we've been losing our shirts. I know that, no one knows that better than I do." But he has not backed away from the Reagan economic policies and emphasizes the decline in inflation and interest rates.

One of the first things Michel did was to visit to the Peoria Journal-Star, a conservative paper that has supported him consistently, to convince them that the paper was "giving an inordinate amount of publicity to the challenger."

Then his media people crafted a series of negative ads portraying Stephens as a rich young union lawyer, a "know-nothing" tool of big labor.

Stephens responded in kind, portraying Michel as a Washington pol who had lost touch with his district, insensitive to the problems of the jobless and the elderly.

In Washington, Michel had developed a reputation as an unflappable "Mr. Nice Guy," but the heat of this contest has occasionally gotten to him.

Last week, in the only television ebate of the campaign, Michel angrily interrupted Stephens and the moderator twice to complain that Stephens was reading from notes, which Michel thought violated debate rules.

The cameras focused on Michel for long periods as he pursed his lips and his face flushed red. At one point he was so disconcerted that he could not think of a question to ask his opponent.

"That was not my finest hour, I'll acknowledge that," said Michel. "I'd just as soon forget that evening. But this Tuesday night is the one that counts."