Since the Reagan administration took office, federal spending to help native Americans has been cut by nearly a third.

But Kenneth L. Smith, the official in charge of protecting the interests of the nation's 1.4 million American Indians, Eskimos and Aleuts, isn't shedding any tears.

"We've had a paternalistic policy for 200 years and it hasn't worked," said the assistant secretary of interior for Indian affairs. "Some tribes had become completely dependent upon the federal dollar for 95 to 100 percent of their budgets. But now, a lot of tribes are sitting down and saying, 'We can't continue to depend so heavily on the federal dollar. We've got to develop some economic base of our own.' "

It's a philosophy that Smith shares with his bosses, Secretary James G. Watt and President Reagan. Put simply: if Indians want Uncle Sam off their backs, they've got to get their hands out of his pockets.

The 283 tribes recognized by the federal government own 51.9 million acres of land, including 5 percent of the nation's oil and gas reserves, 486 billion tons of high-quality coal and half the nation's uranium supply, or $400 billion worth. They also own vast amounts of timber and hold valuable fishing rights.

Reagan's position is that those are sufficient assets for the Indians to make it on their own.

"Excessive regulation and self-perpetuating bureaucracy have stifled local decision-making, thwarted Indian control of Indian resources and promoted dependency rather than self-sufficiency," he said last January, when he promised to reduce federal interference and give tribal governments more responsibility.

Some tribes have done well, even as federal funds for them have been cut from $3.5 billion to $2 billion under Reagan. The Choctaw Indians in Mississippi used a $2.6 million industrial revenue bond last year to attract a card-finishing and packaging facility to their reservation that has hired 350 workers. The Salt River PimaMaricopa tribes in Arizona put up nearly $1 million to build a high-security warehouse for an electronics firm. Several tribes began negotiating their own contracts with outside companies for coal, oil and gas leasing.

But major cuts in federal job, education, housing and health programs have caused havoc in many tribes, especially ones that lack natural resources. Some Indian leaders have charged that the administration moved too fast to cut government ties, upsetting the long-range development plans of many tribes. Other leaders worried that hard times would force some tribes to rush into questionable schemes to develop their natural resources.

Unemployment, meanwhile, hit new highs. In 1982, 37 percent of Indians were jobless, a 20 percent increase since 1981. Unemployment climbed to 90 percent among some tribes in North and South Dakota who were not sitting on top of valuable resources.

Smith's tribe, the Wasco of Oregon, a member of the Confederated Tribes of the Warm Springs Reservation, was forced to close a school and cut back early childhood, cultural and heritage programs because of the budget cuts. Smith acknowledges that the cuts dazed many tribes, but he insists that only "soft, make-work programs" were trimmed. He contends that tribal leaders should have known that their day of reckoning was coming.

"I was the first guy to come in that said, 'Where do we cut? . . . . Where do we scale back?' " Smith said. "And immediately that put me on the other side of the fence. It was a negative thing and it got us off to a bad start . . . . But the old way wasn't working. You could appropriate $1 billion next year and if you don't have a strong foundation or strong tribal government to build upon, it's like pouring money down the drain."

Smith shares the administration's belief in the free enterprise system, in part, because he thrived under it before he became a bureaucrat. Only the second member of his tribe to graduate from college, Smith worked his way up from a $2-an-hour job in 1959 as an accountant with the Confederated Tribes to a $60,000-a-year job as the confederation's business manager in 1972.

Under his leadership, the confederation became the first Indian group to own its own hydroelectric dam, its lumber operations employed nearly 400 workers and the reservation's 160-room resort, Kah-Nee-Ta, attracted thousands of tourists to the Cascade mountains each year for golfing, swimming, sunbathing, horseback riding and hiking. Annual profits reached $3.5 million--enough to pay annual dividends of $1,750 to each member of the three tribes.

"I never had problems dealing with the bureaucracy . . . , with the BIA, state or county," Smith said. "Sure, there were minor problems, but I was always able to deal with those problems in the way that we were supposed to deal with them. The system works if you know how to work it." That talk rubs some tribal leaders the wrong way. They counter that Smith hasn't been able to deliver much as BIA director. Congress rebuffed a $15 million economic development package that he proposed.

His attempts to close a number of BIA area offices caused such a political uproar that he was forced to abandon the idea. And the administration still hasn't made good on its promise to pass legislation to encourage enterprise zones on reservations and allow tribes to issue tax-free revenue bonds.

Rumors that Smith is about to resign have become widespread, but he dismisses the talk with a wave of his cigar. "I knew that when I took the job I wasn't going to be a popular guy, especially in Indian Country," he said. But this administration, he insists, "is doing the right thing for Indians."