If politics is theater, then Chicago is The Palace and Walter F. Mondale brought down the house. He marched in an old-time torchlight parade. He heard snare drums snap in his ear and felt the concussion of fireworks exploding over the Chicago River. Floodlight bathed his face, crowds along the parade route roared, sirens wailed in the night. And the fading army of the Cook County Democratic organization lined the parade route as it has not done since Richard Daley was called to his ultimate patronage post.

This was politics out of a movie, as it used to be. Later in a speech, Mondale invoked Harry Truman, who had marched in this parade. He held up the now-famous Chicago Tribune in which the victory of Thomas E. Dewey was headlined, leaving a permanent blush on the face of the newspaper that proclaimed itself America's greatest. It would happen again, Mondale said.

This was politics in a time capsule -- a fitting extravaganza for Mondale, the presidential candidate who, like Miniver Cheevy, was born too late. Mondale called the roll of threadbare Democratic themes. He talked of jobs and unemployment, of work going overseas, of "cheap foreign goods," education and Medicare, of Social Security and national security -- and his audience loved it.

But Chicago is not the nation. It's not even Chicago anymore. Richard Daley, once mayor for life, is gone and so is a hunk of the population. It has moved to the suburbs and it no longer works for the mills or even the city, but for new firms that have adapted to the new American economy. There, the Reagan prosperity and the lawns thrive as one, and the Democrats of old vote either independent or Republican. So say the polls. Fritz Mondale rejects the polls, though. He told his audience here hat the only polls he cares about are Chicago politicians like Roman Pucinski and Rep. Dan Rostenkowski. The audience, their placards identifying their wards or favorite local politician, loved that one, as indeed they loved Mondale himself. They cheered him, applauded him, yelled for him and buoyed him. He bounced, he laughed. He made a pass at the Nobel Peace Prize by having Mayor Harold Washington and City Council Chairman Edward Vrdolyak join hands, and he listened in glee as Ronald Reagan was denounced as a callous fool. How could he be losing with crowds like this?

But the pollsters say that Walter Mondale travels in a cocoon, surrounded by adoring acolytes. The man with detailed plans for the future -- with a tax plan, a disarmament plan -- is ending his campaign strung out on nostalgia. The steelworkers who hear him want to return to mills that are permanently banked, and Mondale suggests it is possible. He denounces cheap foreign goods, but the fact is they are not cheap and their quality is often unsurpassed here. The reporters who hear him write their stories on portable Japanese computers and some of their newspapers are printed on presses made in the same country. This is not the way it ought to be. It is not the way it once was.

But in the last days of the campaign, everything is as it once was. Truman is invoked, John Kennedy, too, and the New Deal is beckoned from the grave. Walter Mondale, decent, competent man that he is, walks with ghosts. He finds this stroll energizing, and the crowds tell him he, like Truman, will pull an upset. So the other night, Mondale strolled down Michigan Avenue in an old-time torchlight parade. The faces of the crowd were bathed in the amber glow of flares, and rockets exploded overhead. When it comes to political theater, there's nothing like Chicago. It's The Palace, but the old Palace is gone, and the pollsters are saying about politics what F. Scott Fitzgerald once said about life: There are no second acts.