President Reagan described, in his State of the Union address, a country that is strong, confident and caught up in a great surge of progress. Most of his audience was probably inclined to agree that his description was more correct than not, for the past year has generally been a pretty good one for the United States. Mr. Reagan attributed that chiefly to the contributions its people have made as individuals, following their own convictions.

He was right to celebrate the virtues of individual achievement -- but wrong to suggest that hardly anything else matters. The great enterprises in which a country's people cooperate, through their government, make quite a difference in people's lives. The budget that Mr. Reagan proposed to Congress yesterday is based on the proposition that individuals will spend their money better -- better for themselves, better for the country -- than their government can. He acknowledges two exceptions, national defense and Social Security. As for revenue, his budget says that spending cuts are always better than tax increases.

A great many people in Congress, not all of them Democrats, are unwilling to go that far. In that respect both Mr. Reagan's speech and his budget message were combative and adamant in tone. There is nothing in either that might mark a path toward a compromise with Congress on the gigantic deficit reductions that the Gramm-Rudman- Hollings law now requires.

With that rigid limit on the deficit, the choices become more harsh. It will be necessary, Mr. Reagan says, to hold spending on Medicare and Medicaid, the health care programs for the poor and the elderly, very substantially below the levels that the present programs would cost next year. There will have to be large reductions in federal aid to college sutdents, in his view. Similarly, there will have to be a sharp tightening of farm credit. None of these cuts is likely to get very far in either house of Congress without, at the least, searching debate.

In two areas Mr. Reagan's attitudes seem to be shifting. By commissioning the Treasury's study of the international monetary system, he is endorsing a more active American role in stablizing the exchange rates. In setting up a study of catastrophic health insurance, he is thinking in terms of a universal system like Social Security to be financed with compulsory premiums. In both cases, the studies indicate promising developments ahead.

His third study, of welfare policy, is less clear in its direction. It appears to be headed in the general direction of a work requirement, a familiar concept but one of limited application -- particularly in a time when unemployment rates remain uncomfortably high.

Mr. Reagan is right in saying that 1986 finds the United States strong and most of its people prosperous. But there are still a lot of people unemployed. There are people suffering serious and expensive illnesses. There are students without the money to complete their degrees. There are farmers squeezed by swinging prices. All of them represent national interests that the national government needs to take into account. Mr. Reagan's address and his budget open a year of national politics that is going to be devoted essentially to a renewed struggle over the balance between public and private responsibilities.