In the Budget he sent to Congress earlier this year, President Reagan proposed killing off a number of federal programs and agencies. Most of these targets are small, and their demise would do less than the accompanying rhetoric suggested to reduce the deficit. Several of them nevertheless deserve to go. That would be true even in a loose budget year: if the programs are not ineffectual, their purposes are marginal. But Congress, while cutting some of these programs, has killed none of them.

The best example may be UDAG, the housing department's Urban Development Action Grants, which amount to several hundred million dollars a year. The president proposed to cut off the program, but both houses left room in their budget resolutions to continue it; provision has also been made in the pending housing bills. It's a gift to mayors and local government that the federal government cannot afford.

Begun in the Carter administration, UDAG is a sprinkling of seed money to induce private businessmen and other investors to join in revitalization projects usually assembled by city governments. It is supposed to help cities in trouble and, through them, by broadening the tax base and providing jobs, the poor. But the clearest beneficiaries are often developers who are decidedly not poor. Congress has also expanded the eligibility requirements so that most large cities and urban counties and nearly two-thirds of small cities already have access to these funds. A "pocket of poverty" can make even a boom town such as Los Angeles eligible.

The Office of Management and Budget, in sniping at the program, reports that "grantsmanship has been so critical to the determination of UDAG winners that cities have resorted to using" other "scarce . . . funds -- and HUD has actually provided specific aid -- to finance technical assistance and training on how to package and obtain a UDAG grant."

Mayors say UDAG grants are the catalysts that make projects go. Critics say a lot of the projects would be undertaken anyway, while many of those that wouldn't be, shouldn't be. They argue that UDAG distorts investment patterns -- in that political clout and grantsmanship become the determinant instead of the best economic use of available funds.

Any mayor or congressman running for reelection likes to be able to send his media consultant down to photograph some concrete, positive accomplishment -- even if it is only a UDAG-financed Hilton Inn (OMB says UDAG has helped build 262 hotels). Politics aside, there are better ways to spend scarce federal funds. The administration has had the courage to recommend killing UDAG. Congress should have the sense and courage to concur.