JERUSALEM, JULY 7 -- A powerful coalition of Israeli military and money men, backed by the Reagan administration, is seeking to kill the Lavi, Israel's state-of-the-art jet fighter project. But pork barrel politics and national pride may yet save the troubled aircraft.

The chief of staff of the Israeli Defense Force and most of his generals oppose the multibillion dollar project, which they fear could monopolize Israel's defense budget for a decade, draining resources badly needed elsewhere by the military. Defense Minister Yitzhak Rabin concurs with their view, as does Finance Minister Moshe Nissim.

The governor of the Bank of Israel says the plane could harm the nation's economy, while the state comptroller says the Lavi's approval was based on data that is "without basis, inadequate, tendentious and lacking proper cost estimates." The U.S. Defense and State departments also oppose the project and have offered Israel an attractive package of economic incentives to replace it with American-built F16s.

Nonetheless, many observers believe that the Lavi will survive because of other considerations that are in some ways even more powerful than questions of national security and economics.

Thousands of jobs, belonging to voters that Israel's two major political blocs are loath to alienate, are at stake at Israel Aircraft Industries and smaller defense contractors. At stake as well is Israel's cherished self-image as a can-do, high-tech nation that, despite its small size, can play in the big leagues of military hardware.

"There are matters which can be measured and there are those which have no measure," Foreign Minister Shimon Peres, a supporter of the project, told Israeli radio last week. "How much is the fact that Israel is capable of manufacturing such a plane worth in money, or whatever you want -- from the standpoint of deterrence, from the standpoint of {Israel's} reputation, from the standpoint of the fact that we are one of six countries in the world at all capable of producing such a plane?"

Peres, leader of the Labor Alignment, has joined forces with Prime Minister Yitzhak Shamir of the rival Likud bloc, to try to keep the project afloat despite the strong misgivings within military and financial circles. A showdown in the Cabinet, which is said for now to be evenly divided, is expected during the next two weeks.

But while the outcome is still uncertain, government sources expect Peres and Shamir eventually to reach a compromise that would stretch out development of the plane, originally due to be delivered in the early 1990s, for an extra three or four years and would limit its production to fewer than 100 aircraft, thus reducing annual costs while sizably increasing the overall price tag of the project.

As first envisaged in the late 1970s, the Lavi was to be a small, sleek, home-built jet fighter that would replace the aging Kfir at a reasonable price while enhancing Israel's technological independence. But as plans grew more and more elaborate, the price tag doubled.

According to a highly critical comptroller's report issued last week, the project spun out of control and was rammed through the defense and political establishments without serious discussion of its economic viability or contribution to defense. Defense officials, at one point, even presented a Cabinet committee with misleading data on its cost, the report said. It also predicted that the plane would be several years late because of delays in Israeli-made avionics and that Israel would be forced to buy F16s to fill the time gap.

Israel already has spent more than $1.5 billion on developing the plane, over 90 percent of which has come from U.S. funds. The U.S. General Accounting Office now estimates the cost of each Lavi at between $17 million and $18 million.

The GAO predicts that by 1990 production costs will exceed $1 billion annually -- nearly double the $550 million yearly cap that Israel has placed on the project.

As a result, many Israeli officials, including Rabin, say Israel can no longer afford the Lavi. To support his case, Rabin visited Washington last week, meeting with Secretary of Defense Caspar W. Weinberger, Secretary of State George P. Shultz, national security adviser Frank Carlucci and many congressmen. He reportedly received promises that Israel can use U.S. funds earmarked for the Lavi for cancellation costs, for developing other weapons systems and for purchasing 75 to 100 F16s, which would be ready for delivery beginning in 1991, at least two years before the first Lavi would come on line.

The United States supplies Israel with $1.8 billion annually in military aid. Rabin said he received commitments in Washington that the sum will not be lowered through 1989 even if the Lavi were dropped.

But officials and union leaders at the influential state-run aircraft industry are applying pressure to keep the Lavi airborne. They organized a demonstration of about 5,000 workers outside the prime minister's office last week and reportedly have warned that their workers and families have the power to swing five seats in the 120-member Knesset -- a potentially critical margin at a time when the two major blocs control virtually the same number of seats.

"The Americans will be furious" if Israel opts to continue on the Lavi, said a senior official, asking not to be identified. "But right now the politicians would rather have to deal with an angry Pentagon than with an angry workers' committee."