A Bush administration proposal to continue spending billions of dollars for a top-secret network of military satellites to be used in retaliating against a Soviet nuclear attack has become a fierce battleground for competing Republican and Democratic views of future U.S. defense needs.

Two weeks ago, in a partisan vote that some legislators say could ripple through the fall election campaign, the Democratic majority of the Senate Armed Services Committee overrode unanimous Republican objections and voted behind closed doors to kill the $40 billion Milstar satellite program, calling it an overblown relic of the Cold War.

The decision was protested sharply by some senior military leaders and caused the Democratic and Republican committee members to issue strongly worded reports in preparation for a coming struggle on the Senate floor over the fate of the system.

Although the dispute concerns only $1 billion within a nearly $300 billion proposed defense budget for fiscal year 1991, the Milstar fight raises other, larger military issues as the post-Cold War era takes shape. These include: What is the enduring strategic threat from the Soviet Union? Should the United States continue to prepare for global conflict? How much deterrence is enough?

The Milstar satellite system has been under development since 1983, primarily to relay U.S. wartime orders for an attack on the Soviet Union during or after an initial nuclear exchange. Democrats now say that Milstar's deployment is unnecessary; the Republicans say it remains prudent.

The technical challenge of creating a satellite system that could function amid a vast nuclear exchange has led to delays of nearly five years and what one defense offical calls a tripling of the system's total cost, problems that until recently were kept from public view by the cloak of national security.

President Bush, like former president Ronald Reagan, calls the system his top priority for U.S. military communications, a stance that both sides say has raised the political stakes of the congressional decision.

The vice chairman of the Joint Chiefs of Staff, the chief of naval operations and the commander of the U.S. Space Command have written letters to Congress expressing their concern about possible termination. However, the Air Force, citing competing budget demands and Milstar's extreme complexity, tried in vain to cancel the program during internal budget deliberations in three of the past four years. This year, the Air Force proposed a stripped-down version, but was overuled by Secretary of Defense Richard B. Cheney.

Several Republican and Democratic senators who were contacted about the Milstar vote declined to speak on the record. But Democratic committee members say they oppose Milstar largely because of "sticker shock" from the program's estimated $40 billion cost for research, development, production, launch and operation. A senior Pentagon official confirmed in an interview last week that building and launching each Milstar will cost about $1 billion, nearly as much as building a Trident missile submarine.

Describing the five-ton satellites as "the most complex ever built," the official said they would be able to defeat virtually any jamming and antisatellite effort, as well as survive radiation from nuclear blasts in space. Lockheed Missiles and Space Co. is the prime contractor, and key components are manufactured by Hughes Aircraft and TRW.

Although the number of satellites planned is classified, independent experts say four are expected to be deployed 22,300 miles up in stationary orbits over a single spot on the Earth's surface. Six others will likely be deployed in elliptical orbits that cross the North and South poles. Some of the 10 would be "silent spares" to be used if others are destroyed or otherwise don't work.

The program's high cost is partly due to the need to replace a $1 billion satellite each year after the system is fully deployed later this decade or early in the 21st century. An estimated $4 billion has been spent so far and the first satellite is not to be launched for at least a year, making Milstar a ripe target for defense critics.

"Milstar was conceived in a period of intense U.S.-U.S.S.R. strategic competition, when the threat of global war arising from a confrontation in the heart of Europe dominated U.S. planning, when resources for meeting these threats were increasing substantially, and when the Reagan administration was toying with the concept of fighting and winning nuclear wars," the Democrats said last week in an unclassified report explaining their vote.

Although bipartisanship marked Congress's approval of $40 billion in various improvements to other U.S. military communications in the past decade, the Democratic senators opposed to Milstar said the Pentagon had failed to establish "a significant deterrent value in ensuring robust {military} communications worldwide . . . in the aftermath of a strategic nuclear war."

Critics say that the vast devastation from a global nuclear war makes them wonder who would be left to conduct such communications and what meaning they might have.

Committee Republicans called the Democrats' Milstar termination vote "intolerable, since it undermines strategic and crisis stability" resulting from added confidence in the ability to retaliate against any Soviet targets. Noting that the system is useful for more than "nuclear warfighting," they said, "even if that were not the case, we cannot agree . . . that because the possibility of strategic nuclear war has diminished, we should cease planning for a credible response . . . . "

Advocates say Milstar surpasses existing satellite systems, because its sophisticated computer system can automatically shift from one radio frequency and antenna to another to evade jamming. Each satellite is also far more manueverable than existing military communications satellites, allowing it to scoot more readily out of harm's way.

Milstar also is designed to relay data from U.S. intelligence satellites, and officials say eliminating it would force continued reliance on less capable relay satellites.

Noting that Milstar permits communications between commanders and bombers heading over the North Pole to Soviet targets, the Republicans expressed particular anger that cancellation would deny "the U.S. National Command Authority the ability to have ensured communications" with the new force of strategic B-2 "stealth" bombers supported by the committee.

The Democrats counter that there is limited need "to coordinate and retarget U.S. bombers executing strikes . . . hours after the Soviet Union would have been struck by" U.S. nuclear-armed ballistic missiles launched from land and submarines.

Several congressional aides speaking on condition that they not be identified said that linking Milstar with the B-2 could backfire because the bomber may also be canceled this year.

While the House Armed Services Committee this week funded Milstar in its version of the 1991 defense budget, it voted to end B-2 production. The committees' spending plans will go to full floor debate and votes; any discrepancies between the two will be worked out later in conference committee.

Congressional sources and administration officials say Milstar also would permit communications between airborne and on-shore commanders and U.S. naval forces operating in Soviet home waters. But the maritime strategy that calls for such operations is highly controversial and may be altered.

The senior Pentagon official added that Milstar's role in a nuclear war has been "overemphasized," and said the satellites can also better relay messages from tactical commanders to deployed forces such as naval battle groups, without revealing the forces' location.

But the Democrats charge that the number of potential tactical users "has atrophied," partly because associated communications terminals are too complex, expensive and heavy. The senior defense official concedes that no more than 1,800 Milstar terminals are likely to be deployed, which other experts say is less than half the number first estimated.

"Even with {all} 10 satellites, Milstar will only provide 41 percent of . . . validated requirements," said Vice Admiral Jerry Tuttle, explaining recently in a trade publication, Military Space, why the Navy decided to buy separate satellite communication gear.

Milstar was shepherded through much of the 1980s by the office of assistant defense secretary Donald C. Latham, now an executive with Lockheed Information Systems Co.