The Reagan Years: An Assessment; CUTTING RED TAPE

Murray L. Weidenbaum, former chairman of Reagan's Council of Economic Advisers, gives the administration only a ''C'' on regulatory reform. Not only has it not faced up to key statutory problems and undermined public confidence in environmental controls, says Mr. Weidenbaum. By embracing so many protectionist actions - cajoling the Japanese to impose limits on car exports to the United States and placing limits on steel and meat imports - the administration has increased government involvement in business decisionmaking. The result has been a restriction of foreign trade.

''It is difficult to avoid the conclusion that the administration has taken at least as many steps backward as forward,'' writes Weidenbaum, now director of the Center for the Study of American Business at Washington University in St. Louis.

Where the Reagan administration is given credit for turning the tide of federal involvement is in the relationship between the central government and the states and localities. Mr. Shannon notes that a decline in federal flows to the states actually began under the Carter administration but that ''Reagan hurried history along.'' Where federal aid to the states accounted for 17.3 percent of the federal budget in 1978, the peak year, it now is down to 11.8 percent. There used to be about 550 programs funded in full or in part by the federal government. There now are some 400.

''Reagan is the first president since Roosevelt to turn things around,'' Mr. Shannon says. ''The first thing he did was to stop the wild proliferation of new aid programs. He also consolidated a number of programs into block grants. The states used to count on the federal cavalry to come charging over the hill. So now we have 'bootstrap federalism' - the states are forced to rely on themselves.''

Put another way, whereas the states used to depend on the federal government for about 26 percent of their budgets, that figure has declined to 20 percent.

But such figures conceal the still-high magnitude of federal aid, which includes revenue sharing, block grants, medicaid, and education and other programs. In 1981 such aid amounted to $94 billion. It fell to $86 billion in 1982, still the second highest transfer in history. The decline was only $8 billion and hardly created a ripple. It should also be noted that state and local budgets have grown because of the recession and the need to raise more revenue for increased state aid. So the slowdown of federal assistance is not the only reason for the changed complexion of state budgets.

Meanwhile, Reagan's ''New Federalism'' - a plan for turning back medicaid and welfare programs to the states - has not gotten off the ground. In fact federal medicaid payments are increasing, and with the new 5 percent federal tax on gasoline, Washington is also getting involved in new bridge and highway programs.

''But there has been a psychological change,'' says Mr. Shannon. ''In the old days the federal government would have increased aid during a recession. Now the states are having to raise money and the message from Washington is, 'Don't count on us.' So there is an 'austerity federalism,' a trend which is being fostered by governors and mayors across the nation as they watch the federal deficits soar.''

Public employment is another measure of the size of government, and here there also appears to be some change, though not on the national level. The number of civilian employees in the federal government has remained fairly constant for some 10 years at about 2.8 million, declining only slightly in the past two years. The huge post-World War II growth came in state and local governments as they scrambled to carry out programs legislated in Washington.

But that trend is beginning to reverse itself. The number of state and local employees per 10,000 population stood at 256 in 1952 and rose to an all-time high of 497 in 1978. It began declining in 1980 and totaled 467 in 1982 - a drop attributed by Mr. Shannon to several factors, including the reduction in federal aid, the taxpayer revolt, the recession, and, not least of all, the decline in the number of teachers at all levels of education once the post-World War II baby boom was over.

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