Ronald Reagan's bold effort to curb the power of the federal government turns on his ability to keep control of things in Congress. It is one of the most dramatic confrontations in years.
In 1933, Franklin Roosevelt set out to cure the Great Depression, which idled one worker in four, by enlisting the forces of the central government. For half a century since then, centralization has grown. President Reagan has set out to reverse the trend and in his first year, against all doubts, has had spectacular success. He has slashed income taxes, readjusted federal expenditures, and turned responsibilities back to the states. He makes his new budget proposals to Congress Jan. 26.
But a recession has developed while the euphoria of the first year of a new president fades, and the poor and the unemployed are beginning to feel the pinch of Reagan economies. Half a century after FDR - the centenary of whose birth is being simultaneously celebrated - events now test how far Mr. Reagan can push back the centralization which Mr. Roosevelt launched.
Herbert Hoover opposed federal centralization. He urged the virtues of local assistance. Appealing to governors to increase state programs, Hoover in 1929 pledged that ''the federal government will exert itself to the utmost within its province.'' Half a century later, President Reagan argues, in effect, that centralization has gone too far. But he promises that Washington will give its utmost aid to states and localities ''within its own province.''
As Mr. Reagan's second presidential year opens, he is in some political trouble. Under ''supply-side economics,'' the administration offered a three-year income tax cut, (originally proposed at 10 percent a year but modified to around 25 percent over all three years) and the expectation was that Wall Street would take off. Congress made the deepest cut in income taxes of modern times accompanied by cuts in benefits in other areas. This was also accompanied by simplification in federal regulations, and the largest military spending bill in history - $208.7 billion in 1982. The Democratic-dominated House joined in this program.
But stock and bond markets did not respond as expected. After hesitating for a period, values sank. Investors may have been frightened by the cost of the big arms expenditure. Budget Director David A. Stockman confided to the Atlantic Monthly that the administration faced big deficits. A series of leaks in Washington have confirmed the prospect of continuing deficits, with $100 billion often cited as a possibility.
President Reagan's definition of ''new federalism'' consists of turning some of the functions of the central government in Washington back to individual states. For years, Mr. Reagan has been denouncing ''bureaucrats,'' and the image has been projected of an impersonal monster in Washington which gobbles up state taxes. Mr. Reagan ardently believes in the metaphor and seeks a redistribution of benefits, burdens, and responsibility.
Many cities and states, however, find they will give up as much by accepting responsibilities at this point, as they will gain by a return of the tax revenues. Many localities are hard hit by recession, which is increasing welfare expenditures. Mr. Reagan promised in the 1980 campaign that he would balance off local costs by turning back tax sources. Partly this would be done by ''block grants'' - lump sums sent to the states from Washington for them to allocate locally. Cities and states are closer to the people, it was argued, and could make the more efficient distribution.
In operation, federal distributions were reduced in nearly all cases and protests have arisen. The procedure is still experimental but involves major shifts. Last summer Congress cut $35 billion from budget expenditures, including estimate, federal support for state governments in 1982 will be 26 percent less than in 1981, and 37 percent less than in 1980.
Outcries have come from some communities and states just as Mr. Reagan was having fiscal troubles in other directions, indicated by his last-minute budget compromises. Gov. Richard A. Snelling (R) of Vermont, chairman of the National Governors Association, called the combined blows of recession and loss of federal revenue ''an economic Bay of Pigs.''
The fate of the new federalism is uncertain. It attempts to change a 50-year old trend. Rich and poor states make it more difficult - the former having large populations or minerals or similar resources from which they can get revenues. President Reagan was asked last November in an interview how he proposed to deal with poor states, and he responded that individual citizens have a right to ''vote with their feet'' by moving. The dispute reaches down into the basic question of how far government should go in equalizing conditions.