How Reagan's policies are playing in Peoria . . . and the rest of Illinois

US House Republican leader Robert H. Michel of nearby Peoria is correct when he says the folks back home won't stand for the social security cuts and tax increases envisioned in the GOP-Senate budget proposal endorsed by President Reagan.

From conversations here with members of the Illinois Legislature and political observers, this fall's election climate - certainly in Illinois and possibly throughout the United States - looks like this:

* The conservative wind still blows very hard - a widespread view that big government in Washington, here in Springfield, and wherever it may occur, must be reduced and that government spending must be resisted. It fuels the drive for lower taxes - and against raising taxes.

* But crosscurrents to Mr. Reagan's brand of conservatism are appearing. Reduced income is hitting the farmers hard. Unemployment cuts deeply. There is a growing feeling that once again there must be more help for the helpless, for the poor and disadvantanged. And, by all means, the people are saying, leave social security alone.

Political candidates are ducking and weaving these days, sounding like a combination that some observers here call ''conservative-liberals'' or ''con-libs'' for short. They advocate both change and the status quo at the same time - a hard job for anyone except a politician.

The big battleground here is in the run for governor and in the state legislative races.

Republican Gov. James R. ''Big Jim'' Thompson, finishing six years of what is widely perceived as a very able stewardship, is up against Democrat Adlai E. Stevenson III. Mr. Stevenson is a two-term US senator who declined to run in 1980 for a third term. His name in these parts helps make him part of a legend. His father Adlai E. Stevenson served as governor of Illinois, Ambassador to the United Nations, and twice ran unsuccessfully for President.

Governor Thompson, in a Monitor interview, stressed his view that he had ''managed well,'' that he's kept his eyes on spending, and that he hasn't raised taxes. He says he's running again because ''I want to be around'' when, as he sees it, the state as a result of his management takes a big leap forward economically when the current recession fades.

Mr. Stevenson sounds much the same theme: of careful management of the public's money and of an approach that will lift an economy that he says has been particularly bogged down in Illinois because of alleged Thompson mismanagement.

Stevenson deplores the Thompson aid cuts for education and says he will restore them. But he doesn't talk about more taxes. He simply says he's going to do more for more people with present resources. Thompson may sound more conservative than Stevenson, but not much. Both are quite aware of the conflicting winds, and both are bowing to a degree in both directions.

Reapportionment is the new ingredient in both state legislative and national congressional races this year. In Illinois the Democrats have gained the most in redrawing congressional and state legislative districts.

Democrats hold a one-vote majority in the state Senate and Republicans have what Thompson calls an advantage of five ''shaky'' votes in the House.

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