The Palestinians and the Israelis are each supremely aware of the existence of the other. Yet each has difficulty with this reality and has denied the legitimacy of the other's claim to a part of Palestine.
Whether or not a new policy direction will result from the power struggle now going on within the PLO remains to be seen. But for its part the government of Israel is developing a plan to make the Palestine problem go away. Prime Minister Begin intends to define the Palestine refugees out of existence.
Previewed in a little-noticed speech by Israel Ambassador Aryeh Levin to the Special Political Committee of the United Nations last November, this rationale was confirmed to me in Jerusalem by a senior official in Prime Minister Begin's office, Nadav Anner, and by the head of the Foreign Ministry's Division for Political Affairs at the United Nations, Shamay Cahana, although both officials said they were speaking ''personally.''
''We are trying to build a new approach to the refugees,'' Anner said, ''by not referring to the 'Palestine problem' but just to its social and economic aspects.''
The new elements and retreaded arguments of this rationale are:
* Palestinians are not refugees, only Arabs who moved to another part of Arabia.
* Palestinians are no longer refugees if they have made money and homes outside refugee camps.
* Refugees often cannot be distinguished from nonrefugees because many refugees are Jordanian citizens or hold travel documents from other countries.
* Palestinians remain refugees only because Arab countries have refused to accept them and UNRWA (the United Nations Relief and Works Agency for Palestine Refugees) has kept the issue alive.
* Refugees from Palestine and Jewish refugees from Arab countries have canceled each other out in ''an exchange of populations.''
A further element of the government's plan, Anner said, is to rehouse outside camps refugees from 1948 still living in West Bank refugee camps. Humanitarian and innocent appearing, this program (patterned after one existing in Gaza) can be expected to result in a claim that rehoused Palestinians are no longer refugees.
Palestinians are refugees, said Israeli historian Ari Plascov, because they consider themselves refugees. Any Palestinian old enough to speak can tell you where his, his father's, or his grandfather's ancestral home was in Palestine. Palestinians who have succeeded economically, socially, professionally, and carry another nation's passport are no less refugees than Jews who for centuries made that thrillingly evocative promise ''Next year in Jerusalem'' and who have built Israel. The Palestinians' desire to preserve their refugee status all along has been as great as any Arab governments' - and Palestinian nationalist fervor is now far greater than Arab support for it. Leaving aside the half truths in the exchange of populations argument, at least Jews in Arab countries had a national home to go to.
Golda Meir's famous remark that the Palestinian people do not exist ''was not a slip of the tongue,'' Cahana said to me. ''We have not deprived a separate people of their right to national being,'' he added. One need look no deeper for the philosophical origins of the Begin plan. Indeed, Begin rejected the 1948 partition as illegal, he said in his autobiography, because: ''Eretz Israel will be restored to the people of Israel. All of it. And forever.''
Defining the refugees out of existence is simply the Israeli government's way of removing one of the last impediments to absorbing the West Bank and Gaza. This could also support a government claim that there is no need for UNRWA, which is witness to Israeli oppression of Palestinians in the occupied territories.
The well-known foreign policy reason for the United States not accepting Israel's magic trick still holds true: Grave damage to US interests would result. But there are other reasons as compelling.
* Palestinians deserve justice, a state in Palestine, just as Jews received justice when Israel was established.
* Absorbing the West Bank and Gaza, with 1.3 million Palestinians, will result in at least the moral destruction of Israel. The US must not be an accomplice.
In a world shallow with calculation, the US must exhibit a passion for the right.