THE CLOUDS ARE PARTING, and the Democrats are beginning to enjoy the view from Capitol Hill. After a summer of humiliating legislative defeats, they cannot help but find it satisfying to sit back and watch a skeptical financial community devour any of the credibility President Reagan's economic policies once had.

Sky-high interest rates and tumbling stock markets prices are the most obvious signs that something is awry. They cast a dark shadow on Reagan's rosy vision of the country's economic future, the one which investors would pour their dollars into a revitalized private sector and expand employment. Those investors are now shying from Reagan's bargain with them, betraying a lack of confidence in his maneuvers to fight inflations and restore a balanced budget. They have discovered what Reagan's opponents claimed long ago, that the arithmetic of supply-side economics just doesn't add up. And as forbidding interest rates further depress the economic growth necessary to bridge the gap between federal revenues and outlays, it becomes further apparent what Reagan's plan is and always has been--a fraud.

Never mind Reagan's disclaimer that the enactments of the summer don't go into effect until October 1, or even the well-intentioned earnestness of his pleas for patience and sacrifice in the upcoming years. The technical economic arguments for tax cuts and spending reductions have never been the compelling force behind the administration's radical policy initiatives. Reagan's refusal to spare the defense budget any sharp cuts in its proposed growth makes that clear enough.

The issues from the outset of his quest for the presidency more than 15 years ago have been the need to establish a Spartan attitude toward domestic concerns and a tough posture towards the outside world; and analytical search for enlightened solutions has never marked the former California Governor's policymaking. The supply-side rhetoric of 1980, along with his proclamation of a new mandate for governing America, were supposed themselves to be solutions for the grave social problems facing the nation. A word from the people, a word from the President, and the final O.K. from Wall Street were all that was needed to get America on its track.

Cuts in welfare assistance and legal aid for the poor, pensions for the elderly and disabled, and school lunches for elementary school students have all been sanctioned as part of the effort to trim the fat out of the federal budget. Reagan and an acquiescent Congress did more this summer to change the direction of federal public assistance policy than most who voted for him thought possible, but Wall Street needs a lot more out of the cut budget to be convinced that it might be balanced and inflation controlled.

Since the reductions won't come out of the defense budget, they will have to be scraped from an assortment of entitlement and welfare programs, as the President announced in a nationally-televised speech Thursday night. But Republican Congressional leaders have warned Reagan that further cuts in domestic government spending, especially an encroachment onto slated social security payments, will anger their constituents, and may create strong opposition in the legislature. We can only wait to see if any opponents of these further Reagan proposals can overcome the inertia that has set in since their upsets of the summer.

THE MEANING OF THESE EVENTS is obvious. Reagan convinced enough people that he had the answer to America's economic troubles to win the 1980 presidential election. A lot of voters who saw through the blue smoke of his supply-side policies thought he would be better than Carter anyway, supposing that Reagan's actions as president would be more moderate than his rhetoric. But he fooled them all, keeping all of the many campaign promises to dismantle federal programs, slash taxes and increase military expenditures. Reagan has had his pound of flesh. Now Wall Street wants blood.