DESPITE President Reagan's failure to enact many of his extreme proposals, the Reagan Revolution has influenced the presidential candidates greatly. But instead of moving the terms of the political debate to the right, Reagan's policies have shifted both parties toward the center.

Because of the Reagan Revolution liberals now think they erred in the past. They no longer propose indiscriminate spending programs and are less likely to support free handouts. Nowhere is this more evident than in Michael Dukakis' campaign.

His campaign uses the theme of competence to highlight the new type of budget-conscious Democrat who supposedly has matured during the last eight years. Dukakis' handlers point to their candidate as the best and brightest example of this new breed.

To stress this altered liberal outlook, Dukakis talks about more strictly enforcing income tax collection and raising taxes only as a last resort. He emphasizes turning welfare programs into workfare programs. (In Massachusetts he has instituted the Employment and Training Choices Program, which encourages people to work instead of sitting at home and accepting government handouts).

Dukakis repetitively stresses the need to make tough choices on defense programs, such as slashing funds for the MX missile and the Strategic Defense Initiative. And he proposes a new government/business partnership in which the government will require private businesses to provide health insurance for every employee. In doing so he has sought to distance himself as much from Walter Mondale's campaign--in which the former vice president promised more taxes and economic concessions to virtually every special interest group under the sun--as from Reagan.

A more subtle, but equally important consequence of the Reagan Revolution is the shift in Republican thought reflected in Vice President George Bush's distancing himself from Reagan.

Before Reagan came along it appeared that both parties were committed to a certain minimum level of federal spending and involvement. But Reagan wanted to change all that. He insisted that government was the problem, not the solution. And most significantly, he promised to cut back on spending and to balance the budget.

As we now know, Reagan did not succeed in balancing the budget, but he did try his best to hold social spending to a minimum. In fact, Reagan went so far with his budget cutting that his attempts have backfired on him and his conservative colleagues. Even though conservatives now have a louder voice in the Republican Party, the party's overt reaction has been to move closer to the center this year than it ever would have dreamed of in 1980 or 1984.

The Revolution has backfired to the point that Bush no longer finds it necessary or even politically convenient to walk in Reagan's shadow. Bush has taken large steps leftward toward his pre-Revolution political philosophy.

During his acceptance speech at the Republican National Convention, Bush stated that he does not "hate" government and talked about working for a "kinder, gentler" nation. And, most significantly, Bush has proposed programs that Reagan would have sent to the garbage bin during both his successful campaigns and during his Administration's heyday.

Bush has spoken about federal efforts to aid working mothers by giving them tax breaks for day care. He has discussed efforts to simulate Dukakis' universal health care plan with a plan of his own to give the middle class the opportunity to "buy into" medicare. And he has seemingly backed down on Reagan's committment to go ahead full throttle with both research and deployment of SDI. In fact, both candidates have adopted strikingly similar positions on SDI which stress research, with deployment contingent upon further scientific developments.

Unfortunately for Reaganites, this means their Revolution has failed to succeed in the country's most prominent political arena, the presidential campaign. The Reagan Revolution's excesses have immediately pushed both parties closer to the political center but has created no net movement to either side.

Of course, party presidential nominees generally move to the center in an election year to court the undecided independent vote, but the Reagan Revolution has accelerated this movement. With Dukakis sprinting right and Bush scrambling left, it's hard to see the Reagan legacy as any legacy at all.