DEMOCRATS are busy these days celebrating the end of the Cold War and devising costly ways to spend the resultant "peace dividend." This preoccupation should come as no surprise, as liberals have always dreamed of drastic cuts in military spending.

Now, they believe, Mikhail Gorbachev's political savoir-faire and the imminent collapse of communism will give them the money to further inflate the Great Society programs of the 1960s and 70s. They are convinced that anti-communist, anti-government conservatism has lost its appeal in the changing world.

Enter Jack F. Kemp, Bush's ebullient secretary of housing and urban development and probably the most formidable Republican alive. An also-ran in the 1988 Presidential election, Kemp champions what Republicans need most--and Democrats fear most--in the emerging post-Cold War era: a compassionate, yet conservative solution to poverty and urban decay.

Kemp, a fervent intellectual, has dubbed his ideology "progressive conservatism," Beware, this is no oxymoron. Kemp wants to tackle traditionally Democratic issues by applying free-market principles and the human spirit of enterprise.

Put simply, he wants to use conservative means to achive progressive ends. Although his ideas didn't win the support of the GOP in 1988, Kemp's day has finally arrived.

DURING the Reagan years, conservatives focused their attention on the nation's overall economic recovery rather than on specific remedies for urban problems. They correctly believed that in order to help the nation's poorest, America must first achieve economic growth, opportunity and prosperity.

Kemp deserves much credit for the success of Reagan's reforms. Then a veteran representative from upstate New York, he helped direct legislative efforts in Congress to pass economic recovery initiatives, especially tax reductions.

After the creation of 17 million new jobs, as well as the lowering of tax and inflation rates, Kemp sought in his 1988 campaign to broaden the scope of this prosperity to include those poor left out of the Reagan Revolution.

In a recent issue of Policy Review, Kemp wrote, "conservatives must demonstrate by both our words and our actions that at the center of our political and social philosophy is the idea of the good shepherd--that we want the whole globe someday to be free, prosperous, and democratic."

Progressive conservatives challenge the effectiveness of America's current methods to aid the poor. Rather than helping the disadvantaged, some Great Society programs have entrapped them in a mismanaged bureaucracy that offers no hope of empowerment and no incentive for advancement.

Of the many ideas he has outlined as secretary of HUD, the one Kemp advocates most ardently the creation of federal enterprise zones in the inner cities. These zones use tax incentives to encourage urban development and entrepreneurship. Thirty-seven states and the District of Columbia have implemented--with the creation of an estimated 180,000 jobs and about $9 million in private investment in poor areas, according to Kemp.

Perhaps even more provocative is Kemp's support of a resident management and ownership movement that, he wrote, "is sweeping public housing communities across the country." In neighborhoods such as Bromley Health in Boston, women are leading management movements and pressing for greater tenant control of public housing.

Resident mangement at Kenilworth-Parkside, a public housing project in Washington, D.C. has already worked wonders. According to Kemp, teen-age pregnancies and drug abuse there have declined while rent payments and employment have increased. Some estimate that Kenilworth-Parkside's resident management will save the government more than $4 million over 10 years.

Some academics, such as Peter D. Salins, chair of the urban affairs department at Hunter College, share Kemp's criticisms of traditional, government-oriented solution to housing problems. In a 1986 issue of Public Interest, Salins argued that over-bureaucratization and misplaced priorities had hampered public housing efforts.

Kemp's advocacy of private ownership of housing projects has won support from many urban residents, as well as the predictable criticism from their socalled liberal defenders, who, as Kemp says, "believe that people who live in public housing units are not capable of keeping a decent, safe home or even of caring for themselves."