WASHINGTON— RATHER than a dusty civics lesson, federalism is an
evolving principle that continues to influence the lives of all
Americans strongly, if indirectly.  In 1788, James Madison wrote
that while the proposed Constitution gave the Federal Government
''few and defined'' powers, the states' powers ''will extend to
all objects which, in the ordinary course of affairs, concern
the lives, liberties, and properties of the people, and the
internal order, improvement, and prosperity of the State.''
That view of the respective powers of the states and the Federal
Government had been in eclipse for 50 years until President
Reagan took office. These articles examine the successes, some
of them serendipitous, and the lapses of his Administration's
commitment to limiting the powers at its own disposal.  STATES,
cities and counties are feverishly competing to build up their
own economies, using the remnants of the big Federal programs of
the past as just one of their tools.  The idea of ''levels of
government'' -