What was going on when I was born?

The Big Three auto manufacturers reported today that sale rose a substantial 20.6 percent in early May, renewing hopes for a successful spring selling season. The General Motors Corporation reported sales were up 30.6 percent, the sharpest increase of the five major domestic manufacturers, while the Ford Motor Company's sales increased 5.1 percent from the comparable 1981 period. Sales by the Chrysler Corporation were up 2.5 percent. There were eight selling days in the period both this year and last.

Inside turn-of-the-century buildings that once produced mattresses and bicycles, the American Motors Corporation is preparing for what is probably its last effort to remain a volume manufacturer of passenger cars. A.M.C. is set to begin production of the Alliance, a front-wheeldrive subcompact model, next month, with public introduction scheduled for early in September. The company said it hopes to sell 100,000 Alliances in 1983. The badges on the backs of some pilot production cars tell of their ancestry. On the right is the familiar A.M.C. logo; on the left is the Renault emblem. The Alliance, in fact, is an Americanized version of the French company's R-9 model, which was introduced in Europe last year. It is about the size of a Ford Escort, but is classified as a five-passenger, rather than a four-passenger, car.

The Port Authority, in the first step of what is expected to be a 15-year, $600 million improvement program for the New York area's major airports, yesterday approved the construction of new cargo buildings at Kennedy and Newark International Airports. The agency also authorized $200 million for commuter buses for New York and New Jersey. The plan for Kennedy Airport comes after an agreement between the Koch administration and the Port Authority of New York and New Jersey in which the city accepted lower rent for the airports in return for the 15-year development program. The Port Authority plan will eventually include expanded roads, runways and passenger terminals.

It has been dry on the high plains of eastern Colorado this spring, as dry as it has been in years. And when the winds come, turning the sky dark with dust and burying fence rows under shifting dunes of soil and thistle, those who are old enough remember the bleak days of the Dust Bowl, nearly 50 years ago. ''Rain would help, that's for sure,'' said Donald Moss, who works with the United States Soil Conservation Service district office in Denver. ''But that's only part of it. The real problem is that a lot of people have taken to plowing up land that should never have been plowed up in the first place. And if we don't stop it, it could all blow away, just like it did during the Dust Bowl years.'' All across the Western high plains, from Montana to Texas, plows have torn out the dense, soil-retaining roots of more than a million acres of grassland and prairie, much of it over the last three years, and state and local officials are growing more and more alarmed about erosion.

The disclosure that Attorney General William French Smith personally invested in an oil and gas partnership that would give him $4 of tax write-offs for every dollar he put in last year seems likely to rekindle the longstanding debate over the use of tax shelters by high-income taxpayers. The Commissioner of Internal Revenue, Roscoe L. Egger Jr., has estimated that questionable tax shelters cost the Government $3.6 billion a year, and the I.R.S. has for several years been making special efforts to wipe them out. Ironically, the public uproar over tax shelters seems due in part to the increased publicity generated by the crackdown. ''Up until five years ago, the I.R.S. was almost derelict in its duty,'' said Lee Seidler of Bear, Stearns & Company. ''People were getting away with murder. Since then, the laws have changed drastically. Whatever the public perception, the fact is that the most abusive tax shelters, the exotic ones involving Bibles and cattle, have been largely wiped out.''

PUPPET shows for adults are hardly new; they date back to antiquity, when nobody distinguished between entertainment for young and old. But they have been undergoing a renaissance in recent years in this country and Europe. And this weekend in New York, they will abound. Armor will clash and a head will fall when the Manteo Sicilian Marionette Theater brings to life the world of Charlemagne's court in a rare appearance Sunday at the American Museum of Natural History on 79th Street and Central Park West. For more than a century, generations of the Manteo family have carried on the tradition of performing adventures from the life of Roland with nearly life-size marionettes. Bruce D. Schwartz, wearing a stage that fits over his head and torso, will present an Elizabethan farce and also work with rod puppets starting at 11 tonight at the Economy Tires Theater of the Dance Theater Workshop, 219 West 19th Street. Mr. Schwartz is back in town after having gained popular and critical acclaim on his last visit.

Prime Minister Margaret Thatcher told an anxious House of Commons today that she sought ''a peaceful solution, not a peaceful sellout'' in the Falkland Islands crisis. Moments later, her Foreign Secretary, Francis Pym, opened the Commons' fifth emergency debate on the crisis by warning members that ''military incidents may occur with increasing frequency as the net closes around the islands.'' The remarks of the two officials reflected both renewed pessimism here toward the peace negotiations at the United Nations and pressure from right-wing members of the governing Conservative Party who have become increasingly upset at signs that the Thatcher Government is prepared to make substantial concessions to achieve a settlement. In part because the right-wing pressure has included demands for more military action, the day's developments helped reawaken a widespread expectation that a British invasion of the Falklands could come within days.

Because of an editing error, an arti- cle in some editions last Sunday incor- rectly described the peremptory chal- lenge used in criminal trials. Such a challenge, to strike a prospective juror from a panel, requires no expla- nation by lawyers.

In the Pierpont Morgan Library late Wednesday evening, Eudora Welty, the silver-haired American storyteller, stepped slowly onto a platform before 100 invited guests, including some of the country's most distinguished members of the literary community. ''I shall read one story,'' she said. ''I love stories. And I love this story, 'The Birth-mark.' '' For the next 20 minutes, the audience was transported to 1843 by Nathaniel Hawthorne's tale of a beautiful, young wife with a blemish on her cheek and her husband's fatal obsession to remove it. As Miss Welty read toward the end, ''The fatal hand had grappled with the mystery of life...'' the story seemed to emerge as a symbolic statement about human imperfection, intolerance, feminism and marriage, with meaning for the 20th century, too.

President Reagan said tonight that he was willing for Congress to consider proposals to remove Social Security from the budget calculations as a means of resolving the impasse over the budget for the fiscal year 1983. The President, in a nationally televised news conference, also said he would consider a ceiling on future cost-of-living increases for Social Security recipients as a way of restoring solvency to the system. But he promised that all Social Security beneficiaries would receive the 7.4 percent cost-of-living increase scheduled for July 1. On another topic, Mr. Reagan predicted that the economic outlook would improve ''in the latter half of this year.'' ''I do believe that there is every indication that this recession is bottoming out,'' he said.

The Braniff International Corporation yesterday filed for protection under the bankruptcy laws, the first major United States airline to do so. The filing, which came a few hours after Braniff had suspended all its domestic and international flights, set off Flying Without Braniff. Page D3. a scramble by other airlines to handle hundreds of stranded passengers and to pick up some of Braniff's business and routes. Most of Braniff's 9,500 employees were jobless as a result of the airline's collapse, and the Dallas-Fort Worth area stands to lose millions of dollars in Braniff salaries and purchases of supplies by the airline. (Page D3.)

International U.S. flexibility on nuclear arms talks was stressed by President Reagan. Speaking at a televised news conference, Mr. Reagan said that his proposal to reduce the number of warheads on both Soviet and American ballistic missiles did not mean he was unwilling to discuss other types of nuclear weapons with the Kremlin. (Page A1, Column 1.) Britain seeks ''a peaceful solution, not a peaceful sellout'' in the Falklands dispute, Prime Minister Margaret Thatcher assured an uneasy House of Commons. Foreign Secretary Francis Pym warned that ''military incidents'' might accelerate. (A1:2.)