What was going on when I was born?

IS the quality of American cars improving? Anyone who has received a recall notic might not think so. Someone who discovered that a new car's windows would not close in a thunderstorm, that its transmission would not shift into reverse or that its radiator fan stayed on when the engine was turned off, draining the battery might also be skeptical. Detroit standards slipped in the 1970's, the manufacturers and their critics agree, and foreign companies quickly earned a reputation for higher quality. The consensus among the automotive experts now is that foreign cars still hold an advantage, but domestic automobiles seem better than they were five to eight years ago.

What ever happened to the literary underground? The image of the avant- garde writer in resistance to the status quo, keeping a critical distance from the establishment, used to be part of a sustaining myth for many poets and novelists well through the 50's. Today, if you raise the old question of ''selling out'' among writers, the response is likely to be not a tortured ''whether?'' but an ironic ''how?'' The 60's, Ronald Sukenick is working on a nonfiction narrative about the American cultural underground. A novel, ''Blown Away,'' will be published this year, as well as two other books. with an avant-garde vitality yet to be assessed, redefined much in American culture, including middle-class esthetic standards, but at the same time eroded the mystique by which artists had resisted the pressures of the marketplace. Nobody planned it that way, but there is a logic in the history of the situation. Subterraneans wanted simultaneously to rant at Moloch and be part of Moloch, as if you could bite the hand of oppression and then demand it feed you. However, the contradictions that caused the collapse of the underground, once apparent, may finally define its legitimate relation to the culture.

Milton Berle ''I had the training of working with great comedians. I was always watching and listening, to timing, to how jokes were told. You would find someone to admire. For me, it was Ted Healey. He was flippant, aggressive, had a cocksure demeanor. We call it put- downs now. I modeled myself after him. I didn't steal anything, but I did style myself after him.

The theater critic William Dean Howells spent much of his life searching for indigenous American drama, and in 1886 he announced he had found it in the person of one Edward Harrigan. Here was a man, Howells declared, who wrote, directed, acted and managed his works in the manner of a Shakespeare or a Moli ere. Here was a social realist on the order of Dickens or Zola. Such accolades must have sur prised Howells's highbrow readership, for Harrigan was not the product of a university or a conservatory, but rather the self-educated son of a seaman. He had grown up in Manhattan's Irish slums and had run away to sea in his teens. His plays carried the cheapest ticket in town and their most devoted spectators were the orphaned newsboys whom New York had by the thousands. But with his featured actor Tony Hart and his songwriting partner Dave Braham, Harrigan created plays that were unsentimentally true to the New York of the immigrants. From the 1870's through the 1890's, as much American theater was imitating European farce or the English music hall, Harrigan evoked the city of pushcarts and tenements, landlords and ward heelers. The accents heard on his stage came from the mouths of Irish, German, Italian and Jewish immigrants and the blacks streaming to the urban north after the Civil War.

Ann Crittenden writes on economic issues from Washington. WASHINGTON THE Democratic Party is in trouble. And a large part of the problem is the party's inability to enunciate an economic policy that stands a chance of capturing the imagination of the electorate in the way that Ronald Reagan's anti-government, pro-growth rhetoric has done. The Democrats' ignominious defeat in November was, among other things, a resounding rejection of the New Deal creed of ever-more beneficent government programs that has dominated the party for half a century. What's worse, the polls were scarcely closed before the Republicans had stolen and run away with the issue of tax reform, one of the few ''new ideas'' put forward with any vigor in recent years by some of the younger, more pragmatic Democratic members of Congress.

The first national guidelines for the conduct of human gene therapy have been published by the National Institutes of Health and are expected to have an immediate effect on research groups preparing for tests of this revolutionary form of treatment. The therapy is intended to cure a patient of an inherited disease without producing effects that would be passed to future generations. It would involve transplanting genes into a patient's cells to correct an otherwise incurable disease caused by an inborn failure of one or another gene. The treatment is considered potentially feasible for a few rare but deadly diseases, including profound defects of the immune defense system, in which the faulty gene is known and its normal counterpart has been grown in the laboratory. Far broader applications are considered possible if early tests demonstrate the workability of the technique, which involves the body cells and is thus known by researchers as somatic cell therapy.

District Attorney Robert M. Morgenthau of Manhattan said yesterday that he had presented a grand jury with all the available evidence in the Goetz case and had not tried to push the panel toward any specific indictment. Mr. Morgenthau made his comments in an interview after a Manhattan grand jury refused on Friday to indict Bernhard H. Goetz for attempted murder or assault in the shooting of four youths on an IRT subway train last month. He was indicted on three charges of illegal possession of weapons. The most serious of the gun charges carries a maximum prison sentence of seven years, while attempted murder carries a maximum of 25 years.

In defeating the Islanders, 5-1, this evening at Nassau Coliseum, the Washington Capitals displayed the coordinated attack and secure defense that has put them on top of the Patrick Division. Except for two short stretches in the third period, the Capitals dominated the game as they posted their sixth consecutive victory and extended their lead to 13 points over the third-place Islanders. ''We're coming along very nicely,'' said Bryan Murray, the coach of the Capitals, who have outscored the opposition 32 to 13 in their last six games. ''We play with confidence right now.''

Robert Jay Lifton is the Distinguished Professor of Psychiatry in the City University of New York at John Jay College. His study of Nazi doctors will be published early next year. PSYCHOTHERAPY IN THE THIRD REICH The G"oring Institute. By Geoffrey Cocks. Illustrated. 326 pp. New York: Oxford University Press. $24.95. In setting up a psychotherapeutic institute in Nazi Germany, it was no disadvantage to Matthias Heinrich G"oring to have a first cousin named Hermann. But was that institute a help to psychotherapy as a healing profession - or was it a means of placing German psychotherapy in the hands of the Nazis?

WASHINGTON Of all the words of blessing on his second term, none could have been sweeter to President Reagan than the grudging compliment he heard from Democratic House Speaker Thomas P. O'Neill Jr. when they met in private: ''In my 50 years of public life, I've never seen a man more popular than you are with the American people.'' This concession, and Mr. O'Neill's corollary promise to stand aside and not block votes on the President's economic plans, came from a politician whose standard of popularity was established in witnessing the legend of Franklin D. Roosevelt. Roosevelt has been claimed as a model by Mr. Reagan, too, in his own Presidential style, as distinct from policy. There is no reason to think that this will change in the second term, particularly as the President attempts a larger role on the world stage of arms control while continuing his assault on domestic spending. Mr. O'Neill, who did badly as the Reagan nemesis in the first term, recounted his message to the President on the initial working day of the second term: ''I said to him, 'We can read. You got 59 percent of the votes.' ''

RARELY has any industry enjoyed a better operating environment than the nation's military contractors do today. Not since the Vietnam War has there been such heavy demand for weapons. The Reagan Adminstration has been progressively increasing budgets for military hardware since it arrived in Washington four years ago, and the Pentagon, for its part, has been working overtime to help contractors overcome their reputation for gross industrial backwardness and woefully inefficient production. Yet, after four years of Pentagon nurturing and Reagan Administration budgetary largess, a dizzying procession of highly publicized cost and quality fiascos has left the industry's image more tarnished than ever. Why, critics ask, can't the industry find a way to remedy its mistakes and stop wasting billions of taxpayer dollars? There is a litany of woes. The explosion earlier this month of a Pershing 2 missile in West Germany, which killed three American soldiers when its motor caught fire, shocked Europe. Eight governmental units are investigating the Navy's nuclear submarine building program, looking into allegations of multi-million dollar abuse. Other inquiries are focusing on possible illegal overcharges at Ford Aerospace and kickbacks at Hughes Aircraft. The armed services are rejecting shoddy products from military contractors at an unprecedented rate, including fighter jets from McDonnell Douglas, missiles from Hughes Aircraft and semiconductors from Texas Instruments. And cost increases and cost overruns persist, with inflation in the defense sector running 2 percentage points above the overall inflation rate.

Pope John Paul II began a 12-day visit to South America here today with a firm call for greater discipline in matters of Roman Catholic doctrine and a warning against ideologies that seek ''an illusory earthly liberation.'' The Pope arrived from Rome a day after he made a surprise announcement that a Synod of Bishops would be held in November to examine the results of the Second Vatican Council of 1962-65. Although he praised the spirit of Vatican II, which instituted widespread changes in the church, his call came when high Vatican officials have sought to reinforce church discipline against what they see as a growing laxity. In conversations with reporters on his plane today, John Paul explained that the purpose of the synod was not to turn back from Vatican II, but ''above all to hold the line'' and ''confirm the orientation of the Council.'' (American Cardinals, Bishops and theologians said they were stunned by the announcement of the synod, but they welcomed it as an opportunity to discuss developments since Vatican II with the Pope. Page 10.)