May 2, 1981

Democratic leaders in the House today used some of their harshest language to date in denouncing President Reagan's economic proposals and lobbying tactics. They also asserted that they were gaining ground in the battle that will decide the nation's spending priorities for the coming fiscal year. ''We've got the President of the United States a little bit on the run,'' Thomas P. O'Neill Jr., the Speaker of the House, told reporters. ''The American people, despite the President's charm and charisma and wonderful ability at a microphone, are suddenly beginning to realize the effects of his budget cuts.''

When they first met in late 1979, he was the prince in ''Swan Lake.'' She remembers his regal carriage and his dark, curly hair. He remembers her face and admits, with a mischievous grin, that it haunted him for months. When she first spoke, he blushed, not understanding what she had said. As an exchange student from Peking, he had made up his mind to devote all his attention while in the United States to studying dance under the tutelage of Ben Stevenson, the artistic director of the Houston Ballet. Mr. Stevenson had seen him dance in Peking and had invited him to be the company's first exchange student from China.

Secretary of Labor Raymond J. Donovan proposed today to lift a longstanding ban on industrial work at home, saying that such work should not be illegal. The issue came into prominence recently when the Labor Department sought to enforce the prohibition among women who were knitting skiwear in their homes in rural Vermont. However, the Secretary's proposal today covers not only the knitted outerwear but also the six other industries in which work at home was banned by statute 40 years ago. Union officials immediately assailed Mr. Donovan's proposal, saying it was illegal and that, if adopted, it would lead to broad violations of worker protections such as the minimum wage, child labor laws, health and safety rules, and overtime regulation.

The current worldwide abundance of crude oil, coupled with improved conservation of petroleum in the industrialized nations, is strengthening the American economy, according to economists and business leaders. This is in sharp contrast to the problems that oil brought to Western economies after the Iranian revolution two and a half years ago. Bulging worldwide oil inventories are 400 million barrels greater than normal, spot prices have slipped by more than $2 a barrel and expectations are rising that oil prices will decline or remain stable for the rest of the year. Government statistics show that the abundance of oil is already slowing inflation, aiding economic growth and cutting the United States trade deficit to the slimmest total in more than five years. These economic gains are also strengthening the dollar, which is approaching its record high levels of the early 1970's on the world's foreign exchange markets. (Page 29.)

Tens of thousands of people are obtaining United States passports under false identities each year with an ease that is undermining the integrity of the nation's passport system, according to State Department security agents. Investigators for the department's Office of Security in New York, Washington, Chicago, San Francisco and Los Angeles asserted in interviews this week that the problem had gone virtually out of control in the last five years. The problem has mushroomed, they said, largely because drug trafficking has become such a lucrative business, the State Department itself has made too little commitment to suppressing the use of illegal passports and other Federal agencies pay only minor attention to it. The question whether the Office of Security should have broader enforcement functions is now being debated in the Reagan State Department. The investigators, who said that drug smugglers were among the main users of fraudulently obtained passports, estimated that at least 30,000 and possibly more than 60,000 of the three million passport applications received each year were submitted by persons using names other than their own.