Upturn in heartland undercuts Democrats' strategy for '88. Democratic presidential candidates such as Richard Gephardt (r.) have been hammering away at Reagan administration policies in the sluggish Midwest. But the issue may be slipping from beneath them as the picture in the heartland brightens. Republicans should prosper with prosperity.

A stronger economy in America's heartland could mean tougher times ahead for Democratic candidates in 1988. Democrats - hungry for the White House - have been using the prolonged recession in the farm, oil, and ``rust belt'' states to attack the Republicans.

``The heart of America's heartland is being torn out,'' complained US Rep. Richard Gephardt of Missouri, a candidate for president, last week.

Sen. Joseph Biden Jr. of Delaware, another Democratic White House contender, echoed that same theme a few days ago: ``The heartland of America is suffocating.''

But the newest figures emerging here in the country's midsection indicate that the worst may be over. Local economies, from Iowa to Texas, appear to have bottomed out, or turned upward.

Here in Iowa, for example, people are cheering United States Commerce Department figures that show personal income in this state rose by 9.7 percent in the first three months of this year - compared to just 1.7 percent for the country as a whole. New business starts are also up sharply - 30 percent in June compared to a year earlier.

Horace Busby, a political analyst in Washington, says that if the good news continues, ``it virtually undermines the entire Democratic strategy, which is to say that the country has prosperity on the coasts, and is weak in the middle.''

Democrats used the so-called ``bi-coastal economy'' issue in 1986, when they made a net gain of eight seats in the Senate, including ones in North Dakota, South Dakota, and Alabama. They also fended off tough GOP challenges in Colorado and Louisiana. All those states were hurting economically.

Albert Sindlinger, a veteran pollster, says ``the Democrats now have lost the bicoastal issue.''

If present trends continue, most of the heartland states will have escaped the long recession by 1988, according to Mr. Sindlinger's studies.

Ordinarily, economic issues are paramount in US elections. A weak economy helps the ``out'' party (in this case, the Democrats) and hurts the ``in'' party (the Republicans).

Mr. Busby, who worked in the White House with President Lyndon B. Johnson, says:

``The premise of Democratic politicians and strategists has been that this depressed economy would be water on their wheel. ... Personally, I don't feel that the depressed economy thesis was ever as strong as Democrats felt. The reason the Democrats won those 1986 Senate races, for example, in the Dakotas had little to do with the state of the economy. The Democrats simply had superior candidates, especially in South Dakota.''

Busby contends that while the American heartland was not booming in the past few years, it also was not suffering enough to ``cause the public to want to change parties.''

Even so, the uptick in the midlands' economic pace makes the Democrats' task of retaking the White House in 1988 that much harder, Busby says.

Meanwhile, within the Republican Party, an upturn in the economy here in Iowa should help the prospects of Vice-President George Bush as he seeks the party's 1988 nomination.

In recent years, President Reagan's popularity has been lower in Iowa than in any other state, polls have shown. And Mr. Bush's political future has been closely tied to Reagan's fortunes.

An expanding economy here should diffuse the anger with Washington, and coincidently with Reagan's apparent successor.

And there is little doubt that times are improving, says Robert Boyd of the Iowa Department of Economic Development.

``A lot of medium-sized businesses are coming into the state,'' Mr. Boyd says. ``Small businesses are being started in rural communities. It's very vibrant. These so-called dead little farm towns are coming up with money and starting businesses. Many farmers are closing down their farms and going into a nearby community and starting an enterprise.''

Year-to-year figures for the first quarter of 1987 vs. the first quarter of 1986 show Iowa salaries in manufacturing and trade up 4.5 percent, construction income up 19.6 percent, small business profits up 12.4 percent, finance, insurance, and real estate income up 12.4 percent, Boyd reports.

Harvey Siegelman, state economist with the Iowa Department of Economic Development, says: ``It's incredible the way that Iowans are responding to the changing economy. Farmers are becoming manufacturers, and small-town shopkeepers are shifting into such service-related industries as managing hotels and fast-food outlets. We're seeing an entirely new focus on job creation.''

A recent upturn in US manufacturing also has boosted the farm states. As Mr. Siegelman explains it:

``Agriculture is important, but keep in mind that more Iowans work in manufacturing than on farms, and income from Iowa's industrial production is 25 percent greater than income from our agricultural production.''

Second of two articles. The first appeared on Wednesday.