Ex-Klansman Bids For Louisiana Legislative Seat. Supporters applaud David Duke's plans to alter welfare, end affirmative action; opponents worry about resurgent racism. DELTA POLITICS

SEATED with the lunchtime crowd at Liz's, a small caf'e in this community just outside New Orleans, Robert Galloway explains why he is supporting a former Ku Klux Klan grand wizard and avowed white-power advocate in a state legislative race. ``First, I'm fed up with the entrenched powers in this state, with all these big-shot politicians,'' the retired wholesale florist says. ``And what Duke is saying about us subsidizing welfare propagation and all this crime is true and everybody knows it, they're just afraid to do anything about it. Well, maybe Duke can stir things up.''

The ``Duke'' he's talking about is David Duke, until 1979 a national Klan leader and now president of his own National Association for the Advancement of White People, which advocates ``Aryan preservation'' and racial separation. Mr. Duke shocked New Orleans last month by taking 33 percent of the vote, and first place, in a seven-candidate primary-election field for a vacant state House seat in an economically mixed, mostly all-white Jefferson Parish district.

And stir things up he has. Running as a Republican and espousing such traditional conservative Republican causes as an end to affirmative action, lower taxes, and welfare reform, the intelligent and telegenic Duke has New Orleans, much of Louisiana - and even the national Republican Party - mulling over the surprising success of his candidacy.

His opponents worry aloud about resurgent racism and anti-Semitism, and the damage Duke's election could do to Louisiana's already tarnished national image. ``I think the issue has become whether or not the people of Louisiana are going to elect someone with such a negative image around the country,'' says John Treen, a local builder and longtime establishment Republican who is Duke's challenger in Saturday's runoff. Electing Duke ``would send a signal that we're adopting an irrational reaction to the considerable problems we have,'' he says, ``rather than seeking rational solutions.''

At the same time, Duke's supporters seem to relish the chance to administer a figurative swift kick to Louisiana's curious mix of a populist patronage system and a blueblood power structure, as well as to the blacks they believe are infringing on their territory.

``Treen is all business, he just wants to get in there for the business people,'' says Robert Dominique, a jeweler. But ``Duke is with the people around here. He wants to help them keep whatever they've got.'' Careful to state ``I grew up getting along fine with blacks,'' Mr. Dominique adds that Duke's proposed monetary incentives for cutting the birthrate among welfare mothers and his emphasis on reducing black crime simply make sense. ``You walk down Canal Street [in New Orleans] now and you hardly see a white face,'' he says. ``White people around here are saying they can't give away everything.''

Observers cite a number of reasons that Duke did well in the primary, and why he could win the election. Having lost more than 100,000 jobs since the oil bust and consistently running the nation's highest unemployment rate in recent years, Louisiana and its poor economic performance generally top the list.

``It's a white protest vote by those who feel threatened by a deteriorating economy,'' says Lawrence Powell, a Tulane University professor, who lives in the contested House district. ``People are in a mood to look for scapegoats, and what they've seized upon are the blacks.''

Soaring black-on-black crime in New Orleans's crumbling public-housing projects is also on the tip of many voters' tongues, as is a much-publicized attack on white bystanders by black youths during a Canal Street parade celebrating Martin Luther King's birthday.

``David Duke has been able to rub many white voters where they're sensitive,'' says Cedric Floyd, a black demographer who lives in Jefferson Parish. ``There's been a massive effort to educate the voters about Duke,'' he adds. ``So if they still vote for him, we'll know how that white community feels about racism.''

There is also a feeling that retrenchment in recent years from affirmative-action programs and from Supreme Court rulings in favor of civil rights has allowed views of people like Duke to become confused with the country's new conservatism. ``In throwing out minority set-asides, the Supreme Court is in effect legitimizing what David Duke is saying,'' Dr. Powell says.

Also confusing the issue of Duke's beliefs is the fact that many Southern whites more than 30 years old have racist skeletons in their closets. Mr. Treen admits to supporting racial segregation in the '50s, and Duke points out that US Sen. Robert Byrd (D) of West Virginia was once a Klan member. But while they have repudiated their past, Duke's divorce from his is unclear.

In his letter of resignation from the Klan, Duke indicated that he was taking his action for tactical rather than philosophical reasons - primarily to distance himself from an image that he felt limited the cause of ``white victory.'' He also wrote, ``I will never publicly denigrate the Ku Klux Klan,'' a promise he has kept.

Asked last week if he repudiates the Klan, Duke said, ``It's not the Klan; there are many different Klans with different leaders. I am opposed to any organization that advocates hatred or violence against anybody.''

Duke says the important issues that explain his popularity are growing anti-white racism, and his plan for welfare reform, which includes monetary, public housing, and other incentives for welfare mothers who stop having children - as well as less public assistance for those who don't. ``The issues I'm raising have struck a chord,'' he says - ``all over Louisiana, the South, and maybe the whole country.''

Treen says the issue has become David Duke himself. That explains two Treen mailings that detail Duke's Klan connections, pro-Hitler writings, and support for separatist advocates. ``We're exposing David Duke through his own words and writings,'' Treen says. ``If it's dirty, it's because his background is dirty.''