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Budget cuts weaken federal watchdogs' ability to protect consumers...

Caveat emptor. Let the buyer beware. Doug Richards got his Latin lesson the hard way. The Boston resident was headed for trouble as soon as he steered his new purchase out of the used-car lot. Mr. Richards, not his real name, was ignorant of the required dealer-buyer formalities that would have disclosed the car's faulty brakes before he drove away.

In less than 30 minutes his brakes failed, he rammed another motorist, and, as if to punctuate the situation, a towing company overcharged him to haul away his car.

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Even though the used-car dealer is probably liable for the whole affair, Mr. Richards is largely on his own to extricate himself.

Thanks to Reagan administration budget cuts and deregulation, consumers like Mr. Richards - and, in the days ahead, millions of Christmas shoppers - cannot expect the same level of services once afforded by government agencies, says Joseph McDonough, deputy director of the Boston Consumers Council, which is handling the Richards case - or trying to, at least.

Strapped by federal cutbacks that have wiped out all but 5 of the municipal agency's 28 employees, investigators aren't permitted to make the toll call necessary to mediate the towing dispute or to enforce regulations that might have prevented the problem and repetitions of it.

The council handled 54,000 complaints in 1980 with an 80 percent resolution rate. Now the staff can barely keep up with its filing, Mr. McDonough says. The agency's problem is reportedly representative of those of government-funded consumer programs nationwide.

And many regulations left untouched by Reagan deregulation have been diluted by budget cuts that make enforcement impossible, consumer groups say.

Virginia Knauer, top consumer adviser to the President, says that only 215 out of 2,272 regulations reviewed by the administration have been put on hold or withdrawn. But those 215 represent many of the hardest fought consumer protection victories, counter consumer advocates.

The Consumer Federation of America, keeping an informal tab of deregulation, has tracked such changes as these:

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* Withdrawal of a regulation that would require air-bag restraint systems in automobiles.

* Recalls of more than 100,000 autos during 1981 have not been publicized nationally by the National Highway Traffic Safety Administration - an apparent policy change.

* Some nutritional labeling rules for food have been dropped.

* Standards for childproof caps have been loosened to allow the consumer to use a regular twist-on cap if he chooses.

* Mandatory standards for children's projectile toys (like BB guns and missiles) were rejected in favor of voluntary measures like package warnings of the hazards the toys pose.

* A proposed ban on urea formaldehyde foam insulation, known to be a health hazard, has been delayed until early 1982.

* There has been talk by FTC head James Miller III of loosening advertising substantiation requirements.

''Government should be protecting our food supply, our drug supply, and it should protect us from unseen hazards. But all the safety gadgets in the world will not protect you from something inherently dangerous,'' says Mrs. Knauer.

''The biggest consumer concern'' is inflation, she says, and that means the administration will focus on holding down the proliferation of regulation which dips into the consumer's pocketbook through the higher taxes needed to support regulation and through the higher costs caused by regulatory compliance.

Mrs. Knauer suggests that the most economically feasible consumer protection can be achieved through education and industry self-regulation rather than through the burden of extra rules.

Consumer groups warn, though, that regulation grew originally from a free market situation in which business policed itself.

The free enterprise theory is that if left to market forces, consumers will want to spend their money with manufacturers who have built their reputation with reliable products.

''Competition is the greatest stimulant in the marketplace,'' Mrs. Knauer says, suggesting that voluntary labeling would be successful because a food producer would want shoppers to know what his product contained if it would help sell it.

The administration came under heavy fire when Mr. Miller suggested that ''imperfect'' products should be available because purchasers have ''different preferences for defect avoidance.''

Mrs. Knauer makes a distinction between defective and low quality items, noting that in a free market, a buyer has the right to choose from a variety of quality and prices.

As for the air-bag regulation change - which a Ralph Nader group calls the leading indicator of the nose dive consumer protection has taken - Mrs. Knauer says it will save several hundred dollars on the price of a car.

While the Nader group suggests that thousands of lives could be saved with mandatory air-bag restraint systems, Mrs. Knauer counters air bags are ineffective in side crashes, are costly to repack, and explode sometimes when they aren't supposed to.

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