““It all started when my father and mother met in a bar,’’ Jimmy said in an autobiography written for his English class. ““Most relationships that start like this usually don’t turn out okay.’’ This one didn’t. Jimmy’s father smoked crack and drank; his mother smoked pot. They had kids – three boys and a girl – but, as Jimmy says, his parents ““were so disorganized and dependent upon drugs that they would leave a pot of food on the ground and make us eat from it. While we were eating, they would both leave and go their separate ways.''

The state intervened and put the kids in foster homes. Foster care can work. But Jimmy was beaten by his foster parents and moved many times to different homes. (This period of his life is mostly a blur.) At 9, he was placed in a Roman Catholic home for boys. Four years later he moved in with his grandmother. Jimmy loves her, but she was very poor and the neighborhood was terrifying. After two rocky years, Jimmy wound up at the group home where he now lives. He is still at risk, and he knows it. ““The drugs, the drink – it’s in my family history,’’ he says. ““I want to get away from it.''

There are nearly 500,000 kids like Jimmy in America today, and the chaotic pattern of his young life, in a child-welfare system that is appallingly overburdened and routinely destructive, is an example of a national dilemma that is rapidly getting worse. That is partly (but only partly) because the family is breaking down. Divorce and illegitimacy are up. Child abuse and child neglect are up. Proper nurture – by stable, responsible, loving parents – is increasingly hard to find. Most Americans already know this. What is new and different, and what clearly portends a fundamental shift change in America’s approach to the problem of unwanted and uncared-for kids, is our national frustration with welfare.

Welfare reform is a hot subject in Washington these days, and even liberals are playing the game. Now, however, the Republican majorities in both houses of Congress are escalating the debate to new and tougher levels. Essentially, the conservatives want to end welfare because they believe it fosters dependency and creates a financial incentive for young women to have babies they cannot care for. The theory is clearly debatable: whatever is going through the mind of a 14-year-old girl at the moment of conception, a monthly check totaling, say, $322 cannot be decisive. But the Republicans are targeting welfare anyway, and that means drastic restrictions on AFDC (Aid to Families With Dependent Children) and potentially vast disruption in the child-welfare system that AFDC supports. Ultimately, it may very well mean resurrecting the old and long-discredited idea of The Orphanage.

The word sticks in the craw. It evokes the moral hypocrisies of the Victorian Age – its heartless distinction between the deserv-ing and the undeserving poor, its belief in harsh discipline for the young and its pious acceptance of institutional warehouses packed with pathetic waifs. Those connotations are the reason orphanages have suddenly become a red-hot partisan issue inside the Beltway – why Democrats demoralized by the 1994 election results are using the word to caricature the conservative approach to welfare reform and why Republicans are furiously backpedaling. It is a fact that Rep. Newt Gingrich’s newly announced welfare-reform bill would allow (but not direct) state governments to use federal funds to establish orphanages if they chose. And it is a fact that some Democrats – George Stephanopoulos, for example – are jeering. ““We’ll mail all the Republican members [of Congress] a copy of “Oliver Twist’,’’ Stephanopolous said recently. The orphanage idea, Hillary Rodham Clinton declared in a speech last week, is ““unbelievable and absurd.''

But the other impulse behind the orphanage revival is the concern, now verging on panic, for the catastrophic decline of proper child-rearing practices among the poor. The alarm over single-parent families, a fixture of the welfare debate for the past 20 years, seems almost nostalgic at a time when many thousands of welfare mothers are addicted to crack. ““Just as heroin in the 1960s contributed to the rise of single-parent families, so will crack soon give us the no-parent child as a social problem,’’ New York Sen. Daniel Patrick Moynihan wrote in 1989. ““We are likely to respond to this development by re-establishing orphanages.''

In essence, Moynihan and many others argue that America must intervene to save the children of the drug-dependent poor to avert an even larger social crisis in the next generation. This belief is buttressed by evidence that the child-welfare system is close to breaking down. Foster care is the most important case in point. The number of children in some kind of ““out-of-home care’’ has jumped from 300,000 to at least 460,000 since 1987, and Eileen McCaffery, executive director of the Orphan Foundation of America, says ““The numbers will soon overwhelm the system.’’ Foster-parenting is tough, emotionally exhausting work, and the pay is lousy: between 1985 and 1990, according to the National Foster Parent Association of America, the number of families participating dropped by 27 percent.

Meanwhile, the churches and private charities that operate group homes – today’s orphanages – uniformly report a huge increase in applicants and a chronic shortage of funds. Boys Town, the legendary home for troubled teens near Omaha, Neb., says it turns down eight to nine applicants for every child it admits – and that the cost of housing and educating each kid now ranges from $40,000 to $48,000 a year. Father James Close, superintendent of the Mercy Home for Boys and Girls in Chicago, says the mushrooming costs of institutional care probably dooms the movement to bring back the orphanage. ““Let’s say we had an unlimited budget and 5,000 Mercy Homes. So what? They’re going to keep coming in droves – they’re just multiplying out there.’’ Worse yet, he says, the behavior problems exhibited by kids 15 years from now ““are going to be far more severe.''

Only very large orphanages could handle the flood. But those are the very institutions that progressives shuttered decades ago – and with good reason. Ronald Feldman, dean of the Columbia University School of Social Work, helped redesign Boys Town into a series of group homes in the 1970s. ““By and large, orphanages weren’t fiscally responsible and large numbers of kids came out of them with serious problems,’’ he explains. ““How are you going to put 500, 800, 1,000 kids in a large institution that is at once caring and confining?’’ says social and medical historian David Rothman. ““When custody meets care, custody always wins.''

Though the barracks-style buildings may be gone, the notion of the orphanage as a shelter of last resort is thriving. Now they’re called group homes – usually clusters of eight to 10 kids living in small houses that are more supportive, and expensive, than the spartan warehouses Gingrich’s plan evokes. Small group homes struggle to avoid the traps of their oversize predecessors. From the outside, the Worcester Group Home looks like any of the other sprawling Victorian houses lining a well-traveled street in Worcester, Mass. Inside, the atmosphere strives for the homey, though the institutional sometimes wins out. The living-room sofas are comfy, though a bit too upright; the video library – ““Sister Act,’’ ““E.T.’’ – is more cute than hip; individual ““hygiene boxes’’ for items like toothbrushes guarantee privacy. But in the hallway, a bulletin board listing laundry days and the weekly chores is a reminder that this is a community. It’s more sorority house than Mom’s house, but what distinguishes Worcester from either is the oversize desk in the second-floor hallway, where staffers sit 24 hours a day, watching over the kids. For most, it’s the first time anyone has cared to. ““I came in here and didn’t consider anybody my friend. I just considered them my associates,’’ says Jean, 17, slipping into pink flowered slippers and trying to sound philosophical that her closest friend, Carrie, is moving back home.

By the time children land in a group home, they’ve usually been in the child-welfare system for years, bouncing from mother to aunts to foster homes so often that most couldn’t fit into a traditional family even if one would have them. These are kids whose lives have roller-coastered through the social upheavals of the ’80s. Their mothers are often drug addicts, for whom Spock, at best, is a character on TV; their fathers don’t exist, not even in faded photographs. Few of the kids know what it’s like to live in a house where no one yells or takes advantage of them: 80 percent of the girls who arrive at Boys Town have been sexually abused; 90 percent of the kids at the Mount St. Joseph-St. Elizabeth Home in San Francisco have alcohol and drug problems. Just as frightening, ““Half the kids are active cutters,’’ says Mount St. Joseph director Mary Barry. ““Cutters’’ refers to kids who cut their veins in suicide attempts, not cutting classes in school.

There are no quick fixes for broken children, only structure, consistency and love – the sort of things families on the verge of collapse don’t have a store of. To compensate, most group homes strive for a balance. One part is family – each home usually has two parent figures who live with them round the clock. The other is an almost-military devotion to cleanliness (try to find a messy bathroom anywhere), orderliness (at Worcester, 13 pairs of shoes sit in a row inside the back door) and rules (at Boys Town, the dress code is simple: one girl who arrived with orange-and-green hair was told to shower and come back looking ““like a 16-year-old, not a streetwalker’’). The point, says Father Val J. Peter, director of Boys Town, is to teach kids how to live with others – and themselves.

Someday soon, the politicized babble in Washington will collide with the gritty and complicated realities of caring for unwanted children – and when it does, the politicians and policy wonks now pushing orphanages will be confronted with some very tough issues. One of them, of course, is cost. There are now nearly 9.7 million children on AFDC nationwide. If Gingrich’s welfare-reform plan were in full effect today, more than 5 million of those children would lose their financial support. Who will care for them? Gingrich’s bill doesn’t say, although conservatives clearly hope the vast majority would be housed and fed by relatives. But even if that’s true, experts foresee a massive increase in the number of kids who will need someplace to go. Assume, optimistically, that four out of five welfare kids are taken in by uncles and aunts and grandmas and grandpas. That still leaves 1 million children who will need some form of institutionalized care – a tripling of the kiddie caseload and a massive social cost. At $100 per child per day, about average for group homes, caring for those kids would cost at least $36.5 billion.

Who will pay the bill? In a recent interview, Gingrich talked in broadly optimistic terms about the need to ““expand private charities’’ to care for those who lose their benefits under welfare reform. But David Liederman, executive director of the Child Welfare League of America, says that private philanthropy is already carrying its share of the load. ““About 30 percent of the cost of residential care in the United States is subsidized by charitable dollars,’’ Liederman says. ““The homes are run by nonprofits, many of which have large endowments. There isn’t a state in America that pays the actual cost of care.''

Or take the custody question. Parents – even welfare mothers – have rights. Current fed-eral law, embodied in the Adoption Assistance and Child Welfare Act of 1980, is a mind-boggling attempt to balance the rights of parents with the state’s responsibility to protect children. It made ““family reunification’’ a primary goal of the child-welfare system, which means that it limits the government’s power to take children away from their parents except in well-documented cases of neglect or abuse. Now the politicians want welfare mothers to give up their kids – but no one wants to give that kind of power to a ““welfare bureaucrat.’’ Mothers – even unmarried, teenage mothers – resent those who say they should abandon their children. Patricia James is an 18-year-old mother who lives in a group home in New York City with her 2-year-old daughter Del-Sha. Would she send her daughter to an orphanage? ““Del-Sha is my shadow,’’ Patricia says. ““She’s all I’ve got – I don’t have nobody.’’ The answer is no.

And what about the kids? Child-welfare advocates think the conservatives have lost sight of true family values, and they may have a point. Welfare reform, they say, is really about adults – it’s an attempt to cure adult welfare dependency that may have the side effect of forcing many thousands of children into institutional care. ““Get them off the dole, two years and out? What does that mean if you’re a 2-year-old?’’ asks Carol Statuto Bevan of the National Council for Adoption. Still, almost everyone agrees that millions of kids are in jeopardy. And so the real question is: if orphanages aren’t the answer, what is?

Institutional care for children is not cheap. Here is how the 78-bed Mercy Home in Chicago spends its money:

ANNUAL COST PER CHILD Staff $35,000 Room, heat, 8,000 light, gas Clothes, camp, 5,000 transport Food 4,000 Tuition 3,500 Counseling 2,500 Medical, dental 1,500 Total 59,500 ONLY 7 PERCENT OF TOTAL IS GOVERNMENT-FUNDED