TO WALK BIG-CITY STREETS where the poor live is to walk with antennae attuned to muggers and madmen. A situation where it's healthy to be paranoid. At the same time sympathy goes out to the wrecked lives on view, the starch-fat welfare mothers, the children toying among the dope dealers, the incomplete men who cannot hold a job.

This foul brew of people and circumstance has generally brought forth two kinds of books: those full of societal guilt that point out the poor to unseeing eyes (Michael Harrington's The Other America) and those that blame the poor for their plight (Edward Banfield's The Unheavenly City). The former type of book is held up by the left to support demands for reformation of the nation's values, while the latter sort is passed around among conservatives who see urban poverty as a problem for the poor and not society as a whole.

To this battle of political books, Ken Auletta brings a skilled reporter's touch and an unbiased mind in The Underclass. That combination alone would be enough to set his book apart from the ones that preceded it, but Auletta goes a step further by bringing into the argument the people being argued about. By talking to poor people, by watching them--without voyeurism--push to the limits, he insists on testing the human ability to leave a bad way of life behind.

Auletta starts out by saying he wants to talk to criminals, school dropouts, drifters content to sleep in the streets and chronic welfare recipients. This group he defines as the "underclass," and he wants to know how to bring its members into the fold of family values and Friday paychecks.

He finds a cross-section of this underclass in a training project administered by a government-funded program, the Manpower Demonstration Research Corporation, run by a former program officer at the Ford Foundation. In a New York City classroom, Auletta meets his cast of characters, 22 bona fide members of the "underclass," who are being schooled in self-confidence and how to get and keep a job--such things as how to dress and speak at job interviews. Some soon depart, leaving Auletta with 15 to observe and talk to about the state of their lives, to ask how they see themselves in the rush of glamor and technology that is the state of the world but has nothing to do with them.

Auletta's clothes his report, which first appeared in a series of articles in The New Yorker, with a comprehensive review of the academic debate over poverty. Indeed, his book is filled with excerpts from key books, newspaper stories and conversations with officials of government, foundations, and civil rights groups.

As an introduction and overview to the contemporary debate over American poverty--its roots and proposed solutions--Auletta's book is invaluable.

But it is this very same overview that clouds the book's purpose.

It is never clear what Auletta is trying to accomplish in the interviews with his members of the underclass other than to point out that they sometimes have surprisingly negative opinions of themselves or an incongruous appreciation of the value of work that confounds the wisdom offered by the experts.

Similarly, it is not clear what Auletta is trying to do by presenting a compendium of expert views on poverty other than to educate the reader. Is he trying to tell us something? The book seems to have a momentum as it covers the old ground of arguments, liberal and conservative, and the momentum advertises itself as heading for some unbiased solution: the truth.

On that important count the book disappoints.

There is some inconclusive end to the people Auletta observes. They graduate, don't graduate. They find jobs, lose jobs, can't get a job. Overall, the program that sponsored Auletta's sample finds that it has some success with long-term welfare recipients and former drug addicts but fails with former convicts and school drop- outs.

And, similarly, there is an inconclusive end to the reportage of the varying arguments about poverty. But on the basis of what he has personally observed Auletta writes that progress in helping the underclass is "not measured by breathtaking touchdowns but by grinding out two, three, four yards at a time, a Pearl Dawson, William Mason, Mohammed . . ." and other successful members of the group he studied.

The message that members of the underclass are to be helped one at a time and that some will benefit while others, no matter what the degree of help, are beyond salvation is not quite up to the rest of this book. Auletta sparkles as an observer of people and an analyst of ideas. But to say, as he does, that if every individual in the underclass were offered help, some would rise out of the ruined lives they are leading is a common, uninteresting observation.

It also borders on the naive in the face of federal budget cuts and a slowing economy. There isn't the money--even if the desire were there--to help every member of the underclass.

An equally telling point that obscures the message of the book is that the underclass is only a small part of the total number of poor people in the United States by Auletta's own calculation. The poor, as opposed to the underclass, regularly leave their poverty behind as children of the poor grow up and become successful lawyers or actors or whatever. Those leaving poverty are replaced by people losing their jobs or who become mentally disturbed or physically ill. But they too may recover.

This distinction between the poor and Auletta's underclass is critical. Yet it is a distinction he does not focus on. In point of fact, the underclass is competing for federal social programs against the poor; and the poor not only show a desire to be helped but when federal programs do help them, the poor get more out of them than the so-called underclass.

This leads to the question, unanswered by Auletta, of whether the nation should spend its social-welfare dollars on the poor or on the underclass, considering the differences in the cost of helping the two groups and the differences in the results. Within this framework, the only reason to help the underclass is Auletta's warning that the group is growing, threatening the nation with a rising rate of violent crime, damaging the quality of public schools and harming society with increasing drug use and anti-social behavior.

While the warning is probably valid, the fact remains that measuring the number of persons in the underclass is an inexact science. But even if the underclass is growing, the investment of resources necesary to help its members is simply not in a federal pocket that for the moment is intent on cutting social programs.

If the public can be shown what is cheap in the way of effective social programs for the underclass and what works (and Auletta repeatedly suggesting that maintaining strong two-parent families is one clear key to bringing people up from the underclass and poverty), then there would be more of a point to this fascinating and well-written book that lacks only for a conclusion.

In The New Class War by Francis Fox Pivan and Richard A. Cloward, the conclusion offered to a scenario of budget cuts and increasing numbers of poor people is mass protest movements. The authors speculate about the effect of Reagan's budget cuts on social programs and find that if the poor are not offended by the president's program, then their caretakers in both government and private programs for the poor are certainly furious.

The joint anger of the people who deal with the poor and the poor, the authors suggest, will lead to social unrest that will reshape the relationship between capitalism and democracy.

It is democracy, they contend, which created the social programs that care for the human lives damaged by unthinking capitalism seeking out cheap labor and good markets without concern for the effect that, say, moving from Detroit to Houston has on the people left behind.

Now that capitalism finds itself strained to produce a growth economy it is asking Reagan to take away investments in social programs and reroute that capital for the betterment of the corporations.

The argument is presented well and carries some force. But it is, finally, an argument for academics only.

The authors do not attempt an objective assessment of just how much damage Reagan has really done to social programs. Instead, they are content to say that the poor and those concerned with the poor sense Reagan's insensitivity, his bond with the corporations, and that is enough to prompt mass protests as women, labor unionists rankled by the problems of the economy, environmentalists antagonized by Interior Secretary James Watt and others, join in opposition to Reagan.

Their book has the stuff of clear thinking and good argument. But it wholly fails to advance the argument or inform the reader of anything except the authors' opinions.