The Carter administration has decided to turn the successful $1-million-a-year "Livable Cities" program of the National Endowment for the Arts into a $20-million-a-year "Livable Cities" program of the Department of Housing and Urban Development.

It won't make our cities 20 times more livable.

Under the leadership of Nancy Hanks, the National Council on the Arts felt an obligation not only to Art with a capital A - the prominent museums, opera and dance companies, symphonies and such - but also toward artistic activities in the grass roots and neighborhoods. The Council believed that a creative cultural life can best flourish in an attractive environment. It therefore encouraged new ideas of all kinds to make the urban environment attractive and livable.

The aim was, as Nancy Hanks stated last summer before the House subcommittee on the city, "to encourage people to dream about their cities, to think before they build, not after: to consider the alternatives before they tear down."

The National Council on the Arts considered such encouragement a legitimate concern of the National Endowment for the Arts because, as Edmund N. Bacon, the former city planner of Philadelphia, put it. "I depend entirely on the artists to give the new vision which would generate economic activity in my cities."

In Galveston, Texas, for instance, the historic Strand - one of the finest Victorian commercial wharf districts in the country, with once splendid hotels, restaurants, theaters, two opera houses, magnificent churches and luxurious residences - was rapidly deteriorating.

"We tried to solve what we thought was a problem of out-of-date architecture with tasteless 'neo-nothing' facades, and planted a few token trees and shrubs where we have strip-mined the city for expendient purposes," said Emily Whiteside, the director of the Galveston Cultural Arts Council.

Having seen that other cities never recovered from "urban renewal" injections, Whiteside brought the arts council and the business, minority and other groups together. They all consulted Texas' great human landmark, architect O'Neil Ford.

Ford, who is on the Galveston arts council, suggested the group apply for an $8,000 matching grant from the Endowment to study the feasibility of re-cycling the Strand. It was a blueprint for adapting a large number of grand old buildings, to contemporary use. The blueprint attracted $3.5 million in private investment. Restored Galveston is now a thriving cultural and business center and a big tourist attraction.

In Atlanta, Ga., a small Endowment grant helped transform a closed and vandalized school building into an unusual neighborhood arts center where a group of composers, a printing press, a visual-arts publication company, a cooperative photographic gallery and a dance group find work space at rents they can afford.

The place is called the "Atlanta Consortium" and serves the neighborhood with educational programs and professional consulting service to other groups, as well as dance and music performances. Most of all, it pioneered the rehabilitation of an industrial slum.

In Harlem, an Endowment grant seeded the development of a "Festive Plaza." In Williamsburg, a neighborhood in Brooklyn, N.Y., a grant helped organize free architectural advice to homeowners and businessmen threatened by decay and fast-buck "rehabilitation contractors."

There are many file drawers full of Endowment-funded project reports. Not all of them report unqualified success.

The Endowment made only relatively small grants - the average was on the order of $22,000, with the largest $50,000. Most of this was "seed money," and in many instances the seeds are still sprouting. You can't tell yet whether they will blossom.

To keep initiatives fresh and focused on specific city problems, the "Livable Cities" program was variously entitled "City Edges," "City Options," "Cityscape" and now its current name.

At last year's hearings, subcommittee chairman Henry S. Reuss asked Hanks for the secret of the success of this program. "There has to be something more than some nice neighbors coming together and deciding they want a better sidewalk," he said.

The secret, in sum, was unbureaucratic simplicity. The staff for this particular program. Hanks explained, consists of three people. The grant application, she said, "is a real one. It is not written in the prose of specialized, sophisticated, grant-making language. In other words, it is helpful to us and it gets high marks if we can read it and tell what people are talking about."

The program escaped the environmental impact statement syndrome - verbose nothings in a dense tangle of meaningless words - by insisting that the applicant state the purpose of the grant in a 4-by-6-inch "box" - about 350 words. Anything that takes more explanation than that is not worth explaining.

If "Livable Cities" is taken over by HUD, the panels are to be jointly selected by HUD Secretary Patricia Harris and the new Endowment chairman, Livingston L. Biddle.

But last year, at least, a good many people felt that moving the program to HUD was tantamount to killing it. Robert J. Rieby, Jr., the director of the Jersey City public housing authority, for instance, testified about an Endowment grant that enabled young tenant-artists to paint a series of murals on drab public-housing walls.

"If we had gone to our supposed fiscal sponsor and monitor, HUD," Rieby said, "it would have been, from a processing perspective, masochistic and from a programmatic one, an exercise in futility."

Bacon testified, "the press has asked why HUD is not doing this. The crucial point here is that the Endowment's 'Livable Cities' program is free of all the entrapments and impediments to clear thinking that encumber a great institution like HUD. It will be the 'Livable Cities' program that will generate the future policies for HUD. Certainly we have learned that the massive programs, such as HUD generates, do not solve the whole problem."

Why then is the Endowment surrendering this small but important program.

One answer is that Dick Netzer, the dean of public administration at New York University who made a widely distributed critical study, criticized the National Endowment for the Arts for straying too far from the arts.

"The best, or rather the worst example," Netzer wrote, "is the Endowment's architecture program, which is now heavily into city planning. City planning is not art: It is sociology, economics, public administration and engineering. Besides, in the federal government, it falls within the aegis of a very large and rich agency, the Department of Housing and Urban Development."

If Netzer is right, that arts people ought to stick to the arts, then the housers and urban developers ought to stick to housing and urban development.

As so often happens, however, logic is confused by political expediency. The expediency seems to be that last year President Carter established an Office of Neighborhood Development (OND) within HUD to give the noble ideas of Geno Baroni more weight and credence within the bureaucracy. Baroni, a former neighborhood priest, feels - rightly in my view - that the renaissance of the American city depends on a renaissance of city neighborhoods, particularly "ethnic" ones.

But beyond having the right idea, OND doesn't have much of anything else within the HUD bumbledom. So Baconi tries to snatch "Livable Cities."

Sure, maybe he can get $20 million for it and make it that much bigger. But a big bureaucracy has never yet made anything better.