Mayor Marion Barry said last night that growing concern about rising crime in the city is based in part on exaggerated fears the District is on the verge of a crime epidemic.

Appearing on the WETA-TV (26) call-in show "Town Meeting," Barry acknowledged that reported crime rose last year by about 11 percent. But, he said, that increase has been "taken out of context" because crime has risen at a similar rate throughout the country.

Noting that crime in Washington declined by 20 percent in the previous eight years, Barry said: "When you go so low, you've got to go up. There's no place else to go."

Barry and Councilman David A. Clark (D-Ward 1), chairman of the Council's Judiciary Committee and himself the victim of a mugging on the sidewalk outside his Northwest home early last month, said they sensed that city residents wanted a tougher approach to crime fighting.

"The general attitude of people I talk to is we need more jails, longer sentences and higher walls," Barry said.

But, pointing to the city's current money troubles ("The city is facing a financial crisis" he said), Barry ruled out any expensive new programs to combat crime and its causes. And he conceded that in some areas -- especially social rehabilitation of criminal offenders -- his administration had made virtually no progress during its first year in office.

"I'm the first to admit that we have not done very much in the past year," Barry said. He said his administration had devoted most of its efforts to solving housing and economic development problems.

Barry and Clarke appeared on the television program with U.S. Attorney Charles F. C. Ruff, whose office prosecutes criminal offenses in the District.

The hour-long discussion came at a time when the 11 percent increase in reported serious crimes has combined with a string of well-publicized burglaries, murders, robberies and most recently, the shooting of a District police officer during a drug arrest, to heighten citizen concern about what was once one of the District's most troublesome problems.

All three repeatedly said they had no guaranteed solutions for the crime problem. Barry said that crime increases were related to problems of unemployment, and often underscored the need for more money to solve such problems. Many of those funds would have to come from the federal government, he said.

"If the citizens of the District are willing to pay more money, I'm willing to spend more," Barry said. "The fact is, if I were to ask people . . . if they're willing to spend more, the answer probably would be, 'no'."

Clarke, a former public interest lawyer and civil rights activist, said his feelings about rehabilitation as a goal of the prison system have changed.

"With respect to rehabilitation, I think that's an ideal that as a society we ought to maintain, but we ought to be practical about it," he said. "The society does need to be protected from these individuals."

Clarke added that he sensed his constituents "want more people locked up for a longer time."

Guards from both the D.C. jail and Lorton in the studio audience complained to Barry that the institutions were understaffed and overcrowded. Barry said that money problems rule out spending more money.

Barry said he preferred to explore solutions other than incarceration for some offenders, but added, "The general attitude of most of the people I talk to is that we need more jails, longer sentences, higher walls."

" the judges keep sending them up there so we have to find something to do with them."

In response to audience questions, Ruff said he opposed capital punishment and favored a limited transfer of prosecutorial authority from the federal government to the District, provided that "preeminent federal interests" are protected.