Parents of babies with birth defects, men with liver damages who had basement workshops, and families with life savings invested in their homes are living frightened and angry on the rim of an old chemical dump here.

Theirs is not the fear of the unknown so widespread in this day of environemntal consciousness, they have seen the chemicals - many of which have tested out as carcinogens - begin to ooze out of their yards.

"We've lived with this thing for more than two years," says Debbie Gerrillo. "My backyard is filled with rotted cans and drums and that stuff keeps coming out of the ground all the time."

"I've got that slop everywhere," says Thomas Heisner, whose daughter has a congenital birth defect.

The 90 families between 97th and 99th streets live alongside the old Love Canal, an ill-conceived 19th century nigthmare. Rather than water, the canal is filled with 82 varieties of chemicals, buried in good faith and apparently in compliance with government regulations between 1930 and 1953.

Now, pregnant women and young children have been told by the New York State Health Department to evacuate the neighborhood. The fear is turning to panic because some of the chemicals have escaped their rusted containers as a result of six years of unusually heavy rains and snows that caused the old canal to overflow its buried banks.

The gret open trench held only stagnant water in which children swam until 1930 when Hooker Chemical and Plastics Corp. began using it to dump its waste, most of it in steel drums. In 1953, Hooker "sealed" the eerie grave with a clay cap and turned the property over to the Niagara Falls Board of Eduction.

The school board immediately built the 99th Street School and its playgrounds on the site.

Developers then purchased adjacent land and houses sprang up. The 16-acre tract stood as a peaceful middle-class neighborhood about a mile from the Niagara River on the city's southeast side, until about two years ago.

A stench was the first thing the residents noticed in 1976. Next they noticed that an unusually high number of children in their neighborhood were being born with deformities. And late last year, they saw the black goo oozing out of the ground, through their cellar walls, and into their neighborhood school.

This week, the state Health Department announced results of its studies of neighborhood complaints. It said the area had indeed experienced higher than normal rates of miscarriages and birth defects and there were possible connections between the oozing chemicals and the many diagnosed liver diseases.

State Health Commissioner Robert P. Whalen immediately "recommended" that all pregnant women and all children under 2 years of age be "temporarily relocated" outside the area.

The neighbors, their fears heightened, became angry.

"You just can't tell us to stay here in the meantime," said Louise Heisner, Thomas' wife. "Where is the difference between a two-year-old and a three-year-old child? How can you discriminate between us? We have all got to get out."

But most cannot get out of this working-class neighborhood. Their $30,000 homes are now valueless. They have no equity with which to buy or rent anywhere else.

The residents want the state and federal government to buy their homes and to reimburse them for the agony they are sure they have been caused by the chemical graveyard at the edge of which their homes were built. Gov. Hugh L. Carey has petitioned President Carter to declare the neighborhood a disaster area so that financial assisstance can be made available.

The federal government has been drawn in because city oldtimers and Hooker both contend that the U.S. Army dumped some chemicals into the canal after World War II.

Hooker has disavowed any legal responsibility for the problem but has said that "as a responsible corporate citizen" it will lend expertise to cleaning up the site.

Dr. Beverly J. Paigen, a cancer researcher at Buffalo's Roswell Park Memorial Institute, has tested sample of the black slime, and she says that 90 percent of the chemicals can cause cancer.

She also cited evidence that the contamination has been washed out beyond the immediate neighborhood, some into the Niagara River.

"I don't think the neighborhood is safe," Paigen said.

Some of the chemicals that have escaped through rusted and bobbing old drums are chloroform, trichlocoethene, toluene, tetrachloroethane, chlorobenzene chlorotoluene, trichlorobenzene and benzene.

The Board of Education here will note week to close the 99th Street School this fall and transfer all 400 students to a mothballed school building seven miles across town. But unless there is government action, the children will be back to the Love Canal neighborhood each night.