AT THE MOMENT, the District government is having to deal with one of the ugliest features of the social program cutbacks made law last summer. These are the provisions that would deny or sharply reduce federal welfare aid to working poor families.

Last week the D.C. Council voted to use city money to make up the $5 million in welfare aid that the new law would take from about 3,800 working welfare mothers. Mayor Marion Barry agreed with the council that cutting aid to these families was poor policy, but he is concerned about finding room in the District budget for this added expense.

The mayor is right to be concerned about keeping the District budget in line--but he is wrong if he decides that this is a good place to economize. The modest work incentives that federal welfare law used to provide were fair and farsighted. People who try to help themselves ought to be at least a little better off than those who don't. That good principle applies at least as much to the poor--in their mean and low- paid jobs--as it does to the well-off in their comfortable ones.

Encouraging welfare mothers to work is also a good investment. While most political rhetoric these days would have you believe that welfare costs are the source of the Treasury's perilous situation, the trend in welfare rolls in recent years has been down--not up. That has been true not only for the nation but also for the District. AFDC rolls in the city are now a striking 22 percent lower than they were in 1975. That's mainly because of smaller family sizes, but it is also due to increased movement off the rolls. Almost half of welfare mothers now work for at least part of the year. If taking a job now means an abrupt loss of welfare security and valuable food and medical benefits, fewer of them will dare to take the chance. That will be a bad result for the mothers, their children and the taxpayers.

If the mayor can't see his way to footing the whole bill, he might consider a compromise along the following lines. The Reagan plan calls for two sorts of benefit cuts: one would limit compensation for taxes and other work expenses to $75 a month. The other would reduce welfare benefits--dollar for dollar--by the amount of a recipient's earnings after she has been on welfare for three months. Present law, by contrast, reimburses all working expenses and "disregards" a third of earnings in computing benefits.

Since the work expense cap is set much below present average expenses, it will cut benefits substantially for almost all working recipients. However, only those relatively few recipients earning more than $800 a month will lose all welfare help. Eliminating the earnings "disregard," however, will force some families off the rolls with earnings as low as $400 a month. A sensible compromise might accept the work expense cap --perhaps at a somewhat more generous level--but retain the earnings "disregard" feature. A final needed step would be for the mayor--together with governors and mayors around the country--to take the case to Congress for adoption of a similar compromise for all the nation's working poor.