A new report on the problem of illiteracy in the United States by the Northeast Midwest Institute, a nonprofit research and education group, says 60 million adult Americans cannot read the front page of a newspaper.

The report, released at a congressional hearing this week, says that 16 percent of white adults, 44 percent of blacks and 56 percent of Hispanics are "total, functional or marginal nonreaders."

The House Education and Labor Committee conducted a hearing with a Senate subcommittee to probe the nature, extent and causes of illiteracy in this country and find possible solutions.

House committee Chairman Augustus F. Hawkins (D-Calif.) said 1980 census figures showing the United States with 99 percent literacy are "misleading." He said the census definition of literacy -- completing six years of school or being able to read and write a simple message -- is no longer an appropriate measure.

Under a new concept of literacy discussed at the congressional hearing -- the ability to function effectively in society -- 1 in 5 American adults is functionally illiterate. Hawkins said this costs the government about $225 billion in welfare payments, crime, incompetence on the job, lost tax revenue and remedial education.

Rep. Patrick Williams (D-Mont.) said illiteracy is "creating two Americas, to America's shame and national tragedy."

"It is a drag on the economy," he said, "a danger to our defense and a blot on our democracy."

Williams said that many U.S. soldiers cannot use sophisticated weapons because they "can't even begin to read," and that the Defense Department spends $1,000 a page to convert weapons manuals into comic books for them.

William S. Woodside, chairman and chief executive officer of the American Can Co., whose firm funded the report, said the illiteracy problem is due to a "decline in our national commitment to public education" and urged the business community to support public schools.

Monika Sullivan, a German emigrant who now lives in Annandale, testified that her education ended in the fifth grade when the Nazis took her for forced labor. In January she enrolled in adult courses in Fairfax County, and in June passed the General Education Development test.

"I am surprised that so many American people did not finish high school," she told the hearing. "I've been telling everyone to go back to school, no matter what age. Only in this country do you get such an opportunity in the first place."

Dr. John Manning, a professor of education at the University of Minnesota, testified about a growing number of children and adolescents who "choose not to read" and said the obvious result is unemployment. "In a nation which prides itself on individualism, the potential of these individuals is lost to society, to their families and to themselves," he said.

He proposed, as a long-term measure, a dramatic change in the quality of public schools and teacher-training programs.

Anne Richardson, chairman of the board of Reading Is Fundamental Inc., testified that 13 percent of all 17-year-olds in this country are considered functionally illiterate, that 85 percent of the juveniles who appear in court are functionally illiterate, and that nearly one-third of the nation's young people drop out of school.

To fight illiteracy, she suggested "awakening in young people the desire to read and learn, encouraging parents to read aloud to their children and ensuring that children have an abundant supply of books."