THE MAYOR and D.C. council in a single act could give a needed Christmas season gift to more than a fourth of the children in the city. In the budget now in preparation for next fiscal year, they could raise the benefit levels in the city's program of Aid to Families with Dependent Children.

A striking thing has happened to the AFDC caseload in the District in the last five years: it has fallen about 23 percent. The federal budget cuts of 1981 are a partial explanation. They reduced the degree to which people with even the most marginal of jobs could qualify for AFDC (and Medicaid, which in most jurisdictions accompanies it). But the caseload here has fallen much more than nationally, and another explanation may be population losses and shifts, in particular a movement of welfare families across the lines into the suburban jurisdictions.

Even so, at any one time now in the city about 62,000 people are on AFDC, including about 46,000 children. That is 10 percent of the population, and 30 percent of the children. And over the years the benefit levels, which in AFDC are set by state and here by the city government, have been allowed to fall behind. The typical AFDC family is a mother and two children. The official federal poverty line for a family of three is $8,850 this year. The D.C. government's own version of this line -- its so-called standard of need for a family of three under AFDC -- is $7,848. Yet the maximum benefit for such a family is $3,924, or $327 a month.

To some extent, of course, AFDC benefits have become a misleading measure of public support. There has been a great shift in welfare over the last 20 years, from aid in cash to aid in kind. On top of AFDC now come Medicaid, food stamps and, for some families, housing subsidies. But the AFDC check is still the heart of it, and over the years the purchasing power of those checks -- here as well as nationally -- has declined. Anne Wicks, a researcher who testified before a D.C. council committee earlier this year, said that in the years since 1969, AFDC benefits in the District have fallen 35 percent behind inflation. They buy that much less. In the five years from 1980 through 1985 the federal poverty line, which is tied to inflation, rose 43 percent. Benefits here rose 14 percent.

The council hearing was on a proposal to index benefits. We have reservations about indexation; governments lose too much control. But there is a competing proposal inside the Barry administration to raise benefits by fixed percentages over the next year or two. There have been three other such increases in the Barry term; these would continue a constructive trend. You are not talking here about luring people into idleness. You are talking about lifting to a minimal level the standards of living of a lot of the children in the D.C. schools. It's the right thing to do -- and this is the right season to resolve to do it.