When it comes to helping the poor, Americans are bedeviled by a split personality. We are at once Taxpayer and Neighbor.

The taxpayer in us gripes about the cost of a welfare system that seems to benefit lazy people and cheaters, while the kindly neighbor in us complains that the same system fails people who deserve assistance most.This happens because the taxpayer foots the bills for an abstract system, while the neighbor knows of individual cases of unmet needs. Between the two, trying with varying degrees of success to satisfy both taxpayer and neighbor, is the government.

People who rely on government assistance speak bitterly of the indignities of qualifying for it. They feel their privacy is invaded by the loads of paperwork required and by the fact that their lives become an open book for government officials.

Consider an incident that took place in a remote corner of Appalachia but could have happened anywhere. Because of an unpaid bill, a divorced mother and her two children on welfare endured four days without water at their home. Neighbors, hearing of the family's plight, took up a collection to get water service restored.

The grateful woman wrote a letter to the local newspaper to say thank you.

But a few days after the letter appeared, the county welfare office (and taxpayers' surrogate) contacted her, demanding to know how much money she had received - so that her welfare check could be docked.

"I told them that money went straight to the water department to pay my bill," she said, "and I wasn't going to tell them."

The caseworker warned her that if she ever received outside help again and refused to divulge it, she would be in serious trouble.

The woman was angry, as were her neighbors. To give the caseworker the benefit of the doubt, though, her responsibility was to make sure the welfare system was not abused.

But there is more to the story, and it gets complicated. In time, the woman eventually was able to work her way off welfare. Today, she relies only on food stamps.

"I live for the day when I can say I don't need them any more either, " she said. She asked not to be identified for fear that she would lose the food stamps.

The problem now is that she does not declare all her income to the food stamp office. And that is illegal.

The government knows only that she has a job that paid about $6,400 last year. But she frequently works in a restaurant kitchen and gets paid under the table. She baby-sits several nights a week for cash.

Her extra income doesn't amount to more than a couple thousand dollars - but it and the food stamps allow her to be self-sufficient. Her family still lives in poverty, but they can hold their heads up.

If she declared the extra income, she probably would still qualify for some food stamps, but she fears she could not make ends meet and might have to go back on welfare.

After years of ignoring working poor families, Congress did wrestle with how to help them during the budget deliberations. In the end, it expanded earned-income tax credits and moved toward covering more children under Medicaid. Congress did nothing, however, to raise food stamp or welfare benefits even though their values have been badly eroded by inflation over the last decade.

The woman in Appalachia may be a little better off because of the tax credits, but she is terrified that she will be caught for food stamp fraud. Most people in her little town would never suspect her of cheating. Those who do don't fault her.