Key GOP Lawmaker Retreats on Welfare Reform Limits : Politics: Rep. Shaw, likely to head the panel that will draft new rules, bucks party’s ‘contract.’ He opposes denying aid to unmarried young mothers.

The Republican lawmaker expected to chair a subcommittee that will draft the House version of welfare reform expressed deep reservations Thursday about denying benefits to unmarried teen-age mothers--a central element of the GOP’s “contract with America.”

The unexpected retreat from a key provision of the GOP contract suggests that the new Republican majority on Capitol Hill is not fully united behind the aggressive legislative agenda promoted by expected House Speaker Newt Gingrich (R-Ga.).

Rep. E. Clay Shaw Jr. (R-Fla.), who is likely to chair the House subcommittee with jurisdiction over welfare reform, said he cannot support Gingrich’s proposal to permanently deny cash benefits to poor women who have children while they are teen-agers.

The proposal, contained in the legislative manifesto signed by more than 300 GOP congressional candidates before the midterm election, is designed to discourage out-of-wedlock births.

Under the plan, even if a mother who had her baby before she was 18 applied for welfare years later, she and that child would not be eligible. The plan also would allow states to extend ineligibility to babies born to mothers 18 to 20.

“I don’t want to be unduly harsh,” Shaw said, expressing concern about the constitutionality of a proposal that would treat babies born to teen-age mothers differently from other infants.

Shaw earlier had declared his intention to use the GOP contract as his legislative blueprint in committee deliberations over welfare reform. But Thursday, he said that he will not do so.

His reservations are shared by at least one other House Republican on the subcommittee.

“I really don’t think it’s tenable to discriminate based on whether a woman had a baby in or out of wedlock,” said Rep. Nancy L. Johnson (R-Conn.). “I don’t think it’s constitutional, nor do I think it’s fair or reasonable.”

That constitutional concern was brought up by the Congressional Research Service earlier this year because of a similar provision in a welfare reform bill introduced by conservative Republicans. In a private memorandum obtained by The Times, the service cautioned that such a provision would “raise equal-protection-clause questions.”

But Rep. James M. Talent (R-Mo.), an author of the provision, said he doesn’t “see the constitutional problem.” He stressed that, while the bill would terminate cash benefits, other money would be available to states to enable them to help young mothers.

Both the Clinton Administration and Republican congressional leaders have named restructuring the welfare system as a top priority, and the debate over restitching this essential aspect of America’s safety net is likely to emerge as a defining element of the coming congressional session.

Administration officials, who have seen their chances of orchestrating a welfare overhaul disappear since the Republicans took over both the House and the Senate in last month’s election, were relieved to hear of the Republican dissent.

“That would be a big step in the right direction,” said Bruce Reed, a domestic policy adviser to the President. “It would be good if cooler heads prevail.”

While they disagree with the solution offered by the contract, Administration officials, Shaw and Johnson concur that the current system sends the wrong signal to teen-agers by offering them cash assistance and enabling them to move out of their parents’ homes if they have children.

The Administration’s welfare overhaul plan, which is expected to be reintroduced next year, would require teen-agers to live with their parents or guardians to receive government assistance.

Another bill introduced by Shaw and Johnson had a similar provision. For teen-agers who see having a baby and collecting welfare “as a ticket out of the house,” the requirement that they stay home “takes away the lure of the welfare payment,” Shaw said.

Shaw and Johnson also took issue with a provision in the contract’s draft welfare reform bill that would prevent states from using federal money intended to fight teen-age pregnancy and care for children born out of wedlock to counsel women about abortion or pay for abortions.

“I don’t see where welfare reform should get involved with the abortion issue,” Shaw said.