This Congressional report found that today's social and economic conditions harm large numbers of American families in ways that the child welfare, mental health, and juvenile justice systems were not created and are ill-prepared to address. The following findings are reported: (1) the number of children placed outside of their homes during the 1980s increased dramatically; (2) the number of children experiencing repeat placements in foster care is increasing; (3) younger children are entering out-of-home placement at an increasing rate; (4) minority group children are disproportionately represented among children placed out-of-home; (5) drug and alcohol abuse contribute substantially to increased out-of-home placements; (6) deteriorating social conditions, including child abuse and homelessness, jeopardize child safety and fuel the child placement explosion; (7) existing child services are overwhelmed; (8) effective services for children and families in crisis have been impeded by lack of Federal leadership, funding, and oversight; and (9) prevention and early intervention programs show great program benefits and cost effectiveness. Dissenters question the statistical data upon which the projected increase in the number of children requiring foster care are based. Statistical data are included on seven charts. The following material is appended: (1) statistical data on 13 tables; (2) a list of 177 references; (3) a copy of a state survey questionnaire about children in substitute care; (4) a list of Federal programs affecting children in state care; (5) a list of state-by-state litigation on behalf of children in state care; (6) the results of a survey on addicted infants and their mothers; (7) additional views; and (8) dissenting views. (FMW)