US welfare policy may shortchange the Treasury and the needy alike

By , Murray L. Weidenbaum served as the first chairman of President Reagan's Council of Economic Advisers. He is now director of the Center for the Study of American Business at Washington University in St. Louis.

A technical dispute in Washington is providing an unexpected but fascinating basis for reevaluating the effects of the many programs the federal government conducts in an effort to help the poor.

The technical debate is over how the Census Bureau, and the federal government generally, measure poverty. The traditional way of doing it is to count only the actual cash received by people in poverty.

What about food stamps, medicaid, public housing, and similar so-called payments ''in kind''? These are not modest items. In the current fiscal year, the federal government is scheduled to pay out approximately $48 billion for these social programs. Why is this sum not included in the income attributed to the families receiving these benefits?

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First of all, of course, we get the standard bureaucratic response: ''We've never done it that way.'' But the more serious reason that is usually given is that it would not be fair to add in the cost to the government of food stamps and other payments ''in kind'' because a dollar of spending for these programs does not generate a dollar of benefit to the recipients!

Now that is not some hardhearted reactionary speaking. Indeed, that is the typical response of the people who are sympathetic to and strongly supportive of large amounts of government spending for these social programs. For example, Prof. Alvin L. Schorr, professor of family and child welfare at Case Western Reserve University, opposes the inclusion of income-in-kind in measuring the poverty level. He supports his position by noting that food stamps ''. . . certainly aren't worth their face value in cash. . . .'' He suggests that, if these items are to be included, they be discounted by, say, 20 percent or even 40 percent.

The supporters of the status quo in measuring poverty do not seem to see the basic inconsistency of their position. A cynic might point out that they do, in fact, have a stake in underestimating the income of the poor so as to justify more government spending for these social programs. But why should the federal government spend $1 to provide only 80 cents, or 60 cents, of benefits? That is a painfully large slip between the cup and the lip.

It is also a high price to pay for the government interfering with the consumer sovereignty of the people in poverty. That is, the advocates of these welfare payments in kind seem to be telling us that Big Brother (or rather Big Mother) can supposedly do more good for a poor family by providing something the family itself values at only 60 cents or 80 cents than by providing $1 it can spend at its own discretion.

An advocate of economy might note that the family might settle for 90 cents in cash per current dollar of federal social spending, thus simultaneously enhancing its welfare and reducing total governmental outlays. In fact, the reduction in the deficit might be larger, to the extent that some slimming down could also occur in the overhead expenses required to operate the food-stamp, medicaid, public-housing, and related ''payment-in-kind'' services.

I believe this is a propitious time to join the issue clearly and firmly. In a period of massive budget deficits, no major part of the federal budget should escape tough scrutiny. We need to decide whether these programs help the poor to achieve their objectives or whether they do not. It is unfair to the taxpayer to be told, first, that we need to provide these benefits because people are poor, and then to be informed that we should not take these programs too seriously because they really do not work.

Thus, as a matter of sensible public policy, we need to choose one - and only one - of the following two contrasting positions: (1) We recognize that food stamps, medicaid, public housing, and similar payments-in-kind measurably reduce poverty and, therefore, should be continued; or (2) we conclude that these expensive government programs, albeit carried out with the best of intentions, do not succeed in measurably reducing poverty and, therefore, should be curtailed or eliminated.

Either of these two positions is logically consistent. But it is ludicrous, as well as financially draining, for this nation to continue financing huge social programs if, when we get down to the wire, we have to admit that they do not benefit the poor very much. We may then have to wonder whether the unstated, cynical explanation is the correct one: The basic motivation for these large and demonstrably inefficient social programs is not primarily to meet the needs of the poor, but to maintain a large social welfare bureaucracy.

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