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Welfare reform and a new federalism. Letting the states and localities and Washington do what each does best

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Using the Evans-Robb committee's report as a conceptual framework, legislation to apply this new federalism was introduced in the last days of the 99th Congress, in the Senate (S2926) by Senators Evans and David Durenberger (R) of Minnesota, and in the House (HR5698) by Reps. Thomas Downey (D) and Charles Rangel (D), and Frank Horton (R), of all New York; and by Willis Gradison (R) of Ohio. The legislation will be reintroduced in the 100th Congress. This proposal would not affect aggregate federal expenditures, as costs of the federal assumption of AFDC and medicaid would be balanced by savings from programs devolved from federal programs at current budget levels.

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This clearly is the direction a new federalism and welfare reform should take.

These legislative proposals would make a number of important advances in the welfare area while sensibly sorting out federal-state responsibilities for the future:

A variety of federal programs would be devolved to the states which can be run as well by them as by the federal government.

Medicaid coverage would be expanded by 1994 to all children 11 years of age and younger living in families with incomes below the poverty line, and for pregnant women below the poverty level. This would eventually cover an additional 1.9 million children from poor families and poor pregnant women. A simple income standard, rather than the multiple criteria used in AFDC, would be used to determine eligibility.

For the first time a national standard minimum benefit, or ``floor,'' for AFDC benefits would be created, reaching 62 percent of poverty by 1994, when combined with food stamps.

All states would be required to join the 23 that already participate in the AFDC-unemployed parent program, thereby promoting family stability.

This approach recognizes that the poor will not improve their lot significantly until they find a place within the regular labor force. Priority is placed on helping long-term welfare recipients become self-sufficient through work.

Fiscal capacity grants would be provided to states and localities with very low fiscal capacity - some 12 to 15 of the poorest states, which do not have the tax base to support the kind of services the more affluent states can provide their citizens.

States would be required to develop and operate work-welfare and training programs, with broad state flexibility regarding the design of the programs, in much the same way the Reagan administration has proposed.

The litmus test for our new federalism must continue to be based on which level of government can most effectively set the policy for a program, provide funding for it, and administer it.

ANEW federalism modeled on this approach accomplishes several important results. First, it establishes greater nationwide uniformity in the benefits provided by federal ``safety net'' programs, smoothing our irrational system of benefits, which vary according to area of residence.

Second, there is a responsible, logical, and rational rearrangement of the division of labor between the state governments and the federal government. Welfare reform is combined with the means of simplifying the intergovernmental system.

A third objective of the new federalism is to ensure that the newly devised sharing of responsibility among the various levels of government makes economic sense at both the federal and state levels. This new federalism is not simply an excuse to switch budget obligations from the federal government to states and localities, as are the Reagan administration's federalism and welfare reform proposals. Nor does it resemble previous Reagan administration proposals that offered no consistent explanation of how or why various programs were selected for turnback to the states or for total elimination.

These proposals for a swap of greater income-maintenance responsibilities at the federal level for greater state responsibility for economic development, infrastructure, and social services must be considered as a whole. It is difficult for the federal government to take on additional income-maintenance burdens in this era of severe budget constraints without shedding an equal amount of responsibilities in other areas. But it is equally undesirable simply to devolve more responsibilities on the states without adequate fiscal relief. Taken together, these proposals provide a reasonable, achievable blueprint, one motivated by an effort to ensure compatibility among the federal, state, and local governments, not by an attempt to bury or destroy selected programs.

Stuart E. Eizenstat, a Washington lawyer, was chief domestic policy adviser to President Jimmy Carter, 1977-81, and is an adjunct lecturer at the John F. Kennedy School of Government, Harvard University. This article is adapted from an essay published by the Center for National Policy.