Reagan and welfare reform: a call for wisdom

Ask a right-wing conservative where the money can be found to increase defense spending substantially and cut taxes, and the reply might be, "Clean up the welfare mess!"

Well, there certainly is money there. Federal expenditures on such programs as social security, unemployment compensation, medicare, medicaid, foods stamps, manpower programs, depressed-area programs, supplemental security income, and low-income housing, as well as genuine welfare programs such as Aid to Families With Dependent Children, have risen to about $275 billion a year, or 45 percent of the federal budget. That's 10 percent of the nation's total output of goods and services.

There may well even be a "mess" -- meaning considerable fraud and waste -- in some of these programs.

But what this type of conservative usually fails to recognize is that the welfare-poverty type of program has basically worked. It has helped reduce poverty dramatically.

According to official figures, some 22.2 percent of Americans, or 39.9 million, were poor in 1960. By 1978, the number of those with incomes below the poverty level or in families with incomes below the poverty level was halved to 11.4 percent, or 24.5 million people.

Moreover, these official figures overstate the number of the poor. Herbert Stein, chairman of the Council of Economic Advisers under former President Nixon , notes: "The main deficiency in the official figures is their failure to take account of income received 'in kind,' such as food stamps, housing subsidies, and subsidized medical services." If these are included, recent research indicates the poverty level lies probably between 3 and 5 percent.

Whatever, whereas official estimates show a leveling of the poverty level around 1968, apparently improvement continued through the 1970s with the rapid expansion of the food stamp program.

Yet, notes Dr. Stein in a paper for the American Enterprise Institute, a conservative think tank, there is a common mood in Congress and elsewhere toward the poverty programs of "defeatism and frustration."

He adds: 'The expenditures are seen as enormous, and the results, while not negligible overall, are regarded as negative in some aspects and on the whole disappointing."

The social welfare programs are the most frequent targets of those wishing to cut government spending. By now, though, their beneficiaries constitute, as Dr. Stein put it, "formidable political blocs." He continues: "But even aside from that, an objective observer must be concerned with the possible harm and bitterness that would result from withdrawal of benefits to which people feel entitled by law and practice."

To put it more bluntly, would the slums rise up in riot, burning perhaps not only their own homes but those of the comfortable middle class? Would crime and violence increase as the poor sought to maintain their incomes by illegal means?

Both Presidents Nixon and Carter attempted to reform welfare without broad success. One popular idea was the "negative income tax" -- a system for guaranteeing the poor a certain minimum income that would vary according to their earned income. But experiments showed that people receiving these benefits reduced their work effort by as much as one-third or one-half and that the number of broken families increased about 60 percent. Enthusiasm for this solution diminished rapidly.

Another "experiment" got under way in California under Gov. Ronald Reagan. He launched a determined effort to enforce work and child-support rules for welfare fathers. The crackdown reduced the welfare rolls by 400,000 over two years and by 800,000 from projected levels. At the same time, he boosted welfare benefits for the "truly needy" by 43 percent. Eventually, however, welfare recipient levels increased beyond those in New York, where welfare payment levels have declined in purchasing power.

Now Mr. Reagan will face the poverty problem as president of the entire nation.

One adviser, George Gilder, program director of the International Center for Economic Policy Studies, advocates gradually reducing the real level of welfare benefits by not raising them in an inflationary period, and emphasizing in-kind benefits. "Any welfare system will eventually extend and perpetuate poverty if its benefits exceed prevailing wages and productivity levels in poor communities ," he writes in a new book, "Wealth and Poverty" (New York, Basic Books). He says in the same chapter: "The crucial goal should be to restrict the system as much as possible, by making it unattractive and even a bit demeaning."

Mr. Gilder suspects, however, that the Reagan welfare experts in Washington -- domestic counselor Martin Anderson, Office of Management and Budget nominee David Stockman, and such California welfare advisers as Robert Carleson and Charles Hobbs -- will take the California route -- a crackdown on welfare fraud or loose regulations.

Dr. Stein advocates a series of measures to trim the poverty program at its edges, particularly for the "not very poor."

Mr. Gilder protests that he is not a "Scrooge," that he would substitute a nationwide children's allowance system to help welfare mothers with youngsters. France has such a system (and so do many other industrial nations), and it does less harm to the family than welfare, he maintains.

In the last decade or so there has been a lot of research on welfare and poverty. This new knowledge should help the Reagan administration tackle wisely social welfare reform and, one hopes, continue in a new way the "wa r on poverty" started by President Johnson.

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