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Fairness Issue Report [White House Office of Policy Information, 06/01/1982] (1)
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Fairness Issue Report [White House Office of Policy Information, 06/01/1982] (1)
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Records of the White House Office of the Deputy Chief of Staff (Reagan Administration)
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Ronald Reagan Presidential Library
Digital Library Collections
This is a PDF of a folder from our textual
collections.
Collection: Deaver, Michael
Folder Title: Fairness Issue Report
[White House of Policy Information
06/01/1982] (1)
Box: 39
To see more digitized collections
visit: https://reaganlibrary.gov/archives/digital-library
To see all Ronald Reagan Presidential Library inventories
visit: https://reaganlibrary.gov/document-collection
Contact a reference archivist at: [email protected]
Citation Guidelines: https://reaganlibrary.gov/citing
National Archives
Catalogue: https://catalog.archives.gov/
OF
White House Office of Policy Information
PREST THE OF SEAL STATES UNITED
FAIRNESS ISSUES
A Briefing Book
on
Individual Programs
and
General Perspectives
THE WHITE HOUSE
WASHINGTON
FAIRNESS ISSUES
An Executive Briefing Book
White House Office of Policy Information
June 1, 1982
TABLE OF CONTENTS
PART I: A GENERAL ASSESSMENT
Tab
The Fairness Issue: What Is It?
A
The Past Approach To Poverty Has Not Worked
B
The President Has A Plan
C
We Need To Stay On Course
D
Three Key Questions
E
PART II: INDIVIDUAL PROGRAM SUMMARIES
AFDC
F
Food Stamps
G
Child Nutrition
H
Health Care (Medicare/Medicaid)
I
Child Health
J
Social Security Disability
K
Elementary and Secondary School Aid
L
Higher Education Aid
M
Housing Assistance
N
Employment and Training
O
Unemployment Compensation
P
THE FAIRNESS ISSUE: WHAT IS IT?
Crucial question: Is the President's Economic Recovery Plan
fair to all Americans, or do certain classes of people
benefit at the expense of others?
The President's position: The Economic Recovery Program will
benefit all Americans, especially the poor, the
disadvantaged, and the elderly -- the very people who have
been hurt most by the past several years of high inflation,
interest rates, unemployment, and slow economic growth.
The criticism:
The Economic Recovery Program is designed to achieve
recovery on the "backs of the poor."
Budget cuts single out the poor for special retribution.
Budget policies are based on the adverse moral judgment
that "you're poor because you deserve to be poor."
Tax rate reductions are tailored to help the rich at the
expense of the poor.
The President lacks compassion for the poor.
The poor will get poorer and the rich will get richer as
a result of the President's policies.
What do the people think?
Recent Harris survey gave the President a 73-25%
negative rating on "caring about the elderly, poor, and
handicapped."
DMI poll in May 1981 gave the President a 52-47%
negative rating on caring about the poor and elderly; by
February 1982, the rating had become 67-32% negative.
In February 1982 DMI poll, 59% of respondents said the
President's program favored the rich; only 24% believed
the program equally met the needs of all people.
A March 22, 1982, Harris survey showed the American
people disapproving of the President's handling of:
the economy, by 63-35%
the federal deficit, by 66-29%
--inflation, by 61-37%.
A May 28, 1982 CBS/NY Times poll showed that 7 out of 10
Americans felt prices were rising as fast as a year ago.
The problem: Clearly, the President's message is not getting
through. Even where the benefits are indisputable -- as with
inflation -- the public has yet to perceive them.
-2-
What to do (three-point approach) :
O Demonstrate that the past approach to poverty has not
worked:
Social spending has mushroomed.
The economy has deteriorated.
The poor have suffered the most.
Show that the President has a plan:
-
The plan is fair.
The plan will work.
The poor have the most to gain.
0 Emphasize that we need to stay on course:
There are growing positive signs.
--To the extent the economy remains sluggish it is
because we have a long way to go.
We can turn the economy around, but only if we
take the necessary steps.
-3-
THE PAST APPROACH TO POVERTY
HAS NOT WORKED
1. Social spending has mushroomed.
In President Kennedy's first (FY 1962) budget:
Fully 46% went for defense; only 27% for social
programs.
-America spent $28.7 billion on social programs.
The "Great Society" burst the budget at its seams.
--Non-defense payments to individuals jumped from $28.7
billion in 1962 to $63.2 billion in 1970 -- an
increase of almost 120%. Even in inflation-adjusted
dollars, payments to individuals nearly doubled.
Examples:
AFDC grew from $2.9 billion in 1963 to $7.8 billion
in 1969 -- an increase of nearly 200%.
*Non-cash transfers rose from $1.3 billion in 1965 to
$12.9 billion in 1970 -- a ninefold increase.
During the 1970s, the trend accelerated:
Real social spending in 1981 -- adjusted for
inflation -- was nearly 2-1/2 times the level in
1970.
More examples:
* Food stamps' cost rose 15 times -- from
$576 million in 1970 to $9.1 billion in 1980.
* Guaranteed student loans rose from almost nothing
($331 million) in 1977 to $2.3 billion in 1981 -- a
jump of nearly 600%
2. During this time, the economy deteriorated badly.
Inflation worsened.
From 1960 to 1965, prices never rose more than
2% in a year (Can you imagine that!?)
By 1969, the inflation rate had tripled -- to
6.1%.
By 1979 and 1980, it had doubled again, and
America suffered back-to-back double-digit
inflation for the first time since World War I.
--By 1980, value of a 1960 dollar had shrunk to 36¢.
--A pound of hamburger costing 48¢ in 1960 had
risen to $1.58, and was heading toward $2.00.
-4-
O Interest rates rose.
From 1960 to 1965, the prime rate, on an annual
basis, never rose above 5%.
After 1965, the prime rate, on an annual average
basis, never fell below 5%.
The monthly prime rate has not fallen below 10%
since 1978, and over the last three years has
averaged 15.6%.
-Mortgage interest rates averaged nearly 13% in
1980 -- the highest level in U.S. history, and
double the levels of the early 1960s.
--At that rate, some 90% of those who rented could
not afford to buy a home.
o Unemployment worsened.
-- From 1960 to 1964, unemployment averaged 5.7%.
-- From 1975 to 1980, unemployment averaged 7.1% --
a full one-fourth higher.
--The unemployment rate has been trending steadily
higher since mid-1979, and has averaged 7.7% the
past two years.
Effect on the family.
Real family incomes increased more than 16%
between 1960 and 1965.
-- Real family incomes -- that is, incomes adjusted for
inflation -- actually fell from 1969 to 1980.
-Because taxes increased significantly during this
period, real take-home pay declined by much more.
--A Congressional Joint Economic Committee calculated
that the slowdown in productivity growth in the 1970s
cost the average household $3700 in income in 1978.
-5-
Consequently, the number of poor has grown.
From 1949 to 1964 (pre-"Great Society"), the
percent of families in poverty fell from 32.7 to
18.0 -- a decline of more than 40%.
From 1964 to 1968, the percent of families in
poverty continued to drop, falling to 12.8 by 1968.
But then the fall sputtered to a virtual halt,
and by 1980 the percent of families in poverty
(13.0%) was greater than in 1968.
There were more people in poverty in 1980 than in
1966 (29.2 vs. 28.5 million); there were five million
more people in poverty in 1980 than in 1969.
3. And it is these poor who have suffered the most.
o Despite yearly benefit increases, inflation-adjusted
AFDC benefits have fallen nearly 30% in the last
decade.
This has meant a loss to the average four-person poor
family of $2800 in purchasing power -- enough for them
to have paid for food and shelter for more than half a
year.
Because the poor spend up to 70% of their family
budgets on necessities, there are very few ways they
can cut back to beat inflation.
O Yet the rise in economic stagnation and unemployment
left the poor with no alternative but to subsist on
these ever-shrinking real incomes.
4. Let's not play games.
The undeniable conclusion is that despite a decade and
a half of continuously increasing social spending,
there are more poor people in America today, and
those people who are poor are economically worse off.
Ronald Reagan did not create this problem. The poverty
and unemployment that exists today is a direct
outgrowth of the policies and problems of the late
1960s. Poverty, unemployment, and interest rates have
all been trending higher since the middle of the
Carter Administration.
There is nothing "fair" at all in condemning more
people to poverty, and making those in poverty
demonstrably worse off -- yet this is precisely what
the policies of the past fifteen years have done. We
cannot blind ourselves to this fact.
-6-
THE PRESIDENT HAS A PLAN
The Plan (Five Elements)
o Reduce spending growth.
Spending growth would be reduced from 17.4% in
1980 and 14.0% in 1981 to less than 7% in 1983.
Where budget growth totaled $166 billion in 1979
to 1981, it would rise less than 3/4 of that amount
from 1981 to 1983, despite cost-of-living
adjustments and needed defense buildup.
Reduce tax rates.
Individual tax rates will fall 23% by 1983, helping
to offset much of the tax increases which had been
planned by the previous Administration.
Tax indexing, to begin in 1985, will ensure that
taxpayers are not pushed into higher tax brackets by
inflation.
Business tax rates have been dramatically reduced
through sharply accelerated depreciation which will
spur investment.
Reduce unnecessary regulation.
Task force under direction of the Vice President
will, by mid-year, have saved industry and consumers
at least $15 billion in one-time costs and $9 billion
in annually recurring costs.
These savings will free capital to go into
job-creating and productivity-enhancing investments.
Stable monetary growth.
Needed to keep inflation and interest rates down.
Consistency.
Previous President had five economic plans in three
years.
President Reagan will stick with his program to
permit consumers and businesses to plan ahead.
-7-
1. The plan is fair.
O Budget growth reductions are proposed in a wide range
of programs
Reduce the federal subsidy for Amtrak by one-third
(subsidy had reached $192 per ticket on some trips).
Reduce direct loans to large exporting companies
by $570 million (27% of budget had gone to one firm).
Cut by more than half subsidies to companies
developing energy projects -- market competition will
more effectively determine what should be developed.
Eliminate the construction subsidies paid to U.S.
builders of privately owned. merchant ships.
Cut back on dairy and farm subsidies.
Budget changes in "people programs" will reduce or
eliminate help to those who need it least.
Food stamp recipients will be required to count all
income in determining eligibility for aid.
Able-bodied applicants for AFDC will be required to
search for work in order to receive their benefits.
Renters of subsidized housing will be asked to pay
rents more comparable to those paid by unsubsidized
tenants with similar incomes.
All families applying for guaranteed student loans
will be required to demonstrate financial need.
Pell Grants for college students will be targeted to
those who most need them, with 75% of the awards
reserved for families earning less than $12,000 per
year.
0 The truly needy will be protected.
Children from families below 130% of the poverty line
will continue to receive free school lunches.
Food stamp benefits for families with little or
no income will be essentially unchanged.
The Federal government will subsidize, all told,
approximately 95 million meals per day, or 14%
of the meals served in the U.S. each day.
-8-
Through Medicaid and Medicare, the Federal
government will pay for the medical needs of 99% of
America's elderly.
Job training will be provided for almost one
million low-income disadvantaged persons, 90% of whom
will be below age 25 or on welfare.
More than 40% of all college students will continue
to receive federal education assistance.
About 3.4 million American households will receive
HUD subsidized housing assistance.
In sum, Federal income assistance to the poor will be
one-third higher in 1985 than it was in 1980, and
more than seven times the amount spent in 1970.
2. The plan will work.
Cut inflation by two-thirds -- from an average of 12.9%
in 1979-80, to under 5% in 1984, down to 4.4% in 1987.
Since inflation for the last six months has been
running at 3%, inflation could fall even more quickly.
Create 3 million new jobs by 1986, in addition to the
10 million new jobs that could have been expected.
Reduce unemployment by 1986 to the rate that prevailed
in the early 1960s.
Cut interest rates to below 10% by 1984, and to 7% by
1986.
Increase purchasing power for all families. A family at
the poverty level would realize an annual cash savings
of $760 by 1984; a family earning $25,000 would receive
an annual real take-home pay increase of $2,500.
Bring Americans out of poverty. The number of Americans
in poverty would thus decline as real incomes rose.
3. The poor have the most to gain.
o A growing economy benefits the poor the most.
The rate of poverty declined the most sharply in
the early 1960s, when the rate of economic growth
more than doubled.
The number of people in poverty rose most steeply
(by almost 4 million people) in 1980, when economic
growth slowed to a crawl.
Restoring economic growth will best help the poor
escape poverty.
-9-
O Lower inflation helps the poor the most.
Because the poor spend 70% of their income on
necessities, lower inflation rates help the them
purchase those things most essential to a better
quality of life.
Cutting inflation in half would increase a poor
family's purchasing power by 16.3% by 1984 over what
it would have been with inflation at its 1979-80
levels -- the equivalent of a 41% increase in their
AFDC benefits, or a $1,375 annual cash supplement.
This cash savings could mean more nutritional meals,
a car (to make job searches easier), or moving to
more liveable housing.
o More real jobs will help the poor.
More jobs make it much easier for the poor, many of
whom are unskilled, to find work; they often can't
compete with higher skilled workers when the job
market is tight.
Finding a job and learning skills are the best ways
for a poor person to move up the economic ladder.
-10-
WE NEED TO STAY ON COURSE
1. There are some positive signs.
O The most important economic event of 1981 was the
unwinding of inflation.
When President Reagan took office, the United States
had just experienced its second straight year of
double-digit inflation, and the producer price
index for January 1981 was proceeding at an annual
rate of more than 15 percent.
By December 1981, the inflation rate had fallen to
8.9 percent -- a more than one quarter drop from
the previous year.
For the first four months of this year, consumer
prices have increased at an annual rate of less
than one percent. Producer prices have actually
dropped in two of the last three months, presaging
still lower inflation in the months ahead.
This represents the largest reduction in inflation
during a recession in postwar history.
For a family at the poverty line, this drop in
inflation has meant a cash savings of $437 over the
past six months.
Interest rates have also fallen.
The prime rate was 21.5 percent at the beginning of
1981. It has since fallen 5 points.
-Three-month T-bill rates are down more than 2-1/4
points since February, and have dropped nearly
5 points since a year ago.
Mortgage rates are half a point lower than their
November 1981 peak.
Investment has remained strong.
Investment almost always falls, sometimes steeply, in
a recession.
By contrast, this year's inflation-adjusted
investment is expected to match last year's, which
was a near-record year.
Real disposable income.
Real disposable income grew at a 3.5% annual rate in
the first quarter, up sharply from the 0.8% growth
rate of the previous three months.
-11-
O Real consumer spending.
Real consumer spending has grown at an annual rate of
3.4% for the first quarter, up from no growth in the
last quarter of 1981.
Unemployment.
Unemployment remains too high. There are, however,
some encouraging signs:
By the beginning of May, initial unemployment claims
were down almost 6% from the March level.
Some callbacks are beginning. General Motors called
4,200 workers back to work at assembly plants in
Fairfax, Kans., and Lansing, Mich. Chassis production
has been increased at Chevrolet plant in Detroit.
The number of job openings is up. There were 189,000
job openings at statewide job banks in March, a 28%
increase over February. Jobs for clerical workers,
sales workers, and service employees constituted 44%
of the March openings.
Recent inventory liquidations, double what most
economists expected, could set the stage for
increased employment in the summer.
2. To the extent the economy remains sluggish, it is because
we still have a long way to go.
Spending remains out of control.
CBO's projected spending -- excluding the President's
proposed cuts -- show a combined level for 1982-84
virtually equal to the levels proposed by President
Carter before he left office. Spending growth has not
yet been cut substantially.
--The Administration's projected rise in the 1982-85
budget deficits, made over the last three months, is
entirely the result of higher budget levels (rather
than lower tax revenues).
Examples of increases over RR 1983 budget:
*House Post Office Committee -- $3 billion over
*House Agriculture -- $3-6 billion over
*House Education and Labor -- $20 billion over
*House Public Works -- $7 billion over
-12-
Taxes remain too high.
So far, individuals have received only a 5% tax rate
cut, which did not offset social security and
inflation-generated tax increases.
Democratic leaders have continually been looking for
ways to take back both the personal and business tax
rate cuts, breeding uncertainty and making it
impossible for people to plan.
Deficits remain too large.
The market is looking at possibly triple-digit
deficits for some time into the future.
Democratic leaders have not shown a willingness to
reduce these deficits by controlling spending. (Note:
a March 1982 Gallup poll showed 47 percent of the
public favoring reduced spending to close the
deficit, 4 percent favoring higher taxes, 20 percent
favoring both, and 18 percent neither).
3. We can turn the economy around, but only if we take the
necessary steps.
Politically easy though the course might seem, we
cannot return to the tax-and-spend policies of the
past. They produced this crisis.
We need a realistic patience. The economy is like a big
battleship -- it can be turned around, but the process
is slow and takes much effort.
We cannot "wish" the economy into better health. We
have to follow policies that will work, and we have to
stick with them. (Like the battleship, if we stop
turning, the ship will stay where it is; it won't
automatically turn about toward the course we want.
And if we turn back toward the wrong direction, it will
be impossible to get where we want to be).
The economy is the same way. We can either return to
the path of economic calamity that existed under the
previous Administration, or we can hold firm on all
aspects of the President's program, and produce a
stronger, healthier economy.
THREE KEY QUESTIONS
1. Isn't the President proposing to drastically cut back on
social programs for the poor?
0 Overall, spending is not being cut; our 1983 budget is
$38 billion larger than the one for 1982.
Compare to JFK:
--RR's 1983 budget is $758 billion, 43 percent of which
goes for non-grant payments to individuals.
--JFK's first budget was less than one-seventh this
size, and only 25 percent went for non-defense,
non-grant payments to individuals.
Spending for many specific programs to help people is
up substantially from fiscal 1980 (last full Carter
fiscal year). RR is not gutting programs that help the
needy -- far from it.
-Guaranteed student loans:
*Spending in 1980 was $1.4 billion.
*Spending in 1983 to be $2.6 billion.
SSI for elderly, poor, and blind:
*Spending in 1980 was $6.5 billion.
*Spending in 1983 to be $8.9 billion.
Social security:
*Spending in 1980 was $122 billion.
*Spending in 1983 to be $175 billion.
-Health care:
*Spending in 1980 was $58 billion.
*Spending in 1983 to be $78 billion.
--In fact, for 16 social programs (those considered in
this book, plus SSI, combined welfare administration,
energy assistance, and the rest of social security),
real spending under Reagan (spending adjusted for
inflation) will be $4.5 billion greater in 1983 than
in would have been under Carter.
Reminder:
--95 million meals a day subsidized.
-$55.8 billion in income assistance for the poor.
--Medical care for 47 million elderly and poor.
--Rental assistance for 10.2 million people.
Job training for 1 million young and poor.
Care most of all about creating jobs, jobs, and more
jobs. Ultimately, this is the most compassionate thing
we can do.
-14-
2. Doesn't the recession prove that Reaganomics has failed?
Recession began in July 1981 -- three months before the
President's Economic Recovery plan took effect.
Recession, in practical if not strictly economic terms,
has been with us since 1979:
The unemployment rate has been trending steadily
higher since mid-1979, and has averaged 7.7% in the
last two years.
The monthly prime rate has not fallen below 10%
since 1978, and over the last three years has
averaged 15.6%.
Real output increased at only a 0.5% annual rate
from the first quarter of 1979 to the fourth
quarter of 1981.
The level of industrial production declined 6.7%
between January 1979 and February 1982.
Real after-tax corporate profits declined 23% from
the first quarter of 1979 to the fourth quarter of
1981.
Productivity, measured by output per manhour, fell
at a 0.2% annual rate from the first quarter of 1979
to the fourth quarter of 1981.
In some ways this recession has been less severe than
most, because of the President's economic plan:
--Because of sharply lower inflation, real incomes have
fallen substantially less than in most recessions.
--The almost neglible price increases of late helped
boost consumer demand by 2% in the first quarter.
-Investment, which usually falls steeply, has held
firm in an environment of reduced business tax rates.
Only way to pull us out of recession: keep tax rate
cuts in place and work to further reduce spending
growth.
Higher taxes would only depress economy and slow the
recovery.
Failing to control spending growth lets the federal
government absorb more of scarce capital, thus
preventing economy from rebounding.
-15-
3. Shouldn't we eliminate indexing and the third year of
last year's tax cut in order to add a measure of fairness
to the President's budget?
Even with the President's tax reduction proposal in
place, taxes will rise an average of $85 per year (from
1980 to 1988) for a family earning $15,000 per year.
(Note: the average tax increase for a $40,000 family
will be $246, or three times as great).
The third year and indexing are the only real hope for
the lower-income families.
More than 40% of these families' tax cuts come in
the third year, compared to 5% for the wealthy.
Indexing keeps low-income families from being
pushed into higher tax brackets because of
inflation; because the wealthy are already in the
top tax bracket, indexing is of no consequence to
them.
Eliminating both the third year of the tax rate cut and
indexing would boost taxes even more on this low-income
family.
The increase in taxes would be $222 in 1986, and
could be several hundred dollars per year by end of
decade.
The only families who would not be affected by
repealing the third year of the tax cut would be
those with six-figure incomes, who received major
benefits from the reduction of the top bracket from
70 to 50 percent -- a Democrat-sponsored proposal.
Eliminating the third year of the tax rate cut and/or
indexing would amount to an increase in the economy's
tax burden.
This would slow down the economy, as tax increases
have in the past, and thus:
Make it more difficult for unemployed low- and
middle-income Americans to find a job, or for those
who are underemployed to move up the income ladder
and escape poverty.
* Example. From 1959-1969, the number of families
living in poverty dropped nearly 50%; from 1969-79,
when the economy was growing more slowly, the
number of poor families dropped only 6%.
-16-
AID TO FAMILIES WITH DEPENDENT CHILDREN
History
Aid to Dependent Children (ADC) was first authorized
under the Social Security Act of 1935. It made federal
funds available to States to help support needy children
deprived of normal parental support because of the
parent's death, incapacity or absence from the home.
Payments were made for the support of the child, not for the
person caring for the child.
In 1950 Congress authorized ADC payments not only to
needy children but also to the adult caring for the child.
In 1962, Congress authorized payments even if both parents
were present but were unemployed, and the program was
renamed Aid to Families with Dependent Children (AFDC).
o The Program
-- In order to qualify for AFDC, some adult recipients
must enroll in a job-training program. While in the
program, participants have the option of placing their
small children in day care centers or leaving them in
the care of friends, relatives, or neighbors.
-- Benefit levels are determined by each State, with the
Federal government paying 50 to 77% of the costs of
benefits and 50% of the cost of State and local
administration. With the exception of California,
benefit levels are not indexed to the inflation rate.
Coverage
-- In 1950, 651,000 families received ADC benefits. By
1980, 3,642,000 families were receiving AFDC benefits,
representing a more than five-fold increase in the
number of recipients in just thirty years.
-- In 1960, the average monthly benefit was $115 per
family; in 1980 it was $276.
-- In 1980 benefits ranged from $140 for a family of four
in Texas to $569 in Oregon.
-17-
Costs
-- It took 25 years -- from 1935 to 1960 -- for AFDC to
reach the billion-dollar expenditure level.
-- By 1967 -- only seven years later -- the program had
doubled again in cost to $2.3 billion, and in 1968
alone benefit costs rose by another half-billion.
-- By 1980 the program was costing $11.3 billion, in
combined State and Federal costs for benefits, and in
1982 it is expected to cost $12.1 billion.
The President's Proposals
-- Require the States to establish workfare programs to
assure that AFDC recipients perform useful tasks in the
public sector when private sector jobs are unavailable,
and to provide valuable job experience which can help
recipients obtain private sector jobs.
-- Require that AFDC applicants demonstrate that they
have exhausted possible private sector job prospects
before receiving AFDC aid.
-- Require States to count federal or State energy assis-
tance payments as income for determining eligibility
and benefit levels for AFDC.
-- Include the income of all unrelated adults as part of
the AFDC assistance unit for purposes of computing
benefits.
-- Require States, by 1986, to assume full financial
responsibility for erroneous AFDC payments.
-- Seek no further funding for the work incentives
program (WIN).
-18-
Justification
Ensure that Federal resources are targeted on the
neediest, while discouraging individuals and families who
are able to support themselves from continuing to rely on
public assistance.
Ensure a more accurate accounting of need.
-- Energy assistance, and income of all unrelated adults
living in an AFDC household, are part of the aggregate
resources available to an AFDC family.
-- Benefits should take into account all income sources
such as these in order to determine the genuine level
of need, and thus ensure that families with equivalent
total resources are treated equally.
Strengthen the AFDC employment incentives by requiring
those who are able to work to do so.
-- States now have the option, but are not compelled,
to establish workfare programs. As a result, only
half the States are planning to institute them.
-- Requiring workfare in all states would ensure that all
welfare recipients who are able to work, do so.
Eliminate duplication.
-- WIN currently provides work opportunities for welfare
recipients.
-- New work opportunities for welfare recipients created
in the Omnibus Budget Reconciliation Act of 1981,
including the Community Work Experience and Work
Supplementation Programs, make WIN unnecessary.
Save $1.2 billion in 1983, and nearly $6 billion over the
next six years in Federal costs. Total Federal, State and
local savings will be nearly twicw this much.
-19-
Questions & Answers
o Denying truly needy of assistance. Won't the truly needy
be discouraged from seeking assistance as a result of the
Reagan proposals?
-- The truly needy would still be able to collect their
AFDC benefits under the Reagan proposals.
-- What the administration's proposals would do is
encourage recipients to look for work before
applying for welfare benefits by requiring them to
exhaust all job prospects before becoming a recipient.
-- This should not be seen as a disincentive for truly
needy individuals from seeking assistance, but rather
as an incentive towards becoming part of the workforce.
Working for benefits. Isn't it unfair to force AFDC
recipients to work for their benefits?
- If they are able to work, then it is only fair that
they do so in order to receive benefits.
- It is particularly unfair to tax low-income Americans
to support beneficiaries able to work but refusing to
do so.
Losing benefits. How many poor people will lose their
benefits as a result of the president's proposed AFDC
cuts?
-- It is impossible at present to calculate exactly how
many people will lose their benefits, but changes in
eligibility proposed by the administration are very
minor, and fully justifiable. They are:
* Removing parent/caretaker from assistance rolls
for vountarily quitting work, refusing employment
or refusing a workfare assignment: This change would
discourage reductions in work effort simply to become
eligible for welfare.
* Ending employable parent's benefits when youngest
child reaches 16. Except in very unusual
situations, a person of 16 is old enough to care for
himself and should not have to have the parent in the
home during daytime hours. In these cases, the
employable adult should be expected to seek work
rather than relying solely on public assistance.
-20-
*
Including the income of all unrelated adults as part
of the AFDC assistance unit: Unrelated adults often
have significant resources to help support the
AFDC family.
*
Eliminate military service by the father as a
reason for AFDC eligibility. Military personnel
can sometimes avoid family financial obligations and
shift their responsibility to the public assistance
rolls, even when there is continued family contact.
Families that were actually deserted would still be
eligible for AFDC.
--- Benefits will continue to be available, in any case,
to those who need them most.
Encouraging the poor to go on welfare. Won't the
prospective AFDC cuts encourage the working poor to quit
work and go on welfare?
-- No, because even under the Reagan program, resources
available to the poor will be greater if they are
working. For example:
* In Texas, a family relying totally on public
assistance would receive $617 a month; a family with
the parent working at a minimum wage job would
receive $913 per month.
* In Indiana, the comparable figures are $639 for a
non-working family, and $847 for a working family.
-- Under workfare, recipients will not be able to quit
the program and still receive benefits. This
provides a strong disincentive for the working poor
to quit work and go on welfare.
-21-
FOOD STAMPS
History
The food stamp program began in 1961 on an experimental
basis, and was made permanent in 1964. As a pilot program
in 1961, the programs' purpose was as much to remove
agricultural surpluses as it was to improve the diet of
low-income families.
O Program:
-- The Federal government provides food stamps to
recipients, who then redeem them at participating
grocery stores for food.
-- The recipient (family) must have a gross income of no
more than 130% of the poverty line.
-- In order to qualify for food stamps, able-bodied adults
must register for and accept available employment.
o
Major program changes:
-- Prior to January 1979, recipients were required to
purchase food stamps at a certain percentage of the
stamps' face value, that percentage being determined by
the recipient's income level.
-- Effective January 1979, Congress eliminated the
purchase requirement and made the stamps free to
eligible recipients.
Coverage:
-- In 1965, 400,000 persons received food stamps. By 1975
that number had increased by more than 42 times, to
17.1 million.
-- In 1981, more than 22 million people -- one out of
every ten Americans -- received food stamps.
Costs
-- In 1965 the food stamp program cost $35 million. By
1977 the cost had risen more than one hundred times
to $5.4 billion.
-- Outlays doubled from $5.4 billion in 1977 to more than
$11 billion in 1981.
-- Food stamp spending per participant, adjusted for the
increase in the price of food, grew 12.4% between 1977
and 1981.
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-- Erroneous food stamp issuance cost the federal
government more than $1.1 billion in 1981.
The President's Proposals
-- Adjust benefits downward by 35¢ (compared to 30 ¢
presently) for each additional dollar in income
either earned by the recipient or received through
transfer payments.
-- Count energy assistance payments as income in
determining household eligibility and benefit levels.
-- Discontinue exclusion of certain types of cash income
in determining benefit levels.
-- Require able-bodied food stamp applicants to begin job
search activities as soon as they apply for food
stamps.
-- Phase-in complete state responsibility for erroneous
payments by 1986.
Justification (General)
o Reestablish food stamps as a nutrition assistance program
for the dependent poor rather than the massive income
transfer program it has become.
-- According to the Census Bureau, nearly 40% of food
stamp households had incomes above the poverty line.
Save $3.1 billion over the projected Carter budget for
1983, while still providing food stamps for 19.1 million
people, or 9% of the population, and thus ensuring that
those who need assistance will continue to receive it.
Justification for specific program changes.
For adjusting benefit levels downward:
-- Reducing benefits by an additional 5¢ for each
additional dollar of income earned or received by the
beneficiary will:
* Help to contain the explosive growth in cost of the
program.
* Help restore, to the extent possible, family
responsibility for the role of feeding one's family.
-23-
For counting energy assistance and other types of cash
income in determining benefit levels.
- Determinations of eligibility should take into account
income sources such as these in order to determine the
genuine level of need, and thus ensure that families
with equivalent total resources are treated equally.
For requiring recipients to look for jobs.
-- It is entirely reasonable for the government to require
recipients who can work to look for jobs. Social
welfare programs should never be a substitute for
gainful employment. Neither should they permit able-
bodied recipients to choose not to look for work.
For phasing in State responsibility for erroneous
payments.
-- Federal payment towards erroneous food stamp issuance
-- which cost more than $1.1 billon in 1981 -- reduces
State government incentives to more diligently control
waste.
-- Phasing in State responsibility for errors will
encourage States to make elimination of fraud and
waste in food stamps a top priority.
-24-
Questions & Answers
Denying adequate nutrition. Won't cuts in food stamps
condemn low-income Americans to inadequate nutrition
levels?
-- Food stamp benefits for the more than 4 million
recipients with little or no income will be
virtually unchanged by these proposals.
-- Recipients with higher incomes will have their benefits
adjusted only marginally, this to more adequately
reflect their real need for nutrition assistance.
-- More than 19.1 million Americans will continue to
receive food stamps.
-- In particular, food stamps will be available to all
families with incomes below 130% of the poverty line.
Counting energy assistance and other income sources. How
can you justify counting energy assistance and other
sources of cash income in determining food stamp
eligibility?
-- Energy assistance and other income sources are part
of the aggregate resources available to a food stamp
recipient.
-- Determining eligibility should take into account all of
a family's available income sources in order to
determine the genuine level of need, and thus ensure
that families with equivalent total resources are
treated equally.
Adjusting benefits downward. Won't the increase in
marginal reductions in benefits (from 30 to 35¢)
discourage food stamp recipients from working?
-- The adjustment is relatively small, so that it should
have little effect on incentives to work.
-- The adjustment is necessary to contain the explosive
growth in the cost of the program.
-- Food stamp recipients are already required to look for
work while receiving benefits, so this proposal will
not introduce any disincentives to working.
-25-
Waste, fraud and abuse. How can we be sure the
Administration's efforts to ferret out waste, fraud and
abuse won't deny some of needy adequate nutritional
benefits?
-- Erroneous food stamp issuance cost the Federal
government more than $1.1 billion in 1981; reducing
this amount must be a top priority.
-- Fraud and waste hurt the needy by taking away money
that could go to help those who need it most.
-- Eliminating fraud and waste in this and all programs
is an important part of slowing overall spending
growth, which is essential to achieving economic
recovery, which in turn, provides the promise of
more jobs and higher real incomes, and is thus the best
way to help the poor.
-- Adequate protections are provided in the review
process to ensure that those who need assistance will
continue to receive it.
-26-
FEDERAL CHILD NUTRITION PROGRAMS
History
The Federal government began donating surplus food for
use in elementary and secondary school lunch programs in
1936. Since that time, child nutrition programs have
evolved to the point where we now have five federally
supported programs.
o Programs
-- School Lunches:
*
By far the most significant and extensive child
nutrition program. Schools participating in the
program are required to operate it on a non-profit
basis, serve lunches meeting specific nutritional
standards and serve free or "reduced price" lunches
to needy children. In return, the federal government
makes cash payments and provides commodity assistance
to the schools.
In 1950 7.8 million school children participated
in the program. That number rose to 22 million
in 1970, and 27 million in 1980.
*
Currently there is a three-tier price system for the
program which makes lunches available for paid,
reduced price and free:
- Paid lunches are available for children from
families whose incomes are 185% of poverty and
above, (56% of all participants) who must
pay 85% of the cost of the meals.
- Reduced price meals are available for children
from families with incomes between 130 and 185% of
poverty (about 6% of the participants), with the
government paying approximately two thirds of the
cost of the meals.
- Free (totally subsidized) lunches are available for
children from families with incomes below 130% of
poverty (about 38% of participants).
-- School Breakfasts:
*
In 1966 Congress established a pilot school breakfast
program for schools with a high percentage of needy
students who traveled long distances to school.
In 1975 the program was made permanent and now
provides reduced price or free breakfasts to all
children from families at or below 185% of poverty
level.
-27-
-- Special Milk Program:
* Program established in 1954 to help clear surplus
milk from the market through government purchase and
donation to schools.
* The program now subsidizes the cost of milk to
schools that do not participate in other federally
subsidized meal programs.
* Currently, more than 1 million students receive milk
subsidies under this program.
-- Summer Meal Program:
* Established in 1969 for summer school students
attending public schools, this program is fully
subsidized for all recipients, regardless of need.
* There were 1.9 million recipients in this program
in July of 1981.
-- Child Care Feeding Program (CCFP)
* Established in 1975, this program subidizes the
feeding costs of pre-school children at
68,000 child care feeding centers throughout the
country.
* The program currently serves 850,000 children.
Costs
-- School Lunch Program.
* In 1950 the school lunch program cost the Federal
government $120 million. In 1970 the program cost
had more than quadrupled to $602 million and by 1980
it had quadrupled again to $2.3 billion.
* Average federal meal costs in constant dollars rose
from 31¢ in 1970 to 60¢ in 1981. During the same
period, average student payments dropped from 60¢ to
34¢.
-- Other Programs:
Cost 1965
Cost 1975
Cost 1980
School Breakfast
-0-
$86 m.
$288 m.
Special Milk Program
$98 m.
124 m.
157 m.
Summer Meal Program
-0-
50 m.
121 m.
CCFP
-0-
46 m.
216 m.
-87-
The President's Proposals
o School Lunch: No major or basic changes recommended for FY
1983. Last year:
-- Income qualification limit for "reduced price"
meals was changed from 195% of poverty with a standard
deduction, to 185% of poverty without a standard
deduction.
-- The income limit for a free lunch was raised from 125%
of poverty to 130%.
-- The per-meal subsidy to children from middle- and
upper-income families was reduced by one-fourth.
School Breakfast and CCFP. Combine programs into a block
grant to the States.
Summer Meal Program. Provide no further funding for this
program. Last year, administration of program was
essentially restricted to school food authorities and
school districts where at least 50% of the students were
defined as needy.
Special Milk Program. Provide no further funding for this
program. In FY 1982, the program was restricted to only
those schools which had neither a lunch or breakfast
program.
Increase efforts to verify income of parents applying
for free and reduced price meals.
Justification
Eliminate unjustified subsidies to middle- and upper-
income groups.
-- Prior to last year, low-income (and all other)
taxpayers were being forced to pay a 32¢ per meal
subsidy for each school lunch eaten by the children
of middle- and upper-income families. This subsidy
has been cut by one fourth. (The administration had
proposed eliminating it.)
-- Nearly 90% of the more than 1 million students
receiving milk subsidies under the Special Milk Program
are from families with incomes in excess of $16,000 a
year.
-- The Summer Meal Program has no income requirement,
and thus students from middle- and upper-income
families are eligible for benefits.
-29-
Save money.
-- The Reagan proposals would save $1.3 billion over what
was proposed under the Carter budget for 1983.
o Reduce fraud and abuse.
-- The USDA Inspector General estimated that nearly $500
million may have been overclaimed in the school lunch
program in 1980 due to:
* Invalid applications.
* Inflated meal counts.
* Lack of income verification.
-- Increasing efforts to verify the income of parents
applying for free or reduced price meals for their
children will be an important step in reducing these
high levels of fraud and abuse.
Reduce administrative duplication and overhead.
-- Other federal assistance programs, such as Food Stamps,
provide adequate assistance to the needy, thus making
the Summer Meal Program duplicative and unnecessary.
-- The nearly $700 million in subsidies for milk
consumption in other federal meal programs makes the
Special Milk Program similarly duplicative and
unnecessary.
-- School Breakfast and Child Care Feeding Programs can be
administered more effectively and at less cost on the
State level. Converting these programs into State
block grants would reduce administrative burdens by
eliminating more than 40 pages of program regulations.
-30-
Questions & Answers
Children going hungry. Won't the children of low-income
families go hungry due to tightening eligibility
requirements and the elimination of the Summer Meal
and Special Milk Programs?
-- No changes which affect the truly needy were made or
have been proposed in the School Lunch program.
*
Reductions made in 1981 only affected subsidies to
children from families that were 130% above the
poverty line.
*
No basic changes in the program have been proposed
for this year.
*
The 195% to 185% of poverty change in the income
requirement to receive reduced price meals is largely
a technical change which will not reduce needy
children's access to adequately nutritional meals.
*
Students from all families below 130% of the poverty
line will continue to be eligible for free lunches.
-- Termination of Special Milk and Summer Meal Programs
will not hurt the truly needy.
*
The summer meal program (which is fully subsidized
for all recipients, regardless of need) now overlaps
other Federal assistance programs like Food Stamps,
which provides nutrition aid directly to the needy.
*
Recipients of the Special Milk Program aren't needy.
Nearly 90% are from families making more than $16,000
a year. The other 10% are eligible for milk
consumption subsidies in other Federal meal programs,
such as Food Stamps.
Schools dropping out of program. By eliminating school
lunch subsidies to middle- and upper-income families,
won't the smaller total levels of federal assistance
available encourage schools to drop out of the program,
thus hurting low-income children?
-- No. Subsidies to middle- and upper-income families
have not been eliminated, but simply reduced by one-
fourth.
-- School enrollments have declined by approximately 2
million children over the last three years. Decreases
in school lunch participation parallel this enrollment
drop.
-- Furthermore, 99% of all school districts have remained
in the National School Lunch Program this year.
Nearly half of the schools that did leave the program
did so because of school consolidations or closings.
-31-
Block Grants. How can you assume that States will provide
the needed nutritional assistance under the block grant
when they are also expected to make up the difference in
other entitlement programs?
-- Funding for the grant will come from the Federal
government.
-- States and localities are closer to education-related
problems, and historically have been more responsive
than the federal government to locally felt needs.
-- States and localities more effectively target these
resources according to individual needs.
-- Block grants will reduce administrative burdens by
eliminating more than 40 pages of detailed federal
regulations and requirements for school breakfasts and
CCFP, thereby leaving more money available for genuine
nutritional assistance.
Ketchup as a vegetable. How can nutrition be quaranteed
when the USDA defines ketchup as a vegetable?
-- Congress directed the Department of Agriculture to
review school lunch meal requirements to save money
without impairing the nutritional value of the meals.
-- The ketchup regulations were withdrawn because they did
not adequately meet these criteria, and therefore will
not be reissued.
-- Instead, the department plans to promote cost savings
through its "offer vs. serve" regulations. This method
of food service permits students to decline food they
do not intend to eat.