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Ronald Reagan Presidential Library
Digital Library Collections
This is a PDF of a folder from our textual collections.
Collection: Blackwell, Morton: Files
Folder Title: Department of Health and
Human Services (5 of 6)
Box: 6
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
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file
THE WHITE HOUSE
WASHINGTON
HHS
April 22, 1981
To:
Red Cavaney
FROM: Morton Blackwell
I would like to send this memo to
Secretary Schweiker but want to clear
it with you before doing so.
Is that ok?
MEMORANDUM
THE WHITE HOUSE
WASHINGTON
April 22, 1981
TO:
Secretary Richard Schweiker
FROM: Morton Blackwell, Special Assistant to the President
MR
I have read with great concern the controversy surrounding
Warren Richardson's former association with Liberty Lobby.
The conservative groups with whom I am the White House liaison
have the very highest regard for Warren Richardson's competence,
integrity and good sense. To my knowledge no conservative
movement activist has ever heard Warren make any kind of statement
which could be interpreted as a racial or ethnic slur. Specifically,
I have never known him to criticize Jewish people or the state of
Israel and in years of dealing with him I have never heard him
speak the word Zionist. I am particularly sensitive to the
obligation of responsible activists to disassociate themselves
from anyone with an anti-semitic or anti-Israeli viewpoint
and have taken successful steps in the past to exclude such
people (i.e. one who expressed sympathies with the PLO) from any
conservative coalition meeting.
Charges that he harbors the viewpoint of the now very kooky
Liberty Lobby are a bum rap.
Warren is particularly important to the major conservative movement
new right groups which did so much to help elect President Reagan
and a Republican senate. It was he more than any other person who
taught philosophically hard core conservatives how to work
effectively in the legislative process.
Warren guided the massive conservative efforts in the fight against
the confirmation of Paul Warnke, Common Situs picketing fight,
"Labor Law reform" fight and the Panama Canal Treaty battles.
Your selection of Warren was viewed by most conservative movement
leaders as one of the best decisions of the incoming Reagan
Administration. The abandonment of Warren in the face of these
charges will be taken hard by these same leaders.
I strongly urge you to stick by Warren in this crisis. I am
confident that such a course will be in the best interest of the
Administration.
EYES ONLY
MEMORAND UM
TO:
David Newhall, III
FROM:
Warren Richardson
SUBJECT: My Tenure with the Liberty Lobby (1969-73)
In response to your request for additional information
focusing on the nature and length of my service with Liberty
Lobby as chief lobbyist, the following facts, statements and
sequence of events are presented.
First, I condemn unequivocally the anti-Jewish and racist
actions of the Liberty Lobby and some of its employees and
officers. I find morally repugnant their statements, publications
and views expressed or unexpressed- which are anti-Jewish,
anti-black or discriminatory in any way to any group by
virtue of race, color, creed or national origin. I never at any
time personally subscribed to those views; nor did I assist in
any way in their preparation or dissemination.
Racist and discriminatory views divide and detract from any
society, and the anti-Jewish and racist actions of the Liberty
Lobby and some of its employees and officers are not only
reprehensible, they undermine public confidence in legitimate
conservative policies advocated by responsible organizations.
Page Two
My tenure at the Liberty Lobby occured during a period of
financially stressful family circumstances. While I have
reflected in the eight years since quitting that I should have
resigned promptly upon learning of actions and views there
which I found personally abhorrent, the fact is I did not. In
retrosect it became clear to me long ago that it was wrong not
to have quit earlier. I apologize for my inaction to all who
have felt the vicious racist and ethnic stings of the Liberty
Lobby. I never participated in those Liberty Lobby activities.
I never agreed with them. I found them then, as I do now, to
be vile.
In September 1968, my 14 year-old daughter enrolled at
the University of Maryland. Because she lived at home and was
not of driving age, I had to take her to and from college
virtually every day. In February 1969, my wife, daughter
and two sons were involved in a serious automobile accident
necessitating five major operations, three on the spine, on
my wife over the next seven years. The medical costs were
massive.
At that time, I was Comptroller of a small home con-
struction firm near my Maryland home and had been seeking to
re-enter the lobbying profession. The financial burden of the
accident intensified our need. I learned of the job opening
Page Three
at Liberty Lobby (paying 50% more than my current salary) and
applied knowing nothing more about the organization's activities
than its general conservative stance and opposition to American
involvement in Vietnam.
Following my interview, I was presented a copy of the
booklet "The How" (which you have seen) setting forth the
then current legislative program of the Liberty Lobby which
I would be responsible for pursuing. It did not contain any
of the racist or anti-Jewish views or goals which I later found
to be a part of Liberty Lobby activities or those of some officers
or employees.
The first day on the job I was asked if I objected to using
the title General Counsel since I am an attorney. I did not
object provided my function of being chief lobbyist remained
unchanged. Throughout my tenure I functioned as a technical
professional employee. I did not participate in policy making
nor did I perform in the "traditional" mode of counsel. The
Liberty Lobby used outside counsel from time to time as they
saw fit and that counsel did not, as a rule, operate under my
supervision.
After some time on the job I discovered that some of the
employees and officers held what I consider to be anti-Jewish
and racist views. Of course, the wise and principled action
would have been to resign, but at that time, I felt the pressing
Page Four
needs of my family were compelling. Without the promise of
another position- although I did begin to search- I determined
I must hold on to what I had.
In September 1971, my 13 year-old son also entered the
University of Maryland giving me two non-driving children to
take to and from college on a daily basis. That restriction
limited the job opportunities I could pursue since my employers
at Liberty Lobby allowed me the flexible work schedule necessary
to meet this need but few prospective new employers could be
expected to do SO.
When my daughter received her second degree in June 1973 and
went to work in Takoma Park, she began to assume an increasing
share of the burden of driving her brother to the University.
One month later, in July 1973, I resigned from the Liberty
Lobby to become a lobbyist for a trade association in Washington,
D.C. In the eight years since, I have not had any deallngs
with the Liberty Lobby and, I believe, have proven myself to be
a capable, professional lobbyist of high integrity.
I believe a lobbyist's greatest asset is his reputation
for honesty and fair dealings. I trust that this revelation
of the events and circumstances surrounding my tenure at the
Liberty Lobby will enlighten those for whom it is of interest.
April 19, 1981
Mr. David Newhall III
Executive Assistant to the Secretary/
Executive Secretary of the Department
Department of Health & Human Services
Suite 606-G
200 Independence Avenue, S.W.
Washington, D.C. 20201
Dear Mr. Newhall:
I write this as an American Jew and a friend of Warren Richardson
and to express my strong disagreement with the allegations of anti-Semitism
made against Warren Richardson as reported in the Washington Post of
April 17, 1981.
At the outset, I would stress that as a Jew, I have known anti-Semites
and experienced their hatred first hand. I have known Warren Richardson
for over 25 years (since December 1955) and state that Warren has never by
word or deed shown or expressed anti-Semitism. On the contrary,
Warren Richardson is one of the most fair-minded, objective persons
I have known.
This is not to say that Warren and I agree about everything. On the
contrary, we have argued together, disagreed in certain areas, and agreed
in others. But never has there been acrimony or hatred shown by Warren
and I have always considered him a friend.
During the period December 1955 through September 1959, Warren and I,
as attorneys at the General Accounting Office, were close. We ate lunch
together, had many talks on life, religion, raising children, and almost
any other subject that close friends discuss. Warren is a man of strong
convictions, but even if you disagree with him (as I did on some matters),
you recognize him as an honest, straightforward person. As a political
liberal I saw this in Warren's conservatism.
Our contacts have not been restricted to the office. Warren and his
wife, Nancy and myself and my wife have socialized together. In fact,
Warren held my first-born son in his arms at my son's bris (circumcision
ceremony) and participated in our religious celebration. This was not
the act of an anti-Semite.
Mr. David Newhall III
April 19, 1981
Page Two
And so, as a matter of conscience, I have written this on my
Passover and Warren's Easter to refute the allegations of anti-Semitism
against Warren Richardson. These allegations have no basis in substance
or fact.
Sincerely yours,
Irwin Richman
10831 Margate Rd.
Silver Spring, Md. 20901
ALBERT A. RAPOPORT
ATTORNEY AT LAW
SUITE 701
2025 EYE STREET, N.W.
WASHINGTON, D. C. 20006
(202) 783-1140
April 19, 1981
Mr. David Newhall III
Executive Assistant to the Secretary/
Executive Secretary of the Department
Department of Health & Human Services
Suite 606-G
200 Independence Avenue, S. W.
Washington, D. C. 20201
Dear Mr. Newhall:
As an American citizen of Jewish descent, I could not think
of anyone I would rather have as the Assistant Secretary for Legis-
lation than Mr. Warren Richardson.
Today's story in The Washington Post by Spencer Rich is out-
rageous. His story in Friday's edition of the Post was no better.
The gist of the allegations is that Mr. Warren Richardson is anti-
Semitic and, therefore, unfit for public office. I consider the
charge absolutely false, and I object to the methods which have
been utilized to smear him.
I am an American of the Jewish faith. In the past, I have
been a member of B'nai B'rith, B'rith Sholom, and the Jewish War
Veterans. Because of my background, education, and practice as
a lawyer for over 27 years, I feel well-qualified to judge whether
a person is anti-Semitic or not. Anti-Semitism is a condition of
a person's character. It cannot be imputed. It either exists, or
it doesn't exist.
Warren is not anti-Semitic in any way, shape or form. This
judgment is based on the many years I have known him as a friend,
and to be a sensitive human being. We met in September of 1951,
at law school in Washington, D. C. Warren and I went to classes
together, studied together, and endured the trauma of studying for
and taking the bar examination together.. We socialized at parties
and family gatherings. During all of these years, I have never
heard Warren utter an anti-Semitic remark; tell a racist story of
any kind; or speak unfeelingly of a person, because of his race,
religion, or national origin. You can understand my sense of
Mr. David Newhall III
April 19, 1981
Page Two
outrage at seeing groundless allegations that Warren is anti-
Semitic. The only obvious thing to be gleaned from these Post
articles is that Warren is being used as a political football for
the selfish interests of others, regardless of consequences to a
really decent human being, and his family. Is it any wonder that
we have difficulty in getting the best people for government ser-
vice when they have to bear unfounded slings and arrows?
I am indignant that this is a media smear campaign, using
innuendo to achieve a political purpose. In Friday's article,
Post writer Rich quotes Nathan Perlmutter that he "believes" that
Liberty Lobby was anti-Semitic for the last 20 years. So what?
The critical issue is whether Warren is anti-Semitic"
Today's Post article of Sunday, April 19th, is more of the
same. Mr. Rich refers to code words which I have never heard.
Warren was probably just as surprised to learn that he spoke some
kind of code language not taught us at law school.
Warren and I were in law school during the McCarthy era. We
were almost alone in our opposition to McCarthyism. In the after-
class discussions and arguments, which are SO much a part of the
law school experience, Warren and I would go against as many as
15 to 20 other students, expressing our immense distaste for Sena-
tor McCarthy's tactics. How ironic that one of the great anti-
McCarthy debaters is now being subjected to "McCarthyism" by the
very institution which deplored that reprehensible tactic! If
Warren's nomination is stopped because of guilt by association, I
shall be in the forefront of a defense committee, organized to
stop this terrible disease of McCarthyism, which I thought had
been done away with years ago.
Another innuendo which I object to strongly in the Rich arti-
cles, is that Warren should have somehow silenced others from
voicing their opinions. During our law school years, both in and
out of classes (and particularly during the McCarthy debates),
Warren reminded us that we are not entitled to freedom of speech
if we deny it to others. It is entirely within Warren's character
to let others say whatever suits their fancy.
I have always thought of Warren as a brilliant, intellectual
type, who cared about the problems of people. In nearly thirty
years of our knowing each other, and discussing matters ranging
from politics, to religion, to sports, to social problems and
Mr. David Newhall III
April 19, 1981
Page Three
foreign affairs, Warren has never expressed an extremist view;
on the contrary, they are balanced, rational and moderate.
Respectfully yours,
Albert A. Rapoport
file To Wathy
SERVICES
HUMAN
USA
HEALTHA
DEPARTMENT OF HEALTH AND HUMAN SERVICES
OFFICE OF THE SECRETARY
or
WASHINGTON, D.C. 20201
Agent your sproject)
OFFICE OF THE GENERAL COUNSEL
June 12, 1981
Note to: See Attached List
a.
From
: Chair, Interagency Work Group
Subject: Work Group Meeting
The next meeting of the Interagency Work Group is scheduled
for Friday, June 19 at 10:00 a.m. in room 722A, HHH Building,
200 Independence Avenue, S.W., Washington, D.C. Your attendance
at this meeting is particularly encouraged as we will be honored
by the visit to the Work Group of the Australian Minister of
Veterans' Affairs and there are several important items on the
agenda.
The tentative agenda for the meeting is as follows:
1. Report from the Science Panel, including a review
of all ongoing activities.
2. Overview report from the Veterans Administration
on its activities.
3. Overview report from the Defense Department on its
activities.
4. Discussion with the Australian Minister of Veterans'
Affairs, including a review of the Australian program
of Agent Orange>related research.
5. Review of congressional activities.
6. Discussion of future Work Group plans.
Please telephone any additions to or modifications of the
agenda to Leslie Platt (245-7542) by c.o.b., Wednesday, June 17,
1981. Also, please notify Mr. Platt if you will be unable to
attend.
Interagency Work Group Representatives
Dr. William J. Jacoby, Jr. (10-A)
Dr. John A. Moore
Deputy Chief Medical Director
Deputy Director, National
Veterans Administration
Toxicology Program
810 Vermont Avenue, N.W.
P.O. Box 12233
Washington, D. C. 20420
Res. Triangle Park, N.C. 27709
Dr. Barclay Shepard (102)
Dr. David Rall
Special Assistant to the
Director, National Institute
Chief Medical Director
of Environmental Health Sciences
Veterans Administration
P.O. Box 12233
810 Vermont Avenue, N.W.
Res. Triangle Park, N.C. 27709
Washington, D. C. 20420
Dr. Patricia A. Honchar
Dr. Clark W. Heath, Jr.
EIS Officer
Director, Chronic
NIOSH
Disease Division
Robert A. Taft Laboratories
Center for Disease Control
4647 Columbia Pkwy.
Chamblee Facility
Cincinnati, Ohio 45226
1600 Clifton Road, NE
Atlanta, Georgia 30333
John Abbott
Program Analyst
Captain Peter Flynn
NIH-Division of Legislative
Special Assistant
Analysis
for Professional Activities
Building 1-Room 207
OASD (Health Affairs)
Bethesda, Maryland 20205
Room 3E182, Pentagon
Washington, D. C. 20301
Dr. Harold Margulies
Special Assistant for
Dr. Philip C. Kearney
Environmental Affairs
Chief, Pesticide Degradation Lab
OASH Parklawn Bldg. Rm 9A55
U.S. Department of Agriculture
5600 Fishers Lane
BARC-West
Rockville, Maryland 20857
Building 050-Room 100
Beltsville, Maryland 20705
Robert E. Coy (02)
Acting General Counsel
Dr. Jerome G. Bricker
Veterans Administration
Special Assistant for Legislation
810 Vermont Avenue, N.W.
OASD (Health Affairs)
Washington, D. C. 20420
Room 3E182, Pentagon
Washington, D. C. 20301
Frederic Conway (023A)
Deputy Assistant General Counsel
Major Phillip G. Brown
Veterans Administration
Asst. for Bioenvironmental
310 Vermont Avenue, N.W.
Engineering
Washington, D. C. 20420
USAF/SGES
Bolling Air Force Base
Jane O'Connell
Washington, D. C. 20232
Policy Coordinator
S/ES
Dr. Michael Gough
Room 635G
Office of Technology Assessment
HHH Building
United States Congress
Washington, D. C. 20007
Dr. David Logan
Research and Medical Officer
OSHA, Room N-3656
200 Constitution Avenue, N.W.
Washington, D. C. 20210
Stephen Mallinger
Industrial Hygienist
SHA-OSC
ROOM N-3603
200 Constitution Avenue, N.W.
Washington, D. C. 20210
)r. Peter Beach
Director, Veterans Affairs
OHHS
Reporters Building
ROOM 623
7th & D Street, S.W.
Washington, D. C. 20201
Jacky Simon
JIOSH
Room 805
Parklawn Building
600 Fishers Lane
Rockville, Maryland 20857
)r. Donald Barnes
)ffice of Pesticides and
Toxic Substances
Environmental Sciences
Environmental Protection Agency
101 M Street, S.W.
Washington, D.C. 20460
1aj. Gen. William S. Augerson, MC, USA
Deputy Asst. Secretary of Defense
(Health Resources and Programs)
ROOM 3E334, Pentagon
Washington, D. C. 20301
)r. Denis Prager
Associate Director for Human
Resources and Social Services
)ffice of Science & Technology Policy
Executive Office of the President
Rm. 360, Old Executive Office Bldg.
Washington, D. C. 20500
LEGISLATIVE
EXCHANGE
1-file
American Legislative Exchange Council
418 C Street, N.E.,
THE STATE FACTOR
AMERICAN
ALEC
COUNCIL
Washington, D.C. 20002 (202) 547-4646
SERVING AMERICA'S LEGISLATORS
BLOCK GRANTS AND THE STATES
April, 1981
BACKGROUND
On April 6, 1981, the U.S. Department of Health and Human Services sent to Congress draft
legislative details of a plan to return to states discretionary power over 25 Federal categorical
grant programs. The plan is significant: it removes Federal regulations and spending mandates
from $2 billion worth of Federal-State HHS programs. HHS is also awaiting approval (by the
Office of Management and Budget) of two more grant consolidations. The pending proposals
involve almost $5 billion in public aid and would consolidate 18 other categorical grants.
The U.S. Department of Education (DOE) is also proposing block grant consolidations. The
statutory language for the consolidation will not be available until the end of April, but testimony
by DOE officials indicates that the grants will involve 45 separate grant awards totalling $5
billion.
The DOE and HHS plans are but the top of a legislative iceberg posing far-reaching questions for
state legislators: When will the grant be enacted? How much money will the grants involve?
Which programs will the grants affect? How will the states implement the grants?
IMPORTANCE TO STATES
The transformation of categorical grants into block grants offers an historic opportunity to states
to streamline public aid programs. The logic is familiar: since the states finance and enforce
the programs devised at the federal level, and since the states are more sensitive to the needs
and resources of its people than is the Federal government, then states ought to have the
discretionary flexibility to administer the programs. If the monies for those programs are
transferred to states and localities, the cost of excessive overhead incurred through Federal fiat
is reduced or eliminated.
To insure that the grant consolidation process does result in savings, the grant portion of the
Administration's proposed FY 1982 budget is less than the levels for FY 1981:
PROPOSED GRANTS TO STATE AND LOCAL GOVERNMENTS
(in billions of dollars)
FY 1980
FY 1981
FY 1981
FY 1982
FY 1982
Actual
January
Revised
January
Revised
BUDGET AUTHORITY
105.0
110.6
101.1
116.9
86.2
OUTLAYS
91.5
95.3
94.4
99.8
86.4
A non-profit, non-partisan, tax-exempt organization serving State Legislators and members of Congress.
PAGE 2
On the average, the funding for the block grant proposals represents 25% less than the amount
that would have been spent if the grouped categorical grants continued to be financed at FY 1981
levels. The 25% reduction does not mean that payments and services to recipients will also
decrease by 25%. Almost one-half of that reduction may be recouped through reduced overhead
(see White House citation below). The other half of the reduction is made up through
amelioration of Federal spending mandates which require states to make payments and program
changes that may not be necessary. Should states require more money than is provided in a
particular block grant, the proposed grants allow a transfer of up to 10% of money from one
block grant to another.
It should be noted that the increasing cost of categorical grant programs is principally caused by
Federal mandates, which are eliminated under the proposed block grants. The mandates stipulate
varying criteria by which states must write eligibility and benefit standards. The significance of
these mandates is underscored in the February 18, 1981 White House Report containing an
outline of the President's Economic Recovery Plan:
Under block grants, there will be no requirements for matching funds and no demands that
Federal funds "supplement rather than supplant" local funding. There will be no endless
Byzantine squabbles over myriad accounting [sic] regulations that aid bureaucrates, not
children. Approximately 13% of the Federal funds in programs to be consolidated are now
used for administrative expenses by state and local agencies. This overhead will be
drastically reduced under the consolidation proposals.
Currently, there are Federal categorical grant awards in 14 different areas. These include
national defense, energy, agriculture housing and community development. However, details of
block grant proposals are known only for the education and health programs, and even in those
areas the block grants do not comprise the entirety of categorical grant awards.
HEALTH AND HUMAN SERVICES
The U.S. Department of Health and Human Services (HHS) released details of two block grant
programs on April 7. Two more grants will be announced by the third week of April, and the
U.S. Senate Finance Committee and Senate Labor & Human Resources Committee may announce
a fifth HHS block grant shortly after Congress' Easter Recess.
The largest of the HHS block grants is called a "Social Service Block Grant." The grant is set
at $3.8 billion, or $1.2 billion below the FY 1981 level of $5.0 billion. The grant covers funding
for 12 programs: Day Care, Child Abuse and Prevention and Treatment, Adoption Assistance,
Development Disabilities, Runaway and Homeless Youth, Community Services Administration and
Rehabilitation Services. In addition to these programs, states can use the block grant money to
finance state offices of The Legal Services Corporation - an entity for which no Federal money
is provided in the Administration's proposed FY 1982 budget.
The second largest grant is the "Energy and Emergency Assistance Grant." The purpose of this
grant, as explained in the official HHS summary, is to allow "complete flexibility to determine
programs of fuel assistance and other crisis or emergency needs activity for low-income
households." Only two programs are directly covered under this grant - Emergency Assistance
(from Social Security) and the Low-Income Energy Assistance. The grant allows states the
option to fund five other categorical grants. Those discretionary programs are Home Energy
Costs, Low-Cost Weatherization, Temporary Financial Assistance, Emergency Medical Care and
Emergency Social Services. The FY 1982 budget for this grant is set at $1.4 billion, which is
$50 million below the FY 1981 level.
A third HHS grant is called the "Health Services Block Grant." Fifteen categorical grants are
consolidated into one block for $1.1 billion. The funding is $400 million below the FY 1981 level
for the combined programs. The grant covers the following programs: Community Health
PAGE 3
Centers, Primary Health Care Centers, Black Lung Clinics, Migrant Health, Home Health
Services, Maternal and Child Health, SSI Payments to Disabled Children, Hemophilia, Sudden
Infant Death, Mental Health Services, Drug Abuse, and Alcoholism.
The smallest of the HHS block grants is the "Preventive Health Service Block Grant." The
Administration proposes to fund this grant at $242 million or $93 million below the FY 1981 level.
The grant consolidates 10 programs: High Blood Pressure Control, Health Incentive, Risk
Reduction and Health Education, Venereal Disease, Flouridation, Rat Control, Lead-Based Paint
Poisoning Prevention, Genetic Disease, Family Planning Services, and Adolescent Health Services.
HHS BLOCK GRANT REGULATIONS
According to HHS, there are three pro forma regulations that will be attached to that
Department's block grant program. The first regulation simply requires states to draft details
of plans to utilize Federal funds. The plan does not need the approval of a Federal agency, and
there is no indication that this requirement will be used as a Federal lever to force revision
of a state-local program, priorities or criteria -- a practice widespread within the current,
categorical grant system.
The second requirement is that states prepare an annual audit of block grant implementation.
This regulation is a standard requirement of almost every Federal, State or Local grant award,
and the appropriation process of states usually requires some auditing of grant programs anyway.
The requirement is designed to keep the HHS Department posted of the progress of the block
grant programs.
A third, more serious requirement is the proviso that block grant monies be spent only
for those programs listed under the block grant heading. This requirement canonizes a measure
of accountability to the block grant plan. States still have discretion regarding the
implementation of the programs; but states that decide to terminate a program covered under
the block grant may not use the extra dividend to finance a non-germane program, e.g., using
a Preventive Health Services grant to finance a construction project.
The distinction between these three block grant regulations and the regulations that now
accompany categorical grants is that the latter exacts considerable time and revenue that ought
to be directed towards the recipients of public aid. The dollar savings from regulatory attrition
are not known, but there is an awesome regulatory burden that is eliminated under block grants.
There are now 437 pages of law and 1200 pages of regulations for the 40 HHS categorical grants.
Under those 40 categorical grants, there is an additional 5800 separate grants that are
transferred to 24,000 separate grant sites. To implement the programs under the current
system, state-local governments expend an annual 7 million man-hours filling out Federally-
mandated reports.
EDUCATION
There are two block grant proposals for education programs. The only similiarity between these
grants and the HHS grants is the magnitude of the consolidation. All told, some $4 billion is
shifted from the Federal level to the state level. The distinctive feature of the education block
grants is that, in spite of the high dollar transfer involved, it represents a relatively small
fraction of the total money spent on education. States and localities now provide over 90% of
the money directed to education; the Federal share is 8%, and the block grant proposals affect
about 1% of the total.
The biggest of the education block grants is called the "Local Education Agency (LEA) Block
Grant." The LEA grant (not to be confused with the Law Enforcement Education Program)
involves $3.6 billion in Federal monies. Twelve education programs are covered under the grant,
as indicated in the following table:
PAGE 4
PROGRAMS INCLUDED IN LOCAL EDUCATION AGENCY
BLOCK GRANTS (Budget Authority for FY 1981 in millions
of dollars)
Categorical Grant
FY 1981 Funding
Title I ESEA* Basic Grants
$2,822.7
Title I ESEA Programs for Migrants
288.0
Title I ESEA Concentration Grants
145.0
Handicapped State Grant Program
922.0
Preschool Incentive Grants (Handicapped)
25.0
Adult Education Grants to States
120.0
Bilingual Education
137.9
Bilingual Vocational Education
4.8
Basic Skills/School Improvement
18.2
Emergency School Aid (3 programs)
204.9
TOTAL
$4,688.5
*(Elementary and Secondary Education Act)
If enacted by Congress, the grant outlined above would reduce the categorical funding level of
the previous fiscal year by $1.4 billion. The grant proposal assumes annual budget increases of
5% through 1986.
The second education grant is a block transfer to state education agencies. Although this grant
is nominally smaller than the LEA grant, the grant affects a considerably higher number of
programs. A total of 35 programs, outlined below, are directly affected:
PROGRAMS INCLUDED IN BLOCK GRANTS TO STATES
(Budget authority for FY 1981 in million of dollars)
Categorical Grants
FY 1981 Funding
Title I ESEA Prog. for Handicapped
$165.0
Title I ESEA (Neglected & Indigent)
37.8
Title I ESEA State Administration
47.0
Title I Technical Assistance Centers
8.0
Support and Innovation
91.4
State Education Agency Management
51.0
Severely Handicapped Projects
5.0
Regional Resources Centers
10.0
Early Childhood Education
20.0
Regional Vocational.Adult/Post-Secondary
2.0
Handicapped Innovation & Development
8.0
Special Education Personnel Development
58.0
Gifted and Talented
5.4
Emergency School Aid Special Projects
8.5
Emergency School Aid Non-Profit Organization
7.5
Educational Television
6.5
Training & Advisory Services (CRA IV)
45.7
School Libraries/Instructional Resources
171.0
Basic Skills Improvement
13.4
Arts in Education
1.7
PAGE 5
Metric Education
1.8
Cities in Schools
3.1
PUSH for Excellence
1.0
Follow-Through
39.2
Professional Development: Teacher Corps
29.0
Pre-College Science Teacher Training
2.5
Bilingual Education] Training Grants
37.1
Career Education Incentives
15.0
Community Schools
10.0
Consumer Education
3.6
Law-Related Education
1.0
Alcohol & Drug Abuse Education
3.0
Ethnic Heritage Studies
3.0
Women's Educational Equity
10.0
TOTAL
$922.2
The SEA block grant totals $714.6 million, again representing a 25% reduction form the funding
level for relevant categorical grants in FY 1981.
PRELIMINARY ISSUES FOR STATE LEGISLATORS
The movement to return power to state governments signals the dawn of a new era in Federal-
State relations - presenting both opportunity and challenge. The opportunity lies with the
chance to enact meaningful, lasting reforms in eligibility, duration, benefits and priorities of
public aid programs. The challenge lies with the logistics of implementing a block grant
program. The initial implementation problem concerns the timing of the awards. Key
legislative leaders in the Congress have agreed to complete work on the President's proposals
by August 3. However, nearly one-half of the state legislatures will finish their legislative
sessions by mid-May. Fewer than a dozen will be in session by the end of June. By the time
Congress enacts a budget for FY 1982 - which will incorporate block grant budget changes and
program reordering -- the vast majority of states will have already enacted state budgets based
on invalid assumptions about Federal-State revenue transfers.
Another problem concerns the control of block grant monies that are finally awarded to states.
Should the monies be allocated through the state legislatures, or should the state governors be
allowed to arbitrarily decide the funding levels of particular programs in the block grants? The
issue is a basic political problem, since the appropriations processes of the states are usually
more deliberate and open than the executive fiat promulgated by governors. The problem may
also be academic, since the statutory details of the education and HHS block grants allow the
governors, not the state legislators, to transfer 10% of the funds from any one of the block
grants to another.
A third problem is the issue of accountability. Because the Federal mandates that are attached
to the block grants are peripheral, states will have a very flexible power to decide matters of
coverage ands funding. The prospect of unbridled state discretion has evoked a flurry of attacks
on the block grant concept. A typical comment was made by a representative of The Children's
Defense Fund, who told a Washington Star reporter: "the regulations and [categorical] programs
were constructed to respond to specific needs and abuses. The special needs of low-income and
disadvantaged families are unlikely to be met by turning over more less money to states with no
accountability, priorities or directions These programs will pit families against the elderly,
handicapped advocates against poarents concerned about child care, in a bitter competition for
reduced resources."
PAGE 6
SUMMARY
Final passage of block grants is contingent on two factors. First, states must demonstrate a
willingness and ability to accept the administrative and financial responsibility that comes of
grant consolidation. Second, Federal Legislators must recognize the difference between budget
reductions and budget consolidation. The purpose of block grants is not to reduce the Federal
budget, but rather to allow state and local governments the opportunity to implement the Federal
programs which they both enforce and finance. Budget reductions is not a goal of grant
consolidation, but it is a comparative advantage over the categorical system, and is born of the
historical efficiency of state-local administration.
The focal point for the national debate over block grants is the U.S. House of Representatives.
House Budget Committee Chairman James Jones (D-OK) has presented an "alternative budget"
that ostensibly has the same goals as the White budget proposals. State Legislators should be
aware that the Jones proposals do not embrace the Reagan Administration's block grant concept,
nor does it offer the amelioration of spending and regulatory mandates now written into Federal
law. State Legislators should also be aware that the proper focal point for block grant proposals
is the state legislatures the deliberative bodies upon which the lies the ultimate responsibility
for grant programs.
This information has been provided as background material. Nothing written here is to be
construed as necessarily reflecting the views of The American Legislative Exchange Council or
as an attempt to aid or hinder passage of any bill before Congress or the State Legislatures.
ALEC
FIRST CLASS
U.S. Postage
418 C Street, N.E., Suite 200
PAID
Washington, D.C. 20002
Permit No. 827
Washington, D.C.
Chairman
Rep. T.W. Stivers
Idaho House of Representatives
First Vice Chairman
Sen. John R. McCune
Oklahoma Senate
Second Vice Chairman
Rep. Penny Pullen
Illinois House of Representatives
Treasuer
Hon. Paul Dietrich, former member
Missouri House of Representatives
Secretary
Sen. Daniel W. Richey
Louisiana Senate
Immediate Past Chairman
Rep. Donna Carlson West
Arizona House of Representatives
KKS NEWS
U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES
ALL CONTENTS STRICTLY EMBARGOED
UNTIL: 10:30 A.M., EDT
Contact: Laura Genero- (202) 245-6343 (OS)
Tuesday, May 12, 1981
Jim Brown (202) 472-3060 (SSA,
Statement of HHS Secretary Richard S. Schweiker
I am today announcing social security reform proposals which
will keep the system from going broke, protect the basic benefit
structure, and reduce the tax burden of American workers.
---We will stand by the traditional retirement age of 65; we
will not raise it.
---We will not propose raising social security taxes for the
114 million working men and women now contributing to the system.
In fact we propose future tax reductions.
---We will phase out the retirement earnings test, thus ending
the penalty now in law which discourages senior citizens from remaining
in the labor force to supplement their social security income.
---These proposals do not remove from the rolls, or cut benefits
for, those currently receiving benefits.
Restoring social security to financial health and high public
confidence will stay at the top of my agenda until legislation is
enacted to turn the system away from bankruptcy and toward long term
solvency.
The crisis is inescapable. It is here. It is now. It is
serious. And it must be faced. Today we move to face it head-on
and solve it. If we do nothing, the system would go broke as early
as Fall, 1982, breaking faith with the 36 million Americans depending
on social security.
Our package consists of major changes to restore equity to social
security benefits and to restrain the growth of non-retirement portions
of the program which are out of control.
Some of the changes will be difficult. But as things now stand,
without changes, the social security trust fund deficit could climb
as high as $111 billion in the next five years and have a long-term
deficit of 1.52% of total payroll over the next 75 years.
To turn this around, our amendments would address the major causes
of the social security crisis facing us today:
---We must reduce the welfare oriented elements which duplicate
other programs and which have been introduced over the years into the
social security system;
(More)
-2-
---We must relate disability insurance more closely to a worker's
earnings history and medical condition;
---We must reduce the opportunity for "windfall" benefits which
now can mean higher monthly benefit checks to a short-term double-
dipper worker than to a low-wage earner who has spent a lifetime
contributing to the system;
---We must do more to encourage workers to stay on the job until
the traditional social security retirement age of 65;
---We must restrain the benefit growth rate for future retirees
by altering temporarily the initial benefit formula computation which
takes into account the prior overindexing in the system.
The sole impact today's proposals would have on the 36 million
beneficiaries now on the rolls would be a three-month delay in the
automatic cost-of-living increase scheduled for July, 1982. This
change would end the anomaly of social security, the largest single
federal program, still operating on the pre-1976 fiscal year calendar.
If these proposals are enacted, we will not only put social security
back on sound financial ground indefinitely, but also we will be able
to significantly lessen the taxes of those currently supporting the
system.
We will be able to reduce the social security tax rate increase
now scheduled for 1985, and to actually decrease social security tax
rates by 1990 below what they are today.
This means that the young person entering the labor force next
year would pay an average of $33,600 less in social security taxes
over his/her lifetime, a reduction of over 10%.
This Administration is acting now to solve both the short-term
and long-range financing crisis with steps that will at once ensure
the system's fiscal integrity and redirect social security to its
original purpose as a stable base around which working men and women
can plan for their retirement years.
It is vital that we make these hard choices---and make them now.
We cannot postpone any longer the day of reckoning for social security.
###
HHS FACT SHEET
U.S. DEPARTMENT OF HEALTH AND human SERVICES
ALL CONTENTS STRICTLY EMBARGOED
UNTIL: 10:30 A.M., EDT
Tuesday, May 12, 1981
PROVISIONS OF THE SOCIAL SECURITY PROPOSAL
I. CHANGES TO ENCOURAGE WORK BETWEEN 62-65
--Change Benefit Computation Point from Age 62 to 65
The benefit formula treats early retirement the
same as waiting until age 65. After 65, there is
an annual incentive to continue working. Early
retirees at 62 get 80% of what they would get at
65.
Proposal would discourage early retirement by
assigning zero value to the age 62-64 period, thus
reducing benefits in such cases while rewarding
those who elect to work until age 65. This returns
the program to the formula used before the age of
retirement for women was lowered to 62 in 1956.
--Reduce Benefits for Early Retirement
Workers electing early retirement at 62 now receive
benefits equal to 80 percent of what they would
receive if they delayed retirement to age 65.
Proposal would reduce early retirement benefits to
55 percent of the maximum, thus strongly encouraging
workers to remain in the work force until age 65.
II. CHANGE TO REDUCE OPPORTUNITY FOR "WINDFALL" BENEFITS
--Eliminate "Windfall" Benefits for Non-Covered Employment
The benefit formula now makes it possible for a
person, such as a retired Federal employee, who
enters Social Security-covered employment for only
a few years to receive disproportionately high benefits,
in some cases exceeding those paid to low-wage earners
who have spent a lifetime in covered employment.
Proposal would have formula take pension resources from
non-covered employment into account in such cases, thus
sharply lowering the Social Security benefit in such
cases.
-2-
III. CHANGES TO RELATE DISABILITY INSURANCE CLOSER TO WORK HISTORY
AND MEDICAL CONDITION
--Require "Medical Only" Determination of Disability
Workers can now qualify for disability benefits on
combinations of medical and non-medical factors, such
as age, education and work experience. More than one-third
of disability cases age 60 to 65 involve non-medical factors.
Proposal would limit qualification to medical factors alone,
thus restoring program to original purposes.
-Increase Waiting Period to Six Months
Under a 1972 liberalization of the program, the
waiting period for disability benefits was reduced
from six to five months on the assumption that ample
funds would be available.
Proposal would restore the six-month waiting period
previously in law. This conforms to the terms of
most private disability insurance programs.
--Require Prognosis of 24-Plus Months of Disability
Workers now seeking disability benefits must show
only that disability claimed will exceed 12 months
or will result in death. The 12-month test, enacted
in 1965, replaced a test of "long-continued and indefinite
duration" in prior law.
Proposal would restore the original intent of the law,
requiring that the prognosis of disability be of long
duration, at least 24 months, a more reasonable
definition of disability.
--Increase Requirement for Insured Status to 30 Quarters
Workers may now qualify for disability benefits even
if they have been in the work force only 20 out of the
past 40 quarters. Therefore a person could be out of
covered employment for 5 years and still qualify.
Proposal would set the minimum at 30 out of the past
40 quarters, thus more closely tying benefits to the
principle that they are replacement for wages recently
lost.
-3-
IV. CHANGES TO REDUCE WELFARE ELEMENTS
--Eliminate Children's Benefits in Early-Retirement Cases
Children under 18 or under 22 if in school are
now eligible for benefits on the basis of a
retired parent's wage record. Thus a retiree
with a child receives a dependent's benefit,
whereas a retiree with no children gets only his
own benefit.
Proposal would end this inequity in early-retirement
cases and thus encourage the worker to continue
work until 65.
--Extend Disability Maximum Family Benefit to Retirement and
Survivors Cases
Benefits for families of retired and deceased workers
can now actually exceed that worker's net take-home
pay.
Proposal would extend the maximum limitation on benefits
to families in disability cases enacted in 1980 to retire-
ment and survivor cases. This would return the program
closer to its original purpose as a "floor" of protection.
V. OTHER AMENDMENTS FOR SHORT-TERM
--Increase Bend Points by 50% Instead of 100% of Wage
Increases For 1982-87
In 1977, the "bend points" (dollar amounts referred to
in the weighted benefit formula) were made subject to
automatic wage indexing. This change was adopted in
legislation intended in part to offset the cost impact
of earlier legislation and the faulty benefit computation
procedure adopted in the 1972 amendments. However,
benefit levels today remain disproportionately high (by
about 10 percent) compared with the pre-1972 levels.
Proposal would restore the traditional relative benefit
levels for future beneficiaries by increasing the "bend
points" by 50% (instead of 100%) of increases in average
wage earnings for the years 1982-87, after which the 100%
factor would be restored to the formula.
-4-
--Move Date for Automatic Benefit Increases from June
to September and Use 12-Month CPI Average
Under the 1972 amendments (as modified in 1974),
annual Social Security benefit increase have been
automatic each June (payable beginning in July) .
The increase is based on changes in the Consumer
Price Index as measured between the first quarter
of the current calendar year and the corresponding
quarter of the preceding year, a provision which
can unduly inflate or deflate the increase, depending
on economic conditions in those quarters.
Proposal would correct the anomaly of having benefit
increases initiated on the pre-1976 Federal Fiscal Year
basis and change the CPI computation to cover a full
year (July-June) period, thus making the measurement
a more accurate reflection of economic trends and
measuring living costs in a period ending closer to
the initiation of benefit increases.
VI. CHANGE IN COVERAGE
--Extend Coverage to First Six Months of Sick Pay
Most sick pay is not taxed due to complex exclusion which
forces employers to track sick pay on daily, even hourly
basis, and leads some to unwittingly break the law.
Proposal would extend tax to all sick pay during first six
months of an employee's illness. This would eliminate the
administrative burden and would treat sick pay in the same
way as vacation pay.
VII. PHASE OUT RETIREMENT EARNINGS TEST BY 1986
Under current law, 1981 Social Security benefits payable
to persons aged 65 through 71 are reduced by $1 for each $2
of annual earnings in excess of $5,500, a level which rises
each year in relation to average wage earnings. However,
benefits are not reduced for those aged 72 and over (70 and
over beginning in 1982).
Proposal would phase out the retirement test over a three-year
period, permitting $10,000 in earnings in 1983, $15,000 in
1984, $20,000 in 1985 and unlimited earnings thereafter.
-5-
VIII. REDUCE LONG-RANGE SOCIAL SECURITY TAXES
Assuming enactment of these proposals, and those introduced
in the Administration's Budget proposals, it will be possible
to lessen the Social Security tax increase now scheduled for
1985 and to actually decrease Social Security taxes below
the current level in 1990. (See chart below). Note that
while an increase will again become necessary in 2020 due
to the aging of the population, the rate will still be lower
than the 1990-and-after rate scheduled under current law.
SOCIAL SECURITY TAX RATES UNDER PROPOSAL
PROPOSAL
PRESENT
UNDER BUDGET
UNDER WORST-CASE
PERIOD
LAW
ASSUMPTIONS
ASSUMPTIONS
TAX SCHEDULE
1981
6.65%
6.65%
6.65%
1982-84
6.70
6.60
6.70
1985
7.05
6.45
6.95
1986-89
7.15
6.45
7.05
1990-2019
7.65
6.45
6.45
2020 AND AFTER
7.65
7.55
7.55
-6-
COST ANALYSIS OF EFFECT OF VARIOUS SOCIAL SECURITY OPTIONS
(Positive numbers indicate savings; negative numbers indicate
added costs or amounts needed to meet cost of present program)
Short-Range
Effect
Long-Range
Item
CT 1982-86
Effect b/
Status of Present System, Deficit
-$11.0(-110.8)
-1.52%(1002
Effect of Budget Proposal
35.5( 36.8)
.20 ( 15)
Status of Program After Budget Proposals Enacted
(-74.0)
-1.32 ( 87)
Proposal
(1) Cover Sick Pay in First 6 Months
2.6( 2.6)
.02 ( 1)
(2) Change Computation Points for Average Indexed Monthly
Earnings from Age 62 to Age 65
1.3( 1.4)
.39 (26)
(3) Increase Bend Points in Primary Benefit Formula by 50%
(instead of 100%) of Wage Increases, 1982-87
4.2( 4.7)
1.30 (86)
(4) Benefit Rate of 55% of Primary Benefit for Retired
Workers (and 27 1/2% for Spouses) at Age 62
17.6(20.3)
.85 (56)
(5) Eliminate Benefits for Children of Retired Workers
Aged 62-64
1.9( 2.0)
.02 ( 1)
(6) Disability Maximum Family Benefit Applicable to
Survivor and Retirement Cases
2.9( 3.3)
.10 ( 7)
(7) Eliminate Windfall Portion of Benefits for Persons
with Pensions from Non-Covered Employment
.6( .6)
.10 ( 7)
(8) Require "Medical Only" Determination of Disability
(1.e., exclude vocational factors)
7.7( 9.0)
.06 ( 4)
( 9) Increase Disability Waiting Period from 5 Months
to 6 Months
1.4( 1.5)
.03 ( 2)
(10) Require Disability Prognosis of 24+ Months Duration
(instead of 12+ months)
2.8( 3.4)
.07 ( 5
(11) Require 30 QC Out of Last 40 Quarters for Disability
Benefits (instead of 20/40)
10.0(11.5)
.21 (14
(12) Move Date for Automatic Benefit Increases from June
to September (and Use 12-Month Average)
6.3(27.8)
.14 ( 9
(13) Raise Retirement-Test Exemption for Age 65+ to $10,000
in 1983, $15,000 in 1984, $20,000 in 1985, and Eliminate
Test in 1986
-6.5(-7.4)
-.14 (-9
TOTAL EFFECT
46.4(75.0)d/
2.86 (18
In billions. Figures in parentheses are based on "worst case" assumptions; other figure
are based on the expected economic assumptions (those in the President's Budget).
Average-cost over 75-year period, in percentage of taxable payroll. Figure in parenthes
is long-range effect of this item as percentage of actuarial deficiency of present progr
Amount necessary to restor "nancial soundness of program over the long range.
Including effect of additional net income to Hospital Insurance program.
-7-
ESTIMATED SHORT-RANGE EFFECT OF PROPOSAL AS COMPARED WITH PRESENT LAW,
FUND RATIOS AT START OF YEAR /
Expected Economic Conditions
Worst-Case Economic Conditions
Calendar
Present
Present
Year
Law
Proposal
Law
Proposal
1981
23%
23%
23%
23%
1982
21
22
21
22
1983
18
23
16
22
1984
16
25
6 b/
19
1985
14
28
in
17
1986
16
30
18
1987
22
35
21
/
Balance in combined 01d-Age and Survivors Insurance Trust Fund, Disability
Insurance Trust Fund, and Hospital Insurance Trust Fund at beginning of
year as percentage of outgo from trust funds in coming year (1.e., assumes
availability of inter-fund borrowing).
Funds have insufficient balance to pay monthly benefits (actually, this
situation would occur several months earlier).
I
Funds exhausted.
/
By 1990, the fund ratio would be about 50%.
By 1990, the fund ratio would be about 30%, and by 1995 it would be about 50%.
YEAR-BY-YEAR COST ANALYSIS OF PROPOSAL
(In billions)
Proposal
Calendar
Under Expected
Under Worst-Case
Year
Economic Assumptions
Economic Assumptions
1981
$ .9
$ .9
1982
9.1
11.3
1983
11.8
16.2
1984
15.7
21.7
1985
20.5
28.1
1986
23.9
33.6
1981-86
81.9
111.8
-8-
ILLUSTRATIVE BENEFITS FOR WORKERS RETIRING AT AGES 62 AND 65
UNDER PROPOSAL AND UNDER PRESENT LAW /
Earnings
Category
Present Law
Proposal
Age 62 at Retirement in 1/82
Low
$247.60
$163.90
Average
372.80
246.80
Maximum
469.60
310.50
Age 65 at Retirement in 1/82
Low
$355.30
$355.30
Average
535.40
535.40
Maximum
679.30
679.30
Age 62 at Retirement in 1/87
Low
$384.40
$225.20
Average
580.70
348.30
Maximum
755.60
430.00
Age 65 at Retirement in 1/87
Low
$477.10
$447.40
Average
719.00
691.90
Maximum
942.80
860.30
/
Includes effect of (1) 55% benefit rate (instead of 80%) for retirement at
age 62, (2) age-65 computation point (instead of age 62) for all ages at
retirement, and (3) increasing bend points in primary-benefit formula by
50% (instead of 100%) of wage increases in 1982-87. Benefit amounts are
for worker only. Worker is assumed to reach exact age shown in January.
b/ "Low earnings" are defined as the Federal Minimum Wage in each past year,
and the 1981 Minimum increased by the change in average wages in future
years. "Average earnings" are defined as the average wage for indexing
purposes in each year. "Maximum earnings" denote the contribution and
benefit base in each year.
Assumptions:
(1) Worker entered covered employment in 1956 and worked steadily thereafter.
(2) Future earnings (for retirement in 1/87) follow trend under intermediate
assumptions in 1980 Trustees Report.
# 1 #
SERVICES
HUMAN
F
HEALTH
8
STATEMENT
THENT
file HHS
JO ANN GASPER
Deputy Assistant Secretary for
Social Services Policy
Office of the Assistant Secretary for Planning & Evaluation
Hubert H. Humphrey Building
200 Independence Avenue, S.W.
Tel.: (202) 245-6443
Washington, DC 20201
Per our conversation, attached are my
comments on the Working Group Partial
Recommendations Based on Draft Quarterly
Report of the Attorney General under
Executive Order 12336, with Additional
Suggestions. (also attached)
DEPARTMENT OF HEALTH AND human SERVICES
OFFICE OF THE SECRETARY
WASHINGTON, D.C. 20201
JUL I 5 1982
MEMORANDUM
TO
:
FROM
Jo Ann Gaspe
Michael Uhlmann, jab Flizabeth Dole
Deputy Assistant Secretary for Social Services Policy
SUBJECT: Working Group Partial Recommendations Based on Draft Quarterly
Report of the Attorney General Under Executive Order 12336, with
Additional Suggestions
The following are comments regarding the document transmitted to you by
Barbara Honegger on June 29.
1. Action to facilitate the staffing of Executive Order 12336
The title of the issue paper is inappropriate and self-serving and suggests
that the goal of reviewing regulations for potential discriminatory provi-
sions is to increase Justice Department staff.
No evidence is presented in this issue paper to indicate that a current
problem exists concerning gender inequities in proposed Federal regulations.
Routine Department of Health and Human Services analysis of the impact of
all regulations now includes the consideration of any differential impact
on a specific group. During the past year, no gender discriminatory
language or effect has been identified in regulations promulgated by this
Department, which amounts for a substantial fraction of total Federal
regulations. Without a substantiated government-wide problem, no action
is needed.
If a real problem does exist, this paper recommends the wrong solutions.
The Department of Justice proposes to review only "major" NPRMs. Very few
regulations are major regulations. Obviously, the potential for gender
discriminatory provisions is not limited to major regulations, and the
vast majority of regulations would still not be reviewed under the options
proposed.
If a problem does exist, we suggest two possible solutions:
The Director of the Office of Management and Budget should notify
all Federal departments and agencies to pay special attention to
this issue in the review of all regulations and to report any
problems to the appropriate office in the Department of Justice.
Page 2
The Department of Justice staff person assigned to this function
can read all Federal Register NPRMs each day in a few hours, and
if any gender based inequities are identified, initiate appropriate
formal or informal comments from the Department of Justice to the
proposing agency.
2. Social Security: Earning Sharing Proposal
The options presented to the Cabinet Council on Legal Policy are three
variations for sending a particular earnings sharing proposal for social
security to the National Commission on Social Security Reform - transmit
with endorsement; transmit with assurance that the changes are consistent
with Administration policy; transmit with no comment. The particular
earnings sharing proposal under discussion is one developed by the "Civil
Rights Division Task Force" (CRDTF) of the Justice Department; this proposal
was recently published in the Attorney General's first quarterly report
under Executive Order 12336. Considering the controversial nature of this
kind of proposal, a more exhaustive listing of policy choices for the
Cabinet Council might have included:
transmission of the CRDTF proposal with general statements about
the differences of opinion and judgment that exist about the
seriousness of the perceived equity problems in social security and
information about earnings sharing proposals in general and,
especially, this particular variant;
transmission of the CRDTF proposal with a statement of disapproval
of its particulars;
transmission of a statement disapproving the entire concept of
earnings sharing in social security;
not transmitting the CRDTF proposal at all, but instead a statement
that the National Commission should be sensitive to equity issues
in any long-run redesign of the system's key parameters. That
statement might contain appendicies outlining the equity issues as
perceived from different vantage points and the different approaches,
including earnings sharing, that have been put forward from time to
time.
Because of the many problems and issues that the concept of earnings
sharing in social security raises, we recommend the last option outlined
above, i.e., not transmitting the specific CRDTF proposal at all. Some of
those problems and issues are listed below.
Page 3
To the best of our knowledge, the Civil Rights Division Task Force has
engaged in no formal discussions with either the Social Security Admini-
stration or components of the DHHS Office of the Secretary in developing
their latest version of earnings sharing. (Apparently, they also have
ignored all the problems raised in a 1980 SSA report concerning an even
more limited earnings sharing proposal made by the 1979 Advisory Council.)
The National Commission is already very well equipped to consider questions
of equity in social security. SSA staff who have been detailed to it include
individuals who, to a degree unmatched by others, are expert on the general
subject of horizontal equity in social security and the specific issues
in various earnings sharing proposals.
Issues and Problems with Earnings Sharing
Earnings sharing is a concept for organizing the distribution of benefits
within social security. It is, however, a very general concept. In
attempting to work out its details, very specific choices have to be made,
which choices involve complex social policies. The Task Force's particular
proposal presumes a great many of those complex choices, e.g., inheritance
of earnings credits by divorced spouses, the non-inheritance of credits
earned outside any marriage, that the disablilty of a homemaker should
become an insurable event in social security. There exists a substantial
literature on these questions both within the earnings sharing context and,
more generally, within the context of discussions of alternative proposals.
An excellent summary volume is A Challenge to Social Security: The Changing
Roles of Women and Men in American Society, edited by Burkhauser and
Holden, Academic Press, 1982. Before the Administration undertakes any
actions in this area, it should consult that literature and review all the
prior proposals made in this area. Below are just same of the issues to be
considered:
The perceived problem of inequity between one and two-earner
couples depends critically on one's measure of equity. Because
women workers benefits are increasingly dominating their ancillary
entitlements as spouses, many have argued that the problem - if,
indeed, it is a problem - is diminishing rapidly. (Same have
concluded that this phenomemon will accelerate at an even more
rapid rate than now officially estimated.) Thus, it is not clear
that equity demands a change in the program. The argument that the
dual entitlement rules operate as a labor disincentive is belied by
the very substantial increase in the labor force participation of
women in recent years.
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The perceived inequity between one and two earner couples in
retirement could be more easily solved, and at substantially less
cost, by phasing down the dependent spouse's benefit percentage
from it current 50% to around 35% - just enough to give the tilt
in the PIA formula twice to the one-earner couple SO that it
treated the same as the two-earner couple with the same earnings
history. (Same would argue that even this reduction for one earner
families would be anti-family and, therefore, not consistent with
this Administration's pro-family stance).
It should be recalled that the system is in financial trouble in
the 80's, and it is not evident that the projected surpluses in
90's and early 21st century should be spent on a costly transition
scheme as outlined in the Task Force proposal. The surpluses may
be necessary to ease the transition to a new, higher dependency
ratio in the later 21st century.
It is not evident that only the survivors of some, not all, two-
earner couples should be made better off as happens in this particular
earnings sharing proposal. If poverty among aged widows is a
problem -- and, arguably, it continues to be - then perhaps an
even greater general portion of the social security system's
benefits should be reallocated toward very old surviving spouses.
Within that group of older beneficiaries it is not clear that
one sub-group is more deserving than another.
The system contains the current anomaly that a surviving divorced
spouse is better off when her former spouse -- usually a man with
whom she has no continuing economic or social relationship -- dies.
By allowing inheritance of wage credits to divorced surviving
spouses, that anomaly would be continued and enhanced. This is
not a necessary feature of earnings sharing, and should be
separately assessed.
This particular proposal would also make various surviving spouses
much worse off relative to the current system - thus, defeating
the proposal's purported primary objective. For example, by
not allowing the last surviving spouse to inherit wage credits of
the decedent earned outside any marriage, those credits disappear
from any calculation and, in comparision to current law, many
surviving spouses would be substantially worse off.
This particular earnings proposal apparently (details are sketchy)
would have effects on young survivors and disability benefits that
might be unintended and, if separately considered, judged undesirable.
See the 1980 SSA report on the 1979 Advisory Council proposal.
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Because we lack specifics, we are uncertain how the plan would
address the retirement of different spouses who are not the same
age and how that would interact with the so-called retirement test,
especially for those between ages 62 and 65. Some variants of this
proposal could create increased labor force disincentives in
that critical age range.
Most earnings sharing proposals demand coverage of currently
uncovered, especially government, workers. That may or may not be
a good idea, but it should be judged on its own merits.
The current system does not well handle divorce, but there do exist
alternatives to full-scale (or even limited) earnings sharing
proposals to address that problem.
Finally, a basic presumption in the discussion surrounding this CRDTF
proposal should be addressed --- that the system is unfair to women, especially
working women. The system almost entirely ignores age distinctions in
calculating both young survivors protection and aged surviviors benefits.
In distinction to systems that would take combined life expectencies into
account, the current system has a substantial and inherent bias to the
benefit of women. That bias may reflect a general social judgment to
allocate benefits to those whom, on average, society believes need them
more than others. It would be wrong, however, to think that bias is
anything but extremely favorable to women as a class.
6. Gender Equity for Women Business Owners Doing Business with the Federal
Government
We would recommend that the age from contracting be age 18 for both men and
women, since this is more consistant with other Federal statues and regula-
tions regarding the emancipation of minors.
7. Equal Equal Opportunity for Women Small Business Owners Wishing to do
Business with the Federal Government
The materials presented by the Justice Department present evidence of
Congressional intent. The background paper references sex discrimination
conducted under the Carter Administration. Since this Administration is
unequovically committed to the advancement of women, it is hard to accept
that this issue had not already been administratively remedied by this
Administration.
9. Elimination of Gender Discrimination in Federal Programs and Activities
Due to the use of Sex-based Actuarial Tables
10. Elimination of Use of Sex-based Actuarial Data in Determining Payments
to Health Maintenance Organizations
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Our comments on issues 9 and 10 are consolidated since the issue is similiar.
The implications of the issues raised under 9 and 10 are not clearly
spelled out. In general, in insurance and annuity calculations, companies
attempt to find easily measurable characteristics which predict well how
long an individual will live. One that has been found and tested is
gender. When two individuals are otherwise similar, including age, health
status, job pressure, marital status, etc., but one is male and the other
female, the probabilities are high that the female will outlive the male.
Hence it will cost more to pay the woman a pension if both man and woman
retire at the same age. On the other hand, the woman will pay premiums
longer and earn interest longer on those premiums if both buy life insurance
at the same age. These differences have long been recognized in insurance
and pension computations in private industry. They were formerly recognized
in such calculations in government; legislation over the last several years
has eliminated most separate sex-based actuarial tables in government.
Elimination of the sex-based tables transfers income from men to women in
the case of pensions, and from women to men in the case of life insurance.
Men pay more than an "actuarially fair" premium for pension benefits, and
wamen pay less; women pay more than an "actuarially fair" premium for life
insurance, and men pay less. To say, as the issue paper does, that the use of
gender-based actuarial tables has an "inevitable discriminatory effect" is
misleading and wrong, as the authors clearly are using discrimination in
its pejorative sense; that is, in the sense of actions which treat people
differently, when there is no real grounds for the separate treatment. In
the case of gender-based tables, there is a real basis in insurance and
pension experience. For any moderately large group of people with otherwise
similar characteristics, the gender-based actuarial tables will produce a
careful balancing of premiums and payments, and this balancing is time-
tested and accurate. Hence it differs from job discrimination, or discri-
mination in education or housing, areas in which gender has been shown
to have little real effect for otherwise similar individuals.
For this reason, the analogy to job quotas by sex is not really an accurate
one, and the further comments on life-shortening illnesses and perfect
driving records are not apropos. It is possible that people with life-
shortening illnesses should be paid different annuities than those without;
this issue does not deal with that, but whether men and women in equivalent
circumstances should be treated differently. Certainly, men with perfect
driving records should be (and are) treated differently than men with poor
driving records; at issue is whether men should be treated differently
than women with similar driving records, and automobile insurance experience
indicates they should, in an "actuarially fair" sense.
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To comment specifically on the issues at hand; if the Pension Benefit
Guarantee Corporation is valuing the assets of a terminated pension plan,
and the pension plan provided for separate benefit rates for men and women,
it should be desirable to use gender-based tables in valuation. If the
plan had continued, benefits would have been paid from such tables. Why
should the Federal insurance program alter those terms, on which the employ-
ment contract had been based? For the IRS changes, there is no reason
a priori to favor one position or the other. If the current provisions
result in smaller periodic annuities for women and smaller allowable
deductions for women than for men, then changing the provisions will
transfer some income from men to women. The decision should be made on the
grounds that this is a desirable transfer, not because of negative feelings
about discrimination or the mistaken argument that this is similar to
"quotas" in jobs, education or housing.
On issue 10, concerning payments to HMOs, gender-based tables for health
insurance also have sound actuarial backing. Some of the differences arise
from maternity costs, but differences at older ages in susceptibility to
certain illnesses also affect costs. As before, if the use of gender-based
tables are eliminated, there will be same transfer from men to women and
vice-versa. The desirability of these transfers should be the basis for
decision, rather than charges of discrimination. Acceptance of an endorse-
ment of HR 100 implies that the Cabinet Council on Legal Policy wishes to
endorse the requirement of transfer from men to women in private pension
programs, and from women to men in private life insurance programs.
11. Elimination of Sex Discrimination in Farmer's Home Administration
State Supplements Consistent with Effected Reforms in FMHA Rules and
Regulations
We defer to the Farmer's Home Administration.
12. Elimination of Gender Inequities in U.S. Code Relating to the
Immigration and Naturalization Service
We defer to the Justice Department on this issue.
CC: Barbara Honegger