Welfare Reform Remarks at a News Briefing on Goals and Guidelines

THE PRESIDENT. This afternoon I have an explanation to make concerning a basic undertaking that we assumed shortly after I became President. I announced that a comprehensive reform of the Nation's welfare system would be one of our first priorities. Under the general leadership of Secretary of HEW Califano, we've worked with other private and Government agencies during the last 3 months to assess the present welfare system and to propose improvements to it.

It's much worse than we hand anticipated. And although we've conducted hundreds of meetings around the country, and prepared documents and studies that are quite voluminous--and Joe has a briefcase full of them that he will exhibit in a few minutes--we've found that the complexity of the system demands a detailed analysis through computer models and working with Governors and with congressional leaders as well.

I'd like to go over in a few minutes some of the problems with the present system, but I would like to point out that the most important unanimous conclusion is that the present welfare program should be scrapped entirely and a totally new system should be implemented.

This conclusion in no way is meant to disparage the great value of the separate and the individual programs enacted by the Congress over the last 15 years. These include, as you know, a food stamp program for low-income persons, those who work and those who cannot work; the supplemental security income floor for our aged and disabled; work incentives for welfare families with children; increased housing assistance; tax credits; unemployment insurance extensions; enlarged jobs programs; and the indexing of social security payments to counter the biggest threat or enemy of the poor, and that is inflation.

This conclusion that we've drawn today is to say that these many separate programs, taken together, still do not constitute a rational and coherent system that is adequate and fair for all the poor. They are still overly wasteful, capricious, and subject to almost inevitable fraud. They violate many desirable and necessary principles.

We have established the following goals: I've been over these with the congressional leaders, with representatives of the Department of HEW, with Labor, my own economic advisers, OMB, Treasury, to make sure that they are feasible and also advisable. And they will be guidelines for us in the next 3 months as we put together the final legislative proposals.

First of all, the new system will be at no higher initial cost than the present systems combined.

Second, under this system every family with children and a member of the family able to work will have access to a job.

Third, incentives will always encourage full-time and part-time private sector employment.

Fourth, public training and employment programs should be provided when private employment is unavailable.

Fifth, a family should have more income if it works than if it does not work.

Sixth, incentives should be designed to keep families together. Now many of the incentives, deliberately or not, encourage families to be separated.

Seventh, earned income tax credits should be continued to help the working poor.

Eighth, a decent income should be provided also for those who cannot work or earn adequate incomes, with Federal benefits consolidated into a simple cash payment, varying in amount only to accommodate differences in the cost of living from one community to another.

Ninth, the program should be simpler and easier to administer.

Tenth, there should be incentives encouraging honesty and designed to eliminate fraud. What this means is that the accurate reporting of income and financial status will be naturally encouraged among those who receive benefits.

Eleventh, the unpredictable and growing financial burden on local and State governments should be reduced as rapidly as Federal services or resources permit.

And twelfth, local administration of public jobs programs should be emphasized.

Now, we have varying estimates on the number of jobs required to carry out all these programs depending upon the analyses and the basic premises. For instance, to provide this kind of service, we estimate that about 2 million total training and public jobs would be required. We now have plans for about 925,000 public service jobs.

There's no doubt in my mind that with a restoration of the work ethic in our country and with a close relationship with those who need additional employees, in prisons, as teachers' aides or helpers for extensive service workers, those who work in Federal parks, in private industry, among the aged, in recreation centers, that jobs cry out to be filled that are noncompetitive with present employees, and we are determined that these should be administered as much as possible in the community where the jobs take place.

We believe that these principles and goals can be met. There will be a heavy emphasis on jobs, on simplicity of administration, on financial incentives to work, on adequate assistance for those who cannot work, on equitable benefits for all needy families, and close cooperation between private groups and officials at all levels of government.

It's obvious that the more jobs that are made available by .private industry and public regular employment and in public service jobs and training jobs, then the less cash supplement will be required.

We will work closely with the Congress and with State, local, and community leaders, and we'll have legislative proposals completed by the first week in August prior to the summer homework session of the legislature, of Congress.

Every State bas a separate and distinct and unique set of welfare laws, and although we've already started having public hearings, we will go back now when the basic principles have been established, based on the work that Joe Califano and his groups have already done, and work out the final legislative proposals to accommodate the special and unique needs and commitments of each individual State.

If the new legislation can be adopted by the Congress, early in 1978, it will take an estimated 3 additional years to implement the program. The extremely complicated changes will be made carefully and responsibly.

Congressional hearings are already scheduled. Jim Coleman will begin his hearings Wednesday; Secretary Califano will be there to testify on behalf of the administration; and in the Senate the hearings will 'be conducted by Senator Moynihan.

We'll use these hearings which are already scheduled to permit accurate description of the nature of the task ahead and to permit the proposals to be both explained and debated.

In the meantime, a very important and necessary step has been taken and that is in the administration's proposed reform for the Food Stamp Program to limit the level of assistance based on income and to cash out the Food Stamp Program, or rather to eliminate the mandatory payment for food stamps. We hope the Congress will go ahead with this without delay.

Some of the problems that have been apparent for many years are described on these charts on my left. The widely varying Federal contributions to welfare recipients around the Nation are illustrated very vividly here.

There's a factor of 500 percent or more between the lowest payments in some of the States colored in green compared to the highest payments in the yellow colored States with dots on them.

I don't know if you can read it from there, but the States with the yellow and black dots 'have an average Federal contribution of $1,125 to $1,688. The orange colored States have an average Federal contribution of $860 to $1,125. The blue cross-hatched States, $575 to $860; and the green States from $283 to $575.

One of the basic principles that I described is to have a uniform payment by the Federal Government for welfare recipients around the country, varying in amount only enough to accommodate changes in the cost of living from one community to another.

Another problem with the present system is that the multiplicity of programs not only is confusing to administrators and to those who receive the benefits but also result in almost unconstrained fraud and honest mistakes. This chart shows that 67 percent of the recipients get benefits from two or more programs, 18 percent of the recipients get benefits from five or more different programs; 2 percent of the recipients get benefits from eight or more separate and distinct welfare programs.

The complexity of the system is almost incomprehensible, and the consolidation of the cash. payment into one basic aid to the poor--those who cannot work, those who cannot earn enough income to support their families--will be a major step forward.

Another problem arrives from the lack of incentive to work. For instance, a father who heads up a family with four people in it, either a mother and two children or three children, in Michigan, working full time at the minimum wage, has a total income of $5,678. A same-sized family without the father in the home with still four people there, not working at all, has an income of $7,161.

A family with the head of the household--a mother and three children--if she goes to work at the minimum wage, has a total income of $9,530 [$8,970.] ¹

¹ White House Press Office clarification.

This shows that the best thing that a working father can do to increase the income of the people that he loves is simply to leave home.

Another thing that occurs is for a family that stays intact when the father shifts from a State where his family gets welfare assistance to one where he doesn't get many of the programs to aid him and his family, for instance, a father--and this happens to be Wisconsin--who is working full time at the minimum wage, after he pays his taxes and draws tax credits for earned income and receives food stamps, has an income of $5,691, working full time.

If that father quit his full-time job and took a half-time job at the same wage scale, minimum wage, his income would jump almost $3,000, a little more than $3,000--$1,300 to $6,940.

This is another defect in the hodgepodge welfare system that runs counter to the basic commitment of American people that work on a full-time basis--for those who are able to work--is beneficial, ought to be beneficial to a family.

Another thing that happens in the welfare system is that those who are working and receiving benefits, if their income should increase, either to more hours per week, or to a higher wage scale, is quite often counterproductive, and it doesn't take a working person, adult, long to figure out that an increased effort pays no dividends.

For instance, for a family head who again is earning the minimum wage, if they got an increase in income of $100, they would lose--this is kind of an average for the whole Nation--they would lose $66.67 in AFDC payments! The earned income tax credit--they would lose $10; food stamps--they would lose $9.90; housing assistance, where that is paid, lose $8.25. So, they would lose, out of the $100 increase in check, salary, $94.82, which means that they would have a net reward of only $5 out of an increase in earnings of $100.

So, you can see there's very little incentive to work your way off welfare.

I might point out that the legislative leaders, particularly Congressman Ullman and Senator Long, have been through these proposals with us the last time this morning. And this is going to require a very close working relationship with the committees involved.

It's one of those long-standing needs in the Federal Government that has not yet been addressed, and comprehensive welfare reform is long overdue.

I think we have an excellent chance to meet all the principles and goals that we've described here. We will meet the time schedule to present to the Congress the complete legislative package by the first part of August.

The first priority of the Congress, as far as I am concerned, should be the rapid passage of the energy reform legislation.

Later on this year, we will also present to the Congress comprehensive tax reform legislation. We will also have to present to the Congress very shortly our analysis of the needs for the social security package, and there are many other major proposals that are being evolved very carefully and presented to the Congress in a timely way.

I'll have to depend upon, of course, the congressional leaders to decide in which order they will address these major efforts. As most of you, I am sure, are aware, these proposals that I have outlined fall on exactly the same committees. The Ways and Means Committee in the House, under Congressman Ullman, will handle most of the parts of energy that relates to taxation--tax reform, social security, as well as welfare reform.

And all of the subcommittees will begin work immediately. The difficulty in addressing this many major proposals from me and my administration is very difficult for them to assimilate.

It's almost as bad in the Senate, in the Finance Committee, where they handle most of the same questions. But we're determined to proceed expeditiously, and Joe Califano, Ray Marshall, Mike Blumenthal, Charlie Schultze, Bert Lance, and others are doing an extraordinarily good job so far in putting together an analysis of what we have and recommending what we ought to have in the future.

We've also had good response from the Governors and local administrators in trying to give us advice on how administration of the program could be improved.

I would like to ask Joe Califano now to describe to you in more detail what we will do specifically between now and the first week in August and to answer your questions about the principles that I have outlined this afternoon. Secretary Califano.

I'd like for Joe also to show you what books and all they've presented to me. I can't claim that I've read them all.

SECRETARY MARSHALL. Here is the report.

SECRETARY CALIFANO. These are the reports, Mr. President, so far of the work that has been done, which we presented. These reports are largely

THE PRESIDENT. This will give me something to do while I am over at the summit meeting. This, by the way, does not include the computer analyses that have been run to show the impact of the various proposals. And it's obvious that there has to be a close relationship between the people who cannot work that will depend on the cashed out payments, those who can work and earn an income less than adequate for a family, who would receive additional incentives, and those who can work full time but haven't been able to find a job. And that's why it's so crucial that the income tax structure, the HEW Department, and the Labor Department share responsibilities for the comprehensive package.

Thank you very much.