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THE AMERICAN ENTERPRISE IN EXECUTIVE STITUTE FOR PUBLIC POLICY RE COMMITTEE SEARCH, established in 1943, is a publicly supported, nonpartisan re Herman J. Schmidt Chairman of the Board search and educational organization. William J. Baroody Its purpose is to assist policy makers, President scholars, businessmen, the press and Charles T. Fisher III the public by providing objective Treasurer analysis of national and international Richard J. Farrell issues. Views expressed in the insti Richard D. Wood tute's publications are those of the Richard B. Madden authors and do not necessarily reflect the views of the staff, advisory panels, officers or trustees of AEI. SENIOR STAFF Anne Brunsdale ADVISORY BOARD Director of Publications Paul W. McCracken, Chairman, Ed Joseph G. Butts mund Ezra Day University Professor Director of Legislative of Business Administration, Univer Analysis sity of Michigan Robert B. Helms Director of Health Policy R. H. Coase, Professor of Economics, Studies University of Chicago Thomas F. Johnson Milton Friedman, Paul S. Russell Dis Director of Research tinguished Service Professor of Eco Gary L. Jones nomics, University of Chicago Assistant to the President for Administration Gottfried Haberler, Resident Scholar, American Enterprise Institute for Richard M. Lee Public Policy Research Director of Planning and Development C. Lowell Harriss, Professor of Eco Edward J. Mitchell nomics, Columbia University Director, National Energy Studies George Lenczowski, Professor of Po litical Science, University of Califor W. S. Moore nia, Berkeley Director of Legal Policy Studies Robert A. Nisbet, Albert Schweitzer Robert J. Pranger Professor of the Humanities, Colum- Director of Foreign and bia University Defense Policy Studies James A. Robinson, President, Uni Louis M. Thompson, Jr. versity of West Florida Assistant to the President for Communication David G. Tuerck Director, Center for Research on Advertising WELFARE REFORM: ?• • Robert H. Bork,• Moderator Wilbur J. Cohen Barber B. Conable, Jr. Paul W. MacAvoy Abraham A. Ribicoff A Round Table held on May 20, 1976 under the joint sponsorship of the American Enterprise Institute, Washington, D.C., and The Hoover Institution, Stanford, California THIS PAMPHLET CONTAINS THE PROCEEDINGS OF ONE OF A SERIES OF AEI ROUND TABLE DISCUSSIONS. THE ROUND TABLE OFFERS A MEDIUM FOR INFORMAL EXCHANGES OF IDEAS ON CURRENT POLICY PROBLEMS OF NATIONAL AND INTERNATIONAL IMPORT. AS PART OF AEI'S PROGRAM OF PROVIDING OPPORTUNITIES FOR THE PRESENTATION OF COMPETING VIEWS, IT SERVES TO ENHANCE THE PROSPECT THAT DECISIONS WITHIN OUR DEMOCRACY WILL BE BASED ON A MORE INFORMED PUBLIC OPINION. AEI ROUND TABLES ARE ALSO AVAILABLE ON AUDIO AND COLOR-VIDEO CASSETTES. © 1976 BY AMERICAN ENTERPRISE INSTITUTE FOR PUBLIC POLICY RESEARCH, WASHINGTON, D.C. PERMISSION TO QUOTE FROM OR REPRODUCE MATERIALS IN THIS PUBLICATION IS GRANTED WHEN DUE ACKNOWLEDGMENT IS MADE. ISBN 0-8447-2087-9 LIBRARY OF CONGRESS CATALOG CARD NO. 76-25672 PRINTED IN THE UNITED STATES OF AMERICA OBERT H. BORK, solicitor general of the United R States and moderator of the Round Table: This Round Table, which is jointly presented by the American Enterprise Institute and the Hoover Institution, will consider the issue of welfare reform. The welfare issue appears to have become a perma nent feature of the American political landscape. The problem has always been with us and, as we become increasingly egalitarian, is likely to remain with us.. Our dilemma is that we want the poor to have better lives, but we seem also to be unhappy about the results of our attempts to achieve that goal. Federal spending on income security has risen more than $100 billion since 1964 when President Lyndon Johnson called on his countrymen to wage a war on poverty. Yet, more than 20 million Ameri cans still live below the officially defined poverty level. The public perception, whether accurate or not, is that something is very wrong. To begin our discussion, let me turn first to Senator Abraham Ribicoff, a former secretary of health, education, and welfare. Why, senator, do you think there is so much criticism of the nation's welfare program? ABRAHAM A. RIBICOFF, United States Senate (Democrat, Connecticut) : I think, first, because politicians, from the President of the United States down, have found it politi cally profitable to play the demagogue with respect to the poor and the black. Second, the criticism reflects a guilty 1 conscience of the American middle class because American society has failed to solve its problems. Our annual welfare bill, some $40 billion, is high. But, when you compare that with our gross national pro duct of $1.4 trillion, you find that less than 3 percent of GNP represents the overhead of American society for its failure. Beyond these reasons, I believe the dissatisfaction arises because political leaders really don't have the guts to face up to the problem. MR. BORK: Congressman Conable, as a senior Republican member of the House Ways and Means Committee, can you tell us why welfare costs have skyrocketed in recent years? BARBER B. CONABLE, United States House of Represen tatives (Republican, New York): Well, it is a very expen sive program. The $40 billion the senator mentioned is the cost of only the three largest programs-cash pay ments, food stamps, and Medicaid. There are lots of other programs, as well as severe costs, because of an adminis trative hodgepodge. Also, costs have gone up sharply in recent years primarily because more people now, a total of about 29 million, are participating in these major welfare programs. Welfare is a needs program, and the poor are hit hardest in an inflation as the value of the dollar goes down. Obviously, needs will go up and welfare costs will increase in these circumtances. Third, administration is expensive. It costs over $3 billion a year to administer our welfare program at this point-8 percent of the total cost. All these things have combined to make welfare not just a highly visible part of our governmental system, as the senator mentioned, but a controversial and increasingly expensive part. MR. BORK: Dean Cohen, as a former secretary of HEW, do you think our present welfare system is the most efficient way of helping the poor? 2 WILBUR J. COHEN, dean, School of Education, Univer sity of Michigan : No. The present system is not only inadequate, but it has been built up over the years in such a way that it fails to benefit all the poor equitably. There are better ways of helping the poor, but all of them involve more cost and more problems, economic, political, admin istrative, and otherwise. Part of the reason why we don't have a better welfare system, or a substitute system, is because it is difficult, in a country as large as ours, to agree on what an adequate standard is for, say, both New York andMississippi, and because of various other complex decisions which are necessary to administer a system in a country as big and diverse as the United States. If one were to attempt to develop a better system to meet the needs of the poor, one wouldn't start with the current system. MR. BORK: Dr. MacAvoy, you now serve as a member of the President's Council of Economic Advisers. How well do you think our present welfare programs are meeting their objective of helping the poor? PAUL W. MacAVOY, member, Council of Economic Ad visers: Robert, I'm intimidated by the prestigeand seniority of the other members of this panel. As the youngest member of the panel, it's not my position to judge these distinguished gentlemen, who all played some role in the development of the existing institution. [Laughter.] I might add that they have done that job very well them selves. Their remarks were severely critical of where we now are-in other words, they're tearing down their own edifice. So perhaps I should be in the position of building it up a bit. As I understand the original intent of these programs, it was to help persons who are in no position to help themselves to obtain the necessities of life -food, clothing, shelter, the minimum of transportation, and other goods and services. These persons may have been ill; they may, for one reason or the other, be incapaci tated for various periods. The programs have attempted to help them as partof the American dedication to equality. In good part, the programs have done that. 3 The criticism that I could make, as an economist, of present operations is that they have gone beyond their original intent by helping many individuals who may not qualify under these standards. If we were to take the expenditures that Representative Conable mentioned and distribute them only to those who meet the original qualifi cations, we would provide 130 percent of the poverty level of inco:me; that is, we are spending more than enough to bring above the poverty line every member of the popula tion who is considered poor. That poverty still exists indicates that others who do not meet the original qualifi cations must be receiving substantial amounts of income through the programs for one reason or the other. We also have an extensive federal and state bureau cracy administering the programs-so intricate that it is extremely difficultto findout how much we spend on them. Members of my staff, back in the Executive Office Build ing, are tracing these expenditures now, trying to find out how much goes to which part of which program. They will be late for the session this evening. [Laughter.] But when I left to come to this meeting, they had found well over $2 billion of annual outlay for salaries and other operating expenditures for overlapping federal, state, and local programs.

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