Finding fat in social welfare may be difficult

If there is any category of the federal budget that will be difficult to squeeze -- for political, economic, and moral reasons -- it is the so-called means-tested entitlement programs that provide a basic ``safety net'' for the nation's poor. President Reagan in his first year in office made deep cuts in social programs. And though Congress later resisted further reductions and even restored some programs, federal spending on means-tested programs has begun to decline as a percent of the gross national product.

In effect, the President has removed the least needy from the welfare rolls. Between 500,000 and 600,000 families have lost their eligibility for Aid to Families with Dependent Children (AFDC), as well as for medicaid. About 1 million people lost eligibility for food stamps. Some 4 million low-income people living in public housing are paying increased rent, which will reach about 30 percent of income by 1986.

Now the White House is considering further reductions in programs for low-income Americans.

Proposals being talked about for fiscal '86 include cuts in AFDC, child nutrition programs, student aid, medicaid, and subsidized public housing. Also, the supplemental food program for women, infants, and children (WIC) would be frozen.

Democrats and some Republicans in Congress, however, are expected to oppose a further assault on benefits for the lowest-income groups, who have a meager standard of living at best. Economists, too, are skeptical that the administration can find significant ``fat'' in means-tested programs, except perhaps in administrative inefficiencies, particularly in medicaid.

``Almost anything that could be classified as `fat' '' has been cut ``and gone beyond,'' says economist John Palmer of the Urban Institute, a private research group. ``There were cuts in the first round that had a policy rationale -- for instance, not encouraging people to stay on AFDC when working. But now we're getting to the point where the administration's motivation is purely budgetary. You could squeeze a few more billion, but it would be a drop in the bucket compared with middle-class entitlement programs.''

What the public does not always realize is that social welfare constitutes a relatively small share of the federal budget. In fiscal 1984 the government spent $62 billion on means-tested programs, or 7.4 percent of the budget. Of that amount, AFDC accounted for $8 billion; medicaid $20 billion; food stamps $12 billion; SSI (supplemental security income) $9 billion; veterans' pensions $4 billion; child nutrition $3.5 billion; and guaranteed student loans $3 billion.

Measured against the $62 billion spent for means-tested programs, outlays for social security and medicare -- which benefit largely the middle class -- totaled $175 billion and $62 billion respectively. Defense spending, for its part, came to $228 billion and interest on the national debt rose to a staggering $111 billion.

Moreover, while means-tested programs account for less than 10 percent of the budget, they have taken 30 percent of the total budget reductions to date, according to the Congressional Budget Office.

Budget analysts do not quarrel with the motive of reformers to eliminate waste from social programs, encourage people to reduce their dependency on welfare, and improve efficiency of programs.

It is recognized, too, that the general public in 1980 felt the time had come to put a break on the spiral of welfare spending generated by New Deal and Great Society programs. Even some Democratic leaders today fault their party for a dearth of ideas about how to reduce welfare dependency -- an objective that President Reagan has tackled.

But it is grossly unjust, Reagan critics say, to hammer at the waste in social programs for the needy and virtually ignore the far greater amount of waste in other categories of the budget, above all defense.

It is also unfair not to apply the same cost-cutting standard to middle-class entitlements, they add.

``There will always be a level of waste in welfare,'' says one social-policy analyst, ``but you can get at the waste only at terrible human cost. And look at the defense contracts -- and the enormous waste in them.''

Most troubling is the fact that during the Reagan presidency, poverty in the United States has continued to increase, as has the gap between rich and poor.

Despite predictions by Budget Director David A. Stockmann that the poverty rate would ``decline dramatically'' in 1983, the rate shot up that year. According to the US Census Bureau, 900,000 people were added to the ranks of officially poor that year, bringing the national total to more than 35 million poor people, or 15.2 percent of the population. In 1979 the figure was 11.7 percent. Today one of every four children lives in poverty, defined as an income of less than $10,600 a year for a family of four.

Nor, contrary to public perception, does everyone in poverty receive federal help. Of the 35 million poor people in the US, at least 10 million receive no benefits of any kind.

The recession helped account for the surge in poverty figures, but the Reagan budget cuts contributed substantially. According to a widely acclaimed study by the Urban Institute entitled ``The Reagan Record,'' macroeconomic conditions -- mild recession and high inflation in 1980 followed by the deep recession of 1981-82 -- and the Reagan reductions in social spending have been about ``equally responsible'' for the rise in official poverty since 1979.

The ``administration's argument about the efficacy of economic growth as a remedy for poverty appears overly optimistic,'' says the study. ``Simply put, the problem is that a growing majority of the poor are in households that benefit little from economic growth.''

Many social observers see poverty as one of the most pernicious social problems now facing the country.

``It's the most scary thing we ought to be concerned about, because we're locking in people in growing numbers and you see an increasing disparity between the upper and lower quintiles of society,'' says Tom Joe, director of the Center for the Study of Social Policy and a former official in the Department of Health, Education, and Welfare (now the Department of Health and Human Services). ``We seem to have no massive initiative to create jobs. There is a split society on the horizon, and that's a very serious problem.''

The administration maintains that it has simply retargeted benefits, directing them to the poorest people. The proportion of the poor receiving benefits has increased, it says, and the number of nonpoor recipients has fallen. But independent analysts say these claims are exaggerated. Regarding the contention that aid was taken from the less needy and given to the more needy, the Urban Institute study states: ``In fact, this is not the case; in no entitlement programs were real [inflation-adjusted] benefits increased for the most needy when eligibility levels were reduced.''

The problem of the nation's poor is further complicated by the fact that, except for food stamps, the states run the means-tested programs and match or add to money provided by Washington. The severe federal cuts in social programs have shifted more of the burden for social welfare to the states, many of which have in turn shifted it to local jurisdictions. The net result, experts say, has been a deterioration of primary care for the most indigent.