Welfare reform and a new federalism. Letting the states and localities and Washington do what each does best

AS we celebrate the 200th anniversary of the United States Constitution, we should use the occasion to strengthen the federal system that has been the backbone of our governmental structure and to focus on the roles federal, state, and local governments play in American society. Federalism - the system of government in which the nation's power is shared and dispersed among federal, state, and local jurisdictions - is a foundation stone of US democracy. But as the federal government has come to assume more and more responsibilities, these three levels of our government have developed an increasingly complicated and at times highly irrational web of relationships and shared responsibilities for setting policies and for funding, administering, and regulating programs. The federal government often acts in areas where it does not perform well, and yet fails to assume full responsibilities where it should. Reform is necessary, but reform based on rational, pragmatic principles, not on ideology.

The US welfare system is a crazy quilt of varied, often inadequate benefit levels and eligibility criteria, in which the accidents of birth or residence determine a family's level of support. State-by-state variations occur in Aid to Families with Dependent Children (AFDC), medicaid, and unemployment insurance.

The US should reform its inadequate welfare system and correct major distortions in the structure of federalism at one and the same time, for the two issues are inextricably intertwined. We need no longer see the federal and state governments as locked in battle - both are essential to serve the public adequately. Rather, we should take a functional approach to government and ask what services can best be provided at what level of government. Policy, funding, and administrative responsibility should be allocated to that level of government which can assume it most efficiently.

SOME clear principles should guide such a new federalism.

First, principal responsibility should be presumed to belong to the states and localities, unless the problem is a national one, is beyond the resources of individual states, or cuts across state boundaries.

Second, the federal government should have primary responsibility for those functions and programs where a broad national interest, such as the national defense or the national economy, must be served; where nationwide uniformity, administration, or finance is essential; where destructive competition between the states may otherwise occur; where federal oversight is necessary to ensure the protection of civil rights and civil liberties, or to protect vulnerable groups, such as handicapped children; where basic rights, such as minimum income support, are at issue; or where state resources are inadequate.

Using these principles, the federal government should assume greater responsibility for income support programs, where the solution to the problem of low-income Americans demands a national solution and national resources, while states should assume many of the economic development, social service, and infrastructure programs now supported at the federal level.

The National Conference on Social Welfare's Project on the Federal Social Role convened a bipartisan committee on federalism and national purpose, cochaired by Sen. Daniel J. Evans (R) of Washington and then-Gov. Charles S. Robb (D) of Virginia, to examine the federal system and suggest areas of improvement. The Evans-Robb committee suggested that the federal government:

Establish national minimum benefits and eligibility standards for AFDC (a national floor between 75 percent and 90 percent of poverty-level income when combined with food stamps), and for medicaid.

Assume full policy responsibility and 90 percent of the financial responsibility, up to the minimum benefit level, for AFDC and medicaid.

Convert the long-term care component of medicaid into a federal block grant to states, with levels of funding indexed for changes in the prices of the program and the population it serves.

Enhance work and training for welfare recipients.

The Evans-Robb committee suggested the states assume full financial, policy, and administrative responsibilities for a variety of community development, local infrastructure, and social-service programs - such as community development block grants, urban development grants, mass transit, and waste-water treatment programs. To assist states in accepting these federal programs, targeted fiscal assistance grants would be provided to states with low fiscal capacity and to certain localities. States, however, would not be required to fund the federal programs devolved to them.

It is time that liberals abandoned their distrust of states. Today, with better-trained state bureaucracies and more progressive state administrations, states are both more willing and more able to meet greater responsibilities.

Using the Evans-Robb committee's report as a conceptual framework, legislation to apply this new federalism was introduced in the last days of the 99th Congress, in the Senate (S2926) by Senators Evans and David Durenberger (R) of Minnesota, and in the House (HR5698) by Reps. Thomas Downey (D) and Charles Rangel (D), and Frank Horton (R), of all New York; and by Willis Gradison (R) of Ohio. The legislation will be reintroduced in the 100th Congress. This proposal would not affect aggregate federal expenditures, as costs of the federal assumption of AFDC and medicaid would be balanced by savings from programs devolved from federal programs at current budget levels.

This clearly is the direction a new federalism and welfare reform should take.

These legislative proposals would make a number of important advances in the welfare area while sensibly sorting out federal-state responsibilities for the future:

A variety of federal programs would be devolved to the states which can be run as well by them as by the federal government.

Medicaid coverage would be expanded by 1994 to all children 11 years of age and younger living in families with incomes below the poverty line, and for pregnant women below the poverty level. This would eventually cover an additional 1.9 million children from poor families and poor pregnant women. A simple income standard, rather than the multiple criteria used in AFDC, would be used to determine eligibility.

For the first time a national standard minimum benefit, or ``floor,'' for AFDC benefits would be created, reaching 62 percent of poverty by 1994, when combined with food stamps.

All states would be required to join the 23 that already participate in the AFDC-unemployed parent program, thereby promoting family stability.

This approach recognizes that the poor will not improve their lot significantly until they find a place within the regular labor force. Priority is placed on helping long-term welfare recipients become self-sufficient through work.

Fiscal capacity grants would be provided to states and localities with very low fiscal capacity - some 12 to 15 of the poorest states, which do not have the tax base to support the kind of services the more affluent states can provide their citizens.

States would be required to develop and operate work-welfare and training programs, with broad state flexibility regarding the design of the programs, in much the same way the Reagan administration has proposed.

The litmus test for our new federalism must continue to be based on which level of government can most effectively set the policy for a program, provide funding for it, and administer it.

ANEW federalism modeled on this approach accomplishes several important results. First, it establishes greater nationwide uniformity in the benefits provided by federal ``safety net'' programs, smoothing our irrational system of benefits, which vary according to area of residence.

Second, there is a responsible, logical, and rational rearrangement of the division of labor between the state governments and the federal government. Welfare reform is combined with the means of simplifying the intergovernmental system.

A third objective of the new federalism is to ensure that the newly devised sharing of responsibility among the various levels of government makes economic sense at both the federal and state levels. This new federalism is not simply an excuse to switch budget obligations from the federal government to states and localities, as are the Reagan administration's federalism and welfare reform proposals. Nor does it resemble previous Reagan administration proposals that offered no consistent explanation of how or why various programs were selected for turnback to the states or for total elimination.

These proposals for a swap of greater income-maintenance responsibilities at the federal level for greater state responsibility for economic development, infrastructure, and social services must be considered as a whole. It is difficult for the federal government to take on additional income-maintenance burdens in this era of severe budget constraints without shedding an equal amount of responsibilities in other areas. But it is equally undesirable simply to devolve more responsibilities on the states without adequate fiscal relief. Taken together, these proposals provide a reasonable, achievable blueprint, one motivated by an effort to ensure compatibility among the federal, state, and local governments, not by an attempt to bury or destroy selected programs.

Stuart E. Eizenstat, a Washington lawyer, was chief domestic policy adviser to President Jimmy Carter, 1977-81, and is an adjunct lecturer at the John F. Kennedy School of Government, Harvard University. This article is adapted from an essay published by the Center for National Policy.