Richard Nixon and the Origins of Welfare Reform

Richard Nixon and the Origins of Welfare Reform


My name is Tim Naftali and I’m in the wrong place. I’m very pleased to be here at the School of Media and Public Affairs at George Washington University. I am the Director of the Richard Nixon Presidential Library and Museum in Yorba Linda, California. I’m playing an away game today. We are delighted to be a co-sponsor of today’s panel about welfare reform. The 1960s and 1970s were a period when Democrats and Republicans, young Democrats and Republicans came to this city, Washington, D.C. to make a difference, to make their government part of the solution, not part of the problem. That generation of Republicans and Democrats continued to shape policy in this city for years and to produce some of the best governmental initiatives our country has ever seen. Today, we’re gonna hear about an initiative with regard to welfare reform that started in reaction to a Democratic effort, something known as the War on Poverty. It developed under a Republican President, Richard Nixon, and was finished under a Democratic President, William Jefferson Clinton. This is a truly bipartisan story. We don’t hear enough of them here in Washington, D.C. And it is our pleasure, with the Nixon Library, to be co-host of this event. One more thing I wanted to mention to you. Just recently, the last truck arrived with the millions of pages of Richard Nixon’s Presidential materials which have been sent from the National Archives building here to our facility in Yorba Linda, California. Three years ago the Richard Nixon Library became a public library. It is part of the National Archives family of presidential libraries and as such can now have the presidential materials. Consistent with the movement of the materials to our research room, and their reopening July 1st. It is our commitment to non-partisanship and the study of history. We are interested in civic literacy. We want people to learn about their government. It doesn’t matter whether they like or dislike any particular president. What matters for us as Americans is that you participate in the system, you learn the Constitution and you vote. The new Nixon Library is committed to those objectives. One more thing I’d like to add. On July 1st of this year, to celebrate the reopening of the research room in Yorba Linda, California with President Nixon’s presidential materials, we are also opening some spectacular materials that have been closed up until now. Consistent with what you’re hearing today, we will be opening the Daniel Patrick Moynihan White House collection, which has never yet been processed. It will be opened to the public and you’ll understand the importance of Daniel Patrick Moynihan as this conversation continues. It’ll be open to the public on July 1st of this year. And we hope that you will come to Yorba Linda, California, and take advantage of the materials that we have now at the Richard Nixon Library. It’s with a great deal of pride that I introduce my friend, Geoff Shepherd. Geoff Shepherd was an Associate Director of the Domestic Council staff in the Nixon era. Geoff Shepard has worked with me to build these domestic policy discussion sections in order to give people a sense today of the essence of the Nixon domestic policy approach and why those efforts have some legitimacy and connection to the issues that face us socially and economically today. Geoff Shepperd will represent the Richard Nixon Foundation, which is our partner in these domestic policy discussions. Thank you very much and enjoy today’s seminar. It will be wonderful. Thank you, Tim. And to all of you again, welcome to what is our fifth forum on Richard Nixon’s domestic initiatives, and these are co-sponsored by the Nixon Library and the Nixon Foundation. This one, being at GW, is also co-hosted by GW, but it’s our fifth, fifth one, we do these about every month, and it’s a celebration of the papers being moved to the Nixon Library in Yorba Linda. Our first panel was in January. We did that on domestic policy formation, the creation of the Domestic Council and the Office of Management and Budget. We did one in February, which was the efficient use of the President’s time. We had people describing how you inform, advance, and schedule the President. We did one in April on Earth Day out at the Nixon Library on environmentalism. And then we did one late last month on the mysteries of Watergate. And this our fifth panel. This is Richard Nixon and the origins of welfare reform. And what you’re getting here – we think it’s truly unique – you’re getting the people who generated the papers that are being opened to the public at the Nixon Library. So it’s…if you make the analogy to the Civil War, you can research all the documents, but this is an opportunity to hear from the people who created the documents, the news or the developments behind the scene. And for today’s panel, my job is to introduce Lee Huebner, who is our moderator. Now, because the panel is being filmed, we’re going to have questions, we’re going to have time for questions at the end, but the questions are going to be submitted in writing, so that Lee can ask them of our panelists. Lee, come out here and join me. Lee was a speechwriter, all of us, almost all of us on the Nixon staff were young people, and Lee was a young speechwriter. Then after his term on the President’s White House staff, he was publisher of the International Herald Tribune for fourteen years. And then, he returned to this country, and he’s been a professor, both at Northwestern, and now today at George Washington University, and for the past several years up until the summer when he made room for others, he ran this School of Media and Public Affairs. So we’re thrilled that Lee has agreed to act as moderator today for our panel. Thank you. Congratulations and welcome! Thanks so much Geoff and a welcome to all of you. Special thanks to both Tim Naftali and Geoff Shepard. It’s really a pleasure and an honor to be part of this event. I would extend our collective appreciation, I’m sure, to the Nixon Foundation and the Nixon Library for creating and supporting this legacy series. And I welcome you also, if I may, on behalf of George Washington University and the School of Media and Public Affairs. We’re really pleased to join in a program of this sort. We’re obviously fascinated by the American Presidency, past, present , future, only in part because we’re located here, as we always like to say, just four blocks from the White House. At this point I’d like to introduce and welcome to the stage the four panelists whom Geoff has just described to you, the people who were really present at the creation, responsible for a good deal of the creation of the Nixon welfare reform proposals. And I’ll have more to say about each of them later, but if they come out now, in whatever order they like, I think they’re…you’re first going to see Robert Patricelli, then Jodie Allen, Paul O’Neill, and, John Price, well, great, they’re all here, and that takes, that meets the first criteria area for success. I know they’ve been talking a bit this morning and in emails leading up to today about their efforts to rummage through basements, and filing cabinets, and attics, and finding a variety of documents that have refreshed their own memories of this very exciting chapter in their lives, and in all of our lives, and in the nation’s life for that matter. I’ve been asked to set the stage for this discussion. I’m going to try to do that in a very general, brief way, by taking you back, if you don’t mind 40 years. 40 years ago the United States in the late 1960s and turning into 1970 was a particularly unsettled moment. The Cold War was at its height, Vietnam was raging without apparent end, the economy was mired in what we came to call stagflation, domestic tensions were really boiling over, fired by growing sense both of racial and generational separation, division. It was a time of some exhaustion, I would say politically. Coming perhaps surprisingly and some would say, perhaps predictably, in the wake of Lyndon Johnson’s war on poverty and his enormously ambitious Great Society initiative, huge expansion of the federal role in addressing social challenges which seemed to be very tangled and, indeed, intractable. The year of Richard Nixon’s election, 1968, was a, the year, that you look back on with particular, in a particularly sober way, it began with a shattering Tet Offensive in Vietnam, President Johnson’s announcement that he would not run for office again, assassinations of Martin Luther King, then Robert Kennedy, a summer of domestic violence. So it was not a very easy time to become President. And more than that Richard Nixon, we might observe, came to the Presidency probably in the weakest political position of any President in over a century. He was elected with just forty-three percent of the vote in 1968, in a three way race. He was the first new President since Zachary Taylor in 1848 to have both houses of Congress controlled by the opposition party. In his first year in office, he wrote in his memoirs, he submitted forty proposals to Congress. Only two were enacted. Two of his Supreme Court nominees were rejected. And he was burdened of course by his own public image as a sharply partisan figure. And I think also by a kind of embattled sense that he had, that not only Congress but also the Federal bureaucracy and the national media were pretty much opposed to him. So it seemed all the more remarkable at that time, and against that background. And I think to many it’s still rather confounding, hard to figure out, that on August 8th of 1969 just six months after taking office, the new President went on national television to announce a welfare reform program, and it’s a program which historians since, of all persuasions, have often described as perhaps the single most creative domestic policy initiative to come out of the White House since the New Deal. Nixon had just returned from the Pacific that week. He was out there among other things to welcome the astronauts as they returned from the first moon landing, and his welfare reform speech on August eighth picked up on the theme of space, and the moon, and the Apollo mission by suggesting that what the nation should be doing at this moment was to lift its sights, and I think that’s what the family assistance plan did. Over the next three years it was debated and discussed heavily, it came under very heavy fire, mostly from the conservative side of the spectrum at first, which had been fully expected, but later from the liberal side of the political community as well, and Nixon said that was a big surprise to him. Conservative opponents were disturbed by several things. They felt the plan, which was absolutely a floor under income for all Americans, would expand the welfare roles initially by some 13 million people, I think that was Nixon’s figure. It was a huge budgetary gamble on what was a rather speculative experiment at the time. It was a brain child as the right side of a so-called Kennedy Democrat, Daniel Patrick Moynihan, a Harvard Professor at that, whose appointment as a White House adviser itself has been a fairly dramatic Nixon surprise just after his election. Now the administration, of course, responded to all of this by pointing out that the existing welfare system was really an impossible, inequitable mess. A colossal failure was the Nixon phrase. Fostering a culture of dependency, and the new plan was structured to provide incentives to work. You need a job and work related requirement, work fair. It was Nixon’s term for it. The White House pointed out that the plan had conservative roots. The concept of a negative income tax after all had been quoted by the conservative economist Milton Friedman. And, perhaps in Nixon’s mind, this was as important as any other argument, was the fact that it would replace welfare services with cash payments to the poor. And thus would presumably at least eliminate a vast swath of welfare bureaucracy – it would wipe them out, Moynihan reasoned, argued that to a very receptive Richard Nixon. In a sense Nixon’s conservative argumentation for the plan. Some people have said it was almost too effective, as a lot of liberals listened in and decided the plan was too conservative. The requirements for work were too punitive,the levels of support too meager, and it was perhaps part of this mix as well, an unreadiness to believe that Richard Nixon of all people upstaged them, in a sense, by stepping up to the welfare challenge so aggressively. In the end, as you know, the proposal failed. Passed twice in the House of Representatives. It was never voted out of the Senate Finance Committee. It was, as Nixon said in his memoirs, an idea ahead of its time. Well, how was this plan created, very complex process. What does it tell us about Nixon’s own motivations and attitudes concerning domestic policy in general and poverty challenge in particular? What has been its long range impact, its continuing relevance, all of these are questions, which, I’m delighted now to turn over to this wonderful panel. These were people who were there at the time. And, not only there, but centrally involved in the process. And I’ll just say a little bit about about each of them and we’ll let them go to it. And I’ll introduce them in the order in which they will speak. Better do it that way. John Price is just to my right. He was an original member of Pat Moynihan staff at the Nixon White House. A key staffer on Urban Affairs Council, the person who I think as much as anyone really crafted the original Family Assistance Plan. As a culmination of his work there he has since had a long and distinguished career in banking. He was recently with the Chase Bank and now heads the Federal Home Loan Board in Pittsburgh, this is John Price. Next to him is Paul O’Neill, a key figure in domestic policy matters for the Bureau of the Budget as it was called- beginning of Nixon’s term the Office of Management and Budget after it was reorganized-became Deputy Director of Management and Budget. Domestic policy initiatives of that era of which there were many and that included of course the Welfare Reform. Paul has since, as you know, become Chairman and CEO of the Alcoa Inc. Company and was the first Secretary of the Treasury in the George W. Bush administration. I think it said you were the 92nd Secretary of the Treasury of the United States. Is that seventy-second? Well my handwriting must be off. Well, the seventy-second, maybe someday be the 92nd as well. Next to Paul is Jodie Allen. Jodie is Senior Editor of the Pew Research Center. She joined the Pew Center from US News and World Report where she was a Managing Editor and the Business Editor and before that she was at Slate Magazine and someone arose and before that she was editor of the Outlook section of the Washington Post. Commentary section, writing again in the feel of editorial writing and business reporting. And then comes Bob Patricelli. He was the Deputy Assistant Secretary and later Deputy Undersecretary of the Department Health, Education, and Welfare in the next administration and he too was right at the heart of the group that was putting together the Welfare Reform initiatives. He later founded Value Health, where he was the CEO until its acquisition in 1997. He’s now Chairman of Evolution Benefits Inc. in New Haven, Connecticut and of Women’s Health, USA. I think I did that in the order you’re seated. It’s not necessarily the order in which you’re gonna speak, but we’ll work that out as we go. I think that’s all I need to say at this point. It’s a real pleasure to welcome this group and to open to them the opportunity to talk about this. It’s a very special moment in the creation of domestic policy and an important moment in… as we think about ways in which government tries to play a constructive role in social progress. John, do you want to start? Thank you Lee, I’d love to. I’m going to talk about three or four main points and obviously the discussion is going to go on a lot further than that. First of all, I’d like to talk about what I would call the provenance or the background or the ancestry of the proposal. And secondly, I’d like to talk about the unique chemistry and relationship between Pat Moynihan, who in so many ways was a crucial figure if not the galvanizing force on this, and the President, and Richard Nixon. Then, as part of that, I’d like to talk also about the structure of the Council for Urban Affairs, which was a Nixon effort to create an analogue to the National Security Council, and how, for the most part, that was the platform or the venue in which this was thrashed out until it couldn’t contain the issues, and they sort of seeped out into all kinds of fascinating interpersonal rivalries and very different views among the Cabinet and various White House advisers. Finally, as part of that last point, I’d like to say that the whole welfare debate and the utility of the Urban Affairs Council paved the way for the ascension of John Ehrlichman, who by the time that the Congress had gotten around legislatively to create the Domestic Affairs Council, John was in position as a trusted confidant of the President, someone who was bringing the threads together in a more orderly process. So in that order let me, let me start. There will be a school of thought and it’s in books like the Nixon’s Good Deed book by the Burkes, Vincent and his wife Bea, that the Family Assistance Plan of Richard Nixon’s was merely the outcome of an effort and a mental exercise started by Sergeant Shriver in President Johnson’s Economic Opportunity Office and through various personalities who worked very hard on that, found its way into the incoming administration’s work over at the Department of Health, Education, and Welfare. Not entirely true. Because, in fact, as Lee suggested by mentioning Milton Friedman among others, there was a long Republican patrimony to this idea. Milton Friedman wrote a book called “Capitalism and Freedom” in 1962, which first aired the idea of a so-called negative income tax, which he saw as to be administered through the Treasury Department, basically doing away with the welfare bureaucracy and providing a floor under family incomes. The Republican ancestry didn’t end there. The Ripon Society, of which Lee was Chairman and I briefly in my law school career was the only paid employee of Ripon and then later Chairman of it, and Bob Patricelli. The Ripon Society was the forum for the development of a negative income tax proposal in 1966 and 1967. The Ripon affiliate down at Yale Law School, the Trumbull Society, first put this forward and then went so far as to draft a model statute, which was published in the Yale Law Journal in the first quarter of 1968, but which had been sent along to various members of the House by Dick Zimmer, later a Republican member of the House from New Jersey, who was the person who put that statute together. So there was some Republican ancestry. Then the other streams that were coming together were basically the big state northern governors, who favored a change in national standards. What that meant was that there would be some kind of a federal standard imposed so that the very low paying states, principally in the south, would have to pay more, that presumably migration from those low paying districts to the New Jerseys, the New Yorks would be curtailed, or at least minimized. And that was bought into in a big way by the Nelson Rockefellers and the others, and that point of view found its way into the Nixon post-election transition task force on welfare, which Bob Patricelli was a member of and it was chaired by Dick Nathan. Moynihan, interestingly, himself, came from yet a different school. And he was for the sort of European style family allowance or capitation grant where the idea was you’d give a thousand dollars to every child or every man, woman and child in the country and it, to him, was a very tidy idea he, in a piece in the public interest in the spring of 1968, championed the idea. He also tried to get the poverty program, Office of Economic Opportunity, to fund an experiment on that family allowance. So you had these various competing streams that finally came together with Nixon. And then let’s talk just for a second about the Nixon/Moynihan relationship. They needed each other and to me it was fascinating, one of the most…my favorite pictures that I took away from those years there is a wonderful picture of the President with his head thrown back, laughing, and next to him standing Moynihan with a sort puckish, impish look on his face, obviously having made a quip or an aside to him that just tickled Nixon. They had a very affectionate, very mutually respectful relationship, which went a long way in the dynamic of the issue we’re talking about. Moynihan was sort of a player to Nixon’s need and it worked the other way around as well. Almost like the Kissinger-Nixon relationship over things like China, and as with China, the Family Assistance Plan was a break-out, mold-shattering initiative, a sort of Disraelian interruption in American politics. And while Nixon never wrote novels about mid-Victorian social life the way Disraeli did with Sybil and Coningsby, nonetheless, as Lee said, he was a very acute and very deeply interested observer. What did all this mean? What wound up was Nixon said, “I want…give me a domestic version of a National Security Council,” which formulated, since the 1947 National Security Act, national security policy. So what we did was, Moynihan sent me to study what had been done under The National Security Council. So I interviewed Eisenhower alums. And I talked with folks in departments which had somewhat analogous powers, but in the domestic area. For example, at the poverty program, there was something called the Economic Opportunity Council, which was in statute, something saying the head of the poverty program had a council to which he would invite his peers for them to make policy on poverty. And Lyndon Johnson, the President, came to that meeting once. A second meeting was never held. It could never happen. The Secretary of Housing and Urban Development had a so-called convenor power to bring his Cabinet peers together so they could formulate urban policy. It was never exercised. So I wrote a memoranda to the President through Moynihan and I said, based on this experience which I cited, I said, “Cabinet members are heliotropic. They like to turn and face the sun and not each other. You’re gonna have to sit in the chair.” And Nixon did. For the first 18 months he sat chairing 21 out of 23 members of his Urban Affairs Council. I won’t take more time, except to say that, as you’ll see from the conversation, while the discussion began within this new structure with a tiny staff, and cutting its teeth after a while it began to seep out into all kinds of different lines of communication, different memos being thrown over the transom into the President’s office. But it started there and then John Ehrlichman was, because of his long-standing role with the President, was gradually able to assume a crucial role as an arbiter of these conflicting ideas. And he solidified his position. And then when the statute passed July of 1970, he stepped in as the Staff Director for the Domestic Council. You want me to be next? Go next, if you would. All right, so let me set the stage for you. In 1967 I was recruited to be on the staff of what was then the Bureau of the Budget, which you all now know as the Office of Management and Budget, and as a career person, with the turn of the election, the question for the executive office staff was, how do we support the new President and the people that are coming with him? There was an inside notion in the Bureau of the Budget – I presume it’s still there to a degree – that as administration changed no matter what party the role of the Executive Office staff, in particular the Bureau of the Budget, was to figure out the most efficient, effective way to do whatever the President said he wanted to do. Including if he decided, the inside story was that if the President decided he wanted garbage stacked on the White House steps, it was up to us to figure out how to do it in the most efficient and effective way. And so as the election was concluded and President Nixon was elected, there was a reaching out on the part of the staff to understand what the new President was committed to. And in those days, I think maybe you can find copies of this, not easy to do, but you can find two small documents. One was called “Nixon on the Issues” and the other is called “Nixon Speaks Out.” And these are collections of things that President Nixon had said most recently in his public career during the campaign, conveying his thoughts about important issues of national and international affairs and how he thought we should be proceeding. So, for those of us who were on the career staff, these were must-read documents. And in these documents we found lots of things, but particularly to these domestic policy issues, something I remember for myself feeling a great positive feelings because in the lexicon of the times, the Nixon thoughts if you put them all together were part of a system of thinking, they were not random notions about one area of policy or another. While they addressed specific issues, they tied together in a neat, logical way. And subsequent to this initial period, the administration put a capstone over these ideas called the New Federalism. And there was a great appeal to me and I think to my colleagues in the Bureau of the Budget, because this was an organized thought process that answered in a way the questions about what’s the role of a federal government? And by default, what then is the role of state governments and local governments and the private sector, and how do we sort those out? And importantly, related to that, how should we view the collection of revenues from people across the country in order to meet a test of equity in how we thought about raising the revenues that were necessary to accomplish clear purposes like national defense and international security, but also to deal with questions that were ever more jumbled in the period leading up to 1969 about domestic policy. And, in these ideas, I think was a Nixon, this was not a staff thing, this was a Nixon set of ideas about how the world should work in an ideal sense on issues of domestic policy. And I think finding, as he examined what was going on in the country, that it was fundamentally wrong for Federal tax dollars to be dispensed in such a way in the welfare system that states like New York and Wisconsin, who have significant fundraising power to pay welfare recipients, a family of four $263 dollars a month, and in Louisiana and Mississippi people were getting $39 a month. It wasn’t that he thought they ought to be equal, but he thought that there was real injustice in the way the system worked and that it was not properly designed. And allied with that were a set of ideas in this August 8th message, 1969, it was mentioned. Not only did he talk about welfare reform, he talked about redesigning the role of the Office of Economic Opportunity, which was a creation of the Johnson administration, that was in those days run by Sergeant Shriver, a Kennedy brother-in-law, and turning it from being a fundraising mechanism for every kind of locally designed social action cause, including attacking the federal government, to redesign it so it could be a laboratory for testing ideas about how to function in our society, and adopting the ones that proved out and discarding the ones that didn’t. In addition, importantly, in this August 8th message was a significant passage about recreating federal assistance programs for job creation and job and training support, and finally, a significant passage about so-called “revenue sharing.” This was the notion that the Federal government was by design and practice the most efficient raiser of revenue among all the governments. And so we should use the power of being able to raise money at the federal level, but we should redistribute it to state and local governments so that people closer to the people could make the decisions that were relevant to state policy and local policy without interference from the federal government. And that the formula should be designed in such a way that it created some equilibrium, or equity in the way the funds were distributed, and rewarded those states who made a significant revenue effort related to their ability, their economic position to raise money so that if you were a very low income state and yet, you were doing a significantly higher percentage revenue raised and support public needs in your state that ought to be recognized in the revenue sharing formulas. So these four ideas were knit together and in a way that I think stands the test of time if you look down history and see where we’ve been. While the Family Assistance Program never got enacted in its own right, the OEO was reorganized. Revenue sharing came into place for a period of time, until it was scuttled because there was no support in the U.S. Congress for it because the members of Congress didn’t think they got credit for redistributing federally raised revenues. And the job creation programs were modified in a way that in some important respects still exist today. Thank you, I think Bob was going to go next and then Jodie. Well thanks Lee, and thanks very much to the library and the foundation and GW for giving us an opportunity to get back together again and talk about what was really an extremely exciting period in formulation of domestic policy. In 1969 I had come out of Senate committee staff. I had been working for Senator Jacob Javits in New York and was minority counsel of something called the Subcommittee on Employment, Manpower, and Poverty. And I had been covering the Office of Economic Opportunity in a variety of urban programs for the Senator and when President Nixon was elected, I was one of just a handful, I can tell you, of Republican staffers who were available to come off the Hill and enter the new administration. Perhaps it was because I’d had a rather cross-cutting assignment on the Hill, my job at HEW was as the Deputy Assistant Secretary in the Planning and Evaluation Unit. Jodie was there as well, and my particular job was so-called intergovernmental relations. I was the coordinator with the White House. I was the guy who was supposed to pull things together in response to White House requests and help to develop analyses, but the real experts were, like Jodie, down in the career unit of the department. I was 29 years old. What an unbelievable opportunity for somebody to be involved in, in trying to coordinate major policy developments for a new President. I’m just going to talk about one particular period in the development of the Family Assistance Plan as an example of an important point, I think, about policy development and the example is the extremely important period from roughly April of 1969 to June of 1969 when the fundamental battle was being waged, at the Cabinet level, for the heart and soul of the Nixon welfare reform program. This was a process unlike anything I think we’ve seen in the Federal government for at least 2 or 3 decades. A policy, a pitched policy battle waged by Cabinet members, generously reported by the press. People weren’t so terribly concerned about leaks in those days. With, as you will see, strongly felt positions and occasional bursts of humor. Before that period, before April of ’69, we had had the so-called Nathan task force report. I’d been a part of that, that John referred to, and that report had called for, among other things, welfare reform based on a concept of national standards. If you could imagine aid to families with dependent children was all over the lot in the states, barely noticeable levels of payment in some states, big, big gaps in coverage, no uniformity, no safety net. And the Nathan report had proposed basically a national standards program and a gap filling program for the current welfare programs. John and his colleagues at the Urban Affairs Council had begun to organize debate around that. And from the variety of sources he described, the beginning of a second option, then called the Family Security System, came on the table. And on April 4th 1969, Secretary Finch issued a quote “draft,” of the Committee on Welfare, the Urban Affairs Council offering two options to his Cabinet colleagues and to the President. A national standards plan based on the Nathan report, and a first version of FSS, the Family Security System. And that launched, that launched the circus. Immediately thereafter, Counselor to the President Arthur Burns, sent around a memo called “A Short History.” No, excuse me, this was Martin Anderson, staffer to Arthur Burns, sent around a memo called “A Short History of the Family Security System” in which he went back into Victorian England to debunk the idea of basically a negative income tax. His boss, Arthur Burns, then on April 21st- and these are memorandum going to the entire Urban Affairs Council- so the Cabinet secretaries came up with an alternative proposal. It was a critique of FSS and a counter proposal based on national standards, but induced by revenue sharing, so if a state voluntarily expanded its payments under the welfare programs and plugged gaps, they would get benefits through a federal revenue sharing program. That proposal was delivered to Secretary Finch with the following delicious note to Secretary Finch, quote: “If you like my plan and want to, and want to call it the Family Security System, I would have no objection whatsoever.” So things began to heat up. On April 22nd, Pat Moynihan, supported I’m sure by John, and John may want to go into this, wrote a response to Marty Anderson which won the prize for the best memo of this entire period. And I will just say one sentence. John, you can go on on this, but this was a memorandum from the President and it includes this line. “It seems absurd to trouble you with controversies concerning the post-Napoleonic economic history of Britain, comma but if you like dot dot dot.” And the academic Moynihan then took off on Anderson and the proposal. On the same date, Bureau of the Budget Director Bob Mayo wrote his views to the President basically signing up in support of the Burns Plan and condemning the Family Security System. On the 24th of April, the Vice President pitched in and I just want to read you couple of things from the Vice President’s memo, Spiro Agnew. He was decidedly against that Finch FFS proposal and he went so far as to say he didn’t really think that welfare was appropriate in many respects, quote, “By limiting aid to families with dependent children to those cases where both parents are present, I believe you would assure a better chance that the money would be spent productively. Where there is no father in the house, the mother should be given the option of either accepting work training or staying at home with the children. I want to argue most emphatically that income supplementation for families headed by a female alone gives us no reasonable assurance that the money provided for the child would be spent for the child’s benefit.” So, he didn’t believe in welfare for single parent families. So, he was somewhat to the right of the Burns plan. On May 7th the battle was joined by Secretary of Defense Mel Laird. You might say, “Wow, what’s the Defense Department doing weighing in on Welfare reform,”-that was this system that Moynihan and John were orchestrating- and Laird basically said, “I don’t like either of these plans. They’re not well thought out, we need a study, a point of commission and tell it to report at the end of 1969,” on the same date Secretary of Commerce Stans wrote his views. And he was opposed to both plans and said to the President, “Let’s find some other alternatives.” On the same date, White House Staffer Peter Flannigan weighed in and came out against the Family Assistance Plan, which prompted Assistant Secretary Luke Butler of HEW to write me a note: “What the hell does Peter Flannigan know about welfare?” On May 9, Paul McCracken, Chairman of the Council of the Economic Advisers, delivered a technical paper that examined the intricacies of the Family Security System and food stamps. I think Paul was in the room for a lot of that discussion and ultimately, on May 24th, wrote to the President favoring the Burns plan. And then lastly, on June 6th, John Lindsey, Mayor of New York, wrote an extensive memorandum to the President, no doubt drafted by his welfare commissioner, Mitch Ginsberg, who had been on the original Nathan task force, generally endorsing the Family Security System, but saying it didn’t go nearly, nearly far enough and it didn’t provide enough money for the big urban states. So at this point the President is confronted with the following line-up in his Cabinet. He’s got Moynihan and Finch in favor of the Family Security System, he’s got Burns, Agnew, Mayu, McCracken, Stans, Laird, Flannigan all against. So a clear majority of the Cabinet against this proposal. And then on June 10, Secretary Schultz wrote a critical memorandum. He hadn’t weighed in directly as yet, Secretary of Labor at the time, George Shultz. A one page memorandum, followed by a lengthy technical analysis in which he said, “I’ve examined the present welfare program and the proposed FFS system and am attaching a summary and a paper which reports results. The paper describes many uncertainties surrounding the future effects of the FSS. After analysis of these uncertainties, I recommend three critical changes in the FSS as originally proposed.” One was an incentive to work, he wanted to disregard the first 20 dollars a month of earned income in terms of whether you lowered the FSS payment. He wanted an expanded program of childcare programs and training. And all of that was going to cost another billion and a half dollars or so. And it was the Schultz memorandum that basically, I think, broke the logjam, because it combined with the negative income tax-rooted FSS, a work incentive program that made this palatable for the President, and I think some of the more conservative folks in the administration. And then all of this came finally to a climax in August in a major presentation and Cabinet discussion at Camp David. Three days later the Presidential address was released on August 8th. What’s the message here? The message is the value of a free and open debate at the Cabinet level among diverse points of view: People with different philosophical backgrounds orchestrated by a President that keeps his own point of view quiet until the end. He got out of that, the President got out of that, a much better proposal. He got out of that in anticipation of what the arguments were going to be for and against his proposal. And he got out of it actually a Cabinet and importantly a sub-Cabinet level throughout the government that had worked together on something. They had actually created a Presidential policy. And I can tell you people at my level and Jodie’s level, all around in the multiple departments were very excited to be part of this pretty open debate. Contrast that, ladies and gentlemen, with what you’ve seen for the last 20 or 30 years in Washington. There’s not been anything like it. Cabinet government is gone. Policy is formulated by the White House. More recently sometimes thrown over the fence to the Hill. But nothing like that carefully orchestrated debate appears to produce major policy. Bob thanks, that’s just a marvelous view. Other thoughts have been certainly in the anatomy of our decisions, at least in this instance. Jodie do you agree? Were you very excited? I certainly was and I really just want to underline some of the things that Bob and others have said before. My perspective was a more lowly one than those of my fellow panel members here. But I think it’s important, one of the important differences to keep in mind is that government, at least at it’s top levels, was much smaller in those days. And, as Bob has mentioned, Cabinet members actually played an important role. It sort of, to some degree, disappeared from sight in recent decades. But this smallness meant that even a lowly GS something or another like myself, a program analyst, could deal on a day-to-day basis with people like Paul O’Neill and Bob Patricelli, and even their bosses, Dick Nathan and Jack Feniman and Lou Butler, the Assistant Secretary. And Jack Feniman was the Undersecretary of HEW and even with the two secretaries, Robert Finch and, to a greater degree, Elliot Richardson. It was not only smaller, but it was a great deal less partisan. I was struck by the fact. I had come into government, come into HEW, during the last year of the Johnson administration. But the people that I worked with then, the Assistant Secretary Alice Rivelan, Allan Brookins, the Deputy Assistant Secretary Worth Bateman who, together with Jim Ladieu at OEO, had done early work on negative income tax and started the income maintenance experiment in New Jersey. I found that there really wasn’t any discontinuity in interest and belief among these people. It just… it isn’t that everybody agreed. It was just that we felt they were intellectually interested and how shall we say, they were ideologically confirmed. But it wasn’t a partisan thing. It was, the distinguishing character of those days at the policy making level was an interest in data, in facts. It was possible, as has just been described to you, for facts and analysis to be brought forth to power policy makers, all the way up to the President and for those policy makers to actually change their mind. I think John will talk a little bit about how Moynihan himself underwent a change in his thinking about how welfare was best approached. I know that even myself, while at the time when I was making computer runs and drafting testimony, I was very much committed to family, what FFS became, the Family Assistance Plan. When did that happen Bob? Just before the message, I think. It was very late. It was in the last couple of days. Yeah, yeah, we all have to talk a little bit about why it was. It was a branding question, or naming, labeling. I was a definite believer in it. As it worked its way through Congress, and I think I’ll just talk about this more too, it became more of an instrument of fiscal relief than of help for the working poor. And I began to have doubts about it. When I left and went to work at the Urban Institute, I wrote a monograph, which for those days was fairly widely read, called “A Funny Thing Happened on the Way to Welfare Reform,” in which I worried as to whether it was really a wise thing to suddenly double the welfare rolls and expose a whole lot of people to a rather poor, what had become a very poor set of financial incentives. But again, we were all looking at the facts. The other thing that I think it’s important to keep in mind is that this was the time when computer assisted analysis had finally worked its way out of the Pentagon where it had flourished for at least a decade, I think. It worked its way into the domestic side of government, so that– and this was one of my contributions– I had, for a variety of strange reasons, learned how to program computers, and so with the assistance of the current population survey report tapes, I was able to do early simulations of the likelihood of people participating in the Family Assistance Plan, and those models have lived on. They are still a much more sophisticated, I’m sure, way of operating at the Congressional Budget Office. But, I do not think that the findings from those… The better models that exist now have the power that they had when Paul and I–and there are stories to be told there– poured over these numbers as we produced them for Bob, who would then take them up the ladder. People really paid attention to them, perhaps more than they deserved. But none the less, people cared about the facts and that I think is, was a distinguishing characteristic, not just of Family Assistance, but of all the other important contributions of the Nixon years. And people forget that a guy once wrote about this later. When I first went to the Washington Post editorial page, I wrote a column called Richard Nixon’s Greater Society. And other people have written about that since. I think I wrote it first. But there were many things that came out of the Nixon years, not just in…that were conceptually important and have lived on in one way or another, including, of course, the environment. Well, I’ll stop there. That article you mentioned is widely cited. I think it began a whole trend to rediscover Nixon’s… To rediscover all the things that had happened. …Nixon’s domestic initiatives. Right. Cliche that Nixon is remembered for, well, Nixon said himself that he would be remembered for two things: China and Watergate. But more and more it seems that historians are coming to the view that creative domestic policy, which Paul referred to too, which was really part of a philosophically well-knit overview…
Yeah. …was an important part of what was happening. I want to put a footnote on what Jodie was saying. As President Nixon was coming back from a trip to Romania, that you mentioned, John, he had…I don’t know if they were in the air on Air Force One or whether they had stopped to refuel in London, and they had John Ehrlichman call me, which was a thrill for a junior person in the Bureau of the Budget, to ask for some more computer runs so the President could understand the distributional effects of different levels of assistance and different levels of disregard, though Jodie and I went down to a place called CDC, which was a computer service center. The government didn’t have big enough computers to run the simulations we needed, so we’d go down to the CDC in the night and run the computer and so we can answer John Ehrlichman’s questions so he can tell Richard Nixon if we do this or that, this is going to be the implication. You know I think, I would tell you, there’s nothing more thrilling then to be validated that you’re doing something that’s going to be the basis for a presidential decision about how we run the country. And I found out, in this instance, but repeatedly during the Nixon administration, there was a reaching out for facts of the basis for how do we decide things. And among those whose views evolved as part of this debate, if I understood your implication, was Pat Moynihan himself. John, you were… Yes. First of all, let me just say that this was not without fun and amusement. And we’ve heard about how the name “Family Security System” was not quite comfortable for people. The term “negative income tax” was not comfortable either. So the subterfuge that was used in the department, Bob will remember this with some pleasure. They called the draft bill the “Christian Working Man’s Anti Communist Rivers and Harbors Dredging Act of 1969.” That was the title for it. But the point that we’re making here, is that driven by facts, absolutely, but also driven by the sense of an historic opportunity pending. Moynihan started out, as I mentioned, as a fan of the children’s allowance, which I always thought was a will-of-a-wisp because the price tag on it, were you to spend it just to get it out to every family in America, would have been mind-boggling, breathtaking. And while you would argue it would be taxed back from middle income families, it would never fly. That was Moynihan’s initial posture. I had become intrigued by the income tax. I in fact spent a dinner with Richard Nixon in January of sixty-eight with four or five financial types in New York. And I was intrigued by the fact that there seemed to me to be a convergence of views between Libertarian and Conservative Republicans on the one hand, and the Liberal Democrats on the other. Because you’d have the Milton Friedman work and then you’d have the Ripon work I mentioned earlier, plus the Tobin and Peckman work, Brookings and elsewhere. I said that it seemed to me that there was an opportunity here. Nixon was very open to historic openings, to historic opportunities as we’ve seen. Moynihan then, as I mentioned, was almost aquiver with the idea of a major transformation in social policy. In fact, he had a felicitous way of talking to Nixon, and this is a packet of proposals that went down for Easter weekend to keep his gain; Some eight proposals, including the welfare reform, including transformation of OEO, including Early Child Development zero to five, which you started at HEW on his watch and such things. But, this is a typical Moynihan attempt to get the President’s interest going. I call your attention above all to the Family Security System. For two weeks growth in the gross national product you can all but eliminate family poverty in America, and make history. This was very, very, quintessential Moynihan. But the fact is, Nixon had that same impulse in him. He had this fascination with facts. He was one of the most analytic Presidents we have had. As I wrote in the blurb for this meeting, he was an early voracious reader and a policy wonk in his own time. But he also had this personal impulse to be a first, an historic first. He spoke of those things all the time. And so Moynihan and he were like flint and steel, you know, sparking on issues like this. And Moynihan finally… each time that something would surface, like the National Standards Nathan Paper, he said, “That’s great, because we’re going to go a long way before getting to a major change.” But then one night at dinner over at what was then called the AV restaurant on New York Avenue, I collared him. We sat down, had nice dinner just the two of us, and I had gotten wind from you guys and Lindsay about what was cooking. And I was a totally receptive audience to that, as you may have gleaned from what I’ve been saying here as a negative income taxer. So I said to Pat, I said, “Here’s what we’re talking about.” I said, “Your children’s allowance thing is over the moon. It’s not going to work. But here, for $1500 for a family of four, you can get where we’re going.” And he said, “You’ve got it; that’s it.” And from that moment on, he was a complete enthusiastic supporter of what became FAP and became the kind of lobbyist you all remember and appreciate. There is a sense among some critics of Nixon that he bought into it largely because he wanted something dramatic. He wanted to take on what was obviously a problem, but do it in some jaw-dropping kind of way, but that he never really believed it would work- this is the criticism- and perhaps would have gone along with anything. Since the way critics may talk, all of you are in good position to respond to that, that sense that he was more removed from the process than it may have appeared. I don’t think he was at all. And I think he was very responsive to the data points that you were talking about. And he kept probing and probing, and he kept probing for data and he kept probing for views. He spent, you know, an unbelievable amount of hours and man-days on wading through huge briefing manuals on welfare reform, including all kinds of tables, all kinds of iterations. So he was in it up to his nostrils. I think that’s right, and I think it’s kind of a reinforcing proof in what came after. So in 1970 and ’71 he put us to work on the question of what we should do about health insurance in this country. And if you go back and look at what was called FIP, the Family Health Insurance Plan, the foundation ideas for FIP are direct descendants of the ideas of the Family Assistance Program. So these basic ideas of…notions of fairness and equity and how to create the right incentives in our society were…have tracers all through the Nixon administration. This was not…
I think I may have drafted the first version of it. This was not a one off thing. And Lee wrote the Presidential message to the Congress on February 11th of 1971. February 18th, 1971. …which has…a lot of echoes of which are very much in the air this past year, I must say. Yes. There are a lot of differences between the Nixon plan and the Obama plan, but there were a lot of…
But Paul’s point is so true: comprehensiveness, inclusiveness, fact-based… Equity. Equity. Fairness, treating the states in a very different way than what they’ve been treated in previous times. And looking at incentives. We were always very sensitive to that. Something…
We’ve sort of slipped over the point that there were two disincentives in the old system, which not everybody may be aware of. One was that it actually paid to stay on welfare and not get a job. Oh, yeah. You had that big notch. Well, you still do. Nobody cares about this anymore. You went to work and you lost money as a result. And the other was – we haven’t said this explicitly – that if a father left the home, his family could then qualify for welfare, which tended to break apart by families. Those were two dramatic elements. The second one was actually a state option. There was federal support for a welfare for intact families, but it was only by state decision. And obviously only the so called rich state could afford it and so there was a distinction, there was something called the ‘Happy Pappy program.’ So, if you happen to be from Wisconsin or New York. New Jersey. You were a happy pappy. There were a few states but most of the rest of them didn’t have any equity at all and there really was serious evidence that had caused people to look at relocation. Yes. And it caused families to break up so the mother and the children could receive some aid of the father. Welfare shopping. Exactly. Yes. In fact, it was very much like the immigration issue. It was a very, very hot current political issue. A town like Newburg, New York had wound up with the mayor being just extremely harsh in his treatment of welfare families trying to turn them away from migration patterns. But, this also foots into another Moynihan keystone of his career for which he was praised and vilified, which was the famous Negro Family Report in 1964 while he was still in the Johnson administration. But it goes right to some of these issues we’re talking about. His sense of the deterioration in the black family, which in his view, and the data supported it, AFDC had become a black program. The days of a couple of decades earlier when the so-called adult categories were relatively stable in growth and this Aid to Families with Dependent Children program was fairly stable in growth had long gone. The adult categories remained on a modest growth track, whereas AFDC just took off and multiplied, largely in the northern cities. But it had to become largely a black program, black family program, working mothers. And this was, again, something which appalled Nixon’s sense of, you know, family and social stability. And the notion of pride and self-reliance. He kept talking about his father’s grocery store, not in the sense that his own family was poor. He sometimes said, “We were poor, but we didn’t know it.” But he talked about poorer people coming into his father’s grocery store and feeling the stigma of being welfare recipients. And how important it was that children not grow up with that stigma. So I think it was an emotional commitment as well as an intellectual one. Bob. Well, I wanted to comment on your question about was the President really aloof and was this political? And I’ll give you a vignette that says no. In September of 1970, we had reached a critical moment trying to get this through the Senate. And the President went personally out on the line to try to sell this. First he met with a group in August, a group of Republican senators, to try to bring them on board key members of the Senate Finance Committee where this thing was bottled up. And then he had a special by-invitation meeting at San Clemente on September 3, 1970. That was himself and Secretary Schultz and Finch and John Ehrlichman, Veneman, Moynihan. I think I was the junior guy around. And Senators Long, Bennett, Miller, Fan, and Rubicoff and Byrd, the key members of the Senate Finance Committee. And I took a lot of notes. I don’t have much of memory left, but boy, I’ve got files, and I found my notes of that meeting. The President was selling. He opened up the meeting, and he said, “There’s a certainty of disaster in the present system. There are risks in what we are proposing, but we have to do something. My cabinet was split on this,” he said. “The future is in the hands of the men in this room. It’s an historic situation. It requires boldness and courage.” And later in the meeting, he makes your point, Lee, about his own background, I think. He said, “For 14 billion dollars it would be worth it. I want people to be able to move up. Welfare makes me mad.” You know, he was engaged in this issue. There is no question. Very persuasive. What happened to it then? At what point did he either cool off or decided it wasn’t going to pass. What happened in the Congress? Well, if you don’t mind, let me take us back to – Jodie will remember this, and I think we all remember this. I especially remember it because I still have the scars. It was the famous day in the Senate Finance Committee on April 30, 1970. Now, we were data-based in those days. And in the development of this plan, we’ve been very sensitive to the interplay between earned income and family assistance, and wanted to make sure that your family assistance payments didn’t go down so quickly as your earned income went up, that the so-called marginal effective tax rate was so high that it was a work disincentive. So we had focused a lot on that and I think the proposal was reasonable in that regard, especially with Secretary Schultz’s idea, the income disregard. And, when it got up to the Hill, Chairman Mills ultimately was supportive and it passed out of the House relatively quickly, what we deemed to be improving amendments actually. He was really, ran aways to a filibuster. Oh, he was the king in the House side, and nothing came out of the Ways and Means Committee without his complete support. So, we got over to the Senate Finance Committee in early 1970. I want to make a point here with a modern analogy. The ranking Republican on the committee was John Williams from Delaware. And John Williams was very worried about these marginal tax rate questions and work incentives. And so, he required that we put together some tables for him and the committee that went beyond just the marginal tax rate associated with FAP and earned income. So if I could cue a slide. There’s the famous table. And Williams wanted it based on Wilmington, Delaware. So that it could be his own state. And you see earnings going up on the left, and the Family Assistance benefit going down in the second column, and State supplemental going down. So, you get a total family money income. You get the beginning of Federal taxes, both income tax and FICA. Then you’ve got food stamps. This is where Williamson stepped in. He said, “I want to see what happens with commodities.” The Federal commodity program. And this was before we had reformed food stamps. And there was a notch. When you earned a dollar more than whatever it was there, about a thousand bucks, you lost 1600 dollars, $661 rather of food stamp value. And then you had early Medicaid. And it had this same kind of cliff effect with income. Bang! You went a dollar over the eligibility level, and you lost $437 dollars of medical assistance. And when you put it all together, you see on the far right the cumulative marginal tax rates, if you will, with these notches reflected at 150 percent, 108 percent, where, in effect for working for a dollar more, earning a dollar more, you went backwards. And I was the hapless… Still ? Even under the new? No, yeah, that was under the new plan. This would be a Laird-Townsend table? Oh, this was a, Laird was on my staff, and we were scared to death of these tables. Because we knew what they would show and it was current law, you know. We hadn’t created these problems. Food Stamps and Medicaid. But we knew it just could be terribly damaging to the proposal. Understand, I was the hapless guy who was at the witness table and Williams would say, “Well, Mr. Patricelli, do you mean that if you earn a dollar more, you lose five hundred dollars?” and I’d say, “Yes, Senator, but…” and then he would go on and say, “But, and then,” and of course he made his point. And shortly after that the Senate Finance Committee adjourned its hearings. Jodie and others and I, we all scrambled around and we eliminated the notches by reforming Food Stamps and Medicaid. That’s where FIP came in. That’s where FIP came in, that’s right. And we produced charts that no longer had notches but they had high marginal tax rates. Inevitably, when you have federal subsidies accompanying income, you had my high marginal tax rates. Now, Marty Anderson pretended that was what killed FAP. That’s not what killed FAP. The Senate Finance committee didn’t want FAP and I’ll come back to that in another minute. But that analytical framework of testing social policy against work incentives is something that should have been done, Guess what, in connection with health care reform in 2009, which is my current passion. This is the table which we put together to show you what happens under health care reform. I won’t go through this in detail because it’s complicated. It has to be complicated. But as your income goes up in bands of federal poverty level there on the left, and project ahead to 2018, so you have the full impact of the subsidies, you see the subsidies going down from nineteen thousand to five thousand. You see the required premium payments going up. You see federal taxes after taking into account deductions and you go all the way over to the right, and you see the tax rates. And here’s what it looks like. So, if anybody had bothered to sit down and figure out what health care reform did to marginal tax rates they would see, right at the critical point, which is about median family income in the United States, 250 to 300 percent of family income. The way they set this thing up, you’ve got marginal tax rates of 58% without counting anything else. That’s welfare reform all over again and we didn’t learn a thing. And there were all these other provisions in the tax code now to phase out of this, does this take into account, you know, the phasing out of the child? This is just health care and income taxes, through everything else on top of it. All this other… There was no conversation at all about this? None. I didn’t see it and I would. All over this debate in 2009, nobody did a marginal tax rate analysis for what was going on. They would have caught that spike, and seen how illogical it was. Just an asterisk on this. It was Richard Nixon, who, in 1969, noticed, through the help I’m sure of people like you, that the positive income tax applied to families below the poverty line and he abolished income tax for families and poverty, Nixon. So policy lessons from the Nixon administration for the current day and….
…and there was so much interest that one of the first things I did after I left government and went to the Urban Institute, I programmed a little cumulative tax rate model. And it was much used internally because people cared. And then some guys over at Carnegie Melon did a really elegant model and they were very nice to give me credit, but theirs was a much more elegant model to map the whole space. But then I bet you both of those… My obvious model has come, but I bet you even the more elegant model is not used by anybody. So it’s very destructive to have lived in a fact based policy making world and now to the existing one where the facts don’t matter. Alright, well an almost overly famous Moynihan comment is “Everyone can have his or her own opinion, but you can’t have your own fact. You don’t have a right to your own facts.” And that’s, that’s not true anymore! No longer quite so true anymore. Bob, you say that isn’t what killed the FAP though, that other things, other variables… But, I’m glad you pursued that lead, because at least it’s my view and others that would have important points of view here, but remembering that meeting in San Clemente and remembering other interactions, especially with the Senate Finance Committee. This is deja-vu, all over again, the Senate Finance Committee is at the center of policy making, just as it was in 2009 and the Chairman of Senate Finance Committee is critical. Russell Long didn’t believe in anything like a negative income tax. He wanted to see working people get supplements. And he would tell the story of the washer woman in Louisiana who was working hard but couldn’t make enough to get ahead, he wanted to see that woman get a supplement and he wasn’t interested in payments to non-working families or individuals. So he was on one side. Senator Rubicoff was on the other side feeling that Family Systems Plan was too stingy and wanted to see the payment levels go much higher. Ultimately, of course, Long prevailed. As Chairman, he wouldn’t let it out of committee. And we all knew that, had it gotten to the Senate floor, it could have been improved because there was a big coalition of people that wanted to amend whatever came out of Senate Finance to get it back toward, more toward the original design. But we couldn’t get it up. Ultimately, Long, years later, prevailed with the creation of the earned income tax credit, which was a way to supplement the incomes of the working poor. Maybe that’s worth a little bit more discussion. That would be one of the legacies of this whole debate. Oh, no question about it and while I was at the Urban Institute there was another woman there. She had a friend Heather Ross. When she was getting her Ph.D. at MIT, she had come up with an original idea for the negative income tax experiment, the first one of which was launched in New Jersey. And this was before the Nixon administration? Well, that was before, but at this point it’s after. This is a time when it’s floundering around and this, I’m no longer in government, I’m at the Urban Institute. And Mike Stern, who you will remember who was for many years Russell Long’s chief aide, asked Heather and me to come up to talk to him about what we could do in the way of a job alternative. And there was, I can’t remember his name, a Professor at the University of Wisconsin had come up with this sort of an earning subsidy that had that effect of a negative tax rate over the… In other words, the benefit increased with earnings over a certain range and phased out. But I can’t remember, we differed from what we came up with. But Mike Stern was the bill, put the final numbers on it with the original earned income tax credit. But it also had, Long also had a guaranteed job. And it was, it was a sub-minimum wage job, but together with the EITC, well it wasn’t called that then, whatever it was called, produced an above-poverty income if you took the guaranteed job. Now, of course the labor unions didn’t like the job because it was sub-minimum. And they felt it would drag down wages. But it was very interesting. After the long plan came out, the Institute had a seminar on welfare alternatives. And the Rubicoff plan was, I can’t remember what it looked like, do you? But anyway, it was being much debated on the Hill. And I thought well, both Alice Redwood was on the panel with me and Bob Haverman, what was his name, from the Poverty Institute of Wisconsin were also on the panel. I thought well, they’ll both talk about the Rubicoff plan. So I think I’ll talk about the Long Plan, just for difference. Well it turned out all three of us talked about the Long plan. And Alice made a, Alice Redwood made a very interesting point. She said, “You know if a, if someone else had come forward and promised a guaranteed job plus an income supplement that would move X, I forget how many, people out of poverty, it would have been hailed as a great social breakthrough. But because it’s Russell Long, it’s ‘slave-fare.'” And it was true. It was called “slave-fare” by the liberal press. But in fact it was very generous. But at least part of it did survive and has gone on there in income tax credit. One can worry about whether it’s gone too vague. But it is a legacy. That was the real legacy of that. I agree with you. And the thing that’s interesting about it, is that it happened in 1970. So thinking about this period from ’69 to 1974, throughout this time fact was a hotly debated subject and then in 1975, while we were extracting ourselves from Vietnam, there was turmoil. The economy was in really bad shape. Budget deficits were rising to big numbers like 20 billion dollars a year. If we thought that was a big deal. That was a lot of money. But Russell Long got the earned income tax credit passed in 1975, almost without notice and it’s been a foundation for dealing with the subject for 35 years now. You know, your point about objecting to the source of his idea, that is Russell Long, Louisiana. His point earlier about how, finally the liberals turned against it and it reminds me of an early attempt by Moynihan. We need to invoke the support of the more liberal constituency. He and I went to a Medial of Civil Rights Leadership conference one evening in the April time frame as things were still unsettled. And there had been a draft presidential message on welfare for, proposed for April 18th, which didn’t happen. Though there have been little mini ones saying by the President who wanted to go for radical change. But at this group, you know, of the American Friends Society, the American Jewish Committee, ACLU, the usual suspects from, from the liberal constituencies. There was palpable resistance to the idea because it was Richard Nixon and Moynihan kept saying, “You can’t oppose this idea because it is coming from a conservative president.” This is a sound principle, you know the sound attempt at major social policy redirection and it was the first time I’d heard the phrase, but it was said by Hyman Bookbinder of the A.J.C. He said, “Do not let the best be the enemy of the good.” And there were two things going on. One was the antipathy to Nixon, the other was “It’s not enough,” “It’s not lavish enough,” and the National Welfare Rights Organization was saying they haven’t taken any account of the real folks who need to be helped because they’re not being proposed to have a $6,500 floor, to cover all the northern families here. I saw it, remember they sort of… Taking something like 60% of the core above it, poverty level. It was some, I remember it was some figure that Nixon used, but no one should believe that figure just because it’s what I remember, but it was something like that. But Nixon, in his memoir, he only gives 2 or 3 pages to this subject, but he ends with this comment, I think, that I mentioned was an idea ahead of its time, but he also says the liberals pummeled it to death. That’s his way of accounting for its loss and that may not be an entirely objective view, given all that he went through, but that I guess it’s another possibility
It wasn’t just liberals because, just as Bob said, it was Senate financing with which the bottle was corked. Russel Long rather. Speaking of bottles being corked, when the House passed the bill for the first time, I was in Pat’s basement office and he had a ceiling which was translucent panels of glass. And out of this magical credenza came a bottle of the bubbly champagne. And he or we opened it, and the cork went right up through the glass, and laid there for the next year as a smudge visible through the translucent glass to celebrate the passage of FAP at the White House. Did the media play a role in all this? What was the public reception like? They were all over it. As Bob has said, this was a very open debate and, certainly the Post editorial page at Greenfield got her Pulitzer for writing the series. And that’s how I came to know her, on welfare reform. So certainly the Post was very supportive. And I don’t remember, I don’t think the Times was, Post I think. The Times was supportive initially at least. Yeah. I mean they always had the problem of New York and the fiscal relief, which in the end is what I think killed it. The Journal was not supportive, but Moynihan once again tried to appeal to the President by noting that the Journal had said it was nonetheless an historic initiative. A sweeping initiative, but not supported. You would know better than we do, but the media was different in 1969 and the early 70s. So for young people, you don’t know what it was like before there was cable. An ideological litmus test and porosity of polarization around ideology. It was a really different environment. And another thing that was different in those days is the Congressional body was different because there wasn’t an instrument like the Congressional Budget Office. Actually, the whole Congressional budget process was created in 1974. After all of this. Just in quickly reading about this I think public opinion polls right after the Nixon speech in August were very favorable. But when people were asked later independent of that speech, where they formed something called the Family Assistance Plan, or the “negative income tax,” they tended to say no. The whole notion of a guaranteed annual income cash floor under everyone’s economic condition, there was something about it that was a hard sell, I think, with a lot of people. And its backing of self-reliance, I suppose, and all of that. The other question I was gonna have about this is, at what stage did any of you sense that the ball game was really over? That it was now just going through the motions? Nixon continued to repropose this. He would mention it at the subsequent States Union Address, State of Union Addresses.
Yes. And yet there was some point at which I think it was perceived that maybe this was now just a matter of rhetorical support rather than continuing effort to really sell. You mentioned that meeting at San Clemente. Which sounded like a very intense, sincere sell. At some point I think Nixon calculated that it wasn’t worth that effort anymore. Well, we had a lot of work after that, because there had been active discussion at that meeting of pilot programs and could we get together around a concept of a staged implementation. But I think by early ’71, the wind had gone out of the sails. I left in September of ’71. I know by that time I was a bit disillusioned about it’s prospects. Sometime late ’70, early ’71, I think it was apparent. It was apparent? Yeah. I don’t think we stopped believing and trying until the summer of 1972 when Elliot Richardson was a Secretary and he was working through the administration to keep the support alive but it was clear by then that the Senate was not going to do anything about it and I think that’s what really did it. Again, I’m just half remembering from Nixon’s memoir that he said something about including as he went into the ’72 campaign that he didn’t need a big fight with the Republican right during at that time. Well, and interestingly Reagan was a factor here, and Bob and I and a few others briefed too on this, briefed Reagan on it. And then another time he sent his budget director in, I think, to see us. And Nixon was, was quite conscious of the politics here. Because Reagan was a prospective primary, you know, not maybe real, but a prospective primary in ’72. I think another thing there, Lee, was that, as we’ve said, in February of 1971, the President came out with quite a brands of health care reform. Absolutely. And I think that was a more popular issue. And it’s generated a lot… Which provided universal coverage for health care in the United States. Yeah. And had a cost containment, a real cost containment mechanism and all of that. But it was not described then as socialistic or Stalinesque. No. Well, it was through the private sector carriers, but with government supplements for the needy and with mandates. This is, this is like, if I may, this is like Nixon going to China, Nixon proposing a negative income tax. Nixon proposed an employer mandate. That’s right. He said every employer. That’s right. No, no exemptions for small business. Every employer had to. That’s right. There would be financial help. Where required there would be shared risk pools and so on. But again, the Nixon domestic program stands out as quite breathtaking. Why doesn’t it get more credit then? Because it was overshadowed by a major international, as you said yourself, he said, I’ll be remembered for two things, shaking hands with with Chiang Kai-shek, which John, with Mao–
Mao Tse-tung. With Mao’s sidekick, which John Foster Dulles had never been willing to do, and Watergate, so. In retrospect if you go look at the February 18th, 1971 health care message, it stands up really well as a thoughtful, comprehensive, systematic set of ideas about what we should do in this country about health and medical care. Late in his life, Senator Kennedy said on one occasion that the biggest mistake of his political career was not accepting the Nixon proposals on health and medical care in1971. Again, consider the source. It was hard for liberal Democrats to accept the Nixon initiative. Going into the ’72 election and the counter proposal you remember, was a committee of 100, was a labor drafted, single payer kind of a system. And they were not about to get Nixon a victory on health care going into the ’72 election. That just… there was also was, at the time, I recall anyway, Nixon was sometimes of two minds on this issue. He would say things, of course he’d say a lot of things randomly, in confidence and privately. But one of the things he was often quoted saying was about, you didn’t need a President for domestic affairs. With a good competent cabinet, what the President’s needed for is foreign affairs. And the perception grew that he really was spending his time on foreign policy. And for that reason, if credit was to be given on the domestic side, it really belonged to the cabinet officers, or the Moynihans, or those who took these initiatives. That’s why I asked the question earlier about Nixon’s whole involvement in this particular matter, which it seems to be very persuasively say, was genuine and determined. Of course Nixon was also the ultimate pragmatist and realist and I think at some point the Senator was no longer worth that fight. I think we did not see as much of the President in health care as we did in welfare reform. I think that was, that was a serious domestic issue. Health care was an early… And what about the tanking of food stamps nationally, which again people forget was so important. He did that. He did that, that was early. Yep. In May of 1969. Yeah. That was early. That was early. May of 1969. So it probably wasn’t, it was the first truly negative income tax. Oh, yeah. The proposal in United States social policy history. So, was the President directly involved there? Yes, the Urban Affairs Council had a sub committee on… Oh yeah. …nutrition, which Cliff Ardon, Secretary of Agriculture chaired, of which Secretary Finch was a member. HEW and that was the entity through, or the venue through which that proposal came up to the President. You know, I think Lee, you and your colleagues on the Nixon speech writing staff have a contribution to make to this remembrance process. I remember one time drafting something for a Presidential statement and taking it down to Ray Price. And Ray Price did magic to it and made it a third as long. And so much clearer, and I was marveling at what an unbelievable editor he was when he said, “Paul you don’t know what good editing is.” He whipped out some papers that President Nixon had had in front of him, where President Nixon had clearly done the editing himself. And it was unbelievable how much attention he paid to detail. And what a great words person he was. He really had an unbelievable talent for doing this, and you can get him to tell that. Work fairs and choose him. And I saw him and, see, I saw on the domestic policies messages from time to time, Ray and others would show me the President’s editing of what we thought was golden prose, that made it really golden instead of tin or something. The speech writing staff felt the President spent much too much time rewriting our material. But no, he was a masterful writer, without a doubt. There are some questions, happily we’re sharing this afternoon with an audience on the web and Facebook people sending in some questions and other e-mail questions, all of which have just been handed to me and maybe I’ll just share a couple of them. One points out that the poverty rate for people age 65 and above fell dramatically in the last third of the century. Was this a specific concern of Nixon’s? Oh, well, remember, we forgot that the supplemental, the part of FAP supplementary security income passed. Yes, because these were the so-called adult categories. That survived. Yes, they did. They survived. Can you say a little more about that? That seems terribly important, given the demographics of, basically, the aid to adults and disabled, aid to partially disabled, aid to blind. And aid to blind. There were three categories. Three categories. There’s a whole… Go ahead, Bob. No, you do it. Go ahead. Go ahead, please. Anyway, we added, we, the Nixon initiative was to add, as Jodie said, Supplementary Security Income Assessments so that we created a national standard, a really quite generous one, that is still in place today and it’s interestingly, it’s funded out of general revenues. Right. Yep. So that it is, it is a Nixon legacy. It came along with these other proposals. So both the aged and the disabled, low income, they can still of course get Social Security. But many are not eligible for sufficient benefits. This passed in Autumn of ’72 when HR-1 passed, FAP family systems having been stripped out of it. But that survived, and Moynihan sent me a telegram from New Delhi, where he was, I guess at the time as ambassador, and he said, “Few will notice, but John, you and I can take great pleasure and satisfaction in what Richard Nixon managed to accomplish.” So, yes, well, if you put them all together, then SSI, food stamps going national, abolishing income tax for poverty-level families and individuals. Absolutely, and then the earned income tax credit and you put them all altogether, you’d really have, quite a program. There’s another element that we haven’t mentioned, which is an administrative decision that was pushed by Elliot Richardson to cover the disabled under Medicare. It was enormously expensive, and it happened almost without anyone noticing. But, it added immeasurably to the long, the long run implications of Medicare but it was something that would have done by President Nixon, with Elliot Richardson pushing the lead. One of these questions asks the reverse of that question. What would be different today if the original FAP had passed? I would, and I suppose the question I’d tack on to that is, would it have worked? What about these worries that you and others have identified? Even the difficulties of administering this have been talked about since, what about cheaters? Of course we had that problem on food stamps and so we did in the Ford administration. I worked on that, had some reforms that curtailed it and the earned income tax creditors has had a lot of problems, too. So I mean, there are no foolproof systems and you shouldn’t fool yourself, but the thing that was the most eye-opening to me, and I had had it sort of, I went on after I left government working at the Urban Institute, and then at Mathmatica, which ran the incoming experiments. I continued to have throughout the seventies some contact with those field operations and I always find it extremely informative, educational to actually go out and this was a lesson that stayed with me when I became a journalist, and it’s why I worry about journalism now. Unless you get out in the field and do some real reporting, it’s easy to be misled by the textbooks. And I would notice, mostly when I’d go out to the Seattle experiment, which was the biggest of the experiments that, at the actual records, and you could see people coming to realize how marginal tax rates, in other words, benefit reduction rates work. The surprising result was that, far from being stabilizing, these experiments covered two-parent families on equal terms with one-parent families, as FAP would have. Now, they were, many of the plans were more generous than FAP, but that these marginal tax rates varied, so we could look at effects on work incentives, and to a lesser degree on family stability. We expected the program to be stabilizing, but in fact the split rate among the experimental families was something like fifty percent higher, it was enormously higher, I mean you couldn’t… That the University of Wisconsin Poverty Institute people spent a lot of time trying to explain it away. But, it was so big, and when you looked at the records you could sort of see it happening. The family would suddenly realize that if Daddy here wasn’t counted in the unit, even though they got a small incremental payment for his presence, his earnings suddenly were all subject to these very high marginal tax rates and that you always do better to get the earner out of the unit as long as the tax rate and the negative system, despite these best efforts, was higher than the positive system. And so when Moynihan saw this– this was much later in the 70s, he was a Senator– he had a hearing on the subject and was very harsh with then Assistant Secretary Henry Aaron on this subject. So facts do matter and they are not, sometimes they don’t confront your priors. No, and major social experiments, which is a word Nixon himself used, are not without a need for further adjustment. Absolutely. And I think Nixon himself saw this as a start. We’re not doing any of this now. We’re not experimenting, and of course as we were talking about before, there was the whole Manpower Development Research Corporation there to monitor job programs. There was a lot of field experiment going on, and you did learn things. And I think the spirit of ’69, anyway, was my goodness, let’s try something new. Yeah. Can’t be much worse, it could be a lot better. Another question that comes up here is, if you were reliving all of this… Maybe we should ask each person to respond. What would you do differently, or what would you recommend be done differently, looking back? Is that a fair question? You’re allowed to say that you did it all as well as it could be done. What kind of advice would you give in hindsight? Well, I’ll pick up where Jodie just left off. I really think we have learned since that major domestic reform efforts that are really discontinuities are dangerous and have lots of unintended consequences and that if you can do them, experiments and testing programs are a wise thing to do. I feel very strongly about health care reform in that regard. I think it’s hugely problematic in terms of its economic work incentive, destabilizing impacts on employer-sponsored insurance, etc., etc. The point being, incremental is probably better sometimes. Testing and incremental. So I’m a little like Jodie. I’m not sure I’d vote for FAP now. How interesting. Jodie, is that your view, you wouldn’t…? I think that’s right, and the combined output that actually happened probably is pretty good, I think, but we sort of stumbled. Well it was almost like an experiment. A political experiment, and we learn. The fact that, I think, in 1996 when President Clinton was able to get his welfare reform legislation enacted, it picked up some really important threads from Nixon: ideas about job training and job requirements for able bodied people, and it was amazing how much the welfare rolls shrunk as a consequence of the Clinton reforms. Which I think were not negatively prejudicial to the poor. They were really supportive of finding real places for people to work, and training them to do the work. You know, to your question. Now, you know with the availability now of modern communication technology compared to where we were then, I think, this is something that actually happened to me I was reminded of by Jodie’s comment about being out there in the field and seeing what’s going on. In the winter of 1970 I went out to St. Louis during the winter to visit a place called Pruit Igoe, which was an emblem of the mistaken policies coming out of the Second World War, about what we should do with low income populations, which was basically to house them in subhuman places and declare a victory over poverty and all of its accouterments, and to go to Pruit Igoe in February, and see that even though they had elevators, they only stopped on every third floor because it was a way to save money not to have an exit and entrance on every floor. And there was no garbage disposal, so the low income people threw their trash and garbage out the windows of this 10-story place or something. You know, to go to the welfare office, it wasn’t safe to take the elevator to the welfare office because you might get burglarized, or accosted in the elevator. And you know, I think if we had modern technology, we could go show those images to people about what it’s really like out there. It might have helped to propel the Nixon legislation through the Congress. You know, looking back on it, I don’t know what else we might have done. I think we tried everything we could think of to get across the basic ideas of why this is the right place to take the country, and as we’ve said, a lot of good things have happened. One of the happiest moments of my life was watching on television when they imploded Pruit Igoe. Which we did in a lot of places around the country as we realized how profoundly bad these places were. And I think that’s an insight from the Nixon administration that had follow-through. And we’ve gone forward from that. Fine, I’m in. Not a lot more, Jodie is the one familiar with the whole range of the different experiments. I had a snapshot view of the Trenton experiment. The earlier one. With the negative income tax? Yes. I’ve read a little bit about it more recently. There is some argument that says the samples were fairly small. You may not have frankly gotten a good real dispersion. Yeah, the New Jersey experiment really didn’t work. Exactly. Whereas you’re saying that the Seattle and other ones were more convincing and more substantial. And I, years later, I saw President Nixon, and we talked briefly about it. And he said, “So? What about FAP?” And I sort of shook my head and I said, “You know I really believed the time we were doing the right thing. But based on what I hear about the experiments, there’s a lot of questions about the implementation.” I think, had we gotten it passed, we would have, by a process of, you know, seeing it, changing it, tinkering, we would’ve gotten there, but, you know, if it just, if you ask me as he did for my snapshot tape, five or six years later I gave it to him, as I just did you. I’m struck by Paul’s comment as well that Nixon himself may have identified a communication problem. A public persuasion problem. At least when he talked with the writing staff, he was always hoping they’d somehow share of the dream a little more dramatically, a little more powerfully. And he tended to talk about his whole domestic program that way. One of the conclusions that some have come to is that there were so many things that happened, but there was no, you talk about an overall vision, there was no real expression of that. There wasn’t an easy label. It wasn’t a a public ability to say this is what Nixon stands for in terms of domestic policy. I teach a course here, as I may have mentioned, about Nixon as a case study in presidential communication, and this is a long list of domestic initiatives. I’ll mention just some of them, just to illustrate the point, there was an earlier program in this series on the vast environmental legislation and action that was taken. School desegregation went a long, long way in these years. A whole new economic policy, wage and price controls, after all, another jaw-dropping kind of surprise, the notion of deficit financing, the full employment budget, the new federalism, you’ve mentioned, revenue sharing, arts and humanities support increased many times over. Ending the draft, a huge initiative. The big Native American policy reforms, historic in their sweep. The war on cancer. Enormous new funds creating cancer research institutes. The health reform which we mentioned. Home rule for the district of Columbia. National growth policy. The Occupation Safety and Health Act. Social Security expansion. Nursing home reform. Food stamps. Pension reform. The Arissa program. Consumer protection. Taking the Post Office out of politics, and the list goes on. But they’re all bits and pieces in a way. They’re terribly important significant individual actions and somehow they never formed– “Reform is the watchword,” somebody wrote once– but it never really became the watchword during the Nixon administration, for lots of reasons, including the President’s own tendency to emphasize foreign policy. But maybe a large number of these could be put together under the rubric of reducing dependency. Very good. I think, you know, we’ve talked about half a dozen programs which fit into that, into that circumstance. I have an alternative capstone, I would call it “Nixon’s ideas about a just society.” Because if you think about Arissa and about, I think you know, most people have no idea of, because they’re young, what it was like in 1970 and ’71 when the court had ordered forced busing of children around the country. And we were in a condition where there was a real risk of rekindling the Civil War over the issue of the court requiring children to be picked up from their neighborhood and taken to some other place in the name of integration. And, you know, if you want to read something that’s really wonderful, I think it was a 51 page document that President edited heavily, but I think Ray and even you Lee may have had some hand in that document, it’s a masterful piece of analysis of the social condition, but also of the legal fabric that had to be dealt with and ways to do it. It’s really a wonderful piece of Presidential thinking and positioning, so we didn’t go into a civil war. We figured out, because of his initiative, a graceful way to get leaders from communities to meet in a quiet, out-of-the-way place and talk among themselves about how we’re going to solve these problems. And be true to the law, it’s not that we want to fight integration, but we want to do it in a way that’s sound from the point of view of community leaders. You know, things like that are lost, I think, unfortunately. A lot of, I think, people were getting this. Leonard Garment’s another name that quickly comes to mind especially on that issue. One of the questioners asks: how– we’ve mentioned the names of towering figures, at all sides and musicians who somehow were attracted to the Nixon administration, to work for President Nixon, including all of you. Would you care to comment – it’s a final comment, I think we are just about of time – on that? John began by talking about the rapport, the fact that Moynihan and Nixon needed one another. Maybe you could expand on that and even reflect on your own experience in that regard, in working for a very, obviously a very historic, very controversial, very – what’s the word somebody used? High gauged. Somebody who thought in big, sweeping terms, and somebody who could be very demanding, someone who, who could be, who one could be frustrated with at times, I’m sure could also be very inspiring, a very complicated individual, just as this topic is a perfect example of the complexities of public life in general and Nixon matters in in particular. Bob, you? Well, you know, Lee, I’m not prepared to say that the Nixon administration had smarter Cabinet members or more distinguished Cabinet members, or lesser figures than the Johnson administration or the Kennedy administration. I think what’s important for this next generation to understand though, was that in those days, administrations had really the pick of the litter, because it was valuable to go to Washington, it was exciting, government wasn’t the enemy. It wasn’t untill Ronald Reagan started to campaign, I think, against government. Government is the problem. Look at the three of us. Three guys out of Harvard Law School in the late 60s, all ended up in Washington, D.C. within a matter of two, three years. We passed on big Wall Street jobs, I’m sure, all of us and could, could have made a lot more money, but it was the place to go to make a difference. And that feeling persisted under Richard Nixon, even though some people now forget that. I think that in the early days of the Nixon administration there was that same exact… Oh, it definitely did and through the rest of the decade too. I mean, I think it was diminishing, but when I went out into think-tankery and we would try each year to recruit the top economics graduates from MIT and from Harvard, Wisconsin. If they got a job offer from one of the policy shops in HEW or Labor or Treasury, forget about it. They would for sure take them over coming to a think-tank. Now of course the opposite is completely true now, but government was, as Bob said, was the place to be. It wasn’t the enemy, it was the place where you could make a real contribution. We hit our time schedule. I wanted to thank the panelists, and mention, because Lee did a long list of Nixon’s, President Nixon’s domestic initiatives. In September, we’re going to do a panel on peaceful desegregation of the southern schools. We’re gonna come back in October and we have a panel in formation called Moynihan and the White House. Which builds on many of the very very innovative ideas and the interaction between Pat Moynihan and President Nixon. And one of the other things we have planned, we don’t have it scheduled yet, but we have a panel on, coming up on home rule, and we have a panel on federal policy toward Native American Indians. So some of which of, some of the lists that Lee went down, we’re already formulating panels and, and if If the schedule allows us, we may hit them all. But I want to thank all the panelists for coming, and giving us a very happy day.

One thought on “Richard Nixon and the Origins of Welfare Reform

  1. I, unfortunately, got to minute 14 and the moderator just said that Nixon pretty much said that everybody is having a good time getting help from the government and I'm going to put people to work I stead so I'm going to kick people off of government help…

    I'm done.

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