grams. I would like to see every dollar that goes into food be put into cash initially.

Senator MCGOVERN. What Mayor Lindsay and Mayor Flaherty raised yesterday to the President's proposal is that it still leaves State administration as a very real option, as inevitable consequence in many States.

What is your comment in that respect on the administration's proposal as it now stands?

Mr. HARRIS. I think there are two aspects of that that are important and only one of them gets focused on frequently.

In the case of the several million, I think about 6 million recipients of current AFDC, in any State where there is an AFDC standard above the level of $1,600 there has to be some additional mechanism for supplementing the Federal payment to receive their current level. Under the administration bill, it is possible for the States to contract with the Federal Government to administer that supplementary program but the discretion for that, I believe, was left to the States. It also allowed the Federal Government to contract with the States. Now, that is for the 6 million recipients of current AFDC.

The other side of this is that there are 14 million, I believe, new recipients who are not now receiving AFDC and would not be receiving the supplementation under State programs and would not have to deal with any State administration. This is also a point where the magnitude of the problem decreases as the level of the Federal base rises. As you rise from $1,600 to $2,400 level, the number of States whose welfare standards exceed the Federal program drops from 40 to about 20.

Senator McGOVERN. Mr. Harris, to go back one moment to this problem of how this program is going to be financed, I am again bothered by what seems to me to be an effort to place a major part of the cost on the working poor. I understand this work incentive feature that both the President and you are concerned about, how you get some degree of benefits into the hands of people who are working.

Presumably under Dr. Wiley's proposal that might go up to, say, the $10,000 income level. There would still be some incentive payment there. Instead of setting that rate of 50 percent, in other words, taking back 50 percent of the benefits from people who are working have you given consideration to the possibility of shifting more of that load to higher income brackets?

I know somebody has to pay for this program. Supposing we had a universal allowance of $3,600 a year along the lines that Senator Harris was talking about here earlier this morning, would you have any idea of how much an increase there might to be in incomes above, let us say. $15,000 a year on up to finance that kind of program?

Mr. HARRIS. Offhand, I don't; but I think it would be quite astronomical. If I could use a different example to show the order of magnitude and put it in the context of the children's allowance versus the President's program? A children's allowance that paid $50 per month per child would have an outflow of funds of approximately $40 billion that would have to be financed, some of that to be financed by eliminating exemptions and making the benefits taxable.

Senator McGOVERN. That would be a rather sizable amount.

Mr. HARRIS. That gets the added cost down to $25 or $27 billion. That $25 to $27 billion would have to be financed out of higher taxes which are going to be paid by the working poor.

I think the fundamental difference between the negative income tax approach and the children's allowance approach, we are dealing just with families of children, is not in the ultimate distribution of the net benefits, it is in the mechanism by which you finance them. In one case you levy the income conditioning of the benefits before you pay the benefits. In the other case, you pay benefits to everybody but you tax it back.

The net gain by income class will be the same because you have to finance the same amount. You have to collect back from the people above your cutoff level the amount necessary to pay the people below it. Either way.

Senator MCGOVERN. Mr. Harris, what you say is not true. Financing of the children's allowance would automatically fall heaviest on the upper income groups because of our progressive tax structure.

Mr. HARRIS. I did not mean to imply it would fall heaviest on the working poor. Depending on how you finance it, it would fall heaviest on the working people in the middle classes because that is where the burden of taxes lies. I think there are a lot of problems in the tax system as well in terms of the richest members of the society having access to all sorts of ways of not paying taxes.

Senator McGOVERN. It seems to me there is another problem that we are going to be confronted with in trying to arrive at some kind of a formula that includes this work incentive feature, and that is the problem of the millions of people who are going to be involved.

Won't you end up with a program where 75 or 80 million Americans are involved under welfare?

Mr. HARRIS. Under the President's family assistance plan, there will be 20 million. Under the plan recommended by the Heineman Commission, I believe it would be 37 million. Under a plan and guarantee at the poverty level, you would have probably 90 million, as I recall. Senator McGOVERN. Ninety million?

Mr. HARRIS. If you start at the poverty level and supplemented incomes up to twice the poverty level.

Senator McGOVERN. That would be $3,600.

Mr. HARRIS. That would be roughly $3,600.

Senator McGOVERN. Your estimate is that if you invoke that program and then provide work incentives covering families up to twice that level that you would have 90 million people involved in drawing family assistance payments?

Mr. HARRIS. That is right.

Excuse me. It would be 75 million persons. It would be 21 million households. It would be 21 million units filing returns, which is a large number, but is not administratively feasible with our technological devices, the same ones we use for administering both the positive income tax and veterans' programs and all other programs.

Senator McGOVERN. In effect, though, Mr. Harris, wouldn't you really be ending up with a welfare-type program embracing some 75 to 90 million people?

Mr. HARRIS. Yes.

Senator McGOVERN. Pardon?

Mr. HARRIS. Yes.

Senator MCGOVERN. Do you think that is a politically acceptable situation for the Nation? Do you think that you could actually put that kind of program into operation in this country and sustain public support for it?

Mr. HARRIS. I think you could; yes. Once it were in operation, I think it would be like the Social Security System. At the time of its early discussion it was viewed as unworkable and politically unviable for the long run.

Senator MCGOVERN. Now, Dr. Wiley has testified, I think with some backup from the Bureau of Labor Statistics and others that $3,600 will not support a family of four.

Mr. HARRIS. I agree.

Senator McGOVERN. Then you have to move up in the direction of $5,500.

If that were the case, if you take the $5,500 figure and then maintain the same work incentive feature, you are telling us, I think, that that would cost somewhere around $70 billion.

Mr. HARRIS. Yes, sir.

Senator MCGOVERN. How many people do you think would be involved in that kind of program?

Mr. HARRIS. That would involve about 150 million people, roughly. Senator MCGOVERN. So that all but 50 million of the American people would be encompassed in that program in one way or another. Mr. HARRIS. That is correct.

I would not advocate a program at that level. I would advocate a set of programs that would be designed at getting all Americans up to that level or higher, if possible. I think there is a limit to the degree to which we can rely on cash transfer programs to get people up to any level. I think the role of the cash transfer program is to provide a floor, a bare floor below which nobody should fall.

I think the responsibility of other programs is to make sure that almost everybody, if possible, can have an opportunity to get well above

that floor.

Senator MCGOVERN. Would you include in that formula the possibility of public service employment for those who can't find adequate employment in the private sector?

Mr. HARRIS. I think we need programs which encourage full employment, the usual platitude, which we do not have now. In addition, while I think we don't know enough to mount a full-scale public employment program tomorrow, it should very clearly be a future direction of policy development. We need to develop programs that are going to create jobs for people who can't find employment in the private sector.

Senator MCGOVERN. Thank you very much, Mr. Harris. We appreciate your testimony.

And, Dr. Wiley, we want to thank you for staying to hear the rest of the testimony.

The committee will be adjourned.

(Whereupon at 12 noon, the select committee recessed, to reconvene at 10 a.m., Friday, March 6, 1970.)

NUTRITION AND HUMAN NEEDS

FRIDAY, MARCH 6, 1970

U.S. SENATE,

SELECT COMMITTEE ON NUTRITION AND HUMAN NEEDS,
Washington, D.C.

The committee met at 10:20 a.m., pursuant to recess, in room G-308, New Senate Office Building, Senator George S. McGovern (chairman of the committee) presiding.

Present: Senators McGovern, Javits, Percy, and Dole.

Also present: Peter Stavrianos, professional staff member, and Clarence V. McKee, professional staff member for the minority.

OPENING STATEMENT BY HON. GEORGE MCGOVERN, A U.S. SENATOR FROM THE STATE OF SOUTH DAKOTA, CHAIRMAN OF THE COMMITTEE

Senator McGOVERN. Our witness today is the Under Secretary of the Department of Health, Education, and Welfare, the Honorable John Veneman. He is accompanied by Mr. Robert Patricelli who is well known to the members of this committee. He is now the Deputy Assistant Secretary for Interdepartmental Affairs, Department of Health, Education, and Welfare.

Mr. Secretary, we are happy to welcome you to the committee.

My understanding is that you have a rather lengthy prepared statement that will be available shortly.

What I would suggest, in view of our conversation, Mr. Secretary, is that you summarize the highlights and points you most want to make to the committee. That will give the Senators ar opportunity to question you on those aspects that we are most concerned about. Mr. VENEMAN. Very good, Mr. Chairman.

Senator DOLE. Mr. Chairman.

Senator McGOVERN. Senator Dole.

Senator DOLE. Before the Secretary begins, I would like to insert a story from today's New York Times by Warren Weaver, concerning action by the House Ways and Means Committee on the welfare reform program.

Senator McGOVERN. Without objection, the story will be made a part of the record.

(The article referred to follows:)

[From the New York Times, Mar. 6, 1970]

HOUSE UNIT VOTES WELFARE REFORM FAVORED BY NIXON-ONLY 3 DEMOCRATS OPPOSE MEASURE TO GUARANTEE A FAMILY INCOME FLOOR

(By Warren Weaver, Jr.)

WASHINGTON, March 5.-President Nixon's proposal to guarantee every American family a minimum income supplied in whole or part by the Government was overwhelmingly approved today by the House Ways and Means Committee.

The vote was 21 to 3, an auspicious beginning for a controversial program that is now expected to win easy approval on the House floor later this month. All Republicans on the committee supported the bill; the three negative were cast by Democrats-Representatives Al Ullman of Oregon, Phil M. Landrum of Georgia and Omar Burleson of Texas.

It was probably the most significant Congressional victory the Nixon Administration has won in its 14 months in office. Last October, when the welfare bill was introduced, the measure was given only a small chance of ever emerging from Committee.

MILLS MAY MANAGE BILL

Today, it sailed out effortlessly, with the committee chairman, Wilbur D. Mills of Arkansas, once regarded as a stubborn opponent, announcing that he would co-sponsor the measure and would probably serve as its floor manager.

The Family Assistance Plan, which is the heart of the new welfare program, would guarantee a basic income to every family in the country, even if it included a wage earner. The basic income for a couple with two children would be $1,600. The plan contains a requirement designed to encourage recipients to get off the welfare rolls. To receive benefits, the head of the aided household would be required to register for employment or job training.

NIXON MAKES STATEMENT

Benefits would decrease as a family's earnings increased and would be eliminated altogether when earnings reached $3,920 a year.

Committee approval, usually a preliminary event only modestly observed, was celebrated today as though it were final passage. President Nixon issued a statement hailing the move. The White House held a briefing on the bill. Administration officials were openly jubilant.

"Not every Congress," Mr. Nixon declared, "has the opportunity to enact a fundamental reform of our basic institutions. The 91st Congress now has that historic opportunity."

Senate prospects for the Nixon welfare program are regarded as generally good. The principal danger there, from the Administration's viewpoint, is that liberals may increase the cost of the plan so much that the cost-conscious House will balk at any compromise.

Under present estimates, the Nixon welfare program in its first year of operation would cost about $4.4-billion more than current welfare spending. It would go into effect July 1, 1971.

Administration officials estimate that it will increase the number of those eligible for welfare assistance from the current figure of 1.7 million families, or 6.8 million persons, to 4.6 million families, or 22 million to 23 million persons.

THREE GROUPS MERGED

The legislation also consolidates into a single class the three adult welfare categories of aid to the aged, blind and disabled, and sets a new minimum income of $110 a month for individuals and $185 for couples. These figures were increased over the Nixon recommendation at Mr. Mills' request.

Although the Ways and Means Committee made a dozen changes in the Administration bill before reporting it today, the bill clearly remained the measure the President submitted four months ago, only rather gently adapted by Mr. Mills and his colleagues.

The welfare bill will go to the House floor under a "closed rule," an arrangement that prohibits amendments there and limits the members to voting for or against the measure. The vote will probably come before the end of the month. The only adverse response to the welfare legislation came from the United States Chamber of Commerce which issued a statement today contending that the Family Assistance Plan was a first step toward a guaranteed annual income.