The Workfare State. Eva Bertram
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(through AFDC) was roundly discredited in favor of aid to the working poor, and the rise of the EITC became linked to the decline of AFDC. Driving both developments were the strategies of the Nixon administration in promoting FAP and the fervent opposition to its passage among Southern Democrats.
Strikingly, the origins of work-based public assistance in the politics of Nixon’s FAP followed a sequence that would be replayed twenty-five years later, in a new round of political fights that led to workfare’s culmination in the mid-1990s under President Bill Clinton. In each case, a president envisioned a broad package of reforms that contained a mix of elements for poor families, including liberal welfarist measures and work supports. He wrapped the package, however, in tough rhetoric about promoting work and ending welfare, and marketed it as workfare. Congressional conservatives seized on the rhetoric of workfare and recast it in tougher terms, both in public debate and in proposed policies. Core welfarist elements of the president’s plan collapsed—and conservatives helped secure a further shift toward workfare. This chapter starts with the evolution of FAP’s guaranteed income concept, then turns to the internal debate that took place within the Nixon administration over work and welfare, and to the heated political struggles over the proposal that unfolded on Capitol Hill and around the country.
The Political Origins of the “Income Floor”
The intellectual and political history of both the Family Assistance Plan and the Earned Income Tax Credit began with the notion of providing a “floor” under the income of the working poor. The proposal originated not with the Nixon White House but with earlier generations of economists, analysts, and planners, and it had conservative as well as liberal roots.
In 1943, while working briefly at the Treasury Department, conservative economist Milton Friedman observed that the poorest workers confronted a host of tax-related inequities and work disincentives.11 Friedman later proposed that the working poor be permitted to claim a refund on their 1040 tax forms equal to the amount the family income dropped below a certain point. When a family’s income rose measurably above this floor, they would pay taxes; but when income dropped below the floor, they would receive a refund from the government. Friedman believed that this approach would curb poverty more efficiently and less expensively than the existing welfare system. The concept, in short, was pro-work, anti-tax, anti-welfare, and anti-bureaucracy. The principle of a “negative income tax” was not new among economists, but it was Friedman’s 1962 book Capitalism and Freedom that won it a place on the political map.12
Despite Friedman’s credentials, most political conservatives found the idea of providing a government-backed income floor anathema, seeing it as another costly and misguided expansion of the welfare state. During the Johnson years, the guaranteed income principle was promoted primarily by liberal welfarists. Liberals came to the idea from a very different starting point, emphasizing the logic of entitlement and social rights that had gained prominence in the 1960s. Advocates advanced various schemes for providing a guaranteed income, from negative income taxes to European-style child or family allowances.13 The Johnson administration’s own poverty research, meanwhile, was turning up some disturbing facts that argued for a new approach. A large portion of America’s poor was slipping through the cracks in the safety net. The Planning and Evaluation Unit at HEW concluded in 1966 that at least 60 percent of needy Americans received no benefits from the nation’s main antipoverty cash assistance programs, including AFDC and Old Age Assistance (OAA), as well as Social Security. A sizable percentage of this group were working and poor—particularly families with children.14
By the mid- to late 1960s, a number of American economists and analysts were actively promoting income floor schemes. A 1968 petition urging Congress to adopt a “national system of income guarantees and supplements” was signed by some 1,300 economists from almost 150 institutions. Leaders in the social work community also signaled their support, encouraging “income as a matter of right … at a uniformly adequate standard of living” in a position paper released by a National Association of Social Workers conference.15 Confronted with the problem of the working poor, many liberal economists and Democratic policymakers turned first to traditional minimum wage strategies—but the income guarantee idea was gaining traction among analysts within the administration, particularly at the Office of Economic Opportunity (OEO) and HEW. Prompted by his advisers, President Johnson appointed various task forces to examine the guaranteed income concept, and the OEO launched pilot programs to explore its effect on the incentive to work. In 1968, even OEO director Sargent Shriver endorsed a version of the idea.16 But President Johnson was unconvinced.17 By the end of his presidency, the proposition had not gained broad popular support, Congress was skeptical at best, and Johnson remained committed to his own Great Society strategy of providing opportunity and services to the poor.18
When Nixon entered the White House, there was thus little reason to expect the guaranteed income idea to command attention beyond academic circles or government research commissions, even less to expect that it would be elevated to the national political agenda by a Republican leader. The wheels were set in motion when Nixon decided to take on welfare reform, in part to score points among Republican governors, lawmakers, and middle-class voters (especially Southern white voters) frustrated by the welfare system and its rising rolls.19
Shortly after the 1968 election, he tapped Richard Nathan, a Brookings Institution researcher who had worked on pre-election planning for the Nixon team, to head up a Transitional Task Force on Public Welfare. The Nathan task force suggested that an income floor be created under AFDC families nationwide, to be fully paid by the federal government. This would mean higher benefits in poor states (particularly in the South) and relief for state budgets. Arthur Burns, the president’s chief domestic policy adviser, objected to the idea, arguing instead for cutting welfare rolls and costs. But Nixon’s HEW secretary Robert Finch and urban affairs adviser Daniel Patrick Moynihan, a former assistant secretary of labor in the Kennedy and Johnson administrations, convinced the president to back the idea of a nationwide guaranteed standard for AFDC benefits.20
This itself would have marked a significant welfarist policy departure, particularly for a Republican president. Yet the administration would go further. A task force of staffers from HEW (including John Veneman, the new undersecretary) and the Budget Bureau reached agreement on a more far-reaching plan as an alternative to Nathan’s, then set out to win the approval of the president and his key cabinet members for what would become FAP.21 Conceptually, the breakthrough made by Nixon aides was to take a radically welfarist proposal—a guaranteed income for both working and nonworking poor families—and market it as work-based welfare reform.
The outlines of the administration’s proposal emerged gradually. FAP would extend a guarantee of income to all poor families—with one or two parents, working or nonworking. A family of four with no other income would receive an annual minimum federal grant (ultimately set at $1,600), which could be supplemented by the states. Those who worked would receive an earnings disregard for the first $60 they earned monthly, and then see their benefits reduced by 50 percent for each dollar of earned income. Able-bodied family heads, with some exceptions, would be required to accept work or training positions, or lose their portion of the family’s benefit.22
Throughout the spring and summer of 1969, the debate within the administration was heated. Arthur Burns presented a more limited plan, offering fiscal incentives to states to increase benefit levels. Members of Nixon’s cabinet and inner circle lined up on one side or the other. Moynihan was a vocal advocate of FAP, Burns its staunchest critic. HEW secretary Finch and Nixon aide John Ehrlichman supported the FAP approach. The Treasury secretary, CEA chair, and budget director preferred the Burns plan. This internal opposition to the plan, along with early reports of Republican objections in Congress, almost sank it—and forced various adjustments to the proposal after a protracted internal debate over the purposes of public assistance.23
Welfare, Work, and Markets: The Internal Debate
Much of the discussion within the administration addressed familiar issues of rising welfare rolls and costs, benefit levels, and the question of welfare reliance—issues that had been at the center of the debate since the