Backing Down on Benefits
By GEORGE J. CHURCH
COVER STORY
The dilemma: how to cut handouts but not hurt the truly needy
"On this day," said Ronald Reagan at the opening of his press conference last Thursday, "our economic recovery program begins." With the start of the 1982 fiscal year on Oct. 1, some $35 billion in budget cuts enacted by Congress last summer took effect. Social programs that had been expanding rapidly for decades began to shrink, and the nation embarked, at least for a time, on a different economic and philosophic course.
No one can yet calculate either the social or political consequences of the cuts or know how much they will hurt the "truly needy," who the President insists will still be protected by a "social safety net." Yet the new standards of eligibility that go along with the budget slashes make it inevitable that hundreds of thousands of people will be lopped off welfare and food stamp rolls. Federal subsidies for school lunch programs will be sharply reduced. Government-backed unemployment compensation will generally be paid out only for 26 weeks instead of 39.
There are troublesome paradoxes in these slashes, which Reagan sees as essential to "reduce inflation and reward the spirit of liberty and enterprise that were responsible for our nation's economic might." The cuts are deep enough to cause genuine pain for many citizens, yet not sufficient to restrain the out-of-control growth of federal spending. To do that will require a rethinking of some basic questions about democratic government How far can a compassionate society, which this nation is anc must remain, go in protecting its citizens against the vicissitude; of life without conferring unwarranted benefits on people who do not need them and placing an unacceptable financial burden on the great majority of its citizens? How can it equably slim dowi the innumerable payments and handouts that its citizens have been encouraged to consider, over time, as their right?
Those questions are raised by the phenomenal growth of "entitlement" programs, including welfare, food stamps, school lunches, unemployment compensation and a congeries of others, the biggest by far being Social Security. Their common element is that they provide eligible recipients with guaranteed benefits. Once a citizen meets certain standards--falling below a specified income level, losing a job, simply turning 65 in th case of Social Security--he or she qualifies for a pension, a fre meal, a low-interest college loan or whatever it is that by law must be granted, regardless of the cost to the society as a whole.
Most of America's social programs started off modestly, and all with the most laudable of intentions. They were then expanded by successive Administrations and Congresses to reward many more people far more generously than their founders ever dreamed. The most spectacular growth took place in the 1970s, when many of the entitlement programs were keyed to the consumer price index; benefits increased along with inflation.
Between 1970 and fiscal 1981, the cost of living rose 138%, yet in that same period federal spending on entitlement programs more than quadrupled, from $70 billion to $295 billion. Despite the initial scaling down of benefit formulas that Reagan has persuaded Congress to enact in some programs, entitlement expenditures are scheduled to jump a startling $50 billion, the biggest increase ever, in the fiscal year just begun. Moreover, under present law, they will continue to rise steeply in future years. Combined with Reagan's deep multiyear tax cuts and his expensive military buildup, the rise in entitlements could well drown the President's pledge to balance the budget by fiscal 1984 in a tide of red ink. If that happens, inflation will rage on, the job-creating economic expansion that the President counts on will not start, and all the sacrifice imposed by the early rounds of budget cuts will have been in vain.
There is little question that for the health of society, the growth of entitlements must be slowed--especially since the Administration and Congress are running out of budget-cutting alternatives. Entitlements this year will account for nearly 48% of all federal spending, up from 35% in 1970 and 22% in 1956. Military outlays and such truly "uncontrollable" expenditures as interest on the national debt take roughly another 25%. That leaves barely a quarter of the budget represented by spending that is easiest to reduce: the civilian programs, such as grants for mass transportation and rural electrification, for which Congress still makes annual appropriations. Reagan already has persuaded the legislators to chop many of those programs to the bone.
But any attempt to cut back on entitlements provokes a public--hence political--eruption of Mount St. Helens dimensions, as illustrated last month by the uproar over the Agriculture Department's suggestion to schools of how they might serve smaller portions to children getting federally subsidized meals and count catsup as a vegetable (see box). The proposed guidelines were hastily withdrawn, but only after opponents had made the most of an opportunity to portray Reagan as a Dickensian hard-heart, snatching French fries from the mouths of babes.
The fracas was especially unfortunate because it distracted public attention from the genuine difficulties of the school lunch program, which are many. It is far from the biggest of the entitlements: the $3.1 billion shelled out by Washington to subsidize school lunches in fiscal 1980 was dwarfed by the $100 billion outlay that year for Social Security pensions. But the school lunch program, which has done much to raise the nation's nutritional levels, understandably arouses strong public emotions. In so doing, it provides an excellent case study of .how entitlements start, how they grow, how waste and bureaucracy can encrust them, and how difficult it is to reduce them, especially without hurting the "truly needy."
The first school lunch program that Government researchers have been able to track down was started in 1790 in Munich. An American expatriate named Benjamin Thompson founded a Poor People's Institute that put unemployed adults to work making clothing for the Bavarian army; their children were required to work part time too, in return for which they were taught reading, writing and arithmetic, and served a free meal of potato soup, barley and peas. In 1865, French Novelist Victor Hugo, while in exile on the Channel island of Guernsey, put up the money out of his own pocket to provide hot lunches at a local school. His example inspired French philanthropists to found the Society for People's Kitchens in the Public Schools six years later. In 1905 the British Parliament, worried because three of every five potential recruits for the Boer War a few years earlier had flunked physical exams, many because they were ill nourished, passed a Provision of Meals Act making cheap school lunches a national responsibility.
In the U.S., the Children's Aid Society of New York began serving meals to vocational school students as early as 1853. But the initial spur to widespread programs came from two influential books: Poverty by Robert Hunter, published in 1904, and Bitter Cry of the Children by John Spargo, which came out two years later. They voiced what is still the concept behind all school food programs: it makes no sense to provide free education to children if they do not get enough food to benefit from the teaching. "Learning is difficult," wrote Hunter, "because hungry stomachs and languid bodies and thin blood are not able to feed the brain ... If it is a matter of principle in democratic America that every child shall be given a certain amount of instruction, let us render it possible for them to receive it."
Lunch programs, run by boards of education or parent-teacher associations with financial aid from private charities or city governments, had been set up in 76,000 schools by 1931. At that point, the Great Depression threatened to wipe them out; only the Federal Government had the resources to rescue them. Under President Herbert Hoover, the Reconstruction Finance Corp., which was started primarily to aid business, made a few small loans to towns in Missouri, enabling them to continue lunch programs that were on the verge of collapse. Franklin Roosevelt's New Deal agencies supplied money and workers to lunch programs in other states as an emergency relief measure; in 1935 Congress authorized the Agriculture Department to chip in food, partly as a way of getting rid of the surplus farm products that the Government was beginning to purchase in order to prop up prices. By 1942, workers, paid in part by the Works Progress Administration, were serving meals to 6 million children a day, about one-fourth of all children then in school.
World War II ended the need for WPA make-work projects. Roosevelt in 1943 killed the WPA, but Congress appropriated $50 million that year to keep the school lunch program going. Among other motivations, Congress was shocked by the malnourished state of many youths drafted to fight the war. In 1946 the legislators decided to make the school lunch program permanent. The National School Lunch Act, passed that year, opened with these words: "It is hereby declared to be the policy of Congress, as a national security measure, to safeguard the health and well-being of the nation's children and to encourage the consumption of nutritious agricultural commodities" by assisting in the "maintenance, operation and expansion of nonprofit school lunch programs." The act provided both cash and commodity assistance to schools that wished to serve lunches at or below cost to children whose parents were unable to pay full price, and set minimum nutritional standards for the meals. The cost of the program to the Federal Government in its first full year of operation: $68 million.
The program expanded steadily through the 1950s and '60s, as Congress made the benefit formulas more generous and more school districts signed up for the subsidies. By 1967 the Government was providing $338 million in subsidies for the feeding of 18.9 million schoolchildren, 37% of the school population. Nonetheless, a feeling grew that much more could, and should, be done. A coalition of women's groups estimated that 4 million of the 6 million children from families with incomes of $2,000 or less were not getting free or reduced-price meals, partly because local school districts set wildly differing eligibility standards. The nation was dismayed by repeated disclosures of continuing hunger and even starvation in parts of the country. Years of rapid noninflationary economic growth encouraged the belief that America could wipe out all social problems by determined expansion of Government assistance.
Enter Richard Nixon, attuned to the public mood. In language that could have been taken from any liberal Democratic manifesto, Nixon proclaimed: "Something very like the honor of American democracy is at issue. America has come to the aid of one starving people after another. But the moment is at hand to put an end to hunger in America itself for all time." At his behest, Congress in 1970 passed amendments to the National School Lunch Act that gave the program its current structure.
The 1970 amendments set federal income standards for children receiving free and cheap lunches, converting the school lunch program into an entitlement. School districts that joined were to serve free lunches to all children from families with incomes at or below the federally defined poverty line, and charge a maximum of 20-c---a figure that did not change (to 40-c-) until the start of the present school year last month--for lunches eaten by students whose families earned up to 25% more than that.
The standards were later raised to 125% and 195% of poverty; last year a family income of $10,270 or less qualified a student for a free meal, and an income of $15,490 for a 20-c- one.
Still more ambitiously, 1970 amendments provided funds on a sliding scale that enabled--indeed, required--schools to offer subsidized meals to all children. Schools last year got $1.13 from Uncle Sam for each free lunch they served; 93-c- for each "reduced-price" lunch; and 29 1/2-c- for each "full-price" lunch, for which students pay anywhere from 55-c- to $1.20. In all cases, the food actually costs more to prepare. Schools that collect the subsidy may, if they wish, also offer snacks, ice cream and `a la carte items at truly "full" prices, but all pupils choosing the standard meal stand in the same line for the same food. Only school personnel are supposed to know, from an inconspicuous printed code, how much, if anything, students have paid for their meal tickets. (Inevitably, in many schools the student grapevine finds out anyway.)
The basic reason for the subsidized-meal-for-everybody policy is that lawmakers thought that the schools could not earn enough to meet their share of the cost of providing free or bargain-rate meals to the needy unless they enticed into the lunchroom many middle-class or affluent children who would pay somewhat higher, though still subsidized, prices. But other influences were also at work. After all, reasoned some lawmakers, if left to their own eating habits, the children of the wealthy may become addicted to junk food; what better way to teach them good nutrition than to tempt them by low prices to eat a well-balanced lunch? That rationale, observes the deputy superintendent of one affluent Michigan school district, is part of a longtime trend to view the schools as social agencies. Says the educator: "We began just teaching them how to read and write. Then came athletic programs because parents couldn't be bothered to teach their kids how to run and jump. Now we are teaching them how to drive cars and setting up sex-education programs to teach them how to make love."
The 1970 changes led to an enormous expansion of the school lunch program. Over the next ten years, federal subsidies for school lunches multiplied more than five times, from $576 million in 1970 to $3.1 billion in fiscal 1980. Last year, subsidized lunches were served to 27 million elementary and secondary school pupils, about half the total student population, in more than 90% of the nation's schools. Most politicians viewed the growth with pride. In 1974 a Senate Agriculture Subcommittee noted that the subsidies were growing much more rapidly than inflation was driving up food prices. The subcommittee nonetheless urged further expansion of the program. One astonishing reason cited: to meet "competition" from mothers who still insisted on packing lunches for their children.
From time to time, there were doubts about where the program was heading. In 1975, President Gerald Ford, struggling to hold down the federal deficit, vetoed a bill that would have made even more children eligible for 20-c- lunches. In the Senate debate that followed, Maryland Republican Charles McC. Mathias wondered whether "we are not witnessing, if not encouraging, the slow demise of yet another American tradition: the brown bag. Perhaps we are beholding yet another break in the chain that links the child to the home." Brown-bag lunches might not meet federal nutrition standards, he observed, "but I do know that those brown bags and those lunch pails symbolized parental love and responsibility." Nonetheless, Mathias, echoing the dilemma that Congress faced, voted with the majority to override Ford's veto. As he explained: "No humane person wants to see one single child in America go hungry."
True enough, but the school program has now grown to the point where it benefits students who are in little danger of starving, as well as those who live precariously on the lower edge of society. Some examples:
>At North High School in the affluent Detroit suburb of Grosse Pointe, Mich., the clean, airy dining room looks out on a parking lot filled with students' Volkswagens, Hondas and even one classic E-type Jaguar. At 11:30 a.m., the room starts to fill with the first of three lunchtime shifts. But about half of North High's 1,600 students drive to fast-food restaurants, go home or bring their own lunches; of the remainder, 70% pass up the standard federally subsidized lunch to buy `a la carte items--90-c- hamburgers, $1.15 bacon, lettuce and tomato sandwiches, 65-c- side orders of French fries. About 240 students choose the so-called reimbursable lunch each day, paying $1.20 for a choice of sandwich or cheeseburger with potatoes and another vegetable or, if they prefer, fruit. Only ten students get that $1.20 lunch free or at a reduced price; most of the well-fed students look on it as an occasional variation in their usual fare. Says Karen Hagg, 18: "I buy lunch here a couple of times a week if I can afford it on my allowance. Otherwise I bring food from home."
To subsidize meals for these students, the Federal Government last year shelled out $94,000 to the Grosse Pointe district. Some cheating was involved. The school board knows that more than a few parents lied about family income or exaggerated the number of their dependents in order to qualify for free or reduced-price lunches. Lacking the staff to check up on claimants, Grosse Pointe schools found it cheaper to take parents at their word and dish out the low-cost meals.
>At Lakeside High in the suburbs of Atlanta, the meals are heavily influenced by what surplus commodities the Government makes available: on one day last week students had a choice of pizza, with a crust made from commodity flour and topped with commodity ground beef and commodity mozzarella cheese, or commodity pork made into barbecue sandwiches. The school charges 75-c- for a surprisingly tasty meal that costs $1.25 to prepare, and the low price tempts some 750 of the school's 1,350 students to buy it. Only 45 get the meal free or at a reduced price, and everybody assumes that these are blacks bused in from south De Kalb, a nearby, less affluent area. For most well-off students, the cheap meals--which, including the value of commodity foods, cost U.S. taxpayers $33,750 last year--are a bargain. Charlie Gilbert, a tall, blond eleventh-grader, brings a lunch from home and buys the 75-c- meal besides. "I have football practice from 4 p.m. to 7 p.m.," he explains. "If I just eat breakfast and one lunch, it's not enough to hold me over till 7 o'clock."
Unconcerned about nutrition, most Lakeside students would probably seek lunch elsewhere if reduced federal subsidies force the school to raise prices too high. Observes Gilbert: "If they raise prices and if your mom is going to give you money every day, you can go over to McDonald's and buy a hamburger." Seniors can do that, but currently not students in lower grades.
> At the elementary school in rural Somerville, Me., a community of 300, the lunch food-service staff consists almost entirely of Blossom Monroe, 58, a grandmother of eight who is bookkeeper, purchasing agent, menu planner and cook. She operates without a formal budget, simply taking whatever money she gets from the local school board and buying any food she can find that is nutritious and inexpensive. A few days ago, while shopping for her own meals, she saw chicken legs and thighs on sale for 59-c- per lb. at a local grocery and bought a batch for the school. She arrives at 6 a.m. in the tiny kitchen to cook for the two-classroom school, serves the food to the 41 pupils --deciding for herself how big a portion each one needs--and circulates among them, cajoling this student to eat his peas, asking another if he might like a second hamburger patty. Her meals average $1.43 to prepare, but are sold at a "full" price of 55-c-, and only 14 students pay that. Five pay 30-c- each, and the remaining 22 eat for free. Based on statewide average figures, the annual cost to U.S. taxpayers of Monroe's tender, loving care is a modest $5,090.
> At Eastman Avenue Elementary School in east Los Angeles, 1,550 children, nearly all Hispanic, fill the lunchroom with a clamorous din. Every single one of them eats free. Since more than 85% would qualify for no-cost meals anyway, the school had been excused from charging anybody until last year. Now, under new guidelines, it will have to charge students 75-c- for a full-fare lunch and 35-c- for a reduced-price meal. The school has not yet completed processing income-report forms from parents, however, so for the moment the free meals continue. The total cost of the Eastman program in the last school year: $336,375, of which 40% was contributed by the Federal Government. The lunches are plain: on one day, a hot dog and bun, three-eighths of a cup of watery beans and three-eighths of a cup of canned peaches. The children wolfed down the franks and peaches but left the beans. In all schools, urban and rural, rich and poor, teachers seem to have no more success than mothers in getting children to eat their vegetables. "If we allowed children to select their food instead of putting all of it on their trays, we could eliminate a lot of waste," says Eastman's food-service supervisor, Edith Sanderson. "Nobody can afford to feed garbage cans." But 12% to 15% of the meals get thrown out.
Cafeteria Manager Wanda Gillespie notes that Eastman has a special problem: "A lot of kids don't get this type of food at home. It takes a while for them to accept normal American things like apple sauce or mixed peas and corn." Gillespie tries, within Government requirements, to serve foods closer to the Latin taste, such as pizza and burritos.
Despite the waste of food, no one at Eastman doubts that the lunch program has been of great benefit since it began in 1969. Says School Nurse Lydia Chacon: "Absenteeism has gone down a lot. I don't see kids staying out of school for three days at a time, and I see far fewer colds or crankiness among the little children."
Few people doubt, either, that the program nationally has played a valuable part in dramatically reducing American hunger and malnutrition in recent years. But the inflation of the late 1970s reached an intolerable point, dictating an effort to chop the huge budget deficits that have been feeding it. In the view of David Stockman, Reagan's chief budget slasher, school lunch subsidies are "a perfect example of an entitlement program that should be reviewed. It entitles a lot of middle-class people to a trivial subsidy, which is nonsensical, because they pay their school lunch bill on April 15. Now that we've cut their tax due on April 15, they ought to start paying their own lunch bill."
The Reagan Administration originally proposed reductions of almost 41% in planned school lunch spending, but when Congress balked it settled for a cut of roughly 29%; expenditures this fiscal year are supposed to drop just under $ 1 billion below the previous budget target, to $2.4 billion. The major changes:
> Federal per-meal subsidies, including commodities,* are reduced from 32 1/2-c- to 21 1/2-c- for the misnamed full-price meals, and from $1.04 to 80 1/4-c- for reduced-price lunches. These subsidy comparisons are with the levels that would have been reached had the law not been changed; these payments, like other entitlement benefits, are indexed to inflation. The subsidy for the free meals was set at $1.20 1/4, actually higher than last year's $1.13, but a bit below the $1.24 it would have been if indexation had operated normally.
> Eligibility standards are tightened. The maximum charge for a reduced-price lunch doubles to 400, and the maximum family income is $15,630 if children are to pay that little, vs. $17,440 under old formulas (these standards, like subsidy payments, are indexed to inflation). The family income cutoff line for totally free lunches drops to $10,990 from the $11,520 scheduled under the old law. Furthermore, the new legislation urges schools not to notify parents of the changes in eligibility rules for free lunches when asking them to report their incomes, in order not to tempt them to understate their earnings.
The changes are designed to shift the emphasis of the program from benefiting all children to serving the neediest. In some of the poorest districts, the cutbacks will have little effect. For example, about 84% of the 3,600 public school students in Lee County, S.C., are black, and 86% of them get free lunches. That will enable the county schools to collect a special 2-c--per-meal subsidy paid to schools in which 60% or more of the meals served are free and reduced-price lunches. The county expects to receive the same $350,000 in cash subsidies that it did last year. Commodity subsidies will drop about $10,000 below the $104,648 of last year, but the county hopes to make up for that by not replacing two food-service workers who have quit.
Some school districts are already finding ways to make do with less. In Gary, Ind., prices of lunch for high school students who pay have increased from 60-c- to 85-c-; savings have been made by firing administrators, reducing kitchen-staff hours and changing food-preparation methods to increase the amount of food made from scratch in school kitchens.
Barnardsville Elementary School in North Carolina has installed a vending machine to sell noncarbonated soft drinks; coins deposited in it go into the lunch program. Says Principal Roy P. McGuinn: "I'm opposed to it, but I'll compromise my principles that far to help this program." Leith Walk Elementary School in Baltimore is considering buying prepackaged lunches from outside suppliers instead of preparing food in its own kitchen.
Opponents of Reagan's cuts fear that if price increases cause middle-class students across the country to stop buying school lunches, their districts will be unable to earn enough to run cafeterias with reduced federal subsidies. This would shut off free or cheap lunches for the needy too. So far, however, dropouts have been spotty. The 19-school Central Valley district in Spokane County, Wash., decided it could not come up with the additional $130,000 that it would have needed to run its lunchrooms with reduced federal subsidies. Now it prepares its own lunches with its own money, and charges $1 for each. Students who do not feel they can afford that price go to the principal's office and arrange a program of work in the cafeteria to qualify for a free lunch. Last year, with federal subsidies, 45% of Central Valley's 10,600 students ate school-prepared lunches; this year 25% do. Most of the rest bring their lunches from home.
Some other districts have come close to dropping out. The Waverly school board near Lincoln, Neb., considered leaving the program, partly out of disgust with the paperwork involved. Cafeteria managers must follow the Agriculture Department's 111-page guide for school food service, and each day someone must fill out an 18-column sheet listing all financial details of every meal served and sold. The board decided to stick with the program, because without subsidies its schools would probably have had to stop serving its 98 free and 102 reduced-price meals each day. Though the students who eat those meals are a minor fraction of the district's 1,500 pupils, board members felt that they really needed the food. But if school lunch subsidies are pared again, Waverly may drop out after all.
Whether lunch subsidies will be cut any deeper is uncertain. Reagan's advisers are scheduled to decide this week which further cuts in entitlement programs to recommend, and Stockman has made no secret of his desire "to take more out of the school lunch program. But any additional reductions will meet resistance in Congress, even from loyal Reaganites. House Republican Leader Robert Michel last week sent a letter to the American School Food Service Association asserting hopefully: "I don't believe any further cuts are contemplated by the Administration or Congress at this time. We recognize that it is a very important program that should be continued."
In sum, the school lunch program is a classic example of an entitlement plan that started small, achieved worthy results but grew to dimensions never initially envisioned. By cutting subsidies, the Administration is trying to encourage a return to community volunteerism and individual responsibility, as symbolized in part by the brown lunch bag. Whether this can be achieved without hurting the really needy remains to be seen.
Other entitlement programs have gone through a similar cycle of growth--notably Social Security. It began modestly, as a straightforward plan to provide retirement income, when Franklin Roosevelt signed it into law in 1935. Congress began expanding it as early as 1939--a year before the first payments were made--when it decided that benefits should go to the survivor (widow or widower) and dependents of a retired beneficiary. The expansions since then have been legion. Among them: bringing self-employed people, employees of state and local governments and nonprofit organizations into the system; providing for retirement at reduced, though still substantial, benefits at 62 rather than 65; starting, in 1956, a disability-insurance program.
The most fateful expansion occurred in 1972, when Congress raised retirement benefits 20% and decreed that beginning in 1975 benefits should be automatic and linked to increases in the Consumer Price Index. The C.P.I, proceeded to soar far higher than anyone expected. Furthermore, it badly overstates the living costs of the elderly; it is heavily influenced by housing prices, though few retired people buy houses. The maximum Social Security tax has risen from 1% of the first $3,000 of earnings, or $30, in 1935 to 6.65% of the first $29,700, or $1,975 currently. Even that increase has been far from sufficient to finance the staggering rise in benefits, and the trust fund out of which pensions and disability benefits are paid may run out of money by 1982.
If the growth of Social Security pensions ($120 billion in fiscal 1981, up from $31 billion in fiscal 1971) could be significantly slowed, cuts in other programs like school lunches might not have to be so drastic. But Social Security is an anomaly among entitlement programs. Though the retirement benefits were originally intended only to supplement individual savings and private pensions, they have come to constitute almost the entire income of many old people. Moreover, retirees look on the benefits as a mere return to them of taxes they have paid in their working years, though in fact such benefits are being financed by taxes levied on people still on the job today. In any case, the powerful lobby of older people, and those nearing retirement, looks on Social Security pensions, and regular increases in payments, as a sacred right.
The most obvious solution to the Social Security problem would be to key the future growth of benefits to some price index less generous than the C.P.I. Writing in the Wall Street Journal, Harvard Economist Martin Feldstein suggested a 2% "floor" under the indexation of benefits; that is, if the inflation rate were 8%, retirees' income from Social Security would rise 6%. Feldstein estimates that the formula, if adopted in 1982, would save the system $15 billion by 1985. The Administration, however, has not dared to present any such plan. It did consider proposing a three-month delay in the next benefit increase, scheduled for July 1982, but hastily backed off two weeks ago under intense fire from Congress.
A roundup of other major entitlement programs:
Medicare-Medicaid. Both programs were started in 1965 to help pay bills for people age 65 or older (Medicare) and for the poor of any age (Medicaid). Originally both were intended primarily to cover the costs of acute, short-term illness, but Medicaid was expanded in 1972 to cover long-term care in mental institutions and nursing homes. Some studies show that perhaps one-fourth of the patients in these institutions do not need to be there. The cost of both programs has been driven skyward by the soaring increase in hospital and doctor bills, which has averaged at least 15% a year. Medicare benefits today go to 26 million people and Medicaid to 22 million; the two programs combined cost Washington $57 billion last fiscal year. The Administration has persuaded Congress to enact minor adjustments to save $500 million in 1982.
Food Stamps. Started in 1961 on a pilot basis and made nationwide in 1971, this program has been steadily expanded to cover more people and increase the value of the stamps they receive in line with inflation; as recently as 1979 the Government eliminated the requirement that recipients buy stamps and handed them out free to those who qualified. In 1962 stamps went to a mere 151,000 people at a cost to the Government of $14.1 million; last fiscal year 22.5 million Americans got stamps at a cost of $11.3 billion. Congress, at Reagan's urging, has tightened eligibility requirements in a way calculated to remove about 875,000 people from the rolls and save the Government $1.6 billion.
The food stamp program, along with Medicare-Medicaid, is the most scandal-tinged of entitlements, exceeding even welfare; the rip-off is estimated at about $1.5 billion a year. "Food stamps have become a second currency," says John Graziano, inspector general of the Agriculture Department. "They are as negotiable as regular currency is. People have learned, unfortunately, that you can use a food stamp to buy a lot of things besides food"--meaning almost everything from clothes to cocaine. The major thievery is done by organized crime rings that have infiltrated the program as a way to launder money. For example, a criminal syndicate that owns a check-cashing service may buy stamps from recipients with tainted cash, then have a meat market it also owns forward the stamps to Washington for reimbursement.
Veterans Benefits. The great-granddaddy of all entitlements, this program pays benefits for both service-connected and non-service-connected disabilities to veterans of conflicts ranging from the Spanish-American War to Viet Nam, some of whom served for as little as 90 days, plus their widows and dependents. Roughly 5 million people are collecting $11 billion a year, and their lobby is so powerful that the Reagan Administration has proposed no changes whatever.
Aid to Families with Dependent Children. Federal participation in this basic welfare program started in 1935, when Washington joined the states in expanding what was then known as the mothers' aid movement. Originally, the program was intended primarily to assist widows with children. Today 80% of the payments go to single parents whose mates have deserted, and other eligibility standards have been steadily made more generous. In 1936, 534,000 people collected a total of $21.3 million in welfare payments from Washington. Today the Federal Government pays $7 billion to 11 million recipients. A tightening of rules is calculated to remove 400,000 families from the AFDC rolls in fiscal 1982 and reduce benefits slightly for another 287,000, saving Washington $1 billion.
House Speaker Tip O'Neill has frequently grumbled that Reagan threatens to undo all the social good achieved since the New Deal. The argument is political grandstanding. As the President noted at his press conference, "Twenty-two million people were eligible for food stamps before the reform--some 21 million will still be eligible today ... about 40 million individuals are still provided with over $50 billion in cash and in in-kind benefits in eight major public assistance programs other than Social Security." Even the more heavily trimmed programs, like school lunches, appear to be in surprisingly good shape. School districts are adjusting to leaner budgets, parents are accepting the reality of paying more (as they do for everything else these days), and more children are rediscovering the small pleasures of brown-bagging.
Yet the rigorous ongoing national debate over trimming entitlements helps direct attention to a fundamental and vital question: What level of benefits does a citizen have a right to expect from his Government? Both liberal Democrats and conservative Republicans could probably accept Abraham Lincoln's answer --Government ought to undertake only those functions that individuals cannot perform for themselves--although they would surely interpret it differently. Certainly a decent, and especially an affluent, society must ensure some very basic rights: no one should starve, or die for lack of medical attention. Beyond that, Government should strive to improve the lives of its citizens, to the extent that its citizens can afford to have their lives improved. Unfortunately, a rapidly growing economy can afford more than one riddled by inflation and unemployment. Rudolph Penner, an economist at the American Enterprise Institute, looks on benefit programs as a kind of social contract between the Government and its citizens--one that should be renegotiated from time to time, as conditions change. For such a renegotiation to be fair, of course, it must involve everyone, as equitably as possible. For example, Reagan must oppose, as he has not yet, many farm subsidies, tax breaks for special interests and numerous other programs that primarily benefit the well-off. In addition, other budget changes--general tax laws, rates of defense spending, various incentives offered to business--must be publicly perceived to have been fairly distributed among the rich and poor.
"With the changes [in social programs] over the past 20 years, we haven't required people to be responsible for themselves," says Linda McMahon, head of the Office of Family Assistance in the Department of Health and Human Services. "We were the richest nation in the world, so we thought that everyone ought to have everything he wanted. The Government fostered the idea that it owed you something." Indeed, the basic mistake is that Americans began to confuse desirable and beneficial programs--and the continual expansion of them--with basic rights. In the process, they came to regard Government benefits as somehow free, and did not count costs or forgot that there were any. But there are: if not paid in taxes, those costs will be paid in inflation. Literally, free lunches will continue to be served in American schools, and should be to those children who need them. But metaphorically, there is no free lunch. -By George J. Church. Reported by Gisela Bolte and Jeanne Saddler/Washington, with other U.S. bureaus
*Besides cash payments, the Government will donate $407 million worth of commodities (frozen chicken, canned vegetables, peanut butter) to schools this year.
With reporting by Gisela Bolte, Jeanne Saddler/Washington
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