Recent reports have indicated that a key portion of the president's federalism initiative could be dead before it leaves the White House. This would be a national tragedy. An unprecedented opportunity would slip away from us to make government more effective.
The president made federalism the centerpiece of his State of the Union message. That message contained two surprises for informed observers: he proposed a complete federal takeover of the huge Medicaid program, and he committed his administration to negotiate with state and local officials on the final shape of his proposals.
Unfortunately, White House staff members and representatives of state and local governments seem to have reached a deadlock in the negotiations. Why? In my opinion, both the coalition of state and local officials and the White House staff have been too inflexible in these critical negotiations.
The president's federalism proposal is a two-part plan involving nearly 50 federal programs. In the first component, the "swap," the federal government would take over Medicaid while the states would take full responsibility for the AFDC and food stamp programs. The second component of the president's plan, the "turnback," would consolidate and gradually reduce federal funds for a large number of programs for health, social services, education and community development.
The state and local representatives are enthusiastic about the president's proposal that the federal government take over Medicaid. But they reject the other half of the president's proposed "swap"--that states accept full responsibility for food stamps and AFDC. Instead of accepting both sides of the swap, the state-local coalition seeks eventual federal takeover of AFDC and food stamps. They are willing to settle in the interim for the status quo on these two programs. But the status quo would leave in place a confusing mix of federal, state, and local funding, policy roles and administrative responsibilities.
The White House negotiators, on the other hand, have been equally insistent that the states take over most of the federal government's current welfare responsibilities in return for being freed from the financial burden of the Medicaid program. They argue that California did a superb job of straightening out its "welfare mess" while Reagan was governor, and could have done even better if the federal government hadn't been in the way.
The White House staff appears unwilling to recognize the depth and strength of the opposition to full transfer of the AFDC and food stamp programs to the states. Governors, state legislators, city and county officials argue that poverty is a national problem and that the costs of welfare are directly related to national economic conditions. These officials worry that welfare programs could become intolerable financial burdens in future economic slumps.
The administration's negotiators also are giving little attention at this point to concerns from another direction that could have great influence on what Congress does with the president's federalism proposals. I am referring now to the view of many religious leaders and public interest groups that the administration's AFDC and food stamp proposals are an attempt to have the federal government "abandon" the group that suffers the most severe poverty and deprivation --children of low-income families.
How can the present impasse be broken? The administration is apparently exploring the possibility of dropping food stamps from its original "swap" proposal. The states would take over the AFDC program in return for the federal government keeping food stamps and assuming Medicaid program responsibilities. This proposal, however, retains the most controversial elements of the original one, with significantly less program consolidation.
There is another relatively simple solution that might do the trick: continue to provide federal money for income support, nutrition, job training and placement and other services for low-income families with children, but provide it in a more flexible manner. In place of the present confusion of roles, consolidate existing programs into a "family support" payment to the states. Give the states a few basic rules for use of the monies, but otherwise free them to be imaginative and innovative in helping the poor.
The amount of the federal payment to each state could be adjusted for inflation and, if necessary, for adverse economic conditions. The states would know in advance how much money they would have and on what terms. They would have strong incentives to manage these resources well.
If this approach were adopted, I believe another change should also be made in the president's plan. Instead of moving Medicaid fully to the federal level, I believe the federal government should take over only the parts of it serving the elderly and disabled. This would consolidate at the federal level all of the major income support and health-care programs for the elderly and disabled. It would be an important step forward in responding intelligently and coherently to the needs of our growing elderly population.
Full responsibility for the remainder of Medicaid services--to low-income families with children--should be assigned to the states. This would permit them to address the health-care, income-support and other service needs of low-income families in a coordinated way.
This change in the Medicaid portion of the plan would reduce significantly the added Medicaid costs assumed by the federal government. These added federal costs would be offset as in the president's original plan by lower federal payments to states in the turnback component of the plan.
These proposals could revive the president's federalism proposals while preserving the full range of future welfare options--to proceed with full transfer of programs to the states as favored by the president, or to move toward full federal takeover as state and local officials prefer.
There is no reason to sign a federalism death certificate now. This fundamental reform in our system of government is long overdue. Every effort should be made to assure its survival.