The Reagan administration's policies are not only aiding upper-income families at the expense of the working poor, but also are widening the gulf between affluent and poorer regions of the country, according to a new study by the Urban Institute.
"A counterrevolution is underway," said the 494-page study released yesterday, a counterrevolution that already has reduced the size and scope of the federal establishment to roughly the level of the mid-1970s.
If all of President Reagan's "New Federalism" proposals are adopted, the study predicted, they "would restore economic policy and intergovernmental relations to their status before the New Deal."
The White House program of large tax and budget cuts and increased defense spending is causing a steady shift of federal dollars from northern states to more affluent and energy-rich states in the Sunbelt region, the study said. This occurs, in part, because many military installations are concentrated in the South and West while much of the North has grown more dependent on federal largesse than the rest of the country.
The budget cuts, for example, have cost New York $160 this year for every person living in the state, while Texas lost only $103 for each resident.
But the authors found that most states, regardless of their fiscal health, are not picking up the social service and health care programs that have been cut and combined into federal block grants.
The study, called "The Reagan Experiment," is the most detailed and comprehensive effort thus far to gauge the impact of Reagan's presidency.
"The administration has oversold the extent to which trickle-down economics really will solve the problems of poverty," said John L. Palmer, who directed the study with Isabel V. Sawhill. "Even under the best of conditions, there will be large segments of the population that will not be helped."
The study's chief conclusion is that "the Reagan economic program promised more than could be delivered." It said the current recession, together with a highly restrictive monetary policy, has drowned out any response to Reagan's economic initiatives.
An underlying theme is that the president's policies have served "to widen fiscal and economic disparities" among different regions of the country. The study said, for example, that the cuts in domestic spending will have the greatest impact on the Northeast, the Midwest and low-income southern states, which are most dependent on federal money.
At the same time, the three-year tax cut will most benefit the more affluent states, the authors said. In the growing state of Texas, they said, the tax cut saved the average resident $207 this year, compared to just $109 for the average person in Arkansas.
With so many states now struggling to balance their own budgets, the authors said, the Reagan spending cuts are having a more lasting impact than they might in better economic times. In a survey of 25 states, they found that only eight are replacing federal dollars lost under the block grants, and that these states were picking up only a small share, mainly in social services.
If all of Reagan's proposals are approved, the study said, federal aid as a proportion of state and local budgets will drop from 25 percent to just 3 to 4 percent by 1991.
But reaching that point will not be easy, the study suggested. To balance the budget in the next four years, it said Congress would have to come up with domestic spending cuts two to three times as large as those made in 1981. Palmer said this remains true despite the recent $98 billion tax increase.
The authors were especially critical of the way the tax cut was distributed, saying it would "require some sacrifices by low-income families," while producing "modest increases for the broad middle class and substantial gains for higher-income families."
The net effect of the tax and spending cuts will be to penalize working families near the poverty line who receive some federal benefits, the authors contended. Contrary to the administration's own goals, they said, this approach "creates major work disincentives" for some low-income wage earners.
These working families would lose most of their food stamps and benefits under Aid to Families with Dependent Children (AFDC), and they would lose their aid entirely if their modest earnings rise. Their small tax cuts also would be offset by the effects of inflation, reducing their total purchasing power by as much as 5.5 percent, or $550 a year.
By contrast, families earning more than $40,000 would have their taxes cut by $2,400 in 1984, while those earning over $80,000 would gain $19,230 that year.
While the administration argues that everyone, including the poor, will benefit if the economy improves, the authors pointed out that more than 90 percent of AFDC families are headed by women with young children who are unlikely to be employed even in a growing job market.
On one hand, the institute credits Reagan for cutting or abolishing several widely criticized programs, such as public services jobs and economic development grants, that never worked well and mainly increased the congressional pork barrel.
At the same time, "many programs that were cut either had a record of proven social effectiveness or were new approaches with a strong promise of success." The study pointed to immunization grants, the Job Corps, a nutrition program for low-income pregnant women and compensatory education for disadvantaged children.
The Urban Institute is a nonprofit research institute specializing in social and economic problems. Its board of trustees includes former Carter cabinet secretary Joseph A. Califano Jr. and former Republican officeholders William D. Ruckelshaus, Carla A. Hills and William T. Coleman Jr., as well as business executives, including Ray L. Hunt, chairman of the Hunt Oil Co., and Katharine Graham, chairman of the board of the Washington Post Co.