The White House is considering a scaled-down version of President Reagan's New Federalism that would put aside the three largest and most controversial programs involved--Medicaid, food stamps and welfare--and concentrate instead on turning over more than 30 other domestic spending programs to the states.
Richard S. Williamson, the president's leading adviser on the New Federalism, had recommended in an internal memo that Reagan's proposed federal takeover of Medicaid be dropped, and that food stamps and welfare aid be lumped into a relatively unrestricted block grant to the states.
But Williamson said yesterday that while Reagan has made no final decision, negative reaction from several Cabinet members makes it "highly unlikely" that the administration will adopt his idea for a permanent welfare block grant. In that case, he said, Medicaid, welfare and food stamps would be taken off the bargaining table for next year.
Williamson said "the strong consensus view" now was against the welfare block grant, adding, "There's a fear by many people, especially state and local officials, that block grants would be accompanied by budget reductions."
Word of Williamson's proposal, which he said had been discussed with White House counselor Edwin Meese III, served to increase rather than ease state and local opposition to the complicated sorting out of government programs. "If they send that to Congress, it's dead on arrival," said Rep. Leon E. Panetta (D-Calif.).
Several officials said they were concerned that welfare and food stamp payments might end up sharply reduced. They noted that the Agriculture Department already has proposed cutting the $10.8 billion food stamp program by another $1 billion in fiscal 1984.
"When you take an entitlement program and turn it into a block grant, automatically you offer it up on the chopping block," Sen. David F. Durenberger (R-Minn.), a congressional leader on such issues, said of the food stamp idea. "It might look suspiciously like saying the federal government shouldn't have the responsibility for feeding people."
Reagan's original proposal last January was for the federal government to take over the increasingly costly, $33 billion Medicaid program, which is now split between Washington and the states. In exchange, the states were to take control of the federal-state welfare program, Aid to Families With Dependent Children, along with food stamps, which is federally funded.
Reagan later agreed that Washington would retain responsibility for food stamps.
The other phase of the plan remains largely intact, according to Williamson's memo. At least 18 domestic spending programs, ranging from vocational education to wastewater treatment, would be combined in a second block grant to the states, to be financed by federal excise taxes.
The administration still plans to phase out these federal revenues after several years, allowing each state to drop the programs or continue them at its expense.
A third block grant, covering revenue sharing, community development aid and transportation programs, would go directly to the cities or would be passed through state capitals to the cities, the memo said.
Utah Gov. Scott Matheson (D), chairman of the National Governors Association, said the states opposed creation of a welfare block grant because welfare should be a national responsibility. "We also question the potential fiscal impact of this proposal on the states," he said.