This May Hurt a Little

By GEORGE J. CHURCH

Anxiety, and some surprises, as the extent of Reagan's revolution sinks in

The early days of a revolution are a time of pervasive confusion. A sense of sweeping change exhilarates some people, frightens others and causes nearly all to question anxiously just what the changes eventually will mean for the shape and texture of their own lives. So it was in Week 1 of the Reagan revolution in U.S. economic and social policy.

The general outlines of that revolution are clear--and striking--enough. The mammoth budget bills, passed by Senate and House just before the July Fourth congressional recess, reverse the direction in which Government domestic policy has been heading since 1933. After almost 50 years of expanding federal spending to cushion the poor, elderly and disadvantaged against the shocks of economic life, Washington will reduce both the numbers of people who qualify to participate in federal social programs and, in many cases, the size of the benefits they receive. The goal is to reduce federal nonmilitary spending by nearly $40 billion in fiscal 1982--and as much as $145 billion over the next three years--below the figures that would have been reached if the Government had let its domestic programs in effect run right along "on automatic pilot." The results the Administration hopes for: a balanced budget by 1984, a lowering of inflationary pressure and, in combination with deep tax cuts, a revival of economic growth.

But the House and Senate bills are so broad--they reduce planned expenditures for some 200 federal programs, and in the process amend scores of existing laws --that extensive analysis will be required to determine just what they contain. Some provisions, though potentially important, escaped national attention during the debate (see box). Moreover, in the Democratic-controlled House, after Administration supporters won a procedural fight, they produced in a pell-mell rush a substitute for a bill that had made less draconian reductions in social programs than Reagan wanted. Their hastily drafted proposals, which few Congressmen read, were filled with strikeovers, indecipherable hand-scrawled passages and some outright errors. Said a frustrated House Speaker Thomas P. O'Neill: "Nobody knows what's in their bill."

On his way to the podium to present the bill, Ohio Republican Delbert Latta, co-author of the Administration's proposal, discovered that the drafters had left out any money for bilingual education. He penciled in a sum, but perhaps mistakenly made it $85 million rather than the $157 million requested by President Reagan and approved by the Republican-controlled Senate. The House bill contains no funds at all for Project Head Start, which prepares poor children for school, even though Reagan in February had named it as a program he did not want to cut, much less eliminate; Republican leaders decided to deal with Head Start funding later. Correcting errors and oversights will be one big task for a House-Senate conference.

Despite such mistakes, the final fight on the House floor provided a fair index of the philosophic differences between the Administration and its Democratic opponents. By the time that battle began, Congressmen of both parties had agreed to make about 85% of the 1982 budget cuts Reagan sought, slashing urban mass transit subsidies, long-term unemployment compensation and milk for nursing mothers, among many other programs. But the majority of Democrats fought hard to limit reductions in some major "entitlement" programs, which provide benefits for anyone who meets certain qualifications. The defenders were overridden by a coalition of Republicans and conservative Southern Democrats on these major points:

Food Stamps. Most House Democrats wanted to cut this program by $1.5 billion next fiscal year; the conservative coalition deepened the reduction to $1.9 billion. Under current law, a family of four earning as much as $14,000 a year can qualify for stamps; that income ceiling will be lowered to roughly $11,000, and other provisions will reduce benefits even for some families that earn less.

Aid to Families with Dependent Children. This most basic of all welfare programs will be reduced by $1.1 billion next year, almost double the cut most Democrats had been willing to make. Eligibility standards will be tightened, and states will be required to set up "workfare" programs under which able-bodied recipients will have to perform community-service work in exchange for their welfare checks.

Housing Subsidies. Only 162,500 subsidized housing units will be started next year, vs. the 176,000 that most House Democrats would have provided and the 225,000 under current law. Also, the portion of the rent that tenants pay will be increased over the next five years to equal 30% of their incomes, vs. 25% now.

Student Loans. Reagan's forces succeeded in setting up a strict "needs test" before a college student can qualify for a Government-guaranteed loan, which is now available to almost anybody. Among other things, a student will have to demonstrate that his or her family is making a "contribution" to paying the cost of the education.

Administration backers made some concessions to win their victory. At the last minute, they withdrew a proposal to set a strict limit on Washington contributions to the federal-state Medicaid program that pays many hospital and doctor bills for low-income patients. That was one of the rare Administration proposals that provoked Republican rebellion: some G.O.P. Congressmen from the Northeast and Midwest notified the White House that they could not go along because they feared their financially hard-pressed states would have to pick up an unbearable share of the costs. Even so, the House voted to cut federal contributions to Medicaid by roughly 7%, or about $1.1 billion, over the next three years.

Figuring out just who will be hurt by the many reductions, and how badly, is a task complicated by endless partisan wrangling. Two examples: the $122 minimum monthly benefit paid to Social Security retirees will be phased out more quickly than most Democrats wanted.

Administration supporters contend that this measure will primarily affect "double dippers"--civil service or military employees who retire early, collect generous federal pensions and then work just long enough in other jobs to qualify for the minimum Social Security benefit. Democrats claim that the change will reduce benefits for some 3 million deserving elderly people, many of whom have incomes barely above the poverty line (now set at just over $4,275 for an individual). A $1.4 billion reduction in federal spending for school lunches next year will, in the Republican interpretation, force families who can afford to pay for their children's meals to do so, while it benefits the "truly needy"; Democrats insist that the cut will end free or cheap lunches for millions of children who risk malnutrition without them.

Assessing the impact of the spending cuts is made vastly more difficult because of another major departure: the lumping of three dozen-odd education, social-service and community-aid programs (the exact number will have to be fixed by House-Senate conference) into four "block grants" that states can, within broad limits, distribute any way they see fit. The move primarily is a step toward Reagan's philosophical goal of lessening Washington's clout in American society. But it is supposed to save money too; less will be allotted to the block grants than would have been spent on the programs separately.

Who will bear the burden of that consolidation depends on the action of state legislatures. They will have to decide how to allocate the reduced funds among, say, the Meals-on-Wheels program for the housebound elderly, transportation for the disabled and services to victims of child abuse--and even whether to continue some of the programs at all. Generally, mayors and other city leaders fear that state legislatures will slash programs benefiting city dwellers more deeply than those popular with rural and suburban residents. "Big-city school programs are chewed up by Reagan's block-grant concept," says Forrest Rieke, chairman of the Portland, Ore., school board. "It pits us against the downstate interests, and their folks in the legislature definitely have us outnumbered."

In Detroit, already depressed by the auto industry slump, Arthur Jefferson, superintendent of the city schools, counts on receiving only $50 million of federal money next academic year, down from $65 million in 1980-81. Remedial reading and math programs will be among those to suffer most, he says. Cutbacks in federal programs not being lumped into block grants will hurt too, of course. St. Louis has a waiting list of 10,000 people eager to move into subsidized housing, but expects to get only 250 subsidized housing units next fiscal year.

The reductions will surely have some unintended side effects at the local level. In Ohio and Florida, officials are talking apprehensively of raising state or local taxes to replace some of the money not coming from Washington.

The big political question is whether Reagan's success in putting together an alliance of 188 Republicans and 29 mostly Southern conservative Democrats to win the budget battle gives his supporters effective control of the House as well as the Senate. In the wake of the heated budget fight, some of Reagan's aides crowed about having formed a new "philosophic coalition," and some losing Democrats moaned that the President was converting Congress into a rubber-stamp body that would do whatever he wished.

Both contentions seem exaggerated. To win the budget vote, Reagan had to put on a display of wheeling, dealing and horse trading not seen since the days of Lyndon Johnson. To woo a handful of Southern Democrats, the Administration agreed to phase out gradually, rather than eliminate in 1982, federal aid to school districts near military bases, many of which are in the South. To hold Northeastern Republicans in line, the Reaganauts went along with "Nobody knows what's in their bill." one of the few spending increases in the whole budget: a $400 million rise, to $1.8 billion, in funds to help low-income people buy fuel to heat their homes.

Individual Congressmen were stroked too. Oklahoma Republican Mickey Edwards reminded the White House that he had proposed a candidate to be appointed a U.S. marshal in his state, and Massachusetts Republican Silvio Conte brought up the name of his choice for an Agriculture Department post. Both were assured that their requests were all but approved. Administration strategists even decided to say nothing about their stand on extension of the 1965 Voting Rights Act until a budget bill was on Reagan's desk to be signed into law. That issue had little to do with federal spending, of course--but anything that the White House said could have alienated some Southern conservatives, or Northern liberals, or both, and they just might have vented their annoyance by voting against the budget bill.

Obviously, that kind of all-out effort cannot be exerted on every issue. Leaders of both parties generally expect the Republican-conservative Democratic coalition to hold together on economic issues. In particular, prospects have brightened considerably that Reagan can persuade Congress to enact his proposal to reduce income tax rates 25% over the next three years, the second step in his economic policy revolution, rather than adopt the Democrats' proposal for a two-year, 15% cut.

But on social issues, such as abortion, busing and school prayer, the coalition is not likely to be effective. Says Max Friedersdorf, head of White House congressional lobbying efforts: "Those issues are so emotional, are of such deep personal belief, that they are difficult for the White House or any group to lobby on. It is an area we are wise to stay out of."

Even on economic issues, the durability of the conservative coalition is far from guaranteed. Fundamentally, those Congressmen who voted for Reagan's budget did so less because of horse trading--though that certainly helped --than as a matter of political survival.

The President's program is so popular in their districts that they dared not buck it. Says Deputy Democratic House Whip Bill Alexander of Arkansas, in a spirit of resignation: "Most people want the President to get his way because he promises to cure inflation and reduce taxes. The people believe him, so politicians have to."

But will that belief persist after the budget cuts begin to bite, as they certainly will? Said O'Neill, who was in Massachusetts playing golf last week: "Reagan's coalition slipped from 63 Democrats [who voted the President's way on an early budget resolution] to 29, and he had to give tangible goods to get them. He'll slip a hell of a lot further before he's done."

Who is right depends on whether the President's program really produces the large, permanent reduction in inflation and the upswing in job-creating growth that are supposed to justify all the sacrifices being imposed on poor and disadvantaged Americans. On the answer hangs not only the permanence of the conservative coalition, but the economic fate of the nation. --By George J. Church. Reported by Douglas Brew and Johanna McGeary/ Washington, with other U.S. bureaus

With reporting by Douglas Brew, Johanna McGeary, other U.S. bureaus

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