Benefits may be cut, taxed to pay for welfare reform

February 13, 1994|By New York Times News Service

WASHINGTON -- The administration is considering a plan to finance President Clinton's welfare proposal by taxing food stamps, welfare benefits and housing assistance and by cutting aid to legal immigrants who are elderly and indigent.

While no decisions have been made, those are among the options being considered by senior officials at the White House, Treasury Department and Department of Health and Human Services, confidential documents and interviews with officials show. The money from the cuts would be used to expand work and job training programs.

Critics liken the size of the cuts being considered to those pushed through by President Ronald Reagan. The difficult options illustrate the administration's difficulty as it simultaneously pursues ambitious welfare and health care proposals while seeking to reduce the deficit.

One risk is that cuts will hurt the very people the welfare plan seeks to help: the poor and near-poor. That was the fear of the administration official who disclosed the options, calling them "unconscionable."

A second risk is that the potential reductions, which are already being denounced on Capitol Hill, could alienate some Democrats whose help Mr. Clinton needs to pass his health bill.

Melissa Skolfield, an administration spokeswoman, declined to discuss any specific options, calling the discussions "very preliminary."

But she argued that the pain of any cuts would be more than offset by the benefits of the welfare program, which is intended to help poor women, its main recipients, find jobs.

"The plan is going to provide new investments in child care, education and training for poor women who were simply written off by previous administrations," she said.

The cuts being considered are in addition to the $30 billion in proposed reductions included in the 1995 budget, which was released last week.

One administration official said the search for money had become "brutally hard" since "painful cuts have already been made."

The difficult choices are being shaped both by law and politics. The 1990 budget law requires the government to pay for any new spending increases with offsetting taxes or program reductions.

And since welfare, mainly the Aid to Families with Dependent Children program, is considered an entitlement program, the cuts have to come from similar programs whose benefits go automatically to everyone meeting the criteria.

The largest entitlement program is Social Security, but officials consider it too politically risky to cut. The growth of the next two largest, Medicare and Medicaid, is being restrained to finance changes in the health care system.

That means that most of the remaining targets are entitlement programs for the poor, primarily welfare, food stamps and disability programs.

"Everything that's left is virtually a mortal wound," the official said.

One of Mr. Clinton's principal promises in the 1992 presidential campaign was to "end welfare as we know it," and he has vowed to send Congress a bill this spring.

Mr. Clinton has pledged to expand training programs for people on welfare, but then require those still unemployed after two years to join a work program.

There are now a record 5 million families receiving Aid to Families with Dependent Children, the main federal welfare program.

The number of people who would hit the two-year limit is a matter of sharp dispute, with the administration's own estimates ranging from 500,000 to more than 2.3 million.

The hunt for money is crucial. If the administration fails to find sufficient revenue, it could be forced to scale back its plan. Administration officials have said in the past that the welfare plan would cost about $7 billion a year when fully implemented.

The options under consideration have multiplied in recent weeks, as officials prepare to send Mr. Clinton a list by March. Officials are considering cuts in an emergency cash aid program used to prevent evictions and utility cutoffs and to provide shelter for the homeless.

The $300 million program is growing rapidly and federal officials suspect that states are using it to finance services they once provided themselves.

Administration officials are also considering a plan that would make it harder for drug addicts and alcoholics to receive disability payments through the Supplemental Security Income program by claiming their addiction as a disability.

As another way of raising money, the Treasury Department is scouring a $16 billion annual tax credit program for low-income families, looking for signs of fraud or abuse. The issue is considered politically sensitive since the program is one of Mr. Clinton's favorites and the administration recently gave it a large increase last year.

The search for viable options is sufficiently difficult that officials at the Department of Health and Human Services proposed cutting $1.2 billion a year from an obscure provision of Social Security, which provides increased payments to retired fathers who have young children.

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