Nixon and the Elusiveness of Social Welfare Compromise
Today’s anti-poverty programs remain a fragmented and somewhat messy mix that leaves both parties unsatisfied with the status quo. The starting point for social welfare compromise needs to be a changed perspective, which will require some courageous individuals to break from today’s familiar partisan patterns. There will always be a need for elected officials to balance competition with their partisan opponents alongside an openness to compromise when appropriate. It is time to reset the dial a bit, in favor of compromise.
President Nixon welcomes Michael Newton (poster child for Better Hearing and Speech Month) to the White House in 1971. Photo: Wikimedia Commons.
Early in the Nixon administration, as the White House staff assembled its initial domestic agenda, the president was telegraphing ideological flexibility. An early clue was an admiring reference, inspired by a book recommended by his aide Daniel Patrick Moynihan, to Benjamin Disraeli and Lord Randolph Churchill as historically consequential “Tory men with Liberal policies.” Owing to his modest family background, Nixon was more open to breaking from party orthodoxy than perhaps other GOP leaders would have been under the same circumstances. His ultimate failure to secure groundbreaking social welfare reforms, despite his eagerness to engage in the bipartisan give-and-take required for success, provides a window into an important source of polarization in American politics.
The early-term Nixon quote appears in The Politics of a Guaranteed Income: The Nixon Administration and the Family Assistance Plan, Moynihan’s recounting of the 37th president’s infrequently noted push for a negative income tax in 1969 and 1970. Moynihan, a lifelong Democrat and devoted New Dealer, had served in the Kennedy and Johnson administrations but was nonetheless willing also to serve as Nixon’s top advisor on poverty and urban affairs. The intense two-year political battle over the administration’s anti-poverty plan provides a rich reservoir of material from which Moynihan drew his narrative. One could do worse by way of an introduction to the complexities, and sometimes the pathologies, of domestic policymaking in postwar America.
Nixon coupled his push for the Family Assistance Plan, or the FAP, with a comprehensive proposal to improve healthcare and health insurance, including affordable coverage for the entire population. In the end, the administration’s escalating scandals made consideration of the health scheme, which came after the FAP, all but impossible, but it was always likely to suffer the same fate as the poverty program and for similar reasons. The president’s Republican allies were lukewarm at best regarding Nixon’s plans, and Democrats and their activist supporters viewed them more as political threats than as opportunities to improve the lives of less fortunate Americans.
Absent disruptive crises, the partisan divide is hard to bridge, but it is especially wide and persistent over core economic matters, like taxes, health insurance, and welfare support. The parties know voters can be swayed on these questions and are therefore loath to introduce doubt about what they would deliver by wavering on their stated principles.
Nixon and His Moment
Nixon is mostly judged today based on his self-destructive tendencies, which led to abuses of executive authority and eventually to his humiliating resignation in 1974. Given the trauma the Watergate saga inflicted on the country, it is an understandable historical obsession. But it is nonetheless limiting as a lens through which to view his entire presidency, as it obscures other notable considerations, both good and bad.
Nixon’s 1968 campaign was marked by disciplined messaging on domestic stability and ending the Vietnam War, which resonated with a traumatized public. The previous years had brought multiple national tragedies, including the assassination of a beloved sitting president, alongside a deteriorating foreign conflict.
It was also a period of groundbreaking social policy change. In 1965 alone, a heavily Democratic Congress approved Medicare, Medicaid, elementary and secondary education assistance, subsidized loans for higher education, the creation of the Department of Housing and Urban Affairs, a second landmark civil rights bill, and much else. In the years bracketing that historically active year, Congress also expanded food stamps and liberalized scores of other social support programs. In sum, the 1960s ushered in changes to the scope of federal power and responsibilities that rival those of the New Deal era.
And yet this activism did not calm the waters domestically and indeed was seen in some circles as perhaps contributing to the tumult. Beginning in the mid-1960s, rioting was a regular occurrence in the nation’s large pockets of urban poverty, resulting in a level of destruction and disorder that shook America’s sense of steady social progress.
It was in this context that the new president assumed office and considered his options. He brought into the job a personal background that informed how he viewed the world. Most importantly, Nixon understood financial hardship. His family, devoted Quakers, struggled during his formative years but persevered nonetheless in large part because of a determined work ethic and a commitment to the dignity of self-reliance. He also lost two brothers to tuberculosis by the time he was twenty, tragedies that reinforced his acceptance of the fragility of life and the importance of good fortune and health to a person’s economic standing.
He began putting together his domestic plans by assembling an accomplished group of advisors, many of whom would remain prominent in national life for decades. In addition to Moynihan, who later served as Ambassador to the U.N. and India and then as a four-term senator from New York, Nixon relied on the counsel of George Shultz, Arthur Burns, Eliot Richardson, Richard Nathan, and many others with similar credentials.
Moynihan served as the executive director of the newly created White House Council on Urban Affairs, which was later absorbed into the Domestic Policy Council. His assignment was to help the president understand why welfare rolls were surging in America’s troubled cities, and then also what might be done about it.
An Income Strategy
After much back and forth, it was broadly understood that the causes of social unrest in the country were likely complex and multifaceted, and not yet fully understood. However, there were a couple of leading theories, including the rapid evolution of family structures in the 1960s and the incentives that modern welfare support provided to single-parent households.
With respect to the potential improvements in the status quo, Moynihan was committed to breaking with past orthodoxy by introducing a new system of direct federal income support for poor households.
He and his associates believed there were two basic paradigms available for assisting struggling families. The first, the Great Society model, focused on providing services to low-income households to assist them in breaking free from the forces keeping them from earning higher wages, such as substandard educational opportunities, inadequate childcare, and limited housing options. The advent and growth of social workers as a profession was central to this vision.
“Rapid inflation, fueled by Medicare and Medicaid, was putting the costs of care out of reach for many families. Insurance coverage had improved but was uneven. And access to services was severely limited in rural areas and pockets of poverty. Nixon proposed to tackle all of these problems simultaneously.”
The alternative is an “income strategy,” with the more straightforward mission of putting more financial wherewithal into the hands of the struggling families, to use as they see fit. The federal government could do what it does well—provide money—and get out of the business of what is does poorly, engineer social change.
Moynihan urged Nixon to embrace the income model. Specifically, he put before the president a plan for direct federal financial support to families with incomes below certain thresholds, which would then be phased out for households at higher income levels.
It helped that this idea was not new and was favored by prominent conservatives, most notably Milton Friedman. His plan for a negative income tax would have swept aside federal welfare support in favor of a payment from the government that would decline as incomes rose and would be integrated with the nation’s entrenched system of income taxation.
The president agreed with Moynihan’s recommendation. The overall design was of a negative income tax targeting households with dependent children, adjusted by family size, and with a steep phase-out to keep the overall costs to the federal budget manageable. The benefit would be set initially at $1,600 per year for a family of four ($9,900 in today’s dollars) and would allow $720 in earnings before any phase-out of the support. Once the threshold was reached, each extra dollar of earnings would result in $0.50 less in tax support. In the end, the trade-off between costs to the Treasury and a high rate of implicit taxation proved difficult to explain in a manner that was convincing to the plan’s critics.
After some debate, Nixon decided this new benefit would not displace food stamps or other programs, as Friedman recommended, although the hope was that it would eventually lead to less reliance on other fragmented support programs. Moynihan clearly saw the initiative as a first step that, once in place, could be improved and refined.
There was also a penalty ($300) for failing to comply with requirements to work or prepare for work, which was important for keeping Republicans open to considering the plan. Nixon and his team took liberties by suggesting this provision converted the FAP from a guaranteed income to a work support initiative. However, it remained the case that a family with no earnings would get a minimum level of federal support.
Both congressional chambers were then fully dominated by Democrats and yet there was ideological diversity within their party too. At that time, many long-serving and powerful Democrats were from the south and often voted more conservatively than did their Republican counterparts. The FAP would have provided substantial new assistance to millions of poor southern families and yet the plan’s reception in that region was tepid.
As always, presidential politics influenced the proceedings too. Leading Democrats loathed Nixon for his aggressive anti-Communist crusades in the early Cold War, and there were several prominent members of the Senate who were eyeing the 1972 presidential race for a run against him. Among the leading potential candidates at that time were Senators Ed Muskie, George McGovern, and Ted Kennedy. None were especially eager to hand Nixon a victory on a question that Democrats viewed as falling within their traditional partisan domain.
Despite the many obstacles blocking the initiative, the administration worked successfully with the House to pass the plan, with the Ways and Means Committee coming in for especially high praise from Moynihan. Led by longtime chairman Wilbur Mills, from Arkansas, the committee had a reputation as a careful, bipartisan, and mostly dispassionate forum for considering significant tax and spending policies, with an emphasis on consensus and compromise. After initial skepticism, the committee worked through its concerns about the FAP and concluded, much as the White House staff had weeks earlier, that it offered the most practical pathway to providing additional assistance to families with children who otherwise would remain destitute and frustrated. In April 1970, the House approved the FAP by a vote of 243 to 155.
The favorable vote provided no momentum in the Senate, where the president and his team faced stiffer resistance. Moynihan’s description of the political dynamics and leading players in the upper chamber, where he would later serve, is withering. Progressive Democrats denounced the plan as inadequate without acknowledging that nothing better had been offered by the two Democratic presidents preceding Nixon. Conservative Republicans saw it as undermining work and busting the budget. Russell Long, the Chairman of the Finance Committee, engaged in half-truths and demagoguery to denigrate the plan, as did many of the committee’s conservative Republican members. Meanwhile, the progressive wing of the Democratic party also resisted it, on the grounds that the promised benefit was too low. Here Moynihan pulls no punches, as his disdain is evident for partisans forever decrying the inadequacy of what is proposed without having an alternative that would deliver better results (and could pass). The FAP would have been the most significant anti-poverty program to that point in the nation’s history, and yet Democratic progressives and like-minded outside groups were mostly opposed to the scheme.
In the end, time ran out for the Nixon administration, and Congress adjourned at the end of 1970 with the FAP stuck in the Senate.
Health Insurance for All
In retrospect, Nixon’s plans for healthcare were even bolder and more remarkable than the FAP. A GOP president was advancing a comprehensive and cohesive strategy to make healthcare more affordable, with specific plans for efficiency in care provision, combined with changes to ensure the full population had access to health insurance and services in their communities. Neither the Kennedy nor the Johnson administrations had come close to proposing such sweeping changes, and Nixon’s Republican White House successors have played it much safer in the decades following Nixon’s terms. Nixon stands out in this regard as far less reticent to engage in the inevitable trade-offs inherent in this complex topic.
Twice, in 1971 and 1974, respectively, Nixon put before Congress a multifaceted proposal. As explained in the submissions, the U.S. had much to celebrate in its healthcare arrangements, but there also were many persistent and growing problems that demanded attention. Most especially, rapid inflation, fueled by Medicare and Medicaid, was putting the costs of care out of reach for many families. Insurance coverage had improved but was uneven. And access to services was severely limited in rural areas and pockets of poverty. He proposed to tackle all of these problems simultaneously.
Central to the Nixon plan was the promotion of a new concept in healthcare—the Health Maintenance Organization, or HMO. Unlike traditional insurance, HMOs were set up to emphasize prevention and early intervention to head off escalating health problems. That push eventually led to Congress approving the Health Maintenance Organization Act of 1973, which opened the door to a new era in cost control practices.
He had less success ensuring affordable insurance enrollment for the entire U.S. population. His approach to the problem of the uninsured had three main features. First, it created new national standards for health insurance so that all Americans, including those enrolled in Medicare, would have catastrophic insurance protection in addition to assistance with other bills. Second, employers were to be required to offer workers enrollment in plans that met the new minimum coverage standards, and also, after a transition, charge no more than 25 percent of the premium to the participants. This “employer mandate” foreshadowed what would eventually become a prominent feature of the Clinton Administration’s plan and then law under President Obama’s push for the Affordable Care Act (ACA). Third, for persons not covered by an employer plan or Medicare, Nixon wanted to create a new system of subsidization for enrollment in private insurance, with the assistance tied to the incomes of the enrollees (again an idea later taken up by the ACA). This new scheme would partially replace Medicaid.
Nixon stressed his opposition to a full federal takeover of insurance coverage, as many Democrats desired. He saw danger in such an approach, as the government would inevitably use fee controls to cut expenses without regard to the consequences for the quality and timeliness of care for patients. He also pledged his plan’s federal cost, estimated at about $6.0 billion per year (roughly $30 billion in today’s dollars), could be absorbed into the budget without imposing higher taxes, which he opposed.
More so than the FAP, the Nixon healthcare plan had both an offensive and defensive purpose. The president wanted to make improvements in healthcare and was willing to take risks to achieve that objective, but he was also keen to head off an expected line of attack from the Democrats, who were lining up behind plans of their own to provide universal public insurance emulating Medicare’s design.
Indeed, it was opposition to the Nixon plan by Sen. Ted Kennedy, who was then eyeing a White House run, which made it difficult for the administration to get any legislative traction. At that time, Kennedy favored a public insurance system for the entire population, not a hybrid public-private plan as reflected in Nixon’s submission, and he believed campaigning on securing his version of universal coverage would galvanize the electorate in favor of the Democratic party. He announced his opposition to Nixon’s proposal early and never wavered, despite the prospect that a compromise would have brought millions of lower-income Americans into stable insurance arrangements for the first time in their lives. It is no small irony that Kennedy later became a vocal champion of many of the ideas he rejected in the Nixon plan.
Competition and Compromise
Politics is a competitive and subjective endeavor. Candidates, elected officials, and their partisan allies must weigh trade-offs when choosing when to stand on principle, and when to engage with their opponents in compromise plans that could alter their prospects in future elections. There are no hard and fast rules dictating how to make such decisions.
However, it has been the U.S.’s unfortunate fate for half a century that leading politicians from both parties have mostly calculated in crucial moments that continuation of partisan battle was the right course, for them and their parties. The result has been intense and never-ending political combat over important policy questions, and precious little stability and certainty for the public.
There have been exceptions, of course. In 1983, President Reagan worked with a Democratic House to secure a Social Security solvency plan that brought relative partisan peace to a program that affects tens of millions of households. And the failure to pass the FAP was not the end of the story on federal tax credit support for low-income households. Beginning in the 1970s, Congress provided, through the earned income tax credit (EITC), substantial financial support to working households with low wages, to the point where spending on this assistance is now the largest source of support for the country’s least advantaged households. The EITC—a clear descendant of the FAP—is generally popular in both parties and has been expanded repeatedly since it was first introduced.
There were also compromises that backfired, politically speaking. In 1990, President George H.W. Bush agreed to a tax hike that Republicans look back on with regret, despite its centrality to a decade-long period of sustained deficit reduction.
Nixon was a flawed president, to say the least, and though he was ideologically flexible, he did not help himself in Congress by surrounding himself with numerous partisan political brawlers who would be all too comfortable in today’s bruising environment. He also pushed many ideas that were later seen as inflicting long-term damage on the economy, such as price controls.
But he was creative, and willing to venture into areas that other Republicans were too scared to explore.
There are many policy divides making compromise on these core economic questions challenging if not impossible in today’s environment, but perhaps three stand out for being especially significant and also ripe for rethinking by both parties.
First, on taxes, both parties have taken positions that make compromise on important economic and social welfare policies nearly impossible. Republicans have ruled out any and all measures that would raise taxes, and Democrats have said the only tax hikes they will support would be those affecting households with incomes above $400,000 per year. These two “red lines” have essentially made it impossible politically for the parties to agree to significant bipartisan tax and spending changes such as those which passed on a regular basis from 1981 to 1990.
Second, both parties continue to hold onto unrealistic visions for healthcare. Much of the Democratic party has never moved on from Kennedy’s plan for single-payer public coverage, which he first introduced in 1971, even though passing such a plan would upend a system of private coverage that has been in place for well over half a century. The disruption single-payer healthcare would cause, and its high price tag make it a non-starter politically.
Similarly, some in the GOP still cling to the flawed idea that population-wide enrollment in health insurance is not an important consideration when designing healthcare reforms. They can accept a higher percentage of people going without coverage if other goals are met, such as lower governmental expenditures.
Neither partisan perspective enjoys wide support from the public. Voters have repeatedly rejected upending current U.S. health insurance arrangements to make way for a fully public system. At the same time, previous efforts to roll back coverage have precipitated intense opposition too.
After decades of debate, the public would benefit from acknowledgement by both sides that today’s messy public-private system is here to stay, and improvements can be made by changing the rules governing how this system operates. The goal should be more secure and stable insurance for disadvantaged households, as close to population-wide coverage as is feasible, and more discipline on costs with rules that expose and eliminate excessively high pricing and waste.
Third, today’s anti-poverty programs remain a fragmented and somewhat messy mix that leaves both parties unsatisfied with the status quo. Republicans want more emphasis on work, and the Democrats want more generous financial assistance. The compromise would be to incorporate both principles into a system much like the FAP that provides a combination of income protection (especially for children), work incentives, and program simplification that would deliver more stable support consistent with the country’s values and fiscal responsibility.
All of this is much easier said than done, of course. The starting point needs to be a changed perspective, which will require some courageous individuals to break from today’s familiar partisan patterns. There will always be a need for elected officials to balance competition with their partisan opponents alongside an openness to compromise when appropriate. It is time to reset the dial a bit, in favor of compromise.
