Nixon’s lesson on income inequality

On this, the 101st anniversary of Richard Nixon’s birth, I’m reminded that the issue of ‘income inequality’ has been around for decades.  It may have been called other names in the past (such as ‘guaranteed annual income’) but the basic problem remains unchanged: what’s the right role for government vis-à-vis the poor?

In 1969, Nixon (with the assistance of his adviser, Daniel Patrick Moynihan) proposed a ‘Family Assistance Plan’ that would provide direct cash assistance to all poor families – a form of guaranteed annual income. Nixon believed this was more efficient than doling out assistance through various programs such as food stamps, welfare, and Medicaid (which FAP was supposed to replace).

FAP may have looked good on paper, but then it hit a trifecta of opposition. Unions thought it threatened the minimum wage; liberals thought the payments were too low; conservatives didn’t like the idea of giving cash indefinitely to everyone who wasn’t working.

Thus, by his re-election year of 1972, Nixon realized FAP was dead and settled for something smaller. That ‘something’ was Supplemental Security Income, or SSI.

Although administered by the Social Security Administration, SSI is different than the Social Security Disability Insurance (SSDI) program. SSDI has an eligibility requirement based on work. SSI was designed for poor disabled or elderly people who didn’t meet SSDI’s basic work history requirement. Also, SSI is funded through general revenues, such as your income taxes. SSDI is funded by Social Security payroll taxes.

A mere eight days before the 1972 election, Nixon signed the legislation enacting SSI. His signing statement (no doubt crafted with an eye to next week’s voters) has as its first SSI goal: “to end the gap that separates far too many older Americans from the mainstream of American life.” Welcome to income inequality demagoguery, 1970s style.

Nixon’s statement also positively described SSI as replacing complex state-run systems – each having its own rules, etc.

Lastly, Nixon makes a curious reference in his statement to his failure to get Congress to agree to his welfare reform proposals. I suppose he was trying to signal to voters that welfare reform would remain a priority in a second Nixon term, but I wonder what, if anything, Nixon got from Congress in exchange for a huge expansion of the welfare state. Yes, huge. As Nixon admitted, the estimate for the additional federal cost for enacting SSI (that is, additional to pre-SSI federal benefits provided) was $1.5 billion for just 1974 alone. That’s roughly $10 billion in 2014 dollars.

By the way, for fiscal 2014, SSI is expected to pay out $60 billion in benefits – thanks to repeated expansions of the program by Congress. Much of the expansion is related to SSI coverage for mood and affective disorders (AKA ‘crazy checks’) and children’s benefits.

And a special note for you Obamacare cheerleaders: the SSI story ought to be a cautionary tale. SSI became operational in 1974, and just two years later, the GAO declared, in effect, that the program was a mess, rife with staffing and data processing problems. So much for Nixon’s hopes of streamlining a bunch of state-run programs.