What Defeated a Negative Income Tax?: Constructing a Causal Explanation of a Politically Controversial Historical Event


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During the 1964 presidential campaign, Goldwater's politically conservative economic advisor Milton Friedman proposed that a negative income tax (NIT) replace all government programs aimed at alleviating poverty. (Appendix One sketches the mathematics of an NIT.) Goldwater lost to Johnson in a landslide. Nevertheless, at the suggestion of Robert Lampman of the politically liberal Institute for Research on Poverty at the University of Wisconsin at Madison, economists at the Office of Economic Opportunity (OEO) began planning an NIT in the summer of 1965. In the fall of 1965 and again in the summer of 1966. OEO presented an NIT plan to the Bureau of the Budget but "the plan never was taken seriously by the Johnson Administration" (Levine 1975, 16). An NIT "was not regarded as a serious proposal that could be enacted in less than a decade" (Levine 1975, 20).

Some who had worked on NIT plans under Johnson at OEO stayed on under Nixon and continued to do so at OEO and at the Department of Health, Education, and Welfare (HEW). During the 1968 presidential campaign Nixon had promised to "reform welfare". After the election advocates of various welfare reform plans, including those who favored an NIT, among his advisors began jockeying for position. 1 Daniel Patrick Moynihan, Nixon's closest White House domestic policy advisor, at first favored a family allowance system similar to those in Europe, but soon embraced an NIT. He also gained frequent access to, and some influence on, the President. In the Spring of 1969 Nixon decided on a plan containing an NIT, and presented that Family Assistance Plan (FAP) to Congress in August 1969. "In retrospect one can ask why Mr. Johnson turned a deaf ear on a proposal that in its basic mechanics was similar to the one that President Nixon was to endorse a few years later" (Williams 1972, 4).

Williams gives three answers to his question. First, "the negative income tax lacked a well-­placed, articulate and tenacious advocate in the inner councils of the President, a crucial role that Daniel P. Moynihan was to assume in the Nixon administration" (1972, 5). In fact, under Johnson "Wilber Cohen, then undersecretary of HEW, was relatively unenthusiastic about the negative tax" and "in effect held a veto in the Executive Office over any new income maintenance plans" (1972, 5). "Second, the costs of the war in Vietnam were moving to their peak point so that the White House was hardly interested in major and expensive new initiatives" (1972, 5). "Third, congressional and public opinion toward the negative tax was quite hostile" (1972, 5).

Certainly Moynihan had Nixon's ear in a way that no similar NIT advocate had Johnson's, and this partially explains the change of NIT fortunes. Moynihan confirms that the Nixon Administration anticipated reduced war costs: "the prospect of a 'peace-and-growth' dividend still seemed viable, and it was assumed that somewhere down the road major initiatives in social policy would be made possible by the availability of these funds" (1973, 75). Why, though, did Nixon decide to commit anticipated future war cost savings to FAP? Also, Williams offers no evidence of a difference of congressional and public opinion on an NIT at the beginning of the two administrations. If there was such a difference, what change between the summers of 1965 and 1969 made Congress and the public more open to an NIT, and so made such a plan look politically feasible, or even necessary, to Nixon? Or did differences in the plans presented to Johnson and proposed by Nixon make the Nixon plan more popular?

What apparently put "welfare reform" on the political agenda at the opening of the Nixon Administration was a two faceted revolt of the urban black poor in the mid to late 1960s. First, unprecedented numbers of poor black women surged onto the welfare rolls in cities across the country. From 1950 to 1960 the number of families receiving welfare in the United States rose by only 17%. From December 1960 to February 1969, however, their numbers rose 107%. As Piven and Cloward put it: "Fully 71 percent of the huge welfare increase during the 1960s took place in the four years after 1964. It was truly an explosion" (1971, 187). Burke and Burke argue:

The explosion in family benefit recipients put welfare, a subject typically shunned by the White House, on the agenda of President-elect Nixon.... The welfare explosion angered taxpayers and put severe pressure upon state treasuries, especially in such states as Illinois, California, Pennsylvania, and New York. Their Republican governors wanted relief from Washington and from their party's president-to-be. (1974, 41)

Thus Nixon came under immediate pressure from states and their taxpayers to provide some form of fiscal relief from the mushrooming cost of welfare.

Second, urban disorders involving largely poor black males erupted with mounting frequency. Moynihan notes:

In 1965 there had been four major riots and civil disturbances in the country. In 1966 there were twenty-one major riots and civil disorders. In 1967 there were eighty-three major riots and civil disturbances. In the first seven months of 1968 there were fifty seven major riots and disturbances.... Mayors, governors - presidents - took it as given that things were in a hell of a shape and that something had to be done. (1973,102-3)

Thus it fell to Nixon to somehow restore domestic tranquility.

However, Moynihan also observes that "to compound the difficulty of devising a viable response there was then beginning to be voiced a generalized sentiment among the white working-class that it was being discriminated against, even exploited, in the interest of lower-class minorities" (1973, 104). The civil rights movement victories and years of Johnson's Great Society programs had engendered a reaction of resentment among some working-class whites. They began to see "lower-class minorities", with government help, threatening their jobs, schools, neighborhoods, etc. - i.e., their places above those minorities in the social order.

So FAP became the something that had to be done largely because holdover NIT advocates from the Johnson Administration joined other such advocates in the new Administration to persuade Nixon that an NIT approach to "welfare reform" could deal with the immediate political situation that he faced. Moynihan stresses:

The events leading to and from the proposal of FAP have a conceptual unity that admits of separate treatment as a long range development in social policy. The proposal was made, however, as part of an over-riding short term strategy to bring down the level of internal violence. This is a matter to be dealt with many years hence, if ever. (1973, 12)

FAP would provide fiscal relief for states by federalizing a large portion of welfare costs. FAP would placate angry black males by making those with families eligible for benefits, and so restore domestic tranquility. FAP would lessen white working-class resentment of "lower-class minorities" by making those white workers eligible for benefits, and requiring all who receive benefits (except for female household heads with small children) to work in order to receive them.

Friedman saw an NIT as a long term rationalization of income transfer policy rather than as a short term response to a political situation. He wanted an NIT to replace "our present collection of welfare measures" including "old age assistance, social security benefit payments, aid to dependent children, general assistance, farm price support programs, public housing" (Friedman 1962, 193) which he saw as poorly aimed at alleviating poverty. He also cautioned that:

Like any other measure to alleviate poverty, it reduces the incentives of those helped to help themselves, but it does not eliminate that incentive entirely, as a system supplementing income up to some fixed minimum would. An extra dollar earned always means more money available for expenditure. (Friedman 1962, 192)

So Friedman recognized that any income transfer program would probably discourage work to some extent.

In contrast to Friedman's proposal, the Nixon Administration did not seek a comprehensive revision of all income transfer programs. Since programs like old age assistance and social security benefits enjoyed wide popular support, it steered clear of them. FAP aimed only at the areas where the political conflict had arisen: aid to dependent children and general assistance. To curb political resentment among the white working class, FAP added a work requirement to its NIT. So FAP differed from Friedman's NIT proposal in its lack of comprehensiveness and its work requirement - ways that would make it more broadly popular. For example, Moynihan reports that a Harris Survey found 92 percent support for the FAP work requirement (1973, 269).

So an NIT began as a proposal of a politically conservative academic economist to make government efforts to alleviate poverty more efficient by targeting funds. more precisely at those with lower incomes. The research arm of a politically liberal federal anti-poverty agency under Johnson sought to make the proposal more concrete, but foresaw little near term political interest in it. Nevertheless, NIT proposals continued life at OEO and HEW under Nixon - partly in the hands of holdover Johnson Administration researchers. As Nixon's chief domestic policy advisor, Moynihan came to favor an NIT as part of "welfare reform" and was influential with the President. Nixon planners shaped their NIT to deal with the tumultuous domestic political situation that the Administration faced: mounting welfare costs, urban disorders, and resentment among elements of the white working class.

This narrative explanation of what put an NIT on the political agenda centers on reasons why the Nixon Administration proposed FAR Given his position in the Nixon Administration, Moynihan 1973 serves as a primary source for my story. Why would he credit the element of containing domestic disorders in Administration thinking if it were not so?2 Moynihan often criticized Piven and Cloward yet his account of why the Administration proposed FAP is consistent with their view that the State expands poor relief to cope with the unrest of the poor.3 This agreement among usual political combatants strengthens the credulity of Moynihan's account. Finally, Burke and Burke 1974 is another primary source for my story. As journalists who closely covered the Nixon Administration welfare initiative with no obvious political axes to grind, the Burkes also reinforce the Moynihan account.

This paper uses the usual political historian's tool, careful scrutiny of historical texts and documents, to help construct a narrative explanation of the 1970-72 FAP congressional defeat. However, to aid the construction it also uses the conventional political science arbiter of cause and effect relations, multiple logistic regression models, to analyze FAP congressional votes. I begin by drawing on earlier narratives to help model the 91st Congress House floor and Senate Finance Committee FAP votes. Then the results of these models help to structure a narrative of the 91st Congress FAP defeat. Next I model the 92nd Congress floor votes and use those results to help structure a narrative of the 92nd Congress FAP defeat. I conclude by distinguishing liberals from conservatives in the FAP battles and critiquing earlier narratives of the FAP congressional defeat.

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