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STATEMENT OF HON. WILBUR J. COHEN, UNDER SECRETARY, DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE; ACCOMPANIED BY ROBERT J. MYERS, CHIEF ACTUARY, OFFICE OF THE ACTUARY, SOCIAL SECURITY ADMINISTRATION; AND MRS. IDA C. MERRIAM, ASSISTANT COMMISSIONER, OFFICE OF RESEARCH AND STATISTICS, SOCIAL SECURITY ADMINISTRATION

Mr. COHEN. Thank you, Senator. I am also accompanied by Mrs. Ida Merriam, who is the Assistant Commissioner for Research of the Social Security Administration.

I would like to add that in the difficulties yesterday of getting the statement prepared, I inadvertently left off one table, which I would like to have included in the record. It includes the monthly social security cash benefits under the present law and under the President's proposal, which supplements the tables I have in the testimony.

Chairman PROXMIRE. That will be done. Do you have duplicates of that table?

Mr. COHEN. No; I don't. I will be glad to give you that one copy. Chairman PROXMIRE. Why don't you keep it with you for now, since you may need it for reference during questioning?

Mr. COHEN. All right.

(Table 8, referred to, appears on p. 333.)

Chairman PROXMIRE. În other words, you have given us the bad news here in the presentation, but not what we get for it.

Mr. COHEN. That is correct; and I don't know whether that was inadvertent or intentional, but when I looked at it this morning, I saw that it should have been the last table, which was left off.

Mr. Chairman and members of the Joint Economic Committee, it is a pleasure to participate in your consideration of the Economic Report of the President.

The health, education, and welfare of the American people are the Nation's greatest resources. Investment in these resources yields benefits to the individual and to the society. They are essential to individual fulfillment and to the economic growth and stability of the society. In turn, economic development also contributes to the development of these resources. Thus, the Department that I represent shares with you a deep interest in a healthy economy, with its resulting full employment and economic growth.

The singular objective of all the Department of Health, Education, and Welfare's programs is the development of the individual's capacities to their fullest extent. Programs are designed to prevent disease and improve health, to support and encourage education, to provide a strong social insurance system, and to seek ways through welfare programs to reduce dependency as well as reduce the causes and meet demonstrated need. Legislation enacted by the last several Congresses has reinforced the Department's efforts in carrying out its objectives.

President Johnson noted in his state of the Union message on January 10, that:

We tried to meet the needs of our people. And we have succeeded in creating a better way of life for the many as well as the few. And now we must answer whether our gains shall be the foundations of further progress or whether they shall be only monuments to what might have been-abandoned now by a people who lacked the will to see their work through.

I believe that our people do not want to quit.

In my testimony today I will discuss the Department's concern for reinforcing the gains that have already been achieved from the Nation's investment in human resources and some of the problems and needs in the years to come. In this respect I would like to review the areas in which we are developing proposals to expand the opportunities of the American people and to bolster the growth of the

economy.

TOTAL PUBLIC AND PRIVATE EXPENDITURES FOR HEALTH, EDUCATION, AND WELFARE

At this point I would like to discuss the totality of public and private expenditures for health, education, and welfare, no matter what their source or what their method of payment, to give you a full picture of their impact on the Nation's economy as related to the gross national product.

The extent of the Nation's commitment to programs for strengthening human resources is clearly evident in the amounts spent in fiscal year 1966 on health, education, and welfare from both public and private funds. The combined expenditures amounted to $131 billion or 18.4 percent of gross national product.

I might add at this point that the $131 billion is the unduplicated count of expenditures-that is the total amounts are adjusted to eliminate duplication resulting from use of cash insurance benefits to purchase medical care and educational services. The individual areas will add up to a couple of billion dollars more when you look at them separately, but this is the attempt to appraise an unduplicated expenditure of organized funds in this area. It doesn't include every single type of personal expenditure that might be involved, but rather broadly, organized public or private expenditures of funds for health, education, and welfare. This comes, as I said, to 18.4 percent of the GNP.

In fiscal year 1962, expenditures were $93 billion or 17.2 percent of GNP. The growth rate in expenditures between these 4 years exceeded that in GNP.

Total expenditures for these functions under public programsFederal, State, or local-reached $88 billion: Federal expenditures accounted for $47 billion, and State and local expenditures for $41 billion. In recent years, total public expenditures for health, education, and welfare have also been increasing faster than the GNP and the share of GNP devoted to these areas has risen from 11.5 percent in fiscal year 1962 to 12.3 percent in fiscal year 1966.

As President Johnson pointed out in his Economic Report: "*** Americans have insatiable appetities for more education and better health." This is reflected in the rapid rate of increase in public funds that are devoted to these programs.

For example, between fiscal year 1962 and fiscal year 1966, total public expenditures for these programs rose by 41 percent while GNP rose only 31 percent-with a 54 percent increase in educational expenditures and a 61-percent increase in spending on public housing leading the way among traditional programs. In addition, the new programs authorized under the Economic Opportunity Act of 1964 have grown rapidly.

The figures on public expenditures that I am discussing, if you wish to go into the details, are in table 1, following. The table shows the total public expenditures, expenditures from State and local funds and from Federal funds since 1934-35.

Expenditures for the Federal programs rose more rapidly than did State and local government spending-in total amount and in almost every major category. By the end of fiscal year 1966 the total Federal expenditures of $46.8 billion exceeded the State-local total by $6 billion as compared with 1961-62 when State-local expenditures exceeded Federal expenditures by almost $1 billion.

DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE PROGRAMS

The President's 1968 budget for the Department of Health, Education, and Welfare calls for expenditures of $11.7 billion-an increase of $1 billion over the previous year-in addition to social security trust. fund payments in the neighborhood of $31 billion. Assuming the President's recommendations are carried out, the budget as you said, Senator Proxmire, will total $44 billion.

These expenditures will be made through programs, most of which are carried out through the active cooperation and active participation of State and local governments, nongovernmental institutions and individual citizens. About 90 percent of Department of Health, Education, and Welfare funds derived from general revenues are allocated to State and local governments, other non-Federal institutions and individuals. This is how "creative federalism" works and it has been through this venturesome partnership that we have made great economic and social gains.

We can expect in the future, as in the past, that increasing shares of the Nation's output will be devoted to the development of human resources. By strengthening the programs of the Department of Health, Education, and Welfare, we seek to strengthen the entire system for providing services at every level. Through better management and more careful evaluation of the effectiveness of programs, we can insure more effective use of all of our resources.

TRENDS IN POVERTY

Now I would like to turn to another aspect that I think the Members of Congress will be interested in, how our particular programs relate to the national objective of minimizing and reducing the extent of poverty in the United States.

Rapid economic growth combined with increasing expenditures for health, education and welfare and related areas have had a significant impact on poverty. Over the past several years, as GNP grew rapidly, unemployment rates declined and public expenditures for health, education, and welfare, and related activities increased, the incidence of

poverty declined. In 1959 some 38.9 million individuals or 22.1 percent of the total population lived in households falling below the poverty levels of income developed by the Social Security Administration: by 1965 the number had declined to 32.7 million individualsor 17.1 percent of the population. The sharpest declines have been among families with a male nonaged head of household, and the declines have been greater for whites than nonwhites. Increasingly, the poverty roster is becoming the hard-core groups: Aged persons, families headed by a woman and the disabled. Thus, we cannot rely on economic growth alone to pull households out of poverty as heavily in the future as in the past. This is a major reason why we must continue to improve our social security and other income maintenance programs particularly for those not in the labor force.

Some of the worst pockets of poverty are in those parts of the central cities where living costs are highest and where resources for aiding the poor are inadequate. As compared with surrounding suburbs, central cities of our metropolitan areas have disproportionate numbers of the aged poor and of children in poor families. For example, within the central cities, 17 percent of the total population is poor, by the standards I previously stated.

Twenty-seven percent of the aged are living in poverty and 66 percent of the individuals in nonwhite families headed by a woman are living in poverty. In metropolitan areas, there are 10 million poor persons in the central cities while 6 million poor live in the surrounding suburbs. It is more likely that the head of a family living in the city will be out of the labor force than the head of the family in the suburbs. If he is working the chances are greater that he will have a lowskilled, low-paid job.

The increasing demand for health, education, and welfare services for the groups who remain in poverty in the city is growing, particularly as our awareness of their special needs grows but the resources for meeting these demands are not growing at a fast enough pace.

INCOME MAINTENANCE

A reasonable level of living for all Americans is the ultimate objective of our income maintenance programs. Putting a floor under income through income support programs so that no one falls below a minimum of need, is an intermediate step in achieving this objective. Although the objective of social security is not solely the reduction of poverty it is a major instrument in reducing the extent of poverty in this country. Public assistance programs are directed to the poor and have provided a basic income for several millions of persons. Without these programs many more persons would be in poverty and the disparity in income much greater. It is estimated that

Without social security payments a much larger fraction of the aged would be poor. We estimate that about 37 percent of the aged beneficiaries under social security have been brought out of poverty as a result of the social security benefits that were added to whatever other income they might have had.

Of the $3.5 billion of public assistance payments to noninstitutional recipients in 1965, virtually all went to the poor.

The income deficiency of the poor, that is the gap in the amount of income between what they actually have and the social security standard of poverty in 1965 was $11 billion; this is the total amount by which their incomes fell short of the poverty line. Without the social security and public assistance programs the deficiency would have approached $20 billion. The impact of the present programs is very substantial, but of course a substantial gap remains as well. Despite the improvements that have been made in these programs in recent years many persons still remain poor. Legislation proposed this year, both for social security and public assistance will further improve these programs-but we will still be short of filling the basic income needs of the poor-even of the poor who could not be considered potential labor force members.

SOCIAL SECURITY PROPOSALS

The President has proposed a number of significant improvements in the social security program. They are designed primarily to raise benefits from their present inadequate levels, but there are other objectives as well; to permit greater work force participation of beneficiaries who are able to work; to provide health insurance benefits to disabled beneficiaries; to seek better coverage of farmworkers who are presently severely disadvantaged because of the transitory nature of their employment; to provide benefits for disabled widows; and to guarantee at least $100-per-month benefit for anyone who has worked substantially in covered employment, under the social security program, for 25 years. There are other significant but less general changes proposed. These revisions will increase old-age, survivors, and disability insurance (OASDI) outlays by about 20 percent-by $1.1 billion-in the first year after they take effect in July 1, 1967.

Many people not only have been but are disturbed when they learn that almost 2.5 million OASDI beneficiaries have benefits of $44 or less per month; that 2 million aged persons are receiving public assistance; and that one-half of the OAA recipients are OASDI beneficiaries whose incomes are below destitution level even though they earned social security eligibility. It is an uncomfortable fact that despite OASDI over 5 million of the aged have incomes below the poverty level at the present time.

Some persons are convinced that we should not spend additional amounts for social programs at the present time. The administration has taken the view that although some types of expenditure should be postponed; others should not. There is a vast difference between rescheduling the completion of public works such as superhighways and putting off action on the plight of elderly citizens. Similarly, action must be taken promptly for widows and children who are trying to subsist on lagging survivor benefits.

The administration seeks in its proposals:

(1) To make some adjustments which improve protection for currently active workers. For most of them the social security system is their major bulwark against income loss when they retire, are disabled, or die leaving dependents.

I want to emphasize, Mr. Chairman, and members of the Joint Economic Committee that the social security system is not solely a

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