Mr. CARDWELL. This has been checked out in that regard in both the House and the Senate.

Mr. FLOOD. We will see.

Mr. CARDWELL. It was voted down on the merits of the issue in the Senate rather than on a point of order.

Mr. FLOOD. You know the problem.

Mr. CARDWELL. Yes.

Secretary RICHARDSON. While providing each State with a substantial increase over last year to cover wage and price inflation and increasing caseloads, the 110-percent limitation would put an effective appropriation ceiling on the most rapidly rising elements of cost in the public assistance program. Between 1965 and 1971, public assistance recipients have increased 75 percent.

Mr. SHRIVER. That is just the number?

Mr. CARDWELL. That is the number of persons eligible to receive assistance. Over the same period the amount of cash payments has increased 107 percent. During this same 6-year period payments for social services, adminstration, and training have increased from $300 million to $1.4 billion, an increase of 300 percent, or three times the rate of the increase in money payments.

Ths is about four times the increase in the number of recipients. This is why we seek your support in authorizing us to cap this open-ended obligation by providing for a percentage limitaton.

While there is a clear justification for providing an open-ended authorization for benefit payments, there is no comparable basis for treating social services and administration the same way. The administration of the social security program has never been open ended and the proposed Welfare Reform Act does not have an open-ended appropriation for administration and social services. The 110-percent limitation would provide a rational transition to the new system.

LIMITATION ON TRAINING COSTS

Mr. SMITH. What about training? You did not say anything about that in that paragraph regarding the 110-percent limitation. Secretary RICHARDSON. No; I did not.

Mr. CARDWELL. It is included in the category. That is training which is financed at the State and local level, training of State and local welware workers and employees.

Secretary RICHARDSON. There is an estimated $40 million total allocable to training.

Mr. SMITH. Supposedly that reduces the amount you need for pay

ments.

Secretary RICHARDSON. You would think so; yes. It is fair to say that the data by which to judge the contribution of services in terms of rehabilitation or reduction of dependency are very inadequate. This would be one of those things we would like to know more about.

We have ideas as to how to strengthen the services that are provided to people, how to integrate them better and reduce overlap and duplication among the various competing organizations and jurisdictions that provide such services, that will be in our proposed title XX.

Mr. SMITH. All I meant was that an increase in the amount of 10 percent spent for training might reduce the amount needed for wel

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fare. It is not in the same category as money spent for administration. Secretary RICHARDSON. That is true. Of course we are proposing a 10-percent increase anyway. Possibly training could be dealt with under a different footing.

SOCIAL SECURITY BENEFITS

The administration is supporting amendments to the Social Security Act which would make an across-the-board increase in social security benefits of 6 percent, retroactive to January 1, 1971. Such a benefit increase would be slightly higher than the inflation which has occurred since the last benefit increase went into effect on January 1, 1970. The social security amendments recommended by the administration also include a provision which would authorize future automatic cost-of-living adjustments in benefit levels. Other major benefits proposed in the amendments include a more liberal retirement test, increased widows' benefits, and a provision eliminating differences in determining eligibility and benefits for men and women.

Assuming passage of this legislation, outlays for cash benefit payments would increase from $34.2 billion in 1971 to $37.4 billion in 1972. Of this increase, $1.4 billion is the normal growth of the program under current law. The proposed legislation would add another $1.8 billion in outlays. In order to finance the benefit increase, the wage base would be increased from $7,800 to $9,000. This wage base would be automatically increased when necessary to finance future cost-ofliving adjustments in benefit levels.

BALANCING BENEFITS INCREASE WITH TAX INCREASE

Let me interpolate here, Mr. Chairman, that we are aware that the chairman of the House Committee on Ways and Means, Mr. Mills, has indicated-has already in H.R. 1 provided for a 10 percent benefits increase. We simply hope that if this does go through that it will also be fully financed so as to leave the overall balance between intake and outgo in the budget about where it would be in the President's budget. Mr. SHRIVER. What would that mean then, if the increase in benefits was 10 percent?

Secretary RICHARDSON. Well, it could be funded in various ways. But one way to do it, and the one we would hold in favor to do it, would be through a further increase in the wage base.

Mr. SHRIVER. What would that require?

Secretary RICHARDSON. Well, if they only funded the increase to 10 percent, without other liberalizing amendments, I think they could defer some of the scheduled rate increases and fund the increase by raising the wage base to $12,000.

Mr. SMITH. I had thought that an actuarial evaluation showed you could give a 10 percent increase without increasing the tax rate-due to the growth in numbers and salary levels. Is that not true?

Secretary RICHARDSON. I had thought not, but I will check that. Mr. CARDWELL. If you want to keep the balance between income and outgo fixed for the year in which the increase would be effective, such as the 1972 budget year, that would not be true. If you want to use the balance carried forward from prior years, it would be true to some extent; it all depends on how much of that you want to use

and what the actuary's position would be on what a reasonable balance is. That is debatable.

There are differences of opinion as to what that should be.

Secretary RICHARDSON. We could insert, if you would like at this point, Mr. Chairman, an analysis of the different potential wage bases and benefit levels, contribution of various rates.

Mr. FLOOD. Yes. Suppose you do that.

(The information follows:)

Under existing legislation, which provides a 4.6-percent contribution rate for the cash benefit program and a 0.6-percent rate for the hospital insurance program, a large increase in the OASI and DI trust fund balance ($8.6 billion) is produced in fiscal year 1972. The President's proposal is to drop the rate for cash to 4.2 percent and increase the rate for hospital to 1 percent, lowering the increase in the OASI and DI fund balances to $4 billion.

If we wanted to retain or come close to retaining the $4 billion balance of income over outgo contained in the 1972 President's budget, and at the same time increase benefits by 10 percent, we would recommend raising the earnings base from the present $7,800 to $9,800.

The following table summarizes various possibilities on the cash benefit program:

With reference to item B above, since the President's budget was submitted to Congress, the President has additionally proposed that the premium payment required of older people who elect supplementary medical insurance be prepaid by employer-employee contributions just as is presently the case with medicare hospital insurance. To finance this proposal, as well as the rest of his legislative program for social security, the President has suggested that the earnings base be raised to $9,800 and that the contribution rate for the OASDI program be decreased from 4.2 to 4.1 percent (with thhe contribution rate for medicare increased from the 1 percent previously recommended to 1.1 percent, thus retaining the present combined rate for OASDI and medicare at 5.2 percent). The financing proposed by the President would retain approximately the same OASDI trust fund balances proposed in the 1972 budget. See alternative "E" below:

If, in addition to the recent modification of the President's budget for the new method of financing supplementary medical insurance, a 10-percent benefit increase were substituted for the 6-percent increase recommended by the President, and the intent were to retain approximately the same OASDI trust fund balance proposed in the 1972 budget, the earnings base would have to be increased to $10,800. See alternative "F" below:

Secretary RICHARDSON. It is important from a budgetary point of view as well as a programming point of view, because, as the approach taken in the President's budget emphasizes, the significant factor is the difference between total Government income and total Government outlays. While we think that the foreseeable deficit that will exist between the projected outlays and projected revenues is justified by determining the level of outlays on the basis of the budget balanced at full-employment levels, we also think that to permit outlays to go above the amount that would be generated at full employment could only have the effect of feeding inflation.

Mr. FLOOD. Of course, with your budget based on full employment, projecting these increases in benefits is rather a hazardous occupation. You don't have any cushion.

Secretary RICHARDSON. I think there is some misunderstanding about this, because you do not have to regard the budget as a prediction of full employment. What you say in effect is that

Mr. FLOOD. Not 100 percent but very, very close to it.

Secretary RICHARDSON. If you regard full employment as representing, let's say, the 3-percent employment.

Mr. FLOOD. Three percent?

Secretary RICHARDSON. If employment at that level would produce revenues of a specified amount, then you are justified in budgeting on that basis, because if the actual rate of economic growth is below this, the increased expenditures represented by the deficit are useful in helping to bring the rate of growth more nearly toward the projected

rate.

DISABLED COAL MINERS

Under the Federal Coal Mine Health and Safety Act, miners disabled from black lung disease, and widows of miners who died from this disease, are eligible for special cash benefits. I know of your own personal interest in this legislation, Mr. Chairman.

Mr. FLOOD. I would be very disappointed if you didn't.

Secretary RICHARDSON. The authorizing legislation was passed on December 30, 1969, and the program began operation in January 1970. To date, over 257,000 claims have been filed, and we expect that over 325,000 will be filed by the end of fiscal year 1972. By that same date, we expect 90,000 miners and 70,000 widows will be receiving monthly benefits.

Mr. FLOOD. While your Social Security people under Mr. Ball have been doing an extraordinary job, we are encountering gigantic problems, as you probably have heard. They are many and difficult. We

hope most of them can be solved administratively, but there are many, many problems.

Secretary RICHARDSON. I am sure you will want to go into this in detail when Mr. Ball is here.

Mr. FLOOD. Yes.

Secretary RICHARDSON. There are always problems. I think this was true when the disability program first went into effect, in the denial of claims. Remember that program was enacted in 1956 and became effective in 1957. In the early days there were a good many complaints that the Social Security Administration was adopting too tough standards in determining eligibility.

I think we have somewhat the same problem. They do have a responsibility to try, on the one hand, to make sure that nobody with a legitimate claim fails to receive benefits. At the same time, they want to try to be sure that anybody who is not eligible is not put on the rolls by mistake.

Mr. FLOOD. But we are being inundated with the problems.

Secretary RICHARDSON. I think they would like to to whatever extent you wish to go into it-to explain to you how they are going about it. Trying to preserve the integrity of the system and at the same time make sure that all justifiable claims are being met.

VOCATIONAL REHABILITATION

In 1972, we will attempt to concentrate the resources of the vocational rehabilitation program on rehabilitating public assistance recipients. We are requesting an increase of $15 million in basic grants to States, bringing the total to $518 million. In addition, we are requesting $52 million for project grants, an increase of $24.5 million over 1972. We will encourage the State agencies to increase their efforts to rehabilitate people on welfare. All of the increase in project grants will be directed toward this objective.

Mr. FLOOD. This is going to be a problem.

Secretary RICHARDSON. But I think it is true on the other hand that significant numbers of people on welfare can be rehabilitated. We estimate that the number of persons who will receive rehabilitation services from these two programs will increase from 972,000 in 1971 to 1,025,000. Meanwhile, the number of welfare recipients receiving services will increase from 124,000 to 175,000. We estimate that 302,000 people will actually be rehabilitated, of which 51,000 will be welfare recipients. So that is a significant proportion of the total. Whether all of them will, eventually, leave the welfare rolls we don't know, but at least a substantial number will, and we will have reduced payments or reduced claims or other services.

YOUTH DEVELOPMENT AND DELINQUENCY PREVENTION

The Juvenile Delinquency Prevention and Control Act of 1968 expires on June 30, 1971. We will submit legislation to reorient the objectives of this program. The 1968 act envisioned a large-scale State grant program which we feel would duplicate programs authorized by the Law Enforcement Assistance Act. The emphasis in our proposed extension legislation will be on the development of model systems for

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