sure that he must maintain the support of his people in the State of California to remain here.

Mr. BURKE. I would like to have it clarified, whether or not he feels that campaign speeches are more important than his testimony and answers to the committee's questions on social security which involves the well being of over 17 million elderly Americans.

Secretary FINCH. I would be happy to respond to Congressman Burke, Mr. Chairman.

The CHAIRMAN. Just a minute before you respond.

I do think that the Chair should recognize the witness.

Our first witness this morning is the Secretary of Health, Education, and Welfare, the Honorable Robert H. Finch.

We do appreciate having you here. I believe this is your first appearance, and we are so pleased that you could arrange your schedule to be here for the commencement of these hearings.

Mr. Utt?

Mr. UTT. Mr. Chairman, I would like to take this opportunity to welcome a fellow Californian to the committee this morning. He is a fine gentleman, with a great responsibility. And in response to my friend from Massachusetts, I would like to say that that was a rather strange complaint coming from Massachusetts where the people campaign all over the United States for everybody that happens to be running on the Democratic ticket.

The CHAIRMAN. All right.

Go right ahead, Mr. Secretary. You are recognized.

Mr. VANIK. Mr. Chairman, if I might just suggest, perhaps to expedite time, couldn't we consider the Secretary's statement as having been read and proceed to questions? That would seem to provide us an opportunity to get questions in that relate to this subject matter. The CHAIRMAN. No; we will have plenty of opportunity to question the Secretary.

Go right ahead.

Secretary FINCH. I think, Mr. Chairman, and gentlemen of the committee, that I should first introduce my colleagues for the record: the Under Secretary, Mr. Veneman

The CHAIRMAN. We want you to do that.

Secretary FINCH. Also, Robert Ball, the Commissioner of Social Security; Miss Switzer, the Administrator of Social and Rehabilitation Service; Mr. Patricelli, Deputy Assistant Secretary for Planning and Evaluation; Mr. Howard A. Cohen, the Deputy Assistant Secretary for Welfare Legislation.

The chairman and I did have extensive conversations with regard to the time problem that was involved here, and I did cancel a luncheon in order to make this appearance and make a preliminary statement.

I will be happy to return, as I have indicated to the chairman, to pursue these matters in as much depth and at as much length as is desired. This is, obviously, a very comprehensive piece of legislation.

We have the Under Secretary, who has been the chief architect, along with the people in the White House, in drafting this bill, together with our other support people, and the proposal, I think, will make this clear to you.

My commitment is one made many months ago, and it is a campaign commitment, so I plead guilty to that count. But I assure you that you will have plenty of opportunity to cross-examine me at great length next week, and I don't think that the delay will unduly prejudice the opportunity of the committee to proceed in good time and in good speed on this very critical legislation.

I will, in the interest of time and in the hope that we can get to some questions and answers before I have to leave for the airport, point out that because of the familiarity of the committee with the social security law, I would respectfully ask permission to have my testimony on social security entered into the record.

The CHAIRMAN. Without objection, your entire statement will be put in the record if you omit any part of it.

Secretary FINCH. Thank you, Mr. Chairman.

I do think I should spell out the full breadth of the family assistance program.

I am pleased to testify before your committee today. I know of the outstanding performance of this committee during the past 34 years in connection with social security legislation. And I have had the opportunity to observe the excellent working relationship that exists between the committee and the Department of Health, Education, and Welfare.

Over the past several months, many of us in the Department of Health, Education, and Welfare have devoted much of our time and efforts to the subject areas covered by the Social Security Act.

My presentation is not a definitive statement on the Social Security Act, but rather is an attempt to deliver an overall view of the Administration's position on necessary reforms.

President Nixon has sent several messages to the Congress this year recommending amendments to the Social Security Act. The emphasis of these proposals is three-pronged; first and principally, on jobs; second, on an assured income growing out of social security and unemployment insurance when the worker's income is cut off; and finally, on a supporting work-oriented family assistance program. These amendments propose a sweeping and much-needed reform of assistance programs that aid families with children-changes in the assistance programs for needy adults who are old, blind, or disabledincreased social security cash benefits-a system for automatically guaranteeing that the purchasing power of social security benefits will be kept up to date with future increases in prices-broadened protection by social insurance programs-a restoration of the actuarial balance of the hospital insurance trust fund.

The new family assistance plan recognizes that everyone who can do so should have the opportunity to work and support himself and his family. The program provides for greatly expanded training opportunities, expanded facilities for children of working mothers, and greatly increased work incentives within the design of the assistance program itself.

Registration for work and training is a key part of the new approach, but even more important is the emphasis upon expanded opportunities for the individual. We do not want to continue a situation in which large numbers of people have little choice but to rely solely upon assistance payments for the support of their families. We want

rather to develop a system which gives people the opportunity and incentive to become independent and self-supporting.

We believe, too, that to the extent possible we should prevent need through social insurance rather than rely upon an assistance program to meet need after it has arisen. The worker should have the opportunity, as he works, to earn protection against the possible loss of his earnings. This is the function of social security and unemployment insurance to give the worker and his family basic security against the loss of earned income arising because of unemployment, disability, old age, or death. Thus, the administration's proposals in the areas of unemployment insurance and social security are complementary to our recommendations in the welfare area.

Medicare, medicaid and maternal and child health programs are designed to help meet the medical needs and expenses of older people and those with low incomes and therefore are supplements to our income support program. We are proposing a number of changes in these programs which we feel will be the beginning of the control of rising costs in these programs.

Mr. Chairman, each of these proposals should be understood in context as well as individually. Therefore, I will give an overview of each of the proposals, after which other officials of the department will present a more indepth analysis of each proposal.

I will first examine the urgently needed family assistance program, then comment on social services, proceed to the social security amendments and to Mr. Ball, who will have a chart presentation, and then finish my formal statement with a discussion of rising health costs and the immediate steps we are taking within the department to control them.

First, the Family Assistance Act of 1969.

Mr. Chairman, I welcome this opportunity to discuss H.R. 14173, the proposed Family Assistance Act of 1969.

This measure is the product of months of intensive study, beginning even before the inauguration with the President's Transition Task Force. After analyzing many proposals offered by recognized experts inside and outside of the Federal Government, we have concluded that a radical reform of the structure of welfare is needed.

We sought, in designing the family assistance plan, to identify and deal directly with the most pressing problems facing public welfare today. While it is a far-reaching and fundamental reform of public welfare, the family assistance plan is a practical and pragmatic program. It is neither a universal income maintenance system, which we cannot afford at the present time, nor a guaranteed annual income, which we feel could undermine an individual's motivation for work.

This problem-solving approach, rather than the theoretical approach, highlighted the following key areas which needed immediate solution and redirection:

1. The gross inequities that exist between categories of persons equally in need under the present welfare system;

2. The gross inequities from State to State;

3. The increasingly complex and controversial management crisis in welfare; and

4. The economic incentives which in the present system weigh more in favor of continued dependency and family breakup than the reverse.

The program we support is directed toward helping needy people to help themselves through work incentives and work requirements, bolstered by expanded training and day-care opportunities; toward an elimination of the family breakup incentive; and toward the establishment of national minimum payment and eligibility standards. The program would do these things in a way that will not further add to State fiscal burdens.

Now, as to public assistance today.

In June 1969, a total of 10.2 million persons received public assistance from Federal, State and local funds. Of these, somewhat less than 800,000 were recipients of general assistance, in which the Federal Government plays no part. Among the 9.4 million persons receiving aid under federally aided programs, slightly less than onethird were in the adult categories—the aged, blind, the disabled—and nearly 6.6 million persons-over two-thirds were recipients under the program of aid to families with dependent children.

THE ADULT CATEGORIES

In the adult categories the situation is a relatively stable one, with the caseload increasing by about only 3.5 percent in the last year. Slightly over 2 million needy aged persons received assistance in June, an increase of only 17,000 over the preceding year. Their payments averaged $70.55 a month. However, nearly 60 percent of these persons also received social security benefits so that their total incomes were significantly higher than their assistance payments alone. Old-Age Assistance (OAA) recipients constituted 10.4 percent of the persons in the country over age 65. However, this proportion varied widely from State to State. It was 2.7 percent in Connecticut and 40.7 percent in Louisiana.

The caseload of blind recipients has been consistently about 80,000 persons during the past year. The permanently and totally disabled numbered 755,000 in June, an increase of 85,000 over a year ago. Among the blind and disabled, about 20 percent also have social security benefits.

In view of the relatively stable caseloads in the adult programs, we felt that the major problems which they present are very low benefits in some States (less than $39.40 a month under OAA in Mississippi in June 1969, ranging up to $116.25 in New Hampshire); and differences in eligibility requirements among the various States.

We propose to continue as a Federal-State program a combined program for needy aged, blind, and disabled persons. We propose, however, to establish for the first time, a Federal floor-$90 a monthof income and assistance which would be assured to adult recipients in any State. This new Federal floor would act to raise benefits for about one-third of the present OAA recipients, or about 670,000 persons, and would push up benefit levels in the 13 lowest payment States, plus the District of Columbia. The $90 floor, when aggregated on a yearly basis for an aged couple, comes to $2,160, an amount which

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is actually slightly above the poverty line of $2,100 for an aged couple as that line has been recently redefined for 1968.

We make this proposal for a federally established income floor for the adult categories in recognition of the fact that neither work incentives nor family stability incentives are the answer to the dependency of these people. We must do what we can through social and rehabilitation services to bolster self-support and self-care capacity among these recipients, but in the last analysis it must be our obligation to move toward an adequate level of income support for the aged, blind and disabled. Adequate income support where it is necessary is one of the measurements of a just and humane civilization.

We further propose to make uniform the definitions of resources used in determining family eligibility under the program. Certain options for administration of these payments are also opened up to harmonize this system with the family assistance plan, and those options will be discussed later.

In order to make these reforms possible we are proposing a liberalized formula for Federal financial participation under which the Federal Government would provide an average of the first $50 per month to recipients, half of the next $15, and one-fourth of additional amounts. The formula for Federal participation would, of course, apply only to payments actually made. This would provide substantial fiscal relief to most States.

THE AFDC PROGRAM

Most of the controversy around welfare programs centers around the program called AFDC-aid to families with dependent children. In this program costs have more than tripled since 1960 to an estimated total of more than $4 billion in this fiscal year. The Federal Government will pay about half of this cost. During the same period, the number of recipients has more than doubled to a present total of more than 6.5 million.

The rate of growth has been alarming, verging recently on the catastrophic. It took 15 years for AFDC payments to reach the half billion dollar mark, and another 10 years to surpass a billion. But what took place from 1935 to 1960 was duplicated in the short period from 1960 to 1967, when another billion dollars was added to payments. And in the next year alone payments soared by a half billion dollars.

Even more disturbing is the fact that the proportion of persons on AFDC is growing. In 1955, 30 children out of each 1,000 received aid. In June 1969 more than 60 children out of each 1,000 received aid. In studying the program, our estimates indicated that by the fiscal year 1975, costs would again double and numbers of persons would increase by another 50-60 percent.

In spite of its growth and its cost, the program is beset by inequities. Children of a parent who has died, is incapacitated, or is absent from the home are eligible in all States. Those with an unemployed father are eligible in about half the States. Those with a father employed full time are not eligible in any State. Thus a premium is placed on a home breaking up and an incentive exists for the breadwinner to leave, as all of us know.