less than the existence of a functioning capitalist order was at stake in the battle over FAP and its proposal to aid the working poor. The implications were troubling enough that the president requested responses from several of his aides, and a flurry of memos followed. Moynihan expressed annoyance: “It seems absurd to trouble you with controversies concerning the post-Napoleonic economic history of Britain, but if you like….” He argued (with supporting evidence) that economic historians had rejected several of Polanyi’s conclusions about Speenhamland.30 More to the point, Moynihan and other FAP advocates acknowledged the issue of adequate work incentives for lowwage workers and assured the president that FAP addressed it.31 Any program that reduced cash assistance by a dollar for each dollar earned in wages—as Speenhamland did—would indeed reduce the incentive to work by imposing too high a “tax” on earnings. FAP, however, would reduce benefits by only 50 percent of earned income, rather than by 66⅔ percent (as under AFDC) or 100 percent (as under the old AFDC or the Speenhamland system).32
Labor secretary George Shultz, a FAP supporter, echoed the point about the tax on earnings. He then sought to widen the debate, pointing out that the Anderson memo productively exposed “the deficiencies in welfare proposals that entirely overlook labor market forces.”33 Shultz wanted to shift the focus from workers—and the potential disincentives to earn—to FAP’s potential impact on the actions of employers. Drawing another point from the Polanyi excerpt, Shultz warned that a wage subsidy, such as that under Speenhamland (or FAP), could distort the labor market in a way that encouraged employers to keep wages low. If wage subsidies induced workers to remain in jobs that paid too little, employers would not face appropriate market pressures to raise wages or restructure jobs. Speenhamland, Schulz wrote, “made it unnecessary for employers to maintain wages in order to compete for manpower.”34
Shultz added presciently that this problem could be exacerbated by a plan that combined work requirements for welfare recipients with wage subsidies for low-wage workers, particularly in the absence of training and other measures to ensure workers’ upward mobility in the job market. He made the case that the combination of compulsory employment and the absence of training programs was a potential trap for poor workers and boon for employers: it meant that the system would generate a steady supply of low-skilled, low-wage labor, with little means of exit through higher skills and job mobility. “Employers who paid substandard wages could be assured that their labor pool would not be depleted through the process of upward skill mobility,” Shultz wrote. He challenged the position of many conservatives by suggesting that to avoid these problems, “welfare programs must maintain a principle of free choice with respect to labor force participation.”35
Other memos exchanged in the internal debate over FAP reflected a different concern: administration officials worried about the negative reactions of low-wage employers to the FAP measures. If the federal government offered too many opportunities (through job training) for workers to move up to better-paying jobs, disrupting the low-wage market for labor, these employers would surely object. A draft report by Moynihan’s Urban Affairs Council said, for example, that training programs must be voluntary, because “employers of these persons paying them low wages would greatly resent the government coming in and luring, to say nothing of forcing, these low-paid employees to training programs…. Thus, required training programs might create serious disruptions in local labor markets.”36
White House officials also debated the likely costs of such a program. Many FAP advocates wanted to lowball the numbers. Others urged a candid and realistic assessment of the potential impact of assisting low-wage workers—pointing precisely to the consequences conservative opponents feared. Some workers, they argued, could indeed be expected to work fewer hours or to quit altogether. “The possible responses of the working poor are not really accounted for,” wrote Shultz in one memo regarding cost estimates. “Those eligible for [FAP] earn income of about $3.3 billion, which they might choose to forego in some significant measure in preference for [FAP] payments or training allowances.”37 This prospect, of course, was what worried conservatives, particularly those from states with sizable low-wage sectors—such as Southern states.
Underlying but largely unaddressed in this internal debate were deeper issues about work-based public assistance and labor markets. Who should carry the burden of assisting the working poor—the government, through an effective wage subsidy (such as FAP or the EITC), or employers, through higher wages? What was the combined impact of wage subsidies and work requirements on the low-wage labor market itself? Would the supply of workers from the welfare rolls, combined with the wage subsidy from the government, artificially sustain and even increase the number of low-wage jobs in some local labor markets? Would these policies help construct and fuel an oversized low-wage labor market?
The Battle over FAP
Despite opposition from many in his administration and his party, Nixon ultimately approved the proposal, and administration advocates rolled up their sleeves to decide how to pitch and promote the initiative on Capitol Hill and in the press.38 FAP’s political legacy began to take shape with the strategic choices the Nixon team made.
On August 8, 1969, Nixon presented his new plan in a nationally televised speech. The president might have made many different arguments to promote FAP. Canadian leaders in the late 1960s and 1970s, for example, defended similar programs on the merits of aiding workers and meeting the needs of the poor through universal assistance programs.39 In the U.S. context, this would have meant constructing a welfarist argument for extending public assistance to an entirely new needy population. But Nixon elected to build his case for FAP on the failed record of AFDC, and to try to convince liberal welfarists and conservative workfare advocates alike that his plan was better. The president began with a broadside attack on the existing AFDC system, calling it a “colossal failure,” a small Depression-era program that “has become a monster in the prosperous sixties.”40
Nixon captured the objections of both conservatives and liberals to AFDC, saying, “It breaks up homes [a shared concern of conservatives and liberals]. It often penalizes work [conservatives]. It robs recipients of dignity [liberals]. And it grows [conservatives].” The president’s attack on AFDC then merged seamlessly into a new argument about the working poor.
The present system often makes it possible to receive more money on welfare than on a low-paying job. This creates an incentive not to work; it also is unfair to the working poor. It is morally wrong for a family that is working to try to make ends meet to receive less than the family across the street on welfare. This has been bitterly resented by the man who works, and rightly so—the rewards are just the opposite of what they should be. Its effect is to draw people off payrolls and onto welfare rolls—just the opposite of what government should be doing.41
Honest labor and the working poor were thus honored as morally superior to cash assistance and the welfare poor. The solution? Pass FAP, and under the president’s plan, “the program now called ‘Aid to Families with Dependent Children’—the program we normally think of when we think of ‘welfare’—would be done away with completely.”42 Criticism of AFDC had echoed through Washington for years, but never had the program been so condemned at the core by the nation’s leader. Nixon’s decision to use the presidential bully pulpit to excoriate AFDC in order to promote FAP would have a lasting impact: although FAP would collapse, AFDC would never recover.
In contrast to AFDC, the president emphasized, FAP would include working families: “For the first time, the government would recognize that it has no less of an obligation to the working poor than to the nonworking poor; and for the first time, benefits would be scaled in such a way that it would always pay to work.”43 FAP’s work requirement was underscored for the benefit of conservatives, in part to distinguish between FAP and other guaranteed income schemes that conservatives loathed. What would FAP mean, Nixon asked, for those “who can work but choose not to? Well, the answer is very simple. Under this proposal,
