Plan Gives Less to Needy, Asks Public to Pay More

Faithfully reflecting President Reagan’s determination to shrink the role of the federal government in American life, the new budget sent to Congress Wednesday proposes that millions of people--from national park visitors to college students and Medicare beneficiaries--get less help from Washington or pay more for what they receive.

At the government-to-government level, the new budget would reduce federal aid to states and cities, although local officials would have more freedom in deciding how to spend the diminished funds.

For instance, Reagan would fold $5.7-billion worth of transportation programs--including all mass transit aid and some highway assistance--into a $3.4-billion block grant that states could spend for transportation projects of their own choosing. Likewise, seven pollution control programs would be merged into a single grant, at a savings to the federal treasury of $20 million.

And, in terms of programs affecting families and individuals, the budget--covering fiscal 1987, which begins Oct. 1--includes some far-reaching new proposals that would affect both the poor and the middle class. Construction of subsidized housing, for example, would give way to vouchers that would help the needy pay for private housing. At the same time, middle-income home buyers would have to pay more for Federal Housing Administration mortgage insurance.

Many of the items in Reagan’s domestic budget are familiar proposals that Congress has rejected before. Since 1981, the year in which Congress approved a broad retreat from federal commitments to domestic spending programs, lawmakers have grown increasingly reluctant to approve further changes.

Medicare, which helps pay the hospital and doctors’ bills of 30 million elderly people, offers the biggest single source of budgetary savings in the Reagan program--at a cost of $20 billion in higher payments by beneficiaries over the next five years.

Higher Medicare Fees

Under the Reagan proposal, the monthly premium paid by Medicare recipients for insurance covering the costs of doctors’ services, now $15.50, would rise to $17.80 next year and then climb annually with inflation to an estimated $37 by 1991. The insurance deductible would rise from $75 a year to $100 next year and then keep pace with inflation.

Meanwhile, federal spending for Medicaid, the major health program for the poor, would be cut by $1.3 billion next year as more of the financial burden was shifted to the states.

Keep ‘Outlays in Check’

Health and Human Services Secretary Otis R. Bowen said that the proposals would “keep Medicare and Medicaid outlays in check without compromising on quality care.”

But advocates for the elderly and the poor, who have killed similar proposals in past years, are ready for battle again. “I wish you could say it would make medical costs cheaper, but all it does is change the address on the bill,” said John Rother, legislative director of the American Assn. of Retired Persons.

‘Certain Amount of Pain’

At the Education Department, one official conceded that Reagan’s budget would “produce a certain amount of pain” for college students and their families because stricter income standards would make 700,000 fewer students eligible for federal grant and loan programs.

“It’s better than taxing taxi drivers to pay for kids to go to school to become lawyers,” a department official said. And officials noted that federal financial aid would still be available for 4.3 million college students.

Direct aid generally would be restricted to families with incomes of $23,400 or less, and guaranteed college loans would be available to families with incomes of up to $58,000.

Less Generous Pensions

For federal workers, who have a pension system that the Administration regards as “far more generous” than private retirement plans, the budget has an unpleasant surprise. Civil servants would be able to retire with full benefits only at 62, not 55, and employee contributions to the pension fund, now 7% of salary, would be increased to 9%. The annual cost-of-living increase, which already fell victim this year to the Gramm-Rudman law’s automatic spending cuts, would be canceled again in 1987 and would be held in future years to 2 percentage points below the inflation rate.

The budget calls for spending curbs in a wide variety of programs expressly for the poor.

To exclude the “non-needy,” financial standards would be tightened for families whose children eat subsidized school lunches: Eligibility would be restricted to those with annual incomes below $19,703 for a family of four.

Food stamp recipients would be required to work or train for a job. Congress voted last year to expand eligibility for food stamps, but the Administration wants to repeal the more liberal rules.

The budget would reduce the number of workers who receive some form of federal job training from the 2.2 million enrolled this year to just below 2 million. The Administration is asking Congress to shut 40 of the 106 Job Corps training centers, reducing the number of poor youths in the program to 22,000 from 40,500 and saving $196 million in federal spending next year.

Healthy Economy Cited

Labor Department officials, justifying the proposals, said that a healthy economy and lower unemployment rates have made it easier for people to find work. Labor Secretary William E. Brock III said the budget cuts “reflect our awareness of the need for fiscal restraint.”

For many prospective home buyers, the Reagan budget would require additional personal spending. Fees and costs would be increased for mortgages insured by the FHA and the Veterans Administration.

FHA Plan Denounced

Buyers of the average $60,000 FHA home would be required to pay a total of $8,000 in cash at the time of purchase, compared to $4,000 now, according to the Mortgage Bankers Assn. of America, which denounced the budget proposal as an “assault on housing and homeownership.” In response, the Administration said that home buyers “can easily be served by the private sector.” The FHA, it noted, was established during the Great Depression.

This theme of self-reliance by citizens runs throughout the budget. Americans on vacation, the budget suggests, can well afford to pay more to enjoy the country’s national parks, where entrance fees have been frozen since 1972.

National Park Fees

Thus, the $3 fee for a car entering Yosemite would be hiked to $10; at Sequoia and Kings Canyon, the charge would jump to $5 from $2. Golden Eagle passports for the elderly, now priced at $10, would cost $40. “I’m confident these will not adversely affect the ability of Americans to enjoy the parks,” Interior Secretary Donald P. Hodel said.

In this era of fiscal stringency, the government is cutting back on land purchases: No money was budgeted for the Santa Monica Mountains recreation area for 1987 and the Administration requested cancellation of $4.25 million in the 1986 budget. “It doesn’t make sense to bleed the rest of the budget” by spending money to buy land, Hodel said.

Also contributing to this story were Staff Writers Marlene Cimons, Paul Houston, Robert L. Jackson and Oswald Johnston.