The MacNeil/Lehrer NewsHour

MS. WARNER: Good evening. I'm Margaret Warner in New York.

MR. LEHRER: And I'm Jim Lehrer in Washington. After our summary of the news this Tuesday, the Clinton way to reform the American system of welfare with an administration official and four reactors, small capitalism as explained by Paul Solman, and the end of the world as seen in Rwanda by essayist Roger Rosenblatt. NEWS SUMMARY

MR. LEHRER: President Clinton proposed an overhaul of the nation's welfare system today. It would set a lifetime limit of two years on cash benefits and require recipients to find work in the private or public sector. The plan includes $9.3 billion in job training and placement for single mothers. Part of the money would come from benefit cuts to immigrants, drug addicts, and the homeless. Mr. Clinton said the plan was an opportunity for welfare recipients and their families to replace dependence with independence. He spoke in Kansas City this afternoon.

PRESIDENT CLINTON: You can't lecture people. You can encourage people. You can do whatever you want, but there has to be something at the end of the road to work hard and play by the rules. Work is the best social program this country ever advised. It gives hope and structure and meaning to our lives. We propose to offer people on welfare a simple contract. We will help you get the skills you need, but after two years anyone who can go to work in the private sector if possible, in a subsidized job, if necessary, but work is preferable to welfare, and it must be enforced.

MR. LEHRER: There was quick reaction to the plan from members of the Congress.

REP. ROBERT MICHEL, Minority Leader: The bottom line is the Clinton proposal in reality calls for the very modest work requirement that will not move a large number of people off the welfare rolls and into self-sufficiency. In addition, the modest rules to establish paternity in the Clinton proposal will not discourage poor women from having illegitimate children and a primary cause of increased welfare spending in recent years.

SEN. HANK BROWN, [R] Colorado: What the President has come up with is another program that locked people deeper into dependency, and it is a tragic approach, because it compounds the problem and the tragedy of welfare as we know it.

MR. LEHRER: We'll have much more on this story right after the News Summary. Margaret.

MS. WARNER: Senate Finance Committee Chairman Daniel Patrick Moynihan and ranking Republican Robert Packwood had some bad news for the President when they met with him at the White House this morning. They told Mr. Clinton that none of the health care reform plans currently on the table have enough support to pass their committee. They said the President asked them to delay voting on any plan. After the meeting, reporters asked the Senators if the President's plan is dead.

SEN. DANIEL PATRICK MOYNIHAN, [D] New York: Not at all. This is a wide piece of legislation, and some of the principles are absolutely essential. Others are negotiable, and he knows that.

SEN. BOB PACKWOOD, [R] Oregon: I think I would answer it slightly differently. At the moment, all plans are dead. If you mean, if we put up anybody's plan, Sen. Chafee's plan, Sen. Breaux's plan, or the President's plan as a plan and vote on it, there's not a majority for any single plan.

MS. WARNER: But on the House side, there was a vote on one part of the President's plan today. The Ways & Means Committee rejected a Republican amendment that would have eliminated employer-paid benefits. It was defeated by a vote of 20 to 18. Under the proposed legislation, employers would be required to pay 80 percent of workers' health insurance costs. Meanwhile, First Lady Hillary Rodham Clinton hinted that the White House may be willing to forego abortion coverage to win approval of a plan that guarantees universal care. She made her comments during the question and answer session at the League of Women Voters Conference in Washington.

HILLARY RODHAM CLINTON: Part of our real challenge is to get a system that secures guaranteed health coverage for every American. Now we believe that should include reproductive health services. We believe that should include mental health services. We believe that that should include preventive health services, including free preventive health services for groups of the population are at risk. But the way this whole debate is developing it is very difficult to tell exactly where we are going to have to make whatever compromise or where it's going to be taken out of our hands, and the Congress will basically argue it out.

MS. WARNER: The Senate voted today to begin limited Whitewater hearings by July 29th. The resolution was sponsored by Majority Leader George Mitchell and passed by a vote of 56 to 43. The hearings will include only those areas that special counsel Robert Fiske completes during the initial phase of his investigation. The Republicans wanted more comprehensive hearings. In economic news, the government reported today that consumer prices rose a modest .2 percent last month, lending evidence that inflation remains in check. In a separate report, the Commerce Department said retail sales declined .2 percent in May. The drop was attributed to a slowdown in auto sales.

MR. LEHRER: President Clinton spoke with the prime minister of Japan today about the growing nuclear confrontation with North Korea. Former President Jimmy Carter had his first meetings in South Korea about the situation. Carter will go to North Korea tomorrow in a visit aimed at easing the tensions between the two Koreas. We have a report by Caroline Kerr of Independent Television News.

CAROLINE KERR, ITN: This is the scene which South Korea is hoping will never happen for real, a bomb attack on Seoul's city center with a suspicion that chemical weapons have been employed. Today, it was just a rehearsal as soldiers and civilian reservists practiced their drill for evacuating buildings bombed by North Korean warplanes. The South Koreans had planned a massive nationwide civil defense drill tomorrow but have scaled down their plan because they don't want to alarm their own population. Though tensions are mounting, the South Korean foreign minister insisted there was no imminent threat of war.

HAN SUNG-JOO, Foreign Minister, South Korea: In cooperation with the United States forces in Korea, we are closely monitoring North Korea, and I assure you that everything so far is quite normal.

MS. KERR: Meanwhile, the former American President, Jimmy Carter, was meeting the South Korean leader. Mr. Carter's traveling to North Korea tomorrow to try to de-fuse the crisis, but tonight he would say nothing which could jeopardize his mission.

JIMMY CARTER: I'll talk to you later. I don't have any comment to make now. Thank you.

MS. KERR: It's just days until the anniversary of the start of the last Korean war when the same Stalinist dictator invaded this country 44 years ago. In this city, which lies just 40 miles from the border with the Communist North, fears are growing tonight that history may yet repeat itself.

MR. LEHRER: Two warring sides in Rwanda today agreed to an immediate cease-fire. Government and rebel forces reached the agreement at a summit meeting of the Organization of African Unity in Tunisia. Several previous cease-fires have been broken.

MS. WARNER: In Moscow today, Russia's foreign minister warned the U.S. Congress that unilaterally lifting the arms embargo against Bosnia's Muslims could trigger confrontation and even a world war. Foreign Minister Andrei Kozyrev said Russia would not unilaterally lift sanctions against the Serbs, Russia's historic allies. Kozyrev also told Serbian Leader Radovan Karadzic today that the Serbs must give up conquered land in Bosnia or risk losing Russian support. A proposed peace plan would cut the Serbian holdings from 70 to 49 percent.

MR. LEHRER: Henry Mancini, the man who created "Moon River," died today of complications from liver and pancreatic cancer. Mancini won four Oscars for his songs, which included "Moon River," from the movie "Breakfast at Tiffany's." He lived in Beverly Hills, California. He was 70 years old. And that's it for the News Summary tonight. Now it's on to welfare reform, micro lending, and a Roger Rosenblatt essay. FOCUS - WELFARE - SYSTEM OVERHAUL

MS. WARNER: Today the President made welfare reform a top priority, and tonight we make it ours. Mr. Clinton presented a plan that he hopes will dramatically change the basic premise of the nation's much-maligned welfare system. We'll discuss the proposal with one of its administration architects joined by four other experts. But first this background from Correspondent Kwame Holman.

MR. HOLMAN: Before a crowd assembled at the Kansas City Bank where Harry Truman once worked, the President acknowledged that moving welfare recipients into jobs won't be easy.

PRESIDENT CLINTON: I have to tell you that the challenge of the welfare system poses these issues, all of them in stark terms, how to make the economy work, how to make the government work for ordinary citizens, how to empower individuals and strengthen communities. These difficulties are all present in the challenges presented by the current welfare system. There's no greater gap between our good intentions and our misguided consequences than we see in the welfare system.

MR. HOLMAN: The road to this presidential announcement on welfare reform began two years ago when candidate Clinton coined the phrase "end welfare as we know it" and made it a centerpiece of his campaign.

BILL CLINTON: [1992] People on welfare are the people who dislike it most of all. Most people on welfare are dying for another alternative, willing to seize it, and they'd like to end the welfare system as we know it.

MR. HOLMAN: Millions of Americans receive some of the benefits broadly described as welfare, including food stamps, aid for the disabled, and child nutrition programs. But the government's primary welfare program and the focus of what's called welfare reform is aid to families with dependent children, or AFDC. Through AFDC, states and the federal government provide money to parents who care for their children. Nearly all are single parents, overwhelmingly women. AFDC cost states and the federal government $26 billion in 1992, up 30 percent from 1989. In his January State of the Union Address, President Clinton laid out his vision of welfare reform.

PRESIDENT CLINTON: To all those who depend on welfare we should offer ultimately a simple compact: We'll provide the support, the job training, the child care you need for up to two years. But after that, anyone who can work must in the private sector wherever possible, in community service, if necessary. That's the only way we'll ever make welfare what it ought to be, a second chance, not a way of life. [applause]

MR. HOLMAN: The White House originally promised a formal welfare reform plan by early spring, but debate over the cost of the program aimed at putting people to work, along with the focus on health care reform, delayed the announcement until today. But in Congress, both Democrats and Republicans have been moving ahead with plans of their own. One hundred sixty-three House Republicans announced their plan last November. And just last month, an alliance of moderate to conservative Democrats presented their version of welfare reform. Both those plans would require AFDC recipients to take jobs within three years and would slash benefits to those who failed to look for work or enter job training programs.

PRESIDENT CLINTON: We know what the problems are, and we know they did not develop overnight. But we have to make a beginning.

MR. HOLMAN: The President laid out a similar strategy today. Under the Clinton plan, most AFDC recipients would receive no more than a total of two years of cash assistance. A recipient who does not find a private sector job could take a government-subsidized job, or enter job training under a new $9.3 billion federal program. AFDC recipients who refuse work or job training would lose their benefits for up to six months. The President said his legislation will be sent to Congress in a few days, but he doesn't care whose plan ultimately is adopted.

PRESIDENT CLINTON: There are serious people in both political parties in Congress who have advanced proposals to change the welfare system. And I really believe that we have a chance finally to replace dependents with independence, welfare with work.

MS. WARNER: Now to our discussion. Joining us from Kansas City is one of the President's point men on welfare reform, David Ellwood, Assistant Secretary of Health & Human Services. From Capitol Hill, we have Rep. Rick Santorum, Republican of Pennsylvania, who heads a Republican task force to put together one of the leading welfare reform alternatives, and Eleanor Holmes Norton, Democratic delegate from the District of Columbia. We're also joined by Robert Rector, a senior policy analyst at the Heritage Foundation, a Washington think tank, and Theresa Funiciello. She is an author, a former welfare adviser in New York State, and a former welfare recipient, herself. Mr. Ellwood, let's start with you. How far will this plan go actually in ending welfare as we know it?

MR. ELLWOOD: Well, I think it goes an awful long way, because we fundamentally are changing the values in the system. You know, everyone's frustrated with the current welfare system because it doesn't mean reinforce work and family. It doesn't really provide opportunity or responsibility. What we're trying to do is really put together a plan here that says we're going to give you the help you need in the first couple of years to move on welfare and get to work, but if at the end of that time you haven't found a job, then it's time to go out and get one, and if you can't, we'll provide you one.

MS. WARNER: But it willonly really apply to women born after 1971, is that right?

MR. ELLWOOD: Yeah, that's right, and the reason is real simple. We are talking about such a dramatic change in the welfare system, such a traumatic transformation in the system that's been in the wrong business for 60 years. It's been writing checks, rather than helping people get paychecks. We spend a lot of time with the states. We spend a lot of time in welfare offices, and what they all say is that it's going to take time to make this kind of a change. Don't try and do it all overnight. And so what we thought was the only responsible thing was to focus on young people, the next generation. So by the year 2000 we've got half the people both in the system and we've targeted on the young folks.

MS. WARNER: Well, since the details of this are somewhat confusing to the lay person, let me try to have you lead us through how it would apply to a typical young welfare mother. Let's say I'm 20 years old. I have two children. I'm on AFDC. I don't work, and the program goes into effect. What happens to me right then?

MR. ELLWOOD: Under the new system, instead of coming on welfare and nothing happening, and basically you're being able to stay on welfare for pretty much indefinitely. Now the expectation is from the moment you walk in the welfare office you're going to be expected to do something to help you help yourself. Get the training. Get the services. Get the job placement that you need to move off welfare as absolutely as quickly as possible.

MS. WARNER: And so I would go in some -- let me try and take you through this step by step, if I could.

MR. ELLWOOD: Sure.

MS. WARNER: So I would go into some kind of job training and during that time, what -- my children are taken care of in some kind of day care, and also my health benefits, I'm covered for health care.

MR. ELLWOOD: That is correct.

MS. WARNER: All right. After two years, let's say I haven't found a private sector job and you haven't been able to find anyone. What happens then? My 24 months are up.

MR. ELLWOOD: Then the cash assistance comes to an end, and we offer you instead a job that pays a wage. The idea is that we're going to use the money that we used to be spending on AFDC plus some additional money for job creation to find a subsidized private sector job, to work with local non-profits, and work with -- and maybe say to them, we'll pay their wages if you'll provide supervision with local government. The idea here is provide you with work opportunities to provide you the income to support your family instead of a welfare check.

MS. WARNER: Okay. So I go into this subsidized job. It's at minimum wage, is that right?

MR. ELLWOOD: That's right.

MS. WARNER: And are my children still being taken care of?

MR. ELLWOOD: Your children still get child care, and you still get health care.

MS. WARNER: Still get health care. All right now during this time, again, I'm supposed to be looking for a full-time -- I mean, a permanent job, correct?

MR. ELLWOOD: These are very much designed to be last resort temporary jobs. No individual work assignment can last more than 12 months.

MS. WARNER: Okay, so what happens after that 12 months? Let's say I've tried but I still haven't found a job.

MR. ELLWOOD: Then we put you into an intensive job search strategy once again where you look for jobs, try and find jobs. If you turn down any private sector job offer, then you'll be taken out for six months at least.

MS. WARNER: All right. And after this intensive period, if that doesn't work, then I can go back one more time, is that right for a work job, a subsidized job?

MR. ELLWOOD: Then again you can come back for a subsidized work slot. And the basic rule is this. If you've done everything we've asked, if you've played by the rules, if you've tried to find a job and so forth, we will make sure there's a safety net for you. But if you're not willing to work, then you're not going to get paid. If you're not willing to take a private sector job, you're not going to -- you're not going to be -- have the support that we once provided.

MS. WARNER: All right. Now let's say after two years at this subsidized job, we still haven't found me a job and I haven't turned down any job. At that point what happens? Do I just stay indefinitely in this subsidized government job?

MR. ELLWOOD: No. At that point, we say it's time to take a really careful look and ask what's going on here. One possibility is that you really are disabled and really unable to work and so maybe you should have been put in a different category in the first place. Another possibility is that you really have been working hard but you're -- maybe you're not in a very good position to work because of some minor disability, or whatever, in which case you can get another work opportunity. The final thing, which is an opportunity for the state so they can say, we can't understand it, the economy is strong and you have good work skills, we're going to put you in a very intensive, highly supervised job search, where we're going to say if you don't follow up on a referral, if you don't go to a job opening or whatever else, then we'll take you off. But if this is a weak economy, if you don't have the ability to get a job, then we'll give you another work opportunity. Again, if you play by the rules, we'll protect you.

MS. WARNER: But I gather by the year 2000 you expect that there will be 400,000 of these subsidized jobs, correct?

MR. ELLWOOD: That's correct.

MS. WARNER: But they're currently, what, some -- by that point there will be 2 1/2 million young women my age on welfare, I mean, people who qualify for these jobs? I guess my question is: Are there going to be enough of these subsidized jobs to take care of everybody who wants them?

MR. ELLWOOD: Yeah. There really are. And we try to be extremely conservative with our estimates. And I think one of the things that's confusing to people. You don't realize that 70 percent of the people who come on welfare leave within the first two years. The problem is a lot of them end up coming back, and our welfare reform isn't just about changing the welfare system. It's also about reinforcing work for people who leave welfare by making sure you get tax credits, by getting people health reform, which is just absolutely essential so that a woman can leave welfare and go to work and not have to worry about coverage for her children by providing the child care and also by getting the non-custodial parent, the father to do his share. So it really -- we've looked very carefully, and our numbers I think are really actually quite conservative.

MS. WARNER: Well, thank you. Let's bring in our other experts here. Congresswoman Norton, what do you make -- and let's first just focus on the work requirement or the work, replacing welfare with work aspect of this. What do you make of the President's plan? Is this the right direction to go? Do you support it?

DEL. NORTON: Well, I certainly support a guaranteed job, and in my district, if you walk around poor neighborhoods, the greatest fear is that the safety net will disappear altogether. So what was important for me to hear was, that Mr. Ellwood said, the safety net will be there for people who play by the rules. And the reason that's so important for me and for others who represent inner city communities and large cities to hear is that there are atrocious unemployment rates in those cities, and, therefore, we think that, if anything, the administration is overly optimistic about the opportunities that exist in these or near these communities. If someone plays by the rules, however, if in periods of high -- and places of high unemployment are periods of recession, a person won't be left out there while playing by the rules, then this is a start at least.

MS. WARNER: Ms. Funiciello, what do you make of the President's proposal, particularly this work requirement and this time limit, the two years of benefits?

MS. FUNICIELLO: Well, I think we've wrongly framed the debate from the beginning, not only this proposal but the general public debate on the issues. It seems to me we ought to be looking to and poverty as we know it and concern ourselves with how to do that. This particular proposal, as in all other proposals that I've seen this year, offers us an extraordinarily large increase in bureaucracy, more poverty for some and certainly more pain for more children as well as their mothers. We --

MS. WARNER: Why is that? Why more poverty and more pain?

MS. FUNICIELLO: Well, there's a suggestion that if a woman has an additional child, then the entire family, or at least that child, will be not able to get any kind of income, and we may or may not agree that women on welfare should get more money, but we certainly ought to agree that children should not be punished for the maybe inappropriate behavior of the mother. This program will do that. Forcing women out of the home into a wage job may or may not be a good idea. Certainly, it seems to me, that this is an invasion of very private family decision making and something that all families ought to be worried about.

MS. WARNER: Let me ask Mr. Ellwood to comment on that point. What about that point, Mr. Ellwood, that essentially the government will be forcing these women out of their home and away from child care and invading a private decision they ought to be able to make themselves?

MR. ELLWOOD: Again, I think I've emphasized that we are providing the child care, but you know, the best anti-poverty strategy we've found is work, and we've tried to make sure that all jobs through tax credits, through health reform, through child care, really do provide the support that families need. Welfare doesn't get people out of poverty. It never has. It gets people out of poverty of the job, and what we're going to say is we'll give you the hand out but you've got to take that hand.

MS. WARNER: Well, now Congressman Santorum, from the more conservative end of the spectrum, let me hear your critique of the President's plan.

REP. SANTORUM: Well, I appreciate the President moving forward on some welfare reform. I just question how sincere the effort is. No. 1, he waited 18 months into his term to put forward a bill. Three months left in the legislative session, he really has offered a political document, not a legislative document. The chances of something happening in this session of Congress are really nil. This, to me --

MS. WARNER: Excuse me. What about the work requirement? I'm going to get to the politics later, but --

REP. SANTORUM: Well, the work requirement is a step in the right direction. I have some -- there are some severe problems. No. 1, he takes the current two-parent family program, which next year is beginning its implementation, where two-parent families who are on AFDC would be required -- one of those two parents would be required to work -- and phases -- and basically eliminates that requirement and phases it in with all the other phase-ins for people born after 1971. In three years, there will be a hundred thousand less people working under the President's bill -- under the President's bill than under current law. So less people will be working than are required to be working under the law as it stands right now. I don't think that's a step forward. That's a step backwards. What we need to do is to have many more people in the system. The Republican bill that I'm the sponsor of has the welfare task -- the House Republican task force put together -- has over 700,000 people working by the year 1999, five years from now Under the President's bill, we believe that the numbers are more like 150,000 people working. That's not a dramatic work program. That's not changing welfare. What David has suggested is that people born prior to 1972 aren't going to be eligible for this program. That's 70 percent of the welfare caseload who aren't even going to be in the system that, that the President's devised. That, to me, is not a dramatic change of welfare. If you were born in 1970, you can be on welfare the rest of your life. There's never a work requirement for you, and that's not -- that's not a progressive approach. And that's only one of the problems that, that face, that face us in welfare reform. We've got the issue of whether we should be saving money on welfare, the issue of out of wedlock first. There's a whole lot of other issues that need to be addressed that simply aren't addressed in the President's plan.

DEL. NORTON: David Ellwood, if I could say, gave a reason, and I think a very good reason, for phasing this in. We don't know what we're doing. We've never tried to put this many people who've been out of the work force to work all at one time, especially in the lower end of the spectrum. But it's interesting to hear my friend, Rick, lament that we aren't putting more people out there, because in order to do so, one would have to, to cough up a lot more money than the Republicans are willing to cough up --

REP. SANTORUM: Eleanor --

DEL. NORTON: -- for child care --

REP. SANTORUM: Eleanor --

DEL. NORTON: -- and for genuine job development.

MS. WARNER: Let her finish, Mr. Santorum.

DEL. NORTON: So for child care and for genuine job development, remember, the person, the woman in most cases, has got to find a job that will enable her to pay the rent and the food and throwing them all out there without job development, without jobs that can do that, will simply bring them right back, as they now come back, within two years, because it's the kind of revolving door where people get off as fast as they can but they're back within, within that period. And we to end welfare, as we know it, for good, not in a revolving door manner.

MS. WARNER: Let me ask Mr. Ellwood.

REP. SANTORUM: Can I respond to that?

MS. WARNER: Certainly.

REP. SANTORUM: The fact of the matter is, Eleanor, we spend a lot of money -- and you know this -- we spend almost $12 billion in the Republican bill. We are not parsimonious with the money we put forward on putting people into work programs and providing increased job training, providing child care during the times of getting the job training, providing child care for mothers who are in these programs.

DEL. NORTON: You do job search not jobtraining.

REP. SANTORUM: We have 12 billion dollars in that program. We have spent the money. We, in fact, find an additional $31 billion in the welfare budget for saving, which nets out $20 billion in savings. We think that's an important element of reform, is to save the taxpayers some money in the system. The President's plan -- we haven't even figured out how to pay for it yet. Well, they say they have the numbers. We haven't seen them yet, but we don't even know how he pays for this. We do know that part of the savings don't even come from the welfare budget. They come from superfund and some other areas, so you can make the argument that we actually are going to net increase welfare spending.

MS. WARNER: Let me get Mr. Ellwood back in this before I go to - - Mr. Ellwood please answer these two questions. One, why is the Republican bill able to provide so many more public sector or subsidized jobs? And the second, what about Mrs. Norton's point that to ask these women to go off to jobs with minimum wage, they're not going to be able to support their families on that?

MR. ELLWOOD: Well, let me first comment on -- one of the things I don't think -- I hope you don't miss is, in fact, what we're hearing from Congressman Santorum and others is actually this plan is about the same. We're talking about fairly similar ideas. We're talking about two years followed by work. Then the only question is: How quickly do we get there? We've spent a lot of time with the states, and they're telling us the only responsible thing to do is to phase it in gradually. We're talking about half of the population on by the year 2000 and who do you focus on? You try and -- you know, do you spread resources so thin, or do you focus on the next generation? So much of this plan is really geared toward preventing out-of-wedlock child bearing and illegitimacy and teenage pregnancy -- it's designed to help that get off welfare and to do it right, you've got to start with young people, that's all that we're saying.

MS. WARNER: All right. And what about Mrs. Norton's point about the minimum wage and how hard that is to live on, how unrealistic that is?

MR. ELLWOOD: Well, you see, that's another very important feature about what we're doing. We're not just doing the -- changing the welfare system with a push -- we're also changing the pull by really saying working people in America, people that take any job, ought to be better off than on welfare. And that's why we think the expanded earned income tax credit, which has already passed it's so critical, it makes a four and a quarter job pay the equivalent of six dollars an hour. That's why health reform is essential so that people leaving welfare for work find that any job provides health benefits. Why, child care is in our bill. So the idea is any job is now going to be better than welfare, and, again, with Mr. Santorum really what we're arguing about is how fast we get from here to there.

MS. WARNER: Mr. Rector, what is your critique of the President's bill?

MR. RECTOR: I think this bill is a massive step backward away from welfare reform. First of all, we have to be sure what this bill does and doesn't do. The bill does not time limit welfare. There's no one who's been on welfare for over two years or even for over 20 years who has their benefits ended because they've been on welfare for too long. Secondly --

MS. WARNER: I'm sorry. I hate to interrupt you, but I -- I thought we just heard Mr. Ellwood say that anyone who goes on this program will be limited -- anyone of a certain age will be limited.

MR. RECTOR: Let's be clear what happened. If a tiny fraction, a tiny, tiny fraction of those who have been on over two years, less than about 10 percent would -- after they hit the two-year point -- be taken and put in a make work job. The welfare system would then pay the so-called wages in that job. They never really leave welfare. That's an illusion. Secondly, when you're talking about making welfare recipients work for their benefits, this bill doesn't do it. As Congressman Santorum said, the bill actually for the rest of this century cuts the number of welfare recipients -- cuts the number of welfare recipients who are required to work relative to existing law. Third and very importantly, when the bill moves beyond the year 2000, it does, in fact, create massive new welfare entitlements for day care, for training, for wage subsidies, and it does not pay for any of those. The bill is not budget neutral, and in fact, if we implemented it when we got in those out years, we would have to pay all those vast new expansions to the welfare systems either by raising the deficit or by raising taxes. Finally, even among the tiny, tiny segment that he requires to work, only 6 percent of the AFDC caseload is required to work in 1999 under this plan. Even in that tiny segment, they're only required to work 15 hours a week, and when you take their cash and food and medical care and everything lumped together, they'd be getting an effective wage rate of about $15 an hour. This is not a serious proposal. It is a public relations ploy, and it, in fact, takes many other steps backward to make reform more difficult.

MS. WARNER: Mr. Ellwood, I don't want to get into a war of statistics here, but, but could you just address I guess the gist of Mr. Rector's critique, which is that basically you're not going to require enough people to work, and on the other hand, you are going to be creating this huge new sort of welfare entitlement, child care in particular.

MR. ELLWOOD: I just think it's nonsense. We are talking about a plan that has by the year 2000 half the caseload is a time limited welfare system where after two years you can go to work. If you don't go to work, you do not get paid. It's as simple as that. And as to the figures, you know, people are throwing around figures of 400,000 or whatever, but you know success isn't measured by how many people we don't get off. Success is measured by how many people we get off and working. And of those groups, 2.4 million people, we estimate that 40 percent -- almost a million of them - - would either be off welfare, working part-time, or in our work program. That's a dramatic change. You know, what that will be without it? 5 percent. The notion that going from 5 percent of the caseloads working to 40 percent working or off welfare. I think that's a fundamental transformation.

MS. WARNER: But you're not backing away from the assertion that anyone born after 1971 will be limited to two years of assistance, of cash?

MR. ELLWOOD: That's right. And, furthermore, if the system works as well as we expect, we can move much faster than that. States will have the option of phasing in many more people, if they so desire, so I think what we're talking about is an end to welfare. And let me emphasize again one more thing. Young people, the next generation, this isn't just about welfare. It's about prevention. It's about preventing teen pregnancy. It's about reaching the next generation and sending the signal to them loud and clear.

MS. WARNER: All right. I want to get to this issue about trying to prevent or reduce the out of wedlock births, which I think are 1/3 in the United States, or 30 percent now. Ms. Funiciello, do you think this plan will discourage young women who are -- who have no children from having children, and do you think it will discourage young women who already have illegitimate children from having more? Given your experience, do you think it will have any impact on that behavior?

MS. FUNICIELLO: I think that most young women -- we're talking, I guess, teenagers here who get pregnant, get pregnant without intending to do so. I think the evidence is in the level, a high level of abortions. Half the teenagers who get pregnant have abortions, and it's exceedingly difficult to access an abortion today. So I think it's clear that they don't set out to get pregnant. Some will -- even if they had access to abortion -- have some children. And that isn't because of family planning. It's still an accident. And I find the whole debate here to be extraordinary in the level of misogyny that's involved, the idea that somehow teenage girls are going to destroy civilization as we know it, some of the least powerful people in the country, if not the world. The idea that this job and training junk, which we've been doing at a rate of about $24 billion a year already, and proven to be about a 90 percent failure rate, one after the other after the other, we don't know how to do it. We never have. It can't create jobs. The only jobs that the job and training programs create are the jobs for social welfare professionals. Now if we're serious about jobs for poor women, let's take some serious jobs. We know, Mr. Ellwood, that the government contracts out billions of dollars to private agencies, both of a non-profit and a for- profit nature, every year, and if we wished, we could require a rider to every one of those contracts that demands say for every quarter million or half million dollars you get from the government you hire one welfare recipient. That's a real job, a job with benefits, with wages that are reasonable, with health care, with the things that need to go with a job to lift people both out of poverty and out of having to live in horrible neighborhoods. If you're serious, do it.

MS. WARNER: Let me ask Mr. Ellwood. Why not do that? Isn't that kind of a simple and clear idea -- that any company that gets -- you know, for any million dollars in government contracts they get, the have to hire one person on welfare?

MR. ELLWOOD: Well, I think the notion that we should focus on work and figure out ways to be creative with how we spend every nickel of the government to help people help themselves I think that's a very creative idea, and I think we've got to look at all the opportunities and all the options. But let's agree on a simple principle. The deal is about work. It's about helping people help themselves. Don't forget, the harshest critics of the system are the people who've gone to welfare, who've tried to do the right thing, and who've tried to move forward, who find that the system isn't interested in helping them get a paycheck.

MS. FUNICIELLO: Having been there, I would like to say that it is not an easy thing to do. Sometimes women actually make a sacrifice to go on welfare in order to do what is best, in their opinion, for their children. You live in neighborhoods where children are dodging bullets going back and forth to school, where if you leave them alone after 3 o'clock, it's possible that the local junkies will tap them for honors, there are so many potential disastrous roadblocks that have to be dealt with in poor neighborhoods that it can be the best decision for a mother to stay at home with the kids. It is certainly work. I don't think there's any mother in this country or world who would say that it isn't work, and this is the only place, the only time in history where we have suggested that it's inappropriate. What if Mary were to have Jesus next month? If Joseph didn't come along, would we call her all kind of bad names and say -- you know, there's nothing right about what you're doing?

MS. WARNER: Let me get Mrs. Norton in on this debate. Mrs. Norton, do you think this plan is unfair to women? What about the points that Mrs. Funiciello makes, about the choices that a welfare mother has to make?

DEL. NORTON: She is right to the extent that there are some features of the plan that are not entirely realistic. For example, child care is going to be available for one year. One of the reasons why women come on and go off welfare is because their child care is unstable. I've already indicated that I do not believe that there are sufficient number of decent paying jobs out here to absorb the millions of women on welfare. I believe, however, that the President has done something very important here. He has changed the focus of the welfare system from a passive government system that handed out checks -- at least his bill would -- or to a system which is going to be a job system, much more like unemployment insurance than it is like the old welfare system. And unemployment insurance, if you don't take a job when a job is offered, then you don't get your unemployment insurance.

MS. WARNER: Could I ask you to comment though on the family caps proposal as it's called, which means that states, if they want, could deny additional financial benefits to welfare mothers if they have another child? One, do you think that's right, and two, do you think it will have any impact on the rate of illegitimate births?

DEL. NORTON: One, it is wrong, and two, it will have very little impact. We're just beginning to test that. Now, let me tell you something. There's a myth going around here that when a welfare mother has an additional child that something stupendously unusual has happened when we allow her a lousy $60 more a month. I just had a son to graduate from college. The government allowed me more than $2300 a child deduction for him, not means tested, by the way, the same $2300 that somebody who makes $15,000 a year gets. We just passed in this Congress the earned income tax credit. That means that according to the number of children you have, the government will give you money back. The only person who would be left without any kind of subsidy for an additional child would be the welfare mother, and her welfare payments since 1975, the cost of welfare in real dollars has decreased 40 percent. What in the world are we doing? Who are we after now? We're going to get the children this way, not the mother.

MS. WARNER: Mr. Santorum, you're shaking your head. Go ahead.

REP. SANTORUM: First off, Eleanor, the reason you get a dependent deduction, the reason you get the earned income tax credit is because you're working. You're doing things that the people of this country expect average Americans to do. You're working. You're contributing to the economy. You're contributing to the society. That's a very --

DEL. NORTON: -- but even if she works -- even if she's on a --

MS. WARNER: Let him finish, Mrs. Norton.

REP. SANTORUM: What we're saying is -- and the President's bill is a press release on this -- he says, well, states can now pass afamily cap. Well, they can pass it now. All they have to do is get a waiver from the federal government and they've been routinely approved, so this is really not a dramatic policy step. This is something you can talk about. Our bill requires states to put a family cap in, and what we believe in is that working women who are out there right now who have to make decisions about whether to have children because their employer doesn't give them a raise if they have another child should be, should be treated the same as a -- a welfare mother should be treated the same as that working woman who doesn't get a raise because they have an additional child.

DEL. NORTON: But, Rick, you would deny her the raise even if she is in a work program. Thus, even though she is working, she would not get the same raise that I get if I have an additional child.

MS. WARNER: Let me get Mr. Rector in on this because we have to go in just a minute. Mr. Rector, is there any evidence that denying these benefits would reduce the rate of illegitimate births among welfare mothers, and do you think it's a good idea?

MR. RECTOR: There's a very strong set of evidence that within the last 10 years there have been about 12 studies that show a very dramatic link between welfare benefits and illegitimacy. Ten out of those twelve show that link. I think that we're really focusing on the wrong issue here, and President Clinton has told us what the correct issue is in his own rhetoric. President Clinton has told us that illegitimacy is a principal cause of crime in the United States today. He's also told us that welfare is a key cause of illegitimacy. In his State of the Union he warned us that unless something dramatic is done, half of all American children are soon going to be born out of wedlock. Unfortunately, his bill simply has a big goose egg in regard to that issue. He's punting on the issue, and he's not addressing it seriously. The federal government should never have been in the business of saying to a 17-year-old girl if and only if you have a child out of wedlock, we're going to send you a check in the mail. That is a disastrous policy for the young woman, for the child, and for society. What we need is --

MS. WARNER: Mr. Rector --

MR. RECTOR: -- welfare that will reduce illegitimacy and increase marriage. Clinton doesn't provide that.

MS. WARNER: Thank you, Mr. Rector. I'm afraid that's all the time we have. Congresswoman Norton, Congressman Santorum, Mr. Ellwood, and Ms. Funiciello, thanks very much. FOCUS - LENDING A HAND

MR. LEHRER: Finally tonight, another angle on helping people help themselves. One non-profit program that does just that is called micro lending, the making of small loans to small entrepreneurs. Earlier this year, our business correspondent, Paul Solman, of public station WGBH in Boston told the story of such a program in Pine Bluff, Arkansas. Here is a second look.

MR. SOLMAN: Next to Sue's Pawn Shop in Pine Bluff, Arkansas, a new business is dawning, J.P.'s Sheer Fantasy Beauty Salon. there are really two fantasies here, and both are actually being realized every day. One, ages old, is that women with hair problems like Susan Hunter can recoif their heads and recoup their self- confidence.

[BONDING ON HAIR]

MR. SOLMAN: A second fantasy here is somewhat more topical, that Americans on the economic margin, like Jesse Pearl Jackson, can parlay their particular skills into entrepreneurial success despite some age old hangups about business.

JESSE PEARL JACKSON, Beauty Salon Owner: I had an attitude. Let's just say it. I had an attitude.

MR. SOLMAN: And was it an attitude about yourself or about business?

JESSE PEARL JACKSON: My attitude was about business.

MR. SOLMAN: And what was the attitude?

JESSE PEARL JACKSON: The attitude was -- [laughing] -- it's awful.

MR. SOLMAN: For years, Jackson worked for others or at home. Clients kept telling her to get organized, be a business woman, but she didn't have any attitude, or for that matter the money and know-how to become a capitalist. And then she discovered Good Faith, a nonprofit fund that lends money to would-be micro- entrepreneurs. Good Faith, with initial money from private benefactors, and now the Small Business Administration, was founded five years ago. It's a small part of a larger, private, nonprofit effort to spur economic growth in rural Arkansas. Good Faith's guru, a legendary banker from Bangladesh with a host of admirers, Mohammed Yunus. Establishment bankers think that established businesses are the key to economic growth. Yunus thinks:

MOHAMMED YUNUS, Grameen Bank: This is wrong with the way you are looking at the capitalist system. Capitalist system is people, people and their energy, and in a free market situation exchanging their goods and commodities. That's what the free economy is all about.

MR. SOLMAN: So every time you have another micro-entrepreneur, you have a little bit more economic growth.

MOHAMMED YUNUS: Absolutely, because once you have a micro- enterprise coming up, you are allowing a person to show his work and her work.

MR. SOLMAN: The theory is that as micro-entrepreneurs like J.P. Jackson succeed, they expand their businesses, hire others, and add to economic growth. Jackson needed a $1200 loan from Good Faith to get started, and she needed something else.

SEMINAR LEADER: Now let's suppose that our selling price is fifteen cents, a nickel and a dime.

MR. SOLMAN: Before would-be borrowers like Jackson can apply for a loan, Good Faith requires that they attend a sort of business boot camp to learn the essentials of entrepreneurship, how to price, how to sell, how to stay in business. The second requirement, if you want a loan, is to join a borrowing group with other aspiring entrepreneurs. Thus, members share their experiences and must approve each other's loan applications.

JESSE PEARL JACKSON: Okay. I wanted to make a presentation to you all so that I could better understand what I needed the loan for.

MR. SOLMAN: Tonight, Jackson is applying for a huge loan, $7,000 to buy new equipment, expand her inventory, basically hair. But why should she bother with borrowing groups, business boot camp, and the like? Couldn't she apply for a loan from one of America's thousands and thousands of banks?

JESSE PEARL JACKSON: I went to a bank one time and asked for an application, the woman laughed me clean out the door. She said, "You want money for what?" She got so tickled, she couldn't even give me the application. She never even gave me an application. She just got tickled. She said, "You don't walk in here and ask me for an application for a loan. That's not the way you do it." I said, "Well, if you'll tell me what to do, then I'll come back, and I'll do it right the next time." She was laughing so hard and making fun of me so bad till I never even went back.

MR. SOLMAN: Did you feel humiliated?

JESSE PEARL JACKSON: I was really humiliated to the point till I cried. I was ugly I was crying so hard. [laughing] I really did. I cried.

MR. SOLMAN: Presumably, there were cultural factors at work here, maybe even racial ones, but to Tommy May, who runs the bank that rejected Jackson, the rudeness was inexcusable but the rejection probably not. So then who does get a loan from a bank like his?

MR. SOLMAN: If I come to you asking for a loan, how do you size me up?

J. THOMAS MAY, Simmons First National Bank: We're going to look at, I guess, what we call the three C's, character, capacity, and collateral. We're going to look to you as an individual, and we're going to look at what you have done in the past and what your character is. And then we're going to look at your capacity which can be many things. The capacity would be the plan that you have presented to us, because it makes sense, your capacity as an individual to be able to repay the loan back.

MR. SOLMAN: Or get my father to co-sign it.

J. THOMAS WAY: Or get your father to co-sign it who might eventually pay it back. And I think also from a capacity standpoint, we want to look at what other sources of incomes that you would have in case your plan doesn't work. And then finally we're going to look at collateral.

MR. SOLMAN: To a banker like Tommy May, just about any banker really, Jackson just didn't have the collateral or the capacity or the co-signers. She'd never get as far as having her character sized up. To traditional bankers, collateral and capacity are key. But to Good Faith, they're replaced in large part by peer pressure.

JESSE PEARL JACKSON: We basically keep up with what's happening, and if things get down and I say, I'm going to quit, I'm going home, I -- forget it -- you know, I'll just go home, and there's somebody that's always in my face to say, no, you ain't quittin', you've done too much, you've put too much work into it, you've got to stay.

MR. SOLMAN: Jackson meets with her fellow micro-entrepreneurs twice a month. If she defaults, it comes out of her borrowing group's credit limit. In a sense then, members are her co-signers, and they just approved her $7,000 loan request.

JESSE PEARL JACKSON: Oh, I should have asked for more. [laughing with group]

MR. SOLMAN: There's still one major hurdle to clear. This recommendation has to be approved by the Good Faith staff. As of January 1st, the Good Faith Fund has loaned more than $380,000 to about 140 borrowers, an average of roughly $2700 per loan, the current rate 13 1/2 percent. Stanley Walker borrowed $10,000. He used it to open a car customizing business. Colette Moorhead, a grade school art teacher, used her loan to build inventory, buying clay figurines. She paints them, then sells them at fairs, flea markets, wherever she can. David and Kitty Ball from J.P. Jackson's borrowing group used their loan to open a plant store. [piano playing] And Don Martin used his $25,000 loan -- the biggest you can get -- to buy and resuscitate a building for his piano business. Good Faith's strategy is "trickle up," economic growth loan by loan, job by job. And in Bangladesh, that's just what Good Faith's model, the Grameen Bank, has been doing since the mid 1970s, organizing people into borrowing groups and teaching them the tricks of trade. Recently, at a village outside Dacca, Grameen's local borrowers were rather excited to receive its founder, Prof. Yunus, and to show him the fruits of their loans. This woman now spins yarn into string with results that rival Rumpelstiltskin.

PROF. YUNUS: And she built a new house recently for 25,000 dachas.

MR. SOLMAN: Another borrower buys flour to make biscuits. And this woman bought straw to make baskets. In a country as poor as Bangladesh, for as little as ten of fifteen dollars, people can create their own businesses instead of waiting around for a job. Prof. Yunus thinks this is true everywhere.

PROF. YUNUS: People create their own jobs, and that's how the human history began. Would you believe when we were hunters and gatherers of wood we would be waiting around for somebody to hire us? We'd be all finished. We wouldn't be here today. They went out and got their fruits, hunted their animals, and ate themselves. That's their self-employment. Today we just fold our hands and say we don't have a job. Why should you wait for a job? You create your job, but you cannot do that. To create a job, I need money. And banks will not lend me money.

MR. SOLMAN: The Grameen Bank now lends to -- get this -- 1.6 million micro-entrepreneurs, more than 1 percent of the entire population of Bangladesh. Seventeen years later, it's loaned out almost a billion dollars. Initially, the loans went to both men and women about 50/50, but the men, it seems, spent the money on themselves while the women invested in their kids and their businesses. So Grameen now loans primarily to women. Not surprisingly perhaps, J.P. Jackson thinks the Bangladeshi model has something to each us.

JESSE PEARL JACKSON: Here you have money to get money. If you don't have collateral, you don't get to own collateral unless somebody dies and leaves it to you, or unless you are fortunate and you work like a dog all your life and you're too old to enjoy the collateral. Then you don't need the money anyway. So I don't understand the banking process. If you don't have it, you don't get it.

MR. SOLMAN: Tommy May has an alternative explanation.

J. THOMAS MAY: As an institution, we're in the business of providing a profit to our shareholders, and a lot of the smaller entities, we can make as much money or we can make more money on a larger loan. And the other thing is the risk. The risk is just substantially greater. In Arkansas, we're really unique, because we have a usury law, and our usury law says that we can only charge 8 percent. As a result, we cannot take the risk that you would find in a lot of these loans, a lot of these micro-enterprises.

MR. SOLMAN: In other words, Tommy May can't charge more, so he can't cover what he sees as an obviously higher risk. But when I tried out the banker's explanation on Mohammed Unus, he wouldn't buy it.

MR. SOLMAN: So you're disputing the fact that loaning money to poor people is more risky? You think that I'm wrong?

PROF. YUNUS: You're wrong, absolutely, because I'm showing you over 17 years these people's repayment rate is over 98 percent.

MR. SOLMAN: Nearly everyone repays, and the money goes to make more loans and run the bank to pay for Grameen's legion of lending officers, for example, beating the bushes of Bangladesh for borrowers, then teaching them to use the money. There's a Grameen branch, often just a shack, in half the country's 68,000 villages and towns. There are now Grameen-like borrowing groups popping up all over the world, from Dacca to Chicago, to Pine Bluff, Arkansas. But unlike Grameen, American efforts such as the Good Faith Fund have yet to cover their expenses and still rely on subsidies. Now, there may be perfectly good reasons to subsidize micro- entrepreneurship. But from a purely economic standpoint you might ask: If micro-lending represents a real business opportunity for American banks, how come they haven't taken advantage of it yet and are still wedded to old-fashioned ideas like collateral?

PROF. YUNUS: Because you have been brainwashed in your classrooms. Banking can be done only on the basis of collateral, never forget that. You don't want to forget that. And you're afraid. Your classrooms, they never told you that it can be done any other way. If you had grown up with Grameen Bank, you'd definitely say that's why Good Faith Bank is here; they want to say, yes, we can do that. And they are doing it.

MAN: I'm going to give everybody the right here to say, "I look good." Say, "I look good!" All right. Put emphasis on it.

MR. SOLMAN: This is the fifth anniversary of Good Faith and micro-lenders and borrowers from all across the country have come to help celebrate. But to Mohammed Yunus the payoff isn't just feeling good, but reinvigorating the world economy.

PROF. YUNUS: Miles of highways on chimney, but you see that's not economy. Economy is the productivity of the human base. I take examples from Bangladesh. You have 115 million people. If this 115 million people could afford to use toothpaste, you'd be dealing several million toothpaste every month, tubes of toothpaste. If everybody could afford one piece of shirt each year on Christmas or Eid Day, for example, in our case, you'd be dealing 150 million shirts, and people would be -- some people would be making these shirts and some people would be making money with these shirts, buying shoes, and somebody who's making shoes buying something else, dealing the vegetables and so on, that's what makes up the economy.

MR. SOLMAN: Meanwhile, in Pine Bluff, Arkansas, the economy is now made up of people like Jesse Pearl Jackson who buy more thinks with the money they make and contribute to everybody's well-being in the process. Oh, by the way, two weeks after we shot this story, Jackson's loan was officially approved, all $7,000 of it. RECAP

MS. WARNER: Again, the major stories of this Tuesday, President Clinton proposed an overhaul of the nation's welfare system. It would include a two year limit on cash benefits and job training and work requirements for recipients. The President called it an opportunity to replace dependents with independence, but Republican critics said it would only expand government social programs. Good night, Jim.

MR. LEHRER: Good night, Margaret. We'll see you here tomorrow night. We will reschedule the Rosenblatt essay. The welfare reform discussion ate up the time. I'm Jim Lehrer. Thank you, and good night.