GOP Welfare Plan Proposes Severe Cuts in Spending : Legislation: Bill sets stage for landmark fight with Democrats by reducing funding by $40 billion over 5 years, cutting the number of disabled children eligible for aid.

WASHINGTON —  Launching what could become the defining debate of the 104th Congress, House Republicans Thursday unveiled welfare reform legislation calling for more extensive reductions in cash assistance and a more circumscribed role for the federal government than plans favored byPresident Clinton and congressional Democrats.

The bill’s introduction sets in motion a landmark struggle over the extent to which Congress should scale back the government-administered safety net that critics perceive as contributing to the cycle of joblessness and despair that it was designed to ameliorate.

“The welfare state failed because for too many years Congress equated compassion with money,” said Rep. E. Clay Shaw Jr. (R-Fla.), chairman of a key House panel that could begin voting on the measure as early as next week.

The GOP initiative would reduce federal funding of welfare programs by $40 billion over five years, with about $15 billion coming from the consolidation of about 50 programs into three block grants to be administered by the states.

In what would represent a dramatic change in the way the government regards its obligation to poor families, the measure would end welfare’s protected status as a federal “entitlement” that gives benefits to all who qualify, regardless of the cost to taxpayers.

As a concession to cost-conscious governors, however, Republican leaders agreed to create a “rainy day” fund that would set aside money for states to use if a recession or other economic calamity causes future welfare rolls to swell.

While the broad outlines of the GOP legislation have been apparent for some time, the final measure includes a few new elements that Democrats described as particularly harsh, such as a provision that would significantly decrease the number of disabled children eligible for cash assistance.

The GOP measure moves to the forefront of a national debate over the desirability and affordability of such programs as Aid to Families With Dependent Children, which provides cash assistance to about 5 million families at an annual cost to the Treasury of $17 billion.

The Republican approach is regarded as tougher than the President’s reform plan, which would increase government spending rather than reduce it. Like the GOP plan, the Clinton proposal is designed to prod some recipients off welfare and into the work force, but it would include funds to help prepare recipients for employment and, if necessary, pay them to take public jobs.

The Republican plan, in contrast, would require states to cut off cash assistance to most unemployed recipients after two years with no guarantee of a government job and would allow states to cut them off even sooner. In addition, the measure would require states to deny cash payments to unmarried teen-age mothers, to forbid benefit increases when welfare families have additional children and to eliminate assistance altogether for legal immigrants.

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“Much like tough-love, our bill faces welfare’s most difficult problems directly and sends a powerful signal that the government cannot and will not solve everyone’s problems,” Shaw said in an address to the U.S. Chamber of Commerce, where he unveiled the GOP plan.

Administration officials and many congressional Democrats criticized the proposal as too cruel in its treatment of children and too lax in its efforts to move parents into the work force.

“The Republican proposal will be strong on punishing children and will be weak on getting their parents to work,” said Rep. Sander M. Levin (D-Mich.), a Democrat who serves on the House Ways and Means subcommittee chaired by Shaw.

Levin cited a previously undisclosed provision of the Republican plan that would restrict eligibility for cash benefits for disabled children. Under the GOP legislation, the 900,000 children who now receive such benefits under the Supplemental Security Income program would continue to get them. But in the case of new applicants, only those children so severely disabled that they would otherwise be confined to an institution would be eligible for cash assistance.

“You can’t look a child in the eye and say: ‘We’ll help you if you’re now getting help, but if you need it in the future, we won’t.’ That’s irrational,” Levin said.

“There clearly is the need for reform. The bathwater needs changing. The question is whether they’re going to throw away a lot of children with the bathwater.”

Other provisions that Democrats hope to strike from the GOP bill include the elimination of cash benefits for unwed teen-age mothers and their children and the denial of increased benefits to women who have additional babies.

“This is probably the harshest bill ever designed by the leaders of either party,” said Robert Greenstein, executive director of the Center on Budget and Policy Priorities, a liberal research institution.

“It takes a very troubled welfare system and manages to make it worse than it already is.”

Shaw was adamant in his defense of the bill’s more controversial provisions, such as the elimination of cash payments to unmarried teens.

“If American people believe--and they do--that it is wrong for unmarried teen-agers to go on welfare to have children, why then does our welfare system today pay unmarried teen-agers cash benefits?” Shaw said. “It is time for society to send a signal to our teen-agers: Do not sleep with someone and expect the taxpayers to bail you out if you have a child.”

Administration officials and congressional Democrats argued that moving people from welfare to work will cost money in the short run because the government has an obligation to provide training, job placement and child care services.

Because the Republican bill contains little to help with that transition, the officials said, it is likely to dump people from the welfare rolls without ensuring that they can find and keep jobs.

The Republican bill would require 2% of all recipients to work by 1996, with the figure rising to 20% by 2003. But it does not require states to do anything to prepare welfare recipients for work or to help them find jobs.

House Minority Leader Richard A. Gephardt (D-Mo.) said that Democrats will introduce their own proposed solution to the welfare debate today. He said that the Democratic alternative would require all welfare recipients to hold jobs or be enrolled in some form of education or training program within two years.

But Democrats are far from united on the issue of welfare reform. On Thursday, a small group of conservative Democrats in the House preempted their leaders and introduced yet another reform proposal. Their plan would retain the entitlement status of the AFDC program, but would scrap the guarantee of a government job contained in the President’s bill.

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At a news conference, President Clinton said that he would support the GOP bill only if it assures that the nutritional and health care needs of children are supported.

“If it promotes work and family and protects children, then I will be favorable toward it, even with a lot more flexibility to the states--I want that,” Clinton said.

Some congressional Democrats fumed quietly Thursday about what they characterized as the President’s failure to stand up for AFDC’s entitlement status, arguing that poor children will not be protected unless their families are guaranteed access to benefits.

But others rejoiced. Michigan Gov. John Engler, who has led a governors’ crusade to take over welfare, called the GOP blueprint “outstanding.”

“It is a dramatic improvement over current law and provides an opportunity for unprecedented activity at the state and local level on welfare reform,” Engler said after an address to the Conservative Political Action Congress, a group of conservative leaders.

Robert Shogan contributed to this story.

* TOUGH NEW MEASURE: Massachusetts Legislature votes to force poor to go to work, cuts welfare funds. A22