President Clinton has given the thumbs down to Texas Gov. George W. Bush's efforts to enlist the private sector in the business of administering social service programs. Critics say the President's action -- which involved rejecting the advice of senior aides in order to side with labor-union bosses -- has huge potential implications for welfare reform nationwide.

The administrative overhead that Bush wants to pare in Texas cost federal and state governments some $28 billion a year.

Other governors are also convinced that privatizing welfare administrative functions could save 20 percent to 35 percent in administrative costs. Many states are experimenting with contracting out parts of their welfare systems.

• Thirty states use Lockheed Martin to collect child support payments, and the company runs the federal computer which tracks down fathers behind on child support payments.

• Maximus Corp. helps run local welfare offices for states and has doubled in size in the past year.

• Wisconsin is allowing both private companies and non-profits to bid on screening, training and placing welfare recipients in jobs.

• California and Arizona have privatization plans similar to those just nixed by Clinton.

Critics of the Clinton veto say the President is scared of the unions, and the unions are fearful of losing union jobs, dues and their own political clout. In deep-sixing the Texas plan, Clinton went against the advice of his own Secretaries of Health and Human Services and Agriculture and the White House Domestic Policy Adviser, all of whom said Texas had negotiated in good faith for nine months.

When Texas leaders decided to contract with private firms to set up one-stop assistance bureaus that would allow welfare recipients to apply for all their benefits at once, the unions reacted vehemently. Their radio ads featured the sound of exploding bombs; "Texas is under attack," they yelled. "They are coming after us," an announcer warned.

Source: Editorial, "Clinton Promises," Wall Street Journal, May 13, 1997.