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As Congress debates the reauthorization of welfare reform, it is valuable to look back overnearly six years of experience with the PersonalResponsibility and Work Opportunity Reconcil-iation Act to see exactly what welfare reform canand cannot accomplish. Welfare reform has notbeen the disaster predicted by its critics, but nei-ther has it been the extraordinary success hailedby its supporters.Welfare reform has led to a substantial reduc-tion in welfare rolls, largely by speeding the exit of those individuals who were most likely to have lefteventually even in the absence of reform. Althoughthe decline in welfare rolls has slowed and evenreversed in some states as a result of the slowingeconomy, reform itself, and in particular sanctions,has played an important roll in reducing the num-ber of people receiving cash welfare benefits.On the other hand, welfare reform has beenfar less successful in meeting most of its othergoals. Neither time limits nor work requirementshave been vigorously enforced. Welfare reformhas failed to significantly reduce out-of-wedlock births to young women. And, most important, ithas not enabled former recipients to becomeindependent and self-sufficient.In the end, our experience with PRWORAshows the limits of welfare reform. The long-term answer to poverty and dependency does notlie with any government program, no matterhow well intentioned. Congress needs to gobeyond proposals that simply tinker with welfareand begin to phase out government assistance infavor of private charity. At the same timeCongress should aggressively pursue policiesthat promote economic growth and job creation.When it comes to welfare, we should end it, notmend it.
Welfare Reform
Less Than Meets the Eye
by Michael Tanner
_____________________________________________________________________________________________________
Michael Tanner is director of health and welfare studies at the Cato Institute and author of
The Poverty of Welfare: Helping Others in the Civil Society
(forthcoming).
Executive Summary
No. 473April 1, 2003
Introduction
On August 22, 1996, leaders of both politi-cal parties gathered in the White House RoseGarden to watch President Clinton sign thePersonal Responsibility and Work OpportunityReconciliation Act, a bill that, despite itsobscure title, represented the most extensiverevision of federal welfare policy in more than30 years. Echoing his campaign theme, Clintondeclared, “Today, we are ending welfare as weknow it.”
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Welfare reform made a number of signifi-cant changes in the way welfare was provided.Before PRWORA, when most people thoughtof welfare, they thought of Aid to Familieswith Dependent Children, the country’slargest cash assistance program, which pro-vided direct cash payments to families fromwhich parents—most frequently the motherbut other members of the household aswell—were absent or were incapacitated,deceased, or unemployed. The program wasfunded by a combination of federal and statefunds (the federal portion varied from 50 to80 percent), with states setting benefit levelsand the federal government determining eli-gibility requirements.PRWORA replaced AFDC with theTemporary Assistance for Needy Familiesblock grant. That effectively abolished mostfederal eligibility and payment rules, givingstates much greater flexibility to design theirown programs. The TANF block grant was afixed amount for each state, largely based onthe pre-reform federal contribution to thatstate’s AFDC program. The block grantseliminated welfare’s “entitlement” status,meaning that no one would have an auto-matic right to benefits. States could choosewhich families to help. States were, however,required to continue spending at least 75 per-cent of what they had previously spent, a pro-vision known as “maintenance of effort.”Widespread work requirements were to beimposed on welfare recipients. States were toinitially have at least 40 percent of their wel-fare recipients either working or participat-ing in work preparation activities, increasingto 50 percent by 2002, although states weregiven wide discretion in designing their work programs. PRWORA also established a timelimit for welfare receipt. Recipients could notremain on the rolls for longer than 60months (five years). However, this restrictiondid not apply to child-only families (familieswhose children receive benefits but the par-ents do not), and states could exempt up to20 percent of their recipients from time lim-its for “hardship” reasons. States also had theoption of imposing stricter time limits or of using their own funds to continue payingbenefits to families who exceeded the five-year time limit.The legislation included incentives forstates to establish programs to limit out-of-wedlock births. In addition, unmarriedteenage mothers under the age of 18 wererequired to remain in school and to live withan adult. States could prohibit additionalbenefits for women who conceived addition-al children while on welfare.In one of the more controversial provi-sions, legal immigrants who arrived after1996 and had not become citizens were madeineligible for TANF, as well as food stampsand Supplemental Security Income.And, finally, rules were changed toencourage greater state efforts to determinepaternity and to collect child support fromabsent parents. The federal governmentwould also provide additional assistance incollecting child support.Welfare reform was originally passed for afive-year period, requiring reauthorization in2002. However, as with so many legislativeissues, the Republican-controlled House of Representatives and the Democrat-controlledSenate could not reach an agreement on pro-posals for reauthorization. As a result, insteadof being reauthorized, PRWORA was contin-ued on a temporary basis into 2003, setting upa new debate over reauthorization. The Househas now, once again, passed a bill reflectingPresident Bush’s views on the issue, but theSenate is split between rival Republican andDemocratic plans. Passage is uncertain.
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Welfare reformhas reduced thenumber of peoplereceiving cashbenefits largelywithout increas-ing hardship orpoverty amongformer recipients.
As Congress takes up this importantdebate, it is valuable to look back over nearlysix years of experience with PRWORA to seeexactly what welfare reform can and cannotaccomplish. Welfare reform has not been thedisaster predicted by its critics, but neitherhas it been the extraordinary success hailedby its supporters.Welfare reform has led to a substantialreduction in welfare rolls, largely by speedingthe exit of those individuals who were mostlikely to have left eventually even in theabsence of reform. Welfare reform itself, par-ticularly sanctions, and not just the boomingeconomy of the 1990s played an importantrole in reducing the number of people receiv-ing cash welfare benefits. However, the role of the economy cannot be entirely dismissed,and as the economy has slowed, many statesare beginning to see welfare rolls increaseonce again.Welfare reform has reduced the numberof people receiving cash benefits largely with-out increasing hardship or poverty amongformer recipients. In fact, most former recip-ients have found employment and have mar-ginally improved their economic conditions.Moreover, both current and former recipi-ents suggest that reform has led to nonmon-etary gains in the well-being of their families.However, welfare reform has been far lesssuccessful in requiring that recipients work in exchange for benefits. Because of an overlybroad definition of “work activities,” as wellas state credits and exemptions, relatively fewwelfare recipients appear to be actually work-ing. Likewise, states have used exemptionsand state funds to seriously undermine timelimits. Therefore, two important goals of PRWORA have been largely unmet.PRWORA also has had little success atreducing out-of-wedlock births. Althoughout-of-wedlock birthrates have leveled out,after explosive growth in the 1970s and1980s, there is little evidence to link thatchange to welfare reform. Moreover, the rateremains disturbingly high.Finally, welfare reform has done little tomake individuals self-sufficient. Even afterleaving welfare, most former recipients con-tinue to rely on a wide variety of noncash gov-ernment assistance programs.All of this shows that, while modestly suc-cessful, welfare reform has fallen far short of “ending welfare as we know it.”
The Disaster That Didn’tHappen
When welfare reform passed, criticswarned that “wages will go down, familieswill fracture, millions of children will bemade more miserable than ever.”
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One fre-quently cited Urban Institute study predictedthat more than 1 million children would bethrown into poverty.
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However, the results do not appear to haveborne out those warnings. Poverty ratesdeclined every year between 1996 and 2001.Despite a small uptick in 2002, caused by aslowing economy, poverty rates remain wellbelow those before welfare reform was enact-ed.
4
The reduction in poverty cuts acrossdemographic groups, even those generallyconsidered most at risk: women, children,and minorities. Child poverty rates declinedfrom more than 20 percent in 1996 to 16.2percent in 2000, the lowest level in more than20 years.
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Perhaps even more impressive,since welfare reform, the poverty rate forblack children has fallen at the fastest ratesince figures have been recorded.
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Dependentsingle mothers, the group most heavilyimpacted by welfare reform, account heavilyfor this decline. Since the enactment of wel-fare reform, the poverty rate for female-head-ed families with children has fallen from 46to 32.5 percent.
7
The decline in povertyamong female-headed households has beengreater than for any other demographicgroup, although women with childrenremain six times more likely to be in povertythan two-parent families with children.
8
There is, of course, anecdotal evidence thatin some areas some individuals have sufferedhardships because of welfare reform. A 10-state study by Catholic Charities found that
3
Even after leavingwelfare, most for-mer recipientscontinue to relyon a wide varietyof noncash gov-ernment assis-tance programs.
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