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The American Welfare State How We Spend Nearly $1 Trillion a Year Fighting Poverty--And Fail, Cato Policy Analysis No. 694

The American Welfare State How We Spend Nearly $1 Trillion a Year Fighting Poverty--And Fail, Cato Policy Analysis No. 694

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Published by Cato Institute
On January 8, 1964, President Lyndon B. Johnson delivered a State of the Union address to Congress in which he declared an "unconditional war on poverty in America." At the time, the poverty rate in America was around 19 percent and falling rapidly. This year, it is reported that the poverty rate is expected to be roughly 15.1 percent and climbing. Between then and now, the federal government spent roughly $12 trillion fighting poverty, and state and local governments added another $3 trillion. Yet the poverty rate never fell below 10.5 percent and is now at the highest level in nearly a decade. Clearly, we have been doing something wrong.

When most Americans think of welfare, they think of the cash benefit program known as Temporary Assistance to Needy Families (TANF), formerly known as Aid to Families with Dependent Children (AFDC). But in reality TANF is only a tiny portion of a vast array of federal government social welfare programs designed to fight poverty. In fact, if one considers those programs that are means-tested (and therefore obviously targeted to low-income Americans) and programs whose legislative language specifically classifies them as anti-poverty programs, there are currently 126 separate federal government programs designed to fight poverty.
On January 8, 1964, President Lyndon B. Johnson delivered a State of the Union address to Congress in which he declared an "unconditional war on poverty in America." At the time, the poverty rate in America was around 19 percent and falling rapidly. This year, it is reported that the poverty rate is expected to be roughly 15.1 percent and climbing. Between then and now, the federal government spent roughly $12 trillion fighting poverty, and state and local governments added another $3 trillion. Yet the poverty rate never fell below 10.5 percent and is now at the highest level in nearly a decade. Clearly, we have been doing something wrong.

When most Americans think of welfare, they think of the cash benefit program known as Temporary Assistance to Needy Families (TANF), formerly known as Aid to Families with Dependent Children (AFDC). But in reality TANF is only a tiny portion of a vast array of federal government social welfare programs designed to fight poverty. In fact, if one considers those programs that are means-tested (and therefore obviously targeted to low-income Americans) and programs whose legislative language specifically classifies them as anti-poverty programs, there are currently 126 separate federal government programs designed to fight poverty.

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Published by: Cato Institute on Apr 10, 2012
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Executive Summary 
News that the poverty rate has risen to 15.1percent of Americans, the highest level in nearly a decade, has set off a predictable round of callsfor increased government spending on socialwelfare programs. Yet this year the federal gov-ernment will spend more than $668 billion onat least 126 different programs to fight poverty. And that does not even begin to count welfarespending by state and local governments, whichadds $284 billion to that figure. In total, theUnited States spends nearly $1 trillion every year to fight poverty. That amounts to $20,610for every poor person in America, or $61,830 perpoor family of three.Welfare spending increased significantly un-der President George W. Bush and has explodedunder President Barack Obama. In fact, sincePresident Obama took office, federal welfarespending has increased by 41 percent, morethan $193 billion per year. Despite this govern-ment largess, more than 46 million Americanscontinue to live in poverty. Despite nearly $15trillion in total welfare spending since Lyndon Johnson declared war on poverty in 1964, thepoverty rate is perilously close to where we be-gan more than 40 years ago.Clearly we are doing something wrong.Throwing money at the problem has neitherreduced poverty nor made the poor self-suffi-cient. It is time to reevaluate our approach tofighting poverty. We should focus less on mak-ing poverty more comfortable and more on cre-ating the prosperity that will get people out of poverty.
The American Welfare State
 How We Spend Nearly $1 Trillion a Year Fighting Poverty—and Fail 
by Michael Tanner
No. 694 April 11, 2012
 Michael Tanner is director of health and welfare studies at the Cato Institute and author of 
The Poverty of Welfare: Helping Others in Civil Society 
.
 
2
Federal welfarespending alonetotals morethan $14,848 forevery poor man,woman, and childin this country.
Introduction
On January 8, 1964, President Lyndon B. Johnson delivered a State of the Union ad-dress to Congress in which he declared an“unconditional war on poverty in America.” At the time, the poverty rate in America wasaround 19 percent and falling rapidly. Thisyear, it is reported that the poverty rate is ex-pected to be roughly 15.1 percent and climb-ing. Between then and now, the federal gov-ernment spent roughly $12 trillion fightingpoverty, and state and local governmentsadded another $3 trillion. Yet the poverty rate never fell below 10.5 percent and is now at the highest level in nearly a decade. Clear-ly, we have been doing something wrong.When most Americans think of welfare,they think of the cash benefit programknown as Temporary Assistance to Needy Families (TANF), formerly known as Aid toFamilies with Dependent Children (AFDC).But in reality TANF is only a tiny portionof a vast array of federal government socialwelfare programs designed to fight poverty.In fact, if one considers those programs thatare means-tested (and therefore obviously targeted to low-income Americans) and pro-grams whose legislative language specifically classifies them as anti-poverty programs,there are currently 126 separate federal gov-ernment programs designed to fight poverty.Most welfare programs are means-testedprograms that provide aid directly to low-income persons in the form of cash, food,housing, medical care, and so forth, witheligibility based on the recipients’ income.The remaining programs are either commu-nity-targeted programs, which provide aidto communities that are economically dis-tressed or have large numbers of poor peo-ple, or categorical programs, which base eli-gibility for benefits on belonging to a needy or disadvantaged group, such as migrantworkers or the homeless. Some welfare pro-grams are well known; some are barely heardof even in Washington.In 2011 the federal government spentroughly $668.2 billion on those 126 pro-grams.
1
That represents an increase of morethan $193 billion since Barack Obama be-came president. This is roughly two anda half times greater than any increase overa similar time frame in U.S. history, and itmeans an increase in means-tested welfarespending of about 2.4 percent of GDP. If one includes state and local welfare spend-ing, government at all levels will spend morethan $952 billion this year to fight poverty.
2
 To put this in perspective, the defense bud-get this year, including spending for thewars in Iraq and Afghanistan, totals $685billion.
3
 Indeed, federal welfare spending alone to-tals more than $14,848 for every poor man,woman, and child in this country. For a typi-cal poor family of three, that amounts tomore than $44,500. Combined with state andlocal spending, government spends $20,610for every poor person in America, or $61,830per poor family of three. Given that the pov-erty line for that family is just $18,530, weshould have theoretically wiped out poverty in America many times over (see Figure 1).Of course no individual is eligible for ev-ery program, and many poor people receivenowhere near this amount of funding.
4
Andmany supposedly anti-poverty programs arepoorly targeted, with benefits spilling overto people well above the poverty line. Butthat is precisely the point—we are spendingmore than enough money to fight poverty but not spending it in ways that actually re-duce poverty.
126 Programs
 As detailed in the appendix, the federalgovernment currently funds 126 separate andoften overlapping anti-poverty programs.For example, there are 33 housing programs,run by four different cabinet departments,including, strangely, the Department of En-ergy. There are currently 21 different pro-grams providing food or food-purchasing as-sistance. These programs are administered by three different federal departments and one
 
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Sevendifferent cabinetagencies andsix independentagenciesadminister atleast oneanti-poverty program.
independent agency. There are 8 differenthealth care programs, administered by fiveseparate agencies within the Department of Health and Human Services. And six cabinetdepartments and five independent agenciesoversee 27 cash or general assistance pro-grams. All together, seven different cabinetagencies and six independent agencies ad-minister at least one anti-poverty program.The exact number and composition of these programs fluctuates slightly from yearto year, depending on congressional appro-priations and presidential priorities. For ex-ample, the 2011 federal budget eliminatedprograms such as the Foster GrandparentProgram, the Senior Companion Program,Even Start, and Vista, while creating new ones such as Choice Neighborhood PlanningGrants, the Emergency Homeowners LoanProgram, and the Capacity Building for Sus-tainable Communities Fund. However, thenumber of federal anti-poverty programs hasexceeded 100 for more than a decade.State and local governments provide ad-ditional funding for several of these pro-grams and operate a number of programson their own. Federal spending accounts forroughly two-thirds of welfare funding, withthe states—and occasionally localities—ac-counting for the rest.The single largest welfare program today is Medicaid. Medicaid spending that sup-ports health care for the poor, excludingfunding for nursing home or long-term carefor the elderly, topped $228 billion in 2011.The Supplemental Nutrition Assistance Pro-gram (food stamps) was the second most ex-pensive welfare program, costing taxpayers
Figure 1Poverty Threshold, Federal Welfare Spending, and Total Welfare Spending for aFamily of Three (in dollars)
Source: Author’s calculations using General Services Administration, Catalog of Federal Domestic Assistance,https://www.cfda.gov/; U.S. Census Bureau, “The 2012 Statistical Abstract”; Katherine Bradley and RobertRector, “Confronting the Unsustainable Growth of Welfare Entitlements: Principles of Reform,” HeritageFoundation, thf_media.s3.amazonaws.com/2010/pdf/bg2427.pdf.

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