Democrats in Washington are using the excuse of the economic downturn to abolish welfare reform. Republicans can only win by exposing and countering this stimulus package outrage.
Sweeping, historic, welfare reforms were enacted in 1996, led by the Republican congressional majorities at the time, with strong, bipartisan support. The reforms involved the old Aid to Families with Dependent Children program (AFDC), originally adopted during the New Deal. The federal funds for the program were sent back to each state with the funds to be used for a new welfare program designed by each state based on mandatory work for the able bodied.
Sweeping, Historic Success
Before the reforms, the federal AFDC funds for each state were provided through a matching formula. The more spent by each state for AFDC, the more federal matching funds were paid to each state. So the states had an incentive to sign up more and more AFDC recipients, for each new recipient effectively brought more federal funds to the state. As a result, before the 1996 reforms, the AFDC rolls grew and grew, in both good economic times and bad, apart from state AFDC experiments that began to implement the fundamental changes.
The 1996 reforms fundamentally changed federal AFDC financing to end the matching funding. Instead, each state was provided a fixed, finite federal block grant for AFDC that did not change with the amount of state AFDC spending. As a result, if the new AFDC program designed by a state cost less, because the state’s program was more effective in moving recipients off of welfare and into work, the state would keep the net savings for other uses. But if the costs of a state’s program continued to increase, the state would have to finance the extra costs entirely itself.
These reforms naturally revolutionized the incentives faced by the states, and the results of the old state AFDC program, now renamed Temporary Assistance for Needy Families (TANF). Instead of federal matching funds inducing the states to sign up more and more AFDC recipients, the states now faced incentives to move AFDC/TANF recipients from welfare to work as quickly as possible, to save money for each state. As a result, states across the country implemented innovative, aggressive, revolutionary reforms to lead recipients from welfare dependency into real work and real jobs.
The results were truly spectacular. The old AFDC welfare rolls declined by a shocking 60% across the country! The former recipients who now moved into work enjoyed an increase in their income over time through real earnings from real jobs. Child poverty in America declined as a result. Federal spending on AFDC/TANF remained flat for a dozen years with no increase, resulting in enormous savings in federal spending by avoiding the increases that would have otherwise occurred under the old system.
The new system changed incentives for recipients as well, because they now faced real work requirements. In most circumstances, recipients could no longer sit back and just collect welfare checks. But the big effect came from the changed incentives for the state bureaucrats running the programs. The strategy and policy behind these reforms was originally developed by long-time Reagan welfare guru Robert Carleson, and was favored by Reagan since his days as California Governor. Former House Speaker Newt Gingrich led the adoption of these reforms as part of his Contract with America.
Scrapping What Works
This enormously successful, historic reform is now being scrapped by changes adopted in the so-called stimulus package. That package provides billions in additional funds for TANF/AFDC based on the old matching federal funds approach. Indeed, the stimulus bill provides that federal taxpayers will pay 80% of the costs for each new welfare recipient signed up, with the states paying only 20%. That is far worse even than the old, unreformed, AFDC program, which generally divided costs between the states and the feds by roughly 50/50. The federal government is now in effect paying states to increase welfare dependency, and federal costs.
As Robert Rector of the Heritage Foundation writes, “[T]he original [welfare reform] goal of helping families move to employment and self-sufficiency and off long-term dependence on government assistance has instead been replaced with the perverse incentives of adding more families to the welfare rolls.”
There is no reason for this change other than extremist, liberal left ideology. Barack Obama and the other extreme liberals now in complete control of the federal government believe in providing an open pipeline of taxpayer funds for welfare dependency, no questions asked. They believe it is unfair and oppressive to impose work requirements on the poor to receive welfare assistance.
But that left-wing philosophy is misguided and unfair to both taxpayers and the poor. It is wrong and unfair to taxpayers to ask them to finance a living for idle, indolent, welfare recipients who are perfectly capable of working and supporting themselves. At the same time, it is harmful and counterproductive for the government to induce welfare recipients to give up on work, and lapse into unnecessary, long-term dependency and idleness. Inducing the poor to subsist on welfare instead of working will leave them with lower incomes over the long run. It also undermines self-respect among the poor, and the spirit in poor communities, leading them into counterproductive activities resulting from idleness, such as drug use, alcoholism, illegitimate births, single motherhood, and personal deterioration.
The original 1996 welfare reform included a contingency fund to provide extra assistance to the states for TANF during an economic downturn. But those extra funds were provided based on the increase in the unemployment rate in each state. That kept the incentives of the historic welfare reforms in place. If more funds were needed by the states during the current economic crisis, Congress could simply have added more funds to that contingency fund. But instead Congress has provided billions to the states in new TANF funding tied to increases in state welfare spending, effectively paying the states to increase welfare spending to serve outdated left-wing ideology.
But this is not all. Rector reports that the so-called stimulus package includes massive, unnecessary increases in welfare spending across the board, for food stamps, public housing, Medicaid, and other programs. Of the $816 billion in the stimulus bill, $264 billion, or 32%, is provided for increased welfare spending. This amounts to $6,700 in increased welfare for each poor person in the United States, Rector reports.
The supposed stimulus bill increases federal welfare spending by 20% in the first year alone, Rector adds, increasing federal fleecing for welfare from $491 billion in fiscal year 2008 to $601 billion in fiscal 2009, the largest one-year increase in welfare spending in U.S. history. Obama and the left-wing Democrats claim that this increase in welfare spending is temporary. But Rector rightly argues that the Democrats will scream bloody murder if Republicans later try to cut back on these welfare increases. If these welfare increases are continued, then Rector calculates that the increased welfare costs will total $787 billion over 10 years. The stimulus bill would then cost taxpayers $1.34 trillion in increased spending over this period, or “$17,400 for each household paying income tax in the U.S.,” Rector calculates.
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