Stimulus Bill Abolishes Welfare Reform

Conn Carroll / February 11, 2009

From the beginning we’ve warned you that President Barack Obama’s Trillion Dollar Debt Plan will not stimulate the economy, but will instead permanently expand the size and power of the welfare state. There is perhaps no better example of this than the provisions in the bill which abolish the successful welfare reforms passed on a true bipartisan basis by President Bill Clinton in 1996. Heritage senior research fellow Robert Rector has the gory details:

Under the old AFDC program, states were given more federal funds if their welfare caseloads were increased, and funds were cut whenever the state caseload fell. This structure created a strong incentive for states to swell the welfare rolls. Prior to reform, one child in seven was receiving AFDC benefits.

When welfare reform replaced the old AFDC system with TANF, this perverse financial incentive to increase dependence was eliminated. Each state was given a flat funding level that did not vary whether the state increased or decreased its caseload.
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The House and Senate stimulus bills will overturn the fiscal foundation of welfare reform and restore an AFDC-style funding system. For the first time since 1996, the federal government would begin paying states bonuses to increase their welfare caseloads. Indeed, the new welfare system created by the stimulus bills is actually worse than the old AFDC program because it rewards the states more heavily to increase their caseloads. Under the stimulus bills, the federal government will pay 80 percent of cost for each new family that a state enrolls in welfare; this matching rate is far higher than it was under AFDC.