Speaker Nancy Pelosi (D-CA) is attempting this week to schedule a vote in the U.S. House of Representatives on a measure that would extend expiring tax breaks. But the “American Jobs and Closing Tax Loopholes Act of 2010” (H.R. 4213) would shut the door on the important success of welfare reform. That’s because the legislation includes is a one-year extension of the so-called “TANF Emergency Contingency Fund” with an additional $2.5 billion in spending. This fund was originally created as part of the 2009 Stimulus package and directly undermines the historic 1996 welfare reform by paying states “bonus” money for increasing the size of their welfare caseloads.
The 1996 welfare reform fundamentally changed how the old welfare system, known as Aid to Families with Dependent Children (AFDC), financed the welfare caseload. AFDC essentially increased the amount of federal money that flowed to states based on the size of their caseloads – the bigger the caseload, the more money they got. Not surprisingly, the size of caseloads ballooned over years costing taxpayers billions more year to year and trapping millions of families into generational poverty.
Welfare reform transformed the program into the Temporary Assistance for Needy Families (TANF) program. It changed the financing structure into a fixed block grant that did not fluctuate from year to year according to caseload size. In addition, real work requirements were put in place that required able-bodied recipients to engage in work or job preparation activities at least 20-30 hours a week. As a result, over 2.8 million families left the welfare rolls for employment and child poverty shrank by 1.6 million fewer children. Overall caseloads shrunk by more than 60 percent.
The TANF Emergency Fund extension included in H.R. 4213 directly undermines both the funding structure and work requirements that made welfare reform a success. This Fund originated in the 2009 infamous Stimulus package and cost taxpayers $5 billion. It rewards states with extra money if their welfare caseloads increase in size. Further, only 16 percent of expenditures according to the Department of Health and Human Services have gone toward subsidized employment activities and 84 percent has been given out as basic cash assistance or short-term cash assistance. The bill under consideration this week would add another $2.5 billion to the Fund and extend it for another year.
Through this policy change, the Obama Administration and Congress would put more families on welfare and decrease the importance of work and self-sufficiency. Not only is this costly to the taxpayer, but the social cost of trapping more people in dependency on government is devastating.