On Thursday at the American Enterprise Institute, Budget Committee Chairman Paul Ryan, R-Wisc., outlined plans to reform welfare and fight poverty. Ryan’s policies are well intentioned but not crafted in a way that will achieve reduced dependency. Ryan focuses on giving state governments greater flexibility in spending federal funds. While paying tribute to the principles of welfare reform that significantly reduced welfare dependence in the late 1990s, his plan does not draw the right lessons from that reform.
The 1996 welfare reform was successful because for the first time the federal government mandated that state welfare bureaucracies impose work requirements on recipients of federal welfare funds. The federal work requirements led a sharp reduction in welfare dependence and child poverty in the late 1990s. The reform also cut federal welfare spending and insisted that state governments bear a greater share of the welfare costs. These fiscal changes further incentivized states to reduce welfare caseloads. The reform did give states greater flexibility in spending federal money but this aspect was peripheral to the success the reform achieved.
Ryan is correct in asserting that the 1996 welfare reform is a rare example of a policy that actually reduced welfare dependence and poverty while cutting welfare costs. It is, therefore, worthwhile to examine the actual policy carefully. The 1996 reform transformed the old Aid to Families with Dependent Children program (AFDC) into the Temporary Assistance for Needy Families (TANF) program. Within about five years, welfare rolls dropped by half, child poverty plummeted, and employment among low-income individuals jumped. This was an important first step in decreasing poverty and dependence, and one that should be replicated in other programs like food stamps and public housing.
What was at the heart of the progress made by the TANF reform? Its carefully crafted federal work requirement. The 1996 reform focused on work and self-sufficiency, clearly specifying requirements for able-bodied adults to work, prepare for work, or look for work in exchange for receiving welfare assistance. This held the state bureaucracies administering welfare programs accountable for ensuring that assistance provided with federal dollars provided a hand up not a handout.
In addition, the 1996 reform also capped the amount of welfare assistance states received. Prior to the reform, AFDC was an open-ended entitlement: states received more funding from the federal government if they grew their rolls. After the reform states received a fixed amount of funding. This reform incentivized states to reduce dependence rather than rewarding them for increasing welfare rolls.
The 1996 welfare reform also had formal goals of strengthening marriage and reducing unwed childbearing. Regrettably, these pro-marriage aspects of the law lacked teeth. In contrast, to the federal work requirements, the pro-marriage elements of the law merely suggested rather than mandated state action. In consequence, state welfare bureaucracies simply ignored the pro-marriage elements of the law. Today, only one state runs a pro-marriage program and every state continues to operate a welfare system that actively penalizes low income parents who do marry.
The non-marital birth rate has grown from about 32 percent of children born in 1996 to nearly 41 percent of children today. The growth of non-marital childbearing and single parenthood is the predominant cause of child poverty in the nation today. Children in single-parent homes are more than five times as likely to be poor compared to their peers in married-parent homes. They are also at higher risk for numerous negative outcomes.
Ironically, although Ryan’s welfare plan is intended to reduce poverty, his 80-page report barely mentions the profound link between poverty and single parenthood. Increasing marriage is not a goal of the Ryan block grant strategy. In fact, Ryan’s policy would actually increase penalties on low-income parents who do marry. This occurs because Ryan plans to increase the Earned Income Tax Credit (EITC) for single adults without children. Low-income fathers who were unmarried would receive this credit; if they did marry they would lose it. Rather than piling on to the already substantial marriage penalties in the welfare system, policy-makers should look for ways to reduce them.
Ryan’s efforts to focus on fighting poverty and reforming welfare are commendable. That focus should be on replicating the elements of reform that have helped to reduce dependency and controlled spending in TANF. Taking work seriously, capping welfare spending, and strengthening marriage will be the elements of success to continue the on-going work of welfare reform.