This book suggests that we should be working toward the total elimination of government welfare programs subsitituting a renewed and invigorated program of private charity and economic opportunity.

The Poverty of Welfare

Helping Others in Civil SocietyBy MICHAEL D. TANNER

CATO INSTITUTE

Copyright © 2003 Cato Institute
All right reserved.
ISBN: 978-1-930865-41-9

Contents

Preface.........................................................vii1. "The End of Welfare As We Know It"...........................12. Welfare before 1996..........................................133. The Need for Reform-Then and Now.............................354. The Results of Reform........................................515. Welfare: End It, Don't Mend It...............................856. The Dangers of Government-Funded Charity.....................1097. Getting Out of Poverty.......................................1258. Conclusion: The Poverty of Welfare...........................157Notes...........................................................161Index...........................................................201

Chapter One

"The End of Welfare As We Know It"

On August 22, 1996, leaders of both political parties gathered in the White House Rose Garden to watch President Clinton sign the Personal Responsibility and Work Opportunity Reconciliation Act, a bill that, despite its obscure title, represented the most extensive revision of federal welfare policy in more than 30 years. In the Rose Garden, there were smiles all around and an uncommon political harmony, as both Democrats and Republicans basked in the warm afterglow of their enormous undertaking. Clinton even saw it as the beginning of a new era of bipartisan cooperation. "Welfare will no longer be a political issue," he said. "The two parties cannot attack each other over it."

Behind the faade of cooperation, however, welfare reform remained a contentious issue. Clinton had run for president as a "New Democrat," on a platform that called for "ending welfare as we know it." But once in office, he quickly found that the same divisions that split the Democratic Party over the issue also existed in his administration.

As a result, the Clinton administration never formulated a clear vision of welfare reform. The president's reform plan was repeatedly delayed by internal bickering. When finally released in June 1994, the president's plan called for a two-year time limit for welfare eligibility. During that period, recipients would receive job training and be eligible for other educational programs. At the end of the two years, they would be required to find work. If they were not able to find jobs in the private sector, they would be required to work in publicly funded community service jobs. The administration estimated that between 500,000 and 1 million public service jobs might be required. There would be no limit on the length of time a person could remain in a public service job. In addition, there would be a significant increase in funding for childcare. The president called for a crackdown, including federal sanctions, on fathers who failed to pay child support. Unwed teen mothers would be required to live with their parents in most cases, and the administration would launch a $100 million media and education campaign against teen pregnancy.

The Clinton plan was not an attempt to cut welfare spending. Early versions of the plan were estimated to increase welfare spending by as much as $58 billion over 10 years. That was quickly whittled back, but the final Clinton plan would still have increased spending by $9.3 billion over five years.

For better or for worse, the president's proposal was released at the height of the battle over his plans for health-care reform. As a result, it received only cursory public attention and almost no debate in Congress. Thus, welfare reform remained a hot political issue going into the 1994 elections.

The centerpiece of the successful Republican effort to capture control of Congress was the Contract with America, one provision of which called for welfare reform. The Republican plan, dubbed the Personal Responsibility Act, called for returning responsibility for many welfare programs, including Aid to Families with Dependent Children, to the states and providing them block grants. The Republican welfare reform proposal had many other components, including work requirements, time limits, and provisions to deal with out-of-wedlock births. But the most important was the block grants, not because block grants themselves were an innovation, but because they would end welfare's status as an entitlement. Under an entitlement program, every individual who meets the program's eligibility criteria is automatically entitled to receive the program's benefits. Spending on the program is not subject to annual appropriation; it rises automatically with the number of people enrolled. The block grant proposal, by contrast, would provide states with a fixed amount of money and they would have the power and authority to determine welfare eligibility.

Ending welfare's entitlement status would have two important effects. First, it would allow states to impose a variety of conditions and restrictions on receipt of benefits. Second, because it would make welfare spending subject to annual appropriation, Congress could assert greater control over the growth in spending.

As did most provisions of the Contract with America, welfare reform passed the House of Representatives largely intact and was significantly watered down in the Senate. The Senate added a maintenance-of-effort (MOE) requirement, ordering states to continue at least 80 percent of their previous welfare spending. That would prevent states from dramatically reducing welfare spending or benefits. The Senate also added a new child-care program and other spending increases.

President Clinton initially supported the Senate version and even indicated that he might sign the final compromise. However, he quickly became the target of a withering lobbying campaign by liberal groups, notably the Children's Defense Fund. In the end, Clinton vetoed two different versions of the welfare reform bill.

However, as the 1996 elections approached, pressure grew on both parties to pass some type of welfare reform. President Clinton changed course yet again and agreed to end welfare's status as an entitlement, if Congressional Republicans would agree to increase funding for childcare and job training and ease some of the eligibility restrictions that appeared in the original bill. Republicans agreed, and welfare reform passed the House by a vote of 256 to 170 and the Senate by 74 to 24.

Of course, not everyone was pleased with welfare reform. Even as President Clinton prepared to sign the bill, nearly 300 protesters marched outside the White House, chanting "One, Two, Three, Four. Stop the War on the Poor." Three senior members of the administration had resigned in protest.

But President Clinton was not deterred. Echoing his campaign theme, he declared, "Today, we are ending welfare as we know it." And with a presidential signature, 60 years of welfare in America changed.

The Personal Responsibility and Work Opportunity Reconciliation Act of 1996

Welfare reform made a number of significant changes in the way welfare was provided.

Before PRWORA, when most people thought of welfare, they thought of AFDC, the country's largest cash assistance program, which provided direct cash payments to children in families where the parents were absent, incapacitated, deceased, or unemployed, as well as certain other members of the children's household, most frequently their mother. The program was funded by a combination of federal and...