This is about 10 months old from the Heritage Foundation, but it give so much information on what welfare programs are costing, where and why they are failing and how Obama has increased them. I've broken it up in sections because it's quite a bit of information but really worth the read.
Confronting the Unsustainable Growth of Welfare Entitlements: Principles of Reform and the Next Steps
Published on June 24, 2010 by Katherine Bradley and Robert RectorAbstract: The growth of welfare spending is unsustainable and will drive the United States into bankruptcy if allowed to continue. President Barack Obama’s fiscal year 2011 budget request would increase total welfare spending to $953 billion—a 42 percent increase over welfare spending in FY 2008, the last full year of the Bush Administration. To bring welfare spending under control, Congress should reduce welfare spending to pre-recession levels after the recession ends and then limit future growth to the rate of inflation. Congress should also restore work requirements in the Temporary Assistance for Needy Families (TANF) program and apply them to other federal welfare programs.
The federal government runs over 70 different means-tested anti-poverty programs that provide cash, food, housing, medical care, and social services to poor and low-income persons. These means-tested programs—including food stamps, public housing, low-income energy assistance, and Medicaid—pay the bills and meet the physical needs of tens of millions of low-income families. However, these programs do not help the recipients move from a position of dependence on the government to being able to provide for themselves.
Only one welfare program, Temporary Assistance for Needy Families (TANF), promotes greater self-reliance. The reform that created TANF in the mid-1990s moved 2.8 million families off the welfare rolls and into jobs so that they were providing for themselves. Regrettably, while the TANF reform was successful, no other federal welfare programs have been reformed along similar lines. The TANF reform could serve as a partial model of reform for other programs for the poor.
As government spending on means-tested welfare approaches $1 trillion per year, it is time to reboot the other poverty programs to control costs and promote greater self-reliance. In addition, efforts to rebuild marriage in low-income communities would improve the well-being of children, parents, and communities.
Reform should be based on five principles:
1. Slowing the growth of the welfare state. Unending government deficits are pushing the United States toward bankruptcy. The U.S. simply cannot afford the massive increases in welfare spending planned by President Barack Obama. Welfare spending is projected to cost taxpayers $10.3 trillion over the next 10 years.[1] Congress needs to establish reasonable fiscal constraints within the welfare system. Once the current recession ends, aggregate welfare spending should be rolled back to pre-recession levels. After this rollback has been completed, the growth of welfare spending should be capped at the rate of inflation.
2. Promoting personal responsibility and work. Able-bodied welfare recipients should be required to work or to prepare for work as a condition of receiving aid. Food stamps and housing assistance, two of the largest programs for the needy, should be aligned with the TANF program to require able-bodied adults to work or to prepare for work for a minimum of 30 hours per week.
3. Providing a portion of welfare assistance as loans rather than as grants. Welfare to able-bodied adults creates a potential moral hazard because providing assistance to those in need can lead to an increase in the behaviors that generate the need for aid in the first place. If welfare assistance rewards behaviors that lead to future dependence, costs can spiral out of control. A reformed welfare policy can provide temporary assistance to those in need while reducing the moral hazard associated with welfare by treating a portion of welfare aid as a loan to be repaid by able-bodied recipients rather than as an outright grant from the taxpayer.
4. Ending the welfare marriage penalty and encouraging marriage in low-income communities. The collapse of marriage is the major cause of child poverty in the U.S. today. When the War on Poverty began, 7 percent of children in the U.S. were born out of wedlock; today, the figure is over 40 percent.[2] Most alarmingly, the out-of-wedlock birthrate among African–Americans is 72 percent. The outcomes for children raised in single, never-married homes are greatly diminished.
Current means-tested welfare programs penalize low-income recipients who get married; these anti-marriage penalties should be reduced or eliminated. In addition, government should provide information on the importance of marriage to individuals in poor communities who have a high risk of having children out of wedlock. Particular emphasis should be placed on the benefits to children of a married two-parent family.
5. Limit low-skill immigration. Around 15 percent ($100 billion per year) of total means-tested welfare spending goes to households headed by immigrants with high school degrees or less.[3] One-third of all immigrants lack a high school degree.[4] Over the next 10 years, America will spend $1.5 trillion on welfare benefits for lower-skill immigrants. Government policy should limit future immigration to those who will be net fiscal contributors, paying more in taxes than they receive in benefits. The legal immigration system should not encourage immigration of low-skill immigrants who would increase poverty in the nation and impose vast new costs on already overburdened taxpayers.
In addition, the government should not provide amnesty or “earned citizenship” to illegal immigrants, which would provide illegal immigrants with full access to the U.S. welfare system. Of the 11 million to 12 million illegal immigrants in the U.S., at least 50 percent lack a high school degree. Giving this population amnesty and access to welfare would lead to a staggering increase in future welfare costs.
Careful policy reforms focused on fiscal restraint, strong work requirements, the promotion of marriage, and personal responsibility can transform the federal welfare system, reducing dependence on government and increasing the well-being of families and children.
The Need for Reform
When President Lyndon Johnson announced the War on Poverty in 1964, he created large-scale national programs to help the poor and needy. Spending on these programs has grown to alarmingly high levels. In 1964, programs for the poor consumed 1.2 percent of the U.S. gross domestic product (GDP). Today, spending on welfare programs is 13 times greater than it was in 1964 and consumes over 5 percent of GDP. Spending per poor person in 2008 amounted to around $16,800 in programmatic benefits.
The Obama Administration has worked rapidly to expand the welfare state further. President Obama’s fiscal year (FY) 2011 budget would continue this trend, further increasing spending on programs for the poor to 42 percent above levels in FY 2008, President George W. Bush’s last full year in office. By 2011, total welfare spending (including the state portion) would rise to $953 billion.[5] (See Chart 1.)
Critically, most of this increase represents a permanent expansion of the welfare state, not a temporary response to the current recession. According to President Obama’s published budget plans, welfare spending will not decline even after the current recession ends. Over the next 10 years, America will spend over $10.3 trillion on programs for the poor.[6] (See Chart 2.)
This massive, unending growth in welfare aid is not what President Johnson had in mind when he launched the War on Poverty in 1964. Johnson never intended to produce an ever-increasing system of government aid and a growing population that is dependent on the government. Instead, he actually sought to shrink the welfare state by curing causes of poverty. Rather than seeking to expand the welfare state, Johnson hoped to eliminate the future need for welfare by making the poor self-sufficient and prosperous.
Things did not work as President Johnson planned. Since the beginning of the War on Poverty, the U.S. has spent $15.9 trillion on means-tested welfare. Instead of reducing the causes of poverty, this spending has made the problem dramatically worse. By undermining intact families and eroding the work ethic in low-income communities, the welfare state has made families less capable of supporting themselves today than they were when the War on Poverty began.
For example:
• After adjusting for inflation, welfare spending is 13 times higher today than in 1965, when the War on Poverty started.
• The out-of-wedlock birthrate is 40 percent, and the African–American out-of-wedlock birthrate is 72 percent. When the War on Poverty began, the out-of-wedlock birthrate was 7 percent.[7]
• More than 40 million people are on food stamps. Four decades ago, only 4.3 million people were on the rolls.[8]
• As Chart 3 shows, means-tested welfare has grown faster than every other component of government over the past two decades. Welfare spending has grown more rapidly than Social Security and Medicare, education, and defense.
A Model of Partial Reform: The 1996 Welfare Reform Initiative
In 1996, the Aid to Families with Dependent Children (AFDC) program was transformed from a cash welfare program into a jobs program known as Temporary Assistance for Needy Families (TANF). Recipients were required to perform at least 20–30 hours per week of work or job preparation activities in exchange for the cash benefit.
Overnight, welfare agencies became job placement offices, and people who had been trapped in poverty and dependence began seeking employment. Between 1996 and 2009, caseloads dropped from 4.5 million families to 1.7 million. As the reform went into effect, employment for disadvantaged single mothers increased dramatically.[9]
The changes in AFDC were few, but they had a major impact on the program’s outcomes. First, the system for providing federal funds to the state governments was overhauled. Prior to reform, states were paid per person added to the AFDC rolls. This funding stream was eliminated and replaced with a fixed block grant. Under the new system, federal funding would no longer increase if states expanded their caseloads. Yet if caseloads fell, the state would no longer lose federal funds, but could keep the resultant savings and use them for other services for low-income persons chosen by the state. This simple fix shifted the mindset of state agencies from an emphasis on increasing enrollment and processing checks to a new focus on shrinking caseloads and increasing employment.
Work requirements also profoundly affected both the recipients and the states. States were required to have at least 40 percent of their adult TANF caseloads working or engaged in a work preparation activity. However, states were given credit toward meeting these participation rates if they succeeded in reducing their caseloads.[10] In the decades before welfare reform, state AFDC caseloads rarely if ever fell.
If state bureaucracies failed to meet their participation rates and failed to reduce caseloads, they faced a fiscal penalty. These incentives worked together to reduce unnecessary enrollments in welfare, drive caseloads down, and move as many recipients as possible into employment. The results were striking. Caseloads shrank by over 60 percent, 2.8 million families moved off the rolls and into jobs, and 1.6 million fewer children were left in poverty.[11]
The same principles that were effective in TANF could be applied to other federal means-tested programs. Many of these programs serve the same low-income population. The only real difference among them is the type of benefit offered: food, cash, or housing. Ending entitlement funding structures would be a good first step in slowing the growth of spending and stopping the practice of rewarding states for increasing their caseloads. Requiring beneficiaries in other programs to work or prepare for work as a condition of receiving aid would reduce dependence and increase employment.
Reforming Two of the Largest Federal Welfare Programs
Two of the largest federal welfare programs today are public housing assistance and food stamps (Supplemental Nutrition Assistance Program or SNAP). The federal government will spend nearly $107 billion on these two programs in 2010.
Food Stamps. SNAP is the federal government’s largest food assistance program. It is a quasi-entitlement that pays states for nearly every person who enrolls in the program. Benefits are mostly determined by the financial status of the household, including the value of any income and assets, and recipients are generally limited to those who are at or below 130 percent of the poverty line.
Although nearly all food stamp households contain working-age adults, few of these individuals are employed. The program fosters a pattern of long-term dependence. While the food stamp program is commonly misperceived as a temporary, short-term assistance program, in reality the majority of food stamp recipients at any given time are or will become long-term dependents. In fact, half of food stamp aid goes to individuals who have received aid for 8.5 years or more.[12] (See Chart 4.)
Over the life of the program, the number of recipients has grown steadily, and spending has skyrocketed over the past two years. The new enrollment numbers for February 2010 show that nearly 40 million people are receiving food stamps.[13] Spending on food stamps is expected to rise to $75 billion in 2011 according to the President’s budget for FY 2011. This is $36 billion more than in FY 2008. Enrollment has grown to 39 million people as of January 2010.[14]
To put the growth of this program into perspective, 31 million people were on the rolls in November 2008, and the program spent $39 billion in FY 2008. In contrast, since taking office, President Obama has almost doubled the spending on the program and added 8 million more people to the rolls. (See Chart 5.)
• The American Recovery and Reinvestment Act of 2009, the stimulus package, made several changes in the food stamp program, adding billions in spending and expanding eligibility to allow millions more people to qualify for the benefit. The maximum food stamp level was raised by 13 percent (about $44 a month for a three-person household). In addition, because of rising unemployment, the bill suspended the provision that requires able-bodied recipients without children to work at least half-time. This undoubtedly has added many more people to the rolls.
• The FY 2010 appropriations bill included a $5 billion funding increase over FY 2009 levels, but it also lifted the cap on spending altogether. A little-known provision in the FY 2010 defense appropriations bill allows elevating SNAP’s annual funding to “such sums as necessary” in emergency cases where annual appropriations may be too low.[15] It could be argued that the current hard economic times could be deemed an “emergency,” thus allowing the federal government to spend billions more on food stamps.
• Finally, the President’s FY 2011 budget would continue to expand the program and further increase funding. The budget assumes outlays of $75 billion for FY 2011, which is $36 billion more than outlays in FY 2008. The President also asks to extend the new entitlement authority under the FY 2010 defense appropriations bill and suspend the work requirement for another year. The budget would also greatly expand eligibility by increasing the asset test from $2,000 to $10,000 and by not counting refundable tax credits as income.[16] This would make many more people eligible for food stamps.
Although some increase in food stamp spending is reasonable during a recession, food stamp spending has increased steadily for more than a decade. This long-term growth in spending cannot be sustained in the environment of perpetual budget deficits and soaring national debt. Food stamp reform should center on two major points: controlling spending and instilling real work requirements.
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