Strategies for Reform
Welfare reform should include at least five components: controlling welfare spending, instilling a discipline of work among welfare recipients, reducing rewards for dependence on welfare by treating a portion of the aid as a loan, promoting healthy marriage as the best way to prevent poverty, and limiting immigration of low-skill immigrants.
Controlling Spending. When Lyndon Johnson declared a War on Poverty in 1964, welfare spending consumed 1.2 percent of GDP. Today, welfare spending has risen to nearly 6 percent of GDP, and President Obama is rapidly increasing spending and eligibility for means-tested programs. Under his FY 2011 budget, spending on welfare programs would grow to 42 percent above the level of welfare spending during President Bush’s last full year in office (FY 2008). By 2012, annual means-tested spending (including state spending) will rise to $953 billion.
Critically, most of Obama’s spending increases are permanent expansions of the welfare state, not short-term responses to the current recession. (See Chart 7.) According to Obama’s published budget plans, means-tested welfare spending over the next decade will total $10.3 trillion, not including spending for Obamacare.[21] Most of this welfare spendathon will be financed by borrowing from future generations. Not surprisingly, the federal debt will grow to equal nearly the entire national economy by the end of the decade. This endless spending growth is unsustainable and will drive the nation into bankruptcy. Congress must return to a reasonable fiscal path. To accomplish this, once the current recession ends, Congress should return aggregate federal means-tested welfare spending to the pre-recession level, which was already a historic high at the time. Then Congress should cap total spending growth in the more than 70 federal welfare programs at the inflation rate. As Chart 8 shows, this cap would save $1.4 trillion over the next 10 years. Within this overall limit on welfare spending, funding for individual programs could be increased or decreased, depending on changing priorities and program effectiveness.
Instilling a Discipline of Work. One of the most important elements of TANF reform that led to success was the addition of meaningful work requirements. This was at the core of helping to move families off of welfare and into jobs. States were required to reduce caseloads, to have at least 40 percent of their adult population engaged in some kind of work or job preparation activity, or some combination of the two. States that failed to reduce dependence or require a sufficient portion of their TANF rolls to engage in work-related activities faced fiscal penalties. As a result of these provisions, the caseload nationally fell by more than 60 percent in only a few years. More than 2.8 million families left welfare for jobs and a better life.
Both food stamps and the three major federal housing programs could easily be reformed along the same lines by adding similar work requirements. Often, families will receive benefits simultaneously from several programs. Benefits from multiple programs should be tied together as a package, and the beneficiary should be required to work or prepare for work as a condition of receiving the entire package of aid. There is no reason why TANF should have a work requirement while the other welfare programs are treated like old-style entitlements.
Work requirements should have “teeth” and consequences for nonparticipation. For instance, if an able-bodied recipient refuses to participate in work or work preparation activities for at least 30 hours a week, then that recipient should lose the benefits. TANF studies have shown that states that implement these kinds of sanction policies see an immediate change to behaviors that lead to greater compliance and increased self-sufficiency.
In addition to adding work requirements to food stamps and housing, the TANF program should be restored to its original format. President Obama and Congress undermined TANF’s work and funding structure by creating a $5 billion TANF Emergency Fund in the 2009 stimulus package.[22] The fund essentially pays states for increasing their caseloads while putting little to no emphasis on work strategies. In fact, only 16 percent of spending from this fund has gone toward any kind of employment or welfare-to-work programming.[23] The Welfare Reform Restoration Act of 2009 (H.R. 1277), introduced by Representative Tom Price (R–GA), would repeal this fund.
Reducing Rewards for Dependence. The United States funds a system of welfare entitlements that is far larger than most people imagine. This year, federal and state governments will spend nearly $900 billion on means-tested benefits for poor and low-income persons. This high level of spending is not a short-term response to the current recession, but the result of the steady long-term growth of the welfare state. According to President Obama’s budget, means-tested spending will not decline substantially even after the recession ends.
Roughly half of means-tested aid goes to persons who are disabled or to poor elderly persons in nursing homes. The other half goes largely to able-bodied parents and their children. This spending amounts to over $25,000 for each family with children in the lowest-income third of the U.S. population.
Welfare entitlements generally begin at a child’s birth. Some 40 percent of all births in the U.S. are now paid for by the Medicaid program. Most of these Medicaid-funded births occur to never-married women with low education levels. Once the taxpayer has paid for the childbirth, aid to the mother and child will generally continue through a wide variety of programs for years to come. Most of this aid takes the form of unconditional welfare assistance in which the taxpayer is required to support the recipient but the recipient is required to do little or nothing in exchange for the aid. In particular, the potential recipient is never expected to take reasonable steps to avoid future dependence.
Government welfare assistance to disabled persons and to the indigent elderly is nonproblematic and has widespread public support. Means-tested assistance to able-bodied parents and their children is more problematic, but simply abolishing it is neither feasible nor desirable. Government should continue to provide assistance to parents and their children when they are in need. However, the current incentive structure of this assistance is unsustainable because it rewards and sustains behavior that leads to even greater levels of dependence in future years.
Poverty and welfare dependence among able-bodied adults is largely the result of counterproductive and self-limiting behaviors: dropping out of school, having children outside of marriage, and intermittent, haphazard employment. Particularly important is the widespread nonmarital childbearing that pervades most low-income communities. Out-of-wedlock childbearing and single parenthood form the foundation of most child poverty and welfare dependence in American society.
Because the welfare state buffers individuals from the financial consequences of poor decisions and self-destructive behaviors, it encourages and perpetuates these behaviors. Welfare must be revolutionized to increase the incentives for constructive behaviors while limiting the rewards for behaviors that generate poverty and dependence.
One way to alter the welfare incentive system is to make potential welfare recipients more aware of and responsible for the financial costs resulting from imprudent decisions and behaviors. To accomplish this, government could treat the means-tested cash, food, housing, and medical care received by able-bodied parents and their children as a loan. The parent could be expected to repay some portion of the loan (perhaps one-third) at some future time. Both custodial and noncustodial parents would bear some responsibility for the welfare costs of their children.
Treating welfare as a partial loan would ensure that families would continue to receive assistance when in need but would also reduce the incentives for dependence-producing behaviors in the future. If such a policy were implemented throughout the welfare system, over the long term it could reduce the high levels of early nonmarital childbearing that are a predominant cause of poverty and dependence in American society.
Promoting Healthy Marriage. The decline of marriage is a predominant cause of child poverty. Roughly two-thirds of poor children reside in single-parent homes. Children born to and raised by a single parent are seven times more likely to live in poverty than children born to and raised by a married couple.
The lack of marriage is also a huge contributor to welfare dependence and massive government spending. Government spends over $250 billion annually on welfare benefits for single-parent homes in the form of health care, day care, education, food, housing, and other assistance. Restoring marriage in low-income communities has the potential to reduce long-term welfare costs significantly. If poor women who have children out of wedlock were married to the actual fathers of their children, nearly two-thirds would immediately be lifted out of poverty.[24]
Government can take two important first steps to encourage marriage in low-income communities. First, Congress should reduce the marriage penalty inherent in means-tested welfare programs. Second, the government should provide information on the benefits of marriage in low-income communities with high rates of out-of-wedlock childbearing. (See Chart 9.)
Eliminating the Marriage Penalties. As noted, the federal government operates over 70 means-tested welfare programs. Nearly all of these programs work on a simple accounting principle: The less income a family earns, the greater the benefits it will receive from the government.
In many cases, the earnings of an employed husband will be sufficient to bar a family from welfare aid. Therefore, the first rule for maximizing welfare aid is for the mother not to be married to the father of her children, especially if the father has a job. This creates an unfortunate social paradox: Many low-income couples can maximize their joint earnings by avoiding marriage. If the couple is unmarried, the mother will likely receive welfare income and benefits while the father will have any income from his job. If the couple marries, much or all of the welfare aid will be lost, and only the father’s earnings will remain. In the crazy world of welfare, marriage reduces a couple’s joint income while remaining single increases it.
These incentives are clearly counterproductive. The marriage penalties built into means-tested programs should be eliminated or at least reduced. However, reducing the marriage penalties in each of the more than 70 individual programs would be administratively infeasible. A simpler approach would be to increase the earned income tax credit for married families with children to offset the marriage penalties in other welfare programs.
Providing Information on the Importance of Marriage. In most respects, children raised by their married biological parents are far better off than children raised in broken homes. It is in the best interest of children, parents, and society to encourage women to delay childbirth until they are economically secure and in a stable marital relationship. These two conditions are tightly interrelated because marriage is a potent factor in creating economic security and stability. Research shows that most low-income parents are not hostile to marriage, but they no longer believe it is important to be married before bringing children into the world. This serious misconception leads to disastrous long-term consequences for children, parents, and society.
In the interest of restraining welfare costs and improving life outcomes for children, government should inform potential parents in low-income communities of the benefits of marriage and educate those who are interested in the steps to prepare for and maintain a healthy marriage. To accomplish this, government should:
• Conduct public education campaigns within low-income communities on the importance of marriage;
• Provide marriage education classes to at-risk students in middle and high schools; and
• Provide life skills training, relationship building, and marriage education programs to interested young adults who are likely to become single parents.
Some fiscal conservatives may object to such government activism, but unless marriage is restored in low-income communities, there is little hope of slowing the growth of the welfare state.
Limiting Low-Skill Immigration. Current immigration policies encourage a disproportionate number of poorly educated immigrants to enter the United States. In fact, one-third of current immigrants lack a high school degree.[25]
Most lawful low-skill immigrants gain permanent residence through kinship preferences within the legal immigration law. These preferences for their adult brothers, sisters, and parents tend to bring large numbers of low-skill immigrants into the U.S., increasing the fiscal strain on taxpayers. The system should be reformed to allow entry for only spouses and children.
About 15 percent of all welfare spending ($100 billion per year) goes to households headed by lower-skill immigrants who have a high school– level education or less. Assuming the ratio remains constant for the next decade, America will spend $1.5 trillion in welfare benefits on lower-skill immigrants.[26]
This number is low compared to the trillions that would be spent if the current 11 million to 12 million illegal immigrants already residing in the U.S. were given amnesty. Less than 50 percent of them have high school degrees. Amnesty would make this population eligible for means-tested welfare as well as other government benefits. The cost to taxpayers would be devastating: Social Security and Medicare costs alone would be $2.6 trillion.[27]
As the education level of native-born U.S. citizens gradually rises, there is a tendency, ceteris paribus, for welfare dependence to decline. However, massive low-skill immigration works in the opposite direction, replenishing welfare rolls and adding to costs. In addition, high levels of low-skill immigration tend to suppress the wages of less-skilled American workers, thereby adding to welfare costs within that group.[28]
The legal immigration system should be reformed to limit immigration of low-skill immigrants who would impose a fiscal burden on the U.S. taxpayer and to increase the number of higher-skill immigrants who would pay more in taxes than they would receive in benefits.
Conclusion
The means-tested welfare system consists of over 70 programs providing cash, food, housing, medical care, and social services to poor and low-income persons. Even before the current recession, welfare spending was at record levels and growing rapidly. Over the next decade, the U.S. will spend more than $10.3 trillion on means-tested welfare. This amounts to around $100,000 for each person in the lowest-income third of the population.
The continuing rapid growth of welfare spending is unsustainable. The U.S. can no longer afford the automatic and unlimited growth of welfare entitlements. Once the current recession ends, total federal welfare spending should be returned to pre-recession levels, and future growth should be subject to fixed spending limits.
In addition, careful attention must be paid to the underlying causes of poverty and welfare dependence. Welfare has grown rapidly, in part, because the government has rewarded and encouraged conditions that lead to dependence. In particular, the decline in marriage, chronic low levels of work among the poor, and the immigration of millions of persons without a high school degree are major factors leading to high levels of poverty and a burgeoning welfare state.
In the future, government policy should encourage constructive behaviors leading to self-reliance and prosperity rather than rewarding counterproductive behaviors leading to costly dependence and poverty.
http://www.heritage.org/Research/Rep...the-Next-Steps