Commentary

Ending Welfare Reform As We Know It

By Stephen Moore
January 24, 1997

The pretense that President Clinton wants to “end welfare as we know it” finally and forever ended last week. On January 14th the White House announced that it wants to restore $16 billion to the welfare budget this year, thus gutting the welfare reform bill enacted last year by the GOP Congress.

Why this presidential retreat from welfare reform even before it has been tested? Because the quarter-trillion dollar a year welfare industry is against reform of any kind—unless it means more dollars swallowed up by the federal octopus. The standard mantra of the left is that welfare reform costs money—even though we already spend some $200 billion a year on means- tested federal programs.

The welfare industry camouflages its greed by attacking the new welfare law as “cruel.” The national media have eagerly complied with that description. The New York Times and the Washington Post, for example, have both editorialized in favor of disabling the Republicans’ “cruel welfare bill.” The Boston Globe describes the new restrictions as a “cruel kind of welfare triage.” A welfare advocate in California recently told the Associated Press that welfare cutbacks will mean “third world poverty” for many low-income families.

The truth is that the new welfare law does not come close to truly “ending welfare as we know it.” More than 85 percent of the welfare empire has been left intact. Many of the most expensive programs, such as Medicaid, were untouched. Work requirements do not take effect for two years. But listening to the apocalyptic cries of protest from the left, one might easily believe that the safety net has been ripped to shreds and that soon we will be confronted with millions of widows and infants begging on street corners for bread.

Will Republicans in Congress now wilt under this assault and repeal the modest welfare reforms enacted last year—before they are even tested?

The answer should be no. Welfare today consists of more than 60 anti-poverty programs. In a 1995 Cato Institute study, Michael Tanner and I calculated the cash value of the five welfare benefit programs: Aid for Families with Dependent Children, food stamps, Medicaid, public housing, and child nutrition programs. Remember, welfare benefits are tax free, whereas income from work is taxed. This means that in high-tax states, the after-tax value of welfare is all the more rewarding. Our finding: the median-benefit state provides assistance equivalent to about an $8 an hour job. In 10 northern states and California welfare pays better than a $10 an hour job—or about twice the minimum wage.

Those welfare benefits are cruel—mostly to workers who have to pay the taxes to fund them.

If the overarching intention of welfare reform is to encourage work and discourage dependency, then the only conceivable way to reward finding a job is to cut back the benefit levels. That may seem cold-hearted, but it is the cold-hearted truth of the modern welfare state. Under the welfare “reform” bill so savaged by the left, welfare will still pay more than work for the vast majority of those on the dole.

The poverty industry also charges that anti-poverty programs are such a small component of the budget that they are fiscally inconsequential. Again, it’s time for a reality check. In 1995 total federal spending on low-income support programs came to $219 billion. This was a little more than one-eighth of the total budget. When Medicare and Social Security, which also transfer tax dollars to the poor, are included, the total safety net comes to $649 billion. The table shows that between 1989 and 1995 welfare spending climbed by $89 billion, or almost 70 percent. If the current pace of growth in income transfer programs continues, by 2015 entitlements will eat up all federal revenues.

Final numbers for 1996 are not yet available. We do know that as the economy has improved, welfare caseloads have dropped, and the rate of increase in welfare spending has fallen. But the total amount of spending on welfare continues to rise—as it will even under the GOP reforms.

What about cutting off welfare benefits to noncitizen immigrants? Isn’t that cruel? No, it is simply enforcement of more than a century-old feature of immigration law. Immigrants were never supposed to be eligible for welfare in the first place. U.S. immigration policy has always been predicated on the concept that immigrants who come to the United States shall not become “a public charge.” Immigrants who were thought to be unable to take care of themselves were routinely sent back to their homeland during the great wave of Ellis Island immigrants. Most of us are willing to accept immigrants who come to America seeking freedom and economic opportunity—but not a welfare check. There will be no shortage of immigrants who will still be very willing to come here—even if they are ineligible for taxpayer handouts.

Almost all Americans outside Washington understand full well that the War on Poverty, launched by Lyndon Johnson thirty years ago has probably been the most destructive government concept ever invented. Poverty rates are virtually no lower today than they were in the mid-1960s despite a 40 percent increase in real per capita income since then and a $5 trillion infusion of funds. Thirty years of experience with the Great Society should have taught us at least one important lesson: welfare reform is not cruel; welfare is.

SOCIAL WELFARE SPENDING
(Outlays in Billions of 1995 Dollars)
1989 1995 1989-95 Change
AFDC 13 17 31%
Child Nutrition Programs 8 9 12%
Earned Income Tax Credit* 6 15 150%
Food Stamps 17 26 53%
Housing Assistance 12 20 67%
Medicaid 42 88 110%
S.S.I. 15 24 60%
Unemployment Compensation 17 20 18%
Total Low-Income Support 130 219 68%
Medicare 103 178 73%
Social Security 210 252 20%
Total w. Medicare/Social Security 443 649 47%
* Includes only outlay portion of EITC.
Source: Cato Institute based on data from Office and Management and Budget, Budget of the United States Government,
Fiscal Year 1996
, historical tables, Table 8.6, p.108. and earlier years.
Stephen Moore is director of fiscal policy studies at the Cato Institute.