Welfare Reform

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Mr. Chairman, Distinguished Members of the Committee:

It is a pleasure to have the opportunity to appear before youtoday to address one of the most serious issues facing Americatoday -- the need to reform our failed social-welfare system.

In discussing welfare reform it is important to understand themagnitude of the failure that has been our welfare policy. Ourwelfare system is unfair to everyone: to taxpayers who must pick upthe bill for failed programs; to society, whose mediatinginstitutions of community, church and family are increasinglypushed aside; and most of all to the poor themselves, who aretrapped in a system that destroys opportunity for themselves andhope for their children.

Since the start of the "war on poverty" in 1965, the UnitedStates has spent more than $3.5 trillion trying to ease the plightof the poor. Yet, today, the poverty rate is actually slightlyhigher than when we started.

If it was merely a question of wasted money, there would because for concern, but no crisis. After all, the money that thegovernment has wasted on welfare pales in comparison to what itwastes on many other programs. However, the real welfare crisislies in what the system is doing to our society.

Consider some of the results of our welfaresystem:

Illegitimacy. In 1960 only 5.3 percent ofbirths were out of wedlock. Today nearly 30 percent of births areillegitimate. Among blacks, the illegitimacy rate is nearlytwo-thirds. Among whites, it tops 22 percent. There is strongevidence that links the availability of welfare with the increasein out-of-wedlock births.

Having a child out of wedlock often means a lifetime in poverty.Approximately 30 percent of all welfare recipients start becausethey have an out-of-wedlock birth. The trend is even worse amongteenage mothers. Half of all unwed teen mothers go on welfarewithin one year of the birth of their first child; 77 percent areon welfare within five years of the child's birth.

More than half of AFDC, Medicaid, and food stamp expendituresare attributable to families begun by a teen birth.

The non-economic consequences of the increase in out of wedlockbirths are equally stark. There is strong evidence that the absenceof a father increases the probability that a child will use drugsand engage in criminal activity. Nearly 70 percent of juveniles instate reform institutions come from fatherless homes.

Social scientists may dispute the degree of linkage betweenwelfare and illegitimacy, but the vast majority agree that there issome connection. Even William Galston, President Clinton's DeputyAssistant to the President for Domestic Affairs, says that thewelfare system is responsible for at least 15 to 20 percent of thefamily disintegration in America. Others, such as Charles Murray,attribute as much as 50 percent of illegitimacy to welfare. Ibelieve that any objective look at the available literature on thistopic indicates a strong correlation between the availability ofwelfare and out-of-wedlock births.

Of course women do not get pregnant just to get welfarebenefits. It is also true that a wide array of other social factorshas contributed to the growth in out-of-wedlock births. But, byremoving the economic consequences of a out-of-wedlock birth,welfare has removed a major incentive to avoid such pregnancies. Ateenager looking around at her friends and neighbors is liable tosee several who have given birth out-of- wedlock. When she seesthat they have suffered few visible consequences (the very realconsequences of such behavior are often not immediately apparent),she is less inclined to modify her own behavior to preventpregnancy.

Proof of this can be found in a study by Professor Ellen Freemanof the University of Pennsylvania, who surveyed black,never-pregnant females age 17 or younger. Only 40% of thosesurveyed said that they thought becoming pregnant in the next year"would make their situation worse." Likewise, a study by ProfessorLaurie Schwab Zabin for the Journal of Research on Adolescencefound that: "in a sample of inner-city black teens presenting forpregnancy tests, we reported that more than 31 percent of those whoelected to carry their pregnancy to term told us, before theirpregnancy was diagnosed, that they believed a baby would present aproblem..." In other words, 69 percent either did not believehaving a baby out-of-wedlock would present a problem or wereunsure.

Until teenage girls, particularly those living in relativepoverty, can be made to see real consequences from pregnancy, itwill be impossible to gain control over the problem of out-of-wedlock births. By disguising those consequences, welfare makes iteasier for these girls to make the decisions that will lead tounwed motherhood.

Current welfare policies seem to be designed with an appallinglylack of concern for their impact on out-of-wedlock births. Indeed,Medicaid programs in 11 states actually provide infertilitytreatments to single women on welfare.

Dependence. While the average stay on welfareremains relatively short, nearly 65 percent of the people onwelfare at any given time will be on the program for eight years orlonger. Moreover, welfare is increasingly intergenerational.Children raised in families on welfare are seven times more likelyto become dependent on welfare than are other children. ProfessorsRichard Vedder and Lowell Galloway of the University of Ohio, foundthat, if you compare two individuals with incomes below the povertylevel, an individual who does not receive welfare is two and a halftimes more likely to be out of poverty the next year than anindividual who receives welfare.

Crime. The Maryland NAACP recently concludedthat "the ready access to a lifetime of welfare and free socialservice programs is a major contributory factor to the crimeproblems we face today." Welfare contributes to crime by destroyingthe family structure and breaking down the bonds of community.Moreover, it contributes to the social marginalization of youngblack men by making them irrelevant to the family. Their role hasbeen supplanted by the welfare check.

Given this record of failure, I recommend that Congress

  • In the long-term, Congress should end all federal funding ofwelfare. In the short-term, Congress should end the entitlementstatus of welfare and return control of welfare programs to thestates with as few strings as possible. Congress should resist thetemptation to impose conservative mandates on the states in lieu ofliberal mandates.
  • Begin the transition from government welfare to private charityby creating a dollar-for-dollar tax credit for contributions toprivate charity.
  • Make adoption easier. This includes eliminating barriers totransracial adoption, including repeal of the Metzenbaum amendmentpassed last year.
  • Tear down tax and regulatory barriers to economic growth andentrepreneurism, particularly in high poverty areas.

End federal welfare programs

Congress should avoid the temptation to try to "reform" thewelfare system. There is no evidence that any of the reformscurrently popular with either liberals or conservatives will beable to fix the system's fundamental flaws.

In particular, Congress should be skeptical of proposed"workfare" schemes. The workfare concept is largely based on thestereotyped belief that welfare recipients are essentially lazy,looking for a free ride. Not only is there no evidence to supportsuch stereotypes, but outside of certain defined subgroups such asAFDC-UP recipients, there is no evidence that workfare programswork.

The Manpower Demonstration Research Corporation conducted areview of workfare programs across the country and found few, ifany, employment gains among welfare participants. Economists at theUniversity of Chicago's Center for Social Policy Evaluationreviewed the major studies of workfare and welfare-to-work programsand found a consensus in the literature that "mandatory workexperience programs produce little long term gain."

Moreover, workfare jobs are not inexpensive. It is estimatedthat it will cost at least $6,000 over and above welfare benefitsfor every workfare job created. This represents a great deal ofexpense for very little gain.

At the same time, Congress should be equally skeptical ofproposals for increased job training. Again, there is littleevidence that job training programs actually work. A study by theGeneral Accounting Office of 61 job training programs in 38 statesconcluded that the programs "are helping recipients find onlydead-end jobs, and are failing to give the poor the education andtraining they need to advance."

Several job training programs have been particularly notablefailures. The Federal Job Training Partnership Act was designed toboost the earnings of high school dropouts. But a study in 1992reported that those who had enrolled in the program earned 8percent less than those with no training. A study of the "Jobstart"training program, which operated in 13 communities across thecountry found that the program generated only "statisticallyinsignificant" increases in earnings among participants. As FredDoolittle, director of Jobstart explains, "education and trainingalone, as traditionally offered within the [federal job trainingprogram], are not enough to make a real difference in these youngpeople's lives." Of 5,000 Baltimore area participants in theAgriculture Department's Food Stamp Employment and TrainingProgram, fewer than one percent found jobs through the program.

As the Manpower Demonstration Resources Project concluded themost optimistic evidence from studies of job training programs,from the 1967 Work Incentive (WIN) Program to the 1988 JOBSprogram, indicates that "caseload reductions have not been dramaticand increases in people's standards of living have beenlimited."

Given that there is little likelihood that Congress will be ableto "fix" the welfare system, it should begin looking to the daywhen the federal government gets out of the charity business.

As a staring point, Congress should certainly end theentitlement status of welfare. However, for the long-term, Congressshould begin phasing out federal funding for the entire panoply ofwelfare programs.

In the short-term, Congress appears to be nearing a consensus tosend many welfare programs back to the states in the form of blockgrants. If Congress decides to take this approach, such blockgrants should be accompanied by few if any strings.

Congress should not attempt to devise a detailed "conservative"welfare program, imposing conservative mandates in lieu of liberalones. In particular, Congress should avoid mandating work or jobtraining requirements.

Establish a Dollar-for-Dollar Tax Credit forContributions to Private Charity.

If the federal government's attempt at charity has been a dismalfailure, private efforts have been much more successful. America isthe most generous nation on earth. We already contribute more than$125 billion annually to charity. However, as we phase outinefficient government welfare, private charities must be able tostep up and fill the void. To help generate increased charitablegiving, the federal government should offer a dollar-for-dollar taxcredit for contributions to private charities that providesocial-welfare services. That is to say, if an individual gives adollar to charity, he should be able to reduce his tax liability bya dollar. Since current federal welfare spending is equivalent to41 percent of the revenue generated from personal income taxes (forall major means-tested programs), the credit could be capped at 41percent of tax liability.

Private charities are able to individualize their approach tothe circumstances of poor people in ways that governments can neverdo. For example, private charities may reduce or withhold benefitsif a recipient does not change his or her behavior. Privatecharities are much more likely than government programs to offercounseling and one-on-one follow-up rather than simply providing acheck.

By the same token, because of the separation of church andstate, government welfare programs are not able to support programsthat promote religious values as a way out of poverty. Yet, churchand other religious charities have a history of success in dealingwith the problems that often lead to poverty. And, private charityis much more likely to be targeted to short-term emergencyassistance than long-term dependence. Thus, private charityprovides a safety net, but not a way of life.

Private charities are also much better able to target assistanceto those who really need help. Because eligibility requirements forgovernment welfare programs are arbitrary and cannot be changed tofit individual circumstances, many people in genuine need do notreceive assistance, while benefits often go to people who do notreally need them. More than 40 percent of all families living belowthe poverty level receive no government assistance. Yet, more thanhalf of the families receiving means- tested benefits are not poor.Thus, a student may receive food stamps, while a homeless man withno mailing address goes without. Private charities are not bound bysuch bureaucratic restrictions.

Finally, private charity has a better record of actuallydelivering aid to recipients. With all the money being spent onfederal and state social-welfare programs, surprisingly littlemoney actually reaches recipients. In 1994, for example, federal,state and local government welfare spending averaged $35,756 forevery family of four below the poverty level. Obviously, the poordid not receive anywhere near this amount of money. In 1965, 70cents of every dollar spent by the government to fight poverty wentdirectly to poor people. Today, 70 cents of every dollar goes notto poor people, but to government bureaucrats and others who servethe poor. Few private charities have the bureaucratic overhead andinefficiency of government programs.

Make Adoption Easier

Recent discussion of orphanages has largely been a smokescreendesigned to obscure the failure of current social welfare policies.The purpose of eliminating welfare is not to force children intoorphanages, but to avoid bringing more people into a cycle ofwelfare, illegitimacy, fatherlessness, crime, more welfaredependency, and more illegitimacy.

Without the availability of welfare, there will be far fewer outof wedlock births and far fewer children born into poverty. Forthose women who continue to bear children they cannot afford toraise, most will be able to find financial assistance throughprivate charity. Still, a small minority may remain unable tofinancially support a child. For these women, adoption must be aviable option. This will entail eliminating the regulatory andbureaucratic barriers that restrict adoption today.

Chief among these is the need to remove any restrictions ontransracial adoptions. Last year's Metzenbaum Bill was originallydesigned to accomplish this. However, under pressure from thesocial welfare industry, the language was amended to actuallycodify the practice of delaying adoption based on the race of thechild and adoptive parents. Such practices by state adoptionagencies should be explicitly prohibited.

Second, there should be an earlier termination of parentalrights (TPR) for children placed in the foster care system. Parentsshould have a maximum of 12 months to reclaim custody of theirchildren, after which the child should be eligible for adoption.Children should not remain in the limbo of foster care for yearsbecause their biological parents refuse (or are unfit) to resumecustody but will not relinquish parental rights.

Third, federal funding of state foster care programs should berestructured to end "per day/per child" funding formulas thatcreate incentives for states to keep children in foster care ratherthan place them for adoption. In addition, states who are unable toplace a child for adoption within 30 days of TPR should be requiredto notify private adoption agencies within the state of theavailability of that child for adoption. States that fail to do so,should receive no federal funding for their foster careprograms.

Tear Down Barriers to Economic Growth andEntrepreneurism

Almost everyone agrees that a job is better than any welfareprogram. Yet, for years this country has pursued tax and regulatorypolicies that seem perversely designed to discourage economicgrowth and reduce entrepreneurial opportunities. Governmentregulations and taxes are steadily cutting the bottom rungs off theeconomic ladder, throwing more and more poor Americans intodependency.

Someone starting a business today needs a battery of lawyersjust to comply with the myriad of government regulations from avirtual alphabet soup of government agencies: OSHA, EPA, FTC, CPSC,etc. Zoning and occupational licensing laws are particularlydamaging to the type of small businesses that may help people worktheir way out of poverty. In addition, government regulations suchas minimum wage laws and mandated benefits drive up the cost ofemploying additional workers. For a typical small business the taxand regulatory burden for hiring an additional worker is more than$5,400.

Economist Thomas Hopkins estimates that the current annual costto the economy of government regulations is more than $500 billion.That is $500 billion that cannot be used to create jobs and liftpeople out of poverty.

At the same time taxes have both diverted capital from theproductive economy and discouraged job-creating investment. Harvardeconomist Dale Jorgenson estimates that every dollar of taxesraised by the federal government costs the economy 18 cents,leading to annual loss of $200 billion per year from our GrossNational Product. Moreover, tax rates are already so high that newtaxes will cause even greater losses to the economy. Jorgensonestimates, for example, that the 1994 Clinton tax hike will costthe economy more than $100 billion over 5 years.

These figures do not include the estimated $600 billion that theAmerican economy loses every year because of the cost of complyingwith our dizzyingly complex tax system. In 1990 American workersand businesses were forced to spend more than 5.4 billion man-hoursfiguring out their taxes and filing the paperwork. That was moreman-hours than was used to build every car, truck, and vanmanufactured in the United States.

A 1993 World Bank study of 20 countries found that countrieswith low taxes had higher economic growth, more investment, greaterincreases in productivity, and faster increases in living standardsthan high-tax nations. Perhaps that should be a lesson for theUnited States. Instead of worrying about how to make poverty morecomfortable, Congress should concentrate on tearing down thoseregulatory and tax barriers that help trap people in poverty.

Conclusion

We should not pretend that reforming our social welfare systemwill come easily or painlessly. In particular, ending governmentwelfare will be difficult for those people who currently usewelfare the way it was intended -- as a temporary support mechanismduring hard times. However, these people -- almost by definition --remain on welfare for very short periods of time. A compassionatesociety can find other ways to deal with the problem of people whoneed temporary assistance to get through hard times. But ourcurrent government-run welfare system is costly to taxpayers and --more important -- cruel to the children born into a cycle ofwelfare dependency and hopelessness.