February 18, 2009
Column #1,434
Did the Stimulus End Welfare Reform?
By Mike McManus

Robert Rector of the Heritage Foundation, widely recognized as the spiritual father of "Welfare Reform," laments that the Stimulus Law signed by President Obama Tuesday, will "actually abolish this historic reform. In addition, the Stimulus bill will add nearly $800 billion in new means-tested welfare spending over the next decade."

The Welfare Reform of 1996 replaced the old Aid to Families with Dependent Children (AFDC) with a new Temporary Assistance to Needy Families (TANF), a major goal of which was to "end the dependence of needy parents on government benefits by promoting job preparation, work and marriage."

It did so by changing the way Washington reimbursed states for public assistance. Under AFDC, the Federal Government paid 50 to 60 percent of most state's welfare costs, which totaled $16.5 billion.  TANF converted that figure into a block grant which went to the states even if welfare rolls dropped.

That gave states an incentive to help those on welfare to find jobs or provide job training.  There were three impressive results.  The number of families on welfare plunged 61 percent from 4.54 million families to only 1.76 million. 

Second, the poverty rate for single-female households fell 14.7 percent from 1995 to 2005, as they moved into jobs.   Third, state governments now get a $10 billion "Welfare Reform Surplus," that they can spend on anything they wish, such as day care subsidies for those mothers or increased state aid to education.

(Columnist David Usher notes there were two failures of Welfare Reform. One goal, stated in the law, was to "prevent and reduce the incidence of out-of-wedlock births." Today illegitimacy is at "record levels," a jump of 36 percent, he notes. A second goal was to "encourage the formation and maintenance of two-parent families." In 1995, 60.9 percent of households were led by married couples. That dropped to only 49.7 percent in 2005.)

The Stimulus Package restores the old AFDC system.  As Rector puts it, "For the first time since 1996, the Federal Government would begin paying state bonuses to increase welfare caseloads. Indeed, the new welfare system is actually worse than the old AFDC program because it rewards the states more heavily to increase their caseloads.

"Under the Stimulus Bill, the Federal Government will pay 80 percent  of cost for each new family that a state enrolls in welfare; this matching rate is far higher than it was under AFDC," he says.

Nonsense, retorts the Democratic staff of the House Ways and Means Committee.  "He is way off base. The legislation creates a temporary emergency fund, a modest $5 billion over two years.  TANF has a $2 billion emergency fund, but it is down to $1.3 billion.  It needed additional help during the recession.  It is capped at a 2009-2010 two year program for increases in case load."

Rector dismisses such assertions as if he were swatting a fly. "They are restoring the old funding structure which encouraged states to maintain high welfare caseloads. There already is a contingency fund.  Why not put more money into the existing fund, rather than creating a new fund to pay states when they increase caseloads - and do so at 80 percent instead of the old 50 percent? 

"And if you believe they will repeal this law two years from now, you are naïve."
Democratic staff noted, however, that if state welfare rolls grow, they still have to
get 50 percent of them into jobs or job training.  Therefore, it is a bit of an overstatement to say that welfare reform is "abolished."

However the Stimulus Law does far more than add a $5 billion TANF Contingency Fund.  Look at this long list of additional welfare appropriations in the House Stimulus Package:

1.  Raise the Federal matching rate for Medicaid $89 billion
2.  Expand Medicaid eligibility   13
3.  Food Stamp Increase   20
4.  Making Work Pay Credit (Refundable)   46
5.  Pell Grants Increase & Debt Retirement 16
6.  Weatherization Assistance & Retrofit    9
7.  No Child Left Behind Grants 13
8.  Housing subsidies 11
9.  Supplemental Security Income    4

The final version of the law added $220 billion to the welfare state, the largest expansion ever.   Rector is right to be skeptical that these benefits will be ended in two years. Their 10 year cost: nearly $800 billion. Obama promised "transparency" with this law. It was posted at 11 pm one night in a bill of 1,000+ pages, and passed by Congress the next morning. 

This vast expansion of the welfare state was not even debated.

So much for transparency.

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