Wordle: Obama's Inequality Speech

I’m with Larry Mishel in thinking that President Obama mostly hit the right notes in his speech on inequality yesterday, while also agreeing with Larry and Dean Baker on some of the “misguided distractions” in the speech.

I wanted to note one other distraction in the speech that I have not heard mentioned yet: the President’s misguided call for block granting SNAP (food stamps) to the states and freezing its funding level without even any provision for inflationary increases.

Ok, he didn’t actually say he supported a SNAP block grant (like the one that passed the House in the last Congress). But he did say that is was “true that some programs in the past, like welfare [AFDC] before it was reformed, were sometimes poorly designed, [and] created disincentives to work...” [italics mine].

The problem here is that the reform cited by Obama replaced Social Security’s Aid for Families with Dependent Children (AFDC) program with Temporary Assistance for Families (TANF), a leaky-bucket block grant program with its funding frozen at early-1990s nominal levels. While AFDC was definitely in need of modernization and reform, TANF is an even more poorly designed scheme that gives states substantial financial incentives to spend billions of dollars of public funds in a largely unaccountable and often irresponsible manner. In the most notorious cases, states have diverted TANF funds to finance unaffordable tax cuts. If the ACA is ObamaCare, then it would be just as accurate to refer to Temporary Assistance as GingrichCare. But unlike ObamaCare, GingrichCare really has proven to be a failure.

The main consequence is that millions of struggling working-class parents who would have been helped finding a job, going to school, or meeting basic expenses if AFDC were still in place are not getting any of this help under TANF. Today, only about one-quarter of families with income below the federal poverty line currently receive unemployment assistance from TANF to meet basic expenses. Before implementation of the 1996 law, over two-thirds of such families received help from AFDC.

Obama knows this—on several occasions before he was a national figure, he said that he would not have voted to block grant Social Security’s AFDC program. But it appears the requirement to be politically correct on this issue for national politicians remains strong, even thought it plays into the hands of those pushing a RyanAid bill that blocks grants programs like SNAP and Medicaid.