How Conservatives Screwed Up Welfare Reform

August 31, 2011

Last week was the 15th anniversary of federal legislation that replaced the Social Security Act’s Aid to Families with Dependent Children (AFDC) program with a block grant called Temporary Assistance for Needy Families (TANF). Conservatives and even some liberals referred to this as the 15th anniversary of “welfare reform.” But conflating “welfare reform” with the 1996 law is misleading, and not particularly helpful for progressive reformers who want to improve the TANF program, which has turned out to be a largely failed conservative experiment.

Rather than a singular event that took place in 1996 there are really two distinct categories of welfare reform that unfolded in the late 1980s and the 1990s. First, a moderately progressive welfare reform that was mostly put in place in the late 1980s and early 1990s, and, second, a “truly conservative” one, the 1996 legislation that established the TANF block grant.

Key elements of progressive welfare reform during this period included: 1) the large-scale expansion of the Earned Income Tax Credit (EITC) in 1993—in 1994, federal expenditures on the EITC exceeded expenditures on AFDC/TANF for the first time; 2) increases in the federal minimum wage in the first half of the 1990s; 3) the development of several progressive welfare reform demonstration projects, particularly the Minnesota Family Investment Program (MFIP) and the New Hope Project, in the early 1990s; and 4) the expansion of Medicaid eligibility to all very low-income children in the late 1980s and early 1990s. The basic idea guiding progressive reform during this period was to “make work pay.”

By contrast, the 1996 TANF legislation was conservative to the core. While Bill Clinton ultimately signed it, and most Congressional Democrats voted for it, the National Review was quite right when it said in 2006 that the people responsible for the legislation were “conservative intellectuals and officeholders.” The conservative heart of the ’96 law, and the thing that made it truly radical, was the conversion of AFDC from a program for people to a block grant for states. In his opinionated but meticulous history of the passage of the 1996 legislation, Ron Haskins, a conservative at the Brookings Institution, details how the introduction in 1993 of legislation to block grant AFDC provided a marker for what it “meant to be truly conservative on welfare reform.” Alongside regressive tax cuts, block granting has been one of the primary tools used by conservatives to limit the extent to which government promotes economic security for working-class families.

This distinction between conservative and progressive welfare reforms becomes particularly important when assessing evidence of welfare reform’s success. The evidence generally pointed here includes an increase in single mother’s employment rates and a decrease in income poverty in the 1990s. But both these trends started moving in the right direct in the early 1990s, after the implementation of progressive welfare reform in the early 1990s, and before the implementation of the conservative 1996 law (mostly starting officially in 1997 and late 1996). For example, roughly half of the uptick in the employment rates of low-income single mothers in the 1990s happened before the implementation of the 1996 law, and levelled off in 1999, just after all states had fully implemented TANF.

In addition to these positive early trends, we have other strong evidence of the success of progressive welfare reform. The studies that have tried to disentagle the effects of various reforms mostly conclude, as economist Hilary Hoynes has noted, “that the expansions in the EITC were the most important contributer” to increased employment. The MFIP and New Hope demonstrations, both of which were rigorously evaluated by MDRC, were found to be much more successful in boosting economic security than more conservative demonstrations that were evaluated during this period. As MDRC notes in their final report on MFIP, “for single-parent long-term recipients — a major focus of the program and the evaluation — MFIP had strikingly consistent positive effects across a range of adult, child, and family outcomes.”

As for conservative welfare reform—the 1996 TANF law—the consequences are seen in this set of slides from Donna Pavetti of CBPP:

  • the single largest category of expenditures isn’t income supplements or child care or even work-related activities and supports; instead, it’s a grab bag of “other services”, which now account for almost half of all expenditures under the block grant—we know almost nothing about how states are using these funds;
  • because block grant funding has remained frozen at its 1997 level, its actual value (adjusted for inflation) has fallen by nearly 30 percent;
  • in every year since 1996, fewer children in families with extremely low incomes have received income supplements to help meet basic needs under the program—in 1996, just over two-thirds of such families received help meeting basic needs, by 2009, the number had declined to just over one-quarter.

Here we come to another reason why the distinction between the two welfare reforms is important. In a recent post, Jared Bernstein (also of CBPP) argues that these and other findings show that “TANF is a fair weather ship. It does OK, even pretty well, in calm waters. But it founders in a storm.” While I agree that TANF’s performance during the recession has been absymal, I think it’s not correct to say that TANF did “OK, even pretty well” the rest of the time. The problematic TANF trends that Ms. Pavetti notes in her slides were well-established in the late 1990s and have only gotten worse since then. Moreover, the notion that TANF has been a “fair weather ship” implies that it will be an effective program once the economy recovers. There’s little reason to think that this will be the case given the deeply flawed incentive structure of TANF for states, one that requires no accountability from states for federal funds spend on things other than income supplementation.

Conservative welfare reform has floundered in good times and bad over its 15 years. Fixing it will require replacing a failed conservative approach with proven progressive policies and programs, like the ones that made up MFIP and New Hope.

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