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Make Welfare Work for the Poor

When President Lyndon B. Johnson declared a national “War on Poverty” in 1964, he explained that welfare programs were not intended to produce and support long-term dependence but rather to “prevent” and “cure” poverty once and for all.

Since then, the U.S has spent $20 trillion on welfare programs to help the poor. In 2011 alone, government spent more than $927 billion on 79 such programs—nearly $9,000 per year for each poor and low-income American. Means-tested welfare, or government aid to poor and low-income persons, is now the third most expensive government function. Even before the current recession, one out of every seven dollars in total federal, state, and local government spending went to means-tested welfare.

Despite such major expenditures, poverty rates have remained virtually unchanged since the 1960s, and the welfare system continues to grow. Even worse, our government’s massive spending on welfare has ended up hurting many of those it was intended to help. The current welfare system fails to promote self-sufficiency and often traps people into poverty by discouraging work and marriage. For example, in 1964, just 7 percent of children in the United States were born to unwed mothers. Today, more than 40 percent of all births in the nation occur outside of marriage. Among black Americans, seven out of 10 children are born to unmarried mothers.

Ironically, annual means-tested welfare spending is more than sufficient to eliminate poverty in the United States. Total means-tested spending is roughly five times the amount necessary to pull every single poor person out of poverty.

Why, then, has the U.S. welfare system failed to lift the poor out of poverty and deliver on its promise of prosperous self-sufficiency? The answer is that the nation’s welfare policy is based on a misdiagnosis of the nature of poverty. Most poverty in America is not primarily the result of a lack of material goods. The typical poor household in the U.S. today has a standard of living that is higher than the public imagines. Some of America’s poor do, of course, face significant hardships, but these individuals are a small minority.

While the U.S. welfare system may have succeeded in boosting living standards of the poor, it has tragically failed to promote self-sufficiency. Sound anti-poverty policy must address the causes, not merely the symptoms, of poverty. The two greatest drivers of poverty today are the rise of unwed childbearing and the culture of dependence that discourages work. Policy should focus on strengthening marriages in low-income communities and helping able-bodied welfare recipients to work or prepare for work as a condition of receiving aid.

It is time to reform welfare and make it work for the poor and not against them. Too many Americans remain trapped in a system of government dependence, unable to rise and pursue the American Dream. The way to change course, and the key to truly helping those in need, is to point the way to upward mobility.

Guiding Principles

  • Welfare should promote work, not dependence on government. Welfare “gives” the poor many things, from cash to subsidized housing, but it also takes away a crucial ingredient of happiness: the incentive to work, to save, to improve oneself. Its no-strings-attached benefits constitute what the wise Benjamin Franklin would have denounced as “a premium for the encouragement of idleness.” Programs should be reformed to encourage work. The 1996 welfare reforms, for example, inserted work requirements into the largest government cash assistance welfare program. As a result, welfare rolls dropped by half, and child poverty plummeted. Building on the successful 1996 model, welfare reform today should continue to promote personal responsibility by encouraging work. Examples of how to promote work include work requirements for benefits under food stamps and public housing programs.
  • Welfare programs should not penalize work. For many poor Americans, a job or working more hours will translate into less disposable income at the end of the month once you factor in taxes and the loss of particular benefits. In other words, because of the perverse incentives created by welfare programs, many poor Americans essentially have no short-term financial incentive to find a job or work more. Policymakers should reform programs so that they do not discourage additional work. This is particularly true for many programs enacted during the economic downturn such as unemployment benefits that exceed a year and other programs that penalize workers for trying to earn more.
  • Marriage is America’s greatest antidote to child poverty. When it comes to poverty, the family is not a tangential social or religious issue; it is a crucial economic one that is deeply intertwined with standards of living and upward mobility. Marriage reduces a child’s probability of living in poverty by about 82 percent. The poverty rate for single parents with children in the United States in 2009 was 37.1 percent, compared to 6.8 percent for married couples with children. The federal government should eliminate tax penalties for married couples and ensure that existing programs promote marriage.

The Way Forward

  • Strengthen existing welfare programs by inserting work requirements. All able-bodied adult recipients of welfare should be required to work or prepare for work to be eligible for welfare. Work requirements in Temporary Assistance for Needy Families (TANF) should be restored and strengthened. Work requirements should be added to food stamps and public housing assistance programs.
  • Promote marriage as an antipoverty tool. The collapse of the family is a deep-seated cultural problem. As such, it admits of no simple policy solutions. But public policy must not be neutral: Policymakers and program managers should promote pro-marriage messaging in existing government programs and eliminate marriage penalties in welfare and tax policies.
  • Use loans, not grants. Granting welfare to able-bodied adults creates a potential moral hazard because it can lead to an increase in the behaviors that generate the need for aid in the first place. A reformed welfare policy can reduce this moral hazard by treating a portion of welfare aid as a loan to be repaid rather than as an outright grant from the taxpayer.
  • Demand an accurate accounting of government spending on anti-poverty programs. Policymakers and the American people deserve to know how much taxpayer money is spent every year on welfare. The welfare system consists of about 80 programs housed in over a dozen federal agencies. Nowhere in the budget is total welfare spending outlined. The President’s annual budget should detail current and future aggregate federal means-tested welfare spending and provide estimates of state contributions to federal welfare programs.
  • Call attention to the price tag of aggregate welfare spending and cap its growth. Controlling the explosive growth in welfare spending is crucial. Once the economy recovers, or by 2017 at the latest, aggregate welfare funding should be capped at pre-recession (FY 2007) levels, accounting for inflation. Total federal welfare spending should grow no faster than inflation in the following years. This would require Congress to determine which of the government’s approximately 80 welfare programs further the goal of alleviating poverty. The spending cap would save taxpayers $2.7 trillion during its first decade.