When Welfare is Neither Well Nor Fair

A look at how welfare reform could restore responsibility into a government program

It wasn’t until the presidential race of 1992 and the Los Angeles riots of the same year that the idea of welfare reform began to catch on as a positive notion among the media. Then candidate Bill Clinton noted during a September 9, 1992 speech to Clayton County social service workers in Georgia, “It’s time to end this system as we know it, and start with two simple principles: First, people who can work ought to go to work, and no one should be able to stay on welfare forever.”

While sounding conservative, critics are waiting to see if the president will stand by his commitment to end welfare “as we know it,” and replace it with something altogether different and better.

What is Welfare?
Stupid question? Not really. Many people think of welfare in terms of a monthly check the government gives the disadvantaged to live on. But welfare is more than a check. It includes food stamps, Medicaid, housing, low-income energy assistance, education and training programs, refugee assistance, work programs, and much more. Modern welfare programs have grown immensely since President Lyndon Johnson’s Great Society to become one of the largest government expenditures. The U.S. Department of Health and Human Services consumes over 50 percent of the federal budget with most of that money being poured into some kind of “welfare” program. Federal social welfare expenditures consumed 11 percent of the Gross National Product in 1989 at $563 billion. State and local governments consumed $393 billion, or 7.7 percent of GNP. (1) Entitlements have grown so large that many politicians and economists say the growth of such programs will bankrupt the country.

The most basic forms of welfare are General Assistance (GA) and Food Stamps. GA cost federal taxpayers over $47 billion in 1989. State and local governments shelled out over $44 billion. None of that includes Medicaid, social services, housing, security income and other programs. Food stamps cost the U.S. government over $13 billion a year and the number of people placed on welfare keeps rising.

So who uses welfare? According to the Bush White House, two-thirds of families using Aid for Families with Dependent Children (AFDC) stay on the rolls for eight years or more. (2) More than 13 million Americans currently receive welfare. 25 million receive Food Stamps. Recipients include singles, the disabled, veterans, and unwed mothers. Traditionally, all welfare benefits have strings attached:

• String #1: You cannot work
• String #2: Unmarried women must not marry employed men

Former Housing and Urban Development (HUD) secretary Jack Kemp has characterized this system as an “incentive to fail.” Robert Rector, in his article “Requiem for the War on Poverty,” notes:

“Suppose a young man fathers a child out of wedlock. If he abandons his responsibility to the mother and child, the government will step in and support them with welfare. If the mother has a second child out of wedlock, the average combined benefits will reach around $13,000 per year. If on the other hand the young man does what society believes in morally correct (marries the mother and takes a job to support the family), government policy takes the opposite course. Welfare benefits would be almost completely eliminated. If the young father makes more than $4.50 an hour the federal government actually begins taking away his income through taxes.” (3) (Note: A full-time job paying $4.50 an hour is only $720 a month before taxes.)

While many people on welfare have a desire to get off public assistance, many do not and milk the system for all its worth. Fraud in the welfare system is so rampant the federal government and many states have entire departments dedicated to nothing by seeking out fraudulent recipients of welfare.

In Canada, where the welfare system is run in an even looser manner, government officials estimate that welfare fraud cost that country “tens of millions of dollars annually.” One of the largest fraudulent groups being Somalian refugees who receive anywhere between 500 and 12,000 Canadian dollars per month only to channel it to their country’s warlords like Mohammed Farah Aideed to purchase weapons. Aideed’s wife, four children and two adult children are all on public assistance in London, Ontario and funnel as much as one third of their welfare dollars to Aideed. (4)

A Report Card
Virtually no one believes modern welfare is a success. Former President Ronald Reagan said, “The purpose of welfare should be to eliminate, as far as possible, the need for its own existence.” (5) Judging by that criteria welfare programs have failed miserably. Even the size of the Human Services Department testifies to that failure. Need a job? Human Service workers are the fifth fastest growing occupation in the country. (6)

Since the beginning of the War on Poverty over $3.5 trillion in constant dollars has been spent on welfare with outlays increasing annually. The Clinton White House estimates that 25 percent of those currently receiving benefits will still be receiving them in the year 2000, with the number of new cases going even higher. Once more, unless a serious reform package is passed by Congress and signed by the President, even more people will receive welfare payments without having to do anything in return. They won’t seek jobs, do volunteer work, get an education or contribute in some other useful way to society. The status quo of “incentives to fail” will continue growing. Even political liberals are beginning to recognize this. Conservatives have long touted the failures of welfare and the need for welfare reform, yet whenever the topic was raised the usual cries of “heartlessness” we leveled and little was actually done. Now it seems that where the federal government has failed the states are beginning to act. One state at the forefront is Michigan, lead by governor John Engler.

Doing Nothing, Doing Something
In 1991 Governor John Engler cut $250 million from the General Assistance fund that was being paid out to able bodied adults in Michigan. As part of a larger welfare reform package Governor Engler sought to make welfare a stopgap for those fallen on hard times instead of a way of life. And even the Clinton administration has taken notice. During his run for the White House Clinton proposed a two-year time limit on benefits and in November 1993 the president granted a waiver to Wisconsin governor Tommy Thompson to test the proposal through “workfare” in two counties through 1995.

The Michigan reform program, now two years old, has seen dramatic change in its welfare rolls. Radical change in the kinds of programs administered, and new eligibility requirements have reduced the rolls, made fraud more difficult, and given Michigan recipients a real chance to get out from under their financial problems. Even one year after Michigan’s welfare system was reformed dramatic results were being seen.

Michigan’s “Work History Requirement” was the standard string attached to benefits. Two parent families had to have at least one parent with a “recent work history” in order to be eligible for benefits. Legislation eliminated that requirement. Initially the AFDC caseload increased but those were mainly due to transfers from one program to another. Since the change cases have actually decreased by 3,969.

Another area of change was the 100-work hour limitation. In two-parent families if one parent worked 100 hours or more per month the family became ineligible for AFDC. But the 100-work hour requirement was based upon time spent at work, not actual dollars earned. The benefit allowed low-income families to continue working and keep their AFDC benefits so they could get out from under. With the change over 26,000 cases have reported earned income.

Of course the greatest advantage to these changes was not the dollars spent but the fact that families were encouraged, through the state’s economic and welfare policy, to stay together. Under previous policies it was more financially advantageous for an unwed mother to stay unwed and for the father to shirk his responsibilities, with no progress in making the family self-sufficient.

Another policy change took the same route. Normally when a welfare recipient finds work and earns income, their benefits are penalized – even if the income is less than the government benefits. Instead, Michigan decided to reward earned income. “A set monthly amount plus a percentage of the remaining earned income is not counted in calculating the AFDC grant.” The result? The number of cases reporting earned income has increased by 40 percent! “Working clients kept the first $200 of earnings and 20 percent of the remainder before their grant is decreased.”

Keeping families together includes extended families under Michigan’s plan. Many minor parents are now required to live at home with their parents in order to receive AFDC payments. Social Services has seen a 6 percent decrease in minor parent caseload to ensure that no minor parent or their children will come into a dangerous environment through the policy.

Keeping Faith
Probably the most interesting change has been in what reformers call the Social Contract. Those applying for public assistance for a period longer than 3 months are required to sign a Social Contract indicating they will perform some kind of productive work for at least 20 hours a week. No work means no benefits. The result? By June 1993 over 60 percent of applicants initially report being involved in working 20 hours a week or more. The main push behind this portion of Michigan’s reform is to instill a sense of responsibility in applicants who traditionally come to receive their checks and “do nothing” until the next check arrives. It also supposes that the welfare recipient will perform some kind of meaningful work, be it paid employment or volunteer services in return for what they get. It is reminiscent of the biblical admonition, “If a man will not work, he shall not eat.”

Elsewhere in America some reform programs being introduced have terms similar to a Social Contract in Michigan, but with a twist. President Clinton campaigned on “workfare.” He also proposed some kind of workfare program be established to receive federal benefits. The problem with the current Clinton proposal is the kind of jobs that would be offered to welfare recipients – government jobs.

During the campaign Clinton said welfare reform with workfare (government jobs) would cost $4 billion a year. However, democratic Senator Patrick Moynihan contradicted the president saying that providing welfare recipients with public sector jobs on a two-year program would cost $30 billion a year. The Clinton administration countered by claiming that [welfare recipients] “are receiving a check currently and they are not working.” However, administering such a program would require either a new agency, or enlarging a current one. It also ignores the reality that in the real marketplace jobs are earned and kept by hard work and responsible behavior. Welfare jobs would most likely be “handouts.”

Conclusion
One of the cornerstones of welfare reform promoted by the President while on the campaign trail in 1992 included tax credits for families so parents could keep more of the dollars they earn to spend on family needs or save for the future. The President has already removed that portion of his reform through the most recent tax hikes – the largest for American families in history. Most economists agree that the tax hike will hurt the middle class the most and it certainly won’t do anything to help low-income families.

If the American welfare system is to be reformed the Michigan model is a good place to start. For once it demonstrates that a government program can be “liberal” with compassion but conservative in its approach saving taxpayers, and requiring responsibility from citizens and helping the less fortunate pick themselves up and start over again.