Daniel Sutter: Welfare reform at twenty


Twenty years ago President Bill Clinton signed a landmark welfare reform bill passed by a Republican Congress. The Personal Responsibility and Work Opportunity Restoration Act (PRWORA) was hailed as the “end of welfare.” Two decades later we can ask, has reform delivered as promised?

Welfare can be viewed broadly or narrowly. Broadly, welfare can be viewed as all programs where eligibility is means-tested and targeted for the poor, including Medicaid, food stamps, and public housing. A recent Congressional review identified 129 Federal programs for lower income Americans, on which Washington spent $800 billion and the states another $200 million in 2012. PRWORA did not end welfare broadly conceived.

But PRWORA dealt with welfare narrowly construed, namely Aid to Families with Dependent Children’s (AFDC) cash assistance to individuals. Temporary Assistance to Needy Families (TANF) replaced AFDC, with several important changes. Individuals now faced work requirements and a lifetime eligibility limit, which together ended the entitlement to cash assistance. The basis for allocating Federal dollars to states also changed. AFDC used matching grants, where states got $1 from Washington for every $1 they spent, while TANF employs block grants, with states receiving a fixed sum per year regardless of spending.

The complexity of government programs means that the devil is often in the details. Politicians can claim to have made dramatic reforms without altering the details necessary for real change. Only a careful examination can determine if welfare reform was all smoke and mirrors.

The Heartland Institute’s recent Welfare Reform Report Card provides such an analysis. The most important performance measure is probably the number of recipients, and here reform has delivered: a 70% reduction between 1996 and 2014 (from 12.4 million to 3.4 million). Enrollment has declined by 64% in Alabama. The strong 1990s economy might have initially reduced enrollment, but persistence through the 2008 recession indicates a genuine structural change in the program. Total spending has also been brought under control.

A number of program factors have helped reduce enrollment. Work requirements helped reduce fraud and abuse. Deceased recipients and those illegally working could not show up for required training. States spent money on job training and placement, to great effect. But some states have gone to great (and dubious) lengths to get TANF recipients classified as medically disabled and on Social Security SSDI, so that their benefits are entirely picked up by Washington.

The Heartland Institute’s report card includes three policies directly related to PRWORA’s goals: how quickly TANF recipients face work requirements, the lifetime eligibility limit, and the reduction of benefits (or sanctions) for recipients failing to comply with work requirements. Alabama does reasonably well on the PRWORA-related policies, imposing work requirements immediately and limiting lifetime eligibility to five years, but only partially reduces benefits for noncompliance. By contrast, some states have indeed largely undermined reform via policy. For instance, five states do not impose work requirements for at least 12 months, while five states have no lifetime eligibility limit.

The workforce participation rate for TANF recipients provides another important measure of outcomes, since workforce participants are either working or actively searching for work. The workforce participation rate of TANF recipients in 2011 was 30% nationally and 41% in Alabama (20th among states). States vary widely in TANF workforce participation, from two thirds in Wyoming and North Dakota to just 7% in Massachusetts. Although 30% workforce participation might seem low, recipients who secure full time work typically exit the program and might quickly find work once they are searching.

PRWORA was based on solid research, beginning with academic studies documenting the negative effects of AFDC. Meanwhile states experimented with reforms under waivers for their AFDC programs and learned what specifically helped people transition from welfare to work. And PRWORA imposed “Maintenance of Effort” spending requirements to prevent states from diverting block grant dollars to other programs.

Welfare reform dealt with one specific program, not the entire array of welfare programs. The well thought-out reforms have significantly and seemingly permanently reduced the number of recipients. Perhaps most importantly, welfare reform shows that entitlement spending can be brought under control without compromising assistance for America’s less fortunate.


Daniel Sutter is the Charles G. Koch Professor of Economics with the Manuel H. Johnson Center for Political Economy at Troy University and host of Econversations on TrojanVision. The opinions expressed in this column are the author’s alone and do not necessarily reflect the views of Troy University.


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