The New Welfare State: Faster, Cheaper ... and Out of Control?

Clinton-era reforms are widely celebrated, but the recession has raised questions about whether they solved problems or just hid them from view.

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It's still soon to make a definitive judgment on how President Clinton's welfare reforms affected the U.S. (Reuters)

In 1996, President Bill Clinton ignored the protests of his liberal base and signed a reform bill written by congressional Republicans that abolished the existing welfare entitlement and replaced it with a new program, Temporary Assistance for Needy Families. In doing so, he fulfilled a 1992 campaign promise to "end welfare as we know it," by instituting strict time limits and work requirements for recipients and block-granting funds to the states.

Within a few years, the number of families on welfare had shrunk by more than 50 percent. When caseloads remained low and single mothers' employment numbers and wages rose throughout the 2000-01 recession, even the law's critics began to take notice. Rebecca Blank, a member of Clinton's Council of Economic Advisers and a skeptic of the reform, acknowledged in 2006 that "[e]ven the strongest supporters of welfare reform in 1996 would not have dared forecast the steep declines and continued low levels of welfare caseloads a decade later."

Despite being mostly won over by the law's robust performance, Blank issued a warning: "in the face of a major economic shock ... the current system of public assistance may not provide adequate support for many of our poorest families."

The shock Blank worried about came in late 2007. Four years later, her fears seem to have been realized. Because of the 1996 law, welfare grants can't increase to accommodate surges in needy families during a downturn. The government simply block-grants about $17 billion to the states each year, regardless of the circumstances.

In fact, many states have looked to TANF for funds to plug other gaps in strained budgets, leading them to push welfare recipients off the rolls.

The result can be seen in stories of states like Florida and Georgia adding drug tests to already-stringent welfare requirements. In April, New York Times poverty reporter Jason DeParle caused a stir by reporting that welfare restrictions in states like Arizona had caused single moms to move back in with abusive boyfriends, commit petty theft, and sell blood to provide for their families.

Bob Greenstein, one of the 1996 law's critics and president of the left-of-center Center on Budget and Policy Priorities (CBPP), has noted that the number of families making less than the federal poverty level, or $23,050 per year for a family of four, that receive cash assistance has dropped steeply since the 1990s, from 68 per 100 to 27. It seems that the new welfare system is failing the most vulnerable families.

Of course, some perspective is needed to interpret this development. Even now, in the aftermath of the worst recession since the Great Depression, a higher percentage of single mothers are working and a lower percentage of children in families led by women are poor than before TANF was enacted.

In fact, the past few years have marked an evolution in the safety net, which as a whole has exploded in growth.

And while the people that the welfare reform was intended to benefit -- single mothers and their children -- may not receive cash assistance in the numbers they would have in the old system, other parts of the safety net have responded to their struggles in the current downturn.

In fact, the past few years have marked an evolution in the safety net, which as a whole has exploded in growth. It is not as oriented toward funneling resources toward welfare's traditional beneficiaries as it once was, but it's doing far more to act as an "automatic stabilizer," ramping up welfare spending to counteract the economy's contraction.

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