The Real Problem With Welfare: It Stopped Helping the Poor

Mitt Romney has a new ad out accusing President Obama of attempting to "gut" welfare reform by letting states hand out cash to families that aren't working. At best, the claim seems to be some serious hyperbole surrounding the small kernel of truth that the administration wants to give states more leeway on how they move families into jobs. But hey, it's the summer, and campaigns need to fill air time, right?

Rather than dwell on this skirmish, let's remember the bigger picture about the current state of our welfare system, as captured in this graph from the Center for Budget and Policy Priorities. Remember how Bill Clinton promised to "end welfare as we know it?" Well, did he ever.


Clinton's big idea, if you'll recall, was to make families work for their cash benefits, which would expire after a few years. He also handed management of the system over to the states. The result: a massively shrunken program. Old-school welfare used to assist the vast majority of impoverished families. Workfare (or Temporary Assistance for Needy Families) reaches just about a quarter of them.

If this was the the result of millions of parents getting jobs and moving up in the world, it wouldn't be cause for concern.  But that's not what appears to have happened. In 2010, the Government Accountability Office reported that most of the decline had occurred because eligible, impoverished families had simply chosen not to participate.

As the graph below shows, 84 percent of eligible families took part in pre-Clintonian welfare. By 2005, it was just 40 percent.


Why have so many poor families decided to forgo a government check? The GAO concluded that work requirements may have scared some families off -- and depending on your political outlook, you might consider that a good thing. But that's just part of the story. Other families appear to have been discouraged by the endless administrative hoops state agencies forced them to jump through to get into the program. Others were essentially pushed away from TANF by state "diversion strategies." The GAO also noted that some families may choose to save up their eligibility for an even rainier day, or opt out to keep their incomes low so they can get other government benefits.

In the end, though, we have a half-functioning economy, and one of our safety-net programs for the poorest families has been designed in order to keep as many of them out as possible. That seems like a bigger problem than the possibility that Obama might tinker with a few of its policy details.