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Greenstein on the Safety Net, Part 3


Our earlier excerpts from Robert Greenstein’s House Budget Committee testimony of this week looked at the safety net as a whole and the Supplemental Nutrition Assistance Program (SNAP).  This final excerpt discusses the implications of welfare reform:

The 1996 welfare law is frequently cited as a reform that transformed a key part of the safety net.  It’s often either celebrated as a spectacular success or vilified as a cruel failure.  Neither stereotype is consistent with the evidence.

Significant increases in employment among single mothers began in the early 1990s, prior to the welfare law, and continued after its enactment, with the change over the decade being quite strong.  Welfare reform was implemented at the same time that a robust expansion in the Earned Income Tax Credit was taking full effect and that the labor market was expanding rapidly, with tremendous job creation; the unemployment rate fell to 4 percent at the end of the decade.  For a number of low-income single-parent families, the result was an increase in income and a reduction in poverty.

These effects, much heralded at the time, were not the result solely (or very likely, even primarily) of the welfare law by itself.  They resulted from a combination of all three of these factors.  A highly regarded study by Jeffrey Grogger of the University of Chicago found the EITC expansion actually to have a larger effect in increasing work effort than the welfare law changes.  But the two changes reinforced each other, amounting to a combination of “carrots and sticks.”

Even in the hot labor market of the late 1990s, however, some families and children experienced significantly increased hardship in the aftermath of the welfare law.  As a group, those welfare recipients who were the most employable — often with the most education, skills, and/or work experience — made the most progress.  But too often, families with the least education and job skills and/or the deepest physical, mental health, or other problems sank deeper into poverty, ending up with neither cash assistance nor earnings to support their families.  Ironically, the welfare law both reduced poverty among many of the better equipped recipients and increased deep poverty among a number of the most disadvantaged families.

The overall results were the most favorable in the hot labor market of the late 1990s, while TANF’s weaknesses have been greatest in recent years, for three reasons — the lack of availability of jobs in the economic downturn, the inability of the block grant to respond effectively to increases in need as the economy turned down, and the effect of 15 years of erosion in federal TANF funding levels that are now lower even in nominal terms than they were in 1996, and are much lower (28 percent lower) once one adjusts for inflation.

Some of the specific results are quite disturbing.

  • In 1995, for every 100 families with children living below the poverty line, 68 received some assistance from AFDC, the cash assistance program that preceded TANF.  Today, for every 100 such poor families with children, only 27 receive any cash assistance through TANF (and that includes working-poor families that receive some assistance as a supplement to their low wages).
  • For those poor families with children that do receive assistance, benefit levels have plummeted.  In the majority of states, TANF benefits now fail to lift a family with no other cash income even to 30 percent of the poverty line (before SNAP benefits).  In no state are TANF benefits sufficient to pay the rent on a modest apartment (based on HUD’s “fair market rents”) even if the entire benefit is used for rent.
  • With federal TANF funding having fallen substantially in real terms even as need has increased, many states have cut TANF employment and training programs as well, and services to help poor parents find jobs — steps counter to the goals of welfare reform. . . .

To reiterate, I am not saying there have not also been positive effects from the welfare changes.  The results are mixed — positive for some families, negative for others — strongest in an economy where jobs are plentiful, weakest in an economic downturn.

But if the goal is both to promote work and to maintain an adequate safety net for those lacking well-paying jobs — and especially for their children, and for low-income elderly and disabled people who cannot work — then it would be a serious mistake to convert Medicaid and SNAP to block grants as well and to shrink their funding.  Doing so would magnify TANF’s weaknesses and would substantially increase the ranks of the uninsured and the deeply poor.

Click here for the full testimony.