Secretly ending welfare reform

Welfare reform in the mid-1990s was a major public policy success, leading to a dramatic reduction in welfare dependency and child poverty. Little-noted provisions in the just-passed stimulus bill will actually abolish this historic reform.

In addition, the bill will add nearly $650 billion in new means-tested welfare spending over the next decade. This new spending amounts to around $18,500 for every poor person in the U.S. The cost of the new welfare spending alone amounts to nearly $8,500 for each taxpaying family.

The welfare reform of 1996 replaced the old Aid to Families with Dependent Children (AFDC) with a new program named Temporary Assistance to Needy Families (TANF). The key to welfare reform’s reduction in dependency was the change in the funding structure of AFDC.

Under the old AFDC program, states were given more federal funds if their welfare caseloads were increased; by contrast, federal funds to a state were cut whenever the state caseload fell. This created a strong incentive for states to swell the welfare rolls. Prior to reform, 1 child in 7 was receiving AFDC benefits.

When welfare reform replaced the old AFDC system with TANF, this perverse financial incentive to increase dependence was eliminated. Each state was given a flat funding level that did not vary whether the state increased or decreased its caseload. In addition, states were given the goal of reducing welfare dependence (or at least of requiring welfare recipients to prepare for employment).

The stimulus bill will overturn the fiscal foundation of welfare reform and restore an AFDC-style funding system. For the first time since 1996, the federal government will begin paying states bonuses to increase their welfare caseloads.

Is there any aspect of the productive American economy and society that Obama hasn’t started to tear down yet?

/oh wait, he hasn’t started appointing Federal judges yet