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Businessweek Archives

The Promise And Peril Of Welfare Reform



There is only one honest reaction to the recent welfare bill by people in the political center--anxious anticipation. The current welfare system doesn't work, and the politicians and bureaucrats who created it over the past 60 years have been unable or unwilling to reform it. So now, a vast experiment is under way--or 50 experiments, as each state attempts to do what Washington failed to do: move people from welfare to work while protecting the young and innocent. Devolution is the new answer to welfare reform.

That's what worries us. We hope we are proved wrong, but the states have hardly been paragons of good government in the past. Education is, after all, a local responsibility, and it has gone to rot under the aegis of the states. Many legislators use patronage from school districts to get elected. Others have refused to make sure that kids unlucky enough to be born poor get the same schooling as richer kids.

What makes us think these politicians are going to solve intractable welfare problems? Under the new law, half of a state's welfare recipients must be placed in jobs within six years. But with the federal government actually cutting welfare expenditures by $56 billion, state officials will be hard-pressed to find the funds. They will have to find new funding for immigrants and find money for food stamps and Medicaid.

Our guess is that a handful of states--Iowa, Michigan, Minnesota, Wisconsin, and a few others--will do a decent job in welfare reform. They have first-rate governors and relatively clean state legislators. Other states will be tempted to "race to the bottom": cut welfare expenditures in the name of fiscal prudence and economic competitiveness.

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