The Mystery of Welfare and the Recession

Something doesn't compute about the historic welfare-to-work law backed by President Clinton and passed by a Republican-led Congress in 1996. As expected, the number of Americans on welfare has plummeted, from 4.8 million back then to around 1.7 million in 2008. Despite attempts to cast the law as a cold-blooded way to toss people off the dole, it was written—and funded—with knowledge that there would still be tough times. Thus, it set aside $2 billion in case an economic event might one day spark a rush to welfare. So why are caseloads still declining in states when there's little work to be had?

"It doesn't make sense," says Ron Haskins, who helped author the fundamental change in social policy as a staff director for the GOP majority on the House Ways & Means Committee. Unemployment is at 9.9% and nearly 40 million people are on food stamps. But between mid-2008 and mid-2009, as the recession took hold, New York, New Jersey, Michigan, and Texas were among states where cash assistance dropped, even as it rose sharply in Nevada, California, Colorado, and elsewhere. "We found no clear association between the change in the number of families receiving cash assistance in a state and its unemployment rate," said the Government Accountability Office after interviewing welfare officials in 21 states.

Welfare reform—or the Personal Responsibility & Work Opportunity Reconciliation Act of 1996—morphed the program from monthly cash payments to grants dependent on recipients seeking work via Temporary Assistance for Needy Families (TANF). The Health & Human Services Dept. administers TANF, with $16 billion budgeted annually for the states. HHS insists that states receiving funds make sure a minimum percentage of TANF recipients work a certain number of hours weekly and heed a lifetime limit of 60 months of aid. That may sound like a long time, though the program is not overly generous: A single mother of two gets less than $400 a month in assistance.

The extra $2 billion in funding was to ensure that states could take on more recipients during a recession. When it threatened to run out, the Obama Administration set aside an emergency $5 billion more. Yet "unemployment and the length of unemployment increases, and welfare rolls are merrily going down!" says Haskins, now the co-director of the Brookings Institution's Center on Children & Families. He can't make sense of it.

What we know is that more than 3 million people eligible for welfare are not taking part. According to the little-noticed GAO report, released in March, the reasons people are scared off include rules mandating job-related searches; declining cash benefits, which "have not been updated or kept pace with inflation"; and sanctions tied to the search process. Investigators also discovered state "diversion strategies" to keep applicants from staying on the program. States can steer applicants into taking a lump sum for, say, three months of assistance; then they're not counted on the state's regular TANF rolls or required to maintain contact with the welfare office. Says Larry Temple, executive director of the Texas Workforce Commission: "The paternalistic 'we know better' attitude is what got us into trouble. For some this is the best thing."

Perhaps, though there are other factors that indicate the choice may not be entirely up to the individual. For one thing, that $2 billion set-aside? Budget-strapped states have pilfered it to fund child-care programs and other measures that aren't actually welfare. There's also a perverse incentive to decrease the rolls. A state can drop the percentage of recipients who need to seek work if the state reduces the total caseload. Temple concedes there has not been "the uptick people thought we'd have" but says that's because Texas is more efficient than other states in finding jobs for TANF recipients. Texas currently has 45,000 people on TANF and 8.2 percent unemployment, compared with 220,893 people in the program and 5.6 percent unemployment in 1996.

The law has altered the public perception of welfare and the culture of state administrators. It has been a sign of weakness to have caseloads go up, meaning new state welfare chiefs, like Jennifer Hrycyna in Illinois, confront not only their staffs' reflex to deny benefits but also the challenge of easing onerous rules. Instead of a family of three needing to earn less than $6,000 a year to be eligible in Illinois, the ceiling will soon be $9,000. "Work requirements should be structured to provide meaningful opportunities to recipients that will lead them toward long-term self-sufficiency," says Hrycyna, "rather than pushing people into unstable low-wage jobs that get families off the rolls but leave them in poverty." Congress will have to reauthorize the welfare act next year. It would be wise to figure out who the program is really for: the states or their citizens?

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