Presidents are usually effusive, grandiose, and triumphant when they sign major legislation that will form a huge part of their legacy. In 1996, Bill Clinton’s announcement that he’d sign a bill ending "welfare as we know it" was not that.
It was defensive and at times openly apologetic for what was about to happen.
"Some parts of this bill still go too far," he conceded. "This bill still cuts deeper than it should in nutritional assistance, mostly for working families with children."
He probably didn’t know then how true those words would one day turn out to be. Clinton, and now his wife, presumptive Democratic nominee Hillary Clinton, has run hot and cold over the years on the Personal Responsibility and Work Opportunity Act (PRWORA) — what is now colloquially referred to as "welfare reform."
Ten years after signing the bill, Bill took an enthusiastic victory lap in the pages of the New York Times. "Welfare reform has proved a great success," he declared. And at first, it seemed like he was right. Evidence seemed to indicate that it really did increase employment, and worst-case scenarios liberal critics predicted didn’t come to pass.
But another 10 years later, the mood changed again. Days before the New York Democratic primary, Hillary Clinton, who once urged her husband to sign the bill, told WNYC that "we have to take a hard look at it again." New research had showed that in fact welfare reform fell short in the depths of the Great Recession — substantially increasing deep poverty and leaving families who can’t find work without any cash safety net.
The Clintons’ statements have mirrored the overall reputation of the bill over time, especially among Democrats. In 1996 the party was all but unanimous about the fact that something had to change with welfare. There was heated debate over whether the changes were acceptable, including within the Clinton administration itself, but ultimately most congressional Democrats voted for the law on the same mixed grounds that Clinton signed it: It wasn’t perfect, but it was a necessary step toward reform.
Now it is a cross Hillary has had to bear during her presidential run, and a topic on which Bernie Sanders and his left-wingintellectual supporters could, and did, attack her mercilessly.
The idea behind welfare reform back in the '90s was that something was deeply broken about the system and needed to change. That was correct. But something else is deeply broken now, and it too needs to change.
Keeping people out of work was a feature, not a bug, of the original welfare program
What we talk about when we talk about welfare is the Aid to Dependent Children (ADC) program, enacted as part of the Social Security Act of 1935 in the midst of the Great Depression.
This program was initially an outgrowth of a type of program that cropped up in a number of states, known as Mothers' Pensions, in the 1910s. The programs were meant to help single mothers, but only the small fraction deemed deserving.
"That typically excluded divorced mothers and those with children born outside marriage," New York Times reporter Jason DeParle writes in his book American Dream: Three Women, Ten Kids, and a Nation's Drive to End Welfare,which informs much of the history in this article. "And it almost always excluded racial minorities." Indeed, the recipients of Mothers' Pensions were 96 percent white.
ADC too initially excluded black mothers, as did Social Security's flagship old-age pension program. It built on the Mothers' Pension system by providing funding for states to pursue their own programs, with states setting benefit levels and many of the rules. Gradually, federal oversight increased, first with a push in the 1940s and '50s by federal authorities to end racial discrimination.
By 1960, DeParle notes, the program was 40 percent black, and while the program initially targeted widows to the exclusion of divorcées and unwed mothers, almost two-thirds of recipients by that year fell in the latter category. ADC was renamed the Aid to Families With Dependent Children (AFDC) program in 1962.
The purpose of these programs, from the beginning, was to deter women from work. After all, it was originally designed for white widows, a population deemed deserving of aid and one expected to stay home and raise children rather than enter the workforce.
But work by black mothers was more common, and more expected, especially in Southern states that relied on black women's labor as maids, nannies, and agricultural workers. That fed an expectation that black women should be working even if they had children, which in turn fed an anti-welfare backlash.
The backlash was worsened by rapid increases in the rolls, beginning as racial discrimination eased in the 1950s. It was also aided by the rise of the "welfare rights movement" in the 1960s, which organized to enroll poor people then cut off from the program and won important legal victories like King v. Smith, which established AFDC as an entitlement that all eligible people must be allowed to receive:
The two most vocal leaders of the welfare rights movement — sociologists Frances Fox Piven and Richard Cloward — described their goal as overwhelming the system until the government was forced to enact a guaranteed income, a policy that then gaining traction both with economists and with activists like Martin Luther King Jr.
They almost got their wish: Richard Nixon proposed a welfare reform package called the Family Assistance Plan that would have included a guaranteed income — albeit one that recipients would have to meet work requirements to get. The bill passed the House before dying due to both liberal opposition (because it was too stingy) and conservative opposition (because it was a guaranteed income).
Contrary to popular belief, Lyndon B. Johnson’s war on poverty did not, Columbia professor Jane Waldfogel writes, do much to expand AFDC. Johnson hated the idea of poverty reduction through handouts rather than work, and resisted calls from his adviser Sargent Shriver to implement a guaranteed income.
Old welfare really did keep people out of work — and those on it wanted to work
The anti-welfare, pro–work requirement movement really came into its own in the 1980s. Ronald Reagan had campaigned against the program, railing against "welfare queens" living large and driving Cadillacs, and slashed AFDC by about a sixth upon taking office.
He was buffeted by a growing community of conservative think tanks, and most influentially by political scientist Charles Murray, who first made his name with his 1984 book Losing Ground, which argued that abolishing welfare entirely would actually reduce poverty.
Reputable social scientists dismissed the book, but its racially charged conclusions struck a chord. In his book proposal for Losing Ground, Murray wrote, "Why can a publisher sell it? Because a huge number of well-meaning whites fear that they are closet racists, and this book tells them they are not. It's going to make them feel better about things they already think but do not know how to say." He wasn’t wrong.
With enemies like that, many on the left were understandably suspicious of attacks on welfare. But the program really did have deep problems. The three most common criticisms made of AFDC were:
- It caused poor adults who could work to not work.
- It caused dependency; rather than using it as a temporary safety net, some people embraced it as a way of life.
- It encouraged having children out of wedlock and discouraged marriage.
The first of these claims was definitely true, the second was kind of true, and the last might have been true but the effect was very, very small.
Very few social policy analysts would contest that AFDC discouraged work. For one thing, it often featured a 100 percent phaseout rate: Each dollar you earned meant one less dollar in benefits.
"I'd always talk about it in intro econ classes," Hilary Hoynes, an economist at UC Berkeley, says. "Students come in thinking welfare recipients are lazy, and then you talk them through the basics of the economics and describe the incentives of the program, and people were like, 'Of course, why would you work in this program?'"
Ironically, one thing Reagan did upon taking office was increase the phaseout rate, therefore making AFDC an even worse work deterrent than it had been before. "Reagan's cuts cut all the working people off and made it a program for people who weren't working," the Center on Budget and Policy Priorities' Liz Schott explains.
Ethnographic work by Kathryn Edin (now at Johns Hopkins) and Laura Lein (now at University of Michigan) in the early 1990s suggested that AFDC both provided inadequate benefits for the poor, leaving them mired in poverty, and provided significant work disincentives. The phaseout rate, they concluded, was a major deterrent.
"Most of the welfare-reliant mothers we interviewed had an accurate view of the benefits they would lose by going to work," Edin and Lein write in their book Making Ends Meet. "They made reasonable assessments of how much they would need to earn to offset the added costs of work."
The families they spoke with concluded that low-wage jobs would at best leave them no better off than they were with welfare, that it might leave them worse off if they lost their job and were forced to reapply for welfare, and that the jobs they could realistically get would not prepare them for better, higher-paying work in the future.
But because of the stinginess of AFDC, Edin and Lein found that welfare mothers still needed to find other sources of income. Only about 64 percent of their income came from AFDC, food stamps, and other safety net programs. Twelve percent came from off-the-books work (which wouldn't reduce welfare benefits) and underground work (selling sex, drugs, etc.), and 17 percent came from friends and family members. Only 2 percent came from formal work.
Some economists I talked to were more skeptical that the phaseout rates were the major problem — but still agreed that AFDC discouraged work. "Congress lowered the phaseout rate from 100 percent to 67 percent in 1967 and work levels among AFDC recipients went up only modestly," Robert Moffitt at Johns Hopkins notes. The bigger work disincentive, he says, was the mere fact that people were getting money with no strings attached.
Even though few welfare recipients were formally working, research indicated they actually wanted to be working. "Research indicated, including research that we conducted in Chicago, that AFDC recipients preferred work to welfare and would readily accept jobs that will not result in slipping deeper into poverty," according to William Julius Wilson, a professor and sociologist at Harvard University.
What about the claim that AFDC caused dependency? The most influential work on that question was done by Harvard’s Mary Jo Bane and David Ellwood in the 1980s. They found that while most people who entered AFDC left fairly quickly, a minority stayed for long periods, averaging eight years. Though a minority of those entering, because of its longer duration this group made up the majority of the AFDC caseload at any given time.
Moreover, plenty of research has documented that there was a correlation between mothers receiving AFDC and their daughters receiving it later; the literature is split on whether this was causal (the mom getting welfare actually made the daughter more likely to take it up) or whether it was wholly explained by the fact that children of poor parents tend to be poor too.
The best, most recent research I’ve seen on this question, from the University of Kentucky’s James Ziliak, Robert Paul Hartley, and Carlos Lamarche, finds that at least some of the relationship was causal.
Reasonable people can disagree about how bad it was that a majority of AFDC recipients at any given time were in the midst of a years-long spell. After all, that was the original intent of Mothers’ Pensions: that the money could support mothers indefinitely, that they’d never need to work. But it’s hard to deny that the program did lead to millions of people living off welfare for years at a time, without working.
As for the claim that welfare discouraged traditional families, the evidence there is shakiest. Christopher Jencks, a professor of social policy at Harvard's Kennedy School of Government, tells me the argument that welfare discouraged marriage "was probably a little true, but not very." The effect sizes just weren't big enough.
And the phenomenon seemed to be largely about women preferring to rely on their welfare checks than on the earnings of their male partner — it was about independence as much as anything.
As the welfare backlash grew in the 1980s, the federal government was beginning to issue waivers to states to allow them to experiment with various welfare-to-work approaches. A number of governors, notably Gov. Tommy Thompson (R-WI), seized the opportunity, experimenting with work supports, time limits, work requirements, and other approaches that would inspire the latter federal reforms.
The waiver programs were often run as actual experiments, and the results were encouraging. "Out of 11 state programs studied, nine raised employment and earnings, albeit modestly," DeParle recalls.
For example, the organization MDRC produced a hugely influential study in 1993 of a welfare-to-work program in Riverside County, California, which found that the Riverside approach (which emphasized getting a job above all else, including education and training) raised earnings more than 50 percent. That fueled a burgeoning consensus that liberals should accede to work requirements and accept some form of "workfare."
(Subsequent research suggested the Riverside finding was a fluke, the product of an already stronger local economy rather than any reforms.)
The liberal pro-reform line was that assisting the poor was worthwhile but that AFDC had unacceptable work disincentives, and that a public jobs program would be superior. Mickey Kaus at the New Republic was the most vocal journalistic exponent of this view, while Ellwood's 1988 book Poor Supportlaid out the most sophisticated, detailed plan for achieving a liberal version of reform, including greatly expanded health benefits, child care, and guaranteed jobs, alongside time limits on receipt of actual cash welfare.
Arkansas Gov. Bill Clinton was strongly associated with this approach, putting together "the Clinton plan" through his role as chair of the welfare task force at the National Governors Association. The plan sought $1 billion to $2 billion more a year in spending, in exchange for tougher work requirements. Every governor in the country save one endorsed it.
The plan eventually morphed into the Family Support Act, which provided additional matching funds in exchange for sending a certain fraction of the recipients to work programs. Reagan signed it into law in 1988, but it didn't stop the welfare rolls from continuing to grow.
How Democrats came around to the idea of reforming welfare — and why Bill Clinton signed it
"Welfare should be a second chance, not a way of life. In a Clinton administration, we're going to put an end to welfare as we know it," said then-Gov. Clinton in October 1991.
From the get-go, he was passionate about expanding time limits and work requirements and trying to dramatically reduce the welfare rolls.
Still, a number of liberal welfare experts who joined his administration, including Georgetown law professor Peter Edelman, the Kennedy School's Bane, and Ellwood, would be tasked with developing the Clinton welfare plan, alongside the more vociferously anti-welfare aide and speechwriter Bruce Reed.
Almost immediately, it became clear that the idealized grand bargain, in which every welfare recipient would get a subsidized job if needed, along with child care and transportation assistance and everything else they might need to thrive in the workforce, wasn't going to fly. The costs were too much for Congress to stomach, even more so after Republicans regained power in 1995.
"By just mailing checks, the government spent an average of about $5,000 per family each year," DeParle notes. "A work slot (with child care for just one child) would cost about $11,700. The bill for 2 million of them would raise welfare's annual costs by more than $13 billion, nearly 50 percent. Nothing like that seemed remotely possible."
Congressional Republicans began putting together proposals that took the time limits that Ellwood had wanted to pair with very generous government support, and just imposed them without any of that help on the side. In the official House GOP plan, states could totally cut off recipients after three years in a work program.
Under a conservative alternative known as the Real Welfare Reform Act, women under 26 with children out of marriage would be stripped of all AFDC, food stamps, and housing assistance. Just like that.
And, DeParle reports, the Clinton administration task force charged with building out a plan was growing more supportive of hard time limits, much to Ellwood's concern. An idea he saw as part of a comprehensive expansion of the safety net was being transformed beyond recognition.
Eventually, Clinton's team put out a plan in June 1994. It limited cash benefits to two years and required participants to work after that; if they couldn't find work, a government job would be provided. To keep costs down, it only applied to people born after 1971: those 23 and under, at the time.
Once the GOP was back in control of the House and Senate, Speaker Newt Gingrich quickly settled on the idea of block-granting AFDC. Instead of the federal government matching state spending, the feds would grant a set amount of cash every year, which states could then use as they liked to implement a welfare programs.
States would be given huge amounts of discretion as to whether to use those funds for job training, child care, etc. This allowed Congress to avoid getting too specific and gelled nicely with the Republicans' general support of localized governance.
Initially, the Republican plan didn't appear to have much in the way of work requirements — something Democrats, of all people, attacked them for, calling them "weak on work." To get around that, the bill got work requirements but also something known as a "caseload reduction credit," which let states count people who left welfare as working whether they really had a job or not. Just by cutting the rolls, states could meet the requirement.
The Democratic opposition continued to buy into Republican policy ideas, with House Minority Leader Dick Gephardt proposing a four-year cold turkey time limit for aid and Senate Minority Leader Tom Daschle proposing five years. And Bill Clinton was sounding sympathetic to even Republican proposals.
Wendell Primus, a deeply respected appointee to the Department of Health and Human Services who vociferously opposed to cuts to welfare, produced an estimate suggesting the Republicans' Senate bill would push 1.1 million people into poverty. Clinton saw the study, but nonetheless privately suggested he'd sign such a bill anyway.
He got temporarily saved from himself by Gingrich's own blunders. In November and December 1995, Gingrich packaged welfare reform together with a broader balanced budget package that included substantial cuts to Medicare, proposed in the midst of two government shutdowns over broader spending-level issues. When Clinton vetoed the spending cuts, he vetoed the attached welfare reform. In January, he vetoed it on its own.
Humiliated, Gingrich initially didn't want to try for reform again, DeParle reports, until Jimmy Hayes, a House member who switched in 1996 from the Democrats to Republicans, told him that forcing Clinton to veto or sign a standalone welfare bill would put the Democrats in a deep political bind. If Clinton vetoed, he'd be painted as soft on welfare. If he signed, Democrats would rebel. So in July, the House and Senate passed a standalone bill and sent it to the president.
DeParle reports that the administration was split over whether to sign, but more appeared to support a veto than not. Secretary of Health and Human Services Donna Shalala wanted a veto, Secretary of Labor Robert Reich wanted a veto, Treasury Secretary Robert Rubin wanted a veto, Secretary of Housing and Urban Development Henry Cisneros wanted a veto, Chief of Staff Leon Panetta wanted a veto.
David Ellwood, who had resigned from the administration in 1995, urged a veto. Same for political aides George Stephanopoulos and Harold Ickes. On the pro side were Reed, Al Gore, and Rahm Emanuel, arguing that the president couldn't afford to be seen keeping a failed system going.
Sen. Daniel Patrick Moynihan (D-NY) famously predicted "children sleeping on grates, picked up in the morning frozen."
Clinton signed the bill, in the process renaming AFDC the Temporary Assistance for Needy Families (TANF). In response, HHS officials Primus, Peter Edelman, and Mary Jo Bane resigned in protest. Edelman, a longtime personal friend of the Clintons, wrote a long piece for the Atlantic calling welfare reform the "worst thing Bill Clinton has done."
At first, welfare reform seemed to be working as intended
Clinton and congressional Republicans had picked just about the best possible time to enact a law like this. The late '90s were an era of extreme labor market tightness that has not been seen since. Unemployment dipped below 4 percent at times. Even many of the least-skilled former AFDC recipients could find work.
Add to that the fact that Clinton had pushed through a huge expansion in the earned income tax credit (EITC), which made low-wage work considerably more attractive, and you had a scenario where the aftermath of welfare reform could see poverty actually fall.
And fall it did. Here's how the anchored supplemental poverty measure — a more accurate metric for deprivation than the official poverty measure — changed from 1993 to 2002:
And welfare enrollment fell dramatically:
What’s more, it appears that the relationship was at least somewhat causal. Welfare reform really didappear to be decreasing caseloads and increasing earnings and employment. Typically, researchers found that the EITC and the growing economy did more, but welfare reform played a role all the same. "Some women who were on welfare really did have enough work skills to get a decent job at wages above the minimum wage, and they are probably better off off welfare," Moffitt says.
For example, in one influential paper the University of Chicago's Jeffrey Grogger estimated that time limits caused about one-eighth of the decline in welfare use and 7 percent of the rise in employment among single mothers from 1993 to 1999 — less than the EITC, but still significant.
More dramatically, in 2004 Hanming Fang (now at Penn) and Michael P. Keane (now at Oxford) estimated that work requirements and time limits explained 68 percent of the decrease in welfare usage and 27 percent of the increase in workforce participation among single mothers. Once again, EITC was a bigger factor in workforce participation, but welfare reform still mattered.
Most impressively, in 2000, University of Wisconsin's Rebecca Blank (later Obama's acting commerce secretary) and the University of Michigan’s Robert Schoeni found a rise in total income and decline in poverty for most affected by the 1996 reforms.
"Welfare reform is now widely viewed as one of the greatest successes of contemporary social policy," Jencks and Scott Winship wrote in a 2004 piece.
But later research cast doubt on welfare reform’s efficacy
Asked again earlier this year about that article, Jencks told the Washington Post’s Max Ehrenfreund simply: "I was wrong." In that, he’s joined by most social policy experts I consulted for this piece. While conservatives still defend the 1996 reforms, there’s a broad consensus outside the law’s core supporters that something went deeply wrong, and that the initial assessments were way too optimistic.
For one thing, subsequent research cast doubt on the original pro-reform studies. The best, most recent review of the literature I've seen comes from the University of Kentucky's James Ziliak, a veteran researcher on welfare policy issues. It was finalized in late 2015 and incorporates not just the initial rush of research into welfare reform post-1996 but studies since the Great Recession began as well.
Ziliak agrees with prior research that while you can certainly debate the relative importance of welfare reform compared with the EITC and the business cycle, TANF and its associated rules almost certainly caused a decrease in the welfare rolls and increased employment. He also finds a relative consensus that it increased earnings.
For most family structure–related outcomes — teen births, marriage, etc. — the evidence was too limited and mixed to draw firm conclusions.
But Ziliak also concludes that welfare reform reduced the incomes of the poor, when you take both the increase in earnings and the decline in transfer income into account, and especially if you look at the poorest of the poor. In other words, transitioning from welfare to work may have gotten people jobs, but those people didn't actually come out ahead monetarily. Welfare would've paid better than work did.
Specific studies finding this include one by Ziliak himself, with Kentucky colleagues Christopher Bollinger and Luis Gonzalez, which concludes, "The earnings gains among the low skilled a decade after the implementation of TANF and expansions of the EITC have been more than offset by losses in transfer income and have left the most vulnerable single mothers either running in place or falling behind."
Bitler, Hoynes, and Penn's Jonah Gelbach looked at the Connecticut Jobs First waiver experiment, a pre-TANF reform effort with many similar characteristics to federal welfare reform, and found reductions in total income for participants at the bottom at the income distribution. That study is particularly compelling since it was an actual experiment with random assignment.
Ziliak also points out flaws in some of the earlier research suggesting welfare reform reduced poverty. Blank and Schoeni’s paper, for instance, excluded those reporting no earnings and income, which might have made the overall population appear better off than it really was.
"While the official poverty rate fell among single mother families in the 5 years after reform, this is less in evidence over the long term, especially for broader definitions of income that include in-kind transfers like SNAP [Supplemental Nutrition Assistance Program, also known as food stamps] and tax payments and credits," Ziliak writes in an email. "We saw especially an increase in so-called deep poverty, the fraction living below 50 percent of the poverty line."
"If the goal of welfare reform was to get rid of welfare, we succeeded," the University of Wisconsin’s Timothy Smeeding notes. "If the goal was to get rid of poverty, we failed."
Welfare reform almost certainly increased deep poverty
There's the rub. Deep poverty figures tell a much less rosy story than those for overall poverty. That suggests, as Hopkins's Moffitt has argued, that welfare reform was part of a shift away from aid for the poorest of the poor and toward the highest-earning of the poor: those with jobs, who benefited from higher minimum wages and EITC.
When you look at overall poverty from 1993 to 2012 (again, measured accurately rather than through the official measure), you see that it fell substantially in the 1990s and then stayed down.
That was true even in economic downturns. In 1993, as the nation recovered from the early '90s recession, the poverty rate was nearly 21 percent. In 2012, in the wake of the worst recession in post-WWII history, it spiked up to 16 percent, a huge improvement.
The same can't be said of deep poverty. That fell in the '90s too — but by a comparatively tiny amount. And by 2012, it was back fairly close to its 1993 level:
Tellingly, the deep poverty rate in 1996, when welfare reform passed, was 4.6 percent. Since the end of the late-'90s boom in 2001, the rate has never been that low again.
If you try to isolate the effects of welfare reform, it appears that if anything it probably increased deep poverty in the US. The most disturbing evidence in this regard comes courtesy of the University of Michigan's Luke Shaefer and Johns Hopkins's Kathryn Edin, who have documented an increase in the share of Americans living on $2 a day or less in cash income.
Using data from the Survey on Income and Program Participation (SIPP), they found that the share of households with less than $2 per day, per person, shot up from 1996 to 2011, from 1.7 percent of households with children to 4.3 percent. That's a 153 percent increase.
The growth is much smaller if you throw food stamps, tax credits, and housing subsidies into the mix, but it's still an increase of more than 45 percent: from 1.1 percent of households to 1.6 percent. That just underscores Edin and Shaefer's main point, which is that more and more families are being forced to get by without a reliable source of cash income.
And cash matters. You can't pay the rent with food stamps. You can't buy clothing for your children, or refill a subway card, or pay the car bill, or refill your gas tank either. You can't eat housing subsidies (and very few of the poor get them, in any case).
Shaefer and Edin are clear that they view this development as, in large part, a result of welfare reform. "The percentage growth in extreme poverty over our study period was greatest among vulnerable groups who were most likely to be impacted by the 1996 welfare reform," they note. Households headed by single women saw a larger increase in extreme poverty. Households with children (the only ones eligible for AFDC) saw an increase more than twice as large as the one households without children experienced.
And TANF did much less to reduce extreme poverty than AFDC did. In 1996, AFDC brought 1.15 million households above the $2-a-day threshold. In 2011, it was only bringing about 291,000 above it — and this was after more than a decade of population growth.
This conclusion is backed up by other data Shaefer and Edin present. Food stamp recipients must verify their income to the program, and misreporting can result in criminal charges, increasing the data's credibility. In 1996, 316,000 SNAP applicants reported having no income. In 2012, 1.2 million did. "Our SIPP estimates fall behind SNAP administrative data estimates as of 2012," Shaefer and Edin write, "suggesting that our SIPP estimates are on the low side."
Shaefer and Edin also did extensive fieldwork talking to families meeting the $2-a-day threshold, reporting their findings in the book $2 a Day. They found, again and again, that the effective end of cash welfare was forcing families into desperate measures to provide for themselves.
Many people they talked to would sell plasma, one of the few ways to make quick cash when work can't be found. Others would sell their food stamps for cash — a rare practice generally, but common among the extremely poor. The one thing they couldn't do is rely on cash welfare.
"TANF is virtually dead in all of these places. It's absolutely striking that every one of our families is categorically eligible for TANF and none of them are receiving it," Edin told me. "Where it's really dead is in the imaginations and thought processes of the poor. This is not seen as a fallback. In most cases, it doesn't occur to people to apply."
The $2-a-day research has provoked a fair share of pushback from critics, but none of their arguments really refute the central conclusions. The most common argument is that SIPP underreports income, exaggerating the rate of extreme poverty.
But SIPP, Edin and Shaefer argue, suffers less from this problem than other surveys, and the fact that SNAP's data tracks SIPP so well is further evidence that something real is going on here.
Moreover, for this to explain the rise in extreme poverty, underreporting would have to increase over time — and between 1996 and 2005, it actually fell for SIPP.
In a review of Edin and Shaefer's book, Christopher Jencks from Harvard presents still more evidence of this increase in deep poverty and deterioration in living standards for the poorest of the poor. He charts how the economic resources of Americans at the 50th, 10th, 5th, and 2nd percentile of the income distribution have changed from 1967 to the present:
While people at the middle, and even the middle poor, saw their resource levels stagnate from 1999 onward, they plummeted for Americans at the 2nd percentile. This, he concludes, "support Edin and Shaefer’s claim that the poorest of the poor were a lot worse off in 2012 than in either 1996 or 1999."
Other analyses of SIPP have come to similar conclusions as Edin and Shaefer. A 2011 paper by Hopkins's Moffitt, Mathematica's Yonatan Ben-Shalom, and University of Wisconsin Madison's John Karl Scholz estimated changes in post-transfer deep poverty. They found that 4.5 percent of families were under half of the poverty line in 1993, but 6.6 percent were in 2004, a nearly 50 percent increase.
Edin and Shaefer were also building upon a rather large literature showing an increase in the number of "disconnected mothers": single moms who were neither receiving cash benefits nor in the workforce. The Urban Institute's Pamela Loprest and Austin Nichols estimated that while in 1996, one in eight low-income single mothers were disconnected — having no earnings and no TANF or Supplemental Security Income benefits, and not in school — one in five were in the years from 2004 to 2008:
Similarly, Wisconsin's Blank and Michigan's Brian Kovak (now at Carnegie Mellon) find that the share of single mothers with no earnings or welfare not in school doubled from 10 to 20 percent from 1990 to 2005. If you include women with very low earnings and no Social Security Insurance (SSI) income, the rate goes from 12 to 22 percent. Many of these families still received SNAP benefits, but that’s about it.
The bottom line is that a large and growing literature finds, consistently, that deep poverty defined in a variety of ways increased after the introduction of welfare reform. The increases are particularly striking among single mothers, the main group benefiting from AFDC.
It's hard to interpret this evidence as saying anything other than that welfare reform decreased living standards for the most vulnerable members of American society.
Block granting: where even conservatives think reform fell short
It was 20 years ago that leaders of both major political parties gathered in the Rose Garden of the White House to watch President Clinton sign the Personal Responsibility and Work Opportunity Reconciliation Act. The bill that Clinton signed into law on August 22, 1996, despite its obscure title (and unpronounceable acronym, PRWORA—hereafter we will simply call it “the Act”), represented the most extensive revision of federal welfare policy in more than a generation.
There were smiles all around that day in the Rose Garden, and an uncommon political harmony as Democrats and Republicans basked together in the warm afterglow of their enormous undertaking. Clinton even saw it as the beginning of a new era of bipartisan cooperation. “Welfare will no longer be a political issue,” he said. “The two parties cannot attack each other over it.”
Of course, not everyone was pleased with welfare reform. Even as President Clinton prepared to make it the law of the land, several hundred protestors marched outside the White House, chanting “One, Two, Three, Four. Stop the war on the poor.” Three senior members of his administration had resigned in protest. But President Clinton was not deterred. Echoing a theme of his 1992 campaign, he declared: “Today, we are ending welfare as we know it.”
And with a presidential signature, 60 years of welfare in America changed. The Act made a number of significant alterations in the way welfare was provided.
Before the 1996 Act, when most people thought of welfare, they thought of Aid to Families with Dependent Children (AFDC), the country’s largest cash-assistance program, which provided direct cash payments to children in families where the parents were absent, incapacitated, deceased, or unemployed, and to certain other members of the children’s household, most frequently their mother. The program was funded by a combination of federal and state funds (the federal portion varied from 50 to 80 percent), with states setting benefit levels and the federal government determining eligibility requirements.
The Act replaced AFDC with the Temporary Assistance for Needy Families block grant. TANF effectively abolished most federal eligibility and payment rules, giving states much greater flexibility to design their own programs. The TANF block grant was a fixed amount for each state, largely based on the pre-reform federal contribution to that state’s AFDC program. In addition, as mentioned above, the block grants eliminated welfare’s “entitlement” status, meaning that no one would have an automatic right to benefits. States could choose which families to help. States were, however, required to continue spending at least 75 to 80 percent of their previous levels under the new law’s “maintenance of effort” provision.
Widespread work requirements were to be imposed on welfare recipients. States were initially to have at least 40 percent of their welfare recipients either working or participating in activities that prepare one for work, which percentage was to increase to 50 percent by 2002. States were given wide discretion in designing these work programs. They were also given various credits and exemptions that significantly reduced the number of recipients actually required to work.
The Act also established a time limit for receiving welfare. Recipients could not remain on the rolls for longer than 60 months (five years). However, this restriction did not apply to child-only families, where the children received benefits but the parents did not, because of immigration status or other eligibility barriers, and states could exempt up to 20 percent of their adult recipients from time limits for “hardship” reasons. States also had the option of imposing stricter time limits or using their own funds to continue paying benefits to families who exceeded the five-year time limit.
Also included were incentives for states to establish programs to limit out-of-wedlock births. Each year, the five states that achieved the greatest reduction in out-of-wedlock birth ratios (defined as the proportion of out-of-wedlock births to total births), while also decreasing the ratio of abortions to live births, would receive $20 million in additional federal funds.
The other provisions that targeted out-of-wedlock births included: 1) making unmarried mothers under the age of 18 eligible only if they stayed in school and lived with an adult; 2) allowing states to prohibit additional benefits for women who conceived additional children while on welfare; 3) requiring states to establish numerical goals for the reduction of teen pregnancy and out-of-wedlock births, and to develop specific plans for achieving those goals; 4) directing the U.S. Secretary of Health and Human Services to implement a comprehensive program to combat teen pregnancy and to ensure that at least 25 percent of American communities had teen pregnancy prevention programs in place by 2002; and 5) authorizing states to spend unused TANF funds on teen pregnancy prevention and teen parent services.
When welfare reform passed, critics warned that it would only make the lives of disadvantaged Americans worse. Wrote Katha Pollitt in the August 12, 1996 issue of the New Republic: “wages will go down, families will fracture, and millions of children will be made more miserable than ever.” One frequently cited Urban Institute study predicted that more than a million children would be thrown into poverty.
However, the results do not appear to have borne out those warnings. Poverty rates actually declined in the years immediately following the passage of welfare reform, as did poverty for important subcategories such as African Americans and children. Of course, the mid-to-late 1990s was also a time of strong economic growth. Studies suggest that roughly 30 to 40 percent of the decline in the poverty rate could be traced to welfare reform, while 30 to 40 percent was due to the economy as a whole. What caused the rest of the decline in the poverty rate could not be determined, but it was probably a combination of factors.
Since 2000, poverty rates have crept back up, and they have spiked during the recession, but still remain in line with pre-welfare-reform levels. There is some evidence that those in deep poverty—that is, those at half of the federal poverty level or below—may not have fared as well, but it depends which measure is used. Measures looking at income tend to show that the number of families in poverty has increased. As implementation of the 1996 Act, along with the growth of the Earned Income Tax Credit, first established in 1976, and other changes, reoriented the system more toward work, some Americans who had the fewest work skills or had been out of work the longest were left behind. Other measures focusing on consumption found no reduction in consumption for these most vulnerable groups following welfare reform. In any case, welfare reform does not appear to have thrown large numbers of Americans into poverty.
But if welfare reform was not the disaster that its critics feared, neither was it the unalloyed success that its supporters claimed.
Welfare enrollment, of course, declined, from 13.42 million AFDC recipients in 1995 to just 4.12 million people on TANF in 2015. This should be no surprise; many provisions of the 1996 Act, from its time limits to its work requirements, were designed to move people off the rolls.
Studies predating the recent recession suggest that most of those leaving the welfare rolls found employment: Roughly 60 percent of the adults who left welfare were later found to be employed in the months after they got off welfare, and over a period of several months or longer, about 70 percent held at least one job. Studies also showed employment gains among those population categories most affected by welfare reform. For instance, single mothers with children showed little change in their labor-force participation rates through the 1980s and into the mid-1990s. But between 1994 and 1999, their labor-force participation rose by 10 percentage points. Among single mothers with children under the age of six, labor-force participation rates rose by 5 percentage points. In short, at exactly the same time as caseloads started to fall, work effort rose substantially.
Post-recession evidence is far thinner. Some studies suggest, though, that while an improvement over the pre-1996 status quo, the employment and income outcomes for welfare-leavers were not quite as good as during the economic expansion of the late 1990s. The proportion of TANF recipients who are working in some capacity continues to be much higher than pre-welfare-reform levels even after the 2007-2009 recession. Forty-two percent were employed or in a job- preparation activity in 2009, compared to just 19 percent in 1994.
While these are improvements, there has been some deterioration in employment rates and income of former welfare recipients over the 10-year period from 1996 to 2005. The annual job entry rate (the percentage of unemployed adult TANF recipients who obtained jobs) hovered around 35 percent in the years before the recession, when it fell to about a quarter.
At the same time, turning welfare into a block grant helped hold TANF spending in check. In inflation-adjusted terms, TANF spending declined by roughly a third since the first full year of TANF in 1997. Specifically, it went from $16.5 billion in 1997 to $11.1 billion in 2015 (in constant 1997 dollars).
Yet, it must be acknowledged that welfare reform’s successes were modest. This is in large part because the reforms had very limited aims to begin with. The federal government funds more than 100 antipoverty programs, dozens of which provide benefits, either cash or in-kind, directly to individuals (the remainder provide funds to distressed communities or groups). The 1996 Act affected only four of these, and only one (AFDC/TANF) to any significant degree.
Thus, to put welfare reform in context, while TANF spending may have declined in real terms, total spending on antipoverty programs rose dramatically. Federal antipoverty spending alone has more than doubled since 1996, from $306 billion then to roughly $700 billion today. State spending rose from $153 billion then to roughly $280 billion today. That means we are currently spending nearly $1 trillion fighting poverty. Yet all of this additional spending has failed to further reduce poverty.
This is true whether one looks at the official, but flawed, Census Bureau definition of poverty, or the more accurate Supplemental Poverty Measure (which, for instance, accounts for taxes and non-cash benefits).
Nor has welfare reform had much of an impact on economic mobility. Some of the studies undertaken since 1996 found that younger children enjoyed small, positive effects on metrics like test scores, health, and behavior, while teenagers saw small negative effects in terms of academic outcomes and behavior. The vast majority of these studies find relatively small effects on children. This should perhaps not be surprising, as welfare reform was only one contributing factor among much bigger changes to the broader economy.
Earlier studies had found that long-term economic mobility over the entirety of a working life changed little from 1942 to 1999, but there was significant heterogeneity among groups, with women seeing significant increases in mobility and men seeing relatively steady or declining levels of mobility. A more recent study in the American Economic Review by Raj Chetty and colleagues found that along a number of measures, “children entering the labor force today have the same chances of moving up the income distribution (relative to their parents) as children born in the 1970s.”
Thus, the post-welfare reform world looks troublingly like the pre-welfare reform one. If you look beyond TANF, total welfare spending continues to increase rapidly. While that additional spending may well reduce the discomfort of poverty, it does little to help people get out of poverty. Moreover, many of the structural incentive problems with welfare remain.
For example, a 2013 Cato Institute study in which I participated found that total welfare benefits—counting not just TANF, but also food stamps, housing assistance, Medicaid, WIC, emergency food assistance, and the Low Income Home Energy Assistance Program (LIHEAP)—exceeded the minimum wage in 35 states. In the eight most generous states, those benefits could exceed what an individual would earn from a $20-an-hour job in 2013. While certainly not every poor family receives all those benefits, it is clear that the welfare system can still create a strong disincentive to work.
Similarly, while the rate of births to unmarried women has leveled out in recent years, the welfare system still subsidizes single parenthood. One of the few recent studies analyzing the issue, published in the Journal of Political Economy, found that “higher base welfare benefits (1) lead unwed white mothers to forestall their eventual marriage, and (2) lead unwed black mothers to hasten their next birth,” although the effects were modest. A second study by Irwin Garfinkel and others also found “generous welfare promotes non-marital births.”
All of this stems from the reality that the 1996 Act ultimately reformed a welfare program, but not the welfare system.
We would do well to consider, as we look to the next generation of welfare reform, not restricting reform proposals to individual programs. Trimming food stamps by a few billion dollars or adding a work requirement to the WIC program may not be the best strategy. Rather, we should approach welfare reform, and fighting poverty, in a more holistic way.
That means, as a start, consolidating the current multitude of government programs. There is no reason we should have 33 housing programs, run by four different cabinet departments, including, bizarrely, the Department of Energy. There are currently 21 different programs providing food or assistance in purchasing it. These programs are administered by three different federal departments and one independent agency. There are eight different health care programs, administered by five separate agencies within the Department of Health and Human Services. And six cabinet departments and five independent agencies oversee 27 cash or general assistance programs. All together, seven different cabinet agencies and six independent agencies have responsibility for administering one or more antipoverty programs.
There are currently several proposals to combine a number of these programs, usually in the form of a block grant to the states.
For instance, House Speaker Paul Ryan advocates giving the states a block grant in lieu of funding for 11 current welfare programs: the Supplemental Nutrition Assistance Program, or food stamps; TANF; the Section 8 Housing Choice Voucher Program; Section 521 Rural Rental Assistance Payments; Section 8 Project-Based Rental Assistance; Public Housing Capital and Operating Funds; Child Care and Development Fund; the Weatherization Assistance Program; LIHEAP; Community Development Block Grants, and the WIA Dislocated Workers program.
Unfortunately, however, Ryan’s proposal (which he put forth in 2014 when he chaired the House Budget Committee) would send the money to the states rather than to the recipients themselves. As noted, state provision of welfare is better than federal, but Ryan also includes a host of federal strings, severely limiting the ways in which states may use this money. While that may be politically realistic given the resistance to any reform, his ideas essentially place a federalism template over the current system.
Better is the proposal of Florida’s junior senator—and former presidential aspirant—Marco Rubio. It goes further, replacing most current federal welfare programs with a state-run “Flex Fund” under which states could provide benefits the way they want. As he lays out in his 2015 book American Dreams, states should be encouraged to replace in-kind programs with cash benefits, although under his plan the final decision would be left up to the states. In fact, Rubio would impose few mandates for how the states should use their money. For example, while he notes the importance of work requirements as a condition for receiving assistance, he would allow states to decide whether or not to impose such requirements.
The second major concept for a new welfare reform is in fact movement away from in-kind assistance toward greater use of cash payments to the poor. Non-cash, or in-kind, benefits have become—in part because the 1996 reform put restrictions on the largest cash-benefit program—a larger and larger portion of the welfare-benefit basket. In-kind assistance and programs administered through the tax code (like the EITC) comprise the other 88 percent.
Why is cash preferable to in-kind benefits? There are several reasons. For one thing, it is simple and transparent. For another, it treats recipients like adults, expecting them to budget and be responsible, while also freeing them from petty restrictions on their behavior. Also it helps break up the concentrations of poverty that spring up around providers that accept government payments. Last but not least, it limits the power of lobbies that are vested in specific programs.
Third, if we are serious about reducing poverty in America, we should look to factors outside the welfare system itself. We actually have a good idea of the keys to getting out and staying out of poverty: 1) finish high school, 2) do not get pregnant outside of marriage, and 3) get a job—any job—and stick with it.
Even among people with some kind of job, high school dropouts are roughly 2.3 times more likely to end up in poverty than those who complete at least a high school education. If they do find jobs, high school dropouts’ wages are likely to be low. They have declined (in inflation-adjusted terms) by 17.5 percent over the past 30 years. At the same time, children growing up in a single-parent family are four times more likely to be poor than children growing up in two-parent families. Roughly 63 percent of all poor children reside in single-parent families. But only 2.8 percent of full-time workers are poor. The “working poor” are a small minority of the poor population. Even part-time work makes a significant difference. Only 15 percent of part-time workers are poor, compared with 23.6 percent of adults who do not work.
Notwithstanding that the ways to overcome poverty are clear, with the exception of a few education programs—mostly geared toward higher education, such as Pell Grants—few welfare initiatives address these issues. Indeed, the incentive structure often discourages work and increases non-marital births.
It would make sense therefore to shift our antipoverty efforts from government programs that simply provide money or goods and services to those who are living in poverty, to efforts to create the conditions and incentives that will make it easier for people to escape poverty. Poverty, after all, is the natural condition of man. Indeed, throughout most of human history, man has existed in the most meager of conditions. Prosperity, on the other hand, is something that is created. And we know that the best way to create wealth is not through government action, but through the power of the free market.
If we wish to fight poverty, we should end those government policies—high taxes and regulatory excess—that inhibit growth and job creation. We should protect capital investment and give people the opportunity to start new businesses. We should reform our failed government school system to encourage competition and choice. We should encourage the poor to save and invest. And we should seek to reduce the biases within our criminal justice system that disproportionately harm the poor and minorities.
Welfare reform was neither the disaster that its critics feared nor the success its supporters claim. It was a step in the right direction—a small one, and one from which we can learn. The real work of fighting poverty remains ahead of us.
 Warren Strobel and Cheryl Wetzstein, “Clinton Signs Reform of Welfare into Law; NOW Leads Protest Outside of White House,” Washington Times, August 23, 1996. For a detailed look at the welfare-reform debate and Clinton’s decision to embrace the issue, see R. Kent Weaver, Ending Welfare As We Know It (Brookings Institution, 2000).
 They were: Deputy Assistant Secretary of Health and Human Services for Human Resources, Wendell Primus, Assistant Secretary of Health and Human Services for Planning and Evaluation, Peter Edelman, and Assistant Secretary of Health and Human Services for Families and Children, Mary Jo Bane. Barbara Vorbejda, “HHS Official Resigns in Protest of Decision to Sign Welfare Bill,” Washington Post, August 18, 1996.
 Section 401(B) states: “No Individual Entitlement—This part shall not be interpreted to entitle any individual or family to assistance under any State program funded under this part.” However, Weaver suggests in Ending Welfare as We Know It (p. 328) that in some states, an individual entitlement may still exist under state law.
 States may not use TANF funds to substitute for current state spending on efforts to prevent teen pregnancy. TANF dollars may only be used to deliver special services over and above the programs generally available to other state residents without cost and regardless of income.
 See, for example, Council of Economic Advisers, “The Effects of Welfare Policy and the Economic Expansion on Welfare Caseloads: An Update,” August 3, 1999; Douglas Besharov, “The Past and Future of Welfare Reform,” Public Interest, Winter 2003, pp. 4–21.
 Kathryn J. Edin and H. Luke Shaefer, $2.00 a Day: Living on Almost Nothing in America (Houghton Mifflin Harcourt, 2015); Yonatan Ben-Shalom, Robert Moffitt and John Karl Scholz, “An Assessment of the Effectiveness of Anti-Poverty Programs in the United States,” Institute for Research on Poverty, Discussion Paper No. 1292-11; Bruce Meyer and James Sullivan use a consumption measure and do not find an decrease in consumption or expenditures for the single mothers at the bottom of the income distribution. Bruce D. Meyer and James X. Sullivan, “Changes in the Consumption, Income, and Well-Being of Single Mother Headed Families,” American Economic Review, 98(5): 2221-41, https://www.aeaweb.org/articles.php?doi=10.1257/aer.98.5.2221.
 Gene Falk, “The Temporary Assistance for Needy Families (TANF) Block Grant: Responses to Frequently Asked Questions,” March 18, 2016; Office of Family Assistance, “TANF & SSP: Average Monthly Number of Recipients,” U.S. Department of Health and Human Services, Fiscal Calendar Year 2015, March 13, 2016.
 Ron Haskins, “The Outcomes of the 1996 Welfare Reform,” testimony before the Committee on Ways and Means, U.S. House of Representatives, July 19, 2006.
 Rebecca Blank, “Evaluating Welfare Reform in the United States,” Journal of Economic Literature 40:4 (December 2002), 1104-1166.
 Gene Falk, “Temporary Assistance for Needy Families (TANF): Welfare-to-Work Revisited,” Congressional Research Service, October 2, 2012.
 Gregory Acs and Pamela Loprest, “TANF Caseload Composition and Leavers Synthesis Report,” Urban Institute, March 28, 2007.
 Falk, March 18, 2016.
 Rachel Dunifon, “Welfare Reform and Intergenerational Mobility,” Pew Charitable Trusts Economic Mobility Project, May 2010.
 Wojciech, Emmanuel Saez, and Jae Song, “Earnings Inequality and Mobility in the United States: Evidence from Social Security Data since 1937,” Quarterly Journal of Economics 125:1 (February 2010), 91-128.
 U.S. Department of Labor, Bureau of Labor Statistics, “A Profile of the Working Poor, 2010,” Report 1035, March 2012, Table 3, p. 8.
 U.S. Census Bureau, “Table P-16 Educational Attainment,” and “Table P-17 Years of School Completed.”
 Federal Interagency Forum on Child and Family Statistics, “America’s Children: Key National Indicators of Well-Being, 2011,” http://www.childstats.gov/americaschildren/eco1.asp.
 Michelle Chau, et. al, “Basic Facts About Low-Income Children, 2009,” National Center for Children in Poverty, October 2010.
 U.S. Census Bureau, “Current Population Survey, Annual Social and Economic Supplement,” Table POV 22: Work Experience During Year by Age, Sex, Household Relationship and Poverty Status for People 16 Years Old and Over.
Michael Tanner is a senior fellow at the Cato Institute and the author of Going for Broke: Deficits, Debt, and the Entitlement Crisis.
About the Author
There is much with which to agree in Michael Tanner’s Liberty Forum essay summarizing the post-1996 history of welfare reform, its successes and failures, and where to go from here. However, I view the Personal Responsibility and Work Opportunity Reconciliation Act as having succeeded to a greater extent than Tanner believes. Indeed, as I have argued…
Michael Tanner’s Liberty Forum essay provides a characteristically insightful and level-headed overview of the 1996 welfare reform and its consequences. He admirably clears away the rhetorical fog that still envelopes our debates regarding welfare, and does not let either side get away with much. “Welfare reform was neither the disaster that its critics feared nor…
Scott Winship, Yuval Levin, and William Voegeli offer insightful critiques of my Liberty Forum essay on the 20th anniversary of welfare reform. Actually, I use the term “critique” advisedly, because there may not actually be that much daylight between our positions. Still, there are quibbles, if not major differences. Scott Winship clearly feels the 1996 reform…