Excellent reporting in today’s NYT on whether welfare reform worked as well as almost everyone says it did. The conclusion, as we’ve stressed in lots of recent work at CBPP, is that it is at best a fair-weather ship: it only appears to work when there’s lots of job opportunities for the low-income, single parents.
In other words, TANF (Temporary Assistance for Needy Families) has lost its critical counter-cyclical function—its ability to expand when jobs disappear. And since it is at its core a safety net program, designed to catch economically vulnerable single-parent families when jobs disappear, the loss of that function means sharply increasing economic insecurity for families with kids in periods like this one.
From the piece:
The poor people who were dropped from cash assistance here, mostly single mothers, talk with surprising openness about the desperate, and sometimes illegal, ways they make ends meet. They have sold food stamps, sold blood, skipped meals, shoplifted, doubled up with friends, scavenged trash bins for bottles and cans and returned to relationships with violent partners — all with children in tow.
This is neither just an academic point nor simply a program evaluation of a big policy change. It is a stark warning about what happens when you turn a federal function over to states, through so-called block grants. They lose their sine qua non, their automatic ability to expand when most needed. And Republicans from Romney to Ryan have pledged to do the exact same thing with the rest of the safety net, including Medicaid and Food Stamps.
The data in support of this contention—block grants eviscerate counter-cyclicality—are extremely clear and compelling. This figure, from the NYT piece, contrasts the performance of TANF and Food Stamps, the latter of which remains a federal program (now called SNAP, Supplemental Nutritional Assistance Program). Note how they move together in the 1990s recession/jobless recovery but sharply diverge after that (SNAP goes up consistently in the 2000s because despite the expansion, low-income jobs were not forthcoming and poverty rates generally rose in those years).
The figure below is equally revealing, showing the employment rates of low-income single moms (those with incomes less than twice the poverty threshold, from this post on this same theme). They went up strongly in the latter 1990s, and there’s little question that welfare reform played some role in this expansion, though full employment (the key factor), much expanded wage subsidies (the early 1990s increase in the EITC), and the higher minimum wage were also in play.
Source: Census Bureau ASEC data, crunched by Danilo Trisi of CBPP
But they peaked in the latter 1990s and have been coming down since. If welfare reform is so effective at putting people to work, why did it seemingly stop working 12 years ago? Because it’s architecture is that of a fair-weather ship—take the wind of full employment out of its sails and it founders on the shoals. And in this shipwreck, women and children don’t get away in the lifeboats. To the contrary, they risk drowning.
And at the heart of that flawed architecture is the block grant. As Pavetti and Schott write here:
…TANF’s annual block grant funding level has been frozen since its creation 15 years ago and has lost 28 percent of its value to inflation, with the decline growing larger with each passing year. Required minimum levels of state funding for TANF (under what is known as the “maintenance-of-effort, or MOE, requirement) have fallen in value by 28 percent, as well.
Unlike the Feds, states can’t run budget deficits, and that means that when crunchtime hits in recession, they’re going to use the fixed federal TANF money for other programs as well (from the NYT piece):
Arizona spends most of the federal money on other human services programs, especially foster care and adoption services, while using just one-third for cash benefits and work programs — the core purposes of Temporary Assistance for Needy Families. If it did not use the federal welfare money, the state would have to finance more of those programs itself.
“Yes, we divert — divert’s a bad word,” said State Representative John Kavanagh, a Republican and chairman of the Arizona House Appropriations Committee. “It helps the state.”
At least they’re not using it for tax cuts. But the result is the kind of activities noted above that moms have to engage in to feed their kids.
Read the piece and see if you recognize America in there…it’s getting harder and harder to do so.