Why Welfare Reform Has Failed

On August 22 we mark the eighth anniversary of the Personal Responsibility and Work Opportunity Reconciliation Act welfare reform. Republicans have predictably hailed this landmark as a resounding success, but Democrats, too, have found cause to celebrate: after all, ninety-eight Democratic Representatives and twenty-five Democratic Senators, John Kerry among them, helped pass the law, which was then signed, of course, by Democrat Bill Clinton. The next attempt to reauthorize the PRWORA now looms (its seventh temporary extension expires September 30), and while Congress will surely consider alterations at the margins, few seem eager to propose fundamental change. They should, for the bipartisan Washington consensus is wrong. Welfare reform has failed.

Yes, welfare rolls have been cut in half (although in many states they are on the rise again), but that is a very narrow measure of success, one which only suggests that reform, as intended, pushed women off the rolls and made it difficult for others to get on.

It is not a measure of reduced need. Quite the contrary: according to the Department of Health and Human Services, by 2000 only half of those poor enough to be eligible for aid received it (about eighty percent did so in the 1980s and early 1990s).

Reform proponents have also made much of the fact that poverty rates fell in the mid-1990s, but there is no evidence to suggest that welfare reform was the cause. Instead, it was more likely the result of modestly higher wages at the lower end of the labor market, thanks to the relatively low unemployment of the recent boom; families working more hours; and the expansion of the Earned Income Tax Credit (which, while a genuine boon to the working poor, is also a government subsidy to employers who pay low wages).

As data from the Economic Policy Institute show, had we not enacted welfare reform poverty would have probably declined further than it did. Welfare reform increased poverty. Regardless, overall poverty rates have been on the rise again, as have child poverty rates, and more of those who are poor are very poor: according to the Children’s Defense Fund, by 2001 more African American children were living in deep poverty than at any time since such data have been collected.

Meanwhile, in cities large and small homelessness has risen to historic levels, higher even than during the homelessness crisis of the 1980s.

Throughout the nation soup kitchens and food pantries are stretched beyond capacity, struggling and failing to meet new need, much of it from working people whose wages simply haven’t kept up. According to the Urban Institute, one-third to one-half of those who left welfare had difficulty providing food for their families. Half or more former recipients are poor (many are poorer than they were before), and some sixty percent of those who left the rolls in 2002 were unemployed. This is success?

What’s more, welfare reform has been expensive, despite claims in the Republican Contract with America that reform could save some $40 billion.

According to the GAO, in 1997 alone states received $4.7 billion more than they would have without reform. While some of that new money has been used to fund child care and training programs, many states have used those funds for unrelated expenses. In 2003 and 2004, the Independent Budget Office reports, New York State used more than $1.3 billion in welfare funds to close budget gaps.

Nor have poor women been made less “dependent,” another canard; they have instead been made more dependent upon men (as the PRWORA and its marriage incentives intended), or upon the already scarce resources of their friends and neighbors, the caprice of private charity providers, and the vagaries of the low-wage labor market. This too was intended. The US Chamber of Commerce and other business interests, quite active behind the scenes during reform debate, understood the potential rewards: an expanded pool of low-wage workers, and fat new contracts for service provision and administration.

For-profit and not-for-profit contractors have done quite well. In 2001, state and local governments spent more than $1.5 billion on contracts for basic TANF services and administration, nearly one-third of which were awarded to private companies; in every state but South Dakota some welfare services were privatized. Accenture (formerly Andersen Consulting, of Enron infamy), Ross Perot’s EDS, Citigroup, Lockheed Martin, and others have all gotten a piece of the lucrative new welfare pie. This is not reform, but redistribution, yet another instance of public monies lining private pockets.

This too was anticipated. “Compassionate conservatism” founder Marvin Olasky and other anti-welfare reformers insisted in the early 1990s that to redeem the failed War on Poverty we should emulate the faith-based charity system of the late nineteenth century. We did, by cutting cash relief, requiring work in exchange for aid, and privatizing service provision, just as almost all large American cities did in the Gilded Age.

But Olasky read that history rather selectively, for the nineteenth century reforms in New York, Baltimore, Philadelphia and elsewhere that he lauded ultimately failed: need among the poor exploded, unrest in the cities grew, and subsidies to private charities grew so large and corrupted that reformers recanted, fought anew to return relief to public control, and then helped expand it, laying the groundwork for the innovations of the Progressive Era and New Deal — the very programs our new breed of reformers seek to undo in a broad effort, it sometimes seems, to return us to the Gilded Age.

Now welfare has dropped off the political radar screen; reauthorization ranked number twenty-two in Project Censored’s 2004 list of least-reported stories. There is still time to make up for that failure, but to do so we need the courage of our Gilded Age forebears. We must set aside the shallow conventional wisdom and take a clear-eyed look at what reform has done, and at who has really benefited.

Such an effort would make a fine addition to campaign-season discussion about the appropriate use of public power and public funds, and would be a fitting anniversary gift.

Stephen Pimpare is the author of The New Victorians: Poverty, Politics, and Propaganda in Two Gilded Ages (The New Press).

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