Home inFocus Limiting our Government; Expanding our Freedom (Fall 2018) Work for Welfare is Good for Taxpayers and for the Poor

Work for Welfare is Good for Taxpayers and for the Poor

Erwin Antoni and Stephen Moore Fall 2018
President Bill Clinton signing the Personal Responsibility and Work Opportunity Act in 1996. (Photo: Social Security Administration)

Welfare programs have a tremendous and obvious flaw: they take money from those who work and give it to those who do not. This is nothing more than an additional cost to working and an additional benefit to not working.  These programs, though well-intended, incentivize people to work less and collect welfare more. We do not need any fancy calculus or advanced statistical analysis to arrive at those facts – just basic economic training and an understanding of human nature.    

But convincing most people of the negative impact of the welfare state requires more than intuition. Economist Thomas Sowell has often said that you can defeat almost any erroneous position by asking three basic questions: At what cost? As opposed to what? And what hard evidence do you have? Analyzing welfare with this methodology dismantles many preconceptions of these government programs.

At What Cost?

If we first look at the cost of welfare, it is staggering and even disgusting. In the 50 years after Lyndon Johnson’s State of the Union Address, in which he declared war on poverty, the government spent over $22 trillion on welfare programs, and that number has continued to grow. That figure does not even include Social Security or Medicare. Without even considering the fact that the poverty rate has not significantly budged since the war on poverty began, the cost of the expanded welfare state is back-breaking, with nearly $1 trillion a year in costs. Federal and state governments spend more on welfare than on defense.

That is just the start of the financial cost. Sowell’s research has shown that welfare helped cause surges in violence, crime, and the dismantling of families, particularly poor minorities. At least one sentence of his is worth quoting in full: “The black family, which had survived centuries of slavery and discrimination, began rapidly disintegrating in the liberal welfare state that subsidized unwed pregnancy and changed welfare from an emergency rescue to a way of life.” The cost of welfare has not just been in dollars. For example, programs that incentivize single-motherhood have a tremendously negative impact on children. The children of married couples are 80 percent less likely to live in poverty than the children of single-mothers. With the introduction of massive welfare programs, the rates of both single-mother headed households and poverty among their children skyrocketed. The myriad social pathologies that are fed by the welfare state are far too numerous to list here in their entirety but, suffice to say, they are many and insidious, despite the best intentions of those who advocate for those very programs. After all, the most famous road is paved with good intentions.

As Opposed to What?

Now, consider the second question mentioned earlier: As opposed to what? In other words, are there any alternatives to welfare programs? Historically, America had no welfare state, at least not on a governmental level. Historian Walter Trattner gives valuable insight as to just how many layers of protection were traditionally available to the poor in America:

“Those in need … looked first to family, kin, and neighbors for aid, including the landlord, who sometimes deferred the rent; the local butcher or grocer, who frequently carried them for a while by allowing bills to go unpaid; and the local saloonkeeper, who often came to their aid by providing loans and outright gifts, including free meals and, on occasion, temporary jobs. Next, the needy sought assistance from various agencies in the community – those of their own devising, such as churches or religious groups, social and fraternal associations, mutual aid societies, local ethnic groups, and trade unions.”

Clearly, society had developed a multitude of safety nets which were cast far and wide to ensure as few as possible would fall through the cracks. This reliance on one’s self and one’s fellow man has diminished greatly since the Great Depression and the New Deal. Just as one example, research has shown that as the government provides fewer social services, such as in the 1996 Welfare Reform, religious institutions step in and provide more. Conversely, when people are being taxed to pay for welfare programs, there is little incentive to give to charitable organizations which are fighting the same poverty with which the government is supposedly already at war. Likewise, when no government programs exist, people are more willing to lend a hand. Furthermore, since we have already seen that welfare programs are expensive and must be paid with taxes, people paying for those programs have significantly less that they can give to charity.

While discussing the private alternatives to welfare, it is also worth noting how inefficient government is compared to private charities and other localized institutions. The burgeoning bureaucracy that oversees the welfare state is nothing more than a leech on taxpayers. The Senate Budget Committee reported that in 2011, more than $61,000 was spent for each family in poverty, but much of that did not go to the families. If the bureaucracy was eliminated and those families just got checks from Uncle Sam, their incomes would be two and a half times higher than the poverty threshold. Even the Census Bureau has acknowledged that welfare spending could be cut by 75 percent and by simply giving people cash they could be brought up above the poverty line.

We can only conclude that government is terribly inefficient, especially in the realm of charity. Despite burdensome meddling of government in this field, many religious and secular institutions still provide a wide safety net for those in society who have fallen on hard times. The difference today is that the government has put itself in a position to replace those noble, long-standing institutions, and many people turn to government handouts instead, with entitlements continuously growing.

If history can teach us anything, it’s that we don’t need a bureaucracy to accomplish what we can do for ourselves. Even in the midst of President Franklin Roosevelt’s New Deal, it was private individuals and churches that opened soup kitchens and temporary homeless shelters for those who were down on their luck during the Depression. Unemployment never fell below double digits for the remainder of the decade of the 1930’s and people remained poor while FDR exploded the national debt with welfare efforts. After the war, it was tax cuts that led to prosperity. Private charitable activity and the free market have raised far more people out of poverty than the government has. These have historically been a better alternative to the monstrous welfare state we now face.

One other alternative that is worth mentioning is sometimes referred to as workfare. This is welfare but with various caveats which seek to minimize the bad incentives welfare induces while still helping those in need. Provisions such as work requirements or limited durations on benefits are examples of possible methods to help transition people from the government dole to being productive and self-sufficient. Economist Milton Friedman was long an advocate of such an approach that could transition people from cycles of poverty to independence by temporarily guaranteeing a minimum income in place of all welfare measures.

While overall unemployment nears record lows and several minority unemployment rates are setting new record lows, one would imagine that it would be easy for those on welfare to get jobs. Once again though, we have to consider that the welfare state does not provide an incentive to leave those programs. This is especially problematic when you consider how many people on welfare are not old and infirm, but able to contribute to society, and possibly leave welfare altogether. Amazingly, of the 21 million able-bodied adults on food stamps, less than 10 percent work full-time. More than 60 percent of them simply do not work, not even part-time. Many other welfare programs face similar dilemmas. Strict requirements on work, for those who are able, would certainly be a superior alternative to the current welfare mess wherein recipients circle the drain of government dependency.

And the Evidence

The last of the three questions we set out to answer is: What hard evidence do you have? In this case, what hard evidence can be presented to show that welfare has actually reduced poverty? In a word, none. As was mentioned earlier, the government has spent vast sums to eliminate poverty, but to no avail. Thorough research by the Cato Institute has shown that the War on Poverty was entirely ineffective. The rate of poverty is roughly what it was during the Johnson administration. So, we’ve wasted trillions of dollars to barely budge the needle. There just is no hard evidence to support a continuation of the welfare state.

Meanwhile, as Sowell, Heritage scholar Robert Rector, and others point out, the welfare state has demonstrated an appalling track record of encouraging families to break up, destroying incentives to work, chaining generations to a cycle of poverty, and wasting taxpayers’ money. The cost has indeed been high, with nothing to show for it.

Another tremendous and unnecessary cost to the welfare state is the addition of illegal aliens to the welfare rolls. Los Angeles County spent about $1.3 billion on welfare for illegal aliens in just two years. In fact, this is such a drain on the welfare state that in 1996, when Republicans banned immigrants from receiving welfare for only five years, it was the largest cost savings in the entire welfare reform. The Federation for American Immigration Reform found that in the state of Pennsylvania alone, when one includes welfare programs, the cost of illegal aliens to the state’s residents is over $1.3 billion annually. If one adds the federal taxes Pennsylvanians pay, which fund other programs used by illegal aliens, the burden is even higher.

The Way to Cut

The entire welfare situation looks bleak, but there is still hope, and a way out. Many of these programs can be scaled back and the costs drastically reduced by simply requiring that those receiving benefits must work, if they are able. Time limits can also be put in place so that people cannot remain dependent forever. Programs that promise benefits at a certain age can have those ages increased and the payments can be scaled down over time. Also key to escaping the welfare mess is economic growth. Continuing the president’s pro-growth policies of tax cuts and deregulation will help grow the economy and lessen the burden of the welfare state as a percentage of gross domestic product.

In short, the welfare crisis can be averted with three simple steps. First, eliminate benefits for those who are able to work and fail to meet work requirements. The old biblical adage holds true – if you do not work, you do not eat. Second, end all assistance to illegal aliens. American safety nets are for Americans, not the world. Third, moderately and slowly cut benefits so that, over time, some programs can be eliminated and private groups and local communities can take over again with charitable activities, as they have traditionally done.

Research by Ron Haskins of the Brookings Institute has found that during the late 1990s after work requirements were included in the 1996 welfare reform law, more than half of welfare recipients left the rolls and moved into gainful employment.  Most saw gains in income as they developed work habits, skills and climbed the economic ladder.  So taxpayers and the welfare recipients benefited. Millions eventually gained economic self-sufficiency.

If ever there were a public policy triumph, this was it.

Unfortunately, under Barack Obama, work requirements for welfare were eviscerated. The recession was so deep the poverty lobby argued that there were no jobs for the welfare recipients to fill. Moreover, enrollment in the non-work requirement welfare programs, such as food stamps, Medicaid, disability and housing assistance, exploded.

Even as the unemployment rate fell, food stamps, Medicaid and disability enrollment remained at near-record highs. Is it a coincidence that during the Obama presidency, as welfare ballooned, workforce participation rates for those in the prime working ages fell dramatically?

The panoply of more than 20 welfare programs has become a substitute, not a supplement, for work. A Cato Institute study showed that the full package of federal and state welfare benefits could delivered to a family with more than $30,000 of benefits — tax and work-free. Why work?

Earlier this year, Republicans in Congress and the Trump administration tried to add a fairly modest work provision for able-bodied adults in the food stamps financing bill. Democrats en masse voted against the bill to stop workfare. This was more sad evidence that the “new Democrats” of the 1990s have vanished from the landscape.

Some Democrats have equated workfare to a form of “slavery.” By the way, the hard left made these same kind of over-the-top accusations in the mid-1990s about the Clinton work requirements, predicting “blood in the streets” if the bill passed. There was no blood in the streets.  A 2018 study by the White House Council of Economic Advisers (CEA) report finds that only about one in five able-bodied recipients of food stamps and Medicaid work full time. This is scandalous given that today jobs are plentiful and, in most states, employers are begging for workers. “These low employment rates of non-disabled working-age recipients” the CEA report concludes, “suggest that legislative changes requiring them to work and supporting their transition into the labor force for Food Stamps and Medicaid would have positive effects on work participation and self-sufficiency.”

Liberals have denounced the CEA report by regurgitating the same discredited arguments used in 1996 that millions of Americans will lose their benefits and poverty rates will soar. Jared Bernstein, a former Obama economist, wrote that the proposal shows that Republicans care more about rich donors than poor people. The Daily Kos headline shouted that Republicans have replaced the War on Poverty with a “war on poor people.”

The CEA report makes a very valid point that there are “pecuniary and non-pecuniary gains” when people get off welfare and into work. There is dignity and pride in a job well done and earning a paycheck.

Not so in the moral and financial dead end of a welfare check.  The Democrats want to give the poor a fish. Experience teaches us that it’s far better to teach people to fish so they can eat for a lifetime.  This is why work for welfare is not just good economics, it is the moral thing to do.

Stephen Moore is a senior fellow at the Heritage Foundation and Erwin Antoni is a doctoral student in economics at Northern Illinois University.