This week marks the 25th anniversary of the 1996 welfare reform law. Crafted by Congressional Republicans, that legislation was approved by large bipartisan majorities before being signed into law by President Bill Clinton. It marked the end of a former welfare program providing limitless monthly checks to non-working parents and equally limitless federal funds to cover the cost. In its place, a new program required benefits to be time-limited, expected parents to work or train for them, capped federal funds, and held states accountable for more work, less dependence, or both.

Opponents predicted disaster. The New York Times opined “This is not reform, it is punishment. . . .The effect on cities will be devastating.” The late Sen. Daniel Moynihan (D-NY) predicted children “sleeping on grates” in a dystopian Grate Society. Future Speaker Nancy Pelosi (D-CA) ventured “The Republican welfare reform proposal will make the problems of poverty and dependence much worse because it refuses to make work the cornerstone of welfare reform.”

They
were wrong.

After reform, welfare caseloads plummeted as millions of mothers left or stayed off the welfare rolls in favor of work. In just the five years after August 1996, the number of families on welfare dropped over 50 percent. Aided by a strong economy, the share of never-married mothers (the group most likely to go on welfare) who worked rose almost 40 percent over the four-year period beginning in 1996.

Child support grew and additional funds for childcare, extended health insurance, and tax credits that rewarded work all made going to work pay better than staying on welfare. As a result, earnings rose sharply while poverty plunged.

As the Congressional Budget Office noted in 2007, “Between 1991 and 2005, household earnings doubled (on average) in female-headed low-income households,” with the change “driven by a large increase in earnings during the late 1990s.” As household incomes swelled, poverty fell sharply — instead of rising as opponents predicted. For example, the rate and number of African American children in poverty reached record lows in 2001. By 2002, even the New York Times admitted “Welfare reform has been an obvious success.”

While further reforms are overdue, most of those early gains endured in the years since. For example, the official child poverty rate in 2019 was 30 percent below the 1996 level — even without counting increases in food stamps and tax benefits promoting work. As AEI President Robert Doar recently noted and is displayed below, if you count all taxpayer assistance, the “consumption” child poverty rate fell to just 3.7 percent in 2018, or by over 70 percent compared with the 1996 level:

But liberals are now using the pandemic as cover to roll back that work-based progress. President Biden in March signed a massive pandemic relief bill that effectively overturns welfare reform by reviving monthly government checks for low-income parents who don’t work. It does so by converting the child tax credit — previously payable only to working parents — into bigger checks for even those who don’t work at all.

That policy is in place for 2021, and in July monthly federal checks worth up to $300 per child started flowing to 39 million households, including many headed by nonworking adults never before eligible for such “child tax credits.” As one headline concisely put it “Goodbye, Clinton welfare reform. Hello, child tax credit.” Supporters want to make this temporary policy permanent, but are expected to include only a brief extension in their massive spending bill this fall — because they lack offsets for the $1.6 trillion cost in the first decade alone.

Meanwhile the Biden administration just announced record increases in food stamp benefits for 42 million recipients. Approved without legislation, the increases total $20 billion per year — or more than the federal government spends on its share of the welfare program created in 1996. As AEI’s Angela Rachidi notes, the result is a single parent with three children can now collect over $20,000 in annual food stamp and “child tax credit” benefits without working. That’s the equivalent of a full-time job paying $10 per hour, without counting housing, energy, health, unemployment, disability, and other benefits the family might also collect without working.

The 1996 welfare reforms reflected a bipartisan sea change in the direction of promoting work instead of welfare as a solution to poverty. But the old Ronald Reagan adage remains true: If you want more of something, subsidize it. Especially if made permanent, partisan policies subsidizing non-work turn back the clock to what came before — when as Bill Clinton put it, welfare without work was an impoverished “way of life” for too many American families.

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