Give states more discretion to reform wasteful welfare programs

Give states more discretion to reform wasteful welfare programs
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Speaking at a promotional event in Missouri on Wednesday, the president announced that after overhauling the tax code and health-care system, he intends to “go into welfare reform.”

After decades of waging a war on poverty, expanding welfare programs and spiraling costs in excess of $15 billion, the poverty rate in the United States has remained relatively unchanged, fluctuating between 11 and 15 percent since the mid 1960s.

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As a large portion of mandatory spending, means-tested welfare program costs have increased substantially in relation to other federal budget items.

 

In 2012, the federal government spent $668 billion on welfare programs and transfers, only falling short of defense and social security spending. These anti-poverty programs now constitute the second-largest federal budget expense with only social security benefits receiving more federal spending than means-tested welfare programs in 2016.

Welfare reform through devolving greater discretion to states

In devolving greater discretion over means-tested welfare programs to states, we can begin to observe which welfare reforms are most effective in encouraging work, reducing poverty and reducing the fiscal burden of unsustainable program growth.

Indeed, recent experiences in state-level welfare reform may offer some useful insights for promoting greater discretion over welfare programs to the state level.

Earlier this year, the Maine Department of Health and Human Service (DHHS) released a report on the findings of Governor Paul LePage’s decision to enforce existing time limits for Temporary Assistance for Needy Families (TANF) in the state of Maine.

The report found that some TANF beneficiaries had been on the program for 11 years, with the average beneficiary being on the program for seven years. These findings clearly highlight the extent to which states are not adequately enforcing time limits, or work requirements.

What is most interesting about this report is that 1,856 people exited Maine's TANF program in the quarter following the enforcement of time limits. Of these 1,856 former beneficiaries, a large majority had a wage record during the four-year period after exiting TANF. Total wages among this group of former beneficiaries increased 237 percent from 2012 to 2016.

The discretion given to Maine in enforcing TANF time limits in 2012 helped to promote work over welfare, substantially increasing the incomes of former beneficiaries, while saving tens of millions of dollars every year in welfare spending.

Similar to the success of TANF reform in Maine, the implementation of work requirements for Supplemental Nutritional Assistance Program (SNAP) in Maine has led to a drastic reduction in enrollees’ and a significant spike in average wages for beneficiaries exiting the program since 2014.

SNAP is arguably one of the most unsustainable means-tested programs that has seen unprecedented expansion over the past decade alone. The program has expanded from covering 23 million beneficiaries in 2005 to around 44 million beneficiaries today — almost a doubling in beneficiaries in just 12 years.

What is worse, the costs of SNAP over this period have risen from $17 billion to more than $70 billion today — that is an average annual growth rate of 12.5 percent.

Success is measured by returns to work and increased income levels

SNAP program is one of the fastest growing items in the federal budget, growing ten times as fast as government revenues and crowding out resources for other crucial spending priorities. If the federal government measures welfare program success by the number of enrollees, then it may be concluded that SNAP is a resounding success.

If, however, we measure the success of SNAP by the numbers of people transitioning from the program into work and increasing their earnings, then SNAP has been a catastrophic failure.

There are, however, some notably successful SNAP reform efforts in states that have actively enforced work requirements for able-bodied, childless adults at a minimum of 20 hours per week.

In Maine, work requirement reforms have led to an 88-percent decline in SNAP enrollment and a large spike in wages that has more than offset the loss in SNAP benefits.

The same work requirement rules enforced in Maine were implemented in Florida at the beginning of 2016, and by the end of the year, over 300,000 beneficiaries had dropped out of various welfare programs and SNAP enrollment alone declined by 85 percent.

The results are similar in Kansas where time limits and work requirements were enforced in 2013, resulting in roughly half of able-bodied adults leaving SNAP within just 3 months and a continued decline thereafter.

Not only were SNAP enrollees in Kansas almost three-times more likely to work at least 20 hours a week after these reforms, but more work also translated into higher income — with annualized average incomes of able-bodied adults without dependents on food stamps more than doubling in just two years.

Means-tested welfare reforms, which focus on moving able-bodied beneficiaries off government assistance, have been met with much criticism, including claims that work requirements and time limits will result in higher rates of poverty and greater hardship for former beneficiaries.

However, the data actually show that promoting work over welfare helps former beneficiaries drastically increase their incomes, and states that have imposed work requirements and time-limit reforms have actually experienced a falling poverty rate.

The results of implementing reforms that promoted work rather than discouraging it were shown to be both dramatic and in stark contrast to the predictions of opponents of means-tested welfare reform.

From the broadly successful experiences of states that have enforced reforms to means-tested welfare programs, we can deduce that devolving greater responsibility to states through federal block grants enables those with local knowledge to tackle poverty more effectively, while reducing the fiscal burden of spiraling costs.

What’s more, welfare transfers for able-bodied adults under the condition of work requirements are far more effective at eliminating disincentives to work, while constraining state government profligacy.

Jack Salmon is a Washington, D.C.-based researcher focused on federal fiscal policy. Salmon holds an M.A. in political economy with specializations in macroeconomics and comparative economic analysis from King's College London.