Work Activation Programs to Reform Welfare Tammy Wooten ITT Technical Institute

Work Activation Programs to Reform Welfare In August of 1996, President Bill Clinton signed into law the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) (Welfare Reform section, 2010). Before that, federal welfare was an open-ended entitlement that encouraged long-term dependency (See Chart 2). It neither reduced poverty nor helped the poor become self-sufficient. It did however, encourage out-of-wedlock births and weaken the work ethic. The pathologies it engendered were passed from generation to generation. This reform was a step in the right direction, however, much more needs to be done. The next step should be to transfer full responsibility for funding and administering welfare programs to the states. Each state would then have the freedom to innovate their own low-income programs and would cause them to have stronger incentives to reduce taxpayer costs and maximize work requirements (Replacing Welfare with Private Charity section, 2010). The federal government funds an array of subsidy programs for low-income Americans. The two programs that are of the greatest concern to me are food stamps and Medicaid. When most people think of “welfare”, they are usually thinking of the joint federal-state cash assistance program, better known by its most recent name, as TANF or Temporary Assistance for Needy Families (Overview section, 2010). According to DeHaven and Tanner (2010) welfare, as we know it was originally created in 1935 as part of President Franklin D. Roosevelt’s New Deal. The first federal welfare program, Aid to Dependent Children (ADC), was supposed to be a small program, intended to supplement existing state relief programs for widows and to provide support to families in which the father was deceased, absent, or unable to work; however, by 1938, almost 250,000 families were participating in the program. Despite rapid economic growth and declining poverty levels in the
1950s, the number of ADC recipients continued to increase and by 1956 over 600,000 families were receiving this aid (Brief History section, 2010).
Over the years the name has been changed but the assistance has, for the most part, remained the same – substantially increasing – and in recent years has reached an amount just under $20 billion per year (Welfare Reform section, 2010). These programs not only propagate indigence but also foster dependency on the government for financial assistance and services (Welfareinfo.org). Although reform has taken place, the federal government still runs a large range of programs that are expensive and damaging. The federal government should phase-out its role in TANF and related welfare programs and leave low-income assistance programs to state governments, or better yet, the private sector (Overview section, 2010). President John F. Kennedy took office amidst rising concern about poverty in 1960. Beyond renaming ADC to Aid to Families with Dependent Children (AFDC) and expanding it to include two-parent families in which the father was unemployed, Kennedy actually took little action when it came to welfare reform. After his assassination, President Lyndon B. Johnson declared that the federal government would wage war on poverty and his administration proposed a huge array of new subsidy programs for individuals and state and local governments. The expansion of government programs he introduced further expanded AFDC and by 1965, the number of Americans receiving benefits had risen to over seven times as many in only a decade to an amount of 4.3 million. After Johnson left office, Presidents Ford, Nixon and Carter all added new anti-poverty programs and between 1965 and 1975, spending for AFDC tripled. With strong views of shrinking the welfare state, President Ronald Reagan took office in 1981. Unfortunately, welfare-related spending continued to grow during both of Reagan’s two terms. A broad national consensus had developed that traditional open-ended welfare had failed by the time President Bill Clinton took office in 1983. This led to a period of state-government experimentation with welfare, within the constraints that the federal government allowed them. It was those experimentations that eventually led to the much needed welfare reform law of 1996. Sadly, this reform was short-lived. On July 12, 2013, the Obama Administration issued new bureaucratic rules that overturned the popular welfare reform. According to Robert Rector (2012), this was an illegal move, and it completely undone years of progress that helped millions of Americans. Having lost repeated legislative battles to abolish workfare (work for pay standards), liberals went backdoor by using an arcane bureaucratic device called a section 1315 waiver to declare the actual work standards written in the TANF law null and void. These new rules granted federal bureaucrats carte blanche authority to devise new replacement standards. This maneuver clearly violates the letter and intent of the TANF law. The Administration cannot use a section 1315 waiver to modify or weaken TANF’s work requirements. Section 415(a)(2)(B) of the welfare reform act, now codified at 42 U.S.C. § 615(a)(2)(B), expressly states that “a waiver granted under section 1315 of this title [the one that the Obama Administration now claims it is acting under] or otherwise which relates to the provision of assistance under a State program funded under this part (as in effect on September 30, 1996) shall not affect the applicability of section 607 of this title [which applies to the work requirements] to the State.” In short, whatever else might be said of the scope of the waiver authority, the Secretary has no lawful authority to waive the work requirements of section 607 (Alt and Gaziano, 2012).
Just as it is critical to restrain the rapid growth of overall means-tested spending, it is also important to limit excessive spending in the food stamp program individually. The federal government pays the full cost of food stamp benefits and splits administrative costs with state governments that administer the program. In FY 2011, federal spending was $77.6 billion, and state costs were approximately $6.9 billion.
As noted, the food stamp program is growing rapidly. Before the current recession, combined federal and state spending nearly doubled, rising from $19.8 billion in 2000 to $37.9 billion in 2007. Since taking office, the Obama Administration has more than doubled spending on food stamps again: Spending rose from $39 billion in 2008 to a projected $85 billion in 2012 (See Chart 1). Even after adjusting for inflation and population growth, food stamp spending is now nearly twice the level in any previous recession.
The current recession has obviously caused part of the overall spending increase, but the USDA’s Food and Nutrition Service has also liberalized eligibility standards and operated aggressive outreach programs for more than a decade with the goal of maximizing the number of food stamp recipients. These efforts, combined with the recession, have swollen the food stamp caseload to well above normal historical levels. Moreover, President Obama’s FY 2013 budget shows that the President does not intend food stamp spending to return to pre-recessionary levels. Instead, outlays will remain at historically high levels for the foreseeable future. For most of the next decade, food stamp spending, adjusted for inflation and population growth, would remain at nearly twice the levels seen during the non-recessionary periods under President Bill Clinton. This long-term increase in food stamp spending is not sustainable.

In keeping with the general aim of controlling the overall rapid growth of means-tested welfare, Congress should reduce the abnormally high levels of future food stamp spending by taking the following steps. 1. After the current recession, Congress should return total federal spending on food stamps to pre-recession levels adjusted for population growth and inflation. 2. In subsequent years, food stamp spending should grow no faster than the rate of inflation combined with population growth. 3. During periods of very high unemployment, spending may temporarily exceed this limit. 4. Congress should provide each state with an annual food stamp allocation based on its pre-recession spending level adjusted for inflation and population growth.
To implement this cap, the entitlement nature of food stamp spending should be eliminated. Automatic open-ended increases in spending should be curtailed, and states should be given greater flexibility to determine program eligibility. A food stamp spending cap of the sort described above would save the federal government roughly $150 billion over the next decade. Overall, the government should make an effort to return food stamp caseloads to normal, pre-recession levels or to the even lower levels experienced during the Clinton presidency. The additional reforms described below would contribute to that process.
Food stamps is a fossilized program that, except for greatly increased costs, has changed little since its inception in the early years of the War on Poverty. For example, the program was largely unaffected by the welfare reform legislation of 1996, which replaced Aid to Families with Dependent Children with Temporary Assistance for Needy Families, even though TANF and food stamp caseloads overlap to a great degree. Untouched by reform, it is an old-style entitlement program offering billions in unconditional aid. Recipients are entitled to one-way handouts and are rarely required to engage in constructive behavior as a condition for receiving that aid. Like the failed AFDC program, which it closely resembles, food stamps discourage work and rewards dependence.
There is a common misperception that the food stamp program is a program of temporary, short-term assistance. In reality, at any given moment, the majorities of recipients are or will become long-term dependents. Historically, half of food stamp aid to families with children has gone to families that have received aid for 8.5 years or more. (See Chart 2)

Following the welfare reform model, food stamps should be transformed from an open-ended entitlement program that gives one-way handouts into a work activation program. Non-elderly, able-bodied adults who receive benefits should be required to work, prepare for work, or at least look for work as a condition of receiving aid. Many food stamp households contain adults who are capable of working but work little or not at all. In the average month in 2010, 18.8 million households—roughly one household in five in the U.S.—received food stamp benefits. Of this total, approximately 10.5 million households contained at least one able-bodied, non-elderly adult. This included around 7 million families with children and 3.5 million non-elderly, able-bodied adults without dependents (ABAWDs). Among the 10.5 million food stamp households with able-bodied, non-elderly adults, 5.5 million performed zero work during the month. Another 1.5 million to 2 million households had employment but appeared to work less than 30 hours per week. Altogether, each month, some 7 million to 7.5 million work-capable households received food stamps while performing no work or working less than 30 hours per week. These low levels of work are not simply the product of the current recession: They are typical of food stamp recipients even in good economic times.
A work activation program would seek to increase employment among able-bodied, nonworking food stamp households that do not work and to increase the hours of work among those who are employed part-time. Work requirements should be phased in incrementally in the food stamp program once the current recession has ended and I believe this will cause both the existing caseload and the number of new enrollments to drop rapidly. Experience with welfare reform and the TANF program in the mid-1990s demonstrates that work activation can dramatically reduce welfare caseloads. In the four decades before welfare reform, TANF (formerly Aid to Families with Dependent Children) never experienced a significant decline in caseload. In the four years after welfare reform, the caseload dropped by nearly half.
A work activation program can operate at a fairly low cost. For example, a rigorous, closely supervised 16-week job search program would cost about $250 per recipient. In one year, 10 million work-capable food stamp recipients could be circulated through this type of program at an annual cost of around $2.5 billion. This would cover all current work-eligible recipients who are nonworking or underemployed as well as many new work-capable enrollees. Also, work activation could be designed to provide an incentive for states to reduce future dependence. If a state government operated its work activation program in a particularly effective way and reduced its food stamp caseloads below the pre-recession level, it might be allowed to retain a portion of the savings.
As noted, a work activation program will have administrative costs, but most states run their food stamp programs in tandem with their TANF programs, which already have a work requirement. Thus, the burden on states of implementing a work requirement for the food stamp population would not be as great as starting a separate work requirement from scratch. Nonetheless, operating the work activation program will require additional funding. An appropriate funding source for a food stamp work activation program is the TANF program. Federal TANF funding is currently $16.5 billion per year, but only 40 percent of this funding is actually used to pay benefits. The other portion goes to a wide variety of other activities in state budgets. Current TANF spending could be reduced by $2.0 billion per year, and these savings could be reallocated to fund a food stamp work activation program. Reducing TANF spending to $14.5 billion would leave more than enough funding to cover the needs of the TANF population. The reallocated $2 billion would then be split among the states to cover the costs of instituting a new work activation requirement in the food stamp program (Bradley and Rector, 2012).

References
Alt, Robert and Gaziano, Todd. The Foundry (2012, July 16). The Heritage Network. Obama’s gutting of the welfare reform is illegal. Retrieved March 8, 2013 from Obama’s gutting of the welfare reform is illegal – July 16, 2012
Bradley, Katherine and Rector, Robert. (2012, July 25). The Heritage Foundation. Reforming the food stamp program. Retrieved February 8, 2013 from Reforming the Food Stamp Program – July 25, 2012
DeHaven, Tad and Tanner, Michael. (2010, September). CATO Institute. Downsizing the Federal Government. Retrieved February 8. 2013 from TANF and Federal Welfare | Downsizing the Federal Government – Sept, 2010
Luhby, Tami. CNN Money. (2012, August 9). Welfare spending cut in half since reform. Retrieved February 8, 2013 from Welfare spending cut in half since reform – Aug. 9, 2012
Rector, Robert. The Foundry (2012, July 17). The Heritage Network. Obama ends welfare reform as we know it, calls for $12.7 trillion in new welfare spending. Retrieved March 8, 2013 from Obama ends welfare reform as we know it, calls for $12.7 trillion in new welfare spending – July 17, 2012
WelfareInfo.org. (n.d.) Retrieved February 8, 2013 from http://www.welfareinfo.org/reform