A major unanticipated and deleterious effect of welfare reform has been the steep decline in participation in both the food stamp and Medicaid programs. Prior to the legislation, a family qualifying for cash benefits was almost automatically enrolled in both Medicaid and the food stamp program. The stated intention of the 1996 law was to keep these non-cash supports in place as people moved off the welfare rolls.
These unexpected declines in food stamp and Medicaid participation appear to have a number of causes. First, income requirements in some states have kept many former AFDC recipients off Medicaid. In half the states, a working mother with two children is ineligible for Medicaid if she earns more than $9,780 a year, an amount that nonetheless leaves her family nearly $5,000 below the official poverty line.23 In some states, the eligibility cutoff is even lower. Second, many former AFDC recipients were under the mistaken impression that they were no longer eligible for food stamps and/or Medicaid when they lost their cash benefits, and it is clear that some states did little to correct this misunderstanding. In fact, many caseworkers were under the impression that they were to de-emphasize the right to maintain access to food stamps or Medicaid. Finally, in many other cases it appears that the application and renewal processes were too difficult and time consuming for parents who were now working full time. If it takes the better part of a day or several different visits to renew one’s food stamps, most employees at entry-level jobs have to make a choice between keeping their jobs and keeping the food stamps.
A study by the nonpartisan Urban Institute found that half the families that lost cash assistance also lost food stamps, although the income of the vast majority would have allowed them to continue to qualify for the program. Even more troubling, among very-low-income families (less than 50 percent of poverty level), over half no longer received food stamps.24 Similar studies by the Center for Budget and Policy Priorities show that more than a third of the children (and more than half of the parents) of those families leaving welfare also lose Medicaid, although the vast majority still technically qualify.25 Since both food stamps and Medicaid are in-kind benefits, neither counts when officially determining poverty. Thus while families that lose these benefits are clearly “poorer,” there will be no change in the usual poverty statistics. Their substantial losses are statistically invisible.
Families that leave TANF for work become poorer in other ways, too. As everyone knows, there are expenses connected to maintaining a job, most notably childcare. While many states have attempted to provide free childcare for those leaving the rolls, available estimates are that these programs accommodate only 12 percent of the need.26 Mothers with incomes below the poverty level spend an average of 23 percent of their income on childcare,27 meaning that they are automatically $2,500 to $4,000 poorer, figures that won’t show up in official poverty statistics either.
While the overall poverty rate is declining, those who remain poor are even poorer than before. The “poverty gap” is the amount of money that would have to be distributed to all poor families in order to bring each up to the poverty level. While the poverty rate has declined substantially since the Welfare Reform Act passed, the poverty gap for single-parent mothers who were poor worsened from $5 billion to $6.3 billion. Since there are also fewer families left below the poverty level, those that remain are consequently even poorer than before. Other statistics show that the average income of those who remain poor has been declining. All of these figures, of course, came during a period of unparalleled economic expansion that appears to be over.
Still to be felt are the effects of the five-year time limits, which began to be enforced for some families in 2001. Even more ominous is what will happen in the immediate future as the economic recession makes jobs harder to get and reduces state tax funds, while federal funding fails to expand to fill the gap.
How do we make sense of these confusing and seemingly contradictory bits of evaluation data? Many of us on the left predicted catastrophic results, with increasing poverty, state competition (a “race to the bottom”) to reduce benefits to avoid becoming magnets for welfare recipients, and generalized destitution. Clearly, this has not happened—at least not yet. Why?
Three answers to this question stand out. First, the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 removed the anti-work disincentives in AFDC and added significant positive incentives to work. Mothers could go to work and still keep Medicaid, mothers could get childcare only by going to work, and in many states mothers could continue to get TANF benefits during their first years on the job. Surprising many people, most states strengthened these positive incentives with their own funds. In that sense, TANF is a much better program than AFDC.
Second, the strong economy and constant TANF funding provided the states with much more money per recipient than under AFDC. Because of this, the effects of welfare reform have been just the opposite of what almost everyone expected: benefits became more generous. TANF money was then used to maintain (and in some cases increase) monthly benefits, but, more important, it was used in many states to create substantial work supports that made it possible for the first time for low-income single parents to move off welfare.
Finally, welfare reform has not yet met either of its primary challenges: time limits and economic recession. What will happen when women who really cannot get or hold jobs run past their sixty-month limit? We don’t know. For people whose time limits have run out, states are allowed to continue welfare benefits in two ways. First, up to 20 percent of the state caseload may comprise families that have been on welfare past the sixty-month time limit. Second, states may use their own funds (as opposed to federal TANF grant funds) to provide these extended benefits. Clearly some states will choose to continue benefits past the cut-off point. Others clearly will not (since some states have already sanctioned large numbers of people and simply stopped following them). We also don’t know what will happen during recession. And because evaluation takes time, the likelihood is that we will not know what has really happened until years after these changes take place.
HAS WELFARE REFORM BEEN A GOOD THING OR NOT?
In states with active work support programs, welfare reform has clearly been a force toward self-sufficiency for parents who have been able to get and keep a full-time job. Although wages have been modest (averaging $7.15 an hour) for women coming off welfare, if a person took advantage of the Earned Income Tax Credit, was able to maintain Medicaid coverage, stayed on food stamps, was able to secure state-funded childcare, and in addition was able—through earned income disregards—to maintain a small welfare check, TANF has provided a boost. The combination of earnings and work supports has made low-income children and single mothers (taken as a single group) economically better off than they were under AFDC.28 Research shows that if income in a poor family goes up, children do better, even if the mother has to go out to work, so the children have benefited as well. For these families welfare reform has been a good thing.
Because states have had excess funds, considerably more money is being spent per recipient than in AFDC. The work support programs so conspicuously absent in AFDC (childcare, transportation, Medicaid for those working) have been the cornerstone of TANF, and that has been a very good thing.
For immigrants (who essentially lost all forms of social insurance), for people who lost Medicaid, food stamps, and funded childcare, for those living in states without active programs, and for those who have not been able for whatever reason to get or maintain a full-time job, welfare reform has had very different effects. For these people, income has dropped significantly, and the non-cash supports that helped them keep their heads above water have disappeared. Indeed, they are drowning.
The statistics describing the “average welfare recipient” have looked good. But these favorable numbers mask substantial subgroups of people whom society has once again abandoned. PRWORA fails to provide for those members of our society who, while not technically disabled, are unlikely ever
to support themselves fully in a competitive work world. People have cognitive limitations, emotional disorders, psychiatric disorders, and physical disabilities or illnesses that render them unable to work in the usual jobs. There are people whom society needs to support—either temporarily while they get back on their feet or permanently—if they are not to sink into destitution. It’s not always clear who these people are, determining what is appropriate help is neither an easy nor a straightforward process. But the tools for such sophisticated evaluation do exist—cognitive and psychological testing, interviews by professionals, medical evaluation. To help the poor, however, we need to be willing to apply them in a nuanced way. We have designed our system to make sure that no “undeserving poor” get public assistance. This is the essential heartlessness and destructiveness of welfare reform. We consign hundreds of thousands of families to extreme poverty and close the door behind us. It is the old “deserving” versus “undeserving” struggle once again. We help those who can get and maintain jobs (the “deserving”) while the rest are left to their own resources.
Finally, there is the unknown. In addition to time limits and economic recession, there are some states that are simply not evaluating the results of their programs. Since this process is not easy, it will be difficult for independent monitors to keep track of more than fifty state programs. We simply don’t know what will happen.
Welfare reform, then, has been very good for some, very bad for others, and a very dangerous experiment in the unknown for still others.
A TATTERED SAFETY NET
So, what’s left? What are the major elements of American social welfare in 2002?
In the United States, much of social welfare is actually private and employer-based, especially private health insurance and pensions. In the last twenty years the trend has been for employers either to eliminate or reduce some of these benefits. Particularly troublesome for low-wage workers is the increasing tendency of employers to hire workers part time, making them ineligible for employer-based benefits. Nevertheless, the majority of people with health insurance or pensions still get them through their jobs. Although both unemployment insurance and Workers’ Compensation are legislatively mandated, they, too, are employer-based. While we usually do not think of these job benefits as part of our country’s social welfare policy they are, in fact, critical aspects of it.
Probably the most important, and certainly the most overlooked, government-run anti-poverty program is the Earned Income Tax Credit (EITC). An idea backed and turned into legislation by the Republican administrations of Richard Nixon and Gerald Ford, then expanded significantly under the Democratic administration of Bill Clinton, the EITC offers low-income working people a maximum of $4,008 in yearly tax credits in order to “make work pay.” The credit varies with family size and with income. For very-low-income families with two children, the credit gradually increases to its maximum when income rises to $10,000, providing an extra financial incentive to go to work. For incomes over $13,100, the tax credit gradually decreases until it phases out entirely at $32,121. It is important that these credits are “refundable,” meaning that if they are more than the federal tax due, a family receives the balance as a cash refund.
The credit can have as much value as a two-dollars-per-hour raise, and studies have shown the EITC to be very effective at helping to raise people out of poverty and encouraging low-income parents to get jobs. Recent census data show that among working families, the EITC lifts substantially more children out of poverty than any other current government program or category of programs. Although there has recently been more criticism of the cost of the program, it has remained politically popular, presumably because it provides no disincentive to work. Indeed, it is only available to working people.
In July 2001, the federal child tax credit was increased from $500 to $1,000 and made partially refundable. Although the refundable credit is only available to families with incomes between $10,000 and $110,000 (and thus does not help extremely poor families at all), it will eventually be, in effect, a stipend of up to $1,000 per year per child to families with poverty-level incomes.
While Social Security benefits the poor and non-poor alike, it is an extraordinarily important and effective anti-poverty program primarily because it ensures that everyone will have some retirement income, but also because low-income workers receive a higher percentage of their lifetime earnings than do high-income workers.29 Similarly, although Medicare is available to all elderly persons, it disproportionately benefits the poor, who would otherwise be unable to afford any care. Supplemental Security Income (SSI) is a federal income maintenance program for elderly or disabled people whose incomes fall below certain cutoffs. It supplements Social Security payments for those whose retirement income is inadequate, and it provides income for those whose mental or physical disabilities are significant enough to qualify them for the program. SSI benefits for a single person living alone are currently just over $500 a month and will therefore not raise even a single individual out of poverty. Nevertheless, benefits are pegged to inflation so that, in contrast to most public assistance programs, their real value remains constant.
Temporary Assistance for Needy Families (TANF) remains an important program for families with small children, as does Medicaid, which covers not only young families but also the disabled. What has largely been missed in the welfare debate is the fact that neither AFDC nor TANF was ever intended to make people self-reliant. Their purpose has always been to alleviate poverty through direct cash grants, rather than change the conditions in which the poor live. To call either program a failure because it has not raised people out of poverty is like calling the fire department a failure for not preventing a city’s fires. While welfare funds are a necessary bridge to keep families from utter destitution, welfare reform recognized that those funds must be accompanied by other programs if they are to give families the resources to escape the “surround.”
The Food Stamp program, administered through the Department of Agriculture, has generally been credited with virtually eliminating malnutrition from hunger in the United States. Before welfare reform, food stamps were available to anyone whose income was less than 130 percent of the poverty level. While the food stamp program still remains a valuable resource for poor families, PRWORA has severely limited the availability of food stamps for single adults and childless couples, who can now receive food stamps for a total of only three months during any three-year period. Food stamps have also been severely limited for immigrants. Probably as a result of these limitations, soup kitchens and food pantries around the country have reported substantial increases in demand for food since 1996.
Despite the massive cutbacks of the early 1980s, there is still some public housing (with rents proportional to income). There are also “Section 8” vouchers, in which the federal government charges recipients one-third of their income for the vouchers and then pays landlords a government-determined fair market rent. While many poor people would be eligible for housing assistance, and while the programs are very important to the people they serve, waiting lists are long (up to ten years in the District of Columbia), so the large majority of eligible people do not, in fact, benefit at all from these programs.
At the state and local level, General Assistance, that is, public relief to anyone who is poor, has largely disappeared over the past twenty years. Most state and local assistance is now in the form of social services such as child protection, shelters for the homeless, and grants to voluntary institutions to provide particular services, rather than cash grants.
This raggedy assortment of programs is especially hard on poor children. The United States separates public assistance from social insurance and then tries to distinguish between the “deserving” and “undeserving” as it parcels out benefits that no one can live on. Even in a moment of unparalleled wealth, America responds to its poor poorly, often punitively, and in many cases harshly. The system itself telegraphs an underlying message to
the poor by every means possible—and increasingly since the welfare reform of the 1990s: you are at fault for your own condition and you do not deserve even what little you get. As the richest among the rich nations, the United States maintains a population of poor people of a size and in a condition that would shame any other advanced industrial country. Among those living in poverty, for all the reasons discussed in this book, African Americans are treated worst, and are largely left to fend for themselves in impoverished, run-down ghetto areas whose rebuilding is generally on no one’s agenda.
There is also the generally ignored question of what happens to the fabric of society when that society refuses to care for its poorest. Welfare reform’s five-year limitation on TANF benefits sends a crystal-clear message: no matter how poor you are, no matter what the external conditions causing your poverty, after five years you are on your own! It is true that the law contains some provisions allowing the states to extend benefits for a limited number of people, but there is no requirement that they do so. When the richest country in the world simply says “No more!” to its poorest, the delicate fabric that holds a society together is torn. It does not bode well for our future.
Urban Injustice: How Ghettos Happen Page 11