It’s Time To Block Grant Welfare To The States

This column by ACRU General Counsel and Director of Policy for the Carleson Center for Public Policy Peter Ferrara was published February 23, 2011 on

If any liberal reform had been as wildly successful as the 1996 welfare reforms spearheaded by then House Speaker Newt Gingrich, every schoolchild in America would have been forced to memorize the details by now. The reforms of the old New Deal-era Aid to Families with Dependent Children (AFDC) program involved the ultimate welfare policy dream of President Reagan and his longtime welfare guru Robert Carleson, as explained in Carleson’s recent posthumously published book Government Is The Problem: Memoirs of Ronald Reagan’s Welfare Reformer.

The reform returned the share of federal spending on the program to each state in the form of a “block grant” to be used in a new welfare program redesigned by the state based on mandatory work for the able bodied. Federal funding for AFDC previously was based on a matching formula, with the federal government giving more to each state the more it spent on the program, effectively paying the states to spend more. The key to the 1996 reforms was that the new block grants to each state were finite, not matching, so the federal funding did not vary with the amount the state spent. If a state’s new program cost more, the state had to pay the extra costs itself. If the program cost less, the state could keep the savings.

To give the states broad flexibility in designing the new replacement program, the entitlement status of AFDC was repealed, as states could not be free to redesign their programs if their citizens were entitled to coverage and benefits as specified in federal standards. The reformed program was renamed Temporary Assistance to Needy Families (TANF).

The reform was opposed bitterly by the liberal welfare establishment. Their view was well expressed by Sen. Daniel Patrick Moynihan, the Urban Institute and others who predicted that the reforms would produce a “race to the bottom” among the states, and that within a year a million children would be subject to starvation.

But quite to the contrary, the reform was shockingly successful, exceeding even the predictions of its most ardent supporters. The old AFDC rolls were reduced by two-thirds nationwide, and even more in states that pushed work most aggressively: Wyoming (97%), Idaho (90%), Florida (89%), Louisiana (89%), Illinois (89%), Georgia (89%), North Carolina (87%), Oklahoma (85%), Wisconsin (84%), Texas (84%), Mississippi (84%). By 2006 the percent of the population receiving TANF cash welfare was down to 0.1% in Wyoming; 0.2% in Idaho; 0.5% in Florida; 0.6% in Georgia, Louisiana, North Carolina, and Oklahoma; and 0.7% in Arkansas, Colorado, Illinois, Nevada, Texas and Wisconsin.

Ron Haskins of the Brookings Institution reports in his 2006 book evaluating the 1996 welfare reforms, Work Over Welfare, “the number of families receiving cash welfare is now the lowest … since 1969, and the percentage of children on welfare is lower than it has been since 1966.” Indeed, the percentage of American children on AFDC/TANF was reduced from 14.1% in 1994 to 4.7% in 2006.

As a result, in real dollars total federal and state spending on TANF by 2006 was down 31% from AFDC spending in 1995, and down by more than half of what it would have been under prior trends. At the same time, because of the resulting increased work by former welfare dependents, child poverty declined every year, falling by 2000 to levels not seen since 1978, as Haskins further reports. “[B]y 2000 the poverty rate of black children was the lowest it had ever been. The percentage of families in deep poverty, defined as half the poverty level…also declined until 2000, falling about 35% during the period,” Haskins adds.

There was only one problem with the 1996 reforms: They only reformed one federal program. The federal government sponsors another 184 means tested welfare programs, including Medicaid, Food Stamps, 27 low-income housing programs, 30 employment and training programs, 34 social services programs, another dozen food and nutrition programs, another 22 low-income health programs, and 24 low-income child care programs, among others.

All of these programs could and should be block granted back to the states just as AFDC was in 1996. This would amount to sending welfare back to the states, achieving the complete dream of Reagan and Carleson in restoring the original federalism and state control over welfare. It also follows the spirit of the Tea Party movement in restoring power to the states and gaining control over government spending, deficits and debt.

With the states in charge, each state would have the flexibility to structure their welfare systems to suit the needs and circumstances of their particular state. State control would also allow experimentation among the states to try different reform ideas, with real world results proving what works and what doesn’t. Economic and political competition among the states would then lead them to adopt what has worked best.

The best estimate of the total current cost of these 184 means tested welfare programs, plus AFDC/TANF, is $10.3 trillion for the period 2009 to 2018. The Heritage Foundation estimates that in 2008 total welfare spending in America amounted to $16,800 per poor person in poverty, or $50,400 per poor family of three. The Census Bureau estimates that this is four times the spending that would be necessary to bring all of the poor up to the poverty level. Indeed, Charles Murray wrote a whole book in 2006, In Our Hands, published by the American Enterprise Institute, explaining that we already spend far more than enough to completely eliminate all poverty in America.

Ideally, the states would enjoy control over this entire cauldron of money to finance an entirely new, redesigned welfare system for each state. If the results are anything like those for the 1996 reforms, the total savings for taxpayers would be enormous, and the poor would be much better off.