Happy Anniversary Welfare Reform!

by Charles Katebi

Twenty years ago, President Bill Clinton signed welfare reforms into law that revolutionized American anti-poverty policy. Critics warned these changes would cruelly condemn vulnerable families to extreme hardship. But new evidence shows these reforms lifted millions of families out of poverty.

According to a new study by the non-partisan Manhattan Institute, the Personal Responsibility and Work Opportunity Reconciliation Act of 1996, or PRWORA, dramatically reduced poverty in the United States, particularly for children. The poverty rate among all children fell from 15% in 1996 to just 5% 2014. And the rate among children in single-parent families fell from nearly 30% to 10%.

"Poverty among children—and female-headed families—is much lower today than in 1996, when President Clinton signed a historic welfare reform bill," said Scott Winship, Senior Fellow at the Manhattan Institute and the author of the study. "This drop would not have happened without that law and the way it interacted with an expansion of work supports."

Winship's report is just the latest entry in a growing body of research that shows welfare reform helped pull welfare families out of poverty. As early as 2003, three million fewer children lived in poverty compared to 1995, including 1.2 fewer black children, marking the lowest level in black child poverty at the time.

How did welfare reform pull children out of poverty? It put parents back to work. Bill Clinton's reforms transformed the welfare program, Aid to Families with Dependent Children (AFDC), from an open-ended entitlement into a temporary safety-net called Temporary Assistance for Needy Families (TANF). Whereas AFDC offered any qualifying family guaranteed benefits, TANF attached strict time and work requirements on benefits. Congress imposed a maximum five-year limit on TANF benefits, and allowed states to set even shorter time limits.

Once welfare became temporary, parents returned to work. Within three years of these changes, the employment rate for never-married mothers increased by fifteen percent. By 2014, 9 million people moved off the TANF program and into the workforce. Most importantly, the earnings among poor families increased 25 percent as they left the program.

PRWORA also allowed states to use TANF dollars on creative new programs to ease recipients into productive career paths. Wyoming used its new flexibility to require teen mothers to complete high school before they receive full TANF benefits. Recipients must also complete all of their required weekly work hours before they can collect. Thanks to these reforms, Wyoming slashed its TANF rolls by 94 percent, more than any other state.

Unfortunately, these reforms weren't replicated in other welfare programs that continue to punish low-income families for earning too much. States and the federal government collectively spend nearly $1 trillion every year on 80 different anti-poverty programs. Some programs, like the Earned Income Tax Credit, encourage low-income parents to work. Most however, continue to trap children and adults in poverty.

According to Wyoming's Department of Family Services, SNAP (food stamps), POWER (cash assistance), Medicaid and child care assistance encourage low-income families to stay poor. For example, a mother with two children earning $7.25 an hour can receive $2,370 in benefits per month and have $306 left over for discretionary spending. But if she gets a promotion making $13 an hour, her benefits drop to $1015 in benefits and has negative $60 in discretionary income. Would you take a promotion that leaves you worse off?

Rather than fix these programs with similar changes, today's liberals sound more interested in reversing welfare reform's gains. During the 2016 Democratic primaries, Vermont Senator Bernie Sanders called welfare reform "an attack, by and large, on low-income African-Americans" and threatened "some of the weakest and most vulnerable people in this country."

Even Bill Clinton's wife and current Democratic Presidential nominee, Hillary Clinton, says "we have to take a hard look at [welfare reform], especially after the Great Recession." She's even called for letting states waive TANF's five-year limit on benefits: the hallmark of welfare reform.

Politicians, voters, and community leaders of all political stripes should recognize the crucial role welfare reform played in reducing poverty. Instead of reversing PRWORA's gains, we should strive to replicate its success in other programs.