A little-noticed part of the recently passed stimulus bill is the end of the historic welfare reform of the 1990s. A major change in that reform was that states no longer received a financial incentive to increase their welfare rolls. The end of welfare reform was not debated, or even brought up as an issue. Yet these new incentives will have profound effects on the people who have for the last 13 years entered the work force rather than be lifelong dependents on the government. Of course, they will affect the federal budget (but who’s counting?) and state budgets as well. Robert Rector of the Heritage Foundation, who crafted a great deal of the 1990s welfare reform, explains the changes in his report, Stimulus Bill Abolishes Welfare Reform and Adds New Welfare Spending:
The welfare reform of 1996 replaced the old Aid to Families with Dependent Children (AFDC) with a new program named Temporary Assistance to Needy Families (TANF). The key to welfare reform’s reduction in dependency was the change in the funding structure of AFDC.
Under the old AFDC program, states were given more federal funds if their welfare caseloads were increased, and funds were cut whenever the state caseload fell. This structure created a strong incentive for states to swell the welfare rolls. Prior to reform, one child in seven was receiving AFDC benefits.
When welfare reform replaced the old AFDC system with TANF, this perverse financial incentive to increase dependence was eliminated. Each state was given a flat funding level that did not vary whether the state increased or decreased its caseload. In addition, states were given the goal of reducing welfare dependence (or at least of requiring welfare recipients to prepare for employment).
But the stimulus bill overturns the new structure and makes it even worse than it was before.
For the first time since 1996, the federal government would begin paying states bonuses to increase their welfare caseloads. Indeed, the new welfare system created by the stimulus bills is actually worse than the old AFDC program because it rewards the states more heavily to increase their caseloads. Under the stimulus bills, the federal government will pay 80 percent of cost for each new family that a state enrolls in welfare; this matching rate is far higher than it was under AFDC.
Rector has found a great deal more welfare spending in the bill:
…of the $816 billion in new spending and tax cuts in the House stimulus bill–32 percent or $264 billion–is new means-tested welfare spending, providing cash, food, housing, and medical care to poor and low income Americans.
But that’s not the end of it. (You didn’t think it was, did you?)
While $264 billion in new welfare spending may seem like a lot, it is only the tip of the iceberg. If the stimulus bill is enacted the real long-term increase will be far higher. This is because the stimulus bill pretends that most of its welfare benefit increases will lapse after two years. In fact, both Congress and President Obama intend for most of these increases to become permanent. The claim that Congress is temporarily increasing welfare spending for Keynesian purposes (to spark the economy by boosting consumer spending) is a red herring. The real goal is a permanent expansion of the welfare system.
He concludes by denouncing (the House and Senate versions of) the bill as
Trojan horses that deliberately exploit anxiety about the current recession to conceal their destruction of the foundation of welfare reform and a massive expansion of the welfare system….The fact that the stimulus proponents seek to conceal the bill’s massive permanent changes in welfare is a clear indication that they understand how unpopular these changes would be if the public became aware of them. Far from an exercise in “unprecedented transparency”–as President Obama claims–the stimulus bills are an example of unprecedented deception.
What will this mean for refugee resettlement? Perhaps only that the refugees living in dire poverty will be given more help. But it is more likely to have wider consequences. One is the disincentive to work that is inherent in the version of welfare now restored. Of course, it was widely known that many welfare recipients did work while collecting welfare, and I’m sure new recipients will be able to continue this venerable tradition.
Perhaps of greater consequence, there is now an incentive for the states to increase their welfare rolls, and refugees constitute a ready-make group to be recruited. I’m not sure of the law with regard to welfare for refugees, but I would guess that under the Obama regime the broadest possible interpretation will be allowed. Will we now have another interest group — state governments — advocating greater numbers of refugees? We’ll see.