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OCR for page 33
Trends in the Welfare System
Rebecca M. Blank
The system of public assistance in the United States is constantly evolving.
In part, this is due to changing demographic and economic conditions, but even
more importantly, public assistance programs have been the target of ongoing
reform efforts. The most recent major legislative change occurred with the enact-
ment of the Personal Responsibility and Work Opportunity Act of August 1996.
This chapter summarizes trends in public assistance programs over time.
The first section looks at historical changes in the expenditure levels and usage of
public assistance programs. The second section investigates how public assis-
tance programs fit into state and federal budgets. The third section summarizes
the recent legislative changes, and the last section discusses trends in program
design and operation.
EVOLUTION OF EXPENDITURES AND PARTICIPATION
IN PUBLIC ASSISTANCE PROGRAMS
For much of U.S. history, public assistance was the responsibility of local
townships and counties, with states becoming more and more involved over the
last half of the nineteenth and the early twentieth century. As in many other areas
of social policy, the federal government's involvement did not begin until the
New Deal programs of the 1930s established a precedent for federal responsibil-
ity in this area. Even so, such programs remained relatively small in the immedi-
ate decades after the 1930s, with only small numbers of recipients and small
costs.
Things changed dramatically in the 1960s and 1970s. The primary cash
33
OCR for page 34
34
TRENDS IN THE WELFARE SYSTEM
assistance program, Aid to Families with Dependent Children (AFDC), increased
dramatically due to a variety of changes that brought many more eligible single
mothers and their children onto the assistance rolls.1 The establishment of the
Food Stamp program in the early 1960s resulted in major spending increases
during the 1970s, when Food Stamps were expanded to every county and pay-
ment rules were simplified. The Medicaid program was established in 1965,
providing health insurance to low-income families who met certain eligibility
criteria. Medicaid spending levels increased steadily through the 1970s and
1980s, reflecting both increases in the eligible population and increases in medi-
cal costs. Highly variable state programs for the elderly and the disabled were
moved to the federal level in the early 1970s when the Supplemental Security
Income (SSI) program was created to provide uniform cash assistance to elderly,
blind, and disabled individuals throughout the nation. Finally, as a supplement to
low-wage workers, the Earned Income Tax Credit (EITC) program began on a
small scale in 1975.2
Figure 3-1 shows how inflation-adjusted expenditures on public assistance
programs have changed since 1965. (Medicaid is not shown in Figure 3-1, but is
discussed below.) After peaking in the mid-1970s, AFDC expenditures have
been largely constant. Food Stamp expenditures expanded with program expan-
sions in the 1970s, fell during most of the 1980s, but have grown again over the
past 7 years as caseloads have grown. The SSI program remained a relatively
constant-expenditure program for the first 10 years of its existence, but its expen-
ditures have recently shot upward with expanded eligibility categories. Simi-
larly, the EITC was a small program for its first 10 years, but over the past 10
years, major benefit expansions have made the EITC program as large as AFDC,
Food Stamps, or SSI.3
Figure 3-2 shows changes in the number of participants in income support
programs. Participation in AFDC was reasonably flat throughout the 1970s and
1980s. Food Stamp participation trends mirror spending trends. In both AFDC
and Food Stamps, sharp caseload increases occurred in the early l990s. As
Figure 3-2 indicates, these increases leveled off by the mid-199Os, and more
recently available data indicate that caseloads have fallen substantially since
1995 in both programs. EITC participation has risen along with benefit levels.
SSI participation has risen only slowly over the past decade, although costs are
rising more steeply.
1As discussed later, AFDC was abolished in the 1996 legislation.
2These are the programs discussed in this chapter. A host of other programs can also be consid-
ered part of the public assistance system, but these are much smaller in terms of both expenditures
and participation.
3Due to recent legislative changes in Food Stamps, AFDC, and SSI, by 1997 the EITC is expected
to be the largest of these four programs.
OCR for page 35
REBECCA M. BLANK
30
25
20
o
-
-
8 10
5- i
35
AFDC
/ Food Shmps '' . "
~\~ /
...
I,,."
,..
\~
SSI
~ ~it,
-
_~_._ _ _,~....
'., ,,# ~`
EPIC
- . ~
;
O- ,. , 1 1 1 ' '
1965 1970 1975 1980 1985 1990 1995
Year
FIGURE 3-1 Dollars spent on income support (1995 dollars). NOTES: AFDC and SSI
show benefit payments. Food Stamps shows coupon value. EITC shows total costs
including refunds and tax expenditures. SOURCES: AFDC 1965-1993, Food Stamps
1965-1994, and SSI 1994 from Social Security Administration (1995~; AFDC 1994 from
U.S. Department of Health and Human Services (199Sb); SSI 1974-1993 from U.S. House
of Representatives (1994~; EITC 1975-1982 from Internal Revenue Service (various years
a); EITC 1983-1994 from Internal Revenue Service (various years b).
Figure 3-3 provides a direct comparison of inflation-adjusted benefit cost per
participant in each of these programs. Per-person AFDC spending declined over
time, and per-person Food Stamp spending has been largely flat. The SSI and
EITC programs show increases in benefits paid per participant over time. It is
also noticeable that SSI recipients receive far more assistance than participants in
other programs.
In stepping away from the specific numerical trends, what are the implica-
tions of these changes over the past few decades? Cash support for nonelderly
and nondisabled individuals has always been relatively limited in the United
States, compared to most European nations. As a share of public assistance
support, cash support has steadily declined over the past two decades. Increas-
ingly, resources are available through in-kind programs (such as Food Stamps or
Medicaid) or through behaviorally tied support programs, in which cash assis-
tance is linked with work behavior. This is most obvious in the growth of the
EITC, which is available only to families with working low-income adults. But
even the AFDC program became increasingly behaviorally linked, as legislative
changes over the past 15 years mandated that more AFDC recipients participate
in job search and employment programs.
OCR for page 36
36
30000
25000
-
as 20000
~ 15000
as
. ~10000
5000
0 - , . . . .
1965 1970 1975 1980 1985 1990 l99S
Year
FIGURE 3-2 Participants in income support programs. NOTES: AFDC, Food Stamps,
and SSI show numbers of recipients. EITC shows number of tax returns. SOURCES:
AFDC 1965-1993, Food Stamps 1965-1994, and SSI 1994 from Social Security Adminis
tration (1995~; AFDC 1994 from U.S. Department of Health and Human Services (199Sb);
SSI 1974-1993 from U.S. House of Representatives (1994~; EITC 1975-1982 from Inter
nal Revenue Service (various years a); EITC 1983-1994 from Internal Revenue Service
(various years b).
TRENDS IN THE WELFARE SYSTEM
,. .. _
. ..
·..
Food Stamps i I_
' · " ~ANDY
....... --'
/,~
,,..~
Errc
/
AFDC i'
Errs #'
~ :
~ ,, ~ ~ ~ --, _,-
~-_______________
SSI
The United States continues to distinguish sharply between different groups
of low-income families. Elderly individuals receive far more support than fami-
lies with working-age adults. Nonelderly low-income families have always been
a source of frustration for the public assistance system. On the one hand, the
adults in these families are viewed with some suspicion: why are they not suc-
cessfully working their way out of poverty? While always applied to male-
headed households, this viewpoint has also come to dominate our image of fe-
male-headed households as well, as employment among mothers has become
more accepted. On the other hand, the adults in these families come attached to
children, whom we view with less suspicion and want to assist. The result is a
constant tension in public assistance programs between the type of requirements
and limits put on assistance to families and the needs of the children in those
families. Advocates of greater behavioral requirements and more limited assis-
tance inevitably point to the adults and claim that they need to take more respon-
sibility for their own economic well-being. Opponents of these changes inevita-
bly point to the children and claim that they should not be hurt because of the
misfortunes of their parents. Recent legislative changes have supported stronger
OCR for page 37
REBECCA M. BLANK
400
350
in
o
-
o
~ 150
300
250
200
100
50
37
SSI
- ' , _~^ ~.
'.__
AFDC
\
-
-
Food Stamps
' ~ __.,.~...~
i . _,, _ ,, ~ ~ ~.. ~
. ~
O
1965 1970 1975 1980 1985
Year
~~~~~-~-~~-- Errc
. .
1990 1995
FIGURE 3-3 Average monthly benefits (1995 dollars). NOTES: AFDC, Food Stamps,
and SSI show benefits per person. EITC shows benefits per tax return. SOURCES:
AFDC 1965-1993, Food Stamps 1965-1994, and SSI 1994 from Social Security Adminis
tration (1995~; AFDC 1994 from U.S. Department of Health and Human Services (199Sb);
SSI 1974-1993 from U.S. House of Representatives (1994~; EITC 1975-1982 from Inter
nal Revenue Service (various years a); EITC 1983-1994 from Internal Revenue Service
(various years b).
work mandates, but this debate is far from resolved. Credible research that shows
how children are affected by full-time work requirements imposed on their single-
parent mothers may have a major effect on future changes in the structure of
public assistance programs.
Finally, it is worth noting that the expenditure trends in these four public
assistance programs are dwarfed by the growing expenditures in the Medicaid
program. Figure 3-4 plots inflation-adjusted spending on Medicaid, separately
showing spending on the elderly and disabled (largely those eligible for the SSI
program) and spending on families with children (largely those eligible for the
AFDC program.) While health expenditures rose throughout the economy, they
rose faster for Medicaid, in part because Medicaid generally serves a population
with greater health problems.4 In recent years, Medicaid spending on the non-
elderly, nondisabled population has leveled off, but it has continued to increase
4Figure 3-4 adjusts Medicaid dollars by the gross domestic product price deflator. Even if they are
adjusted by the consumer price index for medical care, Medicaid spending still doubles between
1980 and 1995.
OCR for page 38
38
80- .
70
60
_ 50-
C:
40
30
20
TRENDS IN THE WELFARE SYSTEM
/
65+, Blind and Disabled
-
-
Dependent Children, Related Adults and Others
-
~ _~.
10- .~
1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994
Year
FIGURE 3-4 Dollars spent on Medicaid by eligibility category (1995 dollars). SOURCES:
1972 and 1994 from Social Security Administration (1995~; 1973 from U.S. Department
of Health, Education, and Welfare (1975~; 1974 from U.S. Department of Health, Educa-
tion, and Welfare (1976~; 1975-1993 from U.S. Department of Health and Human Services
(199Sa).
for the elderly and disabled. Some of the biggest expenditure increases have been
for the Medicaid population in long-term care facilities.
Trends in the number of Medicaid recipients look quite different from spend-
ing trends, as Figure 3-5 indicates. Until the late 1980s, the population of recipi-
ents was quite flat, despite steady increases in expenditures. Recent eligibility
expansions for children in low-income families have greatly increased the num-
ber of young Medicaid recipients.5 Slight increases in recipiency among the
elderly and disabled have also occurred. Figure 3-6 shows the implications for
Medicaid spending per recipient. Most strikingly, per-person Medicaid expenses
for low-income children and related adults have been essentially flat and are
very low compared to per-person expenses for the elderly or disabled. All of the
growth in Medicaid dollars for families and children is due to increases in the
eligible population. In sharp contrast, per-person Medicaid spending for the
elderly and disabled has increased steadily for over 2 decades. Medicaid spend-
ing on the elderly and disabled has been largely driven by increases in the per-
person cost of services provided to this population, and not by population growth.
fin particular, Medicaid eligibility for children was de-linked from family AFDC eligibility. cur-
rently, all children in families below 135 percent of the poverty line are eligible for Medicaid.
OCR for page 39
REBECCA M. BLANK
30000
-
~25000
~7
a
20000
._
at_
c, lS000
o
~ 10000
a
z
39
T I
Dependent Children, Related Adults and Others ..
\
.
,.
,r'
..
65+, Blind and Disabled
,.~
5000- 1
1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994
Year
FIGURE 3-5 Number of Medicaid recipients by eligibility category. SOURCES: 1972
and 1994 from Social Security Administration (1995~; 1973 from U.S. Department of
Health, Education, and Welfare (1975~; 1974 from U.S. Department of Health, Educa-
tion, and Welfare (1976~; 1975-1993 from U.S. Department of Health and Human Ser-
vices (199Sa).
PUBLIC ASSISTANCE PROGRAMS AND GOVERNMENT SPENDING
Ongoing federal budget deficits have resulted in increased pressure to cut all
forms of federal spending. Many states operate under balanced budget require-
ments and are also constantly seeking areas where costs can be reduced in order
to meet other public demands. Public assistance programs have often been a
primary target in efforts to cut state and federal budgets. At least some of this is
due to a misperception on the part of many Americans about the role played by
public assistance in the budget. For instance, a 1995 CBS News/New York
Times poll indicated that over 50 percent of the population thinks the federal
government spends more than 20 percent of its budget on welfare programs
(Roper Center for Public Opinion Research, 1995~.
Figure 3-7 shows the composition of federal expenditures in 1995. Public
assistance accounted for 14 percent of federal expenditures, of which 6 percent
was due to Medicaid spending. While not an insignificant share, more was spent
on Social Security, on defense, and on net interest on the debt.
Much of the growth in federal expenditures on public assistance is relatively
recent, and it is heavily due to increases in Medicaid expenditures. Figure 3-8
shows the trends over time on government spending on social programs as a
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40
TRENDS IN THE WELFARE SYSTEM
9000
8000
7000
6000
5000
4000
3000
2000
1000
-
65+, Blind and Disablet
-
/
-
Dependent Children, Related Adults and Others
~-~ _
O I I I I I I I ~ 1 1
1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994
Year
FIGURE 3-6 Medicaid spending per person by eligibility category (1995 dollars).
SOURCES: 1972 and 1994 from Social Security Administration (1995~; 1973 from U.S.
Department of Health, Education, and Welfare (1975~; 1974 from U.S. Department of
Health, Education, and Welfare (1976~; 1975-1993 from U.S. Department of Health and
Human Services (199Sa).
fraction of all outlays. Family support programs Unmanly AFDC) have been
flat at about 1-2 percent of the U.S. budget for decades. If Food Stamps are
added to family support, this accounts for a flat 2-3 percent of the U.S. budget. In
these core public assistance programs the programs that U.S. citizens are most
likely to identify as "welfare" there is no evidence of high or growing budget
shares.
Other
Public Assistance, Composed of
I_ (14.0%) Medicaid (s.7~) and
Other Public Assistance ( 8 . 2 %
S;n~ial 5;;e~llrit~
~ vat ~
Net Interest ~ ~
on Debt (17.6~ (10.2%)
Medicare
Defense
FIGURE 3-7 Federal expenditures for fiscal year 1995. SOURCE: U.S. Office of
Management and Budget (1995~.
OCR for page 41
REBECCA M. BLANK
0.14
0.12
to
._
tJ
0.08
:-
._
as
5
a
at
0.1
0.06
Art
41
.-
T;~
!
.~'
.
6s c7 69 71 73 75 77 79 81 83 as 87 89 91 93 9s
(1) Family Support Year
(2) Family Support + Food Stamps
(3) Family Support + Food Shmps + All other antipoverty
(4) Family Support ~ Food Stamps + All other antipoverty + Medicaid
(4)
(3)
(~)
(1)
FIGURE 3-8 Government spending on social programs as a fraction of outlays. NOTES:
The category "Family Support" includes payments to states for AFDC benefits, admin-
istration, and child support enforcement. The category "All other antipoverty" includes
child nutrition and special milk, supplemental feeding, commodity donation, legal ser-
vices, day care assistance, Supplemental Security Income, and the Earned Income Tax
Credit. SOURCE: U.S. Office of Management and Budget (1995~.
The federal budget share for all antipoverty programs (except Medicaid) has
risen from 6 to 8 percent over the past 5 years, primarily because of the growth in
the EITC and SSI programs, discussed earlier. But the big budget-buster is
Medicaid, which has increased from 5 to 8 percent of the federal budget in only a
few years.
The effect of Medicaid on public budgets is even more visible at the state
level. Figure 3-9 shows the breakdown of state expenditures for 1992, the most
recent year for which these data are available. Medicaid accounts for 11 percent
of the average state budget in that year; other public assistance accounts for only
3 percent. As at the federal level, the Medicaid share of state budgets has been
growing dramatically over time. The result is that virtually all states are facing a
crisis in their public assistance spending: All states are currently spending more
for public assistance in total than they were 10 years ago, but almost all states are
spending less on non-Medicaid assistance. In short, programs for low-income
nonelderly and nondisabled families have been cut in order to accommodate the
growth in spending on medical assistance. While many have decried the growing
cost of public assistance faced by the states, few state governors have publicly
discussed the primary cause of this problem increasing costs in medical ser-
vices (especially long-term care services) for elderly and disabled persons. In
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42
TRENDS IN THE WELFARE SYSTEM
Public Assistance, Composed of
Other . r(14.4%) M`~`l;~;d (1L2%1 and
(15.6
Interest on Debt
Police and t;orrectlons ~ ~
Highways and Transpoi-tat)~~
~ ,._ all
Health and Hospitals
~. ,, ,,,%.~.%,.~.~. __, ~ a _
Other Public Assistance ( 3 . 2
i' education
(41.2~o)
FIGURE 3-9 State expenditures for fiscal year 1992. SOURCE: U.S. Bureau of the
Census (1993~.
stead, they have often mistakenly assumed that the problem is spending in other
programs and have cut general assistance, lowered AFDC benefits, or taken other
steps that limit public assistance spending in areas where costs have not been
. .
nslng.
THE 1996 LEGISLATIVE CHANGES6
The 1996 welfare reform legislation has been described as a revolutionary
change in the structure and emphasis of U.S. welfare programs. In reality, the
changes are at once both less radical and more radical than is often claimed. They
are less radical in the sense that the criticisms of existing antipoverty programs
that they embody are not new and reflect concerns that have long been part of the
U.S. debate over helping the poor. Encouraging work, strengthening families,
and reducing government costs are not new ideas. On the other hand, this legis-
lation has produced a more fundamental change in the federal government's role
in antipoverty efforts than any legislation since the Social Security Act of 1935,
giving the states much more control over programs and the federal government
much less. This section summarizes some of the most important aspects of the
new legislation.
The legislation creates a new block grant to the states, the Temporary Assis-
tance for Needy Families (TANF) block grant. The AFDC program is abolished
and states are given almost complete control over the design of their public
assistance programs. States can use TANF money for any programs that accom-
plish the purposes of the block grant, which include providing assistance to needy
families, ending the dependency of needy parents on government benefits, pre-
venting and reducing out-of-wedlock pregnancies, and encouraging the forma-
tion of two-parent families.
6The description in this section closely follows that in Blank (1997b).
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REBECCA M. BLANK
43
In giving states this expanded program authority, the legislation eliminates
family entitlements to cash assistance. Under AFDC, any family that met the
eligibility requirements had to be provided with assistance according to established
rules and regulations. Under the new law, states have much more discretion in
determining who should get funds and how much they should get. They can
eliminate some groups from assistance, redirect money away from cash support
toward services designed to prevent teen pregnancy and promote marriage, or
impose behavioral requirements on the recipients of public assistance funds. If
money runs short at the end of a budget year, families can be turned away.
State entitlements to open-ended federal payments are also at an end. AFDC
was a matching grant program rather than a block grant program. If states spent
more, federal dollars automatically increased. Under TANF, states will receive a
fixed amount of money from the federal government in future years, equal to the
federal payments they received in the early l990s for AFDC and related welfare-
to-work programs. This leaves states bearing the financial risk should there be an
increase in poverty or unemployment; the federal government will not automati-
cally increase payments if a state has to provide assistance to more people. The
federal dollars are also fixed at the same nominal level, so they become less over
time with inflation.
Although states have greater discretion to determine who is helped, the fed-
eral legislation imposes new mandates with regard to work requirements and
payment limits for those who receive TANF funds. Any parent who has received
24 months of assistance in programs funded through TANF must be working or
in a work program in order to receive further funding. By 1997, 25 percent of all
families in the state receiving TANF support must be working at least 20 hours
per week. By 2002, 50 percent of all families must be working at least 30 hours
per week. (States have substantial discretion to define what counts as "work.")
This vastly increases the share of the caseload who must be working, although
these requirements are lowered if caseloads fall within the state. (Because of the
recent decline in caseloads, in the short run a number of states will face much
lower requirements.) The 1996 legislation provided no new federal funds to
assist states in expanding their work programs, although some additional funds
were added in the 1997 budget legislation.
TANF dollars are time-limited to any individual. No family can receive
funding from TANF if an adult in that family has already received 60 months of
assistance over his or her lifetime. (At their option, states can impose even
shorter time limits.) States are allowed to exempt 20 percent of their caseload
from this 5-year limit. States can also continue to support families with state-
only funds, which will probably lead to some creative accounting with regard to
which families are being supported on federal versus state dollars.
The enactment of time limits is the most dramatically new part of the legis-
lation. At this point, however, it is unclear exactly what the impact of these time
limits will be. If there is high unemployment or if many adults hit these time
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44
TRENDS IN THE WELFARE SYSTEM
limits at a point when they are clearly unable to hold a full-time job, states may
well try to negotiate for more extensive exemptions. In addition, enforcing this
lifetime limit effectively will require state and national tracking systems that
identify the cumulative months of support received by any individual in any state.
But the legislation included no funds for establishing such systems, which may
allow some recipients to avoid the time limits in the near term.
In terms of both dollars and numbers of people affected, the biggest impact
of the 1996 legislation will be on those who were once AFDC participants and
who now are subject to the state-designed programs funded by the TANF block
grant. But a number of other provisions in this bill will affect other programs and
other groups of people. The legislation sharply limited the availability of public
assistance to immigrants (although some of these cuts were restored in later
legislation in 1997~; limited Food Stamp benefits to nonelderly, nondisabled
adults without children; and narrowed eligibility categories for SSI.
LARGER PATTERNS IN PROGRAM CHANGES7
As noted above, the 1996 legislation pushed further and faster in some direc-
tions where changes in public assistance had already been occurring. This sec-
tion discusses three of the major trends in the structure of public assistance
programs over the past decade.
Increasing Emphasis on Behavioral Requirements as Part of Program
Eligibility, with Particular Emphasis on Work Behavior
More than twenty-five years ago, President Nixon proposed to roll all cash
and non-cash income assistance programs into one single cash assistance pro-
gram, available to all families who met the income eligibility requirements. Com-
monly referred to as a negative income tax, such a system would provide cash
support through the tax system. The pendulum has swung far in the other direc-
tion, so that Nixon's not-so-ancient proposal seems almost unbelievable in today's
political climate.8 The current emphasis is very much in the opposite direction:
time-limited programs available for narrowly defined target groups, ensuring that
large numbers of people are not eligible for substantial amounts of public assis-
tance. Those who do receive assistance must establish their "deservingness" by
enrolling in job training and placement programs or working and (in some states)
limiting their future fertility, ensuring their children are appropriately cared for,
or meeting other state requirements.
7This section closely follows parts of the discussion in Chapter 3 of Blank (1997a).
8Nixon's negative income tax proposal was the high-water mark of efforts to provide large-scale
cash assistance to the poor, rather than behaviorally tied assistance. The earlier history of public aid
shows an ongoing focus on behavioral regulations as a precondition for assistance.
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REBECCA M. BLANK
45
These more targeted and behaviorally linked public assistance programs will
face several major problems that have not yet been fully understood. First, such
a proliferation of mandates and behavioral requirements is typically more expen-
sive to run (per person) than are cash assistance programs, because the former
require much more monitoring. The cheapest and most administratively efficient
program is one that simply writes and mails a check each month. The more
information that case workers have to regularly collect, process, and evaluate, the
higher are administrative costs, and the greater is the potential for errors, misun-
derstandings, and management problems.
Second, this trend flies directly in the face of another desire that is often
articulated at the same time: To reduce governmental interference in people's
lives. By mandating behavioral conformance as well as income eligibility for
public assistance programs, government's role in the lives of low-income people
becomes much more intrusive.
The effectiveness of these behavioral mandates will depend upon exactly
what they require and how easily they can be monitored and enforced. There is
strong support for behavioral mandates that encourage parents who receive pub-
lic assistance to enter job training and job search programs; that evict people from
public housing who engage in criminal behavior; and that link job recommenda-
tions and placement with high school performance among youth. Other behav-
ioral mandates are more controversial, such as cutting a family's public assis-
tance benefits if the mother cannot keep a teenager in school or refusing public
assistance to infants born to unmarried mothers.
Deciding which behavioral mandates make sense requires good judgment
about what can be effectively implemented without vast increases in administra-
tive complexity and cost, what mandates are likely to motivate changes in behav-
ior (rather than being simply punitive), and what actions might produce unaccept-
able levels of need among mothers and children who could not meet the mandate.
Programs with extensive but unmanageable requirements that end up having little
effect may only make life harder for the poor and increase public cynicism about
the ineffectiveness of government programs.
A Return to More Local and State Discretion in the Design of Programs
Public assistance in this country was entirely based at the county or township
level 150 years ago. Over time, states took over more and more of the financing
and operation of programs, and then, starting in the 1930s, the federal government
entered the scene. The role of counties and states has always been important,
however. The federal government has never directly administered public assis-
tance programs. The people who actually run programs are all county, local, or
state-level employees. The checks received by poor families or by those who run
public services for the poor have always been drawn on state or municipal banks,
and states have always provided substantial funding for many public assistance
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46
TRENDS IN THE WELFARE SYSTEM
programs. Over time, however, the federal government has come to fund more
programs and has imposed more regulations on how programs could be run. Over
the 1980s, states were given the opportunity to apply for waivers to run programs
that did not conform to federal rules, but these waivers tended to be limited in scope
and often took a great deal of time and effort to negotiate. The enactment of TANF
dramatically increases state discretion over public assistance programs.
The interest in returning more control to the state or local level grows out of
four quite different perspectives. First, some argue that giving more discretion
and control back to states will reduce the rigidities and bureaucratic nature of
many current public assistance programs. Second, some who believe that we
simply don't know enough to design effective nationally run antipoverty pro-
grams, advocate allowing states to experiment with a variety of programs like job
training, education reform, or housing assistance. From this multiple experimen-
tation will come better evidence on what works effectively and what does not.
Third, those who are concerned about the growing scope of federal authority
want to devolve centralized decision making away from the federal government
and back to the states. Fourth, those who worry about the federal deficit and want
to reduce federal spending see these changes as a way to cut federal spending on
antipoverty programs and induce states to take greater fiscal responsibility for the
maintenance of these programs.
Some of these arguments have much to recommend them. Certainly for
programs like job training, where there are substantial differences across local
areas in the nature of jobs available and the characteristics of the low-income
population, running locally designed programs is necessary in order for programs
to be effective. Indeed, the federal government has always largely left the spe-
cific design of job search and job training programs to state and local discretion.
Similarly, in areas where existing programs have been largely ineffective, such as
efforts to engage teenage high school dropouts in employment and training pro-
grams, allowing different states to experiment with different programs might
result in useful new information.
On the other hand, there are also serious problems with limiting the federal
role in public assistance programs to fixed levels of block grant funding. First,
states have less ability to finance antipoverty programs than the federal govern-
ment. The need for public assistance is at its largest when the economy is the
rockiest. Thus, public assistance programs are necessarily countercyclical, ex-
panding when the economy is in recession and contracting when the economy
booms. Because most states operate under year-to-year balanced budget require-
ments, it is almost impossible for them to run major countercyclical programs. In
economic recessions, tax revenue shrinks and this often means they must cut back
on spending at exactly the time when need is increasing. These financial prob-
lems, faced by states in the Great Depression of the 1930s, were one of the main
reasons the federal government became more involved in financing public assis-
tance programs.
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REBECCA M. BLANK
47
Second, while the federal government has been sometimes inept and some-
times foolish in the way that it has managed and run antipoverty programs, states
hardly have a better track record. In fact, much of the impetus toward more
centralized regulations and rules in the 1960s occurred because of concern over
how these programs were being run by many states, where racist exclusions and
arbitrary rule making were all too common. While there are always states that
take the lead in implementing new management procedures, the federal govern-
ment has been a key agent pushing states to reduce waste and fraud by decreasing
errors in determining eligibility for assistance, by requiring regular program re-
ports, and by encouraging states to upgrade computer systems.
Third, there continue to be concerns about the equity of state-run public
assistance programs. For instance, if some states choose to dramatically cut all
forms of cash assistance and other states maintain their current programs, benefit
differences across states could become much larger than they already are. This
may not only raise equity concerns, but could also cause substantial migration by
low-income families, forcing those states that want to maintain more generous
programs to cut them back because of growing low-income populations. This
type of competition between states has been referred to as the "race to the bot-
tom," meaning that when states are given complete control over public assistance
benefits, there are incentives for all states to provide less than they might other-
wise choose to, out of a fear of being a "magnet" for poor people.9
Cutbacks in Dollar Expenditures and Entitlements
The urge to cut the growth of government programs all programs, not just
public assistance has been strong in recent years, driven by at least two forces.
First, the rapid expansion of the federal deficit that occurred in the 1980s has led
some observers to worry about long-term debt commitments. Cutting the deficit
can be done by either increasing taxes or decreasing expenditures. While the
second is not popular, the first has been political poison. Second, the long-term
stagnation in wages among many workers (including actual declines for less
skilled workers) has created economic fears about the cost of more extensive
redistributive programs. Ongoing demands for lower taxes mean that there is
unlikely to be any more revenue available for public assistance in the near future.
In this debate over government budgets, public assistance programs have
often been targeted for disproportionately large cuts. In part, this is because low-
income assistance programs often have few politically powerful supporters. Low-
income adults typically vote at a lower rate and are less politically active. In part,
these disproportionate cuts simply reflect the ongoing American discomfort with
the whole idea of public assistance, especially for nonelderly adults.
9See Peterson (1995) for a discussion of this issue.
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48
TRENDS IN THE WELFARE SYSTEM
The urge to cut program dollars is in direct conflict with some other aspects
of reform. Increases in behavioral mandates on program recipients may increase
program expenses, as discussed above. Job training and placement programs for
public assistance recipients can add to the cost of public assistance in the short
run. A year into the enactment of welfare reform, many states have avoided these
financial questions because of a very strong economy. Unemployment is low,
labor markets are tight, and many state budgets are in surplus. Caseloads in many
states fell dramatically after 1995, in part because of the strong economy and in
part because of the enactment of "get-tough" welfare reforms by the states.~°
Given these circumstances, few states have had difficult funding more extensive
job placement programs. At some point, however, the economy will slow down,
unemployment will rise, and state revenues will become much tighter. Of course,
it is exactly at this point that the demand for job placement assistance and for
public assistance support will rise. It is not clear how states will deal with these
multiple demands.
Looking at the decade ahead, we are almost certainly in a world where few
government programs, especially public assistance programs, can expect increases
in funding. The question is more likely to be, How big will the cuts be? rather than,
What can we afford to do that is new and different (and perhaps more expensive)?
This will be a major constraint on all efforts at welfare reform in the near future. It
will almost surely continue to force hard choices on those who want to maintain
public assistance programs at current levels of funding, and may particularly con-
strain states that want to use their expanded control over these policies to experi-
ment with new and redesigned programs. States that want to cut their welfare
budget and provide expanded job search and training programs for their public
assistance recipients to move them into the labor market are going to face these
contradictions most directly. Given the problems facing less skilled workers in the
labor market, there will be no easy, quick, or cheap way for states to move public
assistance recipients into economic self-sufficiency through employment.
For programs to maintain their funding and political support, it will be in-
creasingly important to have evidence demonstrating their effectiveness. This
means that reliable research, evaluating programs and their effects, may become
increasingly important in the public discussion. It will also be important to build
political coalitions that support and protect effective programs in the midst of
budget-cutting fervor.
Overall, we are moving further away from a system that provides direct cash
assistance payments to low-income families, toward a system that increasingly
conditions its assistance much more closely on particular groups that meet behav-
ioral as well as income qualifications. Dollars are shifting toward work-con-
nected programs through increases in the Earned Income Tax Credit, more vigor-
ous child support collection efforts, and subsidized job placement and training
i°See Blank (1997c) for a discussion of the causes behind recent caseload changes.
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REBECCA M. BLANK
49
efforts. It is not clear that these reconfigured public assistance programs will
provide a cheaper or a more effective safety net than the one we have at present.
It will be different, with a different set of management and incentive problems
than are embedded in the current antipoverty system.
ACKNOWLEDGMENT
Leslie Moscow provided excellent research assistance.
REFERENCES
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Representative terms from entire chapter:
assistance programs
