Welfare reform part 2

Uploaded by on May 29, 2009

Complete video at: http://fora.tv/2009/05/18/James_Bartholomew_The_Welfare_State_Were_In

Author James Bartholomew argues that welfare benefits actually increase government handouts by ‘ruining’ ambition. He compares welfare to a humane mousetrap.

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Welfare reform was working so good. Why did we have to abandon it? Look at this article from 2003.

In the controversial book The Welfare State We’re In, James Bartholomew argues that the welfare state in Britain has resulted in a generation of badly educated and dependent citizens, leading to lives of deprivation for thousands and undermining the original intent behind its creation in the 1940s.

Has the welfare state really led to more harm than good? What does this imply for the ever-expanding welfare state in the United States? – Cato Institute

James Bartholomew trained as a banker in the City of London before moving into journalism with the Financial Times and the Far Eastern Economic Review, for whom he worked in Hong Kong and Tokyo. Returning to England on the Trans-Siberian Railway through communist China and the Soviet Union an experience which influenced his political outlook he subsequently became a leader writer on The Daily Telegraph and the Daily Mail.

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The Continuing Good News About Welfare Reform

By and
February 6, 2003

Six years ago, President Bill Clinton signed legislation overhauling part of the nation’s welfare system. The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (P.L. 104-193) replaced the failed social program known as Aid to Families with Dependent Children (AFDC) with a new program called Temporary Assistance to Needy Families (TANF). The reform legislation had three goals: (1) to reduce welfare dependence and increase employment; (2) to reduce child poverty; and (3) to reduce illegitimacy and strengthen marriage.

Plummeting Welfare Dependence
The designers of welfare reform were concerned that prolonged welfare dependence had negative effects on the development of children. Their goal was to disrupt inter-generational dependence by moving families with children off the welfare rolls through increased work and marriage. Since the enactment of welfare reform, welfare dependence has been cut by more than half. The caseload in the former AFDC (now TANF) program has fallen from 4.3 million families in August 1996 to 2.02 million in September 2002. (See Chart 3.)

bg 1620 - chart 3

Contrary to conventional wisdom, the decline in welfare dependence has been greatest among the most disadvantaged and least employable single mothers — the group with the greatest tendency toward long-term dependence. Specifically, dependence has fallen most sharply among young never-married mothers who have low levels of education and young children.17This is dramatic confirmation that welfare reform is affecting the whole welfare caseload, not merely the most employable mothers.

Strikingly, the TANF caseload has continued to decline even during the current recession. The caseload has fallen from 2.109 million families in April 2001 at the beginning of the recession to 2.017 million in September 2002 (the most recently measured month). This represents a net decline in caseload of 4.4 percent since the beginning of the recession. The continuing decline in welfare dependence during the recession stands in sharp contrast to the 30 percent growth in the AFDC caseload during the economic slowdown of the early 1990s.

Increased Employment
Since the mid-1990s, the employment rate of single mothers has increased dramatically. Again, contrary to conventional wisdom, employment has increased most rapidly among the most disadvantaged, least employable groups:

  • Employment of never-married mothers has increased nearly 50 percent.
  • Employment of single mothers who are high school dropouts has risen by two-thirds.
  • Employment of young single mothers (ages 18 to 24) has nearly doubled.18

Thus, against conventional wisdom, the effects of welfare reform have been the greatest among the most disadvantaged single parents — those with the greatest barriers to self-sufficiency. Both decreases in dependence and increases in employment have been most dramatic among those who have the greatest tendency to long-term dependence; that is, among the younger never-married mothers with little education.

A Halt in the Rise of Out-of-Wedlock Childbearing
After the beginning of the War on poverty, the illegitimacy rate (the percentage of births outside of marriage) increased enormously. For nearly three decades, out-of-wedlock births as a share of all births rose steadily at a rate of almost one percentage point per year. Overall, out-of-wedlock births rose from 7.7 percent of all births in 1965 to an astonishing 32.6 percent in 1994. However, in the mid-1990s, the relentless 30-year rise in illegitimacy came to an abrupt halt. For the past five years, the out-of-wedlock birth rate has remained essentially flat. (See Chart 4.)

Among blacks, the out-of-wedlock birth rate actually fell from 70.4 percent in 1994 to 68.8 percent in 1999. Among whites, the rate rose slightly, from 25.5 percent to 26.7 percent, but the rate of increase was far slower than it had been in the period prior to welfare reform.

A Shift Toward Marriage
Throughout the War on poverty period, marriage eroded. However, since the welfare reform was enacted, this negative trend has begun to reverse. The share of children living with single mothers has declined, while the share living with married couples has increased.

This change is most pronounced among blacks. Between 1994 and 1999, the share of black children living with single mothers fell from 47.1 percent to 43.1 percent, while the share living with married couples rose from 34.8 percent to 38.9 percent. Similar though smaller shifts occurred among Hispanics.19

While these changes are small, they do represent a distinct reversal of the prevailing negative trends of the past four decades. If these shifts toward marriage are harbingers of future social trends, they are the most positive and significant news in all of welfare reform.

WHO GETS THE CREDIT? THE GOOD ECONOMY VERSUS WELFARE REFORM

Some would argue that the positive effects noted above are the product of the robust economy during the 1990s rather than the results of welfare reform. However, the evidence supporting an economic interpretation of these changes is not strong.

Chart 3 shows the AFDC caseload from 1950 to 2000. On the chart, periods of economic recession are shaded, and periods of economic growth are shown in white. Historically, periods of economic growth have not resulted in lower welfare caseloads. The chart shows eight periods of economic expansion prior to the 1990s, yet none of these periods of growth led to a significant drop in AFDC caseload. Indeed, during two previous economic expansions (the late 1960s and the early 1970s), the welfare caseload grew substantially. Only during the expansion of the 1990s does the caseload drop appreciably.

How was the economic expansion of the 1990s different from the eight prior expansions? The answer is welfare reform.

Chart 3 does show that the national TANF decline has slowed appreciably during the current recession, which began in April 2001. Critics of reform might argue that this shows the state of the economy has been the dominant factor in the reduction of dependence. While it is true that the slowdown in the economy is affecting the decline in caseload, however, it is important to note the vast difference in trends before and after welfare reform. Prior to the mid-1990s, the AFDC caseload remained flat or rose during economic expansions and generally rose to a substantial degree during recessions. Since welfare reform, the welfare caseload has plummeted downward during good economic times and declined more slowly during the recession.

Thus, while the state of the economy does have an effect on AFDC/TANF caseloads, irrespective of economic conditions, the difference in caseload trends before and after reform is enormous. This difference is clearly due to the impact of welfare reform policies.

Another way to disentangle the effects of welfare policies and economic factors on declining caseloads is to examine the differences in state performance. The rate of caseload decline varies enormously among the 50 states. If improving economic conditions were the main factor driving down caseloads, the variation in state reduction rates should be linked to variation in state economic conditions. On the other hand, if welfare polices are the key factor behind falling dependence, the differences in reduction rates should be linked to specific state welfare policies.

In a 1999 Heritage Foundation study, “The Determinants of welfare Caseload Decline,” one of the present authors examined the impact of economic factors and welfare policies on falling caseloads in the states.20 This analysis showed that differences in state welfare reform policies were highly successful in explaining the rapid rates of caseload decline. By contrast, the relative vigor of state economies, as measured by unemployment rates, changes in unemployment, or state job growth, had no statistically significant effect on caseload decline.

A recent paper by Dr. June O’Neill, former Director of the Congressional Budget Office, reaches similar conclusions. Dr. O’Neill examined changes in welfare caseload and employment from 1983 to 1999. Her analysis shows that in the period after the enactment of welfare reform, policy changes accounted for roughly three-quarters of the increase in employment and decrease in dependence. By contrast, economic conditions explained only about one-quarter of the changes in employment and dependence.21 Substantial employment increases, in turn, have led to large drops in child poverty.

Overall, the health of the economy in the mid and late 1990s did serve as a positive background factor contributing to positive changes in welfare dependence, employment, and poverty. It is very unlikely, for example, that dramatic drops in dependence and increases in employment would have occurred during a prolonged recession. However, it is also certain that good economic conditions alone would not have produced the striking changes that occurred in the late 1990s. It is only when welfare reform was coupled with a growing economy that these dramatic positive changes occurred.

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