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Twenty Years Ago, We Reformed Welfare

Here’s what we did wrong, and what we can do to fix it.

By Dwyer Gunn


President Bill Clinton signing his welfare reform legislation. (Photo: Wikimedia Commons)

On August 22, 1996, President Bill Clinton signed into law the welfare reform act (formally known as the Personal Responsibility and Work Opportunity Reconciliation Act), which replaced the Aid to Families With Dependent Children program with the Temporary Assistance to Needy Families program. The reforms, which turned control of the program from the federal government over to the states, imposed strict time limits and work requirements on welfare beneficiaries. In the immediate aftermath of the law, the reforms seemed to be a smashing success — welfare caseloads declined, the employment rates of single parents increased, and child poverty rates declined.

Over time, however, the feel-good narrative unraveled. It became apparent that the early “successes” of TANF were over-stated and had at least something to do with the booming economy of the late 1990s. Indeed, despite Clinton’s efforts, the evidence suggests that the reforms largely left behind the poorest of the poor, a trend that only accelerated during the Great Recession. The program’s fixed block-grant structure meant it couldn’t respond to economic downturns by increasing aid. During the downturn — which was, lest you forget, the most severe economic slowdown in recent history — many states actually aggressively cut people from the welfare rolls in the face of budgetary pressures, reporting declines in their welfare caseloads.

The Obama administration’s budget is in line with what welfare experts think is needed to fix the program.

These cuts, coming at a time when jobs for low-skill workers were in short supply, left poor families extremely vulnerable during the downturn. Today, most academics agree that the welfare reforms of 1996 were a major contributor to the uptick in the number of Americans living on fewer than $2 a day. As I wrote earlier this year, in a summary paper published by the National Bureau of Economic Research, the poverty researcher James Ziliak concluded that “[t]he limited evidence to date suggests that TANF did not respond to the Great Recession, and this lack of business-cycle response contributed to the growth of deep poverty.”

The flexible nature of the block grants has also allowed states to divert funding away from the core purposes of the program, cash benefits and work-related supports. States now use less than half of their TANF funds on those two core areas.

In honor of the 20-year anniversary of welfare reform, the Sargent Shriver National Center on Poverty Law recently published a series of short essays by various experts. In one of the essays, Olivia Golden, the executive director of the Center for Law and Social Policy, who served as assistant secretary of the United States Department of Health and Human Services when TANF was being implemented, reflected on the program’s current state: “TANF is now in tatters…. It helps less than one in five poor children, with extremely low benefit levels and few meaningful work activities.”

So what, if anything, is to be done?

In another essay in the compilation, the Center for Law and Social Policy’s Elizabeth Lower-Basch suggests that any reforms must include three components:

  1. A national floor on things like benefit levels, time limits, sanctions, and the amount of money that states must spend on TANF’s core activities.
  2. New performance measures that incentivize states to provide useful education and training services and actually move families from welfare to work. States are currently judged based on the “work participation” rates of current recipients, which is an easily gamed metric—for example, states often claim credit for workers who were already employed when they started the program. The metric also doesn’t encourage much investment in the kinds of education and training programs that might help welfare recipients actually improve their economic prospects after they leave the program.
  3. An increase in federal funding. The TANF block grant is not pegged to inflation, so the real value of the funding has actually declined by 33 percent. Lower-Basch also called for a revised block grant formula and a new emergency contingency fund that would respond automatically to recessions and downturns (so states aren’t forced to cut caseloads during downturns).

In another essay in the compilation, Liz Schott of the Center on Budget and Policy Priorities advocated similarly reasonableproposals. Schott calls for federal accountability standards requiring states to serve a certain proportion of poor families, the evaluation of states based on the employment and earning outcomes of TANF recipients after they leave the program, and a requirement that states spend a certain proportion of TANF funds on the program’s core areas.

There may be bipartisan support for at least some of these proposals. In another essay in the compilation, Mark Greenberg, acting assistant secretary for the Administration of Children and Families in the Department of Health and Human Services, points out that the Obama administration’s fiscal year 2017 budget includes calls for an increase in the TANF block grant, tighter restrictions on how states spend their TANF block grant funds, funding for a new contingency fund, and “a better accountability structure focused on helping families get and keep jobs.” In other words, the administration’s budget is in line with what welfare experts think is needed to fix the program.

On the Republican side, the House GOP’s anti-poverty agenda is heavily focused on helping families find employment, and calls for a shift toward evidence-based employment programs. The agenda also notes that states must be held more accountable for the TANF services and programs they provide, and acknowledges that current incentives are such that “undefinedn many cases, states are not rewarded for helping people get back on their feet — and in some cases they are rewarded for doing the reverse.” While the GOP agenda isn’t perfect, it seems that both liberals and conservatives agree that many states need to do much more to help families move from welfare to meaningful employment.

The welfare reform act was supposed to both reduce the welfare rolls and provide recipients with a path to economic self-sufficiency. While it succeeded on the first count, it has failed miserably on the second, leaving millions of poor families in dire straights. TANF needs a re-set; here’s hoping this election will provide it.