Those Welfare Reform Left Behind

Those Welfare Reform Left Behind

The 1996 welfare reform had a carrot and a stick. The carrot was that, by expanding work-related aid — most importantly the Earned Income Tax Credit (EITC) — it dramatically improved government benefits for the working poor. In fact, the U.S. spends much more on poverty relief today than it did before the reform. But as a stick, the country's cash welfare program was eliminated and replaced with a much less generous one, one that provided benefits for only a limited time and required recipients to find jobs.

The reform did what it was supposed to. In the wake of the law, aided by a booming economy, previously non-working welfare recipients flooded into the workforce. Child poverty dropped and never returned to its previous peak; the EITC today lifts 3 million children above the poverty line. Even what the government calls "deep poverty" — half the poverty line — fell among never-married mothers.

$2.00 a Day, the brief and readable new work by Kathryn J. Edin and H. Luke Shaefer, doesn't downplay this history. Rather, it digs beneath it, focusing on Americans who live far below "deep poverty." This is a book about the people welfare reform left behind, those who did not manage to find and keep jobs. As of 2011, the authors report, about 4 percent of households with children were surviving on less than $2 in cash per person, per day.

That statistic has sucked up a lot of the oxygen around the book, which is predictable but unfortunate. The number doesn't take into account in-kind support, such as public housing and food stamps. In fact, as the authors concede, the number of $2-a-day poor falls by half when you include food stamps alone. And because the number is based on a government survey, it doesn't factor in income that people didn't report, either deliberately or by accident. (Even a twice-weekly plasma donation can keep a family of four above the $2-a-day mark.) "Do not go there," writes liberal economist Jared Bernstein of the number that gives this book its title, in what is otherwise a quite favorable review. Scott Winship of the Manhattan Institute raised similar objections a year ago in response to an academic paper Edin and Shaefer published on the topic. At several points in the book, the authors themselves seem kind of sheepish about it.

What matters statistically is that, buried amongst the evidence of welfare reform's success, there is a decided uptick in the number of families subsisting on very little cash — an uptick that shows up in several different data sources. And in addition to their statistical analysis, Edin and Shaefer report that they had no trouble finding real families to interview about this form of poverty. The subjects they describe are eager to work, and many perform well at the jobs they manage to get. But in general they lead turbulent lives, bunking with dysfunctional relatives or in homeless shelters, taking advantage of any charity or government aid available to them, going hungry when need be, and scraping together cash however they can, from collecting aluminum cans to, in several cases, selling their bodies.

Despite its short length, this is an important book that provides a heart-wrenching account of how these families survive on a day-to-day basis. But in terms of the law, the fundamental questions it raises are simply these: How does a federal government with more than 100 poverty programs fail to get at least $2 to some people? And can we help the $2-a-day poor without jeopardizing the pro-work incentives that made welfare reform a success?

First, a quick survey of some major poverty-relief efforts that come up:

Food Stamps (Supplemental Nutrition Assistance Program)
Again, this is one program that many of the $2-a-day poor do benefit from. SNAP was actually supposed to follow the general pattern of welfare reform, with eligibility requirements focused on work. But over the past decade and a half, the program has grown relentlessly, even while the economy was improving, because policymakers have gutted the rules. SNAP is increasingly going to people who do not work — and also to people who are not even poor, to say nothing of $2-a-day poor. These changes may be good or bad, but they are a major part of the story that the authors don't really cover.

Edin and Shaefer defend their decision not to count this money toward the $2-a-day threshold by pointing out that food stamps aren't cash; they can't be spent on rent, transportation, or clothing. For people just a little higher on the income ladder, this argument wouldn't work, because food is a basic necessity and money is fungible: When you buy someone's food for them, they take the money they would have spent on food and spend it on their next priority. For those at the very bottom, though, the money they otherwise would have spent on food simply doesn't exist.

As a result, while food-stamp fraud is relatively rare among recipients generally — at least according to official statistics — the extremely poor often sell their SNAP funds for just 50 to 60 cents on the dollar so they can buy other necessities. This is illegal, although, contrary to what the authors imply, a woman who sells SNAP to buy things like socks, underwear, and school uniforms cannot be given a 20-year prison term and a $250,000 fine. (These punishments are reserved for violations involving at least $5,000. Even businesspeople who defraud the government of six- or seven-figure sums typically are sentenced to five years or less.)

Temporary Assistance for Needy Families
TANF is the cash welfare program that was supposed to replace the pre-reform system, Aid for Families With Dependent Children. At its peak in 1994, AFDC served 14.2 million people, but in 2014 the TANF caseload was just 3.8 million. Many eligible people simply aren't on TANF, and researchers aren't entirely sure why. Some factors seem to be stigma, the lengthy application process and work requirements, the low level of benefits provided, government officials' discouraging applicants, and state legislators' redirecting federal TANF funds to uses besides cash payments.

Child Tax Credits
At tax time, many parents can claim a $1,000 credit for each child. For some poor parents, this credit is "refundable," meaning they get it even though they don't have $1,000 in tax liability to subtract it from. But those at the very bottom can't claim the credit at all. Some sell their children's identities to better-off friends and relatives who can take advantage of the benefit instead.

Like food stamps, this is a program that has grown even since welfare reform (and even after accounting for demographic factors). One woman the authors interview could probably qualify but doesn't want to stop working; other subjects are told they're ineligible despite various ailments.

How can we fix this system without returning to the way things were before welfare reform — an outcome that Edin and Shaefer agree is undesirable, as the old welfare was so far out of whack with American values that even many recipients didn't like it? The authors offer a three-pronged approach: Create jobs, by subsidizing them or offering them directly through the government if necessary; make it possible for every family to live on its own by providing affordable housing and increasing workers' incomes; and recognize that jobs, important as they are, can't always be the solution to poverty, even for the able-bodied.

The last idea is the most direct attack on the work-first welfare reform that started the problem, and it encompasses two different concrete proposals. One is to build "family crisis accounts" atop the Earned Income Tax Credit. Even the $2-a-day poor usually work at least sporadically, and work effort would produce credits in the accounts that families could tap in an emergency. Edin and Shaefer would also like to pressure states to use TANF to provide cash assistance rather than rerouting the funds to other uses (such as child-welfare programs).

These are interesting suggestions, but oddly, only one chapter in this short book focuses on them — the authors could have quintupled the space they spent on policy solutions without breaking the 250-page mark. As a result, they don't flesh out the case for their program, explore alternatives, or even give a sense of how much these reforms would cost, and they neglect numerous issues entirely. Pretty much every reader will notice something important missing or think of a different approach that the authors don't address.

One thought that occurred to me: Instead of attacking states' discretion over TANF funds, why not adjust the food-stamp program, which so many of these households already participate in? We could just provide some percentage of the benefit as cash. Some conservatives say SNAP reversed welfare reform, so perhaps this program, and not TANF, is properly seen as the successor to the old AFDC.

And here's a somewhat more complicated reform, a hobby horse of mine that happens to address many of the concerns Edin and Shaefer raise. First, make the $1,000 child tax credit fully refundable so it's available as cash to all poor families. Second, recognize that this makes spending in some other programs redundant, as many of them similarly provide more money to families with more kids — and cut those programs to at least partially fund the new spending. (Food stamps again come to mind.) And third, for the very poorest, send a check once a month (about $83) instead of making them wait until tax time for the money.

Policy-wise, this would solve numerous problems at once. $83 a month per child is a lot of cash in these households and no doubt would lift many above the $2-a-day threshold. If this money replaced some SNAP benefits, both the incentive and the opportunity for SNAP fraud would diminish, and the destitute wouldn't have to pay criminals 40-50 percent of their money to convert it to cash. With all parents eligible for the credit, it would no longer be a reason to sell kids' identities. The money would not carry the stigma of a benefit provided specifically to the poor. And perhaps most important, the credit would stay constant as parents found work and earned raises, rather than being cut, as happens with other poverty benefits. Edin and Shaefer report that poor families lose about 30 cents in SNAP for every dollar they earn themselves.

There are political benefits as well. Conservatives like the child tax credit (many would like it to be much bigger) but hate what SNAP has become, while liberals are more likely to accept the idea of giving the poor cash instead of in-kind benefits like food stamps. This reform would accommodate both views: Poor families get cash, but in a way that reflects the value of children to society rather than serving as a handout. This is, after all, the same exact tax credit, in the same exact amount, that middle-class families already get.

As briefly as possible, a few more issues that come up but aren't done justice: As Bernstein notes, the authors have little to say about helping the very poor acquire the skills they need to get decent jobs. In a book about the value of cash that proposes some very expensive and elaborate solutions, it's odd to find no mention of the universal basic income. Also, if the authors are correct that there aren't enough low-skill jobs to go around, maybe we should rethink our approach to immigration. At least one of Edin and Shaefer's sources became pregnant by accident, and of course unintended children can easily drive a struggling household into poverty; perhaps the advocates of long-acting, reversible contraception would have something to say about that. One region the authors focus on is the poverty-drenched Mississippi Delta; some might say we should help the poor leave areas where there are no jobs. Only about one-third of $2-a-day families are headed by a married couple, with single motherhood being a major risk factor, and of course there are folks with ideas for shoring up marriage.

Our poverty-relief system is a complicated maze of programs with different focuses and often competing goals. It's impressive that Edin and Shaefer managed to keep $2.00 a Day simple and short — but in doing so, they ensured they would raise far more questions than they could possibly answer. That's not necessarily a bad thing, but it puts the onus on the rest of the policy community to sort through this book, confirm its findings, and come up with a detailed strategy for fixing the problems it so eloquently highlights.

Robert VerBruggen is editor of RealClearPolicy. Twitter: @RAVerBruggen

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