Politics & Policy

Curbing Dependency in the Big Apple

(Image: Dreamstime)
Will Bill de Blasio learn the right lessons on welfare?

In the last two decades, New York City has made tremendous strides in helping people move off welfare dependency, according to a new study by E. J. McMahon for the Manhattan Institute, “Trends in Assistance and Dependency: Tracking Programs for New York City’s Poor, 1956–2014.” In the last 19 years, there has been a 71 percent drop in New Yorkers on welfare. McMahon, a senior fellow at the Manhattan Institute’s Center for State and Local Leadership and president of the Empire Center for Public Policy, Inc., talks with National Review Online’s Kathryn Jean Lopez about the history and future of welfare policy in the Big Apple and elsewhere.


KATHRYN JEAN LOPEZ: What is the most significant take-away from a study of welfare in New York City over the past 19 years?

E. J. McMAHON: The decrease in welfare dependency has been as striking and dramatic as the decrease in crime in New York City, which started just a few years earlier. During Mayor John Lindsay’s heyday in the 1960s, New York City became known as the nation’s welfare capital. Not by coincidence, it also was the epicenter of what became a national “welfare rights” movement. The welfare rolls increased from about 400,000 to over a million people in the early 1970s, which so alarmed Governor Rockefeller and the legislature that they started pulling in the reins from Albany, with little effect. Even at the peak of the city’s economic recovery in the late 1980s, the caseload never dipped below 810,000. By 1995, Rudy Giuliani’s second year as mayor, the number of New Yorkers essentially on the dole was back to 1.16 million. By the time he left office, it was at 462,000, and it’s now about 339,000. This is essentially the baseline for assessing Bill de Blasio’s welfare policies over the next four years.


LOPEZ: What explains the city’s drop in welfare dependency?

McMAHON: The 1996 federal welfare reform — Bill Clinton’s bargain with a Republican Congress to truly “end welfare as we know it” — was the big trigger, of course. But that was not the whole answer. Rudy Giuliani and Jason Turner, who became the city’s commissioner for welfare and Medicaid eligibility in 1998, were deeply committed to the principle that getting poor people into a job, any job, is better than simply writing them a check. And in pursuing that goal, they adopted the same sort of performance-driven, stat-focused approach the city had applied to policing. Mayor Bloomberg basically stuck with that all the way. In fact, the welfare commissioner for most of Bloomberg’s tenure, Robert Doar, previously had been Governor Pataki’s state welfare commissioner, and had done a lot to promote key reforms at the state level.


LOPEZ: Is this all good news? Do we know how people are doing once off welfare?

McMAHON: What we know for sure is that poor people are much better off working, even in an entry-level job, than on welfare. As the report points out, a nonworking single mother with two children can collect cash benefits or cash substitute worth $16,032, well below the federal poverty level, but she can more than double that, earning about $34,000, by working. One big part of the difference consists of $8,787 in federal, state, and city earned-income tax credits, which is a very important means of support for low-income workers.

The city’s official poverty rate went down every year for five years after welfare reform, and stayed essentially flat for the next eight years. Although the poverty rate has risen since 2008, it still hasn’t returned to the levels of the mid 1990s. Child poverty, in particular, is appreciably lower than it used to be, which reflects the city’s emphasis on providing support for working parents with dependents. And New York has a lower poverty rate than Los Angeles, Chicago, Houston, Philadelphia, or San Antonio. The city’s alternative measure of poverty, which starts at a higher income threshold and counts cash income supports from public sources, is actually slightly lower than the official measure, which is based on census data.


LOPEZ: The number of people on food stamps and Medicaid is at an all-time high in New York City. What do these numbers say to you?

McMAHON: There have been several things going on. Eligibility for the federal food-stamps program was expanded in a big way starting around 2002, and New York State began expanding its Medicaid program to families well above the poverty level around the same time, years before Obamacare arrived and started doing the same thing. But there also was a deliberate effort under Mayor Bloomberg to sign more people up for food stamps and Medicaid. He viewed these as “work supports” rather than welfare. The idea was that it was better for a poor person to be working, with the help of food stamps and Medicaid, than to be unemployed and cashing checks. Of course, the ideal would be complete self-sufficiency, and too much of the population is still far from that.


LOPEZ: What are the numbers you’d most like to highlight to the de Blasio administration? Policy prospects you’d both recommend and advise against, with a look to numbers?

McMAHON: The de Blasio administration is well aware of these numbers, but sees them in a much different way. In testimony before the City Council this week, Mayor de Blasio’s new welfare commissioner, Steve Banks, essentially debunked the surprising relative stability in the caseloads since the recession, saying it was largely a product of a “rejection and reapplication cycle” designed to discourage people from seeking cash assistance. Now, in a sense, he’s right. Clearly, the city under Giuliani and Bloomberg set a high bar for getting and staying on the cash-assistance rolls. The question is whether the alternative is actually more desirable.

#ad#Commissioner Banks’ message, in essence, was that the new administration will make it easier to sign up, but that they will ultimately keep the welfare rolls down by becoming “more effective” at finding lasting employment in more “stable” jobs. This sounds like a pretty tall order.


LOPEZ: Knowing what you know about these numbers and life in New York, what must any discussion of inequality in the city include?

McMAHON: There are a few things to remember when you talk about inequality in New York. First, the city has long attracted some of the very richest people in the world. So, to the extent that macro-economic and social forces are driving more wealth than ever toward the pinnacle of the wealth pyramid, the results are bound to be on especially vivid display in New York City.

Second, New York City is and always has been a magnet for immigrants, including some of the poorest people in the world. So the lowest end of the distribution in the city is always going to be pretty low. But as the Manhattan Institute’s Ed Glaeser has pointed out, New York’s inequality is actually a sign of success — the opportunity it represents attracts people from both extremes.

Third, New York imposes the heaviest and broadest array of taxes of any major city in the country, and a disproportionate share of those taxes fall heavily on the wealthiest individuals and business in the city. Much of that resulting revenue is spent on anti-poverty programs — not just “safety net” welfare, Medicaid, housing, and the like, but also on a very generous earned-income credit.

In fact, there is probably more wealth redistribution going on in New York than in any other place in the U.S. The real problem is the squeeze on the city’s middle class, which is tight and getting tighter. While everyone agrees that the goal of welfare-to-work policies should be to get the poor on a ladder up to the middle class, once people manage to climb a few rungs, their aspirations for a better life are too often stifled by New York’s high cost of housing and of living in general. And those costs, in turn, are pushed up further by high taxes and by heavy-handed regulatory policies.


LOPEZ: Did anything in this study reinforce what you’ve come to know about New York and welfare benefits? Anything surprise you?<

McMAHON: The surprise, at least from the perspective of someone trying to predict the outcome back in the 1990s, is that Giuliani and Bloomberg actually were able to hang tough and withstand pressure to backslide on welfare reform, as some other jurisdictions around the country ultimately did to varying degrees. I think the pressure would have been much stronger if there wasn’t a broad realization that their policies were actually working — not in eradicating poverty and all the ills associated with it, to be sure, but at the very least in giving people a better shot at self-sufficiency than they had under the old welfare regime.


LOPEZ: Are there lessons for beyond New York in this report?

McMAHON: The main lesson, I suppose, is the usual one: If you can do this in New York, you can do it anywhere. Mayor de Blasio himself says the best cure for poverty is a job. But the debate, if you can call it that, has stalled at that point. New York has never tackled the dicier topics of marriage and family formation and the role these things play in poverty. At the very end of Bloomberg’s tenure, his administration tried to get at those issues, at least obliquely, by launching a campaign to discourage teen pregnancy. It was promptly blasted by many other city politicians. One state senator from Manhattan called it “ill-targeted and pathologically mean-spirited.” Needless to say, it’s now history.


LOPEZ: Fifty years after LBJ’s “Great Society” speech this week, how might a New Yorker reflect on where the Big Apple and Empire State are, what we’ve learned, what we haven’t?

McMAHON: Based on what Mayor de Blasio and his team have had to say on this subject so far, it seems the city will no longer emphasize the notion that a job, any job, is better than no job. Instead, they seem to be moving to an emphasis on placing welfare recipients in the best possible job, in a job that is both more secure and more likely to lead to advancement, which thus might require more special training first. In fact, on the theory that a four-year degree is the key to getting a really good job, going to college will now also fulfill your work requirement.

All of which sounds nice and desirable, but this was the approach that doomed previous “workfare” experiments in the decades before the 1996 federal welfare reform. Meanwhile, the new administration is leading the charge for things like a higher minimum wage, mandated paid sick leave, and other policies that will shrink the number of jobs at the source. It’s a troubling combination. It looks like some lessons from the ’60s, ’70s, and ’80s may have to be learned all over again.

— Kathryn Jean Lopez is editor-at-large of National Review Online.

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