American Renewal Won’t Occur Without a Reform of Our Welfare Programs

T he New York Times recently admitted that child poverty has been cut by more than 50 percent since 1993. And indeed, America’s progress in reducing child poverty in the past 30 years has been nothing short of remarkable. But partisans still disagree about what policies are responsible for that progress. Democrats credit a rapidly growing safety net, while Republicans point to the impact of pro-work welfare reforms.

There’s truth to both arguments, and the safety net has, in fact, helped many people temporarily keep their heads above water. But concerns linger especially on the right about whether the maze of government programs aimed at struggling low-income families with children undercuts work, marriage, and personal responsibility — the keys to upward mobility and long-run success for families.

Fortunately, there’s a path out of this maze: Policy-makers can reorient safety-net programs away from simply staving off poverty toward helping struggling families achieve a brighter future. That’s what my AEI colleagues Angela Rachidi and Scott Winship and I argue in American Renewal, a just-released book co-edited by former House speaker Paul Ryan offering a full spectrum of conservative policy solutions.

We believe there can be no real societal renewal unless we first reform our country’s labyrinth of welfare programs.

In designing such reforms, policy-makers should reject the idea that the only way to help low-income Americans with limited opportunities is to redistribute more income from wealthier Americans, as many on the political left unconvincingly suggest.

Indeed, today’s federal safety net already spends a rapidly rising amount on benefits and services through a blizzard of over 80 federal programs. Counting just the largest cash-like benefits (including welfare and disability checks, tax credits for low-income parents, and food stamps), real spending on these safety net programs has almost doubled since 1995.

And that doesn’t include Medicaid and other health benefits, the largest and most rapidly growing income-based support. Counting those resources, annual federal support for low-income individuals and families in need now exceeds $1 trillion.

In other words, more taxing and spending won’t solve anything. The real problems are the lack of coordination across programs and the lack of accountability for achieving results. Instead of throwing more money at the problem and expecting a better outcome, then, Congress should direct current funds in smarter ways.

Policy-makers should start by reforming federal tax benefits to better promote work and marriage, which are the best defenses against poverty — while rejecting Democrats’ recent temporary removal of the work requirement in the Child Tax Credit (CTC). One option is to consolidate the CTC and the related Earned Income Tax Credit into a single and larger Working Family Credit that would offer low-income working families with three children up to $12,000 per year (annually adjusted for inflation). This proposal would provide an estimated $25 billion more per year to families with children — paid for by savings in other parts of the safety net. And that’s without counting the additional earnings it will prompt along the way.

Another key reform involves revitalizing states’ responsibility to help families thrive. Federal taxpayers currently pay for the vast majority of safety-net benefits, giving states little concern over whether that money achieves results. In fact, states might protest when federal funds succeed at helping a family escape the need for benefits, because fewer federal dollars will be sent their way.

Policy-makers must flip that incentive structure. Current federal welfare programs should gradually shift to being half funded by states — with financial incentives for states to help families work and earn more. With this reform, assistance would remain available for those in need, but states would be newly focused on reducing dependency by helping nonworkers find employment.

The key is to introduce financial incentives while giving states much more flexibility to operate safety-net programs in ways that make sense for their residents. That also dispenses with the need for controversial federal mandates, such as time limits on collecting benefits. Once you get the financial architecture right, everything else will follow — without a ton of red tape from Washington.

This approach has worked well in the past. Similar pro-work reforms included in the 1996 welfare-reform law succeeded in incentivizing work, increasing earnings, and reducing child poverty and dependence for millions of low-income families. That historic change was crafted by a Republican Congress and signed into law by Bill Clinton, but it was only a partial reform. Recent decades have seen millions of people move away from traditional cash welfare and onto federal disability, food stamps, and housing rolls. This Republican House and Democratic Senate and president can stem the tide by completing that reform and renewing our commitment to working families, their children, and ultimately our country’s future.