GOP blueprint: The failure of conservative welfare reform

Debunking a supposed “success” can help us see the future more clearly, writes Paul Rosenberg.

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San Pedro, CA – What do you call a “balanced budget plan” that won’t balance the budget until 2040? A joke? Or the Ryan Plan?

What do you call a “deficit-reduction plan” with $4.6 trillion in tax cuts over the next 10 years? A joke? Or the Ryan Plan?

What do you call a “deficit-reduction plan” that boosts millionaires’ incomes by a whopping 12.5 per cent, while those making under $100,000 would see a top increase of 2.3 per cent and those making less than $10,000 would see an increase of just 0.2 per cent? No joke: It’s the Ryan Plan.

And to top it all off, 62 per cent of the cuts in the plan target programmes for low-income Americans.

There’s no way around it. These are the facts. And they’ll stay the facts, no matter how “mean” or “bullying” Republicans may say that Obama was being in his recent speech to American newspapers editors, when he criticised the Ryan Budget Plan that Mitt Romney has now fully embraced.

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Perhaps – perhaps – Republicans could argue that all those tax cuts might be justified if the US were a high-tax country, staggering under a massive tax burden. But it’s not. The US is a low-tax country, with total taxes just over 30 per cent, the bottom of the barrel for advanced industrial nations. It compares to about 45 per cent for Germany, the strongest economy in Europe, and over 50 per cent for Finland, Sweden, Denmark and Norway. What’s more, federal income tax rates are near historical lows, both for middle-income families and for the 1 per cent.

A little history here: When Bill Clinton became President in 1993, Republican presidents Ronald Reagan and George Bush had just spent 12 years running up massive deficits, reversing a post-World War II trend of almost 35 years of declining debt-to-GDP ratios. Clinton raised tax rates – over cries of doom from Republicans – and managed to start running a surplus within five years. Ryan’s plan would take more than 25 years, five times as long, to accomplish what Clinton did. It’s a joke, all right. But no one is laughing. 

The fact that Ryan’s Plan would also end Medicare as we know it seems almost a distraction from its main thrust, which is to drastically shrink the government back to 1920s’ levels – sparing only the military – while vastly enriching the millionaire class. 

Welfare reform as trial run

All these facts and figures can be difficult for most of us to process. Humans are wired for living in small groups, not nation-states, much less global empires. We need help making sense of these vastly larger social entities, particularly in projecting out into the far future. We need reference frames that help make sense of the world for us.

Fortunately, we can use relatively limited experiments from the past to provide useful guides for the future. And Ryan himself has offered up a perfect one for us, when he said his budget aimed to begin “welfare reform, round two”. As economist LaDonna Pavetti, of the Centre on Budget and Policy Priorities, was quick to explain, Ryan’s call conveniently ignored the tragic failures of round one.

Ryan continued, “That means block-granting means-tested entitlements – like food stamps, like housing assistance – back to the states so they can customise these benefits, have time limits, work requirements, the kinds of successful policies that made welfare reform so successful.” But as Pavetti pointed out, the success Ryan spoke of was an illusion.

Specifically, she noted, “The statistics he cites about welfare reform’s ‘success’ come from the early years of welfare reform, when the unemployment rate was exceptionally low – in April 2000, it fell to 3.8 per cent, below what economists consider full employment. Since a safety net is supposed to help people during times of economic need, the true measure of success is how it does during the worst of times, not the best of times.” And by that true measure, conservative welfare reform is anything but a success. 

Pavetti cited four fundamental facts: First, that single mothers’ employment gains during the early years of welfare reform – when the economy was booming – have nearly all been lost by today. [Chart] Second, that welfare reform itself only played a modest role in those initial gains – according to one study, just 13 per cent compared to 34 per cent for the Earned Income Tax Credit and 21 per cent for the stronger economy.

Third, that TANF (Temporary Assistance for Needy Families), the programme replacing traditional welfare (AFDC: Aid to Families with Dependent Children) helps many fewer poor families than AFDC did – 27 families out of every 100, compared to 68 families out of every 100 before welfare reform. [Chart] Fourth, that states “used their flexibility under TANF’s block grant to undermine, not strengthen, the safety net for poor families.”

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During the Great Recession, when unemployment doubled, the national TANF caseload rose by just 13 per cent (compared to 45 per cent for SNAP/food stamps), while states scaled back their TANF programmes “to save money – shortening and otherwise tightening time limits and reducing already low benefits further, leaving the poorest families poorer”.

The first two facts Pavetti cited speak to how a misleading aura of “success” was created, while the second two speak to the very real dangers of taking a block grant approach. Last August, Pavetti provided a more in-depth view of how welfare reform failed when she posted a 4-part report “TANF at 15” at CBPP’s “Off the Charts” blog.

Misleading aura of ‘success’ 

Part I, “How Well Does It Provide Income Support for Poor Families?” found a dramatic decline in TANF’s role providing income support to poor families [chart]. Specifically, over 15 years, “The national TANF caseload has declined by 60 per cent, even as poverty and deep poverty have worsened… The increase in deep poverty has been especially large. The number of families in deep poverty rose by 13 per cent between 1996 and 2009, from 2.7 million to 3 million”.

In addition to the dramatic decline in the number of families helped, the per-family benefits have declined as well, though at rates that vary significantly by state. Only three states have higher levels than in 1996, 10 have declined 0-10 per cent, eight have declined 10-20 per cent, 27 have declined 20-30 per cent and three have declined more than 30 per cent. Current benefits are well below poverty level – particularly in the South [map].

Part II, “How Have States Spent Their TANF Dollars?” had three main findings:

(1) Federal TANF block grant values – not adjusted for inflation – have declined almost 30 per cent [Chart].

Even worse, “State minimum required contributions to TANF have declined even more”.

(2) The cash assistance portion of TANF spending has declined drastically, “from $13.9 billion in 1997 to $9.3 billion in 2009, the most recent year available” [Chart].

(3) TANF funds have been shifted by states, “to pay for a broad range of services, including some that Congress did not envision when it created the block grant… In 2009, states used just 28 per cent of TANF funds to provide basic assistance, compared to 71 per cent in 1997” [Chart].

Each of these developments have clearly undermined the effectiveness of the welfare system, which is the subject of the next in the series, Part III: “What Is TANF’s Record of Success?” This part also had three main findings:

(1) As already noted, the early employment gains by single mothers have been lost.

(2) TANF doesn’t respond well to rising need: “TANF caseloads, unlike AFDC caseloads, haven’t responded to changes in the number of jobless single mothers… Beginning in 2002… the number of jobless single mothers started rising, while the number of families receiving TANF kept falling” [Chart].

(3) TANF is especially bad in dealing with those in greatest need: “TANF does far less to help families escape deep poverty than AFDC did… In 2005 (the latest year for which data are available), TANF lifted 650,000 children out of deep poverty – just a fraction of the 2.2 million children that AFDC lifted out of deep poverty a decade earlier. In 1995, AFDC lifted 62 per cent of children who would otherwise have been below half of the poverty line out of deep poverty; by 2005, this figure for TANF was just 21 per cent”  [Making TANF 1/3 as effective as AFDC. Chart].

US poverty on the rise

The fourth part in the series, “Looking Ahead“, addresses measure to improve TANF, which falls outside the scope of our present concern. That concern is how to avoid making the same mistakes that were made with welfare reform. The first step in doing that is to recognise a failure when we see one. But the resistance to doing this is intense.

The myth persists

The evidence presented by Pavetti is both stark and easy to understand. Yet, it has not penetrated Washington groupthink in the slightest, any more than President Obama’s birth certificate has penetrated the Tea Party base groupthink. Not just conservatives and Republicans believe that welfare reform was a success, many Democrats and even some progressives believe it as well. In fact, it’s the sort of Washington lie that one believes in order to prove one is a “Very Serious Person”.

A case in point is a January 2009 Washington Post column by Peter Beinart, one of the liberal hawks at the New Republic, whose ideological cover for the Iraq War was enormously helpful in drowning out voices of reason from the Democratic base.

Beinart may have gotten the Iraq War terribly, horribly wrong, but now he was to have his revenge in a column titled, “Admit It: The Surge Worked“. Curiously, Beinart even acknowledges the role of other factors involving the motivations of various Iraqi forces, “all of which mattered as much if not more than the increase in US troops,” but still insists on praising Bush and the “surge”:

Politically, Bush took the path of most resistance. He endured an avalanche of scorn, and now he has been vindicated. He was not only right; he was courageous. It’s time for Democrats to say so.

Beinart also connects the “success” of the “surge” with that of “welfare reform”:

Older liberals… remember the welfare reform debate of the mid-1990s, when prominent liberals predicted disaster, and disaster didn’t happen.

Except, of course, disaster did happen, as Pavetti quite convincingly shows. It just didn’t happen right away, because of the other unrelated factors improving conditions in the late 1990s – just as other factors made it look like the “surge” was a success.

Beinart is part of a tribe – the tribe of Democratic Party insiders – and his column provides a snapshot of how they think. But it doesn’t explain how things came to be this way. For that, we need to turn to The Price of Citizenship: Redefining the American Welfare State by Michael B Katz, perhaps the leading historian of American social policy.

While Katz examines various different aspects of social policy from their early roots -workers’ compensation, disability insurance, unemployment, medical care, food security, urban policy, urban housing, homelessness, social security and welfare – his primary focus is on how social policies were redefined and restructured in the post-Nixon decades of the 1980s and 90s.

Embracing conservative ideas

While the origins of these policies varied widely, the sorts of transformations they underwent in the Reagan/Bush/Clinton era were surprisingly uniform, as summarised by Publishers Weekly:

Three forces drive the welfare revolutions, he says a savage, selective war on dependence, a push for devolution of power from the federal level to the states and an often naive, ill-conceived use of market models shaping a ‘master narrative of policy reform’ involving ‘the discovery of a crisis of numbers and costs (rising rolls); the assignment of blame to morally suspect persons (the undeserving); the reduction of programme size through controlling eligibility more than reducing benefits (reform); the measurement of achievement by fewer beneficiaries (success); and the failure to track the fate of those denied help (willful ignorance)’.

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The narratives that Katz describes – and documents across a wide range of policies – fit like a glove with the way in which the on-the-ground failure of conservative welfare reform is constantly reinvented as a “success” inside the Beltway.

And – as LaDonna Pavetti pointed out – that same pseudo success is now the foundation on which Ryan and Romney want to base the most radical restructuring of the federal government ever contemplated in a single swoop.

In one sense, Americans are fortunate that the Republicans have taken such an extreme position, spurring Obama to go back into a fiercely critical campaign mode, which has no need whatsoever to resort to exaggeration. As Harry Truman famously said, when a supporter once shouted out “Give ’em hell, Harry!”, “I just tell the truth, and they think it’s hell”.

But, on the other hand, once the campaign is over, there’s still a very real possibility that Obama will turn around and deliver some version of Ryan/Romney light. Obama, after all, belongs to the same tribe of Democratic Party insiders that Beinart belongs to.

He shares the same tribal timidity and limited vision that has resulted in embrace of conservative ideas like the individual healthcare mandate and carbon cap-and-trade -futile attempts to compromise with post-2008 conservatives who now denounce their previous ideas as parts of a socialist plot to destroy the US.

This is why we need to focus on the failure of conservative welfare reform. It is unambiguous proof that problem is not just contrary-minded conservatives who walk away from their old ideas once neoliberals embrace them. The problem lies with the very conservative ideas themselves. The world just does not work the way that conservatives believe it does. And the best way to see that is to look unflinchingly at the very things that conservatives trumpet as examples of their success.

Paul Rosenberg is the senior editor of Random Lengths News, a bi-weekly alternative community newspaper.

Follow him on Twitter: @PaulHRosenberg