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Debate over Welfare Reform Lingers 10 Years Later

August 22, 2006 at 6:20 PM EST
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BILL CLINTON, Former President of the United States: Today, we are ending welfare as we know it.

BETTY ANN BOWSER, NewsHour Correspondent: The sweeping Welfare Reform Act of 1996 ended cash assistance as an entitlement. It was intended to move people off welfare, and it did.

Since 1996, the number on assistance has plunged from 12 million down to 4 million. Nearly a million lost benefits when they hit time limits or didn’t follow rules, and millions more left from low-paying jobs. But in recent years, the decline of caseloads has slowed.

This summer, the Bush administration announced new rules it hopes will push much larger numbers of welfare recipients into jobs. The changes are a response to the Deficit Reduction Act President Bush signed into law last winter and are intended to further reduce costs of the federal program.

GEORGE W. BUSH, President of the United States: The message of the bill I signed today is straightforward: By setting priorities and making sure tax dollars are spent wisely, America can be compassionate and responsible at the same time.

BETTY ANN BOWSER: The administration says states will now face stiff financial penalties if they don’t prove that half of their welfare recipients are working. That 50 percent work requirement was in the original 1996 law. But Michael Leavitt, secretary of health and human services, says until now states were able to get around it.

MIKE LEAVITT, Health and Human Services Secretary: We’ve essentially gone back and said, “Let’s reboot, start again. Let’s put in the 50 percent work requirement that was originally intended so that people can not only get back on their feet, but have some way to sustain themselves over a long period of time.”

BETTY ANN BOWSER: Currently only five states meet the 50 percent work requirement. In fact, the majority of states fall below 36 percent. And the Congressional Budget Office estimates that states may have to spend $12 billion in expanded programs to implement the new rules.

The administration also challenged the definition of “work,” saying many states have been too lenient.

MIKE LEAVITT: In some states, they were allowing motivational reading to be work. In some cases, it was shopping for clothes. In a couple of cases, it was bed rest. I mean, I know that sounds crazy, but you can see it just needed to be redefined and tightened up to where it was what we all know to be work.

Flexibility of the programs

BETTY ANN BOWSER: Welfare advocates, like Chris Hastedt, say the flexibility which has made welfare programs successful is now being taken away. Hastedt works with welfare families in Maine.

CHRIS HASTEDT, Maine Equal Justice: I think that tightening up on the definitions of the work activities already in there, a set of work activities, are going to make it more difficult for states to design programs like Maine has that really respond to the needs of families.

BETTY ANN BOWSER: She points to Maine's parents of scholars program which gives benefits to welfare recipients seeking a college degree.

ROCHELLE RIORDAN, Welfare Participant: We have an exam this week. So Mommy needs all the help she can get.

BETTY ANN BOWSER: Rochelle Riordan is one of the 1,000 participants enrolled in the program. After discovering her former husband had put the family deep into debt, Riordan was forced to seek financial assistance. She says it was the most humbling experience of her life.

ROCHELLE RIORDAN: I swore, growing up on welfare as I had, that I would never, never be in that situation. Never say never. And there I was, and I needed help. And I didn't want to do it. I vehemently did not want to do it, but I had no choice. I have a child to support, and she comes first.

BETTY ANN BOWSER: Determined to get off government assistance for good, Riordan is now on her way to a four-year degree. While Riordan gets no government money for tuition, she does get help for child care, school supplies and transportation. And the state of Maine gets to count her as one of their work participants.

ROCHELLE RIORDAN: I'll be completely self-sufficient. With the jobs that I would be eligible for, I would have medical insurance. I would have dental. I would not need food stamps. I would be self-sufficient, and I would be paying back tenfold. What I've taken out in the last -- well, it'll be a year and a half that I will have collected when I graduate, I'm going to pay that back tenfold in taxes. You can't say that about the people who are on minimum wage.

BETTY ANN BOWSER: But with the new rules, postsecondary education cannot be considered work.

MIKE LEAVITT: It ought to be clear that it isn't intended to be a scholarship program. It was intended to help people sustain themselves during a period of transition and to have a plan to get back on their feet.

BETTY ANN BOWSER: Welfare recipient Emily Wood says she was unable to get back on her feet. With a limited education, she says she was going nowhere in low-wage jobs.

EMILY WOOD, Welfare Participant: I was trying to make it on just whatever job I could find. And I happened to be working in a Laundromat, couldn't find child care, lost my job there, and basically was kind of running out of options.

BETTY ANN BOWSER: Now enrolled in the parents of scholars program, Wood will receive her bachelor's degree with high honors this summer. The new rules take effect this October, and states like Maine are quickly assessing what they must do to save programs and avoid penalties.

Meanwhile, the debate continues over how best to get people off of government assistance and out of poverty for good.

Assessing welfare programs

Ron Haskins
Author, "Work Over Welfare"
It's been a triumph. It's the most successful social policy of our time. The result has been that the rolls have plummeted for the first time since the program was established in 1935.

GWEN IFILL: Jeffrey Brown has more.

JEFFREY BROWN: And with me for a look at the impact of welfare reform, Ron Haskins, who helped draft the law as staff director of the Republican-led House Ways and Means Committee in 1996. He's now a senior fellow at the Brookings Institution and author of a new book, "Work over Welfare: The Inside Story of the 1996 Reform Law."

And Sharon Parrott, director of the Welfare Reform and Income Support Division at the Center on Budget and Policy Priorities, welcome to both of you.

SHARON PARROTT, Center on Budget and Policy Priorities: Thank you.

RON HASKINS, Brookings Institution: Thank you.

JEFFREY BROWN: Let's start with an overall assessment of welfare reform 10 years later -- Ron Haskins?

RON HASKINS: It's been a triumph. It's the most successful social policy of our time. The result has been that the rolls have plummeted for the first time since the program was established in 1935. Mothers went to work in droves. It's unprecedented in Bureau of Labor Statistics records that any demographic group would have such a rapid increase in employment.

And as a result of that, of course, their earnings increased every year and their income from welfare declined every year. That's the very definition of lowering welfare dependency. And at the end of the period in 2000, they were about 25 percent better off.

And child poverty declined very substantially. Black child poverty reached its lowest level ever, and poverty among children in female-headed families also reached the lowest level ever. And now, even after increases in poverty rates because of the 2001 recession, the poverty rate still is 20 percent lower than it was when it started to decline, so it's been a triumph.

JEFFREY BROWN: All right.

Sharon Parrott, a triumph?

SHARON PARROTT: I think there have been strengths and weaknesses, but I think the story is little more mixed, in my view. It's unquestionably the case that employment rates among single mothers improved in the 1990s and poverty fell.

Many of those mothers that went to work worked in low-wage jobs. Many remained poor or near poor, but they were working, and that was a clear goal of the '96 law and a broadly shared American value. But I think we have to look at some other statistics that are often overlooked when we talk about the history of welfare reform.

We know that there is a group of single mothers and their children that are decidedly worse off than they were under the previous system. The previous system was not positive, but this is a group that's been made worse off.

JEFFREY BROWN: Who's that?

SHARON PARROTT: Those are the groups of the families where people have very serious problems. They have physical health problems, mental health problems, substance abuse problems, very low educational levels. In many cases, those mothers are still on welfare, unable to make the transition.

But more troubling, a very large number of those families and a growing number of those families are now what are termed "no work, no welfare" families, families that aren't working and aren't getting help. And when I say they're not getting help, they're not getting help making ends meet, and they're not getting help moving forward towards employment.

Growing out of social welfare

Sharon Parrott
Center on Budget & Policy Priorities
When a mother has child care help, when she goes to work, it's much easier for her to make that decision to go to work.

JEFFREY BROWN: Would you agree, Ron Haskins, that there is a part of the population that has not done well?

RON HASKINS: Yes. That definitely is the case. It's undeniable, because we can see it very clearly, again in Census Bureau data, and there have been a number of very, very good studies.

But this is not a reason to say that welfare reform did not succeed. There is no such thing as a policy that succeeds for everybody; there never has been, and there never will be. This is the downside of the policy, and it's something we should do something about.

Frankly, I think we should do more than we're doing, but it's not a reason to say that welfare was not successful because, for the overwhelming majority, it was successful. But we have this group at the bottom that is probably worse off because they've not been able to maintain themselves in the labor market.

JEFFREY BROWN: Let me try to establish something else that I've wondered about in looking at this. How much of this, how much of the change was due to the economy? A lot of the decline in the rolls, as I understand it, happened in the late '90s, strong economy at that time -- Sharon Parrott?

SHARON PARROTT: I think most researchers that have looked at this have concluded that there was really a synergy among three factors that led to the decline in poverty and the rise in employment. Welfare reform was one of those things. It was very work-focused.

But there was also a very strong economy which, unlike some of the strong economies we've had, this one actually reached down into the low-wage labor market, which made a very big difference. And we did a set of things outside of welfare that really helped families that were working but still remained poor.

And that made work pay; that increased work incentives. When a mother has child care help, when she goes to work, it's much easier for her to make that decision to go to work.

JEFFREY BROWN: What do you think was the right mix here?

RON HASKINS: I think all three are important. What she referred to as the work support system, the welfare reform that pushed people into the economy, and a healthy economy. But a healthy economy, a rapidly expanding economy is not necessary. It makes it better, but there's still a lot of mothers that were not working before who are working now when the economy is not as hot, and even in 2001, the actual year we had the recession.

And let me emphasize this point, because I think this is one of the most important points, and that is that, over a period of more than a decade, Congress, which is not usually accused of having vision, changed a whole series of programs, and they changed these programs and even created some new programs specifically to help low-income working families.

In the old days, if you were on welfare and you took a job, you lost almost all your benefits. It was an economically rational decision to stay on welfare. But because Congress changed these programs, especially Medicaid and, above all, the earned income tax credit, which provides a wage subsidy to low-income working families, mothers could take a job at $7.50 or $8 an hour and have the equivalent of a total income of $16,000 or $17,000 a year, which many of them did.

So this work support system is really a crucial part of the picture, and it's something that separates American social policy from social policy in the rest of the world, that we expect people to work, and we support them if they do work.

Getting out of poverty

Ron Haskins
Author, "Work Over Welfare"
[W]e need a whole new set of programs to figure out how to help these low-income mothers get better jobs -- and fathers, as well -- and move up the job ladder, which is the way Americans would like it to be.

JEFFREY BROWN: What about the question of, not only getting people jobs, getting people to work, but getting them out of poverty? Is there still an issue of now people have moved into the status of the working poor, even if they have jobs?

SHARON PARROTT: Yes, it's absolutely the case that people found work. They typically worked at $7 or $8 an hour. And while Ron is right they got some added help from their earned income tax credit, sometimes from child care subsidies, although most families that need child care help don't get it because the program is so underfunded, but they're still living at the poverty line, just below it or just above it, and really struggling to make ends meet.

So I do think an important next step is: How do we help mothers and, in fact, fathers and people without children that are in the low-wage jobs to get skills so that they can progress, so that they can move forward in the labor market, get better jobs that can better support their families?

JEFFREY BROWN: What do you think about the working poor question?

RON HASKINS: Yes, I agree with that, but I think we should make this point. Let's think of three levels. One level is dependent on welfare. That is bad. The country feels it's bad. Opinion polls have shown for 20 years now that the American public expects people to work.

So the second stage is they leave welfare, they go to work, and most of them did escape poverty because of the combination of the welfare benefits and the work benefits from the work support system.

But then the third stage, which we don't know how to do, is to help those mothers move from $7 or $8 an hour to $15, or $18, or $20 an hour. Having met a lot of these mothers, having watched the programs at the state level, I know a number of these mothers are capable of it. But they're school dropouts. They're working in jobs that do not necessarily lead to $15 or $18 an hour.

They need training, and we've been trying this for years, we as a nation. We've spent billions of dollars. And the programs have been very unsuccessful. So we need a whole new set of programs to figure out how to help these low-income mothers get better jobs -- and fathers, as well -- and move up the job ladder, which is the way Americans would like it to be.

JEFFREY BROWN: Well, you both started to talk about things looking forward. Of course, Betty Ann Bowser's piece talked about the new laws that will be starting in October, trying to get states to cut it down to 50 percent of those off of welfare. What do you think will be the impact?

SHARON PARROTT: I think what's really unfortunate is that, instead of building on some of our successes and recognizing where we have weaknesses in our system, the new rules are very rigid.

And they say to states: Look, you need to have more people in work activities, these programs that are designed to help people get jobs, but they tell them they have to be very narrow. Everyone has to sort of fit in the same box. It's a very rigid approach.

And the problem is that many of the families, particularly those that are left on the rolls, have very diverse needs and capacities. One study in Minnesota found that long-term recipients, a very large proportion of them, had very low basic cognitive abilities.

Others have shown high degrees of mental illness. Those people need more nuanced help. They need to move towards employment. I think no one is arguing that they don't, but they need specialized help to get them there.

And the new rules are very, very rigid. They don't give states the flexibility to really tailor welfare-to-work programs in ways that can address those complicated problems.

JEFFREY BROWN: Well, it strikes me that we keep talking about broad, national reform here. But, of course, all this happens at the state level. So would the new laws -- what do you think about this suggestion that they would straitjacket the states?

RON HASKINS: I'm not sure exactly what the term "very, very narrow" means. This is the deal that was made in '96 when the bill passed, a 50 percent work requirement. That has not changed. The categories that qualify as jobs or work have not changed.

What happened is that the HHS wrote a regulation that is more specific about how you define those categories of jobs. And they also required the states to report a lot of information to make sure they were actually living up to the work requirement.

So how it's going to work out, I don't think anybody knows. There are a lot of people worked up about it. If I were in Congress, I would be watching this very carefully, and I'd start having hearings right away. And I'd find out what the states are actually doing.

But this is the point: The states should have half their caseload in work activity. You could make an argument it ought to even be higher. And it makes sense that the states would report to the federal level. So maybe it's overdone, I don't know, but we need to look and see what actually happens in the states.

JEFFREY BROWN: Final response?

SHARON PARROTT: I do think there are actually some pretty big differences from the deal that was, quote, unquote, "struck 10 years ago." And in particular, states had explicit authority to do things much more flexibly 10 years ago if they were doing it with their own dollars. And that flexibility has been taken away.

And I would also say that a number of states use their flexibility to interpret these terms broadly not to scam, as I think many officials at HHS have really suggested, but instead to say, "You know what? This family doesn't need to be in job training. This family needs to get a mental health -- their mental health in order so that they can succeed in job training." And it's that kind of flexibility that's really been constrained.

JEFFREY BROWN: OK, we'll have to leave it there. Sharon Parrott, Ron Haskins, thank you both very much.

RON HASKINS: Thank you.

SHARON PARROTT: Thank you.