Stringing along: the 'no-strings' approach to welfare reform would not be likely to result in reform worthy of the name

National Review, April 17, 1995 by Robert Rector

Mr. Rector is senior policy analyst for welfare issues at the Heritage Foundation.

A NEW theme, federalism, has emerged in the welfare-reform debate, taking its place alongside the topics of work and illegitimacy. Speaking for most of his fellow governors, Michigan's John Engler told Congress, ``It's time to give the states a chance. Certainly we can do better . . . States must have the freedom, with no strings attached, to implement change.''

John Engler is a solid conservative with a record of moderate accomplishment on welfare reform. Unfortunately, what he was proposing as a national welfare policy has nothing to do with federalism, and his ``no strings'' approach represents a step backward compared to reform alternatives such as those contained in the Contract with America.

To understand the muddled relation between state governments and welfare reform we must begin by recognizing that the current U.S. welfare system has been overwhelmingly created and funded by Washington, D.C. Programs such as Aid to Families with Dependent Children (AFDC), Food Stamps, and Medicaid are well known, but they are only the tip of the welfare iceberg. There are more than eighty major welfare programs in each state providing cash, food, housing, and social services to low-income Americans. Nearly all these programs emanate from Washington. Total welfare spending in 1994 reached $350 billion, of which a full 74 per cent came from the Federal Government. Moreover, the states' share of spending is largely restricted to one program, Medicaid. If Medicaid is excluded from the count, the Federal Government's share rises to nearly 85 per cent.

Governor Engler's call to ``let the states do it,'' with its emphasis on federalism and decentralized power, has a strong appeal to conservatives. But Engler's proposal was greeted with dismay by many conservatives in the House and Senate. This is because Engler was proposing to get rid of not only the mountains of bizarre liberal welfare regulations but also the last handful of conservative national requirements in welfare, particularly those involving work, paternity, and illegitimacy.

Thus the question of what is conservative in welfare reform has become confused. Three distinct approaches have emerged.

1. True Federalism. True federalism starts by honoring the Tenth Amendment and recognizing that the Constitution provides no role for the Federal Government in welfare. In this approach, national means-tested welfare programs such as AFDC, Food Stamps, and Medicaid would be abolished and federal taxes reduced proportionately. State governments would then take full control of welfare programs within their borders and -- most critically -- would take full responsibility for funding them. The Federal Government would be removed from welfare entirely, both as a program provider and as a funding source.

True federalism has received little public discussion, but it is very popular among House freshmen. Representative Steve Chabot (R., Ohio) is working on a bill that would abolish federal means-tested programs and return the savings, not to state governments, but directly to the taxpayers. The bill would provide an annual tax rebate of roughly $3,400 each year for each household paying federal income tax. Income-tax withholding would be adjusted so that the ``rebated'' funds remained in the taxpayers' pockets instead of coming to Washington. Each state government could then take whatever portion of the tax rebate it deemed necessary to run welfare in its state. Governors thus would be directly accountable to their own taxpayers for the costs of welfare.

2. No-Strings Block Grants. This approach has been pushed by Governor Engler and by Governor George Allen of Virginia (although Engler, to his credit, has spoken favorably of true federalism as well). Governors would be given carte blanche to run welfare, but the funding of the welfare system would remain primarily federal. Washington would buy the car, gas, and tires, and the governors would drive wherever they wanted. It is easy to see why governors would be attracted to this scheme, which should be called ``super revenue sharing'' rather than federalism. Among federal legislators, Senator Bob Packwood (R., Ore.) seems inclined toward this approach.

3. Block Grants with Conservative Principles. This policy is best represented by the legislation introduced by two conservatives, Representative Jim Talent (R., Mo.) and Senator Lauch Faircloth (R., N.C.). Talent and Faircloth are among the strongest proponents of state flexibility -- their bill abolishes over 65 separate federal welfare programs and folds the funds into a single huge block grant. The bill thus wipes out the forty-foot pile of federal regulations on welfare. In place of this mound of red tape, Talent and Faircloth would establish a few precise, conservative principles on work, illegitimacy, and paternity. Says Talent, ``We want great increases in state flexibility, but we also want to ensure that federal funds are used to promote work, not dependence, and marriage, not illegitimacy.''