On the supply side - failure of Clinton administration welfare reform policies

National Review, May 16, 1994 by Lawrence A. Kudlow

WOULDN'T it make sense to the average taxpaying voter if the current Washington effort to "end welfare as we know it" actually produced less, rather than more, federal spending for welfare? Not a chance. Instead, the Clinton Administration is about to propose a plan that will cost at least $35 billion more than current plans and by 2000 may total $60 billion above current plans. Despite New Democrat rhetoric about "two years and you're out," the social engineers in HHS and the White House are coming up with a massive bureaucratized entitlement for daycare spending, along with expanded job training, with only a small percentage of welfare recipients actually subject to workfare provisions.

Unfortunately, an early plan from House Republicans, authored by Pennsylvania Senate hopeful Rick Santorum and Connecticut Representative Nancy Johnston, is far too timid: five years and you're still not really out. This proposal creates a new entitlement of $6,000 for each person moving from welfare to workfare. Its off-budget scoring mechanism will result in huge out-year spending increases. And though it does provide for a 2-percent-plus-inflation cap on five welfare programs (AFDC, SSI, EITC, food stamps, and housing allowances), the cap is not legally binding.

What is more, the Santorum-Johnston proposal deals very lightly with spiraling out-of-wedlock births. It requires mothers under 18 to live at home, has inadequately enforced paternity requirements, and gives states the option of limiting AFDC for mothers under 18. But most illegitimate births occur to women between the ages of 19 to 21. And would states ever deny themselves federal funding by exercising the AFDC option?

None of this generates the "more deterrents, greater social stigma, and more economic penalties" advocated by William Bennett. Nor does it meet the criteria set out by Charles Murray, who argues that welfare will never truly be reformed until it is extinguished. Following their lead, Empower America (where Bennett, Jack Kemp, and Vin Weber perch in opposition) sharply criticized the House GOP proposal and urged a "bold, principled, and fundamentally different alternative."

The Empower America approach emphasizes much tougher limitations for welfare assistance to unwed mothers, stronger workfare provisions, and stiff spending caps. Additionally, at the urging of Jack Kemp, the organization's plan contains strong economic-growth provisions for blighted urban and rural areas, including the elimination of capital-gains and payroll taxes and the encouragement of commercial bank lending to minority entrepreneurs in those areas.

Republicans will ultimately come up with a tough alternative to the Clinton proposal, for it is hard to overstate the failure of the U.S. welfare system. Since the mid-1960s, federal, state, and local government spending on welfare, measured in 1992 dollars, has increased nearly eight-fold, from $37 billion in 1965 to $305 billion in 1992. All told, spending on "greater welfare" (to borrow columnist Ben Wattenberg's term) has cumulatively totaled a staggering $4.9 trillion. Welfare has grown from 1.5 per cent of gross domestic product in 1965 to 4 per cent currently.

Looking ahead, according to the Congressional Budget Office's January 1994 baseline projections, mandatory spending on means-tested programs is expected to rise by $114 billion between now and 1999--9.2 per cent annually, or three times the expected inflation rate. All this after an "end welfare as we know it" bill in 1988, and two budget "deals of the century" in 1990 and 1993.

What haw Americans gotten for this? More welfare recipients (Robert Rector of the Heritage Foundation estimates that the total welfare population may be something like 60 million people) and rising social pathologies, including drug abuse, crime, and violence. For instance, the out-of-wedlock birth-rate had increased from 5.3 per cent in 1960 to 29.5 per cent in 1991, including a 67.9 per cent rate among blacks; and the number of violent crimes has risen from 288,000 in 1960 to nearly two million in 1992.

It is time to spend less, while creating both incentives for traditional two-parent families and penalties for unwed mothers. This is exactly the approach taken in a new proposal sponsored by Republicans Lauch Faircloth, Charles Grassley, and Hank Brown in the Senate, and Representatives James Talent, Tim Hutchinson, and Charles Canady in the House. On illegitimacy, the Faircloth-Talent bill stipulates that one year after enactment unwed mothers age 21 and younger would receive no direct welfare payments except Medicaid: no AFDC, no food stamps, no public-housing assistance. Four years after the bill passes, the cut-off age would be raised to 26.

The budget savings from this reform would be allocated to the states in the form of a block grant designed to provide help to orphanages, adoption, or group homes. However, these federal funds could not be spent for abortions or conventional welfare subsidies. For any unwed mothers currently on welfare, if they had additional children they would be ineligible for welfare increases. What's more, the bill would create a $1,000 partially refundable tax credit for working married couples with children.