Wisconsin's welfare miracle

Policy Review, Mar/Apr 1997 by Rector, Robert

Everyone wants-or professes to want-to "end welfare as we know it." Despite such lofty proclamations, welfare is still thriving. Last year, federal and state governments spent $411 billion on means-tested welfare programs that provide cash, food, housing, medical care, and social services to poor and low-income Americans. This greatly exceeded the $324 billion spent in 1993, the first year of the Clinton presidency.

At the core of America's vast, dysfunctional welfare system is Aid to Families with Dependent Children (AFDC). At present, nearly one out of seven children in the United States receives AFDC, residing with a mother married to a welfare check rather than a working husband. The typical family now on AFDC will spend nearly 13 years in the program.

"Ending welfare" must begin with reform of AFDC. Congress enacted major new legislation last summer that will start this process. The new law promises three major changes. First, it eliminates the entitlement system of AFDC funding, under which states that increased their AFDC caseloads received automatic increases in federal funding, while states that reduced dependence faced a fiscal penalty.

Second, the new law establishes performance standards that will require each state to reduce its AFDC caseload, or at least, if the caseload does not decline, require some recipients to work in return for their benefits.

Third, the law sets a new goal of reducing illegitimacy and will reward states that reduce outof-wedlock births without increasing the number of abortions.

Although the new federal legislation sets the proper framework for reform among the states, the liberal welfare establishment and its allies in the media incessantly warn that reform will prove to be difficult, if not impossible. But one state has already proven the naysayers wrong: Wisconsin. Wisconsin's experience with welfare reform provides an unparalleled model for implementing reform that other states would be wise to follow.

In the last 10 years, while AFDC caseloads in the rest of the nation were rising steeply, the caseload in Wisconsin has dropped by half. In inner-city Milwaukee, the caseload has fallen by 25 percent, but in the rest of the state, caseloads have fallen by nearly 70 percent. In 28 of Wisconsin's 77 counties, the welfare rolls have already dropped by 80 percent or more.

And if all this weren't remarkable enough, the pace of Wisconsin's reduction in welfare dependency is accelerating. In Milwaukee, the AFDC caseload is now shrinking 2 percent per month; in the rest of the state, 5 percent. Wisconsin's achievements are utterly unprecedented in the history of AFDC. Liberal welfare experts used to insist that a successful work program might reduce welfare caseloads by 5 percent over five years; in much of Wisconsin, the number of people on welfare is steadily falling by that amount every 30 days.

Wisconsin has thus won more than half the battle against AFDC dependence and is proceeding with the other half with breathtaking speed. This victory is crucial, since welfare dependency severely hampers the healthy development of children. In the long term, the greatest beneficiaries of Wisconsin's dramatic achievements in reforming welfare will be the children themselves.

The Road Less Traveled

This remarkable story begins in 1987, when a major congressional debate on welfare culminated in the Family Support Act (FSA). Touted as yet another "end of welfare," the FSA was a complete bust. The Act did, however, generate the expectation among voters that welfare recipients would be required to work. In the same year, a second unheralded event occurred with far greater significance for the future of welfare: Tommy Thompson took office as governor of Wisconsin.

Following a gubernatorial campaign largely about welfare, Thompson entered office with a firm commitment to reform. The chart at right tells the rest of the story. Despite the rhetorical promises of the Family Support Act, the nationwide AFDC caseload remained constant in the late 1980s and then grew by more than a third between 1990 and 1994. The nationwide caseload has eased downward over the last two years, but the majority of states still suffer higher levels of welfare dependency than before the Family Support Act became law.

Wisconsin has been the only clear exception to this pattern. Upon taking office, Thompson initiated a series of reforms that cut welfare dependency during the late 1980s and blocked any resurgence during the 1990-93 recession. Starting in 1994, a second round of more sophisticated work-related reforms has caused the caseload to nosedive further. But the raw figures understate Thompson's achievements. As noted, welfare rolls across the country ballooned by some 35 percent during the early 1990s. There is every reason to believe that, without Thompson's reforms, Wisconsin would have followed this national trend. If it had, its AFDC caseload would have surged from around 100,000 recipients in 1987 to a peak of 135,000 in 1993. It is reasonable to conclude that Thompson has not merely cut his state's caseload in half (from 98,295 recipients to 48,451) but has reduced it by some two-thirds relative to the potential peak in dependence that Wisconsin would have experienced in the early 1990s in the absence of reform.