Patty MacSparran

Economics 2020
Term Paper Welfare Reform

Changing the Welfare Lifestyle

What is welfare and how did it come about? This is a system that has guaranteed cash
assistance to the poor in years past. This program was founded during the Great Depression and
provided equal benefits to the poor. When the welfare system began it was part of three safetynet programs meant to alleviate poverty in America: Social Security, which is for the old and
disabled, Unemployment Insurance, which is for those temporarily out of a job, and Aid to
Dependent Children, whose name was later changed to Aid to Families with Dependent
Children. The latter is what we typically think of as welfarecash transfers intended to help
widows with children. Later in the 1960s food stamps became available to low-income families
or individuals. Most of the recipients to this were mothers and children and their personal
circumstances were of little matter to receive the assistance and it wasnt unusual for some to use
this their entire lives. Although by 1992, the majority of aid went to single mothers rather than
widows or others and this spouted a nickname to those women as welfare queens even though
a majority of these women legitimately needed aid. Many worried that this was becoming a
lifestyle rather than a safety net. By this time also, public opinion had turned strongly against the
old welfare system and because of this changes were about to come to the welfare program.
Welfare as we knew it no longer exists. Because there wasnt any time limit as to how long
you could receive this help from the government, over time it enabled many people to become
idle and irresponsible for their own care and many were no longer seeking employment. This
caused anger from those individuals who did support themselves and saw the welfare system as a
reward and something that perpetuates poverty rather than reducing it. The changes came in the
mid 1990s with the Personal Responsibility and Work Opportunity Reconciliation Act of 1996:

Patty MacSparran
Economics 2020
Term Paper Welfare Reform

AKA The Welfare Reform Act. So what is welfare reform? According to Wikipedia1 the
definition is changes in the operation of a given welfare system. The term often denotes
reforms that are more aligned with neo-liberal policies. In the United States, the term was used to
get Congress to enact the Personal Responsibility and Work Opportunity Act, which further
reduced aid to the poor, to reduce government deficit spending without coining money, and in
the dictionary its a movement to change the federal governments social welfare policy by
shifting some of the responsibility to the states and cutting benefits. New rules came about with
this change such as:

Most recipients are required to find jobs within two years of

first receiving welfare payments.
Most recipients are allowed to receive welfare payments for a
total of no more than five years.
The states are allowed to establish family caps that prevent
mothers of babies born while the mother is already on welfare
from receiving additional benefits.

The reason for these changes is to encourage recipients of welfare to set goals of employment
and become self-sufficient. The states and counties within are the administrators of this program
and will best serve the poor while operating within the new guidelines. According to the Census
Bureau, America already spends nearly four times as much on welfare as would be necessary to
bring all of the poor up to the poverty level in cash, eliminating poverty in America
entirely. Lawrence M. Mead's 1986 book Beyond Entitlement: The Social Obligations of
Citizenship argued that American welfare was too permissive, giving out benefit payments
without demanding anything from poor people in return, particularly not requiring the recipient
to work. Mead viewed this as directly linked to the higher incidence of social problems among
poor Americans.

Wikipedia, Sept 17, 2014

Patty MacSparran
Economics 2020
Term Paper Welfare Reform
"Federal programs have special difficulties in setting standards for their
recipients. They seem to shield their clients from the threats and rewards
that stem from private society particularly the marketplace while
providing few sanctions of their own. The recipients seldom have to work
or otherwise function to earn whatever income, service, or benefit a
program gives; meager though it may be, they receive it essentially as an
entitlement. Their place in American society is defined by their need and
weakness, not their competence. This lack of accountability is among the
reasons why non-work, crime, family breakup, and other problems are
much commoner among recipients than Americans generally." 2

One of the arguments today about what is causing poverty in America is that the welfare system
is like a trap, as someone tries to work and increase their meager incomes, they start to lose their
welfare benefits, but then are taxed more on their earnings so they find its easier to stay in the
system and earn more income from the government than to find employment. Another
argument for the increase in poverty is that the poorest families are bearing more children
outside of marriage because the system pays serious dollars for more children. The poverty rate
for female-headed households with children is 44.5 percent, compared to 7.8 percent for married
couples with children.
So how does this lifestyle effect everyone and the economy? One, it causes inequalities
in all sectors such as education from school funding because funding is reliant on local property
taxes and if the majority of the people in the area arent bringing in an income then they arent
paying taxes which is less funding for their own schools. Also, low-skilled jobs have decreased
within the cities because there are less applicants to hire so they move to more affluent suburbs.
One of the reasons welfare can be a benefit to our economy is that our economy is fueled by
consumer spending so the increased spending by those in the system will help create better job
security for everyone. This will cushion the decline of disposable income. In a recession, like
the one we just had, the economy experiences a deep decline in incomes earned. People were
losing jobs and there was less money to be spend overall. So the use of combining private and
2

Mead, L.M. (1986). Beyond Entitlement: The Social Obligations of Citizenship. New York Free Press.

Patty MacSparran
Economics 2020
Term Paper Welfare Reform

government sources of income allow disposable income to increase and help the economy grow.
But like anything given for free, it can be too much of a good thing. Because giving out too
much assistance will take more people out of the working field and become more financially
dependent on the state and that hurts the economy. This hurts because in order to get the funds
to support the recipients the state must take wealth from productive people who then themselves
have less disposable income to invest, save, or donate to charity and to buy goods and services.
America has made some changes in the past to make this program better and is aware of the need
for improvement.
The changes from the welfare reform have been positive. According to the independent
Brookings Institute, the nationwide welfare caseload declined about 60 percent between 1994
and 2004, and the percentage of U.S. children on welfare is now lower than it has been since at
least 1970. In addition, Census Bureau data show that between 1993 and 2000, the percentage of
low-income, single mothers with a job grew from 58 percent to nearly 75 percent, an increase of
almost 30 percent. Some will still argue that the positive changes come from a robust economy.
I personally think the government misallocates the wealth of the country and stifles productive
investments but I have high hopes for the future and for a solution to the problem.

Patty MacSparran
Economics 2020
Term Paper Welfare Reform

References
Ferrara, P. (2014, August 15). How welfare reform can end poverty in America, and promote booming
economic growth. Retrieved from Forbes:
http://www.forbes.com/sites/peterferrara/2014/08/15/how-welfare-reform-can-end-povertyin-america-and-promote-booming-economic-growth/
Khazan, O. (2014, May 12). How Welfare REform Left Single Moms Behind. Retrieved from The Atlantic:
http://www.theatlantic.com/business/archive/2014/05/how-welfare-reform-left-single-momsbehind/361964/?single_page=true
Longley, R. (n.d.). Welfare Reform in the United States: From handouts to employement. Retrieved from
About News: http://usgovinfo.about.com/od/federalbenefitprograms/a/welfarereform.htm
Wikipedia. (2014, Sept 17). Retrieved from Welfare Reform:
http://en.wikipedia.org/wiki/Welfare_reform