Is the U.S. Welfare System Broken?

NPP Pressroom

Facebook Twitter

Wall Street Cheat Sheet
Anthea Mitchell
05/17/2014

Is the welfare system necessary? The answer is unquestionably still yes. However, that doesn’t mean it isn’t broken, and based on where the majority of government aid is going, it very well might be. The first important thing to recognize about the collection of U.S. aid programs is how much they’ve grown, and the second is that this money is not going to the most needy individuals or groups. The growth in size isn’t inherently a point against the effectiveness of welfare programs, nor does it negate their necessity. It merely highlights just how much money and budgetary strain these programs account for, and how important it is that funds are allocated properly. The increase itself is simply an acknowledgement of the greater difficulties in today’s economy.

Welfare programs, including Supplemental Security Income, Temporary Assistance for Needy Families, the Earned Income Tax Credit, Food Stamps, subsidized housing, school lunch, Head Start, and the WIC program, grew by 89 percent between 1986 and 2007 (adjusted for population), based on a new report from Robert Moffitt, economist at Johns Hopkins University, according to The Washington Post.

Even more important is what happened during and after 2007 though, when the recession began to economically hobble more and more people. According to a report from the United States Senate Budget Committee’s nonpartisan Congressional Research Service, the total amount spent by the more than eighty federal welfare programs totaled approximately $1.03 trillion, and the federal portion of that expenditure increased by 32 percent compared to federal spending on welfare in 2008. That’s more than Social Security, Medicare, or defense. Looking at just the ten largest programs, the report found that the programs have doubled their demand on the U.S. budget over the last thirty years. And glancing back at tax time in April, we saw that 9.8 percent of U.S. tax dollars go to unemployment and labor, according to The National Priorities Project. But in what way is this aid distributed, and how has that changed over the years? Let’s take a look.

You might think that this increase has Americans at the lowest socioeconomic level sitting pretty with a giant check in their hands. This is far from the case, and in fact, aid to the poorest Americans in the 0 to 50 percentile of poverty has seen a 19 percent reduction in assistance. The working poor and higher income groups, between the 100 and 150 percentile of poverty, have seen an increase in aid by 121 percent — reports CNN based on the same 2011 Moffitt assessment.

What’s especially notable is that the assessment shows how this changing way of addressing poverty is not only counter-intuitive but is also not as effective in reducing deep poverty — the percentage point reduction was greater in the 1984 and 1993 periods than the 2004 period examined.

The report explains that the “impact of the system on the poverty rate … was higher in 1984 and 1993″ than it was in 2004, with “almost three-quarters of the poverty gap … eliminated instead of two thirds (a sign that the system in 2004 moved more families just below the poverty line to above it than previously).”

So why are these programs going more and more to those at a higher income level? According to Moffitt’s report, it’s because politicians consider some individuals more deserving of aid than others, unrelated to need. “The U.S. benefit system is paternalistic and tilted toward the support of the employed and towards groups with special needs and perceived deservingness,” reads the assessment. One group you see this in a great deal is single-parent households. Assistance has fallen by 35 percent between 1983 and 2004 for those 2.5 million single parent households that have the lowest earnings.

“We see a pattern — rising support for those who work and declining support for those who do not. The decline of support to families with non-employed members and to single parents seems to be rooted in presumption that they have not taken responsibility for their own situation,” said Moffitt, according to a news release from John Hopkins University. For specific programs, like the Temporary Assistance for Needy Families (TANF) “legislation reduced the number of poor single mother families served by 63 percent within 10 years,” said Moffitt this month at the Presidential Address to the Population Association of America in Boston.

The welfare system is problematic regardless of which side of the party aisle you stand on. For Democrats, it points to the failing war on poverty Lyndon B. Johnson so passionately began, and preferential aid that fails to address the socioeconomic gap in America that President Barack Obama has focused on so seriously. It could also be used as an argument for a higher minimum wage. If more federal aid programs are giving money to working American families, it’s also a sign that holding a minimum wage job may not be enough to make ends meet. Rather than approach that issue through a welfare solution, upping the minimum wage could bring other positives with it, including more consumer spending to pour back into businesses.

On the Republican side of the issue, Moffit’s report and the growing welfare system could be seen as proof that welfare isn’t working. It’s not helping the people it’s supposed to, and even with those that it does help, it isn’t reducing the poverty level. “There are nearly 100 programs at the federal level that are meant to help, but they have actually created a poverty trap,” said Rep. Paul Ryan (R-Wis.) to The Washington Post last month. “There is no coordination with these programs, and new ones are frequently being added without much consideration to how they affect other programs. We’ve got to fix the situation.”

He then referenced a new 204-page policy review from the GOP that slams anti-poverty measures. “Today, the poverty rate is tuck at 15 percent — the highest in a generation,” reads the report, “Federal programs are not only failing to address the problem. They are also in some significant respects making it worse.”