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What Makes The Welfare Bill A Winner


Economic Viewpoint

WHAT MAKES THE WELFARE BILL A WINNER

The welfare reform bill passed by Congress and signed into law by President Clinton does not cut welfare spending sharply. Nevertheless, it is revolutionary because it establishes the principle that individuals and families are no longer automatically entitled to government support just because they are poor.

Although most families on welfare use the benefits only to tide them over temporary difficulties, about 40% stay for more than two years. Unfortunately, the evidence is clear that the longer a family has been on welfare, the harder it is to get off.

That's why limiting the time families can be on welfare is one of the most important provisions of the new law. These limits prevent families from using welfare as a permanent crutch: They stipulate that recipients must give up most of the benefits unless the family head begins to work within two years. Families can spend more than one spell on welfare, but lifetime benefits are limited to five years--although states can waive that requirement for up to 20% of their families.

ABUSE AND NEGLECT. The termination of benefits after the allotted period has been sharply criticized. In my view, however, it is an important step in the right direction (BW--May 1, 1995). Time limits are desirable not only because they reduce government outlays but also because long periods on welfare erode work skills and entrench the habit of depending on the government for handouts. This destroys earning power, individual initiative, and self-confidence.

Democrats in Congress who voted against the bill argue that many children will become innocent victims if their mothers are forced off the welfare rolls. (But note that 50% of House Democrats and more than half of those in the Senate supported it--along with practically all Republican members.) I agree that the effect of welfare reform on children should be the main consideration. But critics are comparing the new system with an ideal standard, not with the failed approach being replaced. New approaches to poverty and welfare are long overdue.

In the past 50 years, more than $5 trillion has been spent on means-tested government programs for the poor. The number of families on welfare grew from less than 8 million in 1970 to almost 15 million in the 1990s. Yet mistreatment, neglect, and other abuses of poor children continue to worsen. I do not know of evidence that shows that children in welfare families do even as well as those in the many equally poor eligible families that forgo welfare benefits.

Prolonged exposure to welfare severely harms many children, despite the monetary benefits, mainly because it corrupts their values. Children in families that spend long periods on welfare begin to accept that it is more normal to be supported by the government than to be financially and psychologically independent. This is why even five years of benefits is often too long. Forcing welfare parents to get even modest jobs can contribute to giving new hope and motivation to their children.

WEAK PROGRAMS. The new law decentralizes welfare policy through federal lump-sum grants to state governments that are free to operate their own welfare programs--subject to federally imposed time limits and other restrictions. Opponents of this devolution of power argue that many states will neglect poor blacks and other minorities. Some may develop weak programs--but it is more difficult now to discriminate against minorities than it was before civil-rights and related federal laws were enacted.

Moreover, practically all the innovative approaches to welfare during the past decade, including major provisions of the federal law, were first begun or proposed by California, Michigan, New Jersey, Wisconsin, and other states. Many others will copy these innovators, which is why I expect most states to spend their welfare grants with less bureaucracy and more effectiveness than the federal government has.

The welfare law is not perfect. For example, it is doubtful whether the best way to deter immigrants is to make legal aliens ineligible for many welfare benefits. The law is, however, a significant step toward recognizing a basic lesson of economics: that government benefits greatly affect incentives, behavior, and values.

Welfare reform should be followed by similar reforms of Social Security, Medicare, and other so-called entitlement programs to incorporate much more powerful incentives for families to help themselves. The result would be higher savings for old age, greater economies in spending on medical care, and a society with much better values.BY GARY S. BECKER


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