"The issue of welfare," Daniel Patrick Moynihan wrote in 1972,
"is the issue of dependence." That issue, which sparked one
failed attempt after another to "reform" welfare, was finally
settled in 1996, when President Bill Clinton signed a law ending "welfare
as we know it."
We're still a long way from finishing the job of replacing welfare with
work. But already the next big social issue is coming into focus: the
struggles of low-wage workers to keep working, climb up the income ladder,
and lift their families out of poverty.
In the last century, U.S. welfare policy was organized around the needs
of the dependent poor. In the 21st century, the plight of the working
poor will dominate our post-welfare social policy. It's time to forge
a new social compact upon this simple but powerful proposition: No
American family with a full-time worker will live in poverty.
The 1996 law (dubbed the Personal Responsibility and Work Opportunity
Reconciliation Act) is the bridge between these two eras. It converted
the old welfare entitlement into a new bargain of mutual responsibility
in which public assistance is temporary and conditioned on work. Coupled
with new policies to make work pay -- especially the 1993 expansion of
the Earned Income Tax Credit, a federal wage supplement that adds up to
$4,000 to a low-wage worker's earnings -- and buttressed until recently
by a strong economy, the new "work first" philosophy is working.
The nation's welfare caseload has declined by 57 percent -- or 2.2 million
families since 1996. Researchers say that about two-thirds of those who
have left the rolls -- "leavers" in social science parlance --
have found steady work. Of those who remain, an unprecedented one-third
are working. According to the Urban Institute's Robert Lerman, 2000 census
data show strikingly strong earnings gains for single mothers, with those
at the bottom of the wage scale enjoying especially high wage growth.
Reform has yielded other important byproducts as well: Experts credit
the changed signals coming from government about work and personal responsibility
for contributing to a 20 percent drop in teen pregnancies and births over
the last decade, without any corresponding rise in abortions.
The new emphasis on "work first" and making work pay, in tandem
with the record-shattering economic expansion of the 1990s, also gave
America its best decade of progress against poverty since the 1960s. Overall,
the poverty rate dropped from 15 percent to 11.3 percent between 1993
and 2000, while the child poverty rate fell even more, from 22 percent
to 16 percent.
Some analysts, however, caution against declaring welfare reform an
unqualified success, especially as the economy falters. Liberals (who
mostly opposed the 1996 law) are concerned that the number of people receiving
food stamps and Medicaid health coverage has declined, leaving some single
mothers worse off even when they take private sector jobs. Conservatives
worry that we've made little progress toward achieving a key goal of the
1996 reform: promoting marriage. Almost no one, though, is calling for
junking the 1996 reform outright. Ending the old welfare entitlement,
it turns out, was the public policy equivalent of Cortes' decision to
burn his boats before marching inland on Mexico City.
In one respect, ending welfare already has been an unambiguous success:
It has engendered tremendous public sympathy for the working poor and
largely erased the stigma on social spending. Polls suggest that the anti-welfare
passions of the past have yielded to a new public consensus on helping
families struggling to work and achieve self-sufficiency. For example,
a survey this year by Hart Research found that 71 percent of Democrats
and 63 percent of Republicans say it is very important for President Bush
and Congress to "(do) more to help those trying to work their way
off welfare." In fact, voters rank this priority among their top
five concerns, along with "providing greater help to the working
poor," which 62 percent of voters found very important.
Government policy is another key barometer of the public's shifting attitudes
toward social provision. Even as welfare rolls declined, total federal
support for working families rose by $74 billion between 1993 and 1999.
This figure includes big increases in federal child-care aid (many states
have upped their spending too) as well as the dramatic expansion of the
EITC. In fact, it's no accident that the EITC -- at $30 billion a year
almost twice the size of federal welfare spending -- has become America's
biggest anti-poverty program, as well as its most effective. It's because
the EITC rewards work, not dependence.
This shift seems to have ended welfare politics as we knew it. For decades,
conservatives used welfare as a wedge issue to divide low-income and working-class
voters and to cast Democrats as defenders of dysfunctional government
programs. By realigning U.S. social policy with Americans' deeply held
values of work, family, and mutual responsibility, the 1996 changes have
detoxified the welfare issue, which was conspicuous by its absence in
the 2000 campaign.
The results so far have borne out the central New Democrat insight that
inspired Clinton's promise to end welfare: The way to make U.S. social
policy both more effective and more generous is to make it more morally
demanding, on both recipients and society at large. Unfortunately, many
liberals and anti-poverty activists who predicted that reform would be
a social calamity are deeply committed to denigrating the progress made
to date. It makes more sense for Democrats, as the party of public activism,
to cheer changes that are visibly restoring public confidence in government's
ability to help the poor lift themselves up.
For the first time in decades, in fact, progressives have an opportunity
to seize the initiative on social policy. As Congress gears up to renew
the 1996 law for another five years, progressives should set two goals:
finishing the job of ending welfare dependence and starting to define
America's post-welfare social compact. The key to meeting the first goal,
as Anne Kim argues elsewhere in this issue, is keeping pressure on the
states to move welfare mothers into work and to bring the dads into the
welfare-to-work system as well. At the same time we need to redouble efforts
to discourage out-of-wedlock births -- the "feeder system" for
both welfare and child poverty.
Second, we need to make support for low-wage workers the central organizing
principle of America's 21st-century social policy. This entails rethinking
not just welfare, but the whole array of federal means-tested social programs
to ensure that they provide low-wage working families with the essential
building blocks of a decent life: access to jobs and income supplements
to reward work, child care, affordable housing, and health insurance.
If we want to affirm the dignity of labor, we can't ignore the reality
that entry-level jobs don't pay enough to help families obtain what most
Americans would consider a minimally decent living standard. Of course,
we could simply legislate higher wages, but that would discourage many
businesses from hiring people with scanty skills and work experience and
result in higher prices that will disproportionately pinch the poor. The
right answer is to index the federal minimum wage so that it keeps pace
with inflation and to avoid job-destroying "living wage" campaigns.
And we should make sure that public policy fills the gap between what
jobs at the bottom of the labor market provide (in pay and benefits) and
what working families need to live comfortably.
In addition to reorienting anti-poverty policies around the needs of
low-wage workers, the new compact entails big policy changes outside the
traditional social policy realm. For example, it's past time to create
a universal health care system, since many of the jobs available to low-income
workers don't offer health insurance. But instead of creating a top-down
national health care bureaucracy, we can achieve universal coverage from
the bottom up -- by offering low-wage workers tax credits for purchasing
private medical insurance.
Another crucial step is to make all American families savers and wealth-builders
as well as earners. Just over half of U.S households report owning some
stocks or bonds, but it's the top half. To universalize savings and investment,
Washington should create tax-deferred personal savings accounts for families
of modest means. For very poor families, government could match contributions
into the tax-exempt accounts, which would be dedicated to purposes such
as education, buying a house, or retirement. In this way, we could ensure
that elderly Americans have two sources of economic security: what they
can earn by working and real financial assets that help them accumulate
wealth over time.
Throughout the last century, U.S. progressives and social thinkers looked
to the European welfare state as their model. That model, based on an
ideal of social solidarity, seeks to engineer equality of outcomes through
policies that redistribute wealth. This social democratic approach has come under terrific pressure, however, as demographic changes, immigration,
and high unemployment have swollen the ranks of non-workers and globalization
has forced new efficiencies on both government and business. Worried that
"social charges" are consuming too much of their national wealth
and that rigid labor markets are suffocating entrepreneurship, most European
countries are rethinking welfare and paring back social spending.
Today the United States has an opportunity to reinvent social welfare
around a new model with distinctly American roots. It would stress equality
of opportunity, not results. It would restore the link between effort
and reward by demanding that everyone work to support themselves and contribute
to the common pot. In return, it would enable and reward work, spur economic
self-reliance and mobility, and help every American get an ownership stake
in our free enterprise system.
This approach would seek to reconcile our economic and social policies,
making them mutually reinforcing. It would aim at reducing poverty and
inequality in ways that keep our labor markets dynamic, our enterprises
competitive, and our government solvent. Above all, our new social compact
would end the social and economic isolation of the nation's poor and equip
them for productive citizenship.
Blueprint Keywords: Extra EITC
