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June 30, 2010

The Unsustainable Welfare State: Reform is Necessary

A Path to National Bankruptcy

  • Welfare on the Rise: The growth of welfare spending is unsustainable and will drive the United States into bankruptcy if allowed to continue unreformed. Welfare spending is projected to cost taxpayers $10.3 trillion over the next 10 years.
  • The President’s Budget: President Obama’s FY 2011 budget request would increase total welfare spending to $953 billion, a 42% increase over welfare spending in FY 2008.
  • The Collapse of Marriage: The collapse of marriage is the predominant cause of child poverty in the U.S. today. When the War on Poverty began, 7% of children were born out of wedlock; today the figure is over 40%. Most alarmingly, the out-of-wedlock birthrate among African-Americans is 72%.
  • Projected Mean-Tested Welfare SpendingAmnesty Will Make the Problem Worse: If the U.S. government were to provide amnesty or “earned citizenship” to illegal immigrants, the welfare system would be flooded with new recipients. Of the 11–12 million illegal immigrants in the U.S., at least half lack a high school degree.

Slow the Growth

  • Congress Needs to Act : It is time to reboot the over 70 different federal poverty programs to control costs and promote greater self-reliance. In addition, efforts to rebuild marriage in low-income communities would improve the well-being of children, parents, and communities.
  • Establish Reasonable Fiscal Constraints : Once the current recession ends, aggregate welfare spending should be rolled back to pre-recession levels. After this rollback is completed, the growth of welfare should be capped at the rate of inflation.

Responsible Reform

  • Promote Personal Responsibility and Work: Able-bodied welfare recipients should be required to work or prepare for work as a condition of receiving aid. Food stamps and housing assistance, two of the largest programs for the needy, should be aligned with the TANF program to require able-bodied adults to work or prepare for work for at least 30 hours per week.
  • Loans, Not Grants: Welfare to able-bodied adults creates a potential moral hazard because it can lead to an increase in the behaviors that generate the need for aid in the first place. A reformed welfare policy can reduce the moral hazard by treating a portion of welfare aid as a loan to be repaid rather than as an outright grant from the taxpayer.
  • End the Welfare Marriage Penalty: Current means-tested welfare programs penalize low-income recipients who choose to marry; these anti-marriage penalties should be reduced or eliminated. In addition, government should provide information on the importance of marriage to individuals in communities who have a high risk of having children out of wedlock, with an emphasis on the benefits to children of a married two-parent family.
  • Limit Low-Skill Immigration: Around 15% ($100 billion/year) of total means-tested welfare spending goes to households headed by immigrants with high school degrees or less. One-third of all immigrants lack a high school degree. Over the next 10 years, America will spend $1.5 trillion on welfare benefits for lower-skill immigrants. Government policy should limit future immigration to those who will be net fiscal contributors, paying more in taxes than they receive in benefits. The legal immigration system should not encourage immigration of low-skill immigrants who would increase poverty in the nation and impose vast new costs on already overburdened taxpayers.

For more information, please visit: www.heritage.org.

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