The U.S. welfare system may be defined as the total set of
government programs-federal and state-that are designed explicitly
to assist poor and low-income Americans.
Nearly all welfare programs are individually
restrict eligibility for benefits to persons with non-welfare
income below a certain level. Individuals with non-welfare income
above a specified cutoff level may not receive aid. Thus, Food
Stamp and Temporary Assistance to Needy Families (TANF) benefits
are means-tested and constitute welfare, but Social Security
benefits are not.
The current welfare system is highly complex, involving six
departments: HHS, Agriculture, HUD, Labor, Treasury, and
Education. It is not unusual for a single poor family to
receive benefits from four different departments through as many as
six or seven overlapping programs. For example, a family
might simultaneously receive benefits from: TANF, Medicaid, Food
Stamps, Public Housing, WIC, Head Start, and the Social Service
Block Grant. It is therefore important to examine welfare
holistically. Examination of a single program or department
in isolation is invariably misleading. The views that I express in
this testimony are my own, and should not be construed as
representing any official position of the Heritage
Foundation. In addition, the Heritage Foundation does not
endorse or oppose any legislation.
The Cost of the Welfare
The federal government currently runs over 70 major
interrelated, means-tested welfare programs, through the six
departments mentioned above. State governments contribute to
many federal programs, and some states operate small independent
programs as well. Most state welfare spending is actually required
by the federal government and thus should considered as an adjunct
to the federal system. Therefore, to understand the size of the
welfare state, federal and state spending must be considered
together. (A list of individual welfare programs is
provided in Appendix B.)
Total federal and state spending on welfare programs was $434
billion in FY 2000. Of that total, $313 billion (72 percent) came
from federal funding and $121 billion (28 percent) came from state
or local funds. (See Chart 1.)
Welfare spending is so large it is difficult to comprehend. On
average, the annual cost of the welfare system amounts to around
$5,600 in taxes from each household that paid federal income tax in
2000. Adjusting for inflation, the amount taxpayers now spend
on welfare each year is greater than the value of the entire U.S.
Gross National Product at the beginning of the 20[th]
The combined federal and state welfare
system now includes cash aid, food, medical aid, housing aid,
energy aid, jobs and training, targeted and means-tested education,
social services, and urban and community development
programs.[] As Table One shows, in
Medical assistance to low income
persons cost $222 billion or 51 percent of total welfare
· Cash, food and
housing aid together cost $167 billion or 38 percent of the
Social Services, training, targeted
education, and community development aid cost around $47 billion or
11 percent of the total.
Recipients of Welfare Spending
As Chart 2 shows, nearly half (46 percent) of total
means-tested welfare spending goes to families with
children. Of the welfare spending going to families
with children, roughly one quarter goes to married
couples with children, while three quarters go to single parents
and other broken families. Thus single parent and other
broken families with children receive some 34 percent of aggregate
means-tested aid. Overall families with children received
some $200 billion in welfare aid in FY2000 of which roughly $148
billion went to single parent or other broken families.
The other half (54 percent) of
means-tested aid goes mainly to the elderly and the disabled.
Some 19 percent of total welfare spending goes to the elderly,
while another 35 percent goes to non-elderly adults; the bulk of
these individuals are disabled.
The Growth of Welfare
As Chart 3 shows, throughout most of U.S. history welfare
spending remained low. In 1965 when Lyndon Johnson launched
the War on Poverty, aggregate welfare spending was only $8.9
billion. (This would amount to around $42 billion if adjusted
for inflation into today's dollars.)
Since the beginning of the War on Poverty in 1965 welfare
spending has exploded. The rapid growth in welfare costs has
continued to the present.
· In constant dollars, welfare spending
has risen every year but four since the beginning of the War on
Poverty in 1965;
As a nation, we now
spend ten times as much on welfare, after adjusting for inflation,
as was spent when Lyndon Johnson launched the War on Poverty.
We spend twice as much as when Ronald Reagan was first elected.
Cash, food, housing, and energy
aid alone are nearly seven times greater today than in 1965, after
adjusting for inflation;
As a percentage of Gross Domestic
Product, welfare spending has grown from 1.2 percent in 1965 to 4.4
Some might think that this spending growth
merely reflects an increase in the U.S. population. But,
adjusting for inflation, welfare spending per person is now at the
highest level in U.S. history. In constant dollars, it is
seven times higher than at the start of the War on Poverty in the
Total Cost of the War on Poverty
The financial cost of the War on Poverty has been
enormous. Between 1965 and 2000 welfare spending cost
taxpayers $8.29 trillion (in constant 2000 dollars). By
contrast, the cost to the United States of fighting World War II
was $3.3 trillion (expressed in 2000 dollars). Thus, the cost of
the War on Poverty has been more than twice the price tag for
defeating Germany and Japan in World War II, after adjusting for
Welfare Spending in the Nineties
Welfare spending has continued its rapid growth during the last
decade. In nominal dollars (unadjusted for inflation),
combined federal and state welfare spending doubled over the last
ten years. It rose from $215 billion in 1990 to $434 billion in
2000. The average rate of increase was 7.5% per year. Part
of this spending increase was due to inflation. But,
even after adjusting for inflation, total welfare spending grew by
61 percent over the decade.
As Chart 3 showed, medical spending
(mainly in the Medicaid program) grew most rapidly during the
1990's, but welfare cash, food, and housing spending grew as
well. Adjusting for inflation, cash, food and housing
assistance is 37 percent higher today than in 1990. However,
the growth in these programs has slowed since 1995, increasing no
faster than the rate of inflation. This recent slowdown in
spending is, in part, the effect of welfare reforms enacted in
Future Welfare Spending Growth
Under President George W. Bush's proposed budget means-tested
spending will grow at a rapid rate. Indeed, the rate of
welfare spending growth in the Bush budget is virtually identical
to that projected in the last Clinton budget. Projected welfare
spending figures from the President's FY2002 budget are provided in
Appendix A.[] The rapid of
growth in welfare spending is illustrated in Chart
Clearly, President Bush's budget plan does not require cuts in
welfare spending or even a slowdown in the rate of spending
growth. According to the current spending proposals:
Total federal welfare spending is projected to grow from $316
billion in 2000 to $450 billion in 2006: an increase of 42
percent. The rate of spending increase is projected at 6
percent per year.
· Federal spending
on cash, food, and housing aid is projected to grow from $142
billion to $174 billion: an increase of 23 percent. The
annual rate of spending increase would be 3.6 percent, nearly 50
percent greater than the anticipated rate of inflation.
· Together, federal and state welfare
spending would rise from around $438 billion in 2000 to $626
billion in 2006.
· Altogether, the
United States will spend $3.6 trillion on means-tested welfare
assistance over the next five years. This amounts to around
$47,000 for each taxpaying household in the U.S.
Welfare and Defense
The rapid projected rate of growth of future
welfare spending can be illustrated by comparing welfare to
defense. The President has promised to make defense spending
a priority. Under his budget plan, nominal defense outlays
would increase for the first time in a half decade. Defense
spending would rise by 20 percent over five years from $301 billion
in FY2000 to $362 billion in FY2006.
During the same period, however, welfare
spending is scheduled to rise by 42 percent. As Chart 5
shows, the gap between welfare and defense spending will actually
broaden during this period. Currently, the U.S. spends
$1.45 on welfare for every $1.00 spent on national defense; by
2006, we will spend $1.78 on welfare for every $1.00 on
Welfare spending advocates often paint very
alarming pictures of poverty in the United States in order to
promote even more rapid increases in welfare spending.
To the average voter and the average politician the term poverty
provokes images of destitution. In reality the typical "poor"
person in the U.S. has standard of living far higher than our
normal images and expectations for poverty.
According to the government's own data, the
typical American, defined as poor by the government, has a
refrigerator, a stove, a clothes washer, a car, air conditioning, a
VCR, a microwave, a stereo and a color TV. (Half of the
poor own two color TV's; a third have telephone answering
machines.) By his own report, the typical poor individual is
able to obtain medical care for himself and his family; he lives in
a home that is in good repair and is not over-crowded. By his
own report, his family is not hungry and in the last year he had
sufficient funds to meet his essential needs.
While this poor individual's life is certainly far from opulent, it
is equally far from the popular images of poverty conveyed by
activists and the press.
Welfare Reform and the Poor
In 1996, Congress enacted a limited welfare
reform; The Aid to Families with Dependent Children (AFDC) program
was replaced by the Temporary Assistance to Needy Families (TANF)
program. Critically, a certain portion of AFDC/TANF
recipients were required to engage in job search, on the job
training, community service work, or other constructive behaviors
as a condition for receiving aid. The effects of this reform have
· AFDC/TANF caseloads have been cut nearly
· TANF outlays have fallen substantially.
(See chart 6.)
· The decline in the TANF caseload has led
to a concomitant decline in Food Stamp enrollments and
While critics predicted the reform would increase child poverty,
the exact opposite has occurred. Once mothers were required to work
or undertake constructive activities as a condition of receiving
aid they left welfare rapidly.
· Employment of never-married single
mothers has increased nearly 50 percent;
· The child poverty
rate fell sharply from 20.8 percent in 1995 to 16.3 percent in
· The black child poverty rate and the
poverty rate for children living with single mothers are both at
the lowest points in U.S. history.
· When non-cash welfare aid such as the
Earned Income Tax Credit, Food Stamps, and public housing are
properly counted as income, the child poverty rate stands at 11 to
In the welfare reform of 1996 all sides came out as winners:
taxpayers, society and children. By requiring welfare mothers
to work as a condition of receiving aid, welfare costs and
dependence were reduced. Employment increased and poverty fell.
Moreover, research shows that prolonged welfare dependence itself
is harmful to children; reducing welfare use and having working
adults in the home to serve as role models for children will
improve those children's prospects for success later in life.
The workfare principles of the 1996 reform
should be intensified and expanded. Work requirements in TANF
should be strengthened. Similar work requirements should be
established in the Food Stamp and public housing programs.
Finally, because the reform has clearly succeeded in cutting
welfare use, TANF outlays should be reduced by 10 percent in future
Welfare Spending and the Collapse of Marriage
As noted previously, about half of all
means-tested welfare spending is devoted to families with
children. Of this spending on children, around three quarters
goes to single parent families. For example, Chart 7 shows
the percent of aid to children in major welfare programs which
flows to single parent families. The single parent
share is generally well above 80 percent.
Clearly, the modern welfare state, as it
relates to children is largely a support system for single
parenthood. Indeed, without the collapse of marriage which
began in the mid-1960's, the part of the welfare state serving
children would be almost non-existent.
The growth of single parent families,
fostered by welfare, has had a devastating effect on our
society. Today nearly one third of all American children are
born outside marriage. That's one out-of-wedlock birth every
35 seconds. Of those born inside marriage, a great many will
experience their parents' divorce before they reach age 18.
Over half of children will spend all or part of their childhood in
never-formed or broken families.
This collapse of marriage is the principal cause of child poverty
and a host of other social ills. A child raised by a
never-married mother is seven times more likely to live in poverty
than a child raised by his biological parents in an intact
marriage. Overall, some 80 percent of child poverty in the U.S.
occurs to children from broken or never-formed families. In
addition, children in these families are more likely to become
involved in crime, to have emotional and behavioral problems, to be
physically abused, to fail in school, to abuse drugs, and to end up
on welfare as adults.
Since the collapse of marriage is the predominant cause of
child-related welfare spending, it follows that it will be very
difficult to shrink the future welfare state unless marriage is
revitalized. Policies to reduce illegitimacy, reduce divorce
and expand and strengthen marriage will prove to be by far the most
effective means to:
· reduce dependence;
· cut future welfare costs;
· eradicate child poverty; and,
· improve child well-being.
Tragically, current government policy deliberately ignores or
neglects marriage. For every $1,000 which government
currently spends subsidizing single parents, only one dollar is
spent attempting to reduce illegitimacy and strengthen
Fortunately, President's Bush's budget plan does propose a new
program to "promote responsible fatherhood." This
proposed program could become the seedbed for a broad array of new
initiatives to strengthen marriage. Still, the money
requested is pitifully small: only $64 million per year. This
amounts to roughly one penny for each one hundred dollars in
projected welfare spending. The budget allocation to
the new fatherhood program in FY 2002 should be increased fivefold
with the funds diverted from TANF outlays. Beyond FY 2000
some 5 to 10 percent of federal TANF funding should be devoted to
When Lyndon Johnson launched the War on Poverty he did not
envision an endless growth of welfare spending and
dependence. If Johnson returned today to see the size
of the current welfare state he would be deeply shocked.
President Johnson's focus was on giving the poor a "hand up" not
a "hand out." In his first speech announcing the War on
Poverty, Johnson stated, "the war on poverty is not a struggle
simply to support people, to make them dependent on the generosity
of others." Instead, the plan was to give the poor the
behavioral skills and values necessary to escape from both
poverty and dependence. Johnson sought to address the "the causes,
not just the consequences of poverty."
Today, President Johnson's original vision has been all but
abandoned. We now have a clear expectation that the number of
persons receiving welfare aid should be enlarged each year, and
that the benefits they receive should be expanded. This
expectation is clearly reflected in the future spending projections
in Appendix A. Any failure to increase the numbers of
individuals dependent on government and the benefits they get is
regarded as mean spirited.
Yet the expansion of the conventional welfare system is
destructive. More than twenty years ago, then President Jimmy
Carter stated, "the welfare system is anti-work, anti-family,
inequitable in its treatment of the poor and wasteful of the
taxpayers' dollars." President Carter was correct, yet
today little has changed except that the welfare system has become
vastly larger and more expensive.
This expansion of welfare spending has harmed rather than helped
the poor. Instead of serving as a short-term ladder to
help individuals climb out of the culture of poverty, welfare has
broadened and deepened the culture of self-destruction and trapped
untold millions in it.
Rather than increasing conventional welfare spending year after
year, we should change the foundations of the welfare system.
Policy makers should embrace three basic goals.
1. We should seek to limit the future
growth of aggregate means-tested welfare spending to the rate of
inflation or slower.
2. We should require all able-bodied
welfare recipients to perform community service work as a condition
of receiving aid along the lines of the TANF program operating in
3. We should support
programs which foster and sustain marriage rather than subsidizing
single parenthood. In addition, we should reduce the
anti-marriage penalties implicit in the welfare system.
These three goals are synergistic. They will operate in
harmony and reinforce each other. In the long run, it will be
difficult to control welfare spending merely by cutting
funding. Rather, if we change the behaviors of potential
recipients we will reduce the need for future aid. As the
need for aid diminishes, spending growth will slow and then
decline, and the well being of the poor and society as a whole will
E. Rector, is a Senior Research Fellow at The Heritage