Welfare in America, 1998–2013: The Case for Further Reform

Hovver logo by Diana Furchtgott-Roth, Director, Economics21; Senior Fellow, Manhattan Institute


Executive Summary

In 1998, spending on major U.S. federal welfare programs and Medicaid totaled $225 billion in today’s dollars. By 2013, spending had grown by 83 percent, to $412 billion. The Supplemental Nutrition Assistance Program, or SNAP (popularly known as “food stamps”), accounted for the largest percent increase in spending over this period, nearly tripling in real terms: from $27 billion (in 2013 dollars) in 1998 to $80 billion in 2013.[1]

This paper examines the evolution of major U.S. welfare programs since 1998—shortly after the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA), the 1996 federal welfare reform signed into law by President Clinton, went into effect.

The paper chronicles the average amount of aid provided, as well as length of time on public assistance, focusing on the following programs: SNAP; Temporary Aid to Needy Families, or TANF (established by PRWORA); Medicaid; and Section 8 Housing Choice Vouchers (HCV). The paper also reports on how welfare eligibility and enrollment have expanded significantly since the Great Recession began in late 2007.

Indeed, while the U.S. economy has since improved, participation in such programs has generally not declined. This paper concludes that there is ample scope for states to reform welfare, and it proposes two substantial changes: (1) cap welfare spending at the rate of inflation and the number of Americans in poverty; and (2) allow states to direct savings from welfare programs to other budget functions.

While politically challenging, such changes would allow states greater flexibility to better target the neediest, as well as stem the increasing flow of money into such programs. For instance, this paper finds that federal savings through 2013 would, after accounting for inflation and the number of Americans in poverty, total $1.3 trillion had welfare funding remained at 1998 levels.

Related proposals have been espoused by a number of elected officials, including recently by Wisconsin Rep. Paul Ryan (who refers to his approach as one based on “Opportunity Grants”) and Utah senator Mike Lee. Theirs, and the reforms suggested herein, differ from the status quo by providing greater discretion to state governments as to how to best assist those in need—while suggesting that sustained spending at current levels, which reflect significant recent increases, may neither be sustainable nor the best approach to long-term poverty alleviation.

About the Author

Diana Furchtgott-Roth, former chief economist of the U.S. Department of Labor, is director of Economics21 and senior fellow at the Manhattan Institute for Policy Research. She is a contributing editor of RealClearMarkets.com, and a columnist for the Washington Examiner, MarketWatch.com, and Tax Notes. From 2003 to 2005, Ms. Furchtgott-Roth was chief economist of the U.S. Department of Labor. From 2001 to 2002 she served as chief of staff of President George W. Bush’s Council of Economic Advisers. Ms. Furchtgott-Roth served as deputy executive director of the Domestic Policy Council and associate director of the Office of Policy Planning in the White House under President George H.W. Bush from 1991 to 1993, and she was an economist on the staff of President Reagan’s Council of Economic Advisers from 1986 to 1987.


Read other papers by Diana Furchtgott-Roth: Does Immigration Increase Economic Growth?

Welfare in America, 1998–2013 by Latinos Ready To Vote

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