Congress Ends Welfare Reform as We Know It

A party that previously trembled for fear of being caricatured as a gang by tax and spending liberals is no longer afraid. In Washington, government handouts are respectable again.

In some ways, this marks the end of a long arc of “new democratic” politics led by Clinton, the president who signed both welfare reform and the original, more reserved and respectably bourgeois version of the child tax credit. In 1992, Clinton was partially elected president Pledging he would “end welfare as we know it”. Government aid, Clinton said, should reward work, not idleness. In 1996, Clinton was partially re-elected by signing the law Welfare Reform Actwho put strict deadlines on monetary aid and brought welfare mothers to work. Clinton also expanded Earned Income Tax Credit, an income support program only available to low-income workers.

But the pendulum has swung back not just for Democrats. While the Covid bill was under scrutiny in the Senate, Republican Senator Mitt Romney proposed his own expansion of the child tax credit, which would increase the maximum benefit even further to $ 4,200 per child (although Romney would offset this by cutting back on other income support programs) . Romney’s plan was attacked immediately As “welfare aid” to Republican Sens. Marco Rubio and Mike Lee, the Republicans ultimately voted as a block against the Covid bill, which contained President Joe Biden’s version. But Rubio and Lee are also in favor of increasing the maximum tax credit for children. in fact, they want to raise it even higher than Romney’s to $ 4,500. (They differ from Romney and Biden in that they would not extend the child tax credit to inactive families.)

To measure how far Republicans have come, remember that when Romney was the party’s 2012 presidential candidate, he was widely judged for despising the needy. Less than two months before the election, the left-wing magazine Mother jones caught Romney grabbing on tape to a small group of political donors about people who “depend on the government” and “believe they are victims” and “believe that the government has a responsibility to care for them”. This revelation had about the same impact on Romney’s reputation as Hillary Clinton’s presidential candidatedeplorableComment would have on hers four years later.

So what has changed?

On the Republican side Romney’s 2012 defeat certainly influenced his thinking. The following year, bipartisan Senate immigration legislation died in the Republican-controlled home, pushing the GOP in a more nationalist direction that culminated in the election of Donald Trump.

When the GOP became the anti-immigration party, Republicans had to grapple with the fact that future economic growth depended on alternative means of supplying workers. A prenatal policy would be needed and the child tax credit was a tool of ideas as Republicans always prefer to disguise state handouts as tax cuts. A tax recognition is even more generous than a tax Deduction because the amount will be deducted directly from your tax bill. (A deduction only reduces the portion of your income that you owe tax on.)

With the support of both parties, Congress raised The maximum child tax credit ranged from $ 500 to $ 1,000 in 2012 and $ 1,000 to $ 2,000 in 2017. At the same time, the tax credit became “refundable,” which means that families who did not owe enough taxes can claim them had to make the full credit, The government would just pay them the difference in cash.

Lots of conservatives have traditionally against refundable tax credits, because when the government cuts checks to low-income people, it does looks less like a tax cut than welfare. However, the GOP’s urgent need to populate the future workforce prevailed against this problem.

The reasons Democrats no longer yearn to end welfare as we know it are more complex.

Most obviously, yes did End it in 1996 by replacing AFDC with a much more stingy program called Temporary help for families in need. In the first two decades this new form of welfare went from Support of 68 percent of all families in poverty up to only 22 percent. TANF did pretty well in its early years at getting welfare mothers into work, in large part because the economic boom in the late 1990s massively increased the demand for workers of all skill levels. However, when it bottomed out during the Great Recession, many low-income families were destitute with the replacement of AFDC with TANF, a problem that persisted over the next decade with the excruciatingly slow recovery of the labor market.

The Democrats’ great political hope in 1996 was that “ending welfare as we know it” would protect them from republican welfare attacks – which were at the core dog whistle often appeals to white racism. Certainly, the Democrats imagined, was the false belief that most blacks were welfare-minded is not even true that most welfare recipients are black) would become irrelevant if monetary assistance for poor mothers were severely restricted.

But that didn’t happen. White voters, who were prone to believe wrong things about blacks, did not change their beliefs just because Washington was spending significantly less money on cash. And the GOP saw no reason to discourage such misunderstandings. Republicans like Sen. Jeff Sessions back then newly defined Welfare as a whole other Means-tested federal programs such as Medicaid and Pell grants and vocational training programs. Eventually, Trump stepped into the Oval Office and showed that a politician didn’t need the welfare issue (an issue he rarely took up) to address racial prejudice.

Something else that has changed for Democrats was concerned that cash payments would get in the way of work. Underlying the whole idea of Welfare reform was the economic assumption This welfare created a financial incentive for the recipients to work. The concern, explains Georgetown economist Harry Holzer, was not so great that people would quit their jobs to provide welfare – that rarely happened. Rather, it was that people who were already on welfare would be reluctant to take a low-wage job, which is most likely within reach, because a growing paycheck would cause their benefits to shrink and eventually disappear. Welfare experts view this as a high marginal tax on every new dollar earned. Just as a rich person might decide not to do any extra work if that puts them in a very high tax bracket, so people live on a subsistence level, Thinking could rationally conclude that re-entering the job market would be to their financial disadvantage.

The chilling work was real and still exists. But the expansion of the Earned Income Tax Credit, which is refundable, and the passage of the Affordable Care Act, which provided healthcare subsidies for higher incomes, reduced this deterrent. (A strong argument for The increase in the national hourly minimum wage from $ 7.25 to $ 15 is a higher paycheck for entry-level users would reduce the incentive a lot more.)

Is an increase in the value of the child tax credit that work builds an obstacle to support? It doesbut to a much lesser extent. The extensions that Biden and Romney put forward largely undid these concerns by making eligibility virtually universal. If there is No Income level at which you lose your child tax credit, then the marginal tax an unemployed person pays on jumping back into the workforce is zero. And if the eligibility threshold is very high – according to the Covid bill, many six-figure families are still getting the full $ 3,600 – then reducing or eliminating the loan won’t be very difficult.

The catch is that the closer you get to the general availability of a government benefit, the more expensive it becomes. Biden’s expansion costs about $ 100 billion per year. It is only supposed to take a year to tackle the Covid crisis, but there is a good chance it will be extended. (Romney’s plan would have cost even more –$ 113 billion per year – which he promised to cut to $ 66 billion by cutting others Poverty Programs, Including Pro Work Earned Income Tax Credit.)

The cost of these expanded tax credits is much higher than Congress was prepared to consider when passing welfare reform in 1996. The budget deficit at the time was actually on the verge of a budget surplus. Today the budget deficit is a cool $ 2.3 trillion. Even Republicans are not complaining as much about deficit spending out of consideration for the Covid crisis as they were under President Barack Obama (although this is unlikely to last).

For the Democrats, any fuss they might get from spending spiraling out of control is being replaced not only by the Covid emergency, but also by a blessing they received last fall from Harvards Jason Furman and Lawrence Summers, two veterans of the past democratic governments that were less confident about deficit spending. The persistently low interest rates, according to Furman and Summers, are leading to large budget deficits much less of a threat for the economic health of the country.

For Democrats a little further to the left, there is also a new economic concept: Modern monetary theory, This basically means that deficits will never matter. The is probably not true. In the meantime, the Democrats have specific reasons (aside from the partisan fact of a Democrat in the White House) to be less than usual concerned about large increases in spending.

A final, sociological reason for welfare reform in the 1990s was society’s changing expectations of women and work. Married women with children under 18 entered the world of work very quickly. rocket from less than 40 percent in 1970 to around 70 percent when the Social Reform Act was passed. As Brookings economist Gary Burtless explains, by the mid-1990s the traditional notion that women must be mothers who had to stay home had largely died out. As more and more married mothers (who by definition were not entitled to social assistance) became wage earners, “it seemed logically contradictory to say that single mothers should be exempt from the expectation that they too would work.”

This argument did not go away, but lost its urgency in the 2000s as the percentage of married mothers who worked leveled. Last spring, the Department of Labor reported an employment rate for married mothers of 69.9 percentwell below the labor force participation rate for single mothers (77.6 percent).

Meanwhile, there is a growing feeling, especially among younger people, that if the government can exempt the parents of a young child from work, married or not, why the hell not? “If I do my job as a New York Times Columnist who takes care of my 2 year old son full time, ”said Ezra Klein wrote“I would be described as leaving the world of work. But as much as I adore my child, there is no doubt that I would work harder.”

Reader, Klein won’t give up on his Times Column to raise his son. Even Anna Quindlen, who wrote extensively about the agony women experienced in relation to work-life balance, never tarnished her New York Times op-ed column to take care of your little ones. (When she gave it up in 1994, she stated that it was Focus on writing fiction.) Inhabitants of less lofty spheres also receive innate satisfaction from work. It has nothing to do with how “hard” the work is, but with living in this workplace club that we call the economy. People who stay at home with their children do not belong to this club. and they experience this exclusion as a loss that is more than economic, even if it really makes more sense to stay at home with the children.

Even if this or that public aid program provides a great incentive to return to work, most people will still choose to return to work. This was the case even in 1996. It is unlikely that the end of welfare reform as we know it will wreak almost as much social chaos as the end of welfare reform as we knew it. For the near future, the Democratic Congress will spend unchecked. At some point it will stop, and then the practical compromises that plague liberal governance will reappear. People on the receiving end – and fans of more open governance in general – should enjoy the vacation while it lasts.

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