The Heritage Foundation - Leadership for America

Congressmen Tom Price (R-GA) and Jim Jordan (R-OH) should be commended for introducing a bill this week that will eliminate a little noted provision passed in the stimulus bill which severely undermines the success of the historic 1996 welfare reform law.

H.R. 1277, the Welfare Reform Restoration Act, repeals Section 2101 of the stimulus bill which creates a new $5 billion program that encourages and rewards states for increasing the size of their caseloads. The stimulus bill reverts welfare back to the broken system it once was that trapped a growing number of families into a lifetime of dependency on government assistance. Welfare reform was heavily bipartisan and many of the democrats and republicans who voted for it originally in 1996 are still in Congress today.

The old system, known as the Aid to Families with Dependent Children (AFDC), tied funding levels to the size of the caseload – the larger the caseload, the more money a state would receive and if caseloads shrunk, a state would be penalized and receive less money. It is not surprising that welfare caseloads grew at an alarming rate due to this system.

The 1996 welfare reform law eliminated this perverse financial incentive by giving each state a flat funding level that did not vary whether the state increased or decreased its caseload. In addition, states were given the goal of reducing welfare dependence. They were rewarded by allowing them to keep the extra funds once recipients left the rolls and moved into employment – not to mention the satisfaction of knowing they helped transform lives by moving them from poverty into gainful employment and stability.

The stimulus bill overturned the fiscal foundation of welfare reform by restoring an AFDC-style funding system. For the first time since 1996, the federal government will begin paying states bonuses to increase their welfare caseloads. Indeed, the new welfare system created by the stimulus bill is actually worse than the old AFDC program because it rewards the states more heavily to increase their caseloads. Under the stimulus bill, the federal government will pay 80 percent of cost for each new family that a state enrolls in welfare; this matching rate is far higher than it was under AFDC.