Saturday, March 10, 2012

Was welfare reform a failure?

Politicians said "no" from the get go. Researchers who were initially skeptical got more on board after some data came in. But now we've had a chance to see how welfare reform fares during a prolonged depression, and as a result more dissent has been raised. For example, yesterday Evan shared this article with me on facebook, which reports that extreme poverty has increased dramatically, and TANF (the new welfare program after welfare reform) is to blame. People who would have been covered by AFDC (the old system) were not covered under TANF. My response to him was:

"I think the "success" is the devolution of control over eligibility and benefits to the states, and the inclusion of work requirements. The failure to index the block grant amount is obviously not a success. Work requirements make good sense in a strong economy, but they also pose a real problem now. The TANF emergency fund, which subsidized jobs for TANF recipients heavily, was great for that - but that's now expired. More info here.

I don't know TANF too well. Generally speaking, I take labor supply effects of welfare seriously - you can't have open-ended benefits. But if the government takes a hard line on labor supply requirements, they HAVE to take labor demand issues seriously - which means demand management and subsidized employment, job creation tax credits, etc. It's perverse to expect people to hold jobs but then not do anything when the economy doesn't create a sufficient amount of jobs to hold. On the other hand, it's quite reasonable to expect people to hold jobs if the economy is producing jobs

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