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Health and Human Services
Welfare Reform

Reforming our welfare system is a popular idea with the general public. But the case for significant change would be dramatic even if it were unpopular. Built gradually over decades of accompanying economic and social change, the welfare state has provided some level of material comfort for its recipients but at a staggering cost in terms of dollars spent and lives wasted.

The Costs Of Welfare

The dollar cost of North Carolina’s welfare state is tremendous. The combined budget for public assistance programs — cash welfare, Medicaid, Special Assistance for Adults, and other programs either means-tested for low-income North Carolinians or intended for their direct benefit — makes up about one-third of the total state budget. Real public assistance spending per low-income person has roughly tripled in the past two decades.

More significant than the monetary cost of the welfare system is the toll it has taken on families and children. By providing cash and benefits to mothers who do not work and who are not married, the welfare state promotes longtime dependency, personal irresponsibility, indolence, and illegitimate births. One study found that a 50 percent increase in the value of cash welfare and Food Stamp payments resulted in a 43 percent increase in the number of out-of-wedlock births in a state. The unformed or broken families created in part through our welfare policies are damaging the health, safety, and life prospects of children. Single parenthood correlates strongly with the possibility that children will be poor, fall behind their peers educationally, drop out of school, use drugs, commit crimes, experience mental illness, commit suicide, or become single parents themselves.

Signs Of Progress

Both at the national level and in North Carolina, welfare reforms have borne fruit. Caseloads for the cash welfare program Temporary Assistance for Needy Families (TANF, formerly AFDC) have fallen dramatically. Unfortunately, poverty rates haven’t fallen as quickly, partly because of an influx of poor immigrants whose incomes are higher than they would have been in their home countries but still below the U.S. poverty level. Furthermore, the state’s out-of-wedlock birth rate has skyrocketed by nearly 100 percent over the past 20 years, and now stands at 33 percent — a troubling indicator about future social ills. Long-term success in combatting poverty will rest on changing behavior to encourage marriage, high school completion, and full-time work.

In 1997, the General Assembly took the unprecedented step of giving some counties the power to devise their own TANF programs. Local experimentation in such areas as “pay for performance” — giving recipients welfare benefits only after completion of required work — and privatization appears to have borne fruit. In the early- to mid-1990s, North Carolina’s rate of caseload reduction was the lowest in the Southeast. By 2001–02, North Carolina moved into the top rank of states in successful welfare reform.

Recommendations

1. North Carolina should continue to implement welfare reforms to tighten time limits, promote marriage and personal responsibility, require work, target benefits to the most needy, and encourage efficient operation. Counties should be given significant authority to experiment, and privatization options considered.
2. The state should create a Private Assistance Tax Credit so that taxpayers can decide how much of their welfare spending should be directed to public or private agencies. The credit would allow taxpayers to write off donations, up to a maximum, to private anti-poverty programs with offsetting reductions in state spending.

To view higher quality graphs, download Agenda 2004 [560KB Acrobat].