W]@y Expanding Welfare Will Not Help the Poor By Robert E. Rector

Introduction wish to thank the.subcommittee for inviting me to testify -on HIL. 529, the "Mickey Leland Childhood Hunger'Relief Act." H.R. 529, which proposes to raise spending on Food Stamps by an extra $5 billion ove r the next five years, is the latest step in an endless series of expansions of the welfare state. But the U.S. welfare system has failed. Both the public and decision makers increas- ingly recognize that the current welfare system has harmed rather than h elped the poor. Welfare has undermined the American family and promoted long-term dependency. President Clinton has declared his intention to "end welfare as we currently know it." But far from ending welfare as we know it, this bill dramatically expands i t. It is deeply distressing to those interested in serious welfare reform that despite his reform rhetoric, the President's proposed budget has little funding for implementing welfare reform while containing billions for expansions of old- fashioned welfa r e programs. H.R. 529 will not help poor Chart I American children. Poor children The Poverty Paradox: Massive Government do not need more conventional wel- Spending Shows No Results fare spending. As Chart 1 demonstrates, we are now spending Billions of 1 9 90 Dollars Poverty Rate five times as much on means-tested $2W 35% welfare as when the War on Pov- after adjusting for infla- ...... erty began, t......................... ........... ................... ................... ............ $200 . ...... 28% t ion. If welfare spending were an answer to the problems of the poor . ............. ................................. ... .............. ......... $150 . ....... 21% in the inner city and elsewhere, we would have solved these problems long ago. $100 . ... ............ ...... ............. .... 14%

American children don't need more welfare spending. They need $50 . ...................................i ................... ........... 7% stable families and fathers. They @.y I ..q- -.1 need to be able to play in their 1:.. -_" neighborhoods without getting shot. 1930 1940 1950 1960 1970 1980 1990 They need a decent education, which, despite massive spending, Tdd Skft and Fo&Fd the public school monopoly is un- Weftm Spending ftvefty Rcft able to provide. H.R. 529 will not El Miuded for Inflafton) solve any of these real problems; in fact it will make most of them Note: Accurate poverty data prior to 1947 are unavailable. worse. I Source: Various US govemmeryt reportL Naftp DdoChat

Robert E. Rector is a Senior Policy Analyst at The Heritage Foundation. This lecture is taken from testimony given before the Subcommittee on Department Operations and Nutrition of the Committee on Agriculture, U.S. House of Representatives, on April 28,1993. ISSN 0272-1155. 01993 by The Heritage Foundation.

Overview Chart 2 Let me begin with a few basic facts. Welfare Spending per Low Income Person on Cash, Food and Housing Aid 1) The level of welfare spending in pending per Person In 1990 Dollafs the United States is enormous $1,4 00 and growing rapidly. In 1990, the latest year for which complete data $1,200 . ................................................................................................. are available, welfare spending $1,000 . .................................. . ............................................. reached a record high of $226 bil- lion, or 4.1 percent of GNP. This $800 . .............................. ............................. ............ figure excludes programs for the middle class like Social S e curity. ......................... $600 . ...... ...................................... Contrary to political claims, wel- .... .. . ... fare spending increased during the $400 . ..... .. ............................................. . . 1980s, after adjus t ing for inflation. $200 Nor was the recent increase re- stricted to medical aid. As Chart 2 W-1 14' C-1 I I'[ l'I'll I I 11:11.11111111 I-In I I-]:I i h 1:11111 n shows, means-tested cash, food, 1940 1950 1960 1970 1980 1990 and housing aid also increased more rapidly than the growth in the Low income person means the lowest income third of the nation. population, after adjusting for infla- tion. 2) Total welfare spending is more than sufficient to raise the incomes of an persons defined as poor by the Cen s us Bureau above the poverty income levels. Part of the $226 billion in welfare spending does go to persons in nursing homes and other institutions who are not included in the annual Census Bureau population and poverty count. However, $184 billion was spe n t on the general non-institutional population in 1990. This sum was roughly two and a half times the amount needed to eliminate poverty. Welfare cash, food, and housing aid alone were more than enough to eliminate poverty. 3) There is little poverty-induc e d malnutrition in the U.S.; the material living standards of poor Americans are far higher than is generally understood.,Today the fifth of the popu- lation with the lowest income has a level of economic consumption higher that of the me- dian American fa m ily in 1960. 1 There is little or no poverty-induced malnutrition in the U.S.' Persons defined by the U.S. government as "pooe' have almost the same average level of 2 consumption of protein, vitamins, and other nutrients as persons in the upper middle cl ass. Poor children have particularly high levels of food and nutriment intake as Tables I and 2

1 The per capita economic consumption of the lowest quintile of the population 1991 exceeded the per capita income of the median family in 1960. In 1960 median family income equalled $5620 while the average family had 3.71 members. Per capita income of th e median family in 1960 was thus about $1515 in current dollars or $6535 in 1991 dollars. By contrast the per capita consumption of the households in the lowest income quintile in 1991 was $7480. Data sources for these figures are: U.S. Department of Labor , Bureau of Labor Statistics, Consumer Expenditures in 1991, Report 835, December 1992, p. 4.; and U.S. Department of Commerce, Bureau of the Census, Historical Statistics of the United States: Colonial Times to 1970, Part I (Washington, D.C.: U.S. Governm e nt Printing Office, 1975), p. 296 and 301. 2 Robert Rector, "Food Fight: How Hungry Are America's Children?" Policy Review, Fall 1991, pp. 38-43; Robert Rector, "Hunger and Malnutrition Among American Children," Heritage Foundation Backgrounder No. 843, A ugust 2, 199 1.

show. In reality, children living in "poverty" Table"I today, far from being malnourished, are actually Average Per Capita Consumption super-nourished by any conceivable historic or bi- of Nutrients as a Percentage of ological standard. Poor children today will actu- Recommended Daily Allowances ally grow up to be one inch taller and ten pounds for Children under age 6 in 1985 heavier than the GIs who stormed the beaches of 3 Famlly Iwo fewilly Incoine ftwilly moome Normandy in World Wa r 11. In reality, the princi- Below711%mof owowloo%ol Above 510% al PoverlyThmehold Form,ftediold Pay" lbleshok! pal nutrition-related problem facing poor persons . ..... -21 `2 40 in the U.S. today is not "hunger but obesity; the Vitamin li@1:2- 'ill 206" ' 164 poor have a higher rate of obesity than do mem- I. - In -i-\u223\'a7 2: .... - : . ..... 1: -lS2 bers of other socioeconomic groups in the U.S. Vitamin A .:.186'' 18,31" Vitaniln@'C''::: .179 (For further information about poverty and malnu- '': . 64 ffibollav in 181 179 182 trition please refer to the accompanying article'l :to 49 have submitted to Committee, "Food Fight: How Nlacin 138 135 145 . ...... . . .... . . . . .. ... ... . ilhoinho 31n Hungry Are America's Children?") Warn .In B-6 .1.1.3 ill 133 Simi l arly, the claim that poor Americans are Magnesium 1.0.5 105 126 badly housed is untrue. Nearly all of America's ::,94::'. poor live in decent housing that is well-main- zinc 76 75 73 Sources: Human Nutrition Information SerAce, U.S. Deparlment of tained. I n fact, "pooe' Americans have more hous- Agricukure. Low Income Women 79-50 Years and Their Chiciren 7-5 YeBrx 4 Da)a, pp. 72-73. Women 19-50 Years and Their Children 1-5 ing space and am less likely to be overcrowded Years, 4 Days, 1985, pp. 64-65. than i s the average citizen in Western Europe.4 4) The War on Poverty did not succeed. While there may be little material poverty, this does not mean that the War on Poverty was a success. The recent expansion of the welfare state has not really raised the inco m es of less affluent Americans. Instead it has largely replaced work with dependence. And by Table 2 undermining family structure, welfare Average Per Capita Food Consumption has greatly contributed to the increase in By Gram Weight for Children under age 6 in 1985* single mothers who have difficulties sup- porting their families. ftmoy Iwo" Felber lecoloo ftmor loccoloo Below 73% of Below 100% of Above 300% al 5) The real problem in low-income PovedyThrubM ftvodytWaAdd__ Pare ft .Wield INA 6`614, 97. commu n ities is behavioral poverty, Milk and Milk Products 390 386 401 not a shortage of welfare benerits. "Be- . ..... . havioral poverty" refers to a breakdown Fruits Iand F .r.u.it.Ju.ices 1.51 154 ""2-5'13" ... . ... . . in the values and conduct that lead t o the Sugar. #nd S%- 21 20 37 formation of healthy families and stable personalities, and promote self-suffi- ciency. Behavioral poverty is a cluster o All figures in grams. Sources* Human Nutrition Information Sentice, U.S. Departrnent of Agriculture, soc i al pathologies including: depen- Low Ancome Wwwn 19-50 Years and Their Children 1-5 Years, 4 Days. pp. 14-36. dency and eroded work ethic, lack of edf Women 19-50 Years ard Their Children 1-5 YeaM 4 DaA 1985, pp. 14-36. ucational aspiration and achievemen t, in-

3 Bernard D. Karpinos, Height and Weight qfMilitary Youths (Medical Statistics Division, Office of the Surgeon General, Department of die Army, 1960), pp. 336-35 1. Information on the current height and weight of youths provided by the National Cent er for Health Statistics of the U.S. Department of Health and Human Services based on the National Health and Nutrition Examination Survey. 4 Robert Rector, "How the Poor Really Live: I.,essons for Welfare Reform," Heritage Foundation Backgrounder No. 875 , January 31, 1992, pp. 12-13.

ing: dependency and eroded work ethic, lack of educational aspiration and achievement, in- ability or unwillingness to control one's children, increased single parenthood and illegitim- acy, criminal activity, and drug an d alcohol abuse. While there may be little material poverty in the United States, behavioral poverty is abundant and growing. For example, the black illegitimacy rate was around 25 percent when the War on Poverty began; today two out of three black childr e n are born out of wedlock. A similar increase is occurring among low-in- come whites. Likewise, crime and dependency rates exploded as welfare spending increased. 6) The centraldilemma of the welfare state is that nearly all -of 'the cash, food, housing, a nd medical. programs designed to alleviate material poverty have the harmful side effect of increasing behavioral poverty. Welfare fosters dependency and family disintegration. The erosion of the work ethic and family structure in turn demolishes the real life prospects of low-income Americans, greatly contributing to crime, school failure, and other problems. 7) The Leland Hunger Relief Act will actually harm the poor rather than help them. By ex- panding conventional welfare benefits the bill will make m ost social problems worse. H.R. 529 will cause an increase in: single-parent families, welfare dependence, school failure, and crime. -

8) We should reform welfare rather than expand benefits. What is needed is a dramatic over- haul of the welfare system w ith the aim of promoting work and marriage and discouraging single parenthood and dependence. A good place to begin welfare reform would be to estab- lish firin work requirements for many non-elderly Food Stamp recipients; this would dramat- ically reduce dependency and save the taxpayers billions.

The Growth of the Welfare State

Discussions of welfare are often distorted by talking about one or two government programs as if they existed in isolation. It is easier to call for expanding a given anti-pover ty program if you ignore the existence of dozens of related pro- Chart 3 grams aiding the poor. But the effects of Federal, State and Local Welfare welfare can only be understood by ex- Spending by Program amining the welfare system in its en- tirety. In r eality the federal government ON.00omof .IM Dokn runs over 75 means-tested welfare pro- grams. These programs provide cash, food, housing, energy aid, medical aid, 6200 . .................................................................................... . ...................... training, and social services to poor and low-income Americans. Spending 1160 . ............................................................................. growth in these programs is shown in Chart 3. $100 . ..................... . ..................................................... In 1990 federal, state, and local gov- ernments together spent $226 billion on $50 . . ................................. ........... .................. assistance programs for low-income per- sons and c ommunities. This figure in- cludes only spending on program for 1940 1960 1960 1970 1980 1990 the poor and low-income persons and 0 C=K F004 ft=ft 0 mmftmaumm excludes general entitlement programs El swim all Am meoxg Am m wa*um such as Social Security an d Medicare for the middle class. Adjusting for infla-

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tion, total welfare spending in 1990 was five times the level of welfare spending in Chart4 the mid- 1960s when the War on Poverty began. As Chart 4 indicates, total mean- Total Welfare Spending a s a Share of GNP tested welfare spending now equals about Share of Gross National Product 4 percent of GNP, up from a little over 1 6% percent in the mid-sixties. As a percent of GNP welfare spending is now at roughly 5% . ................................ . ............................................................................... the same rate as existed in the Great De- pression when a quarter of the labor force 4% . ..... .... .. ................................................................... . . .. ......... was unemployed.

. . ....................................... .................. Over 25 years have passed since Presi- 3 % dent Lyndon Johnson launched his "Un- conditional War on Poverty." Johnson 2% . . . ............................................... . declared that this war was to be a great "in- vestment" whi c h would return its cost to 1% society manyfold. Total welfare spending since the onset of the War on Poverty has amounted to $3.5 trillion in constant 1990 1940 1950 1960 1970 1980 1990 dollars-more than the full cost of World War H after adjusting for in f lation. From g DakOW another perspective, the average American household has already paid around $50,000 in taxes in fighting the War on Poverty. Before we ex- pand welfare spending even more, as H.R 529 proposes, I think the taxpayers are justified in as king what return they have gotten on their current "investment."'

Understanding the Two Types of Poverty Concern over the enormous cost of welfare is legitimate. But for the general public the problem with welfare is not merely its cost but rather the per ception that welfare'has harmed rather than helped the poor. In order to analyze this perception, it is important to begin with an understanding of two separate concepts of poverty: "material poverty" and "behavioral poverty." Material poverty means, in t h e simplest sense, having a family income below the official poverty income threshold, which was $14,463 for a family of four in 1992. To the average man on the street, to say someone is poor implies that he is malnourished, poorly clothed, and lives in fi l thy, dilapidated, overcrowded housing. In reality there is little material poverty in the U.S. in the sense generally understood by the public.5 Behavioral poverty, by contrast, refers to a breakdown in the values and conduct which lead to the formation o f healthy families, stable personalities, and self-sufficiency. As noted, behavioral poverty incorporates a cluster of social pathologies including: eroded work ethic and dependency, lack of educational aspiration and achievement, inability or unwillingnes s to control one's children, increased single parenthood and illegitimacy, criminal activity, and drug and alcohol abuse. While material poverty may be rare in the United States, behavioral poverty is abundant and growing.

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The present welfare sy stem is designed almost exclusively to raise the material living standards of less affluent Americans. The key dilemma of the welfare state is that the prolific spending intended to alleviate material poverty has led to a dramatic increase in behavioral p o verty. The War on Pov- erty may have raised the material standard of living of some Americans, but at a cost of creating whole communities where traditional two-parent families have vanished, work is rare or non-exis- tent, and multiple generations have g r own up dependent on government transfers. The onset of the War on Poverty directly coincided with the disintegration of the low-income fam- ily-and the black family.in particular. At the outset-of-the -Second World War, the black illegiti- mate birth rate was slightly less than 19 percent. Between 1955 and 1965 it rose slowly, from 22 percent in 1955 to 28 percent in 1965. Beginning in the late 1960s, however, the relatively slow growth in black illegitimate births skyrocketed-reaching 49 percent in 1975 a n d 65 percent in 6 1989. If current trends continue, the black illegitimate birth rate will reach 75 percent in ten years. Similar increases are occurring among low-income whites. Dependence has also increased enormously. Currently, one child in eight in t h e United States re- ceives aid from the Aid to Families with Dependent Children (AFDC) program. Some 22 percent of U.S. children bom in the early 1970s received AFDC for at least one year before reaching their 15th birthday. For black children bom in the early 1970s, 55 percent received AFDC for some portion of their childhood before reaching age 15. 7

High Welfare Benefits Undermine Family Structure The central feature of H.R. 529 is to increase the monthly value of Food Stamp benefits. But re- search in dicates that higher welfare benefits lead to increases in out-of-wedlock births, single parent- hood, and dependence. Increases in single-parent families and dependence in turn lead to increases in school failure and crime. The National Longitudinal Surve y of Youth (NLSY) provides the best current data base for ana- lyzing the effects of welfare on behavior. In 1979, the NLSY established a large sample of young women (aged 14 to 19) and then tracked the behavior of these women over the next decade. Using t h e NLSY data, Dr. June O'Neill, of Baruch College in New York City, found the dollar value of monthly welfare benefits in a state has a dramatic affect on whether women will have children out of wedlock. Holding constant a wide range of other variables suc h as income, parental education, and urban and neighborhood setting, O'Neill found that a 50 percent increase in the monthly value of AFDC and Food Stamp benefits led to a 43 percent increase in the number of out-of-wedlock births over the study period.8 T hese findings on the effects of welfare benefits in increasing out of wedlock births closely match recent research by Shelley Lundberg and Robert D. Plotnick of the University of Washington.9

6 U.S. Department of Health and Human Services, National Center for Health Statistics. Note: The black illegitimate birth rate is available only from 1969 on. The pre- 1969 black illegitimate birth rates were calculated using the very similar "Non-White" rate. 7 Nicholas Zill, Kristin A. Moore, et al., 7he Life Circu m stances and Development of Children in Welfare Families: A Profile Based on National Survey Data (Washington, D.C.: Child Trends Inc., 1991). 8 Dr. M. Anne Hill and Dr. June O'Neill, Underclass Behaviors in the United States: Measurement and Analysis of D e terminants, forthcoming paper, research funded by Grant No. 88ASPE201 A, U.S. Department of Health and Human Services. 9 Shelley Lundberg and Robert D. Plotnick, "Adolescent Premarital Childbearing:-Do Opportunity Costs Matter?" June 1990, a revised versi on of a paper presented at the May 1990 Population Association of America Conference

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Similarly, high benefits discourage single mothers from remarrying. Research by Dr. Robert Hutchens of Cornell University shows that a 10 percent increase in AFDC bene fits in a state will cause a decrease in the marriage rate of all single mothers in the state by 8 percent. 10 The collapse of family structure in turn has crippling effects on the health, emotional stability, ed- ucational achievements, and life prospect s of low-income children. Children raised in single-parent families, when compared to those in intact families, are one-third more likely to exhibit behavioral problems such as hyperactivity, antisocial behavior, and anxiety. Children deprived of a two-par e nt home are two to three times more likely to need psychiatricmm than those in two-parent families. And they are more likely to commit suicide as teenagers. Because the father plays a key role in a child's cognitive development, children in single-parent f amilies score lower on IQ tests and other tests of aptitude and achievement. 12 Children in single- parent families are three times as likely to fail and repeat a year in grade school than are children in two-parent families. In all respects, the differen c es between children raised by single parents and those raised in intact homes are profound, and such differences persist even when single-parent homes are compared to two-parent homes of exactly the same income level and educational stand- ing. 13 Family d isintegration is a major contributing factor in America's soaring crime problem. A fa- ther plays a vital role in disciplining a young man and building his moral character. Boys raised without fathers are much more likely to become involved in criminal ac t ivity. For example, holding family income, neighborhood, parental education, and other variables constant, young black men from single-parent homes are twice as likely to commit crimes and end up in @ail when compared to similar young men raised in low-in c ome families where the father is present. 4 But the greatest tragedy is that family instability and its attendant problems are passed on to fu- ture generations. Children from single-parent homes are far less likely to establish a stable married life when they in turn become adults. White women raised in single-parent families are 164 percent more likely to bear children out of wedlock themselves; I I I percent more likely to have children as teenagers. If these women do marry, their marriages are 92 perce nt more likely to end in divorce than are the marriages of women raised in two-parent families. Similar trends are found among black women. 15

Higher Welfare Benefits Increase Dependence The O'Neill study also found that higher welfare benefits increased the number of women who left the labor force and enrolled in welfare. A 50 percent increase in monthly AFDC and Food

in Toronto, Canada. 10 Robert Hutchens, "Welfare, Remarriage, and Marital Search, " American Economic Review, June 1989, pp. 369-379. 11 Dr. Deborah A. Dawson, "Family Structure and Children's Health and Well-being: Data From the 1999 National Health Interview Survey on Child Health," paper presented at the Annual Meeting of the Population Association of America, Toronto, May 1990, Table 5 . 12 Marybeth Shinn, "Father Absence and Children's Cognitive Development," Psychological Bulletin, Vol. 85, No. 2 (1978), pp. 295-324. 13 Dawson, op. cit. See also Nicholas Davidson, "The Daddy Dearth," Policy Review, Winter 1990 14 Hill and O'Neill, op. cit. 15 Irwin Garfinkel and Sara S. McLanahan, Single Mothers and their Children: A New American Dilemma (Washington, D.C.: The Urban Institute Press, 1986), p. 3 1.

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Stamp benefit levels led to a 75 percent increase both in the number of women enrolling in AFDC and in the number of years spent on AFDC. In other words increases in benefits' value will cause dramatic expansion in welfare caseloads. 16 These findings on t he effect of higher welfare benefits in reducing work effort are confirmed by a series of controlled experiments conducted by Office of Economic Opportunity (OEO) in the mid- seventies. The longest running and most comprehensive of these experiments was c o nducted be- tween 1971 and 1978 in Seattle and Denver, and became known as the Seattle/Denver Income Maintenance Experiment, or "SIME/DIME." The SI?V1E/DRv1E experiments found that increasing welfare benefits had a dramatic negative effect on labor force p articipation and earnings. Indeed, the SIME/DRVIE experiment found that every $ 1.00 of extra welfare given to low-income persons re- duced labor and earnings by $0.80. 17 The results of the SIMEMR@ffi study are directly applicable to existing welfare pro g rams: nearly all have strong anti-work effects like those demonstrated in the SIMEMIME experiment. Not surprisingly, the growth of the welfare state has coincided with a decline in labor force attach- ment. In 1960, among the lowest income quintile of pop u lation, nearly two-thirds of households were headed by persons who worked. 18 By 1991 this figure had fallen to around one-third, and only I I percent had household heads who worked full time throughout the year. 19Part of this decline in employment can b e attributed to the increasing number of retired elderly households in this income group, but an equally important factor is the decline in labor force participation among non-elderly heads of households. 20 Thus higher welfare benefits decrease work effor t and increase welfare dependence. But in- creased dependence, in turn, has strong negative effects on children's intellectual abilities and life prospects. Holding constant a wide range of factors such as family income, parental education, and residence i n a slum neighborhood, long-term welfare dependence by a family reduces a child's intel- lectual ability by over one-third compared to nearly identical children in low-income families that were not on welfare. 21 Not surprisingly, research shows that young women raised in families depen- dent on welfare are two to three times less likely to graduate from higb school than are young women of similar socio-economic background not raised on welfarJ2 Finally, dependence on welfare also appears to spread from one generation to another. Children raised in families that receive welfare assistance are themselves dim times mom likely than other children to be on welfare when they become adults. 23

16 11ill and O'Neill, op. cit. 17 Gregory B. Christiansen and Walter E . Williams, "Welfare Family Cohesiveness and Out of Wedlock Births," in Joseph Peden and Fred Glahe, eds., The American Family and the State (San Francisco: Pacific Institute for Public Policy Research, 1986), p. 398. 18 U.S. Bureau of the Census, Current Population Reports, Series P-60, No 80. Income in 1970 of Families and Persons in the United States, p. 26. 19 U.S. Bureau of the Census, Current Population Reports, Series P-60, No. 190, Money Income ofHouseholds, Families and Persons in the United State s : 1991, p. 7. 20 See footnotes 18 and 19. 21 M. Anne Hill and June O'Neill, "The Transmission of Cognitive Achievement Across Three Generations," paper prepared for the RAND Conference on Economic and Demographic Aspects of Intergenerational Relations, Sa n ta Monica California, March 1992., 22 R. Forste and M. Tienda, "Race and Ethnic Variation in the Schooling Consequences of Female Adolescent Sexual Activity," Social Science Quarterly, March 1992. 23 M. Anne Ifill and June O'Neill, Underclass Behaviors in the United States: Measurement and Analysis of Determinants (New York: City University of New York, Baruch College, March 1990).

This inter-generational dependency is a clear indication that the welfare system is failing in its goal to lift the poor from poverty to self-sufficiency.

Why Welfare Undermines Work and Marriage Although it seems clear that the current welfare system undermines work and marriage, it useful to understand why this is so. Current welfare may best be conceptualized as a system which offers each sin& mother a'_'paychecle' worth an average of-between $8,500-and $15,000, depending on 14 the state. The mother has a contract with the government: She will continue to receive her "paycheck" as long as she fulfills two conditions: 1) s h e must not work; and 2) she must not marry an employed male.25 The current welfare system has made marriage economically irrational for most low-income par- ents. Welfare has converted the low-income working husband from a necessary breadwinner into a net financial handicap. It has transformed marriage from a legal institution designed to protect and nurture children into an institution which financially penalizes nearly all low-income parents who practice it. Welfare establishes strong financial disincent i ves to marry, effectively blocking the formation of intact, two-parent families. Example: Suppose a young man in the inner city has fathered a child out of wedlock with his girlfriend. If this young father abandons his responsibilities to the mother and c h ild, government will step in and support the mother and child with welfare. If the mother has a second child out of wedlock, as is common, average combined benefits will reach around $13,000 per year. If, on the other hand, the young man does what society believes is morally correct (i.e., marries the mother and takes a job to support the family), government policy takes the opposite course. Wel- fare benefits would be almost completely eliminated. If the young father makes more than $4.50 per hour, the fe d eral government actually begins taking away his income through taxes. The federal wel- fare reform act of 1988 permits the young father to marry the mother and join the mother and child to receive welfare, but only as long as he does not work. Once he tak e sa full-time job to support his family, the welfare benefits are quickly eliminated and the father's earnings are subject to taxation.' The economic logic of welfare is simple and cruel. If a mother and father do not marry, their joint income equals: welf are for the mother plus the father's earnings. 26 If they do marry, their joint in-

24 This sum equals the value of welfare benefits from different programs for the average mother on AFDC. 25 Technically the mother may be married to a husband who works pa rt-time at very low wages and still be eligible for some aid under the AFDC-UP program. However, if the husband works a significant number of hours per month even at a low hourly rate, his earnings will be sufficient to eliminate the family's eligibility t o AFDC-UP and most other welfare. 26 The general policy rule is ftt alT means-tested welfare benefit programs have anti-marriage effects because the welfare benefits will be higher if a man and woman do not marry and they are treated by the government as s eparate "households" for purposes of calculating benefit levels. A partial exception to this rule is the earned income tax program which, because it is limited to employed parents, will encourage marriage between an employed man and a mother on AFDC who i s not employed. However, the existing EITC would, in some cases,

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come equals the father's earnings alone. Another way of expressing this dilemma is that the welfare system imposes an extraordinarily high marginal tax rate (i.e., income loss rate) on th e act of mar- riage. If a man earning $ 10,000 per year marries a mother on welfare, their joint income (including the value of the welfare benefit) will fall by some 50 percent. If a man earning $20,000 marries a mother on welfare, the couple's joint inc o me will fall some 30 percent. A simple approach to welfare reform would appear to be to allow the welfare mother to retain all or most of her benefits when she goes to work or gets married. While this approach at first seems plausible, in reality -it -wou l d result in nearly all low-income -families receiving welfare. (For exam- ple, it would create a strong incentive for a low-income couple to divorce, put the mother on wel- fare, and then remarry-or to postpone marriage until after a mother was enrolled o n welfare.) The cost would be enormous. Real reform will need to be tougher and more complex.

Principles of Real Reform Welfare is currently a 'check in the mail with no obligations. This is wrong. Instead, welfare should be based on the principle of reci procal responsibility: society will provide assistance, but able-bodied recipients will be expected to contribute something to society in exchange for the bene- fits they receive. The Apostle Paul set forth the foundation of sound welfare nearly two thous a nd years ago. In laying the ground rules for charity in the early Christian church, he stated simply, "He who shall not work, shall not eat." Society should provide aid to those in need. But, as Paul understood; aid which is merely a one- way handout is h a rmful to both society and the recipient. Such aid undermines the individual's abil- ity to take responsibility for his or her own life. If the habit of dependence becomes entrenched, it limits the individiial's capability to become a fully functioning mem ber of mainstream society.

Toward Comprehensive Welfare Reform A second, related goal of welfare reform must be to change the welfare incentive structure. The current incentives for non-work and non-marriage must be drastically reduced. At the same time t he rewards to those who work or get married must be increased. Comprehensive reform would have five parts: 1) Reduce Welfare Benefits. The higher the value of a combined monthly welfare benefits the ' greater the increase in out-of-wedlock births and depe n dence. Thus H.R. 529, by raising ben- efit levels, will have completely counterproductive effects. Rather than increasing benefits, the combined welfare benefits for families on AFDC should be reduced. This is particularly necessary in states with high be n efits levels. AFDC recipients are eligible for benefits from nearly one dozen major welfare programs. In roughly half the states, the combined value of benefits received by the average AFDC family very much exceeds the federal poverty in- come threshold. 2 ) Establish Work Requirements in the AFDC Program. Within the AFDC program, moth-ers who do not have children under age five or who have received AFDC for over five years should be required to perform community service for at least 35 hours per week in ex change for benefits. In all two-parent families receiving AFDC, one parent should be required to

discourage marriage between a employed man and an employed single mother. Because of the small size of the EITC this effect is probably not great.

work . The work requirements should be permanent, lasting as long as the family receives benefits. The effect of such a work requirement in encouraging welfare recipients to leave welfare and obtain private sector employment is clear. Equally important but les s obvious is the fact that a work requirement also eliminates most of the anti-marriage incentives of the current welfare system. Under the current welfare system, when a single mother marries a fully em- ployed male she loses most of her welfare benefits. Under a welfare system with a work re- quirementi a single mother would -still lose her benefits upon marrying-but she would now be losing benefits which she had to earn rather than a free income, so the loss would be far less significant. As long as the m other could obtain a private sector job which paid roughly as much as welfare, then marriage would no longer impose a significant financial or per- sonal cost on the mother or her prospective spouse. Indeed, if required to work for welfare benefits, some w elfare mothers would prefer to marry and be supported by a husband's in- come rather than enter the labor force. By converting welfare from free income to income which must be earned, a work requirement eliminates most of welfare's anti-marriage incen- ti v es and would make marriage economically rational once again for millions of low-income parents. 3) Establish Work Requirements for Food Stamp and General Assistance Recipients. Food Stamps and General Assistance recipients should be required to perform co m munity service in exchange for benefits received. Elderly and disabled recipients as well as mothers with young children should be exempt from this requirement. Experiments have shown that work requirements for Food Stamp recipients can significantly redu c e dependence and produce significant savings for the taxpayer. 27 4) Provide Tax Credits or Vouchers for Medical Coverage to AD Working Families. The current welfare system, which provides free medical coverage to single parents and non- working parents o n AFDC but does not provide medical assistance to low-income working families, discourages both work and marriage. The federal government could reduce the anti- work/anti-marriage effects of welfare by enacting the comprehensive medical reform pro- posed b y The Heritage Foundation. 28 This plan would provide federal tax credits and vouch- ers for the purchase of medical insurance to low-income working families not eligible for Medicaid.

5) Provide Tax Relief to Ali Families with Children. The federal govern ment heavily taxes low-income working families with children. A family of four making $20,000 a year cur- rently pays about $3,000 in federal taxes. This heavy taxation promotes welfare dependence by reducing the rewards of work and marriage relative to w elfare. Acrucial step in welfare reform is broad family tax relief to all low-income working families.

Education Reform and Moral Renewal in the Inner City However, reforming welfare alone will not be sufficient to grapple with the real problems of urban poverty. In addition, we must draw upon the strengths of institutions outside government. Par-

27 AM Associates, Food Stamp Work Registration and Job Search Demonstration: Final Report (Office of Analysis and Evaluation, U.S.Department of Agriculture, co ntract No. 53-3198-0-85), July 1986. 28 Stuart M. Butler and Edmund F. Haislmaier, eds. A National Health Systentfor America (Washington, D.C.- The Heritage Foundation, 1989).

ticularly important are churches. The church in the inner city can and should be our number one weapon in combatting crime, poverty, family break up, and school failure. Research by Dr. Richard Freeman of Harvard University shows that black inner-city youth who have religious values are 47 percent less likely to drop out of school , 54 percent less likely to use drugs, and 50 percent less likely to engage in crime than those without religious values.29 Religious institutions can succeed in improving urban life where government has failed. Churches need to have a larger role in build i ng the moral character of young people in the inner city. At the same -time -poor parents need the right to choose 4he-type -of education which will best meet the moral and intellectual needs of their children. Both goals can be met by providing poor par- ents with educational vouchers which can be used to send their children to any school the parent chooses, public, private, or religious. Poor parents should have the same right of choice in education currently exercised by Bill Clin- ton, Al Gore, Jesse J a ckson, and Marion Wright Edelman. Because they are rich, these parents are not forced to send their children to public schools; instead they send them to private schools. Ironi- cally, they will adamantly fight to deny the same right of choice to poor par ents. The bottom line is simple: Poor parents do not need more Food Stamps, instead they need school vouchers which will give them the same rights of choice in education currently exercised by Bill Clinton and Al Gore.

Conclusion

Amy attempt to reform th e current structure of public welfare must begin with a realization that most programs designed to alleviate "material" poverty generally lead to an increase in "behavioral" poverty. While the poor were supposed to be the beneficiaries of the War on Pover t y's transfer pro- grams, they instead have become its victims. If policy makers fail to recognize or respond to this re- lationship, the welfare state will continue to worsen, rather than improve, the lives of America's poor. The rule in welfare, as in ot h er government programs, is simple: You get what you pay for. For over forty years the welfare system has been paying for non-work and single parenthood and has ob- tained dramatic increases in both. But welfare which discourages work and penalizes marriag e is a system which ultimately harms its intended beneficiaries. Comprehensive welfare reform must com- bine toughness and a refusal to reward negative behavior with positive rewards for constructive be- havior. 30

However, truly grappling with the problem s of the inner city and American families will require much more than reforming welfare policies. In addition, we need to begin a process of cultural re- newal. Key to this renewal is educational reform based on parental choice and a broadening of the rol e of America's number one anti-poverty weapon: the inner-city church.

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Chart 5

Total State and Federal Expenditures I on Food Assistance Programs

annons of constant 1990 SUS $27

$24- Last low of 82 1 -CMIOr Adminl8tratION

$3

so 70 72 74 76 76

Heritage Dataftert ; Spendf:?&%yrams Include: Food ftwiM WIC, Sdiod Lunch,Program, Food Donation ropgmms, Nutrition Programs, among others. Soume: USD& FoW and Nuffltion Servics

Chart 6 Total Food Assistance Spending Per Poor Person

Go"twi 1989 $us

SIFOO - 1- 771,

$60o

$500-

$400-

$300---

$200-

$100-

so - 70 7172737476767778"%0 W *02_M 'a 1 087 OU 099

Hermes Datachart Source: U.S. Bureau d the Census; USD& Food and Nutrition Service.

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