Executive Summary

Beginning with a major expansion of federal support for the working poor and culminating in the landmark 1996 law ending "welfare as we know it," the Clinton administration launched a revolution in U.S. social policy. With Congress set to renew the law this year, the opportunity is at hand to finish the job of replacing welfare with work and making work pay.

Having vetoed two earlier welfare reform proposals sent to him by the GOP-dominated Congress, President Bill Clinton on Aug. 22, 1996, signed a bill that replaced the 61-year-old welfare program with a performance-based grant called Temporary Assistance for Needy Families (TANF). Though larded with harsh provisions aimed at legal immigrants (some of which the administration later killed), the new law essentially embraced the "work first" philosophy championed by PPI and tested in many states under a liberal federal waiver policy in the first half of the 1990s. TANF eliminated the individual entitlement to cash assistance, required most welfare recipients to work, and imposed a five-year time limit on receiving public assistance.

In combination with new public supports for work, especially the 1993 expansion of the Earned Income Tax Credit (EITC), and (until 2001) a strong economy, the work-based approach has surpassed just about everyone's expectations. Welfare caseloads have fallen by 57 percent since 1996, and the percentage of Americans on public assistance today -- about 2.1 percent -- is at its lowest since 1964. The percentage of working recipients is also at its highest ever -- at about 33 percent -- and two-thirds of those who've left welfare since 1996 are holding down jobs.

The earnings and incomes of poor single mothers have also risen dramatically. The Urban Institute reports that since late 1996 the wages earned by the bottom quarter of employed single mothers have risen by more than 17 percent. Census figures show that for the two million single-mother families with incomes between $13,000 and $21,000, earnings increased from $4,900 in 1993 to $11,700 in 2000. Total income for this group rose by more than $4,000. In short, millions of low-income families have exchanged dependence on government for the dignity of work.

Many analysts caution against declaring welfare reform an unqualified success. With the economy in recession, they warn, the movement of people from the dole to payrolls could be reversed. Some believe that the people who remain on the welfare rolls are beset by personal problems that make them harder to employ than those who have left. Conservatives worry that we've made little progress toward achieving a key TANF goal: promoting marriage. And liberals who opposed the 1996 law now fret that the number of people receiving food stamps and Medicaid health coverage has declined. Nonetheless, few are calling outright for undoing the 1996 reform and returning to the old entitlement.

In one respect, moreover, welfare reform already has been an unambiguous success: It has generated tremendous public sympathy for the working poor and largely erased the stigma on social spending. The anti-welfare passions of the past have yielded to a new public consensus for helping families struggling to work and achieve self-sufficiency. For example, a recent survey by Hart Research found that 71 percent of Democrats and 63 percent of Republicans say it is very important for President Bush and Congress to "[do] more to help those trying to work their way off welfare." In fact, voters rank this priority among their top five concerns, along with "providing greater help to the working poor," which 61 percent of voters found very important.

These sentiments have been backed by public action: From 1993 to 1997, federal spending on low-income families increased by $74 billion, and many states have increased their child care and other supports for the working poor.

The political significance of this shift is enormous. For decades, advocates for helping the poor have been on the defensive as the welfare rolls exploded, a new "right" to unconditional public assistance was proclaimed, and the problems of family breakdown and long-term welfare dependence grew worse. Now that social policy has been realigned with the values of work and mutual responsibility, advocates of a more progressive and generous approach can seize the initiative.

This year's reauthorization of TANF (along with food stamps and the federal child care subsidy program) presents an opportunity to complete the social policy revolution begun in 1996. First, we need to reaffirm the law's central insight that work and moral reciprocity -- the willingness to contribute to the common pot and give something back -- is the basis of a progressive social compact that can both empower the poor and sustain public support for effective public policies. Moreover, we must extend this new social contract to men as well as to women.

Second, we need to make support for low-wage workers the central organizing principle of America's 21st century social policy. This entails rethinking not just welfare, but the whole array of federal social programs to ensure that they provide low-wage working families with the essential building blocks of a decent life: housing, child care, health insurance, access to jobs, and income supplements to reward work. In this way, we can help working families lift themselves out of poverty. We should make this simple but powerful proposition the touchstone of America's new social policy: No American family with a full-time worker should live in poverty.

Third, we need to redouble promising efforts to reduce teenage pregnancies and out-of-wedlock births. Premature childbearing outside of marriage is the "feeder system" for welfare dependency and is the biggest contributor to child poverty. A key lesson of welfare reform is that public policy can send important cultural signals that reinforce responsible behavior, as the success of welfare reform's central message -- "work first" -- has demonstrated. We must now work to achieve the same progress on a new front: The imperative of reducing out of-wedlock births should be a pivotal message in TANF reauthorization.

With these immediate and longer-term goals in mind, PPI recommends the following progressive strategy for the second act of welfare reform:

Principle One: Focus on "Work First"

Congress should resist attempts to relax TANF's time limits and work requirements. Lawmakers should be skeptical of proposals -- often from groups that opposed welfare reform in the first place -- to "stop the clock," expand exemptions to federal time limits, substitute education and training for work, or otherwise weaken the new emphasis on work. Reauthorization is an opportunity for Washington to raise, not lower, the bar. That means giving the states more ambitious work and job retention goals while also increasing financial incentives and rewards for those who succeed.

PPI Recommendations:

• Maintain time limits, raise work participation rate requirements, and eliminate the caseload reduction credit.
• Fund transitional jobs programs for "hard-to-serve" recipients.
• Double funding for high-performance bonuses rewarding states for their progress on job placement, retention, and advancement.

Principle Two: Preserve TANF Funding

Congress must not use shrunken welfare rolls as an excuse to cut TANF funding. As the economy sours, increasingly strapped states will likely find it harder to place people in jobs, especially hard-core welfare recipients with multiple barriers to employment. These recipients will need more intensive and expensive services -- such as transitional community service jobs -- to move in stages toward independence. Moreover, as more young mothers work, states need to spend more on child care and other work supports, even as they spend less on cash assistance. We can't end welfare on the cheap.

PPI Recommendations:

• Maintain the TANF block grant at its current level.
• Maintain state maintenance-of-effort (MOE) requirements at their current levels.

Principle Three: Put Dads to Work

The first round of welfare reform required single mothers to work; the next must extend that basic social obligation to the men who father their children. So another important reason to preserve TANF funding is to ensure that states can bring "deadbroke dads" into their new job placement and support systems, as well as fund proven efforts that promote responsible fatherhood.

PPI Recommendations:

• Help low-income fathers find jobs by extending them full access to TANF employment services, job training, and work supports.
• Eliminate barriers to TANF participation by low-income men, such as separate work requirements for two-parent families.
• Toughen child support enforcement and encourage full pass-through of all collections.
• Fund effective "responsible fatherhood" programs.
• Eliminate the EITC's marriage penalty.

Principle Four: Combat Teen Pregnancy and Reduce Out-of-Wedlock Births

Bearing a child out of wedlock can irreparably damage the prospects of young mothers and their children, who are five times more likely to live in poverty than children in married, two-parent homes. Reducing out-of-wedlock births is therefore critical to ending the generational cycles of poverty that perpetuate dependence.

PPI Recommendations:

• Fund effective programs to reduce out-of-wedlock births, especially among teens.
• Reform the "illegitimacy bonus" to better reward states for their efforts to combat teen pregnancy and out-of-wedlock childbearing.
• Support community-based efforts aimed at ending the glamorization of teen pregnancy and single parenthood in popular culture and by the entertainment industry.

Principle Five: Expand Key Supports for Low-Wage Workers.

Too many working-poor families lack adequate child care, housing, transportation, and health insurance. Congress should invest more in these key components of a comprehensive system of public supports for working families. It's time for another expansion of the Earned Income Tax Credit, which directly rewards work and has become America's biggest and most effective anti-poverty program. Congress should also undo remaining provisions of the 1996 law aimed at denying access to work supports for legal immigrants.

PPI Recommendations:

• Increase funding for the Child Care Development Block Grant.
• Cover the uninsured.
• Expand the EITC.
• Fund transportation initiatives such as Access to Jobs and Reverse Commute.
• Boost the number of available Section 8 housing vouchers.
• Pass the Savings for Working Families Act to support large-scale expansion of individual development accounts (IDAs), which provide matched savings to poor families.
• Restore benefits to legal immigrants.

Principle Six: Reward States for Promoting Work and Reducing Poverty

While maintaining pressure on the states to move people from welfare to work, the renewed TANF should also encourage them to help families move up the job and income ladder. PPI proposes a new poverty reduction bonus, keyed to state action to improve the work supports and earnings of low-income families. This should not be confused with liberal proposals for a child poverty reduction bonus, which ignore the reality that the best way to help children is not to create new handouts but rather to support their parents' efforts to work and increase their income. A worker-based poverty reduction bonus would reinforce the shift in U.S. social policy from the dependent poor to the working poor, from income maintenance to upward mobility for those stuck in the low end of the labor market.

PPI Recommendations:

• Create a meaningful poverty reduction bonus that:
  • focuses on reductions in poverty for working families, not children;
  
  
  • credits state spending on anti-poverty programs;
  
  
  • requires states to compete against their own past performance; and
    
  • is generously funded.
• Include poverty reduction as a stated purpose of TANF.

Principle Seven: Break Down Bureaucratic Barriers

TANF is a performance-based grant that sets national goals but gives the states wide latitude in reaching them. Congress should consider applying the TANF model elsewhere, merging other means-tested anti-poverty programs into broad funding streams that free states from federal micromanagement while holding them strictly accountable for performance. It's also time to modernize old "safety net" programs like food stamps, which were designed to supplement the welfare system, and to reorient them around the needs of low-wage workers and their families.

PPI Recommendations:

• Consolidate redundant programs and funding streams, encourage inter-agency coordination, and streamline access to programs.
• Support the creation of "one stop" job centers using both TANF and Workforce Investment Act funding.
• Improve performance by implementing national, interagency performance measures, requiring rigorous evaluation of new programs, and improving information gathering on best practices.
• Tighten reporting requirements on TANF spending.
• Modernize food stamps.

Principle Eight: Encourage Public-Private Partnerships

Government can and should do more to harness the talents of the private and civic sectors in empowering the working poor. Already, businesses like America Works and Maximus that help welfare recipients find and keep jobs are generating cost-saving innovations and injecting competition into social service delivery. And while established religious charities have long played a vital role in delivering social services, Congress should also encourage smaller congregations and community organizations to get involved in welfare-to-work, child care, teen pregnancy prevention, responsible fatherhood projects, and other efforts to break the cycle of poverty. Performance-based contracts, rigorous evaluation of new programs, national outcome measures, and improvements in information gathering can help create a competitive market for social service delivery that taps the best of all three sectors: government, business, and community.

PPI Recommendations:

• Inject choice and competition into the delivery of social services by encouraging the participation of a wide array of private actors.
• Encourage the use of "pay for performance" contracts.

Blueprint Keywords: Extra EITC Extra Welfare

Will Marshall is president of the Progressive Policy Institute. Anne Kim is the director of the Progressive Policy Institutes Work, Family & Community Project.