- The Washington Times - Tuesday, August 1, 2000

The facts are in: The welfare reform of 1996 has worked. Has it worked because of the work requirements? Partly, but not much. Has it worked because of the lifetime five-year limit for welfare? Not really. Is it because of the booming economy? Not at all.

Why then has it worked? It has worked because the reform turned incentives to the states on their heads.

From World War II until the mid-1990s, in every good economic year the nation's welfare rolls went up, instead of down. Why? It was because the 1935 Aid to Families With Dependent Children (AFDC) program was an open-ended entitlement program financed at least in half by the federal government, with the states determining the benefit levels and many eligibility requirements.

Federal money flowed automatically depending on individual state spending on AFDC. Therefore, in good economic years the states had more money to spend, so they simply made more people eligible for welfare and did nothing to move able-bodied families off the system. To do so would have been to lose federal money.

The result was the exploding welfare rolls of the 1960s, '70s and '80s. During this period, the nation's family welfare rolls went down only twice in 1974 and in 1982, both during major recessions. The 1974 reduction came about through the Reagan California welfare reform of 1971-72 followed by the New York reforms, which used the California model, and later by many other states that followed suit.

I was Ronald Reagan's welfare director while he was California governor, and we withstood slings and arrows charging that we were losing federal money. Our reply was that: No, we are saving federal money. Later, with Mr. Reagan's approval, I advised Gov. Nelson Rockefeller of New York, who took similar actions.

In 1973, I became U.S. commissioner of welfare and carried the California message to the other states. The result was the historic drop of the nation's AFDC rolls in 1974, the first time since the start of World War II.

The reduction of the rolls in 1982, another recession year, stemmed from President Reagan's comprehensive welfare reforms, which tightened eligibility requirements. In addition, the 1981 reforms permitted the states for the first time to require work for benefits. But few states took advantage of work requirements, since removing families from the rolls would result in a loss of federal money.

The perverse incentive, that the more a state spent the more federal money rolled in, remained. Consequently, the boom years of the '80s and early '90s saw an exponential growth in welfare rolls.

With new Reagan-style governors such as Tommy Thompson of Wisconsin determined to reduce their rolls and use the work requirements permitted in the Reagan reform of 1981, gains were made in the early '90s.

But the real revolution came with the election of 1994. All the big states, except Florida, had new Reagan-style Republican governors who would support reform, and, most important, Republicans controlled both the House and the Senate. Since President Clinton had made the end of welfare as we know it a mantra of his 1992 campaign, the new Congress could send him true welfare reform and test his promise.

The "Contract With America" welfare-reform plank consisted of many negative mandates that had been the staple of conservative welfare reform over the years because a Democratic Congress would never repeal the open-ended entitlement nature of AFDC. With the new Congress, I went to the leaders and urged them to add an outright repeal of the 60-year-old AFDC program and replace it with finite annual appropriations, or block grants. We would reverse the incentives. With the new program, a state that required work and removed non-needy families from the rolls would get to keep the federal money saved instead of losing it. This would prove to be a powerful incentive.

The work requirements in the legislation are very weak, but the states now have an incentive to use them. The same is true of the five-year limit on benefits. There are many loopholes to protect those families who through no fault of their own need more years.

The economy? Now that the states have a financial incentive to get able-bodied people off welfare, the good economy is being used to reduce the rolls instead of being used to increase the rolls, as in the past.

Welfare reform is a success because we reversed the incentives to the states. Congress should keep its promise to the states to continue the block grants at its capped funding for the first five years. We have stopped the uncontrolled growth in welfare spending. Let the states have their reward for doing a good job at welfare reform. If this promise is kept, the governors will be more apt to support capping and block granting other open-ended welfare-entitlement programs.

Robert B. Carleson is chairman of the American Civil Rights Union. He was principal adviser on welfare reform to Ronald Reagan while he was California governor and then president.

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