The War on Poverty Begins with Jobs
Last week, the U.S. House of Representatives examined our country’s War on Poverty through committee hearings, opening the door to potentially overhauling the current welfare system. The hearings provided insightful answers on how to cut, amend, or replace the current mess of federal welfare programs that have had little positive impact on poverty rates. This post is the first in a three-part series highlighting the need to reform the nation’s welfare program, beginning with the establishment of a real method of testing effectiveness, and focusing on outcomes rather than just inputs.
The War on Poverty officially began forty-nine years ago when the poverty rate was at 19%. A half-century later, with over 60 social welfare programs funded by the federal government, countless of them duplicated at the state level, and $15 trillion poured into the system, the poverty rate today is 15.1% — a mere four percent improvement in almost five decades. Despite all the continued allocation of funds, why have these numbers barely budged?
The problem is that the current measurement of success – insofar as such a measure exists – centers on the amount of funding put into welfare programs, rather than the progress of those participating in them. During any given debate in Congress on the issue, the mere mention of cutting funding is a cause for hysterics. But the ultimate victory, as first envisioned by President Lyndon Johnson when he declared the War on Poverty, would logically be the total defunding of the welfare system once the issue of poverty is eliminated. In his 1964 State of the Union Address, he makes this clear: “Our aim is not only to relieve the symptom of poverty, but to cure it and, above all, to prevent it.”
A look at the chart below shows that a lack of funding is hardly the problem. This is why rigorous evaluations that measure a program’s outcome (both intended and unintended consequences) must be established. Outcome-based measurements that take into account a participant’s earnings, education gains, employment status, and the cost of operations are helpful in determining which programs are successful and which programs are not working. In doing so, the federal government would create powerful incentives for the various agencies to deliver results efficiently and effectively, with the overall goal of reducing the number of Americans living in poverty.
A great example of this is the reform undertaken in Wisconsin beginning in the late 1980s, when a mediocre system was eventually replaced with Welfare to Work (W-2). W-2 revolutionized the way the state government looked at assistance. Instead of granting benefits without looking at the results, Wisconsin made the mental shift from providing an assistance program to creating a jobs program. They established work requirements along with job training and benefits in the form of transportation and child care – all of which focused on the results obtained by the individual rather than simply giving them a check. Making this adjustment, Wisconsin was able to cut its number of welfare cases by 93% over the course of two decades. While their system is not perfect, it is a step in the right direction in that it was innovative and points to measurable successes, such as the decline of caseloads. Rather than follow this lead, President Obama’s approach has been to allow states to waive work requirements in a move some consider will undermine reform efforts.
Dramatically reducing poverty – and thereby restoring the American Dream – is one of the most important goals for which we can strive as a nation, and it is a goal that Washington should strive to achieve. But we don’t get there by throwing more money at the problem. We’ve tried that for nearly half a century and have failed to eliminate it. The focus of our welfare program must change. The next part in this series will build upon this and examine solutions that identify and eliminate perverse incentives by making a return to work the central focus of social welfare programs, rather than emphasizing benefits alone.