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The Real New Deal: Much has been written about the bill passed by Congress and signed into law by President Clinton in 1996 that ended welfare as we then knew it. A first round of coverage took seriously the possibility that the initiative would throw millions of vulnerable women and children to wolf-riddled streets; streets that critics such as the otherwise acute Senator Daniel Patrick Moynihan (D- N.Y.) charged would come to resemble those of Calcutta. When it became clear, however, that disaster was not imminent--that welfare reform was working out exceedingly well and humanely--reports and commentaries came to take two new routes, both of which continue. One tack consists of recitations and analyses of absolutely spectacular numbers, with perhaps the most unbelievable statistic to be found next door, in Wisconsin, where traditional welfare caseloads have fallen by 87 percent since 1993. No, that's not a misprint. The second stream of coverage has to do with the staying power of such numbers. What will happen, skeptics ask pointedly, when the next recession hits? What will come of people, still invariably on the edge, who will be fired first because they will have been hired last--and because the skills they bring to the table and workplace are so frequently weak? In particular, what will happen to all the single mothers and their children who will have used up their lifetime allotment of help under TANF (the Transitional Assistance for Needy Families program) the next time the economy sours? How will they cope? And how will states themselves cope, since TANF is not an entitlement, meaning that federal funding is not open-ended as was the case with its predecessor, AFDC7 These are all legitimate questions. But there is another line that has been pursued in public conversations hardly at all. It has to do with a pathbreaking commitment--one with which I concur for both pragmatic and moral reasons--that Washington and the states have made to low-income workers over the last decade or so. Namely. a belief that if a man or woman works. he or she should not he poor. As simple or uncontroversial as this rule may now sound, it would have sounded anything but that way not many years ago. This is the case insofar as assuring minimum incomes to millions of individuals (for that's what we're really talking about) runs counter to a roster of older and more deeply ingrained American principles about self-sufficiency, limited government, and the like. At the very least, this new understanding can be rightly read to suggest an enlargement, not a contraction, of the very welfare state that the "Personal Responsibility and Work Opportunity Reconciliation Act" three years ago was supposed to shrink. Specifically, what new and enlarged government supports am I talking about? What, precisely, have they added to the economic lives of lower-income workers? In an illuminating working paper, David Ellwood of Harvard's Kennedy School of Government estimates that while low-income working families were eligible for about $5 billion in public aid in the late 1980s (in constant 1996 dollars), by 1996, that number had risen to more than $50 billion. About half of that growth was attributable to "dramatic expansions" in the federal Earned Income Tax Credit (EITC), which is a refundable tax credit that can reach up to 40 percent of earnings for very low-income families. By 1996, Ellwood writes, "inflation-adjusted federal expenditures on the EITC alone exceeded the combined real state and federal benefit expenditures on AFDC benefits in any year." Then there is Medicaid, child care assistance, the Children's Health Insurance Program, the Rod Grams-sponsored child credit, and in at least 10 states (including Minnesota) local versions of the EITC. Not surprisingly. Ellwood writes, the decrease in welfare-type benefits and the increase in benefits for working families has "sharply altered the incentives for single parents to work." Translated, lots of former welfare recipients are now employed, often for the first time. For example, imagine an unmarried woman with two children taking a full-time job, in 1986, that paid $10,000 a year (again in 1996 dollars). Given the array of laws and programs (and, critically, give backs) at the time, she would have wound up only about $1,625 better off than if she had not gone to work at all. Jump ahead to 1996. This same woman's gain from taking a job paying $10,000 annually is now more than $6,700. An with her disposable income netting out at more than $14,000, she and her children are now above the poverty line. They aren't living luxuriously by any means, but they are measurably better off. Does this new thinking about public support of the most poorly paid Americans constitute an expansion of the welfare state (which is not to say "welfare" proper)? Yes, it unquestionably does. But I'm willing to accept this backtracking because we are obliged to recognize--if we are serious about celebrating work over dependence-- certain inescapable facts about the kinds of jobs routinely found at the bottom of the ladder. Facts such as very low pay, lack of health benefits, the absence of the kind of flexibility that middle-class employees with families, including child-care responsibilities, assume, etc. The choice, it seems to me, is clear and has been reinforced by what can only be described as breathtaking results all across the country: Far better to have government do what it's currently doing than almost anything akin to what it used to do (or chose not to do) in helping families build new lives for themselves. -- Mitchell B. Pearlstein is president of Center of the American Experiment, a conservative think tank in Minneapolis. |