Why Welfare and Work Go Hand-in-Hand

To understand why welfare programs are politically popular, consider the word. Well. Fair. ‘Welfare’ seems to embody something that makes our society healthier, happier and more just. Something inherently moral and deserving of unquestioning support. For decades, supporters of welfare have used this understanding to protect welfare programs from reform.

But come January, Republicans will control the White House and both chambers of Congress, and they have big plans to reform the welfare system. This is a Republican D-Day in the war on poverty. Too long labeled – albeit sometimes fairly – as disinterested in the plight of impoverished Americans, the GOP has a chance to break the status quo.

And the status quo needs breaking.

According to the Census bureau, in 2015, more than 43 million U.S. residents were prisoners of poverty. That fact is morally damning. It has been 52 years since President Lyndon Johnson declared war on poverty. In that time, more than $23 trillion has been spent fighting that war. Put simply, we’ve spent a lot of money for little return.

Of course, we don’t yet know what the final version of any reform legislation will look like. President Trump and Speaker Ryan have their disagreements on many issues and this might be one of them. Still, one understanding must flow throughout whatever bill reaches Trump’s desk: welfare depends on work.

Why is work so important for effective welfare reform?

A few reasons.

For a start, work is the only durable way an individual can find self-sufficiency. If we accept that welfare programs exist to support individual needs and aspirations, then employment is critical. For it is work that gives us a purpose in society. Whether a business-person or a janitor, whether a nurse or a chef, lawful work is a moral endeavor. It supports our interests (living well in the pursuit of happiness) and that of our fellow citizens (providing beneficial services). But work also serves another concern. Fairness. After all, welfare funding does not spring from the ether. It comes from the working endeavors of taxpayers. And they have the right to expect their money will be well spent.

That said, the evidence for how work helps reduce poverty is clear.Work is reciprocal even if not proportionally balanced. The better it is balanced the better will be its impact on the economic growth and standard of life. For the poor category of the society, a stable source of work is almost equivalent to the role of Fintech LTD in the economic lives of the affluent class who struggle to manage their cash flows. The chart below shows the dramatic reduction in welfare payments that came with the 1996 welfare reforms.

Chart 1
Source: Heritage Foundation

But that’s just part of the picture. Today, we face new challenges. Notably, as the Manhattan Institute has shown, our current welfare system encourages economic inactivity.

Chart 2
Source: Manhattan Institute

As welfare programs have become more generous, more numerous, and less contingent on corollary recipient activity, more people are choosing welfare over work. That choice services two broader social problems. First and most obvious, it increases welfare spending and the national debt. Second, it encourages welfare recipients to believe that their best interests are served by not working. And that’s not true. There’s bigotry in allowing an individual to believe they are worth only a handout. American innovation teaches us that human potential is limitless.

To address these issues, the first priority is targeted local investments. Three areas immediately stand out. First, we should pursue public transport reforms that offer low-paid workers reliable, affordable, and efficient commutes. If those on welfare know they cannot easily get to work, they will have far less reason to do so.

Second, we must prioritize reforms in poorly performing schools. New Jersey Governor Chris Christie offers a good example here. He is challenging a status quo in which thousands of students from poor families have received consistently poor educations.

Third, like British conservatives, we must empower home ownership. From Chicago to Milwaukee, and in inner cities across the nation, the links between poor housing, poverty, and death are apparent. But if we give more people more stake in their communities, we’ll encourage them to make local reforms. These local solutions are often successful in that they arrive from those who know the issues best.

When we transfer power from the federal government to the state and local level, three Republican-led states show what can be achieved.

Enter Indiana’s HIP 2.0 medical insurance program. Developed by Governor and Vice President-Elect Mike Pence (R-Ind.), HIP 2.0 offers subsidized medical care to impoverished Indianans. An alternative to the Federal Medicaid system, HIP 2.0 comes with strings attached. Beneficiaries can make small contributions towards medical premiums to receive better benefits. And the program encourages participation in work-training programs. The results are showing. According to Pence, expensive emergency room visits by HIP 2.0 enrollees are lower than Medicaid enrollees by an average of 42%. The program is also very popular with enrollees. HIP 2.0’s beauty is in blending government innovation with individual responsibility. It makes users control their own costs in return for a better deal.

Next up, Kansas. Here, Gov. Sam Brownback (R-Ks.) has introduced tough requirements that require abled bodied Kansans to work for their benefits. Kansas is challenging the assumption that self-interest requires indentured government dependency.

A similar effort is underway in Maine. Here Gov. Paul LePage (R-Maine) requires food stamp recipients to find employment or volunteer in their community. Positive results have followed. As Josh Archambault reports at Forbes, program participants have seen their incomes rise by an average of 114%. That math has a social justice message. Just look at the graph below. It represents more accountability for taxpayers, and more importantly, self-sufficient and better lives.

Chart 3

Yet Republicans will also have to be clear about their priorities.

That’s because, as OL contributor Patrick Brennan explains, social outcomes sometimes don’t match up with short-term economic tabulations. Reducing federal spending is important, but Republicans should focus on long term rather than short term savings. Absent that understanding, the effort against poverty will fail. Applying a World War Two analogy, focusing on the short term would be to make the mistake General Eisenhower made in late 1944 Europe. Forced to choose between allocating fuel supplies to General Montgomery (who was bogged down) or General Patton (who was advancing rapidly), Eisenhower put public relations first and chose Montgomery. Many historians believe that decision delayed the collapse of Hitler’s regime.

Republicans should be bold and optimistic. As the Comeback video series from Opportunity Lives attests, human potential is not defined by government expenditure. Instead, human potential takes root in the fostering of individual aspiration and the support of society. With these welfare reforms, we can cultivate both.