The 1996 reform didn’t result in a reduction in total spending on welfare, now known as Temporary Assistance for Needy Families. Since 1998, the first year for which we have complete data, total TANF spending — both from federal block grants as well as required state matching funds — has remained essentially flat, after adjusting for inflation,1according to data from the Center on Budget and Policy Priorities, a left-leaning think tank that is critical of welfare reform. Per-person spending has fallen, however: In 2014 there were about 12 million more people below the poverty level than in 1998, according to the Census Bureau. The U.S. population has grown nearly 20 percent during that time.
Perhaps the more significant change, though, is in how that money is being spent. Welfare reform replaced the old, federally run cash assistance program with a system of state-administered block grants. Under TANF, states can spend welfare money on virtually any program aimed at one of four broad purposes: (1) assistance to needy families with children; (2) promoting job preparation and work; (3) preventing out-of-wedlock pregnancies; and (4) encouraging the formation of two-parent families.
Some states have interpreted those purposes — especially the last two categories — “very, very loosely,” said LaDonna Pavetti, a researcher at the Center on Budget and Policy Priorities. After-school programs to reduce teen pregnancy, for example, can be funded through TANF block grants.
The result has been a dramatic shift of resources away from cash assistance and toward spending on other programs. In 1998, nearly 60 percent of welfare spending was on cash benefits, categorized as “basic assistance.” By 2014, it was only about one-quarter of TANF spending. That shift has happened despite a burgeoning economics literature suggesting that direct cash transfers are in many cases the most efficient tool to fight poverty.
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