Debating Welfare Reform: What's Happened? What's Next?

Transcript

MS. ISABEL SAWHILL: Good afternoon. I'm Belle Sawhill. I'm a co-director of a project here at Brookings, along with Kent Weaver and Ron Haskins, that we call "Welfare Reform and Beyond." And we're very pleased to be posting this debate on welfare reform, in partnership with the Casey Foundation. We want to thank them for all their efforts on behalf of this event, and Mike Laracy is here from Casey.

Some of you attended our launch event in January and I'm sure many of you also attended the event in early February sponsored by the Ford School at the University of Michigan. And you're probably beginning to feel like these conversations are getting somewhat incestuous and to add to that possible impression, you should know that two of today's debaters, Ron and Becky, are, of course, co-editors of a book that will be published by none other than the Brookings Institution in September and it's called the "New World of Welfare" and you can see more about it on both, I think, the Ford website and our website.

We think today's format is going to be particularly valuable though. It's going to really add to what we've already learned because it's going to hopefully sharpen some of the differences and point up where the disagreements exist, where, perhaps, more information or data could help to resolve an issue, and where, in the end, what we're talking about is different values or normative assumptions about welfare reform.

There are two questions on the table. The first is what's happened? Is welfare reform working? The second is what's next or how does the existing law need to be changed or supplemented? The debate is being webcast on the Internet and you can send in a question if you're watching it live to communications@brookings.edu and we'll try to include not only questions from the audience, but also questions that come in through the website if time permits. And we hope that since it is being webcast live, that those of you in the audience, when the time comes, will stand up, identify yourselves and speak into a microphone.

I now want to turn this over to the moderator of the debate, Bob Reischauer, a former senior fellow at Brookings to add to the incestuousness here. And now, of course, president of my former organization — the Urban Institute. And so, without further ado, Bob.

MR. ROBERT REISCHAUER: Thank you, Belle. Eighty years ago, people used to complain about interlocking directorships of corporations. And now it's the incestuous intermingling at think tanks. Is that progress? Yes. [Laughter]

The president signed the Welfare Reform Bill which had a catchy title of "The Personal Responsibilities and Work Opportunities Reconciliation Act" four years and six months ago. This legislation represented, really, the most profound change in the nation's welfare policy since the "Aid to Dependent Children" program was first enacted as part of the Social Security Act of 1935. This reform legislation ended the individual entitlement to benefits. It transformed an open-ended draw on the Federal Treasury into a block grant. It imposed federal work requirements and time limits on receipt of federal benefits, and called for strict sanctions for those who violated these limits. And it gave states greater flexibility to design different approaches to welfare.

There can be no question that welfare as we knew it has changed dramatically over the past four and a half years. In part, this is the result of the legislation. But it's also the result of a number of other factors. One was, of course, the proliferation of waivers that were granted by the Clinton administration which set off a wave of change and reform at the state level under the old program. In part, it's because we have had an exceptional economy over the course of the last six years. And in part, it's because of societal changes which we really don't fully understand at this point.

But the tangible evidence of the change is really everywhere. Welfare roles, as all of you know, are down by roughly half. The employment rate among the population that participates in welfare is up and earnings within this group are also up. The fraction of the welfare dollar that is now spent on supportive services, as opposed to cash assistance, is much higher. But probably most notable among all the changes is that welfare is no longer the polarizing, divisive issue that it had been for twenty-five years. The public is no longer obsessed or even particularly interested with the topic. And participants in the policy debate no longer snarl at each other, or question each other's motives, or accuse each other of using biased analysis. At least, that's what we hope will be the case.

The purpose of today's gathering — debate — is not really to re-fight the battles of yesteryear, but rather it's to look at the past and to ask what we can learn that might inform the decisions that we will have to make about the future of welfare — and we will have to make those decisions during the 107th Congress, during the next two years. Sometime this year, Congress and the president will have to make a decision on whether to extend the supplemental payments that are made to the states that had low benefit levels. A year and five months from now, Congress will have to reauthorize the fundamental legislation.

And so there really is a lot to consider and we have, fortunately, two impressive teams of experts to conduct this debate. I'm going to provide very brief introductions to them because they are individuals who are known to most of you and you have been active in this discussion over the course of the last decade.

First, to my right, on your left, is Bob Kuttner, a founder and author, a columnist, a teacher, and a former Hill staffer. Founder of American Prospect, which is a journal of liberal persuasion, as well as the Economic Policy Institute. Author of five books, the latest of which is "Everything for Sale." A columnist both for "Business Week" and for Boston Globe Syndicate and teacher at almost every university in the Boston area at one time or another.

Fred Barnes, to my far left, is an editor, a journalist, political reporter, TV host and commentator. Editor of the "Weekly Standard," another recent edition to the political discussion journals in this nation. From 1985-95, the senior editor and White House correspondent for the "New Republic." Host, along with Morton Kondracke of "Beltway Boys" on Fox News. And until recently, a regular on the CBS "This Morning" program, as well as The McLaughlin Group.

Becky Blank, to my right — dean, scholar, and former administration official. Dean of the Gerald Ford School for Public Policy at the University of Michigan. Scholar, professor both at the University of Michigan and previously at Northwestern University. And former administration official, in the sense that she was a member of the Council of Economic Advisers from 1997 to 1999.

Finally, Ron Haskins, instigator, scholar and former Hill staffer. Instigator of this debate and this event, a series of events, in his role as one of the co-directors of the Brookings Institution's "Welfare Reform and Beyond" initiative. Scholar, as a senior fellow here at Brookings and as a former research professor at the University of North Carolina where he was in developmental psychology and probably best known for his role as the staff director of the subcommittee of Ways and Means, out of which the welfare reform legislation sprang.

We have a very complex format here. It is going to start with brief, three-minute opening statements by each of the participants and I'm not sure what I have to enforce this time limit, but maybe water — I'll throw water on them. [Laughter] Following that, there will be some questions from me to the two groups. If they are well-behaved, I will allow them to ask each other a few questions, at which point we will go to the audience and to the web audience for their questions and we'll wrap it up with closing statements from each group.

So without further ado, let me turn this over for Bob Kuttner's three minutes.

MR. ROBERT KUTTNER: Thank you.

MR. REISCHAUER: The time is running.

MR. KUTTNER: Well, tight time limits are all too in keeping with our subject matter. When then candidate Bill Clinton pledged to end welfare as we know it, he also pledged that people who work hard and play by the rules should not have to be poor. And I think our argument is that we have within our reach the ability not just to end welfare as we know it, but to end poverty as we know it — to fulfill, to borrow a phrase from Arlie Hershel, what is an incomplete or stalled revolution, to fulfill the rest of a social contract which, in my view, goes something like this: Everybody who is able to work ought to work. Jobs ought to be available for everybody who needs a job that pay a living wage. People should have the opportunity to move up from minimum wage jobs and people should not have to choose between their job and their children.

Welfare reform as it currently exists has, unfortunately, carried out only part of this agenda. We have shown that in a full-employment economy if you tighten the screws, it's possible to kick a lot of people off welfare. It's even possible for a majority of them to improve their economic condition, but 30-40 percent of them are probably worse off. When you add the cost of child care and transportation and being ready for work, when you take into account the fact, as a classic piece of research by Kathy Eden showed, that a lot of welfare mothers were working under the table because that's what it took to live — when you add that to the fact that rents are way up, especially for poor people in a full-employment economy, that a lot of children are being cared for in catch as catch can arrangements, there's no doubt that some people are worse off.

We also know that many, if not most local welfare offices have not yet changed their mentality and mission from one of how do we make people jump through hoops, how do we make sure that people are not fraudulently qualifying for welfare, to one of how do we make sure the people get the support to enable them to succeed at work? We published a wonderful article on this by Martha Myers in our special issue of "The American Prospect" on making work pay, based on site visits.

Too many welfare offices don't go the extra mile to make sure that people do get the child care, the Medicaid, the food stamps, the educational benefit that at least some states offer them and I think that Congress intended to be part of the entire package — not just to force people into work, but to enable them to succeed at work.

The tragedy, it seems to me, is that this social compact of ending poverty as we know it, of seeing welfare reform not just as a policy to kick people off of public assistance, but to reward work, is within our grasp. Particularly at a time when Congress and the White House are fighting about whether to give back a trillion or two trillion dollars in surpluses. For a lot less money than that, we could give the working poor the supports that they need to succeed at work so that they don't have to choose between success at work and their own children and so that the next generation is not locked into a cycle of poverty.

If we are going to go beyond the idea of saving the public fist money and enable young people, particularly young men, to be marriageable material for the next generation of young women and break this cycle once and for all, we need to realize that there's a difference between social income that goes to subsidize idleness and social income that goes to subsidize the thriving of the next generation and the ability of working people to succeed a work.

There ought to be a liberal-conservative consensus. Liberals ought to admit, as we have done for 20 years, that there was something wrong with the old system. Conservatives ought to admit that if the system is a little more flexible, a little less punitive, and a little bit more towards gearing — geared towards helping people succeed, we can have a program that doesn't just end welfare, but that ends poverty.

MR. REISCHAUER: Thank you. Fred?

MR. BARNES: Well, I thought we were talking about welfare reform and not ending poverty —

MR. KUTTNER: I rest my case. [Laughter]

MR. BARNES: — but the two — there certainly is a link. And a lot of poverty has been ended already. But let me — I want to review the welfare reform of '96 for just a moment, anyway. I think it historically will go down as the greatest achievement of the Clinton-Gingrich era. Certainly, it's the greatest thing the Republican Congress did. And many of you all will forget that it was in the Contract for America in 1994 that Republicans campaigned on and then surprisingly actually passed it three times and then the third time President Clinton signed it. Now, he, of course, played a big role in this. He had, as Bob said, campaigned on ending welfare as we know it and, indeed, he achieved that. And a number of liberal intellectuals had a great deal to do with it, as well. Paving the way. I think particularly of my friend Mickey Kaus of the New Republic, or then of the New Republic, who's written about this subject a lot and certainly changed my thinking on it some.

Welfare reform has been a stupendous success, I would say, already. Even in ways — in areas where it wasn't expecting to be a success. It's passed the money test and Ron knows more of the numbers on this, but the people who have gotten off welfare and gotten jobs make considerably more income than they did when they were on welfare. The caseload, as Bob said, has been cut in half. We see the beginnings of the end of the culture of poverty that has been so harmful in so many urban areas, in particular, in the country, creating that controversial word, even — "underclass." And to the extent that there was an underclass, welfare may not have created it, but it certainly sustained it.

We have seen work enhanced, as it should be in America, and we've seen the debate change. Now it's changed from — the debate just here — the debate on reforming welfare to ending poverty, which is of course something that was never promised in 1996 in welfare reform.

Now, there were many critics of the Welfare Reform Bill of 1996 and to my knowledge, anyway, I haven't heard too many apologize for the things they said about it. That it would — and I think it was Senator Moynihan who said families would be sleeping on grates. Others said one million children would be thrown into poverty. There was going to be a race to the bottom among states to provide as little as possible in welfare so welfare recipients would go to other states. There wouldn't be enough jobs to hire people who were coming off welfare, and besides, the people coming off welfare were ones who had so many needs and so many problems that they were just not employable. They wouldn't take jobs. They couldn't work. All of those proved to be untrue.

Now, I think there is a pretty simple formula for getting along in America, in our society. And the formula is simply three things: stay in school, at least through high school, get married and stay married, and get a job and hold it. Those are the things you need to do and you'll do okay. Staying off drugs would help, as well. My own personal feeling is that if you are a religious person, that helps. But the government doesn't have a role in promoting that.

But work is critical in this whole thing. And welfare reform has had a lot to do with it. If you don't work, you're not a full member of society, of American society, the way it's set up. You need to pay taxes, obey the law, and work. And if you work, you can hold your head high in society in a way you couldn't otherwise. It provides social equality. If you work, you're the equal of Donald Trump. In fact, you may be more than equal to Donald Trump in many ways.

And one of the things that has been achieved by the Welfare Reform Bill is that it has created a bit of a social transformation in the United States where work is honored more now than it was and — and I don't mean this in a mean or cruel sense, but non-work is dishonored, as it should be.

Now, the things that need to be done next are much smaller than what's already been done, because the big things have been done — disentitling welfare and setting limits on how long people can stay on welfare. The big issue is what happens to people when they actually hit the limit, they don't have a job, but they have to drop off welfare? What should states do? Mickey Kaus outlines in article which I believe is coming out in the magazine on the three options. One is states can use the 20% loopholing and just keep people on welfare or they can cut people from welfare or put them on workfare. Now, workfare seems to me to be the best thing to do. It's a government job, but it is a job and will require people to show up — they will have to show up for a government job that perhaps pays a sub-minimum wage. They'd certainly want to go out and find a job in the regular economy.

And lastly, marriage. One of the things that welfare, and particularly AFDC dishonored was marriage. We know that a two-parent family is by every empirical measure I've seen the best for raising children and keeping them out of poverty. Whatever can be done, starting with getting the marriage penalty out of the earned income tax credit should be done in changing welfare in order to promote marriage. Thanks.

MR. REISCHAUER: Thank you.

MS. REBECCA BLANK: Welfare reform has lived a charmed life. It got lucky. It got lucky in a number of ways. We passed welfare reform just as this economy went into the longest and strongest economic boom in American history and that mattered for how people view the last four years of history. Welfare reform also got passed just as we were implementing a variety of measures, most of them pushed by the Clinton administration to expand the minimum wage and to expand the earned income tax credit. Those sorts of work supports reinforced the message of welfare, which is that we're cutting back your public assistance at the same time we're expanding your work supports, at the same time as there are more jobs available and rising wages for less skilled workers. And all of that produced these amazing effects of falling case loads, increasing labor force participation and declining poverty.

I should note that a substantial minority of low-skilled women appear to be worse off, even in the midst of this economic boom, and that's something to be concerned about. But it is true that the average less-skilled woman does seem to be better off. The question, of course, is how you interpret all of that and what it means and whether you can ascribe it to welfare reform. And there clearly is a good amount of this that is ascribable to welfare reform, but there's also a good amount of it that's ascribable to the other policies that have been put into place and to the strong economy.

As we look ahead towards what's happening with the Welfare Reform Reauthorization and what the debates are going to be, I think there are a number of issues to keep in mind in places where the current legislation needs to be either fundamentally rethought or changed in the margins.

Comment number one. This is a change that doesn't need to be made, but a number of people, particularly those of the more conservative persuasion, will try to make it. We should not cut the funds that are available currently from the federal government to the states through the PERORA block grant to run public assistance programs. And the reason we shouldn't cut that is most states these days are not using that cash to provide cash benefits. The bulk of that cash is going to provide work supports. And if we're serious about running a work-oriented welfare system within this country, we have to continue to provide states with the income to run serious work programs. In some cases, it may be more expensive to run those programs than it is just to give people cash support. But the grant itself should not be cut in the authorization phase.

Secondly, this legislation needs to provide much better for what is surely going to be at some point a coming economic downturn. We can all debate over whether we're in it or not. Economists are currently having that debate. But the legislation wasn't designed well for a cyclical economy. It sends a lump sum of money to the states that doesn't vary over time, even though need does vary with economic cycles.

There are a variety of ways to deal with that. There's a very inadequate contingency fund that needs to be potentially improved. I, myself, would like to see the amount of money in this block grant vary with unemployment rates by state or in some way respond to the economy.

We also need to do some things to change our unemployment insurance system to make it more worker-friendly for low-wage workers. We also need to worry about giving states the incentive to run serious public sector employment programs when the private sector jobs slow down and become less available. So we need to do some things and this reauthorization round offers us the opportunity to be more serious about some of the cyclical problems that are embedded within welfare programs.

Thirdly, we need to maintain the income tax credit and we need to maintain the real value of the minimum wage. And that is an ongoing issue that's going to be fought not just around the authorization, but on throughout this Congress.

Fourthly, we need to do a better job with child care. Both are true. We are spending more money now by orders of magnitude on supporting child care in this country than we have at any point in our past history. It is also true that we're not spending enough money and paying enough attention to that problem, that far too many women have difficulty finding care, have difficulty finding the quality of care where they want to leave their children, or simply have difficulty even getting the subsidies that are out there. And there's a whole unfinished agenda on the child care front that we need to work on.

Fifthly, we need to make food stamps and public health insurance usable by working poor families. Many, many families, as they leave welfare, are still eligible for food stamps, are still eligible for Medicaid and are not receiving?or their children are not receiving it, because these programs are not well designed to serve working low-income families who aren't tied into the public assistance system in other ways. And there's a whole agenda around that that we can come back and discuss later.

I don't know what number I'm on — seventhly?

MR. REISCHAUER: Sixth.

MS. BLANK: Sixthly, thank you.

MR. REISCHAUER: The last one. [Laughter]

MS. BLANK: Sixthly. No, I'm going to make two more comments and I'll speak fast. We've got to deal with those who are most disadvantaged. And those are the people who face multiple barriers out in the work force and recognize that not everyone can be off public assistance in five years. Which leads directly into my last point, which is that we have to encourage those who are trying to leave. And in part that means that some of the more punitive aspects of this legislation — time limits and hard lifetime sanctions — just make no sense whatsoever. For a certain share of the population that may be able to work some, work part-time, but who are not going to be economically self-sufficient within a short period of time.

Those things that looked like tough love in a strong economy have the potential in a weaker economy, which I fear is coming, to look much more punitive and much more counter-productive. Low-income women, and particularly those who are raising children, need to have a helping hand and not an iron fist. And the current legislation needs a lot of changes. In some cases, it goes way too far with time limits and sanctions, in some cases it doesn't go far enough in terms of being more counter-cyclical, providing more support for working poor families. And this is an opportunity to make some of those changes.

MR. REISCHAUER: Thank you. Ron?

MR. RON HASKINS: After those three presentations, you might wonder what's left for me to say and so do I. [Laughter] Fred and I are conservatives and as befits conservatives, we like to live in the past. So I would like to remind this audience and our friends on the other side that liberals controlled American social policy for generations up until 1995. And as a result of that control, we wound up with a blizzard of social programs and huge increases in spending on the order of a factor of five, comparing the mid-1960s when we spent about 50 billion on social programs, compared with '95 on the eve of the welfare reform when we spent about 350 billion dollars in constant dollars on social programs.

And what did we get for this spending? The first thing that we got was an entitlement system, the heart of which was Medicaid, food stamps and cash welfare that guaranteed benefits to people who followed two rules: don't get married and don't get a job. And they were guaranteed benefits and we had a life and death struggle in the Congress of the United States to try to end just one of those entitlements.

Did the system have any impact on poverty? The answer is clearly no. Poverty in the mid-1960s hovered around 12%, in the mid-1990s, in the middle of an expansion, it hovered around 14%. So if anything, poverty expanded slightly.

And what about non-marital births? The engine that drives this whole problem. In the mid-1960s, they were about eight percent of all births. By the mid-1990s, they were 33% of all births. And for black citizens, it was a complete disaster — non-marital births rose from the mid-twenties to almost seventy percent.

Now, to be fair, this expansion of spending on these programs was often passed on a bipartisan basis. When it came time to change it in 1995, and we passed what I think would be considered by historians the Clinton-Republican Welfare Reform Bill, the system was dramatically changed. Bob has already mentioned these, it's worth bearing in mind, the most basic change of all, as Senator Moynihan knew well, was ending the entitlement. Because the concept was people must be responsible for their behavior. If you guarantee them a package of benefits worth $12,000, you're not going to make much progress when you say to them "you must work in order to get benefits."

A block grant that no longer gave open-ended funding, it gave the states motivation to help people get off the rolls and they could keep the change. Strong work requirements on both states and individuals, backed up by sanctions on both states and individuals that have actually been imposed. None of the false kind of sanctions and work requirements that we'd had in previous law.

And finally, to cement the message that Becky is particularly distraught about, a five-year time limit, change the name of AFDC to "Temporary Assistance" to send a very clear message that people were expected to leave welfare, not to make a lifetime on welfare.

And results, again, I think there is very little disagreement, the rolls have plummeted, work has increased dramatically, particularly among never married mothers, precisely the mothers that most people thought were incapable of supporting themselves and their children, poverty has fallen dramatically, particularly black child poverty, which is now at its lowest level ever and in two of the last three years has declined more than any previous year and we are now beginning to find that under some circumstances, there are actually positive effects on school-aged children.

So, the dramatic changes in the system, moving away from the kind of gift-giving that liberal social policy wanted has really produced changes that have brought us to the point where we are now where we can make true progress in social equality and I want to emphasize the past because I am afraid in this reauthorization debate that we will have a retrograde debate and talk about going back on some of the strong provisions that we have put in this welfare reform bill. The timing should not be a problem. The work participation should not be a problem. And as we get into this debate, I'm sure that we'll see big differences between the two sides on these major issues. What works is work.

MR. REISCHAUER: Thank you. Let the record show that lacking effective sanctions, each one of the speakers exceeded the three-minute time limit. [Laughter] I'm going to ask the liberal side to choose one dimension each which they regard this welfare reform experiment as being a success on. And ask the conservative side their choice — choices for a dimension upon which it has been the greatest failure.

MR. KUTTNER: Well, I think a handful of states, such as Washington state and Vermont and in some respects, Wisconsin, have seen this program as an opportunity not just to cut the rolls, but to help people succeed at work. Not just to divert the federal grant money into other fiscal savings, but to reward work and to understand what it's like for often a single mother with more than one child to not just work intermittently, but to improve her livelihood by working.

And that means career ladder programs, that means pre-employment programs. Above all, it means child care programs. It means making sure that working people at the low end of the labor market get other benefits that were designed into the program to help them not just punch a time clock but to stay in paid work and succeed at it and to be rewarded for it.

I wish there were more states like this, but it does show that given adequate resources and given compassionate policy, that's not just punitive, you can take the PERORA framework and use it not just to cut the rolls, but to improve people's lives. The question is whether states need to be rewarded not just for cutting the roles, but for effectively supporting work.

MR. BARNES: Look, I would say, and I don't know whether Ron would agree on this, he can pick another one, I would say that the failure of the bill that I think is the most harmful is its failure to promote marriage and reduce out-of-wedlock births, which, as Ron says, is really the core of the welfare problem in the first place.

Now, I say that knowing that I don't have a whole lot of things to offer. Maybe Ron does — I hope he does — to offer that would improve welfare in order to promote marriage.

MR. REISCHAUER: Becky?

MS. BLANK: Yeah, can I respond to that one? That's the funny thing about this bill that any states that want to adopt various strong promotional pro-marriage-type legislation can, because there's much greater discretion at the state level.

MR. BARNES: Yeah, but they haven't.

MS. BLANK: Most states have chosen not to do that and the reason why is very important. They haven't a clue what to do. We do not have policies that are well-designed and proven effective to substantially improve marriage or substantially reduce teen childbearing. And as a result, states, given a choice between doing something effective, i.e., trying to support women to get into work, as opposed to spending on money on programs that don't work, have chosen to help women into work. If we simply try to strengthen the mandates on states around marriage and teen childbearing, we're asking them to waste their money.

MR. REISCHAUER: You were supposed to say something about the success, but that's all right.

MR. HASKINS: I want to disagree on marriage. I do think that marriage is one of the major — wait a minute, let me finish here. I do think marriage was one of the goals of the bill. It's mentioned specifically in the beginning of the bill and three of the four purposes mention some family composition measure. So it clearly was a major focus of the bill. And it is a disappointment that states have not done more. Becky may be right, but I don't think she's necessarily right.

For example, we now know, as a result of excellent research being conducted around the country, that half of parents who have children outside of marriage, are co-habiting at the time of the birth. And we know that an additional thirty percent, bringing the total to eighty percent, say that they hope they're in the midst of a long-term relationship and they even mention the word "marriage."

So there are opportunities there. If we could discover programs that would focus on these young couples at that time, perhaps faith-based programs that would encourage marriage and if we could make some changes in law that I think we all would agree with, for example, in earned income tax credit and the marriage penalty and earned income tax credit and make it more financially advantageous, as well, to get married, which it already is to some degree, that make it even more so, I think we could have an impact on marriage. It is a great disappointment that the states have not done more about marriage, which in itself would address too many births outside marriage.

MR. KUTTNER: I have the answer. If you want to take the 17-year old boys who are fathering children out of wedlock who Bill Wilson says are not eligible marriage material for young women because they have no way of making a living, start with them when they're two years old, start with early childhood enrichment programs, have day care so that their mothers who are being forced by circumstances to work don't abandon them so they fall to the streets. And maybe — maybe — despite all of the odds against it, if you work with them when they're young, they'll grow up to be marriageable young men.

MR. REISCHAUER: Let me ask Ron a question. There were — was, you mentioned, I think, fear that there would be a race to the bottom, that states would compete with each other to lower benefits so as to be not attractive to welfare folks and people looking at the evidence suggest that that hasn't occurred. If you look across the states at the variations not in the benefit levels and what's happened to benefit levels, but the variation in time limits, work requirements, supplemental services, ability to get an education while you're on, hasn't there been a tremendous variation in that, that looked at in a more sophisticated way, might be interpreted as a "race to the bottom?" Or a pulling apart of welfare opportunities available in the various states?

MR. HASKINS: I thought that I had looked at the outcome data on welfare even by states in just about every way you could. But I confess that I have not examined the data with that idea in mind. It may be true. Certainly, when you give states the kind of flexibility that we gave states, you can expect huge differences across the states. There are certain commonalities across the states. There's a lot of commonality in the way they change the programs at the local level. But there is tremendous variation across the states. That's to be expected. There are tremendous differences across the states. That also is to be expected. And we did very little in the bill to try to correct those inequities in federal support across the states.

Now, the VIPC and food stamps, to some degree, makes up for that and a few other federal programs, as well. But I am not aware that this would qualify at all as a race to the bottom. I don't think most rational people who have examined the evidence would conclude that there's anything like a race to the bottom.

MS. BLANK: The race to the bottom literature tends to assume that there's like a single dimension here along with states that are competing and it tends to be benefit levels. And in the old AFDC program, that's what we focused on because that was the main distinction across states.

In the last five years, we've gone into a period of enormous flux and change, so that there is now a large number of dimensions along which states vary. In fact, benefit levels are probably the least important attribute in many states as to how they're running their program. What matters is how do they implement their sanctions, what sort of welfare-to-work programs do they have? What type of diversion programs do they have? What type of work support programs do they have?

And in a period of the rapid change that we've seen, I, who study this regularly, have difficulty characterizing states in any simple, linear way as "more generous" or "less generous." You know, there's some you can sort of put in one category and some in another. The fact that people who are on the ground — lower-income families haven't been able, necessarily, to make those distinctions, and you haven't seen large migration as a result, or any of these "race to the bottom" effects, I think, reflects the complexity of the world that we're in, as well as just the enormous kind of change. It is possible over time that particularly in a few areas, such as one or two states that offer much better medical benefits for certain types of families, that you might indeed start seeing migration and some of these effects.

MR. REISCHAUER: Let me ask this side here to talk a little bit about collateral damage, which we haven't really heard much of. Food stamps and Medicaid enrollment went down to a surprising degree, unexpected by most analysts because people leaving welfare didn't continue with other benefits that they were eligible for.

Was this a flaw in the program? Could the administration have done something to counteract this? What should be done in the future on that?

MS. BLANK: The food stamp and the Medicaid program for mothers with kids were basically programs you got into once you're on welfare, okay? And what happened, of course, is we removed AFDC. We took that entry program out, and these other programs were left dangling, and it shouldn't have been any surprise that, as a result, an awful lot of people left those programs too.

The food stamp program, historically, has not been well set up to serve working low income families who are not on other forms of public assistance. They have all these crazy rules, like you have to show up once a month if you're working to recertify yourself and spend the time waiting around the office. It's hard to go to work and do that at the same time. These offices are not open on weekends. They're not open in the evening. They don't have child care.

So there's a variety of problems with the food stamp program. Some of those are being remedied. There's a large number of possibilities here that need to be under discussion for improving services of food stamps, particularly to the working poor families.

Medicaid programs. We have expanded their availability to children, but then not advertised this as effectively as possible. The CHIP program, the child health insurance expansions have, over the last year or so, improved the number of children who have access to Medicaid who are actually using it. But with the large number of people leaving old AFDC now, without TANF, health insurance among adults and low income working families have fallen and remains very, very low. And there's a real leap, a completely unfinished agenda here, which I think some states are just beginning to grope towards the answer for as to how do you cover people who are not going to get health insurance through their low wage work and who are no longer eligible for Medicaid. And that's a complete policy issue that's going to keep staring us in the face.

MR. HASKINS: I think a major point that you passed over lightly that I would like to emphasize is that the states have started to work very hard on this problem. The Ways and Means Subcommittee on Human Resources last year had a hearing about Medicaid, and the committee had no trouble finding three states — Florida, Oklahoma and Ohio — whose numbers had done just what Bob mentioned. They had gone down like this for children. And they instituted strong administrative procedures, no changes in federal or state statutes, just changes in procedures, make it easier to apply. In Florida, for example, they made it possible to apply and to maintain your eligibility; you never have to visit an office, and their numbers went right back up.

So the states are already doing something about this. Maybe we should do something in legislation to encourage that. But I think the states are already showing that they, too, are concerned about it.

Second point. I don't think we should lose sight of the fact that both of these programs, but particularly food stamps, are stigmatized. That is not a bad thing. It is good for stigma to apply to welfare programs. Many people are conflicted over this. On the one hand, they want stigma because they want people to do everything they can to get off welfare and to earn their own money. On the other hand, even conservatives are attracted to the point that Mr. Kuttner made, which is that we have built a work support system that does provide very substantial benefits to working families to take them out of poverty and to bring them up to the area of 16 or 17 or, in some cases, $18.000 in income. And you can't do that unless people get their Medicaid, and especially their food stamps.

So I think that we should do everything we could to make eligibility possible. But we should recognize that some people deliberately do not want these programs because of the stigma.

MR. REISCHAUER: Fred?

Q: A lot of you have mentioned that states are handling this in very different ways. There's a lot of variation across the states. The question is, have we learned anything about what works? And to the extent we have, when we reauthorize this legislation, should we require states to adopt those things which seem to be working in other states, or we should we leave this largely as a roll-your-own kind of policy and say each state's social or economic, political environment is so different that it really isn't really right to suggest, incentivize, require states to follow the Wisconsin model, or the Vermont model?

MR. BARNES: I think you'd have a very hard time passing something that requires states to follow the Wisconsin model. But all 49 other states know the Wisconsin model exists. It's been written a lot about. And as much as I hate to actually agree with Bob, it is a great model. I mean you look at the results there, and they have practically nobody on welfare any more. Well, what do they have? Fewer than 10,000 people, or roughly 10,000 people on welfare, some in workfare, but many, many have found jobs. I mean it is a worthwhile model. But you have to remember, the political environment that you're operating in, I think that would be a waste of time and effort to try to achieve that in Congress. One, Republican governors will have a huge role. They're not going to want that, I don't believe. Maybe Ron knows otherwise. And I'm not sure it would — I'm not sure how well it would work if imposed on states any way. Wisconsin has done it mainly through Tommy Thompson and others there, and it's worked very well.

MR. KUTTNER: I think if federal policy can reward states for cutting the roles, then it's equally fair to ask federal policy to reward states for getting out the support that help people succeed at work. And in a sense, Wisconsin is sort of the ultimate example of a state that was both very tough on its sanctions, but relatively tender on its supports. Maybe that's not a bad formula. And I think as Congress reviews how different states went about this as laboratories of federalism, it is worth coming back at this and learning the lessons that the state experience has taught us and deciding if federal policy should reinforce certain approaches and discourage others.

MR. HASKINS: I'd like to make an unambiguous answer to this question, which is, no, the federal government should not impose new requirements on the states to adopt programs that might have worked in other states. I think part of the genius of this legislation and the reason that we've had such great success is because the states have innovated and they have done things on their own, and they will continue to do that. I do agree, though, with Mr. Kuttner that that is why we put a billion dollars in performance bonuses into the original legislation, to reward states that had good performance. The administration has proposed and, in fact, has changed by executive fiat the criteria on which those performance bonuses are awarded, and they include some measures that you would be very happy about, like the number of kids, the percentage of kids who get food stamps.

So that is the mechanism that I hope the federal government will follow. If there are things they think the states should do, in Fred's case and mine, I think, activities having to do with non-marital births, activities having to do with marriage, then reward them. Redo the performance bonus, perhaps put more money in there, but, above all, do not mandate that states follow the same cookie cutter approach.

MR. KUTTNER: I think the argument is about what the performance bonus ought to reward. You know, I think we can narrow the difference to that and then fight like hell about what we think ought to be rewarded.

MR. HASKINS: And I think we will have a fight over it, too, because the Clinton administration made the performance bonus almost exclusively on work and now on child care, on food stamps and on Medicaid, with one little sliver in there of conservative concern, which is the kids in two parent families. My prediction would be that that's about to change. And when that happens, then I think Congress will jump. Change administratively. I assume the Bush administration will try to change it. And then I think Congress will jump into it, and I think this could be a very productive debate about how we divide up that performance bonus and reward states for doing the right thing.

MR. REISCHAUER: One of the big issues in reauthorization is going to be funding levels, and there are several different questions within that area. Some of you have spoken already. We have a scene a situation in which the welfare rolls have been cut in half. The simplest question is, shouldn't the funding be reduced somewhat when the program is reauthorized? Becky said no way. Let's just start down the group with Fred on what you think about that.

MR. BARNES: It seemed pretty obvious to me. If you cut the number of people on the welfare rolls in half that the money you spend on welfare ought to be cut as well. Now, I'm not saying you cut the money in half at all. But it seems to me that if you don't cut it now, when do you cut it?

MR. REISCHAUER: Ron? There is dissension within your ranks.

MR. HASKINS: I would never disagree with my illustrious colleague, Mr. Barnes. But I might take exception. [Laughter.] I think the money should not be cut for a very straightforward reason. The justification for cutting the money is that the rolls are down by half and welfare is a cash giveaway program. And in 1995 that was true. Bob mentioned this in his opening comments. If you look at state budgets, they gave 80, 85% of all of their spending in the form of benefits. But now if you look at their budgets, they're spending money on child care, on transportation, on work related activities. Congress demanded that the states convert their cash programs to employment programs. And they have become the most significant and successful employment programs in American history, without question.

So now to come back and to cut the funds I think would be a big mistake, both because the states have many productive uses for this money, which they are currently doing, including saving up for recessions, and because it sends the wrong signal: do the right thing, do as Congress says, then we cut your funds.

MR. KUTTNER: Yeah. And to make a kind of a conservative point from the liberal side, there's a world difference morally and in value terms between spending money to subsidize the idle and spending money to facilitate self-reliance. And if we want to encourage people to work their way out of poverty without making their children pay the costs and suffer the consequences, that is not costless, and it's a very smart social investment.

So I think, if anything, we ought to increase the funding, particularly for child care and early childhood development, and we ought to get rid of this insane patchwork of child health programs where, depending on what kind of a job your parent is in if you're a child, you are either in a stripped-down, bare-bones health plan by a private insurer or you're in Medicaid, or you're in CHIP. And then you have a whole paper chase to figure out eligibility. I t would be much simpler, cheaper, more cost-effective to give every child a Medicare card at birth. We should streamline and simplify. And in order to really make this thing work where it isn't just ending welfare, but it's reducing, if not eliminating poverty, we may need more social supports.

MR. REISCHAUER: Another dimension of this issue is the supplemental payments that are going to states that had low benefit levels when the bill was enacted. We distributed the money largely on past expenditures. Right now those states which have low benefits get about $700 per poor child, and the richer states with the higher benefits back in 1996 get about $1,800 per poor child. So there's a question. There're two questions. One question is, should the supplemental payments, which are boosting the payments in these low level states and which expire at the end of this fiscal year be continued? The second question is, when the bill is reauthorized, should the distribution of funds across the states be more equalized so that the money, whether it's more or less than we give out now, is more equally distributed between Mississippi, say, and Massachusetts?

Becky?

MS. BLANK: Yes. The federal dollars, as far as I'm concerned, ought to supplement the states and help states in two ways, in particular. There're two ways in which it ought to in some sense adjust for inequities. One is there are poorer states out there that simply don't have the same tax base and need some additional resources. And indeed, those have traditionally been the low benefit states under AFDC, and they are, therefore, the states that got some supplements under this program. And it makes sense to me, if you receive those supplements, exactly what the formula should be by which you continue them, I think a lot of well-meaning people can disagree and argue about that. But that there should be some cross-subsidizations from richer to poorer states for anti-poverty programs strikes me as only sensible.

The second way in which you want to smooth things out is across the business cycle, that at times when need is high?

MR. REISCHAUER: That was the next question. That's' the next question. Don't —

MS. BLANK: So that's the other form of smoothing. And I do think you want to continue these state supplements, even though I'm quite willing to argue about what the formula should be.

MR. HASKINS: No, we should not change the formula whatsoever. Anybody who's worked in the Congress knows that these are the most vicious, horrible, terrible fights. They never end the way anybody thinks they should end. You cannot open it up. So we should not reconsider the formula.

Now as to the supplemental bonus, which is based on the money states got in the past and their poverty levels and growth in their poverty levels and population, I think that the best course of action would be to freeze it for one year. It is growing dramatically. And we should freeze it at probably the 2000 level — I think it's something like $300 million — and continue it for just one year, and then throw that in the pot during the reauthorization debate. My concern is that if we spent the full 3 1/2 or four billion that it would cost to renew it for five years, that that would be an argument used in favor of cutting the TANF block grant next in 2002 when we get to that.

So I would just like to spend a little money now, get us over one year so we don't completely get rid of it, because I think it does achieve a good purpose, which is somewhat equalizing resources across the states, and then consider it as part of the whole mix and all the funding issues within the renewal of the TANF block grants.

MR. REISCHAUER: Ron, maybe you could tell us why it was authorized for only four years and TANF was authorized for five.

MR. HASKINS: I have no idea. But I know the underlying answer is the Democrats did it.

[Laughter.]

MS. BLANK: That's not what I heard.

MR. REISCHAUER: Now that we've enlightened you all on that critical question, there is the issue of block grants in a cyclical economy. Becky has twice raised this issue —

MS. BLANK: I care about this.

MR. REISCHAUER: — and we know where she stands. I'd like to ask the other side here what they think. Should the size of the block grant vary with the strength of the economy sort of in general, or, taking it down it to another level, at the state level?

MR. BARNES: I'm going to let Ron give his own answer, but I'm going to say not necessarily, because — and I'm looking here at a chart based on information from the Department of Health and Human Services the rise and rare fall in the welfare rolls, and they've risen, or held the same, in almost every period of economic growth and not always fallen in recessions — I mean not always grown in recessions. Did I get that completely backwards?

MR. HASKINS: Yes.

MR. BARNES: In other words, the welfare rolls have practically never shrunk during periods of economic growth and haven't always risen, except in the last five years. Except the last five years. But we've had some eras of strong economic growth before, and the welfare rolls have gone up. So that's why I say not necessarily.

MR. HASKINS: I would like to emphasize that point. It's not directly in response to your question, but it takes one second just to put in that the welfare rolls have virtually never declined in the past. The most they've ever declined is two years, and they went down about 6% over two years. So this argument that liberals make that the economy played a major role here, you just have to go back, at least to the 1980s and look at a time when we had almost as many jobs as we have now, 20 million new jobs, and the welfare rolls went up 12% during that period.

So the link between welfare and the economy is a very, very, very weak link, and it was weak because people were out of the economy. They weren't in the work force, so what difference did it make to them if there was a hot economy?

MR. KUTTNER: But now we've created a system where they are linked —

MR. HASKINS: Okay. Yes, indeed.

MR. KUTTNER: And so you can't hold the same view.

MR. HASKINS: Oh, sure I can. What? Do you want consistency, huh?

[Laughter.]

Here is why we don't have to make these changes. In the first place, states can save up money, and, indeed, many states are saving up money so that they will have money for a rainy day. We explicitly recognized that it the original block grant, and many states are doing it. Now, I think we should take some actions to help them do that. So it would be still be voluntary, but they should be able to do it.

And the second thing is that the welfare rolls have declined so much that every state has about 50% more money than it needs to maintain benefits at the level of 1995 before the decline in the rolls started. So, logically, that is, in effect, a savings account. Every year the states have a 50% surplus. If people are not working any more, they take the money out of child care and out of the programs that are supporting work now and transfer it back into benefits so that if more people come back on the rolls, they will have more benefits.

Now the big question here, and I'd love to hear Becky address this, is how much do we think the rolls are going to increase. Ten percent strikes me as a big number. And they have a 50% decline. Go back up ten percent. So this is not a huge transfer of resources to cover them. Twenty percent strikes me as a monstrous number. And that still seems to me a very manageable thing. It's not going to be 30 or 40%, unless, of course, Becky says it is.

MR. KUTTNER: Oh, boy, where to start.

We've got 4% unemployment. We have full employment. And I think liberals, since the day one, have been saying the best social policy is full employment, because if you have full employment, everything else is possible. I was in Massachusetts in the mid '80s when Mike Dukakis was Governor, and he was crowing about the Massachusetts miracle. He was taking credit for the fact that the welfare rolls in Massachusetts have plummeted and these former welfare mothers were making eight and nine dollar-an-hour jobs in the back rooms of banks and insurance companies. The dirty little secret was it wasn't Dukakis's miracle at all. It was the fact that the state of Massachusetts, thanks to the Reagan defense build-up, had three percent unemployment.

Now, I can tell you that when unemployment goes back up to five and six and, God forbid, seven or eight percent, there's going to be a game of musical chairs. And by definition, six or seven or eight percent of the people aren't going to have jobs. And at the bottom of the labor market, most of these people who've come off of welfare don't have much unemployment comp entitlement either. So then the question is, do you let 'em starve, or do you find some way of supporting them, either through unemployment insurance or through some kind of welfare? If you take the money out of child care on the assumption that that's your real rainy day fund, that's great, except who watches the children? So you can't just do a shell game and take it from one pot and put it in another pot without having the whole thing go to pot.

Becky?

MS. BLANK: Yes, two comments.

When the unemployment rate goes up, you've got to multiply that for the less skilled, because unemployment is not a linear function. When you see unemployment go from four to six percent in the overall economy, that almost surely means it's gone from six to 12% among the least skilled, that unemployment is much more heavily borne by less skilled workers in this economy. So that a slowdown in the economy is going to hit people much more than the aggregate numbers that you see suggest.

The second comment is that nobody knows what the response of the caseload is going to be to the next economic downturn, because so much has changed. Not only have we fundamentally changed the rules of the game in terms of time limits and sanctions and diversion policy to keep people off welfare, we've also over the last five years fundamentally changed the number of people who are working much more than they did in the past. And that makes it almost impossible to predict what happens.

Here's our best guess out of history, however. The group that was always closely tied to the labor market in the past was the old AFDC-UP program, the unemployed parent program. This was the group of largely working two-parent families who were dependent upon the labor market. I spent far too much of my research time in the last five years trying to measure what the effects of changes in the macroeconomy were on caseloads in the old AFDC program. Within the UP program, a one point rise in the unemployment rate, in the aggregate unemployment rate, would lead to a 15 to 20% rise in the rolls within the AFDC-UP. And that is probably the magnitudes you ought to expect when you're in a world where most, now, single mothers are tied to the labor market. I find that quite large. As Rob says, that's a humongous effect. But I think it's a reasonable effect to expect.

MR. REISCHAUER: All right. I'm going to warn the audience that after the next round, I'm going to go to you for questions. But —

MR. HASKINS: — before we do that, can I make a brief comment. I think it's very unfortunate that Mr. Kuttner has stooped to the level of accusing that wonderful President Reagan of helping either Michael Dukakis or the state of Massachusetts. Fifteen percent does not strike me as unmanageable, Becky. I mean they have a lot of money. It's a matter of being able to manage it and get it where it will do the most good. Certainly even those mean Republicans don't want to see people starve. And as for the unemployment insurance system, the qualifications to qualify for minimum benefits are extremely modest, and most welfare mothers, if you even work half-time at minimum wage, you would qualify for unemployment insurance in most states. The problem is voluntary separations from employment.

So that's something that I don't think — again, to go back to the previous question — Congress is going to impose upon the states. But if mothers work even half-time at minimum wage, they will qualify for at least a minimum unemployment benefit.

MR. KUTTNER: Can I have five seconds on that? Voluntary separation from unemployment is often another way of saying that a kid got sick, Ron.

MR. HASKINS: Kids get sick in middle class families, Bob.

MR. KUTTNER: Yeah, but middle class families have support systems.

MR. REISCHAUER: And you can duke this out outside.

(LAUGHTER)

Let's talk a little bit about work.

When people hit their time limits, or the economy is particular weak for a prolonged period of time, should the government be the employer of last resort and TANF funds used for that purpose?

MR. HASKINS: Are you asking me?

MR. REISCHAUER: Yes.

MR. HASKINS: Well, okay.

MR. REISCHAUER: Well, I or Fred.

MR. BARNES: Well, if necessary, yes. One, you don't want to say — well, you can stay on welfare; we didn't really mean it about these limits; the heck with it; work doesn't really matter that much. You don't want to do that. And if people don't have a job — if they truly don't have a job, you may not want to cut them off on welfare, and so you could offer them or require them to do — to have a government-guaranteed job.

Now, you don't want it — I wouldn't want — I think it would be ineffective to have it if it competed with jobs in the free market and I would advocate them being paid a sub-minimum wage for that job and they would quickly see that it would be a lot better to have a job in the private economy than doing that.

MR. REISCHAUER: If the clock is ticking and a mother is working but not making enough to support herself so she's combining earnings with welfare , should we let the clock tick at a slower pace, allow her to continue in this situation for 10 years, let's say?

MS. BLANK: I think the clock shouldn't tick...

MR. REISCHAUER: At all.

MS. BLANK: ... if you've got someone who is working and needs some additional support in order to maintain economic stability in that situation. You want to keep providing the incentives for her to, you know, find a better job?both job retention as well as job improvement and additional skills training, which, hopefully, will move her into a position where she doesn't need the additional subsidies of whatever sort she's receiving.

But to keep the clock ticking when someone is making all of the right efforts, I think, is just counterproductive to trying to move people into stable employment.

MR. REISCHAUER: Ron, do you have a view on that?

MR. HASKINS: Yes. I would only add to Becky's point — I'd make two clarifications. One is they would have to be working at least 25 hours a week. Second, I would not go further than allowing Congress to make this an option that they could be allowed not to count it.

Now, in effect, I think that's what we already have. Money is fungible. And I think the states that want to, like Michigan and Illinois that already have decided that they're going to cover people — I think every state could do that because they money's fungible. But I would be willing to make it an option because the real — the heart of your question is the toughest way to pose it is that people have used up their five-year limit. They are working. They lost their job because of the recession. And they're looking for another job and can't find one.

I think 90 percent of Americans at least want to help that family, but they've used up their five years of welfare. So if it could be shown that more than 20 percent of the caseload, which is the current exemption from the five-year time limit, needs help, then Americans would be willing to help them.

So, now, we have not shown that yet. We have not found a state that says?oh, we're at 20 percent and we need to be at 25 or 30. If that did happen, then I think Congress should take action and help in some way because people who are truly looking for work and had work and lost a job should not be refused welfare.

MR. REISCHAUER: Go ahead.

MR. KUTTNER: A related comment on unemployment insurance — the fraction of people covered by unemployment insurance and the fraction of income that is replaced by unemployment insurance have both gone steadily down since 1980, so it's a pretty weak part of the safety net.

MR. REISCHAUER: Fred.

MR. BARNES: Just look at the — maybe somebody can answer me about the numbers here. Now, say you work 30 hours a week at the minimum wage and you'd make about — what would you make — you'd make about $7,500. And you got food stamps, the ceiling of which is what? $4,000? And you got a rent supplement, and you had Medicaid, and you had the earned income tax credit. I mean, how much more do you need? Why would you need more?

[Laughter.]

MR. KUTTNER: Spoken like a true Republican.

MR. BARNES: I'm sure your wife will be glad to hear that.

(LAUGHTER)

MS. BLANK: You're not going to get more than $15,000, Fred.

MR. BARNES: I'm talking about why would you need more that you have to ask the government for, the taxpayers for?

MR. KUTTNER: Well, Medicaid isn't cash income.

MR. BARNES: I realize that but it saves you using cash income.

MS. BLANK: And a very small share of low-income families receive any rent supplements. Those are extremely spotty and very unavailable in some areas of the country.

MR. HASKINS: Well, it's a third.

MS. BLANK: For rent supplements.

MR. HASKINS: I know, but it's a third. I mean that's not that minor.

MR. KUTTNER: But you're talking about $11,000.

MR. HASKINS: And the other thing you have to add to Fred's point is, under the old welfare system, they were much worse off as long as they stayed just on welfare than even the situation that Fred described. There is a limit to what taxpayers can be asked to do. I don't know if it's $10,000 or $12,000 or where it is, but there is a limit.

MS. BLANK: Let me put it this way. I would be much happier if I thought that most families were in your situation. I think the evidence suggests — in fact, from what we know has happened to food stamps and health insurance coverage — is the vast majority of low-wage working families don't receive any of the additional supplements and are really getting by largely on this $7,500 in earnings and maybe a little bit of other help elsewhere.

And you know, $8,000 is clearly not enough if you're trying to raise one or two children in an urban area in this country.

MR. REISCHAUER: Let me throw the floor open to questions.

When you have a question, stand. I think a microphone will come to you. Identify yourself and any affiliation that you might have. Yes.

QUESTION: Hi, I'm John Ogana. I'm with Congressman Scott. I have a comment and then also a question.

The comment, first, is that I'm actually happy to hear Ron say that he's — he favors extending the supplements to the poor states for a year because that's exactly what I'm putting together a bill to do. And I'd welcome any kind of input to that.

The question is for the conservatives. If we can agree — and we can argue about what the definition is — if we agree that there are some people who are not able to work, who are just, you know, for whatever reason, are not going to be able to get off the welfare system, should we have a safety net that is implemented across all the states to catch these people?

MR. HASKINS: Yes, and we do. The states can keep up to 20 percent of their caseload on welfare forever. If it can be demonstrated that 20 percent is not enough, then, we should reconsider the 20 percent. And at the same time that they're receiving those benefits, they get food stamps and Medicaid. The package of benefits is worth around $13,000 now in the median states. If they have a serious disability that's measurable, they can get SSI and get even more money. So I think we already have a system that is pretty good in this regard if the 20 percent is the right number.

Now, a lot of people say that's just a hocus-pocus number, but it's not. It was established by the political process. Therefore, to me, it's at least a reasonable number. And now the proof is on someone to show why it needs to be bigger. And if that could be shown, I think the Congress would be responsive and would be willing to change the number.

QUESTION: Thank you. My name is Victoria Graham. I'm the managing editor of "Women's E-News" in New York, a nonprofit, funded by the NOW Legal Defense and Education Fund. We're very interested in the issue of welfare reform and, of course, how it affects women who are the face of welfare and welfare reform.

I have a question about the morality. As I read the findings, which I gather Ron drafted, you know, I hear that marriage is the fundamental basis and a successful marriage is the basis and so on and so forth. And responsible fatherhood and responsible motherhood are also the basis of dah-dah-dah, which all sounds great.

And yet, I have this feeling — and I think a lot of other people do — that perhaps our government ought not to be forcing this. And we know about a lot of women who have children — we used to say out of wedlock. It sounds terribly moralistic, but I think they've got real good reasons for not getting married and I would like to ask anyone who wishes to respond — what is this telling what used to be a secular society, although I feel like the sands are shifting under me, that, you know, marriage is the be-all and the end-all? So, tell me why this is an important component of welfare reform.

I read the stuff about statistics show blah-blah-blah. But tell me more. Convince me.

MR. HASKINS: I think we should look at your question from the perspective of children. We now have massive evidence that children do better in two-parent families. Study after study — two-parent families and do better in two-parent married families than they do in reconstituted families. And in fact, reconstituted families — kids have virtually the same level of difficulty that they do in divorced families. So from a child's perspective, there's no question that marriage is extremely important to development.

Secondly, I do not shy away, madam, for one second from the perspective that politics is the forceful allocation of values. And the values of the American people are that marriage is to be honored, that it is a crucial institution in any society, particularly a society committed to its children.

Therefore, government policy should, wherever possible, encourage marriage and, above all, should not discourage marriage. That's the situation we face all too often now. At the very least, we should make policy neutral with regard to marriage, and many people, I believe a majority of Americans included, would favor actually favoring married couples.

QUESTION: But marriage is like a living sacrament.

MS. BLANK: Let me say one thing quickly, which is that I think some of the most interesting experimentation right now that's going on in terms of programs is what's called the fragile families project, which is trying to work with keeping both parents actively involved in children's lives, whether they're married or not, and particularly focusing on getting young men from the point of birth of a child on to have both financial responsibility, but also to have ongoing parental responsibility and involvement. And I think the evidence says clearly that that's important. And we need to worry about that one at least as much as we worry about marriage.

MR. REISCHAUER: Let me — we have a question here from the web.

From Susan Bergeron, Ohio Department of Jobs and Family Services, to Ron about rainy day funds and his suggestion that Congress should take action to help states save for rainy day funds. What type of action should Congress take?

MR. HASKINS: The very first thing we should do is to set some percentage limit that the states could set aside in a rainy day fund and count that money as obligated. And the reason that's important is that, when the Congress looks at how much money is remaining in the block grant, and especially the people who want to cut the money, they're going to say — Oh, well, there are all these surpluses left.

So if we could change this accounting rule and allow the money to kind of disappear — even though it's being saved for a rainy day — then that would kill two birds with one stone. It would make it easier for the states to save it and it would avoid the problem of savings showing up as money that, you know, is free money and therefore we can cut the TANF block grant because the states have all this money saved up.

QUESTION: Hi, my name is Anh Quach, and I'm a junior at Grinnell College.

[Laughter.]

And I'd kind of like to throw a wrench into the debate because I believe that the dynamics of families who are in of welfare have changed and that none of the questions that have been — the arguments that have been made today have actually addressed these problems.

I'm going to give you an example of this and it comes very personally to me because it's about my family. I come from — I'm a first generation American. My parents were refugees from Vietnam and my mom is currently a single mother and she has three daughters. I'm the oldest. And she has two full-time jobs. She runs a family day care during the day, one of the high-quality, certified, Montessori school teaching type of family day cares that you've been talking about, from seven to six and then, afterwards, she has an evening job at a lab. She works there from about seven in the evening to about two in the morning Monday through Friday.

And then on the weekends, she does that job eight hours during the day and then, in the evenings, she waitresses. And so, she has the child day care because she wanted to be able to be at home for my sisters when they came home from school so as to solve the problem of teenage delinquents coming home with no parental guidance.

And I think she did a fabulous job because, for me, I go to Grinnell College. I have a Fulbright Scholarship. I'm graduating in three years. And right here, you look at me and you would never know that my family makes $20,000 a year.

So, my question is, what type of welfare reform can we make to help families such as my family?

[Applause.]

MR. BARNES: In answer to your question, would your mother take welfare?

QUESTION: Yes.

MR. BARNES: In what form?

QUESTION: — the most minimum form of welfare because she does have two full-time jobs and we aren't like the very, very bottom of poverty. And we also have Medicare. But the problem is — but I go to school out of state so Medicare doesn't go towards me.

MR. BARNES: Medicaid.

QUESTION: Medicaid, sorry.

MR. BARNES: You don't look that old.

[Laughter.]

QUESTION: So any — so whatever money that she does make goes into providing for me for school and for my health care and whatnot.

MR. BARNES: And how old are your sisters? Are they younger?

QUESTION: One is 17 and the other one is 12.

MR. KUTTNER: You know, here it is. I mean, one answer is don't cut off the working poor. Here's the system. Whether you call it welfare, whether you call it EITC, whether you call it child allowances, reward the working poor. Your mother is not affluent. She is working harder than most people in this room, and she's deciding ...

UNIDENTIFIED PANELIST: She's probably working harder than everybody in this room combined.

[Laughter.]

MR. KUTTNER: And that should be honored and rewarded.

And secondly, it seems to me — and this is certainly a hobby horse of mine and The American Prospect — other civilized countries treat day care work and day care workers as comparable to public kindergarten school teachers and treat them as professionals and pay them middle class wages. If she were paid a middle class salary for running a day care, she wouldn't have to be working 16 hours a day. That's useful work. It's the next generation. And that's a social decision, a political decision, that we as a society have failed to make. And as a result, a lot of people who provide day care for our kids and everyone else's kids are not as competent and as conscientious as your mother because they're paid minimum wage, and they're not trained as well as kindergarten teachers. And we ought to take some of this damn money we're giving back in a tax cut and put it towards decent child care.

[Applause.]

MR. REISCHAUER: Wendell.

QUESTION: Wendell Primus, Center on Budget.

I'd like to follow up on that question if I may to the conservatives where — let's take a mother that isn't earning quite as much — let's say $14,000 — and faces a marginal tax rate of 21 percent in the EITC, 8 percent on the payroll tax, is also being phased out of food stamps, maybe also faces a child care copay. The point is, she faces the highest marginal tax rates in our combined tax and transfer system.

Don't you think that some of the tax benefits should go to that family either by strengthening the EITC, lowering the phase-out rate, or making the child tax credit partially refundable? Why shouldn't the mothers who are working harder and not gaining as much income get some of the benefits from this tax bill?

And Fred, were you persuaded by Ron's eloquent defense of no cuts in the funding?

[Laughter.]

MR. HASKINS: Wendell Primus is the only person that I know with an IQ of 140 that doesn't understand the plain definition of a tax. A tax is when government takes money that you earned, Wendell, money that you earned. To call the phase-out rates for welfare programs a tax rate is simply wrong and misleading. It's not right, Wendell. You should do that.

What the American public wanted was for Americans to stop welfare. That meant welfare income was going to go down and to increase their earnings, and their earnings would go up. That's exactly what's happened.

Now, we can argue with the margin. But we already have a very generous system. The earned income tax credit, we're giving subsidies up to $29,000 a year. If we have a marriage penalty relief, we'll be giving it up to probably $37,000 or $36,000. So it's just wrong to say that these are tax rates. The system works exactly the way the American people want. Welfare down, earnings up.

MR. BARNES: Well, to answer your other question, was I convinced that the money spent should not be cut?, Ron did not convince me. In fact, I've thought more about it since then.

It's hard for me to believe that if you cut the welfare rolls in half and that you need all that money saved for child care and transportation, you're going to need it all for that? All that money? It just seems that...

MS. BLANK: And work programs. I mean you're doing the same thing ...

MR. BARNES: I know, but aren't you doing that anyway? There are already work training programs which, of course, have a notorious record of failure no matter who they're run by.

UNIDENTIFIED PANEL MEMBER: But you've got it so much ...

MR. BARNES: It seems to me you don't need all that to save — all that money — if you cut the rolls in half. So I'm not convinced yet, but there's still time.

MR. REISCHAUER: But there isn't any more time for any more questions. If you each would like a minute to wrap up.

MR. HASKINS: A whole minute?

MR. REISCHAUER: Well, I'm adjusting for the fact that you're going to blow through the limit.

MR. HASKINS: Oh, I see. Okay.

[Laughter.]

MS. BLANK: I actually want to end where Bob started, which is that we passed welfare reform in 1996 with a large discussion around trying to reduce out-of-wedlock childbearing and trying to increase work. And we simply missed a discussion entirely in that conversation for a whole variety of political reasons about reducing poverty.

And welfare reform is about many, many things, but it is surely — among other things — about reducing poverty. And I think the real question is, if we want to create a work-oriented welfare system, we've got to be serious about stabilizing mothers' incomes in such a way that they can continue to work and continue to support their children and not feel constantly on the edge and constantly panicked by economic uncertainty.

In some cases, if we do this right, we will get them to be completely self-sufficient at that. But in a number of cases, we will not. And those are exactly the cases in which we need to continue the type of helping hand and the work subsidies and the support systems that we've only begun to put in place.

MR. BARNES: You know, it is remarkable how the debate has changed in just five years since 1996. The debate is not about how many poor people have been thrown off the rolls and are sleeping on grates or how many children have — where are these million children that have been thrown into poverty. It's not about any of these subjects. Suddenly, it's been changed to — it's about reducing poverty.

Well, that's not what this welfare reform bill was about. It was about trying to end the cycle of poverty, honor work, get more people in work and off welfare and snap that cycle of poverty. It's started that process, I think, very, very well. Work — in just five years in this country at all levels — is honored more than it was. Welfare is stigmatized. I think that explains, in part, why so many people don't take Medicaid and food stamps. It's not just because they haven't heard of them. It's because they don't want to be on welfare. And we have, in the last five years, had a revolution in thinking in this country about welfare at every level of our society.

People that are on welfare, have been on welfare, people who've never thought about welfare — there's been a change. The Zeitgeist has changed. And it is, as Ron said, and Mickey Kaus and many others have said, it's finally been discovered by the entire country now that only work works.

MR. KUTTNER: Well, in fact, Fred, more than a million people have been thrown into poverty. The figure is probably closer to 2 million if you count the people who have been thrown off the rolls and the people who are working part-time and have less net income than they had before 1996.

I can't believe you think Medicaid is stigmatized. Welfare may be stigmatized. Medicaid is being able to go to the doctor. Forty percent of Medicaid money goes to middle class old people in nursing homes, for crying out loud. So I take issue with that.

And also, since we're talking so much about two-parent families, this bill — let's not forget — was a two-parent bill. You had one parent, which was the Gingrich Congress, that wanted to do all kinds of punitive things. And you had another parent, represented not only by Bill Clinton, who said that people who worked hard and played by the rules shouldn't have to be poor, but represented by people like Wendell and Peter Edelman and David Ellwood and Mary Jo Bane and other real heroes, who felt that this bill was needlessly more punitive than it needed to be and that we could end welfare as we knew it, but also end poverty as we knew it. And at least on the Democratic side, certainly on the liberal side where there was a goal of reducing and maybe even ending dependency, there was a companion goal of ending poverty.

Let's also keep in mind that nobody with an income of much less than $100,000 a year is completely self-reliant. There is still social income in this society. We send our kids to public schools. Some of us take public transit. Some of us depend on Social Security to keep us out of poverty when we're old. And yes, we all work very hard. But some of the income in this society is social, and I think that particularly needs to be the case for the working poor.

So the unfortunate thing about this debate is that, with a little bit of generosity of spirit and of outlay, we can both get our goals. We can reduce the rolls, maybe even almost to nothing, and we can also honor and reward work and enable these people not just to sing for their supper but to feel like successful members of the workforce.

MR. HASKINS: Well, I certainly am glad that I started with history because I want to reinstate that these are the very — this is the very political philosophy that gave us this system of welfare based on non-work, and children born outside marriage and it's astounding to me that Mr. Kuttner now, despite the evidence, makes a claim that there are 2 million people in poverty. The evidence is overwhelming, undisputed. I know of not a single scholar in the country that disagrees —

MR. KUTTNER: Bill Stanley —

MR. HASKINS: — that the drop in poverty has been very substantial. And if you use wider measures of poverty that include the earned income tax credit, the drops have been the greatest in history.

Surely, we can agree that it's somewhat hypocritical for people who supported the system and attacked Gingrich and Republicans as doing punitive things and now that system is in place and poverty has fallen like a rock, particularly poverty among minority children, to now say that those guys were mean and that poverty is up, I think just violates all the rules.

The main point to be made in conclusion is this. We're on the right track. Work works. Poverty is down. And the American public supports the system as it currently exists. Let's make minor changes, not major changes. We're moving in the right direction.

MR. REISCHAUER: Thank you. Let me thank the audience here and on the web, Fred, Ron, Becky and Bob, and invite you all to the reception ...

[APPLAUSE AND END OF EVENT.]