The Outcomes of 1996 Welfare Reform

July 19, 2006

Chairman Thomas and Members of the Committee:

It has been ten years since the welfare reform law was signed by President Clinton amid predictions of disaster from the left. Thanks to provisions in the legislation itself that provided millions of dollars for research, to an unprecedented level of research sponsored by foundations, to data reported by states to the federal government, and to national data collected and reported on a routine basis by the Census Bureau, a tremendous volume of information bearing on the effects of the legislation has been produced. In fact, there is probably more information about the effects of the 1996 welfare reform law than any other piece of social legislation enacted in recent decades.

The most important reform was the replacement of the old Aid to Families with Dependent Children (AFDC) program with the Temporary Assistance for Needy Families (TANF) program. The research on TANF yields a coherent picture that will almost certainly stand the test of time. With its emphasis on work, time limits, and sanctions against states that did not place a large fraction of its caseload in work programs and against individuals who refused to meet state work requirements, TANF was a historic reversal of the entitlement welfare represented by AFDC. If the 1996 reforms had their intended effect of reducing welfare dependency, a leading indicator of success would be a declining welfare caseload. TANF administrative data reported by states to the federal government show that caseloads began declining in the spring of 1994 and fell even more rapidly after the federal legislation was enacted in 1996. Between 1994 and 2005, the caseload declined about 60 percent. The number of families receiving cash welfare is now the lowest it has been since 1969, and the percentage of children on welfare is lower than it has been since 1966. Although it is often reported in the media that cash welfare caseloads increase during economic recessions and decline during recoveries, this claim is mostly false. In the forty-one years between 1953 and 1994, the number of families on AFDC declined in only five. Only once – between 1977 and 1979 – did the caseload decline (by about 2 percent) two years in a row. By contrast, 2005 was the eleventh year in a row that the caseload declined. Clearly, we are in a new era of welfare use.