Welfare Special Report
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A Million More Poor Children

By Isabel Sawhill and Sheila Zedlewski
Friday, July 26 1996; Page A27

The nation is poised to enact a dramatic revision in the way it delivers assistance to the poor. Commonly called "welfare reform," proposed legislation contains measures that would encourage work and parental responsibility but also would reduce by $60 billion the income going to poor families and poor communities over the next six years. Each of the major programs serving low-income families – Aid to Families With Dependent Children (AFDC), food stamps and Supplemental Security Income for the aged and disabled – would sustain a cut of 20 percent or more.

These changes are being considered without any close analysis of their impact. In this context, we offer our own assessment of the consequences.

The Urban Institute's analysis of the House version of the bill indicates that it would reduce the number of families dependent on public assistance over the longer term by requiring work. But even accounting for this effect, we estimate that it would increase the number of poor children by 1.1 million – or, by 12 percent. More than one-fifth of all families with children in the United States would be affected. The average loss of income (including the value of Food Stamps and other cash-like assistance) would be about $1,000 a year in 1996 dollars once the bill is fully implemented. Worth noting is that more than half of all families affected are employed already. We expect that the Senate version would have roughly similar, if somewhat attenuated, effects.

Our estimates are based on a detailed modeling of how households would be affected, but no one can predict the effects of the proposed legislation with certainty. Its impact will depend on how states and individuals respond to the new rules.

States would have more flexibility but far fewer federal dollars. They also would have a new and potentially costly mandate to move their welfare population quickly into jobs. Either they would be forced to reduce eligibility and benefits for poor families (for example, by setting shorter time limits), or they would need to replace lost federal funds with their own resources. Undoubtedly, a few states would add resources to their current contribution to the federal-state pot, but we expect this to be rare. Indeed, most analysts predict that states would spend less, not more, of their own money on assistance to the poor. The reasons for this include: (1) the fiscal pressures states would face because of projected cutbacks in total federal aid under the current caps on appropriated funds, (2) the greater flexibility the new law would give states to put up less of their own money and (3) competition among the states to keep tax burdens low. We should emphasize that the Urban Institute's estimates assume no reduction in state welfare spending. Thus, it provides a relatively optimistic forecast of spending on the poor.

The legislation requires individual AFDC recipients to work after two years, and it terminates all benefits at the end of five years. (States are permitted to exempt up to one-fifth of the caseload from the five-year time limit.) Eligibility for food stamps is limited sharply for families without children (more so in the House version than in the Senate's). Food stamp benefits are scaled back greatly. And in the House version, states may choose lump-sum food assistance grants in place of the current federal guarantee of a minimum level of assistance to all those in need. Finally, legal immigrants are denied many of the benefits they receive now.

Under either bill, we expect that most welfare recipients or potential recipients would work harder at finding and keeping jobs. Even now, about 60 percent of all recipients leave welfare before the end of five years. Of the remaining 40 percent, half would be eligible for a hardship exemption. We estimate that, given the choice between working and subsisting primarily on food stamps, about two-thirds of those who reach the limit and are not exempt would find jobs, many part-time and at sub-poverty wages.

Some will argue that our two-thirds figure is too high, and others that it is too low. But reasonable changes in this estimate don't produce a dramatically different result. One way or the other, there will be more poor children, even if many more of their mothers are working.

The projected increase in poverty among children could be attenuated slightly in at least two ways: by increasing the hardship exemption to 25 percent, or by providing noncash vouchers for the support of children whose parents do not find work at the end of the time limit.

But it would be a mistake to assume that this bill is only about families on AFDC. The food stamp and immigrant provisions are even more important, and they contribute substantially to the projected increase in poverty and loss of income among low-income families.

Isabel Sawhill is a senior fellow at the Urban Institute, and Sheila Zedlewski is director of its Income and Benefits Policy Center.

© Copyright 1996 The Washington Post Company

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