Changes that the Reagan administration made four years ago in the welfare system have removed roughly 442,000 families from the rolls and reduced outlays by $100 million a month, the General Accounting Office reported yesterday. But most of those families never made up the lost income and ended up substantially worse off, the GAO said.
The report, prepared for the House Ways and Means Committee, was based on national statistics and interviews in five cities 18 months to two years after Congress approved President Reagan's proposals to trim the Aid to Families with Dependent Children program. The report found that the families forced off the rolls, most of whom held low-paying jobs while on AFDC, suffered very severe losses of income, and in many cases lost their Medicaid benefits as well.
But despite the families' efforts to increase their income, most failed to make up the loss of their welfare checks, in part because most were already working full-time and could not increase their hours.
Even so, most didn't go back on welfare. A year after the new law was passed, only between 7 percent and 18 percent of those who lost their benefits because they were working had gone back on welfare.
In all of the five cities, the GAO found families who had been removed from the rolls were substantially poorer. In Boston, the families' average monthly income, measured in constant 1981 dollars, including earnings, welfare payments and food stamps, was $925 before the law was passed; two years later, it was $801. In Dallas, the average dropped from $731 to $529; in Memphis, from $649 to $479; in Milwaukee, from $1,004 to $788, and in Syracuse, N.Y., from $871 to $717.
The report also found that families whose benefits were cut also were earning substantially less two years later.
The GAO found that among families who had been forced off the rolls, anywhere from 30 percent (in Boston) to 90 percent (in Memphis) were below the poverty line in 1983.
Rep. Harold E. Ford (D-Tenn.), chairman of the Ways and Means subcommittee that handles AFDC, said yesterday, "I am most disturbed by the GAO finding that in sites paying low AFDC benefits, like my own Tennessee, up to 90 percent of families who lost AFDC benefits due to Reagan policies were living below the poverty level 1 1/2 to two years later, but had not reapplied for AFDC."
The study said people who lost eligibility took a variety of steps when their income dropped. Few moved or sought public housing, but 10 percent to 25 percent, depending on the city, took out loans. Up to 55 percent used up all their savings, which, in four of the cities, the GAO said, averaged under $500. A handful sold their cars, about one-sixth pawned or sold property, and others cashed in or borrowed on life insurance policies.
A person on welfare normally qualifies for Medicaid, but among wage earners who lost AFDC, only one-eighth to one-fourth still were eligible for Medicaid.