HEW Explains “Welfare”
November 18, 2015
The programs the federal government formed in response to the Great Depression that provided financial assistance to those in need were the foundation of the welfare system we know today. Since the 1930s, government spending on welfare programs has become a substantial part of federal and state budgets, and some people are concerned that beneficiaries abuse the system by qualifying by not applying for jobs and having more children to increase aid received. These views combined with other criticisms that continue in partisan debates today have ultimately shaped the system’s evolution. In 1996 Congress passed the Personal Responsibility and Work Opportunities Reconciliation Act of 1996 signed by President Clinton, which ended welfare as an entitlement program and started the Temporary Assistance for Needy Families program. It also shifted responsibility from the federal government to the states to design their own welfare programs, as long as they fall within categories of aid set by the federal government. Thus, state governments control the type and amount of aid they provide individuals and their dependent children; most states offer health care, nutrition assistance, housing assistance, childcare assistance, unemployment aid, and cash aid.
Other services also assist early child development, job training, and assistance with energy expense. As such, many departments administer welfare services, including the Departments of Health and Human Services, Housing and Urban Development, Labor, Education, Agriculture, and the Treasury. Welfare eligibility is based on gross and net income, family size, and crisis situations including medical emergencies, homelessness, or unemployment. An individual must be citizen of the United States or a qualified non-citizen legal resident to qualify for assistance.
Temporary Assistance for Needy Families (TANF) is one of the only programs that still exists to provide cash assistance to low-income families. The program was established in 1996 to replace the Aid to Families with Dependent Children (AFDC) program. The AFDC program, which had been providing cash assistance to families since 1935, was a federal program that required states to offer cash assistance to low-income families with a parent absent (for example, many single mothers qualified for this program). It was reformed to create TANF, which is a program where the federal government offers a block grant to the states to establish a welfare program of the state’s choosing accomplishing at least one of several goals– to allow children to receive care in their own homes, to end family dependence on state governments, to promote two-parent households, and to prevent and reduce the incidence of out-of-wedlock pregnancies. The TANF program’s block grant has been set at $16.5 billion each year since 1996, meaning that its real value has fallen a third due to inflation, and there is no longer a federal requirement that every person who applies should receive access to TANF benefits. These benefits can include job training, marital assistance, and cash benefits.
The Supplemental Nutrition Assistance Program (SNAP) is the main program providing food benefits to low income Americans. The program provides people who meet the eligibility requirements with a debit card loaded with a certain amount each month, which can be used to purchase specific items of food. Examples of food items that qualify for SNAP assistance include vegetables, fruits, bread, and even snack foods such as chips and ice cream; SNAP funds cannot be used to pay for most restaurant meals, cigarettes, and alcohol. In order to qualify for SNAP benefits, a person must meet certain income and asset requirements, and demonstrate a willingness to work and either have a job or participate in state employment training. Individuals who are elderly and disabled have different eligibility requirements– they can have higher assets and can exceed income limits if everyone in the household receives SSI benefits or other cash assistance. Eligibility differs slightly across states (e.g. some states include a car as one of the excluded assets that do not count towards the limit, and some do not) and applications are evaluated at the state level.
Health Care Assistance
Spending on three federal health care programs - Medicare, Medicaid, and the Children’s Health Insurance Program (CHIP) - together accounted for 24% of the entire federal budget in 2014. This makes health care spending the second largest welfare expenditure behind only Social Security. About $511 billion went solely to Medicare, which provides health coverage to 55 million people who are over the age of 65 or have disabilities. The remaining funds cover Medicaid, CHIP, and marketplace subsidies. Medicaid provides health coverage and medical services to individuals and families with low incomes and limited resources Medicaid programs are administered individually by the states, so there is considerable variation in how Medicaid plans operate. Different states are allowed to establish their own eligibility standards, set the rate of payment for services, and determine the type, amount, duration, and scope of services provided . Medicaid is also a means tested program meaning that eligibility for the program is based almost entirely on income and financial resources, a criterion which plays no role in Medicare coverage . As of 2014, 62 million people are enrolled under Medicaid . To keep both programs straight in your head, just remember: Medicare covers old people and Medicaid covers poor people. Similar to Medicaid, the Children’s Health Insurance Program (CHIP), provides coverage to eligible children. The program was designed to cover uninsured children in families with incomes that are modest, but not high enough to meet Medicaid eligibility requirements . As of 2014, 8.1 million children are enrolled in CHIP.
Source: Office of Management and Budget, FY 2014, Historical Tab
Source: Congressional Budget Office, The Budget and Economic Outlook: Fiscal Years 2013 to 2023, February 2013
As shown above, federal expenditures on welfare programs, though not all are expected to increase, still take up a large portion of GDP. These significant initiatives are costly and most prove their efficacy and cost-effectiveness in order to retain funding and support at the state and federal levels. They ultimately share the goal of not only providing short-term assistance to individuals but also helping them break out of the cycle of poverty and eventually no longer receive welfare benefit. Ideally, the cost of spending money to provide the services will result in an overall more productive population that contributes to the economy.
Student Blog Disclaimer
The views expressed on the Student Blog are the author’s opinions and don’t necessarily represent the Wharton Public Policy Initiative’s strategies, recommendations, or opinions.