This column by ACRU Senior Fellow Robert Knight was published February 5, 2014 on Townhall.com.
In celebration of the Gipper’s birthday, Townhall is featuring a series of concise examples of Mr. Reagan’s wisdom, mostly in his own words, drawn from The Reagan Resolve, a monograph compiled by the Carleson Center for Welfare Reform.
Ronald Reagan recognized that the expansion of the welfare state was the greatest threat to federalism, and fighting it was a driving force throughout his political career.
California in 1971 was heading toward bankruptcy because of the massive growth in welfare spending. As Governor, Reagan discovered he was greatly hampered by federal welfare rules and policies. But, working with his welfare reform champion Robert B. Carleson, Reagan was still able to achieve great savings for the state’s taxpayers and better serve the poor by focusing assistance to those most truly in need.
As a result of the tremendous savings generated by removing the non-needy from the welfare rolls, Ronald Reagan was able to deliver the first benefit increase to California’s most needy citizens in over a decade and a half. As Reagan expressed his concerns on the subject at the time:
“Welfare needs a purpose: to provide for the needy, of course, but more than that, to salvage these, our fellow citizens, to make them self-sustaining and, as quickly as possible, independent of welfare. There has been something terribly wrong with a program that grows ever larger even when prosperity for everyone else is increasing. We should measure welfare’s success by how many people leave welfare, not by how many are added.”
[Remarks at Governor’s Conference on Medicaid, San Francisco, 1968]
In testifying as Governor before the Senate Finance Committee in 1972, Reagan said:
“… I consider the welfare problem the gravest domestic issue our Nation faces …. I believe that:
1. States are better equipped than the federal government to administer effective welfare reforms if they are given broad authority to utilize administrative and policy discretion.
2. A system of a guaranteed income, whatever it may be called, would not be an effective reform of welfare, but would tend to create an even greater human problem.
3. A limit should be set on the gross income a family can receive and still remain eligible for welfare benefits.
4. For all those who are employable, a requirement be adopted that work in the community be performed as a condition of eligibility for welfare benefits without additional compensation.
5. The greatest single problem in welfare today is the breakdown of family responsibility. Strong provision should be made to insure maximum support from responsible absent parents.
6. A simplified system of pensions should be established for the needy aged, blind, and the totally and permanently disabled.”
[Testimony of Gov. Ronald Reagan to the U.S. Senate Finance Committee, Feb. 1, 1972, pp. 1-2]
However, overbearing federal bureaucracy and restrictions prevented Reagan and Carleson from achieving their goal of requiring work from able-bodied recipients in return for welfare assistance. So-called “workfare” requirements would allow beneficiaries to “earn” their benefits from the taxpayers and eliminate incentives for those not truly in need to game the system and deplete resources available to help those with nowhere else to turn. Reagan explained the rationale when he became President and continued his push for the principle of welfare recipients “earning” their benefits:
“Many people today are economically trapped in welfare. They’d like nothing better than to be out in the workaday world with the rest of us. Independence and self-sufficiency is what they want. They aren’t lazy or unwilling to work; they just don’t know how to free themselves from the Welfare security blanket.”
[Remarks to the National Alliance of Business, October 5, 1981]
Their experience in California led Reagan and Carleson to advocate policies at the national level to provide states with finite federal funding in exchange for maximum flexibility in using the money for state welfare programs — a concept commonly referred to as block granting. As President-elect, Reagan personally approved the block grant concept, with his signature “RR OK” initials, as part of his transition team’s action documents submitted to him by Bob Carleson, acting as Reagan’s Health and Human Services transition head. As Reagan argued to Congress in 1986:
“Many services can be provided better by State and local governments. Over the years, the Federal Government has preempted many functions that properly ought to be operated at the State or local level. This budget contemplates an end to unwarranted Federal intrusion into the State and local sphere and restoration of a more balanced, constitutionally appropriate, federalism with more clearly delineated roles for the various levels of government. Examples include new consolidations of restrictive small categorical grant programs into block grants for transportation and environmental protection, at reduced Federal costs. Continued funding is maintained for existing block grants for social services, health, education, job training, and community development.”
[Message to the Congress Transmitting the Fiscal Year 1987 Budget, Feb. 5, 1986]
Years after Reagan left office, in 1996, the block grant concept was finally enacted into federal law. For the first time in history, a Great Society program, Aid to Families with Dependent Children (AFDC), was repealed. It was replaced with the Temporary Assistance to Needy Families (TANF) program. Under TANF, federal welfare cash assistance is now provided in the form of finite block grants to fund state programs based on mandatory work requirements for able-bodied welfare recipients. The former AFDC program depended on a federal matching formula that encouraged states to increase welfare rolls and spend more money in both good times and bad.
Replacing the federal matching formula arrangement with finite block grants was the key to the overwhelming success of the 1996 Welfare Reform. Under the block grant, federal funding does not increase when a state spends more on welfare or increases the state’s welfare rolls. If a state’s program costs increase, the state must pay the extra costs itself. But, if the program costs less, the state gets to keep the savings in order to provide enhanced services for the state’s truly needy.
Incentives matter. Allowing states to keep their welfare savings provides an economic motive for welfare offices to become employment centers instead of mere welfare intake bureaus measuring their success by how much welfare rolls grow.
Touching on the perverse incentive that motivated the welfare establishment, Reagan as President in 1982 observed:
“The war on poverty created a great new upper-middle class of bureaucrats that found they had a fine career as long as they could keep enough needy people there to justify their existence.”
[Remarks at a Kansas Republican Party luncheon, Topeka, Sept. 9, 1982]
See full text of The Reagan Resolve and source documents for Reagan’s quotes at http://theccwr.org/ReaganResolve.html.
For more information, see The Carleson Center for Welfare Reform.