Let Them Spend Cash?

Don’t look now, but the libertarians may be winning the welfare debate

Over the past few weeks, the right engaged in a bracing debate over child allowance payments for American families. Big issues like federal support for pro-natalist policies and the dangers of giving up hard-won policy victories encouraging and requiring work within federal welfare programs were argued. What has been less discussed, but may in the long term be more important, is how these new payments may be the first step toward a more libertarian approach to welfare.

Cash vs. The Welfare State

The 1996 welfare reform bill—passed by bipartisan majorities and signed by President Clinton—was a social policy revolution. The old Aid to Families With Dependent Children (AFDC), an open-ended entitlement that data and observed experience suggested was making life worse for those who became dependent upon it, was supplanted by a time-limited cash welfare benefit tied to work requirements called Temporary Assistance to Needy Families (TANF). This new program was supplemented with earned-income tax credits to “make work pay” and federally-funded child care vouchers to make it possible for mothers to hold down a job.

TANF worked like a charm. Welfare caseloads and child poverty rates fell simultaneously as single, mainly minority mothers joined or rejoined the workforce in droves. Since that time the work-focused welfare paradigm has been the heart of the conservative gospel with efforts to extend work requirements into Supplemental Nutritional Assistance (SNAP), housing, Medicaid, and other programs targeted to low-income Americans. It seemed there was no problem that a tough, properly administered work requirement couldn’t solve.

In 2006, AEI scholar Charles Murray, a libertarian, began to call conservative orthodoxy into question. His book, In Our Hands: A Plan to Replace the Welfare State, argued that the vast superstructure of federal welfare programming was fiscally unsustainable and morally fraught. Murray proposed scrapping most of it and replacing it with a cash payment that was in essence a universal basic income (UBI). He argued that such an approach would restore agency and create a “market” within poor communities that would encourage cooperation between parents, each of whom would have a pretty good idea of the resources available to each other for the maintenance of their children. This might also create an incentive for stable partnerships as these mothers and fathers opted to conserve cash by sharing a place to live. Such domestic partnerships might, in time, bloom into marriages or something akin to them.

At the time of publication, Murray’s idea was viewed as unworkable in the political context of the middle George W. Bush years because newly resurgent Democrats would never agree to the elimination of the welfare state they had so lovingly constructed over decades. Without the savings generated by ending those programs, there was no way to finance the replacement benefit. Republicans, still basking in their 1996 success, also had a lingering suspicion of policies that involved creating new cash benefits.

This suspicion of cash was “present at the creation” of the modern welfare state. Robert Caro, the great historian of Lyndon B. Johnson the man and the president, says that when Johnson’s advisors proposed the War on Poverty, LBJ’s one prohibition was, “No dole.” Having lived through the New Deal he was acutely aware of how Republicans—not to mention his own Texas Democrats—would react to anything perceived as a giveaway to those regarded as undeserving. He refused to be blown up by a petard of his own making.

In consequence, a new deluge of alphabet-soup programs was created to provide services, rather than cash, to the poor. Head Start, Job Corps, Community Action, VISTA, and a host of others were rushed through Congress to eliminate poverty, root and branch. This wasn’t a dole—it was a massive experiment in social and human reengineering. Social transformation, under the War on Poverty, would proceed from within as federally-funded programs and hundreds of thousands of civil servants and nonprofit employees took on the task of moral, educational, and social reformation among low-income Americans as the predicate for joining the Great Society.

Provided with resources and left to their own devices, with mutual support from family and friends, low-income Americans appear to do no worse, and in some cases better, than those who are enrolled in the heavy-handed and intrusive federal nanny-state programs.

As one might expect with such an ambitious project targeted at a detailed rewiring of the inner lives of human beings, things didn’t turn out as expected. People resisted being told what to do and how to live. Poverty, crime, unmarried births, and a host of other social ills rose relentlessly for decades beginning in the 1960s, and federally led anti-poverty programs fell into deep disrepute laying the political foundation for the conservative snap-back embodied in the 1996 reforms. In Ronald Reagan’s famous locution, we declared a war on poverty and poverty won. Henceforth, the U.S. government would focus its efforts on the basics, requiring work in return for public benefits, as the main pathway to economic self-sufficiency and social reform.

Return to the Bad Old Days?

Superficially, then, President Biden’s American Rescue Plan (ARP) appears to be a volte-face, a return to the bad, old days of mushrooming, counter-productive federal anti-poverty programs. Mainstream media outlets describe the nearly $2 trillion plan as a major shift toward a more generous safety net, unprecedented in American history. ARP is the new face of a renewed progressivism.

In terms of gross expenditures on poverty programs, there’s more than a grain of truth to this understanding. The value of the $16 billion TANF block grant, which was never indexed for inflation, has declined dramatically since 1996 and, as the chart below shows, is increasingly devoted to non-cash benefit activities related to assisting poor families (e.g., work, training, childcare, child welfare, work-related tax credits).

Changes in TANF Spending Categories, 1997-2015 (Source: U.S. Department of Health and Human Services, Administration for Children and Families)

The new child payments will add $110 billion in federal spending by the end of 2022. Should Congress make the program permanent, it will cost close to $1.9 trillion over the next 10 years, and, according to estimates, reduce child poverty by between 30 percent and 50 percent. But, as my AEI colleague Michael Strain has noted, the ARP child payments are poorly targeted as an anti-poverty measure. Most of these resources will not go to the poor but to the middle class making them more like Social Security and Medicare than TANF, in what supporters have acknowledged is an effort to give the broader public a stake in maintaining the new program.

At the same time, the ARP payments look like another step toward seeing the federal government as an income transfer machine rather than an intrusive social engineer, not the nanny state but the auntie state. Seen that way, these payments resemble Charles Murray’s 2006 vision far more than LBJ’s.

Return to Personal Responsibility?

To a significant degree, the ARP child payments are an outgrowth of interest in the idea of UBI programs being experimented with here and abroad. If you want people not to be poor, the argument goes, give them money. The jury is very much still out on whether these types of programs will have their intended effect without setting off a new era of work avoidance and even more, and worse, disrupted family formation.

At the same time, some recent small experiments in other federal programs are contributing to a growing body of knowledge that may confirm the libertarian insight that individuals (and families) are the most important experts in their own lives. Provided with resources and left to their own devices, with mutual support from family and friends, low-income Americans appear to do no worse, and in some cases better, than those who are enrolled in the heavy-handed and intrusive federal nanny-state programs.

I first stumbled on this data while researching prisoner reentry programs for a recent volume of essays AEI published, Rethinking Reentry. Chapter One is a meta-analysis of reentry programs that found most had little or no effect on criminal recidivism. More troubling, in some of these programs, the “control groups”—those selected for comparison purposes who do not receive services—actually did better than those who did. Reentry programs, it seems, weren’t just not helping. Depending on the model, they appeared to make the situation worse.

In another program for homeless families, three different approaches were tested for improving long-term outcomes—housing vouchers/no services, vouchers plus moderate intervention, and site-based housing with mandatory, intensive services. The vouchers-only group won in a walk. Even these very poor, troubled, and disadvantaged families, if provided resources without strings, were better at caring for themselves than the intricately designed programs that sought to do their caring for them. When I heard these outcomes presented among a group of welfare researchers, there was utter, shocked silence. One participant in the session commented that anytime someone proposes a new social program, we should insist that a parallel, cash-only approach be evaluated alongside it and let the best program win.

The beating heart of conservatism is realism, taking the world and the people who inhabit it as it and they are. One of the perennials of human nature and experience is a constant trading off of risks and rewards. Our primary affections are devoted to our own families and our energies to doing what we can to get the best for ourselves and for those we love. A happy, if unintended, side effect of this behavior is that a lot of other people we may not necessarily even know get pulled along with us. Maurcio Miller, a long-time anti-poverty program operator and critic of an overly intrusive welfare state, believes the American approach to poverty is fundamentally misguided and counterproductive because it doesn’t recognize what he calls “positive deviance,” the hope and hustle of human nature. If our welfare programs targeted this inherent drive, increased the freedom of those who receive public benefits, and supported their aspirations, we would be putting taxpayer dollars on the side of natural human instincts and behavior rather than seeking to reshape it from the outside.

To be sure, a libertarian rewiring of the welfare system was not the intent of the expanded child payments in the ARP. If we don’t shift from warehousing the poor to appealing to their desire to improve their own lot in life, the poor will be better-provisioned but remain economically stagnant. On the other hand, these payments might become another step toward extricating government from the lives and ambitions of low-income Americans and relying chiefly on the innate interests, capacities, and drive of people who have the best understanding of their own needs. We’ve tried everything else. Why not this?