POVERTY AND WELFARE



Perhaps the only topic that entertains more myths than the federal deficit is welfare. Reagan once described a Chicago Welfare Queen driving a Welfare Cadillac. Allegedly, she had used 80 different names to collect $150,000 in benefits. When the press tried to track her down, they discovered she did not even exist. Nonetheless, this apocryphal anecdote has enjoyed lasting fame - among both conservatives and liberals, for different reasons.



One of the most popular myths is that welfare is a serious drag on the economy. Actually, it barely registers on the radar screen. The most vilified form of welfare is Aid to Families with Dependent Children (AFDC), which allegedly gives poor mothers a financial incentive to avoid work and have babies. Together, AFDC and Food Stamps are by far the largest items of the welfare budget. Yet in 1992, AFDC formed only 1 percent of the combined state and federal budgets. Food stamps also took up 1 percent. 1 If you expand the definition of "welfare" to include all one-way transfers of benefits (such as student grants, school lunches and pensions for needy veterans), then welfare takes up only 12 percent of the combined budgets. 2 (More)



Another myth is who gets welfare. Mention the word "welfare" and most people automatically think of the poor. But the fact is that corporations and the rich receive far more welfare than the poor. Welfare for the poor (AFDC and Food Stamps) totaled $50 billion in 1992, but welfare for corporations (pork-barrel projects, business subsidies and tax breaks) are estimated to run from $85 billion to $800 billion, depending on which think tank you listen to. (More) Brian Kelly, a Washington journalist who has written a book on corporate pork, discloses that pork alone costs taxpayers between $20 to $100 billion a year. 3 By itself, the $500 billion dollar Savings & Loan bailout would have funded 10 years of AFDC and Food Stamps. There is simply no question who receives the most welfare from government.



During the 80s, government spending on individuals increased for everyone except the poor. The reason is because the poor cannot afford lobbyists to defend their interests in Washington; consequently, politicians find the poor easy targets for budget cuts. Between 1970 and 1991, the purchasing power of benefits for the typical AFDC family fell 42 percent, primarily as a result of state and federal cuts. 4



Average Monthly Benefits (Constant Dollars, 82-84 CPI) 5

Program 1980 1993 AFDC (per family) $350 261 Food Stamps (per person) 42 47

It is impossible to live well on welfare alone, and most recipients go hungry near the end of the month. In 1992, the poverty level for a mother with two children was $11,186. 6 In that year, the average yearly AFDC family payment was $4,572; Food Stamps for a family of three averaged $2,469, for a total of $7,041. That was only 63 percent of the poverty line, and 74 percent of a minimum wage job.



The decline of welfare benefits helped poverty grow in the 80s:



Poverty Level, 1960-1992 7

1960 22.2% Recession year 1966 14.7 Johnson's "Great Society" in progress 1969 12.1 1970 12.6 Recession year 1975 12.3 Recession year 1976 11.8 1977 11.6 1978 11.4 1979 11.7 1980 13.0 Recession year 1981 14.0 Recession year 1982 15.0 Recession year 1983 15.2 1984 14.4 1985 14.0 1986 13.6 1987 13.4 1988 13.0 1989 12.8 1990 13.5 Recession year 1991 14.2 Recession year 1992 14.5

During the 50s, poverty hovered around 20 percent. Michael Harrington had to write a bestseller entitled The Other America to remind the middle class that not all Americans were living like Ward and June Cleaver. In 1964, Johnson declared war on poverty with his "Great Society" program. The increased welfare payments reduced poverty to 12 percent by the end of the 60s.



Generally, the poverty level mirrors the unemployment rate. Unemployment is greatest during recessions; as unemployment gradually falls over the years following a recession, poverty falls too. But if you look at the general trends between recessions, you can see that poverty rates were lower in the 70s than in the 80s. This is largely due to deepening cuts in individual welfare benefits.



Another myth is that the burgeoning incomes of the top 1 percent allowed them to give more to charity. In fact, the rich drastically reduced their charitable donations in the 80s, and the poorest raised them, despite their declining incomes. In 1990, the poorest income group -- under $10,000 -- actually gave the highest share to charity: 5.5 percent. 8

Charitable donations in the 80s: 9 Percent Percent of Income 1980 1988 change 88 income ----------------------------------------------------------------- $25,000-30,000 $665 $1,075 +62% 3.6 - 4.3% $500,000-$1 million 47,432 16,602 -65% 1.7 - 3.3 Over $1 million 207,089 72,784 -65% *

* Dividing $72,784 by $1 million seriously skewers the percentage because of the open-endedness of this income group, which includes multi-millionaires and billionaires.



Another set of myths surrounds who is on welfare for the poor, and for how long. The following statistics were compiled in 1994, but they also reflect the trends of the Reagan-Bush years:



Traits of families on AFDC 10

Race White 38.8% Black 37.2 Hispanic 17.8 Asian 2.8 Other 3.4 Time on AFDC Less than 7 months 19.0% 7 to 12 months 15.2 One to two years 19.3 Two to five years 26.9 Over five years 19.6 Number of children One 43.2% Two 30.7 Three 15.8 Four or more 10.3 Age of Mother Teenager 7.6% 20 - 29 47.9 30 - 39 32.7 40 or older 11.8 Status of Father 1973 1992 Divorced or separated 46.5% 28.6 Deceased 5.0 1.6 Unemployed or Disabled 14.3 9.0 Not married to mother 31.5 55.3 Other or Unknown 2.7 5.5

As you can see, the stereotype that the average welfare recipient is a teenage black mother with several children is completely false, and not a little racist. The fact that blacks make up only 12 percent of the population but 37 percent of AFDC recipients reflects the continuing discrimination they experience on the job market.



Another set of myths surround the "incentives" that welfare supposedly brings. In March 1987, the General Accounting Office released a report that summarized more than one hundred studies of welfare since 1975. It found that "research does not support the view that welfare encourages two-parent family breakup" or that it significantly reduces the incentive to work. 11



Nor does welfare give single mothers an incentive to bear more children. AFDC families are not much larger than the national average. In an effort to curb this supposed incentive, New Jersey became the first state in the nation to experiment with a "family cap." The cap denies mothers extra welfare benefits for having more babies. And did the cap result in fewer births among AFDC mothers? At first, the Heritage Foundation reported that AFDC births fell 29 percent - a tremendous result. But no other study confirmed this finding, and it soon became clear it was nonsense. The Heritage study failed to report that birthrates for New Jersey in general were falling also. A Rutgers University study by Michael Camasso found that the family cap had no effect on welfare birthrates. His study researched two groups of women: mothers who would receive more benefits if they had additional children while on welfare, and those who would be denied more money under the family cap. Camasso wrote: "From August 1993 through July 1994 there is not a statistically significant difference between the birth rates in the experimental and control groups."



Many other studies have confirmed that welfare provides almost no extra incentive to have children. An 8-year study in Wisconsin, which is undergoing massive welfare reform, has found that women on welfare actually have a lower-than-average birthrate than non-welfare women! In fact, their birthrates were lower than the national average. Perhaps the greatest problem with "incentive" theories is that welfare payments are too small to provide any meaningful incentive.



One factor that would relieve the number of mothers on welfare would be the greater financial support of fathers. In 1989, only three-fourths of the women who were awarded child support received payments of any kind, and only half received full payments. The mean child support payment was $2,995; for women whose incomes were below the poverty level, the mean was only $1,889. 12 Obviously, even full payments are inadequate amounts for raising a child; before a society should condemn welfare moms, it should consider rousting out deadbeat dads.



The "feminization of poverty" has been especially hard on the nation's children. America has the greatest level of child poverty anywhere in the industrialized world:



Percent of children below the poverty level 13

1970 14.9% 1975 16.8 1980 19.5 1985 20.1 1990 19.9 1992 21.1