US Welfare Reform

Greg Barns has a piece in today’s Herald-Sun (not online, sorry), which makes the traditional leftist argument against US welfare reform. These kinds of opeds – a hardy perennial in the Australian debate – make the essentially correct point that welfare reform was a tough love approach. But they also make three standard errors.

1. They focus on time limits, and ignore the massive expansion of the US EITC, a wage subsidy to low-wage workers that now amounts to $35 billion per year. That’s a bigger transfer to the poor than anything in Lyndon Johnson’s war on poverty.

2. They ignore the increase in labour force participation, which was substantial, particularly for single women.

3. They’re muddy about the counterfactual, tending to imply that the status quo is just fine (ie. that our current approach to the Disability Support Pension is the best solution).

US welfare reform was no panacea, but like US foreign policy, it’s easy to over-simplify it from the other side of the Pacific.

There are some more careful (and appropriately sceptical) pieces on US welfare reform by the Urban Institute and David Ellwood.

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7 Responses to US Welfare Reform

  1. Greg Barns says:

    Andrwew misses the point of my piece. Yes, the US reforms in a macro sense work, but if one looks at the individual cases you see harsdship and unfairness.

    Furthermore, Andrew doesn’t address my human rights and justice point – this is critical.

    Finally, if I am a standard leftist on this well – I am proud to be labelled as such!

  2. Andrew Leigh says:

    I think Greg’s point about human rights and justice is an interesting one. As a one-time lawyer, this was part of the reason I went to study economics: because I felt that rights-based analysis didn’t have much to offer in the field of social policy. In a normative sense, one can construct “rights to work”, “rights to a basic income” or “rights to a minimum wage” — but law is much less helpful when it comes to balancing them. Economics, on the other hand, doesn’t see things in terms of rights, but in terms of the costs & benefits of a particular policy, which I at least find a more useful framework.

  3. Geoff Robinson says:

    James Galbraith in New Left Review 237 (1999) had an interesting argument on this, which was criticised by some of the left; http://www.monthlyreview.org/500galbr.htm

  4. Don says:

    I understood the point of Greg’s piece (which I won’t comment on) but I’ve also got a couple of niggles.

    Greg says: “The Washington-based Centre for National Policy, a bipartisan think tank, published results in 2002 of extensive research into penalty schemes for the long-term unemployed.”

    1. The Center for National Policy’s report was NOT about schemes for the long-term unemployed. It was about the Temporary Assistance to Needy Families (TANF) program. TANF’s support goes largely to single parent families. It replaces the old AFDC program.

    2. The Center for National Policy isn’t a ‘bipartisan’ think tank – it’s a ‘non-partisan’ think tank.

    As I understand it, being ‘non-partisan’ is what makes the CNP eligible for its tax exempt status under section 501(c)(3) of the tax code. The Heritage Foundation is also a section 501 think tank.

    Calling it ‘bipartisan’ suggests that the CNP’s work is equally acceptable to Republicans and Democrats. I doubt that this is true.
    ____________

    Also, I couldn’t help noticing that exactly the same sentence appeared in an editorial for the Canberra Times on 4/5/05.
    http://canberra.yourguide.com.au/detail.asp?class=your%20say&subclass=general&category=editorial%20opinion&story_id=390788&y=2005&m=5

  5. Andrew Leigh says:

    Don, thanks for the post. I share your concern about conflating TANF with penalty schemes.

    Geoff, I haven’t read James Galbraith’s article, but can’t see how he derives his figures. For a simple comparison of inequality across countries, see http://www.lisproject.org/keyfigures/ineqtable.htm.

  6. Greg Barns says:

    Mr Robinson’s believes I was in error in my categorisation of the CNP report. That is not so. The work examined job requirements and penalties under the TANF programs in various states. These programs include penalty schemes.

    In response to Andrew, human rights and respect for the individual’s circumstances can never be anything but at the front and centre of public policy in this area.

  7. Don says:

    Greg, I don’t think this makes a lot of difference to the argument you were making, but I think it’s misleading to describe TANF as an income support program for the long term unemployed.

    I DO think it’s worth looking at the US experience. Back before the 1996 reforms (PRWORA), when the federal government was granting waivers under AFDC, Wisconsin attracted a lot of attention.

    Wisconsin’s waiver experiments became the W-2 program and people like Robert Rector of the Heritage Foundation called it a miracle. They seem more reluctant to discuss it now.

    I wrote a short post on this a while ago:
    http://badanalysis.com/catallaxy/?p=798

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