Acton Commentary

Effective Childcare--The Welfare Reform Dividend


There is no question from the Judeo-Christian theological perspective that there is a preferential option for the poor. Or that our nation’s policies ought to reflect this preferential option, placing the needs of the poor at the center of national discussion. Clearly, all of society must, to the level appropriate to their vocation and station in life, contribute to assisting those in need. Translating this clear ethical, moral, and spiritual mandate into sound welfare policy, however, is not a simple, straightforward task. As Congress takes up the reauthorization of the 1996 welfare reform legislation, it is important that actual needs, such as effective childcare for working parents, not be allowed to become another welfare state boondoggle, undermining meaningful social policy reform.

Since the watershed 1996 Temporary Assistance to Needy Families (TANF) legislation was enacted, the United States has enjoyed great success in reducing welfare caseloads, moving able-bodied people into employment, and significantly reducing child poverty. The savings involved in moving fully one-half of welfare recipients off of direct cash assistance and into employment have created a substantial welfare reform dividend that should be employed to meet the next phase of welfare reform—effective childcare for those millions of parents now in the workforce.

Opponents of welfare reform continue to argue that government funding for childcare has been flat or has actually decreased since 1996. This assertion is false; in fact, childcare funding has increased a whopping 409 percent from $2.2 billion in 1992 to $11 billion 2002. Two-thirds of this spending, however, did not come from new congressional appropriations, but from the dividend derived from savings in the TANF program due to welfare reform. At the base of the ability of many states to realize such savings was the liberalized local control afforded to states and their social service providers in administering the social services block grant provided by TANF program.

From both a pragmatic and moral point of view, it would be wrong to make work a qualification for social assistance and then fail to provide the necessary infrastructure that makes work profitable—financially and personally. Normatively, it is family structures that enable work to be both meaningful and profitable. Those in higher income brackets, if family sources are not available, can usually afford to pay for childcare. In many instances, those parents, often single, who have moved from welfare to work, have neither the income nor the family structure sufficient to meet the childcare needs.

The welfare reform legislation currently under consideration in the U.S. House of Representatives contains an important provision that would further increase the flexibility that states have in using TANF savings for childcare. Taking into account the dividend created by TANF savings, the legislation would allow states to transfer up to half of their total TANF funds to childcare; current law allows only a 30 percent transfer. Added to this is the proposal to create a State Flex program that would allow governors and state officials the flexibility to combine TANF, food stamps, public housing, and work programs into packages more able to address individual needs, especially childcare. This greater flexibility, combined with expanded work requirements, seems a wise use of these resources.

The difficulty of meeting the childcare needs within this arrangement is that it still has the effect of creating government dependencies and new programs, atrophying civil society’s role in supporting children and families in need. It is a cliché to point out that government dollars drive out private, community based initiatives, but it is a fact. In reality, many of those in the working poor category opt out of government subsidized childcare programs, preferring instead, the faith-based childcare offered by local churches and community based entities. These programs are usually qualitatively better because they often provide the civil society “ties that bind” in offering personal support, a morally informed worldview, communal connections, and love to both children and working parents.

The best way to “spend” the considerable dividend derived from TANF savings would be to further decentralize childcare programs and lift the burden of regulation on faith-based and community providers. This could be easily accomplished by establishing, as an intermediate solution, TANF funded childcare vouchers, so that those parents in need of childcare have real choices. Such reforms would incentivize the meeting of local needs with local solutions. Removing obstacles to meeting childcare needs could go far in establishing locally controlled, parent-accountable childcare, transforming the welfare reform dividend into a dividend of effective compassion.