Escape from the Welfare Trap

The standard literature on welfare reform, steeped in positivist methods, leaves out a central component of human nature: even welfare recipients have free will. They can choose to stay on welfare or they can choose to drop it. The decision often has more to do with the particulars of government policies than with actual individual circumstance.

I'm reminded of the point by an unnoticed, yet extraordinarily interesting, demographic trend that popped up earlier this year. Some welfare recipients unexpectedly gave up the dole without any change in underlying economic data.

The key fact is this: When the Republicans captured a majority in Congress last year, nearly everyone, including welfare recipients, believed that the day of the free ride was coming to an end.

Congressional leaders warned that programs will be cut and abolished. Even those designed to serve the poor would reconsidered. Though no omnibus legislation has become law, social trends had begun to reflect this new reality, inspiring people to change their behavior.

As a result, food stamp rolls have already fallen dramatically. Acting on their own free will, more than one million people have stopped taking food stamps since this time last year. The bulk of this drop has occurred since January, the very time that Congress convened to announce a new policy on entitlements. During the previous four years, the rolls had steadily swelled, sometimes expanding by 40,000 recipients per week.

Even without legislation, then, the problem of welfare dependency has started to abate. People are factoring in expectations of what this new Congress will do and acting according. They are reassessing their own personal situations and drawing on their own and their community's resources.

Poor people are a lot smarter than social scientists give them credit for being. Like everyone else, they plan ahead, with a view toward a certain amount of future financial stability, which sometimes leads them to the want ads and to churches and community organizations.

This encouraging trend also suggests that welfare reform might be easier than some people think. When welfare no longer offers an easy way out, millions more will be persuaded to become more independent, developing individual and entrepreneurial skills. The more people that drop relief, the more government saves money.

Food stamps cost taxpayers $27 billion per year, making it the largest single welfare program. Including administration, food stamps cost taxpayers approximately $1,000 per year, per recipient. With 1 million people suddenly out of the program, Congress could enact an immediate $1 billion cut because the appropriation is no longer needed.

The best way to ensure that this trend continues is to make even larger cuts, further pushing people away from dependence on government and toward economic participation. But if Congress does not follow through on its promises—and it appears it will not—we can expect a snapback to the status quo, as people realize that this Congress is no more serious about cuts than previous administrations promising the same.

Do not expect those with a special interest in a welfare program to celebrate when its customer base declines. The bureaucracies desire the growth. This is the paradox of welfare bureaucracies: they are supposed to help people; instead they lobby for their own institutional gain.

The case of food stamps offers an additional complication. The primary beneficiaries of this program are not those who get free food, but those who sell their food to the government. The program is administered by the Department of Agriculture, a New Deal agency designed to help farmers, not the Department of Health and Human Services.

The food growers, then, are the ones most likely to complain as people begin to drop off the rolls. If the Agriculture Department, in combination with influential agricultural interests, succeed in keeping the largess flowing, it will be at the expense of a vulnerable population that desperately needs new answers.

These agricultural lobbyists won't be entirely candid about their motives. They will say, as great practitioners of “compassion,” that the poor will starve without food stamps. But here's another trend that bears reflection: charitable giving is also increasing during the past year.

Private charity tends to be inversely related to growth of government welfare. For example, the high point of American charitable giving predates the Great Society. As today's budget cuts go into effect, people will reach deeper into their pockets to help those genuinely in need.

To understand these two trends requires that we think about welfare reform as more than a static sequence of economic trends. What Washington does changes people's views of how they should live.

The models of the social scientists do not show it, but even poor people have free will and can exercise it wisely. Even the perception of cuts in welfare helps people realize that independence is in their own interests. By making real cuts in the welfare state, policy makers can make the common good coincide with a sound fiscal policy.