5. The greatest single problem in welfare today is the breakdown of family responsibility. Strong provision should be made to insure maximum support from responsible absent parents.
6. A simplified system of pensions should be established for the needy aged, blind, and the totally and permanently disabled.”
[Testimony of Gov. Ronald Reagan to the U.S. Senate Finance Committee, Feb. 1, 1972, pp. 1-2]
However, overbearing federal bureaucracy and restrictions prevented Reagan and Carleson from achieving their goal of requiring work from able-bodied recipients in return for welfare assistance. So-called “workfare” requirements would allow beneficiaries to “earn” their benefits from the taxpayers and eliminate incentives for those not truly in need to game the system and deplete resources available to help those with nowhere else to turn. Reagan explained the rationale when he became President and continued his push for the principle of welfare recipients "earning" their benefits:
“Many people today are economically trapped in welfare. They’d like nothing better than to be out in the workaday world with the rest of us. Independence and self-sufficiency is what they want. They aren’t lazy or unwilling to work; they just don’t know how to free themselves from the Welfare security blanket.”
[Remarks to the National Alliance of Business, October 5, 1981]
Their experience in California led Reagan and Carleson to advocate policies at the national level to provide states with finite federal funding in exchange for maximum flexibility in using the money for state welfare programs — a concept commonly referred to as block granting. As President-elect, Reagan personally approved the block grant concept, with his signature “RR OK” initials, as part of his transition team’s action documents submitted to him by Bob Carleson, acting as Reagan’s Health and Human Services transition head. As Reagan argued to Congress in 1986:
“Many services can be provided better by State and local governments. Over the years, the Federal Government has preempted many functions that properly ought to be operated at the State or local level. This budget contemplates an end to unwarranted Federal intrusion into the State and local sphere and restoration of a more balanced, constitutionally appropriate, federalism with more clearly delineated roles for the various levels of government. Examples include new consolidations of restrictive small categorical grant programs into block grants for transportation and environmental protection, at reduced Federal costs. Continued funding is maintained for existing block grants for social services, health, education, job training, and community development.”
[Message to the Congress Transmitting the Fiscal Year 1987 Budget, Feb. 5, 1986]
Years after Reagan left office, in 1996, the block grant concept was finally enacted into federal law. For the first time in history, a Great Society program, Aid to Families with Dependent Children (AFDC), was repealed. It was replaced with the Temporary Assistance to Needy Families (TANF) program. Under TANF, federal welfare cash assistance is now provided in the form of finite block grants to fund state programs based on mandatory work requirements for able-bodied welfare recipients. The former AFDC program depended on a federal matching formula that encouraged states to increase welfare rolls and spend more money in both good times and bad.
Replacing the federal matching formula arrangement with finite block grants was the key to the overwhelming success of the 1996 Welfare Reform. Under the block grant, federal funding does not increase when a state spends more on welfare or increases the state’s welfare rolls. If a state’s program costs increase, the state must pay the extra costs itself. But, if the program costs less, the state gets to keep the savings in order to provide enhanced services for the state’s truly needy.
Incentives matter. Allowing states to keep their welfare savings provides an economic motive for welfare offices to become employment centers instead of mere welfare intake bureaus measuring their success by how much welfare rolls grow.
Touching on the perverse incentive that motivated the welfare establishment, Reagan as President in 1982 observed:
“The war on poverty created a great new upper-middle class of bureaucrats that found they had a fine career as long as they could keep enough needy people there to justify their existence.”
[Remarks at a Kansas Republican Party luncheon, Topeka, Sept. 9, 1982]
See full text of The Reagan Resolve and source documents for Reagan’s quotes at http://theccwr.org/ReaganResolve.html.
For more information, see The Carleson Center for Welfare Reform.