[Budget Supplement]
[Creating Opportunity and Encouraging Responsibility]
[7. Making Work Pay]
[From the U.S. Government Printing Office, www.gpo.gov]


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  I think the objective of welfare reform should be to break the cycle of dependency in a way that promotes     
responsibility, work, and parenthood. I believe that our objective for all Americans should be to make sure that
every family can succeed at home and at work, not to make people choose.                                        
                                                                                                                
                                      President Clinton                                                         
                                      February 1996                                                             
                                                                                                                

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  America's welfare system is broken. It does not serve the taxpayers or 
those trapped in it. And it undermines the values of work and family. We 
must replace it. At the same time, Congress' failure to raise the 
minimum wage has hurt millions of hardworking families.
  For three years, the Administration has worked aggressively to fix 
specific parts of the welfare system, while pursuing comprehensive 
reform. In 1993, the President's economic program gave tax cuts to 15 
million working families through the Earned Income Tax Credit, which 
rewards work over welfare. In 1994, the Federal Government collected a 
record $10 billion in child support (see Chart 7-1). A year later, the 
President signed an Executive Order to make the Federal Government a 
model employer for collecting child support. In July 1995, the President 
ordered that Federal regulations be strengthened to prevent welfare 
recipients who refuse to work from getting higher Food Stamp benefits 
when their welfare checks are cut.

                                     


  The Administration's actions--combined with the falling unemployment 
rates that a strong economy has generated--are having an impact. Since 
their peak in March 1994, welfare caseloads have fallen from 14.4 
million to 12.9 million, or 10 percent (see Chart 7-2).

                                     


  The Administration has given 37 States the freedom to test ways to 
move people from welfare to work and protect children. The President's 
welfare plan also would dramatically increase State options to structure 
the system, but retain basic standards for helping the poor to live and 
become self-sufficient.
  Through State welfare experiments, 9.9 million recipients across the 
Nation are in households in which adults are being required to work, 
take more responsibility for their children, sign a personal 
responsibility contract, or earn a paycheck from a business that uses 
money otherwise spent on Food Stamps and welfare benefits to subsidize 
private sector jobs. These States are doing their part to promote real 
reform that reflects the basic values that Americans share: work, 
responsibility, and family.
  Now, however, Congress needs to do its part and work with the 
Administration on bipartisan legislation that honors those same values 
by requiring work, demanding responsibility, protecting children, and 
providing adequate resources to get the job done right.
  In 1994, the President sent Congress a dramatic welfare reform plan 
to: time-limit welfare benefits; establish tough work requirements and 
provide child care for welfare recipients; impose tough child support 
enforcement measures on non-custodial parents; increase State 
flexibility to run public assistance programs; and protect children. 
That proposal triggered many others--in Congress and from the Nation's 
governors.
  The President is determined to keep working with Congress to enact a 
bipartisan welfare reform bill. In this budget, the President proposes a 
revised plan to replace the current welfare system with one that 
requires work and provides child care so people can leave
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welfare for work. This new plan saves about
 $40 billion over seven years while 
promoting sweeping work-based reform and protecting children.

                             WELFARE REFORM

  To succeed, welfare reform must focus on moving those who can work to 
independence through: tough work requirements; child care; incentives to 
reward States for placing people in jobs; a continued financial 
commitment by States to reform; a flexible program structure that can 
respond quickly to fluctuations in welfare caseloads and adapt to local 
needs; a strong national nutritional safety net; and protection for 
children even if their parents lose assistance.

Moving People from Welfare to Work

  Welfare reform is mainly about work. The President's plan would repeal 
Aid to Families with Dependent Children (AFDC) and create a new, time-
limited, conditional entitlement to cash assistance. As soon as they 
join the rolls, beneficiaries would have to develop and sign a personal 
responsibility contract with their welfare office. Within two years, 
able-bodied parents would have to work or lose their benefits--and after 
five years, they no longer would get cash benefits.

  Providing Child Care to Reward Work Over Welfare: Child care is vital 
to moving people off welfare and helping them stay off. Many people stay 
on welfare because when they work, the cost of child care leaves them 
worse off. The budget proposes significantly more funding for child care 
to help low-income parents get the skills to hold a job or look for one. 
Child care funds also would help parents avoid welfare in the first 
place.
  Ensuring Protection During Economic Downturns: In a recession, State 
revenues fall as welfare caseloads rise because more jobless families 
seek public assistance. Without
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a funding structure that can adjust to 
caseload changes, a recession could render many States unable to keep 
paying welfare benefits and still meet the tough work requirements of 
any real reform. The President believes strongly in maintaining a 
flexible funding structure that adjusts to changing economic 
circumstances.
  Keeping a Stake in Successful Reform: States must maintain their 
commitment to move people from welfare to work. Without it, some States 
may withdraw their support for programs that move people to work and 
drastically cut benefits in a ``race to the bottom.'' States should be 
held accountable for making welfare reform a success. The President's 
proposal requires a sustained State financial contribution. The proposal 
also recognizes that State welfare bureaucracies need a positive 
incentive to focus on the central goal of moving people from welfare to 
work. Thus, the President proposes $800 million in performance bonuses 
to reward States that achieve the best results in moving people from 
welfare to work.

Requiring Parental Responsibility

  To end welfare as we know it, we must encourage responsible behavior. 
The President's proposal sends a strong message to the next generation 
that they should not have children until they can care for them.

  Strengthening Child Support Enforcement: In his 1994 welfare plan, the 
President proposed sweeping changes to strengthen child support 
enforcement. These included: revoking driver and professional licenses 
for parents who refuse to pay child support; improving interstate laws 
to find such parents; and strengthening the tools to establish paternity 
so that both parents take full responsibility for their children.
  Reducing Teen Pregnancy and Stabilizing Families: In his State of the 
Union address, the President launched a national
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campaign to cut teen pregnancy by a third over 
the next 10 years. The budget proposes $30 
million to address the problem and support grass-roots community 
efforts. A National Clearinghouse on Adolescent Pregnancy would provide 
information, data, and technical assistance to teen pregnancy prevention 
programs, including education about abstinence.
  Teens who become parents often need support and guidance, especially 
to meet their children's emotional and material needs. Under the 
President's proposal, minor parents would have to live in an adult-
supervised environment as a condition of receiving temporary employment 
assistance. To help them become self-sufficient, minor parents also 
would have to participate in education or job training activities.

Protecting Children

  Welfare reform should not punish children.

  Maintaining our National Commitment to Abused and Neglected Children: 
In 1993, the Administration secured legislation to provide close to $1 
billion for the new Family Preservation and Support program. The law 
recognized that child abuse and neglect are serious, growing problems. 
Recently, reported child maltreatment and the need for out-of-home 
placements have both risen sharply--about 2,000 children die each year 
due to abuse and neglect.
  Some congressional welfare bills would cut child protection programs, 
leading to more uninvestigated reports of mistreatment, more children 
left in unsafe homes, and more children languishing while they await 
adoption and permanent homes. Congress should reject such cuts and, 
instead, maintain a flexible system that can respond over time to 
changes in children's need for protection.

  Maintaining our National Nutrition Safety Net: Every day, the national 
nutrition safety net protects millions of children, working families, 
and elderly. The Food Stamp program reaches one in 10 Americans every 
month--over 13 million children and two million elderly people. About 26 
million children receive lunches supported by the Agriculture Department 
each school day. Another 2.5 million children a day participate in the 
child and adult care feeding program.
  Throughout their history, Food Stamps and Child Nutrition have 
produced significant, measurable improvements in the nutrition of 
children and families. The programs work because of: national standards 
on nutrition, eligibility, and benefits; funding structures that ensure 
that the programs respond to changing needs caused by economic 
fluctuation; and Federal oversight that helps ensure their integrity. 
The Food Stamp program helps to ensure that low-income families and 
individuals have access to the resources they need to maintain an 
adequate diet. The President's plan maintains the national nutrition 
safety net for Food Stamps and Child Nutrition, enabling them to respond 
to the changing and disparate circumstances of families and children.
  Under the President's plan, the Food Stamp program continues to index 
basic benefits with inflation; counts all energy assistance as income; 
and imposes a new work requirement that makes adults aged 18-50 with no 
dependents ineligible for Food Stamps after six months of each year 
unless they work 20 hours a week or participate in workfare or training 
(eligibility continues if a State does not supply a training or workfare 
slot). Tough new integrity measures crack down on fraudulent Food Stamp 
trafficking and waste. In addition, the plan gives States unprecedented 
flexibility to run the Food Stamp program. It better targets food 
subsidies for Family Day Care homes and makes other minor changes in 
Child Nutrition programs.

  Protecting Children Whose Parents Reach the Time Limit: As we have 
said, welfare reform should not punish children. Even after a family's 
cash benefits end, the President's plan calls for vouchers for goods and 
services so that children continue to receive essential items, such as 
clothing and housing.
  Protecting Health Coverage for Poor Families: Health care is an 
important part of the strategy to move poor people from welfare to work. 
The President proposes to retain the Federal guarantee of coverage under 
Medicaid--which provides health care to low-income Americans--for those 
who receive cash
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assistance. In addition, his plan does not restrict 
Medicaid for documented immigrants.

Reforming Supplemental Security Income (SSI)

  The SSI program provides critical financial support for the neediest 
aged, blind, and people with disabilities. The budget supports key 
reforms to ensure that SSI continues to reach those most in need.
  The budget tightens eligibility standards for childhood disability 
benefits. It would deny benefits to adults who are on SSI due to 
substance abuse. It proposes improved SSI and Social Security Disability 
program integrity measures, such as continuing disability reviews. It 
would give the Social Security Administration new tools to collect SSI 
overpayments from individuals no longer on the SSI rolls. Finally, it 
proposes to allow a family to use any large, retroactive SSI benefit to 
establish a dedicated savings account for a child with disabilities, 
with funds in the account usable only for education and training, 
special equipment, housing modifications, or therapy and rehabilitation.

Making Equitable Changes in Benefits for Legal Immigrants

  The President believes that legal immigrants should have the 
opportunity, and bear the responsibility, to be productive members of 
society. He also believes they should be able to tap the social safety 
net when the need arises.
  The budget proposes to hold sponsors who bring immigrants into the 
country legally responsible for their financial well-being. 
Specifically, it would count (or ``deem'') sponsors' income when 
determining whether immigrants are eligible for SSI, Food Stamps, or 
AFDC--until immigrants become citizens. These rules, however, would not 
apply to those who suffer a disabling impairment after entering the 
country, the very elderly who have lived in the country for at least 
five years, those who have worked for over five years, or veterans and 
their families. The budget preserves Medicaid eligibility for low-
income, eligible legal immigrants. It also creates a consistent 
definition of eligibility for documented aliens for AFDC, SSI, and 
Medicaid, and lets States apply this definition to their own State-
funded programs.

                   THE EARNED INCOME TAX CREDIT (EITC)

  To move people from welfare to work, the Government must do more than 
set time limits and work requirements in welfare programs. It must 
ensure that those who work can support their children. As a wage 
supplement, the EITC helps low-income parents do that.
  This tax credit has long enjoyed broad, bipartisan support as a vital 
tool for making work pay. Congress created it 20 years ago, and 
Presidents of both parties have pushed successfully to expand it. The 
most recent was President Clinton, who teamed up with Congress in 1993 
to reward work for 15 million families.
  The budget maintains these gains for hard-working, low-income 
families. In addition, the President proposes to allow States, on a test 
basis, to make advance EITC payments to low-income working families--
that is, payments during the tax year, rather than a lump sum at the 
end--to learn whether this would help move more families from welfare to 
work. Currently, employers can include a portion of a family's expected 
EITC in an employee's paycheck, but few of them do. The Administration 
also seeks to cut program costs by improving compliance and targeting. 
(For more details on the compliance and targeting measures, see Chapter 
12.)

                            THE MINIMUM WAGE

  In real, inflation-adjusted dollars, the value of the minimum wage is 
nearing its lowest level in 40 years. The President proposes to raise 
the minimum wage from $4.25 to $5.15 an hour over two years, in two 
steps of 45 cents each.
  A higher minimum wage would truly make work pay. A 90-cent rise would 
mean over $1,800 a year in higher earnings for full-time, full-year 
workers at the minimum level who now make less than $9,000 a year. With 
the proposed increase, nearly 10 million working Americans would get an 
immediate
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pay raise. Another nine million low-wage workers with wages up 
to a dollar above the new minimum also could benefit indirectly, 
presuming that their paychecks rise as well.
  The stereotype of minimum-wage teenagers in comfortable circumstances 
who work only for ``extras'' is sadly inaccurate. In truth, minimum-wage 
paychecks mostly go for expenses like rent and baby food. The average 
minimum wage worker brings home half of his or her family's earnings.
  Nevertheless, about a quarter of workers who would get a pay raise 
with this increase are teenagers. These teenagers' jobs are their 
introduction to the world of work. Over three-fifths of all workers have 
been paid at the minimum wage at some time during their working lives.
  Generally, economists agree that while a minimum wage increase of 90 
cents an hour would raise the living standards of millions of low-wage 
workers, it would cost the economy few, if any, jobs.