[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]





                           TO REVIEW OUTCOMES

                        OF 1996 WELFARE REFORMS

=======================================================================

                                HEARING

                               before the

                      COMMITTEE ON WAYS AND MEANS
                     U.S. HOUSE OF REPRESENTATIVES

                       ONE HUNDRED NINTH CONGRESS

                             SECOND SESSION

                               __________

                             JULY 19, 2006

                               __________

                           Serial No. 109-74

                               __________

         Printed for the use of the Committee on Ways and Means












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                      COMMITTEE ON WAYS AND MEANS

                   BILL THOMAS, California, Chairman

E. CLAY SHAW, JR., Florida           CHARLES B. RANGEL, New York
NANCY L. JOHNSON, Connecticut        FORTNEY PETE STARK, California
WALLY HERGER, California             SANDER M. LEVIN, Michigan
JIM MCCRERY, Louisiana               BENJAMIN L. CARDIN, Maryland
DAVE CAMP, Michigan                  JIM MCDERMOTT, Washington
JIM RAMSTAD, Minnesota               JOHN LEWIS, Georgia
JIM NUSSLE, Iowa                     RICHARD E. NEAL, Massachusetts
SAM JOHNSON, Texas                   MICHAEL R. MCNULTY, New York
PHIL ENGLISH, Pennsylvania           JOHN S. TANNER, Tennessee
J.D. HAYWORTH, Arizona               XAVIER BECERRA, California
JERRY WELLER, Illinois               LLOYD DOGGETT, Texas
KENNY C. HULSHOF, Missouri           EARL POMEROY, North Dakota
RON LEWIS, Kentucky                  STEPHANIE TUBBS JONES, Ohio
MARK FOLEY, Florida                  MIKE THOMPSON, California
KEVIN BRADY, Texas                   JOHN B. LARSON, Connecticut
THOMAS M. REYNOLDS, New York         RAHM EMANUEL, Illinois
PAUL RYAN, Wisconsin
ERIC CANTOR, Virginia
JOHN LINDER, Georgia
BOB BEAUPREZ, Colorado
MELISSA A. HART, Pennsylvania
CHRIS CHOCOLA, Indiana
DEVIN NUNES, California

                    Allison H. Giles, Chief of Staff

                  Janice Mays, Minority Chief Counsel

Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public 
hearing records of the Committee on Ways and Means are also published 
in electronic form. The printed hearing record remains the official 
version. Because electronic submissions are used to prepare both 
printed and electronic versions of the hearing record, the process of 
converting between various electronic formats may introduce 
unintentional errors or omissions. Such occurrences are inherent in the 
current publication process and should diminish as the process is 
further refined.
















                            C O N T E N T S

                               __________

                                                                   Page

Advisory announcing the hearing..................................     2

                               WITNESSES

Gingrich, Hon. Newt, Gingrich Group..............................    17
Santorum, Hon. Rick, a U.S. Senator from the State of 
  Pennsylvania...................................................    10
Thompson, Hon. Tommy G., Partner, Akin, Gump, Strauss, Hauer & 
  Feld...........................................................    25

                                 ______

Haskins, Ronald, Brookings Institution...........................    43
O'Neill, June, Zicklin School of Business, Baruch College, New 
  York, NY.......................................................    61
Parrott, Sharon, Center on Budget and Policy Priorities..........    71
Rector, Robert, Heritage Foundation..............................    82
Riley, Bishop Roy, Conference of Bishops for the Evangelical 
  Lutheran Church of America, Trenton, NJ........................    58

                       SUBMISSIONS FOR THE RECORD

Sykes, Russell, Office of Temporary and Disability Assistance, 
  Albany, NY, statement..........................................   119
United States Conference of Catholic Bishops, DiMarzio, Nicholas, 
  letter.........................................................   124







 
                           TO REVIEW OUTCOMES

                        OF 1996 WELFARE REFORMS

                              ----------                              


                        WEDNESDAY, JULY 19, 2006

                     U.S. House of Representatives,
                               Committee on Ways and Means,
                                                    Washington, DC.

    The Committee met, pursuant to notice, at 10:35 a.m., in 
room 1100, Longworth House Office Building, Hon. William M. 
Thomas (Chairman of the Committee) presiding.
    [The advisory announcing the hearing follows:]

ADVISORY

FROM THE 
COMMITTEE
 ON WAYS 
AND 
MEANS

                                                CONTACT: (202) 225-1721
FOR IMMEDIATE RELEASE
June 15, 2006
FC-22

                        Thomas Announces Hearing

               To Review Outcomes of 1996 Welfare Reforms

    Congressman Bill Thomas (R-CA), Chairman of the Committee on Ways 
and Means, today announced that the Committee will hold a hearing to 
review the outcomes of the Personal Responsibility and Work Opportunity 
Reconciliation Act of 1996 (the ``1996 welfare reform law,'' P.L. 104-
193). The hearing will take place on Wednesday, July 19, in the main 
Committee hearing room, 1100 Longworth House Office Building, beginning 
at 10:30 a.m.
      
    In view of the limited time available to hear witnesses, oral 
testimony at this hearing will be from invited witnesses only. 
Witnesses will include Administration officials, among others. However, 
any individual or organization not scheduled for an oral appearance may 
submit a written statement for consideration by the Committee and for 
inclusion in the printed record of the hearing.
      

BACKGROUND:

      
    The 1996 welfare reform law made dramatic changes in the Federal-
State welfare system designed to aid low-income American families. The 
law repealed the former Aid to Families with Dependent Children 
program, and with it the individual entitlement to cash welfare 
benefits. In its place, the 1996 legislation created a new Temporary 
Assistance for Needy Families (TANF) block grant that provides fixed 
funding to States to operate programs designed to achieve four 
purposes: (1) provide assistance to needy families; (2) end the 
dependence of needy parents on government benefits by promoting job 
preparation, work, and marriage; (3) prevent and reduce the incidence 
of out-of-wedlock pregnancies; and (4) encourage the formation and 
maintenance of two-parent families. The law also included individual 
time limits and work requirements intended to reinforce the new focus 
on work and independence for families needing assistance as part of 
broad reform efforts.
      
    Since passage of the 1996 welfare reform law, welfare caseloads 
have dropped by more than 60 percent as nearly 8 million parents and 
children have left the welfare rolls. The share of adults on welfare 
who work has more than doubled and this increased work has meant higher 
wages and earnings for welfare recipients. Key poverty rates--White, 
African-American, and Hispanic--all declined in the wake of the 1996 
reforms, resulting in 1.4 million fewer children living in poverty. The 
1996 welfare reform law and associated reforms also included numerous 
provisions designed to end waste, fraud and abuse in welfare programs--
such as ending ``disability'' checks for drug addicts and alcoholics--
resulting in billions of dollars in savings to taxpayers.
      
    The TANF program and related reforms originally were authorized 
through fiscal year 2002, requiring Congress to review and reauthorize 
the 1996 welfare reforms. Following years of debate, House passage of 
three comprehensive welfare reauthorization bills, and enactment of 12 
short-term extensions of current law, comprehensive welfare 
reauthorization provisions were included in the Deficit Reduction Act 
of 2005 (P.L. 109-171), which the President signed on February 8, 2006. 
This legislation reauthorized the TANF program through 2010, increased 
the effective share of welfare recipients expected to engage in work or 
other activities, provided for a $1 billion increase in mandatory child 
care funding, and created new healthy marriage and responsible 
fatherhood promotion programs, among other changes.
      
    In announcing the hearing, Chairman Thomas said, ``Welfare reform 
has been a success in helping low-income parents work and better 
support their families. This hearing will allow us to take stock of 
what went right and what else needs to be done to promote more work, 
stronger families, and better outcomes for more families with 
children.''
      

FOCUS OF THE HEARING:

      
    The hearing will focus on the outcomes of the 1996 welfare reforms.
      

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

      
    Please Note: Any person(s) and/or organization(s) wishing to submit 
for the hearing record must follow the appropriate link on the hearing 
page of the Committee website and complete the informational forms. 
From the Committee homepage, http://waysandmeans.house.gov, select 
``109th Congress'' from the menu entitled, ``Hearing Archives'' (http:/
/waysandmeans.house.gov/Hearings.asp?congress=17). Select the hearing 
for which you would like to submit, and click on the link entitled, 
``Click here to provide a submission for the record.'' Once you have 
followed the online instructions, completing all informational forms 
and clicking ``submit'' on the final page, an email will be sent to the 
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submission for the record. You MUST REPLY to the email and ATTACH your 
submission as a Word or WordPerfect document, in compliance with the 
formatting requirements listed below, by close of business Wednesday, 
August 2, 2006. Finally, please note that due to the change in House 
mail policy, the U.S. Capitol Police will refuse sealed-package 
deliveries to all House Office Buildings. For questions, or if you 
encounter technical problems, please call (202) 225-1721.
      

FORMATTING REQUIREMENTS:

      
    The Committee relies on electronic submissions for printing the 
official hearing record. As always, submissions will be included in the 
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files for review and use by the Committee.
      
    1. All submissions and supplementary materials must be provided in 
Word or WordPerfect format and MUST NOT exceed a total of 10 pages, 
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Committee relies on electronic submissions for printing the official 
hearing record.
      
    2. Copies of whole documents submitted as exhibit material will not 
be accepted for printing. Instead, exhibit material should be 
referenced and quoted or paraphrased. All exhibit material not meeting 
these specifications will be maintained in the Committee files for 
review and use by the Committee.
      
    3. All submissions must include a list of all clients, persons, 
and/or organizations on whose behalf the witness appears. A 
supplemental sheet must accompany each submission listing the name, 
company, address, telephone and fax numbers of each witness.
      
    Note: All Committee advisories and news releases are available on 
the World Wide Web at http://waysandmeans.house.gov.
      
    The Committee seeks to make its facilities accessible to persons 
with disabilities. If you are in need of special accommodations, please 
call 202-225-1721 or 202-226-3411 TTD/TTY in advance of the event (four 
business days notice is requested). Questions with regard to special 
accommodation needs in general (including availability of Committee 
materials in alternative formats) may be directed to the Committee as 
noted above.

                                 

    Chairman THOMAS. If we could ask our guests to find seats, 
please. Good morning. Today the Committee will examine the 
outcomes of a decade of welfare reforms. The Personal 
Responsibility and Work Opportunity Reconciliation Act 1996 
(P.L. 104-193) was signed into law on August 22nd, 1996. These 
reforms made significant changes in our Nation's cash welfare 
system and these changes have successfully lifted millions of 
Americans out of poverty and away from welfare dependence.
    Today, nearly 8 million parents and children are no longer 
dependent on welfare checks for support. As dependents declined 
and work increased, poverty had been reduced. Compared with 
1996, today 1.4 million fewer children live in poverty. These 
improvements contrast sharply with some of the harsh 
predictions from the opponents of our reform efforts.
    The positive outcomes of welfare reform confirm welfare 
recipients share in the American dream of wanting to work, 
build a better life for themselves and their children. Families 
want the dignity of collecting a paycheck instead of a welfare 
check because they see that work is the only true permanent 
path out of poverty.
    Thus, today we have adopted a new measure of compassion, 
how successful we are in reducing dependence and helping low 
income parents go to work. As we have seen, these two goals are 
closely related and lead to independence.
    Earlier this year the President signed the Deficit 
Reduction Act (P.L. 109-171), which extends and strengthens the 
1996 welfare reforms. It encourages more recipients to work, 
which will further lessen dependence and poverty while 
providing increased funding and tools to help families make the 
transition to work.
    Today, the Committee will review the progress of helping 
our Nation's low income families to find and keep jobs. We are 
pleased to welcome back several familiar faces to discuss these 
important issues.
    Prior to yielding to my colleague from New York, I will 
briefly recognize the current Chairman of the Subcommittee on 
Human Resources, the gentleman from California, Mr. Herger.
    Mr. HERGER. Thank you, Mr. Chairman. I am pleased we are 
meeting today to reflect on the outcomes of the 1996 welfare 
reform law which yielded unprecedented increases in work and 
earnings and declines in poverty and welfare dependence. We are 
honored to be joined today by key figures behind the 1996 
reforms.
    Mr. Chairman, I ask that my longer statement be included in 
the record, and I would like to thank all our witnesses for 
being here today.
    [The opening statement of Mr. Herger follows:]

    I am pleased we are meeting today to reflect on the outcomes of the 
1996 welfare reform law, which yielded unprecedented increases in work 
and earnings and declines in poverty and welfare dependence.
    We are honored to be joined today by key figures behind the 1996 
reforms, including:

      former House Speaker Newt Gingrich,
      former Wisconsin Governor Tommy Thompson,
      our former Ways and Means Committee colleague--and fellow 
lead Republican on the Human Resources Subcommittee, I would note--
Senator Rick Santorum,
      and others intimately involved in crafting the 1996 
reforms.

    In the early nineties, welfare increasingly became a trap, 
ensnaring a record five million families per month by 1994. Almost none 
of the parents on welfare worked, studied, trained, or otherwise 
prepared for the future in exchange for their checks. By remaining 
dependent on welfare, they and their families were ensured to remain in 
poverty so long as they collected benefits. Recipients back then 
collected welfare for an astonishing average of 13 years, with each 
year spent in poverty.
    Starting in the early 19nineties, innovative States attempted to 
correct this problem by promoting more work and personal responsibility 
among low-income parents. Of particular note, Wisconsin, led by former 
Governor Tommy Thompson, was at the forefront of this trend.
    Many of these policies--such as requiring work or training in 
exchange for welfare benefits, enhancing funding for child care and 
other work supports, placing time limits on receipt of benefits--
provided a roadmap for the National reforms approved by this House 10 
years ago this month.
    Our purpose today is to reflect on what has happened in the 10 
years since National welfare reforms were enacted, especially in terms 
of the families and children affected.
    Here's a short summary of the profound impacts these reforms had on 
our society:
    First, welfare dependence has been reduced by 64 percent, as nearly 
eight million parents and children no longer depend on welfare checks 
for support.
    Second, the number of adults on welfare who work has doubled, and 
there has been a 34-percent rise in work among never-married mothers 
who comprise the group most likely to go on welfare.
    Third, as dependence declined and work and earnings increased, 
poverty has been reduced. Today there are 1.4 million fewer children 
who live in poverty than 10 years ago.
    Fourth, efforts to reduce fraud and abuse have ended inappropriate 
benefits for literally thousands of individuals--including fugitives, 
prisoners, drug addicts, alcoholics, and non-citizens.
    Before 1995, many measured America's compassion for low-income 
families by how much money government spent on welfare and associated 
benefits. Yet as welfare spending and poverty grew sharply in the early 
nineties, that case became progressively harder to make. Today, we have 
adopted a new measure of compassion--not how much money we spend, but 
how successful we are in reducing dependence and helping low-income 
parents support their families with a paycheck instead of a welfare 
check.
    When it comes to spending, no one can argue we have done reform on 
the cheap. We guaranteed states record Federal welfare funds, we 
doubled funding available for child care, and we required states to 
maintain a high commitment of state funding for welfare and child care 
needs. In fact, total taxpayer resources for welfare and child care 
increased from $7,000 per family on welfare in 1995 to about $16,000 
per family today.
    Reform also ended the entitlement to benefits that encouraged self 
destructive behavior. Today welfare benefits are contingent on 
recipient behavior, including going to work or limiting benefit receipt 
to no more than 5 years in a recipient's lifetime. Those changes have 
had dramatic effects, including changing recipients' attitudes about 
welfare benefits and their need to collect them. Literally millions 
have chosen work over welfare. That is a remarkable turn.
    This hearing gives us a chance to examine the success of past 
welfare reforms. But it also provides an opportunity to consider what 
these lessons suggest for future reforms in a variety of other 
programs.
    I'm delighted that the Committee has decided to review these 
important reforms and I thank all our distinguished guests for being 
here to share their insights.

                                 

    Chairman THOMAS. Thank the gentleman. The Chair now 
recognizes the gentleman from New York, Mr. Rangel, for any 
statement he may wish to make.
    Mr. RANGEL. Thank you so much, Mr. Chairman. With all due 
respect to the Senator, I really look forward to seeing Speaker 
Gingrich, and my good Governor, things that we had done 
together, and rather than get involved in who has done the 
best, all I can say is that I look forward to working with both 
of you as you accumulated enough knowledge and expertise and 
experience to know that we have got close to 40 million people 
today that are in poverty, 13 million kids, and we all agree 
that we are going to have to do something because poor folks 
are terribly expensive and a heck of a burden for any society 
to be carrying. We can't even get half of our kids eligible for 
the military because they are sick and uneducated, and poverty 
has a lot to do with it.
    So, I have worked with Speaker Gingrich briefly in getting 
technology to hospitals, and I want to thank him for his 
cooperation. I can't thank you enough for kicking off the 
African bill. You were the first witness for that. It meant all 
the difference in the world in breaking down the concept of 
partisanship because people basically can get together unless 
they make up their minds ahead of time that they are not going 
to. I will be trying to work with you to get your ideas, as to 
how we can have a better educated population, get rid of 
poverty the best we can, have a healthier community, and I am 
convinced that it is in our National security to do just that.
    So, thank you. It is good to see you both again. I would 
like to yield to Mr. McDermott, who is dealing with the subject 
matter before us today, but it is really great seeing both of 
you.
    Mr. MCDERMOTT. Thank you, Mr. Chairman. Thank you, Mr. 
Rangel. This is a strange political world in which we celebrate 
putting 5 million more people on poverty than the day when 
President Bush came into office. You can spin it all you want, 
but that is what has happened. It has gone up every year since 
the President took over.
    You can't congratulate yourself for adding a million and a 
half kids to the poverty rolls. They are there and we know it. 
Whether we choose to be honest with ourselves and the American 
people or not, that is the fact.
    Now across America parents are working harder and playing 
by the rules but they are falling behind. They are earning less 
today than they earned yesterday. Their wages can't keep pace 
with inflation, let alone the soaring increases in health care 
costs or housing or home energy or gasoline for their cars.
    Now the Republicans may want to declare victory on the war 
on poverty here, but given the fact that Temporary Assistance 
for Needy Families (TANF) cash assistance caseloads have 
fallen, that seems to be the only measure that matters. The 
caseloads have fallen.
    This is really a time for commitment, not for celebration. 
Instead of growing America's middle class, today's economy, the 
disadvantaged class is the one that is really growing. We need 
to learn why.
    I would like the Committee to turn their attention to the 
monitors for a second. Slide one will tell you some interesting 
things. You can see the blue lines, those are where poverty was 
going down. Now it started in 1993.
    In 1990 the Democrats put in the earned income tax credit 
(EITC), in 1993 they increased the EITC. In 1996 the 
Republicans tried a number of times--and finally Mr. Clinton 
got a bill that made some sense and we did make some changes. 
In 1997 we increased the minimum wage for the last time. You 
haven't done anything with the minimum wage since then.
    What you see is it was going down; there was a strong 
economy under Mr. Clinton and things went down to 2000 and they 
have gone up every year since. Now we have passed tax cuts for 
the wealthy in 3 out of the 4 years.
    Next slide, please. What we have not done is deal with the 
minimum wage. The minimum wage measured against the Federal 
poverty line is at the lowest level ever. For anybody to have a 
victory party on children in poverty when you leave this kind 
of a minimum wage up there is simply laughable.
    Welfare reform was supposed to encourage and support work, 
but wages are falling and the Federal backstop is a broken 
promise. Now that is why you see child poverty rising. We know 
of millions of Americans that their wages can't beat inflation. 
Even the Chairman of the Federal Reserve seems unable to beat 
the inflation, which is presenting a serious threat to the 
economy. Workers who are earning the minimum wage cannot keep a 
family out of poverty. So, what is left to support work?
    Next slide, please.
    Chairman THOMAS. The gentleman's time has expired. How many 
more slides?
    Mr. MCDERMOTT. Just one. Let me talk about this one. This 
slide shows what has happened to the reason why people continue 
to slide into poverty. We talked about minimum wage. The 
funding for TANF has decreased by 9 percent, the child care 
funding has declined by 7 percent, social service block grant 
has declined by 11 percent, and the workforce investment 
funding is still declining.
    Now you can't take those parts out of the welfare reform 
program and have it work. You are going to continue to put more 
kids into poverty. Welfare is about kids. The reason we have 
welfare is to give kids something, and the fact that more and 
more--another million and a half kids are in poverty in this 
country simply does not deserve a welfare victory lap.
    Thank you, Mr. Chairman.
    [The exhibits follow:]

[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    

    Chairman THOMAS. Thank the gentleman. It is now my 
pleasure, with assistance from some Members of the Committee, 
to welcome the panel in front of us, the Honorable Rick 
Santorum, U.S. Senator from the State of Pennsylvania and in a 
previous life was a Member of the Committee on Ways and Means. 
To provide a formal introduction the Chair will recognize the 
gentlewoman from western Pennsylvania, Ms. Hart.
    Ms. HART. Thank you, Mr. Chairman. I am actually honored to 
have my colleague before the Committee, especially as someone 
who served this Committee well and this House well in working 
on a number of very difficult issues that are easily demagogued 
but never backing down from doing the right thing.
    As I think my colleagues know, Rick served here for 4 years 
before he moved over to the Senate, which I still say is the 
wrong side of the Capitol, but you are making it as good as it 
can be and we are pleased to have you before us today.
    Mr. Chairman, if you didn't know this, both Rick and I 
started our public service careers the same year, 1991, as I 
was sworn into the State Senate, where Rick had already made a 
mark as an executive director of a Committee, and he decided 
that he had done enough there and was time to come down here. I 
am pleased to continue working with him and I am really pleased 
that he is before us today to share a lot of the work that he 
has done and discuss some of the things that we can do to make 
it better. I yield back.
    Chairman THOMAS. Thank the gentlewoman. Thank you, Senator.
    Very few of us can say that we have spent our entire life 
in a State and almost during our entire lifetime there was only 
one Governor for that State, but the gentlemen from Wisconsin, 
Mr. Ryan, can come close to making that statement with one of 
our other panelists at the dais.
    Mr. RYAN. It's a pleasure. Thank you, Chairman. Back home 
in Wisconsin we call Tommy Thompson ``Governor.'' Here in 
Washington most people call him ``Secretary.'' I think what is 
probably most fitting today is to call him a pioneer, because 
Tommy Thompson is the pioneer of welfare reform.
    Tommy Thompson got elected to Governor when I was 16. I 
think our friendship is strong enough where we can say this. To 
watch what Tommy did in Wisconsin is an incredible story. It is 
an incredible story of achievement, what he did here as HHS 
Secretary, but the achievements of welfare reform in Wisconsin 
was the prime example that was used to implement welfare reform 
here, and for serving as Governor for 14 years, Secretary for 4 
years and now on to bigger and better things, it is a pleasure 
to introduce Tommy Thompson.
    Chairman THOMAS. Thank you very much. I will reserve the 
honor of introducing the other panelist, the Honorable Newt 
Gingrich.
    When I came to the House of Representatives in the 96th 
Congress, we shared a number of activities together, early on, 
and I was pleased to see that culminating his Congressional 
career he was selected Speaker of the House, which allowed 
Members of his party to be Chairmen of Committees. So, to the 
greatest amount of credit for my being able to introduce him as 
Chairman of the Committee on Ways and Means, I want to welcome 
my friend, my roommate, my colleague, and someone who I am 
pleased to say in a very positive way has made a difference, 
the gentleman from Georgia, Speaker of the House, Mr. Gingrich.
    All of your written testimony will be made a part of the 
record. You can address this Committee in any way you see fit 
in the time you have available. We will start with the Senator 
and then move from my left to your right across the panel. 
Senator Santorum.

 STATEMENT OF THE HONORABLE RICK SANTORUM, A U.S. SENATOR FROM 
                   THE STATE OF PENNSYLVANIA

    Senator SANTORUM. Thank you, Mr. Chairman. It is a pleasure 
for me.
    Chairman THOMAS. Prior to beginning could I turn the Chair 
over to the then Chairman of the Subcommittee on Human 
Resources, the gentleman from Florida, Mr. Shaw, which will 
make it a complete old home week. Senator.
    Senator SANTORUM. Mr. Chairman, that is exactly what I was 
going to mention first out of the box. It is great to be back 
here in the Committee on Ways and Mean and it is great to be 
here with the team that I think began welfare reform, the team 
here at this table, as well as many of the people on the dais 
here today, led by Clay Shaw in his role as Subcommittee 
Chairman back in 1995 and 1996, and prior to that a working 
group that was put together when I was the Ranking Member of 
the Subcommittee on Human Resources on this Committee as a 
freshman Member. Then the whip of the minority, Newt Gingrich, 
asked us to put a task force together to develop a welfare bill 
and Nancy Johnson and Dave Camp, our two Members here, Clay 
Shaw, many others who are not here today, but who worked 
diligently, Mike Castle and Jim Talent, many others, worked 
together and came up with a bill that became part of the 
Contract with America, and Newt was an instigator behind it and 
I will tell you that Governor Thompson was someone that we 
consulted with very closely in our work in trying to develop 
this piece of legislation.
    So, to have all of those Members present here today I think 
shows you the kind of tremendous talent that was at the table 
to put this together, and as the Chairman was just referring, 
the tremendous success.
    I find it somewhat remarkable that the gentleman from 
Washington would put up a chart showing a huge decline in child 
poverty and say that is a problem with this bill. What we have 
seen is the Great Society policies of the sixties, which were 
defended here so adamantly during the debates on welfare--I 
remember looking at those numbers in 1965, 21 percent of 
American children under the age of 18 were in poverty, and 
after several trillion dollars later in 1995 21 percent of the 
American children were still in poverty. That was the ``great 
success'' of the Great Society. We saw very little change in 
between those two times.
    The bottom line is that we did not see much good come from 
these well-intentioned, but I believe fundamentally harmful 
programs of government dependency.
    In the area of African-American poverty, which is one that 
I was most concerned about and most watched, at no time during 
that 30-year period in 1965 to 1995 did poverty among African-
American children drop below 40 percent. At no time did it drop 
below 40 percent.
    We were confronted with a bill, if I recall, in which 
incredible statements were made. Senator Kennedy on the floor 
of the Senate called the bill that we were passing in 1995, 
committing legislative child abuse. The Ranking Member of this 
Committee on the floor of the House said, and I will quote him, 
``This is a cruel piece of legislation.'' Sam Gibbons said, 
``It punishes children, the innocent children, because of the 
errors of their parents. It punishes them not at birth, but it 
punishes them for a lifetime and it certainly punishes others 
through all of their childhood era. It will deprive them of 
food, of clothing, of housing, of education, of love.'' As if 
the government can provide love for children.
    So, parents are the problem, government is the solution. 
No. No, that was wrong. We did something about what was wrong 
and we, in fact, put a commitment in there that said that we 
actually believe that parents can provide for their children. 
We believe that poverty is not the ultimate disability, but in 
fact a temporary condition that can change if people are given 
the opportunity to work and in some cases the requirement to 
work. I can't tell you the number of people that have come up 
to me, knowing my role in welfare reform, who were on welfare 
and who came up and said thank you, I would still be on welfare 
today if I wasn't required to work; I just needed that in my 
life.
    So, we made dramatic progress as a result of the 
legislation that we put forward. We continue to build on that. 
One of the things I am most proud of is the fact we didn't just 
sit back and say well, we did the impossible.
    I have my chart. This is the chart on poverty among 
African-American children. That poverty level that never 
dropped below 40 percent dropped to below 30 percent in the 
year 2001. Yes, it went up slightly, slightly vis-a-vis what it 
had been during the recession that happened in the early part 
of this Administration, but it is on its way back down as the 
economy strengthens.
    It is a fundamental shift. The baseline is different 
because we believe in people and parents and their ability and 
desire to help take care of themselves and take care of their 
children instead of relying on government to do so.
    I believe that and I tried to experience it in my own 
office. When I came to the U.S. Senate after working 2 years on 
this bill, one of the things I committed myself to doing was 
hiring people off welfare in my Senate office. I have hired 
nine people off welfare in my Senate office.
    I can tell you story after story of success and, yes, 
sometimes failure. Yes, sometime they didn't make it. Sometimes 
it didn't work well, but there were many, many more successes.
    A woman I talk about often is Michelle Turner, who came 
into my office from an abusive relationship and out of the 
People's Emergency Center in West Philadelphia. She went on to 
work in my office, first as a receptionist, caseworker, senior 
caseworker, and then she managed the entire casework operation 
in the eastern part of my State. Now she left my office for a 
much higher paying job outside of government and is doing very 
well. She was single, she had two children, two different 
fathers, now she is married and she has another child with her 
new husband, and they are raising all those children in a 
stable home.
    That is the difference believing in people. That is what 
this Committee was all about and that is what this effort was 
all about. I am glad to see that you are focusing on it, you 
are concentrating on those successes. We built upon those in 
the Deficit Reduction Act--and this will be my final comment, I 
know I am over time--and that is that we understood that yes, 
we were successful economically but families are still in 
trouble. There are still no dads in far too many homes.
    So, the Deficit Reduction Act provided money for fatherhood 
programs and money for a marriage initiative. I would say to 
this Committee if there is an area that I believe we need to 
continue to focus concern on, is that fundamental problem that 
Patrick Moynihan talked about 40 years ago, which is the 
breakdown of the family in the inner city. If you go to poor 
neighborhoods there is one commonality no matter where you go 
or what ethnicity, what race--if you go to a poor neighborhood 
there is overwhelmingly one thing you will not find, dads. That 
has got to change. If we are really going to have a profound 
impact on the future of poverty in America, we have got to 
change that. That is I think our great challenge. I think we 
have taken a step in the right direction, but there is more 
that we need to do. Thank you, Mr. Chairman.
    [The prepared statement of Senator Santorum follows:]
 Statement of The Honorable Rick Santorum, U.S. Senator from the State 
                            of Pennsylvania
    Chairman Thomas, Ranking Member Rangel, and distinguished 
colleagues. I appreciate the opportunity to be with you today, back 
where we started the roots of the 1996 welfare reforms. Some of you may 
recall that I sat on this Committee in 1994 as we worked to begin the 
process of crafting a proposal I will discuss more below. It was that 
experience that gave me the opportunity to help push this issue through 
the Senate in 1996.
    I am immensely proud that I helped author the first major attempt 
to infuse conservative solutions into the American social welfare 
system in the 1996 Personal Responsibility and Work Opportunity 
Reconciliation Act (PRWORA), and even more pleased that the law has 
resulted in the greatest social welfare success in American history. As 
I have said in the past, and repeat here today, we all knew that it was 
just a start because we needed to improve not only the welfare mother's 
balance sheet, but her family and social environment. We needed to 
build up the ties that bind, because ties that bind are also the ties 
that support, the helping hands of neighbors, friends, and family who 
care--in ways that government bureaucrats never can.
    Nonetheless, we changed welfare in this bill, and we did it over a 
long process. I know some suggested at the time that the bill was just 
something that was thrown together at the last minute, but I have to 
believe that those individuals failed to recognize the work that was 
put into this bill, the time and the effort to learn and examine the 
issues, the hours of the debate on the floor of both the House and the 
Senate and in the conference committees--all to write a carefully 
crafted bill that is truly compassionate.
    Granted, this bill is not compassionate in the sense that the 
Federal Government is going to go out and take care of every person's 
need who is poor because it is not truly compassionate when the Federal 
Government becomes the replacement for those whose responsibility it 
truly should be to take care of a child. That is not compassion.
    Compassion is having a system that builds families, providing an 
environment where children can flourish. Compassion is a system that 
supports neighborhoods and civic organizations, mediating institutions 
that provide the values and community support for families that they 
need to help take care of children, to create the neighborhoods where 
children are no longer afraid to go out and play. No, this bill was 
about reversing the dependency on government handouts and instead 
providing a meaningful and effective hand up.
    Before being completely revamped by the Republican Congress in 
1996, our welfare system was successful at nothing except maintaining 
poverty. It demonstrated the complete failure of relying on a policy of 
income redistribution, of focusing solely on giving people money and 
expecting nothing in return. That approach stands in stark contrast to 
providing the mix of opportunities and obligations necessary to build a 
future.
    Ron Haskins of the Brookings Institution, who you will hear from 
later today, is one of the nation's leading experts on welfare and 
welfare reform. Ron and I worked closely to craft the 1994 welfare 
reform bill that was part of the Contract with America. He taught a 
great me a great deal about American welfare prior to 1996.
    First, studies showed that welfare was anti-work.\1\ When welfare 
benefits are high and it is easy to get on welfare, it is less likely 
that low-income single mothers would work. This result shows up over 
and over in the research and has rarely been even cause for debate.
---------------------------------------------------------------------------
    \1\ See generally ``How Welfare Harms Kids'' by Robert E. Rector 
and Patrick F. Fagan, Backgrounder #1084, June 5, 1996, and 
specifically endnote number three.
---------------------------------------------------------------------------
    Second, welfare before 1996 was an unlimited entitlement. It 
demanded nothing, absolutely nothing, of the recipient. For context it 
is important to reflect back to the late 1930s when welfare first 
began. At that time there was debate over whether the program should 
include never-married mothers. Many policy experts at the time 
contended it should be limited to only the children of widowed or 
deserted women because they feared the unintended social consequences 
of government paying never-married mothers. Others experts argued that 
children of never-married mothers must be covered, since every 
individual needed coverage--essentially arguing that family norms did 
not matter.
    Welfare before 1996 was all about the subtle economic incentives 
that not only enabled women not to work and to have children out of 
wedlock, but also gradually removed the social stigma attached to such 
behavior. The fact that the entitlement welfare failed is beyond 
dispute.
    From the 1960s to the 1990s, total social welfare spending nearly 
tripled.\2\ So what did we get for this increase? Poverty maintenance 
and family dissolution. There is no way to call this program prior to 
1996 a success. The percentage of American adults living in poverty in 
1995 was almost a full percentage point higher than the percentage 
living below the poverty line in 1966. In 1965, 21 percent of all 
Americans children under the age of 18 lived in poverty. Over the years 
it fluctuated slightly up and down, but in 1995, the percentage was 
20.8 percent. In 1974, the percentage of African-American children 
living in poverty was 39.8 percent. Between then and 1995, it never 
again dipped below 40 percent, and stood at 41.9 percent in 1995.\3\
---------------------------------------------------------------------------
    \2\ According to ``It Takes a Family,'' page 129, ``In 1968, about 
three years into the Great Society programs, total social welfare 
spending in the United States was $226 billion (in inflation-adjusted 
dollars). By 1990, it had risen to $614 billion.'' In addition, Robert 
Rector said ``In just three years--from 1965 to 1968--yearly welfare 
spending more than doubled, from $38.3 billion to $80.5 billion in 
today's dollars.'' See ``Welfare: It Keeps Growing and Growing and . . 
.'' from June 29, 1995, at http://www.heritage.org/Press/Commentary/
ED062995b.cfm. Also, according to Michael Tanner of Cato, ``In 1990 
total social welfare spending by federal, state, and local governments 
(for major means-tested programs) topped $226 billion, a total 
equivalent to $5,790 for every poor person, or $23,160 for every family 
of four below the poverty level.'' See ``Ending Welfare As We Know 
It,'' Cato Policy Analysis No. 212, Michael Tanner, CATO, July 7, 1994.
    \3\ U.S. Census Bureau, Housing and Household Economic Statistics 
Division, Last revised: December 14, 2005, http://www.census.gov/hhes/
www/poverty/histpov/hstpov3.html.
---------------------------------------------------------------------------
    And if that is not enough, from 1960 to 1995, the percentage of 
births occurring out of wedlock among the total population rose 
sharply. In 1960, 5.3 percent of all births in this country were to 
unmarried mothers. By 1995, the figure was 32.2 percent.\4\
---------------------------------------------------------------------------
    \4\ Department of Health and Human Services, Center for Disease 
Control, National Health Center of Statistics, 2001, http://
www.cdc.gov/nchs/data/statab/t001x17.pdf.
---------------------------------------------------------------------------
    Pick a number, statistic or social impact--the result remains the 
same. Welfare, prior to 1996, was a disaster. The program was 
misguidedly based on the belief that poor people could not or would not 
work. It merely served as a means for income transfer. Although some on 
the other side of the aisle argued that this program was 
``humanitarian,'' there was nothing humanitarian about the 
intergenerational poverty it sustained, the destruction of the natural 
family it brought, or the way it removed hope in our poorest 
communities. In terms of the human lives wrecked, human potential 
wasted, marriages destroyed or discouraged, and children denied a 
future, it was the greatest social policy debacle in American history.
    After the election of 1994 Republicans took control of the Senate 
and the House and this dysfunctional welfare system was changed. The 
ultimate changes that were signed into law had their roots in a group I 
chaired when I was a member of the House Ways and Means Committee's 
Humans Resources Subcommittee, of which I was then the ranking minority 
member. Our Minority Whip Newt Gingrich asked me to get together a 
group of members to draft our own welfare reform bill. The bill we 
drafted was an integral part of the now famous Contract with America. I 
went around and talked with women on welfare and the people that worked 
in and around the welfare system in Pennsylvania. The more I learned, 
less sense our welfare system made.
    When we introduced our bill, the liberals called it cruel, 
heartless, and mean-spirited. We had actually had the audacity to call 
for time limits on welfare and we wanted recipients to work as a 
condition of receiving benefits. Despite the criticism, we knew that 
such measures were necessary if we were to help people move from 
government dependency to the dignity of a paycheck.
    Our bold proposal became the starting point for innovative ideas in 
the 104th Congress, by which time I was in the Senate. Even though I 
was not on the committee of jurisdiction, I began working with the 
chairman of the Finance Committee, Bob Packwood, to help him craft a 
new welfare reform bill. The House had already passed its version of 
the welfare reform bill when the Senate moved a bill out of committee. 
Just before the bill was scheduled for action on the Senate floor, 
Chairman Packwood resigned from the Senate leaving Republican Leader 
Bob Dole searching for a new floor manager. I volunteered to take the 
helm since I was one of the few Republicans senators who knew anything 
about welfare. I ended up managing most of the bill on the Senate 
floor.
    My role as floor manager for the welfare reform debate remains not 
just one of my proudest accomplishments, but also one of the most 
surreal. I remember a welfare rights organization that bussed in 
welfare recipients and caseworkers to a church near Capitol Hill. The 
group invited me to discuss the changes being contemplated by Congress. 
The best way I can describe the atmosphere of this event was like being 
the meat thrown into the lion's den. I was not able to finish a single 
sentence without being interrupted, but beyond the anger I encountered 
there was a distinct undercurrent--fear. The recipients had been locked 
in this dysfunctional system for so long they had convinced themselves 
that welfare was the best they could hope for. In the end, this display 
of anger was but the last roar of the Great Society drug-peddlers, 
those who had addicted generations of poor Americans to the narcotic of 
dependency.
    When Republicans scrapped the Aid to Families with Dependant 
Children (AFDC) and replaced it with Temporary Assistance for Needy 
Families (TANF), liberals howled. For example, the Urban Institute 
predicted that the bill would cause 2.6 million people to fall below 
the poverty line, including 1.1 million children.\5\ However, these 
critics miscalculated a bit.
---------------------------------------------------------------------------
    \5\ Potential Effects of Congressional Welfare Reform Legislation 
on Family Incomes, by Shelia R. Zedlewski, Sandra J. Clark, Eric Meier, 
and Keith Watson for the Urban Institute, July 26, 1996, http://
www.urban.org/url.cfm?ID=406622.
---------------------------------------------------------------------------
    Welfare reform worked. Welfare caseloads are down 64 percent, and 
the number of families on welfare has declined 57 percent.\6\ The 
overall poverty rate dropped as has the child poverty rate.\7\ Compared 
to 1996, 1.4 million fewer children lived in poverty in 2004.\8\ The 
number of adults on welfare who are working has more than doubled since 
1996.\9\ The results speak for themselves--and the policies of the 1996 
welfare reforms are a success.
---------------------------------------------------------------------------
    \6\ ``A Decade Since Welfare Reform: 1996 Welfare Reforms Reduce 
Welfare Dependence,'' Report from the House of Representatives 
Committee on Ways and Means, Subcommittee on Human Resources, February 
26, 2006, http://waysandmeans.house.gov/media/pdf/welfare/
022706welfare.pdf.
    \7\ ``A Decade Since Welfare Reform: 1996 Welfare Reforms Produced 
Remarkable Success,'' Report from the House of Representatives 
Committee on Ways and Means, Subcommittee on Human Resources, July 11, 
2006, http://waysandmeans.house.gov/media/pdf/welfare/
071106welfaresuccess.pdf.
    \8\ Ibid.
    \9\ Ibid.
---------------------------------------------------------------------------
    Statistics are telling, but nothing tells the story better than 
real life. A young mother spoke to me at a hearing on the progress we 
had made with welfare reform and recounted that when she got her first 
paycheck, her children were unusually excited to go to the store. When 
she asked them why, they explained that they could not wait to go to 
the checkout line and not feel shame as people stared at them for using 
their food stamps. Self-respect is being restored.
    Another young man told me that he had gained renewed admiration for 
his mother for holding it all together--her job, their home, and their 
family. He never thought she could do it. Respect for others is being 
restored.
    Finally there is Billy Jo Morton. When I was sworn into the Senate 
in 1995, I decided that since I was going to take an active role in 
reforming welfare, I had better see how it actually works firsthand. I 
hired five people who were on welfare--at that time about 10 percent of 
my staff--to work in my Pennsylvania offices. Billy Jo worked for me in 
my Harrisburg office for her first job off welfare. She told me that 
until she was forced to move off the rolls she thought she was stuck 
with two kids at home and no chance for a better life. Billy Jo was a 
great employee. After a while, we provided her a flexible schedule that 
allowed her to attend community college part-time. Later she was 
offered a scholarship to finish her degree, which she did in education. 
I am pleased to report that she is now working as a teacher. And hope 
is being restored.
    This is what happens when you have enough faith in people to help 
them rise up to take responsibility for their lives and to make the 
right choices. With welfare reform, the government stopped enabling 
destructive behavior. The 1996 reforms prevented prisoners and 
fugitives from collecting welfare benefits, saving at least $250 
million in SSI benefits and contributing to more than 40,000 arrests 
since 1996.\10\ It ended the destructive practice of giving 
``disability'' checks to drug addicts and alcoholics. The bill also 
prohibited non-citizens from collecting welfare benefits, which reduced 
the receipt of SSI benefits by non-citizens by 14 percent, food stamps 
by 61 percent and cash welfare by 82 percent.\11\ We changed the 
paradigm for government programs from life-long government support, to 
hard work and sacrifice.
---------------------------------------------------------------------------
    \10\ ``A Decade Since Welfare Reform: Ending Waste, Fraud and Abuse 
of Welfare Benefits,'' Report from the House of Representatives 
Committee on Ways and Means, Subcommittee on Human Resources, June 1, 
2006, http://waysandmeans.house.gov/media/pdf/welfare/
060106welfarereport.pdf
    \11\ Ibid.
---------------------------------------------------------------------------
    There is only one conclusion to draw from all of this. Before 1996 
the American welfare system was a mammoth federal income-transfer 
program that acted as a barrier between low-income families and 
independence in the U.S. economy. Our economy had the jobs for welfare 
recipients. The problem was, the liberal welfare policies neither 
encouraged nor required recipient to get anywhere near those jobs--
until we passed welfare reform.
    I gave you a few anecdotes earlier, but this one last story may 
give you a better understanding of what has happened since 1996. It is 
the story of one of my employees, Michelle Turner. Michelle came to 
work for us in 1996 as a staff assistant in Philadelphia. Prior to 
that, she had been on and off welfare for about five years. She had 
left home as a teenager, mostly because she never got along with her 
father. She ended up living with a man who would be the father of her 
first two children, both girls. Although she says he never actually hit 
her, the stress of the situation finally caused her to pack up her two 
daughters and leave.
    Michelle ended up living in a Philadelphia shelter for recovering 
substance abusers--something she was not but it was the only place she 
could go. She decided to stay there until she could afford her own 
place. In an effort to get out of the building and off welfare, she 
took a class at Drexel University and updated her resume.
    ``I just had to get off welfare,'' Michelle said. ``The people at 
the welfare office who would give you the check, their attitude was 
that it was their money. They would talk to you in such a demeaning 
manner. Plus, it wasn't enough to live on.''
    Michelle ended up getting an internship at the People's Emergency 
Center, a domestic abuse shelter, as part of their welfare-to-work 
program. From there, Michelle took a job as a staff assistant in my 
office which in her words was ``a glorified receptionist.'' Soon, she 
became a caseworker and eventually she became my Director of 
Constituent Services. She's been married since the Spring of 2000 and 
has given birth to a third daughter. In 2003, after nine years, she 
left my office to take a job at Drexel as the administrative assistant 
for a surgeon. She and her husband recently bought a new house.
    When I asked Michelle how her life would have been different if she 
stayed on welfare instead of getting a job, she quickly answers, ``I 
would probably be married, but I probably would have repeated what I 
had found myself falling into--an abusive relationship. I never would 
have ended up working in a Senate office, and never would have had the 
confidence to get a good husband and buy a house. I would have ended up 
working in some dead end.''
    The power of work, and people who believed in her, gave Michelle 
Turner the break she needed. She did the rest herself.
    The next iteration of welfare reforms came in the Deficit Reduction 
Act of 2005 (DRA) \12\ These provisions were designed to build on the 
1996 reforms. For example, one of the main reforms was to update the 
work participation rates to the more relevant date of 2005, ensuring 
that the intent of the 1996 Welfare Reform Act that at least half of 
all welfare recipients engage in work activities is realized.\13\ Why 
is this change important? It is important because prior to this bill it 
was reported that Pennsylvania was last among all of the states in 2004 
in the percentage of welfare recipients who are working or were in 
approved programs.\14\ Just seven percent of the caseload in my state 
was working! We owe it to the people in our states that need a hand up 
to actually provide the opportunities to better themselves rather than 
allowing them to lose hope.
---------------------------------------------------------------------------
    \12\ Deficit Reduction Act of 2005, P.L. 109-171, signed into law 
on February 8, 2006.
    \13\ Ibid, at Section 7102.
    \14\ ``Welfare applicants pushed to find jobs sooner,'' by Joe 
Fahy, July 14, 2006, http://www.post-gazette.com/pg/pp/06195/
705797.stm.
---------------------------------------------------------------------------
    I am also very pleased that the DRA includes $100 million annually 
for healthy marriage promotion, and $50 million annually for the 
promotion of responsible fatherhood.\15\ As I mentioned early on, we 
must provide families with the necessary support systems to succeed--
the helping hands of neighbors, friends, and family who care. We know 
that children growing up in married, two-parent homes are less likely 
to be victims of abuse, engage in high-risk behaviors, and suffer from 
emotional problems--the studies are overwhelming. It is therefore 
important that we communicate the value of the role of families and 
particularly the role of fathers in our society. This important funding 
will create opportunities to strengthen families through various 
programs which support marriage and responsible fatherhood in our local 
communities. I am grateful to have worked closely with many of you on 
this Committee to add this important element to the welfare reform 
process.
---------------------------------------------------------------------------
    \15\ Deficit Reduction Act of 2005, Section 7103.
---------------------------------------------------------------------------
    Throughout my years in the U.S. Senate, I have worked to implement 
programs designed to decrease the hardships that far too many Americans 
endure. While I believe that the Deficit Reduction Act is a step in the 
right direction, and I remain committed to ensuring that work remains a 
gateway to opportunity for all Americans. I want to draw your attention 
to something I have developed as the Chairman of the Republican 
Conference and with my Senate colleagues--the Senate Anti-Poverty 
Agenda.\16\ The Senate Anti-Poverty Agenda revolves around Work, 
Investment and Neighborhoods or WIN. The WIN Anti-Poverty Agenda 
reflects the proactive anti-poverty agenda of the Senate Republican 
Conference which embraces the critical role of work, investment, and 
neighborhood-based solutions in the effort to empower families in need, 
create opportunity, and reduce poverty. It includes twelve specific 
legislative action items that we believe will serve to reduce poverty. 
I have included a copy of this document with my testimony and hope that 
each of you will look at these items and reach out to work with us to 
make a real impact in our communities. Mr. Chairman, I would be remiss 
if I did not note that two of these particular items are currently 
under review in the context of tax extenders and the pensions 
conference, and ask that you and the other members of this Committee 
weigh these items heavily as you move to conclude the conversations on 
those bills.
---------------------------------------------------------------------------
    \16\ The Senate Anti-Poverty Agenda may be found at http://
src.senate.gov/public/_files/graphics/povertybook0.pdf.
---------------------------------------------------------------------------
    Ladies and Gentlemen, we have made great progress since 1996, and 
we improved the program just this year, but we still have work to do to 
continue to lift families out of poverty and provide them with 
opportunities to better their lives and those of their children. I 
stand ready to work with you as we continue this important effort. 
Thank you again for this opportunity to be with you today.

                                 

    Mr. SHAW. [Presiding.] Thank you. Speaker Gingrich.

  STATEMENT OF THE HONORABLE NEWT GINGRICH, FOUNDER, GINGRICH 
    GROUP, AND FORMER SPEAKER, U.S. HOUSE OF REPRESENTATIVES

    Mr. GINGRICH. Thank you very much, Mr. Chairman. I do want 
to repeat what Senator Santorum said, and say that under your 
leadership, Chairman Thomas, Congressman McCrery, Congresswoman 
Johnson, Congressman Camp, Congresswoman Jan Meyers, I think 
back to all the people who were deeply involved in a period of 
growing these ideas and developing them, and it was remarkable.
    I want to both praise Congress and challenge Congress, and 
talk on three levels; how we achieved welfare reform, the 
current results, and the challenges for helping those who have 
been left out of the American dream in the pursuit of 
happiness.
    I want to start by quoting Abraham Lincoln, who, faced with 
the need to explain the purposes of government in his message 
to Congress, July 4, 1861 said: The leading object of 
government is to elevate the condition of men, to lift 
artificial weights from all shoulders, to clear the paths of 
laudable pursuit for all, to afford all an unfettered start and 
a fair chance in the race of life.
    I think, as a person who had been born into extraordinary 
poverty, who had taught himself how to read, who had a total of 
one year of schooling in his entire life, Lincoln felt very 
deeply the obligation of government to create opportunities. I 
want to look at welfare reform in that context and meet part of 
the challenge that, legitimately I think, Congressman McDermott 
had raised.
    Let me say, first of all, how do we get this done. I have 
one of the people who made it possible sitting to my left. The 
fact is that in the States, Governors Thompson, Engler and 
Leavitt had already done an extraordinary level of 
experimentation. Much of what we did stood on their shoulders 
and it is totally appropriate that Governor Thompson be here 
today.
    Without their leadership and experimenting we would not 
have had the baseline, but it went beyond that. Part of what 
made the Congress different in 1995 and 1996 is that the 
Governors actually came to Washington, brought the people who 
were running the programs--we locked the door, and we had State 
level people who actually were doing the job in the same room 
with legislative drafters at the Federal level and we argued as 
equals and we hammered out a program we thought would work; and 
it was a level of practicality which I think has seldom been 
achieved and which cut away all of the normal situations like 
this--where Washington is on one side of the table and the rest 
of the country is on the other. We were all in the same room 
with our sleeves rolled up and it was a remarkable practical 
collaboration.
    We were also helped because beginning with Ronald Reagan's 
first campaign for Governor in 1966 when he talked about a 
creative society, Reagan had begun to lay the base for the 
country to talk about welfare reform.
    In two books in particular, one, Charles Murray's Losing 
Ground and the other, The Tragedy of American Compassion, those 
two books had helped intellectually win the case. By the time 
we passed welfare reform in 1996, 92 percent of the country 
favored welfare reform, including 88 percent of the people on 
welfare.
    So, the country had spoken and it was a combination of 
creative collaboration at a practical level, sound principles 
developed over 20 years, and, kind of the will of the American 
people being imposed, even if many people in Washington were 
resistant to it.
    The results have been pretty amazing. Kay Hamowitz's 
article in City Journal and Ron Haskins's new book and the 
testimony he will give you later on will give you a real 
framework of this. Let me point out a couple of things. First 
of all, in response to Congressman McDermott's explanation of 
reality, it is pointed out by Kay Hamowitz that of the single 
mothers who have gone to work under welfare reform only about 4 
percent are still at the minimum wage level. There is a pattern 
by which if you go to work and you learn a trade and you become 
more valuable, as you just pointed out, for somebody you just 
lost to the private sector, you get a better job. If you think 
of minimum wage as the beginning wage rather than as a 
permanent wage, it turns out that most Americans pass through 
that period and rise; and there is zero question that the 
welfare reform worked.
    As Kay Hamowitz says: ``The poverty rate for single women 
with children fell from 42 percent in 1996 to 34 percent in 
2002. Before 1996 it had never in recorded history been below 
40 percent.'' I say with sadness to some of my friends I would 
have thought that a program which gave us the lowest level of 
child poverty rate in history would be seen as a success from 
which we could build better and even more important steps in 
the right direction, but sometimes partisanship doesn't make 
that possible.
    I would also point, as Secretary Leavitt, one of the three 
horsemen who we brought in to help create this, said in a 
recent speech, I am quoting Secretary Leavitt, ``employment 
among single mothers has increased dramatically, reaching 63 
percent today, the highest level ever.'' Child support 
collections have nearly doubled. Nearly a million and a half 
fewer children live in poverty than a decade ago. Child poverty 
among African-Americans has declined from 40 percent to 33 
percent, among Hispanics from 40 percent to 29 percent.
    All of these, it seems to me, are good things in the right 
direction and to the degree that it has already positively 
affected people, this was an important, powerful step.
    I want to pick up on Congressman Rangel's concern for 
Americans trapped in poverty because he is exactly right to be 
concerned, and I would hope that we could work together in a 
genuinely bipartisan manner to find real solutions.
    Let me tell you where I am coming from. We have to help the 
poor, the powerless and those who have been left out of the 
American dream. Our Declaration of Independence declares all 
are created equal and are endowed by their Creator with 
certainly inalienable rights. Among these are life, liberty and 
the pursuit of happiness. Yet it is clear, if we are going to 
be honest, that tragically too many Americans today lack the 
education, the personal skills, the habits and the 
opportunities to pursue happiness; to be productive and 
therefore to be prosperous.
    Now I think we have to continue the successful welfare 
reform policies but I think we have to go beyond that. I think 
we have to apply the successful lessons of welfare reform to 
two areas that people absolutely rely on government to get 
right, education and health. Without a proper education and 
without adequate health and health care, people simply cannot 
achieve success.
    I want to underline this. I think our goal should be to 
enable every person in America to have a sufficiently high 
level of education, and sufficiently good health that they are 
able to be productive and prosperous because they are in fact 
productive. Productivity in the 21st century is a function of 
knowledge. Yet, we have to face our crisis in education.
    The study sponsored by the Bill and Melinda Gates 
Foundation recently reported results that should bother every 
American. They reported, for example, that in the Detroit 
school system, which was the lowest-scoring major school 
system, only 21 percent of students who enter public high 
school, graduate.
    Now we need to confront this. If we are cheating four out 
of every five children who enter the ninth grade, we are going 
to continue to have a crisis and the crisis represents itself 
in pain that Congressman Rangel is all too familiar with at a 
personal level. He knows that in his district all too many 
young men are going to be in prison instead of being in 
college. He knows that across the country in the inner city all 
too often we fail people.
    If you think of the tragedy of the Detroit schools where 
four out of five children, young people who enter school as 
freshman will not graduate, we have to profoundly change the 
system.
    I just want to suggest to you if we made saving the 
children a central theme of the next few years and if we were 
truly serious about rolling up our sleeves and breaking 
through, saving young people who are today just entering 
school, saving people who are trapped in Medicaid programs that 
frankly don't meet their health needs and therefore don't leave 
them prepared physically and mentally to be able to get good 
educations, but beyond that, rethinking the entire structure of 
our prison systems so that no one goes through prison without 
becoming fully educated, which will be a totally different 
model than the warehousing and coercion model we have today.
    I just want to say on behalf of all the people who helped 
develop the remarkable welfare reform 1996 that I think we now 
have both an obligation as citizens and an opportunity as 
leaders to develop a similar scale of reform and apply it 
across all the aspects of government which relate to trapping 
people in poverty and give people a chance to acquire 
education, productivity, and as a result, prosperity. I 
appreciate very much the chance to testify.
    [The prepared statement of Mr. Gingrich follows:]
Statement of The Honorable Newt Gingrich, Founder, Gingrich Group, and 
             Former Speaker, U.S. House of Representatives
    ``[the] leading object [of government] is to elevate the condition 
of men--to lift artificial weights from all shoulders; to clear the 
paths of laudable pursuit for all; to afford all an unfettered start 
and a fair chance in the race of life.''
               --Abraham Lincoln, Message to Congress, July 4, 1861
                                 ______
                                 
Chairman Thomas, Ranking Member Rangel, and members of the committee:
    I appreciate the opportunity to testify today about the outcome of 
the historic welfare legislation that was passed ten years ago. The 
national debate leading up to the enactment of welfare reform in August 
1996 and the results of its implementation since then afford the 
country a set of profound lessons about how ``we the people'' can bring 
about profound change that dramatically improves the lives of millions 
of our fellow citizens.
    In the last several months I have been drawn to reading a number of 
books about Abraham Lincoln. I was particularly struck by the message 
that Lincoln delivered to Congress four short months after he took 
office and on the first Independence Day during an unfolding Civil War.
    The civil division in the country no doubt prompted Lincoln to 
reflect deeply on the essential nature and purposes of government. His 
historic task was to define the form and ends of the Union for which he 
would ultimately rally and lead his countrymen to preserve. In one 
section of the speech he wrote that the leading of object of government 
``is to elevate the condition of men--to lift artificial weights from 
all shoulders; to clear the paths of laudable pursuit for all; to 
afford all an unfettered start and a fair chance in the race of life.''
    I cite this passage because I believe it to be not only an eloquent 
statement of the republican principles upon which the nation was 
founded but also a fair description of the spirit that animated those 
leaders in the states and the Congress who led a three decade long 
effort to reform the welfare system.
    We were determined to lift the ``artificial weights'' of a 
bureaucratic system of welfare that drained individual initiative and 
energy and hurt the very people it was designed to help. In its place, 
we were determined to clear a path of work and opportunity that would 
develop the habits of success that would lead to self-sufficiency.
    This effort has been largely successful. Welfare rolls have 
declined nearly 60% in the past ten years and fewer families are on 
welfare than at any time since 1969. Nearly a million and a half fewer 
children live in poverty than ten years ago, with child poverty rates 
among African Americans and Hispanics down markedly. At the same time, 
employment among single mothers has increased dramatically, reaching 63 
percent today, the highest ever.
    There are many other measurable outcomes from this reform 
legislation that warrant your close assessment. We should make every 
effort to see what has worked well--so we can continue it--and what has 
worked less well--so we can make adjustments and improve it. But I 
leave the bulk of this statistical assessment of the outcomes to the 
very talented scholars whom you have assembled for your panel who have 
labored far more than I in measuring the precise impact of welfare 
reform from a myriad of angles.
    Instead, I would like to share the 10 big lessons that I have drawn 
from the successful effort to design and implement welfare reform and 
suggest that we should apply these lessons to developing a next wave of 
reforms in order to lift the artificial weights from--and elevate the 
condition of--our fellow citizens.
TEN LESSONS FROM WELFARE REFORM
    1. Successful Reform Always Starts with a Big Idea of How to 
Improve the Lives of Individuals. It has been said that nothing is more 
powerful than an idea whose time has come. Often a powerful idea can 
take many years before it is accepted and adopted. In the case of 
welfare reform, the powerful idea of replacing dependence and welfare 
with personal responsibility and work took 30 years before it became 
the law of the land. The idea was first put forward by candidate Ronald 
Reagan running for Governor of California in 1966. In a memorable 
campaign speech, Reagan called for replacing the Great Society with the 
Creative Society and ensuring that we had not settled on a welfare 
policy that was perpetuating poverty with a ``permanent dole''. Then in 
1970, Reagan proposed welfare reform at the National Governor's 
Association. No one supported him. It would take another 26 years 
before the big idea of replacing welfare with work finally became a 
reality.
    2. Then Key Step is Deciding Whether to Repair or Replace. The 
first and absolutely unavoidable step in designing large scale domestic 
policy reform legislation is to decide whether to dedicate energies to 
marginally improving the current system or whether to develop a series 
of replacements for the laws, the regulations, and the bureaucratic 
culture and governmental structures.

    Our current system of bureaucratic public administration is 
incapable of meeting the delivery requirements of the 21st century. The 
male clerk with a quill pen and an open inkwell sitting on a high stool 
at a high desk was the standard when the civil service laws were 
codified in the 1880s. That process oriented, red tape ridden system is 
now mutated through 125 years of further laws and regulations. It is 
impossible for it to match the expectations of speed, accuracy, 
flexibility and efficiency inherent in the world of UPS and FedEx. 
Successful reformers will have to replace bureaucratic public 
administration with entrepreneurial public management as a new system 
of rules, regulations, incentives, and metrics.
    The difference in orientation between what we are currently focused 
on and the real change we should be advancing can be illustrated 
vividly.


[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

    Of course, it is not possible to reach the desired future in one 
step. It will involve a series of transitions, which can also be 
illustrated.


[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

    Every aspect of Washington (and for state government of the state 
capital; and for local governments of city hall, the county building or 
the board of education building) tends to focus on marginal ``reforms'' 
of the current bureaucratic systems with which they are comfortable. 
The news media, the lobbyists, the bureaucracies themselves all are 
chanting ``be reasonable,'' ``be responsible,'' ``be practical;'' the 
pressure to sustain the status quo will always be overwhelming.
    If we had followed that advice in 1994 we would not have developed 
The Contract with America, we would not have insisted on voting on the 
entire contract in the first 93 days of taking office, we would not 
have insisted on welfare reform, we would not have driven through the 
first consecutive large balanced budgets since the 1920s.
    Similarly, if President Reagan had been `reasonable', 
`responsible', `practical' and `prudent' he would not have said his 
vision of the outcome of the Cold War was `we win, they lose,' he would 
not have called the Soviet Empire `the evil empire' and he would not 
have said ``Mr. Gorbachev tear down this Wall'' (which required the 
President to personally write it back in three times after the State 
Department bureaucracy took it out each time).
    3. Great Change Always Comes from Outside Washington, D.C. Great 
changes come from the country to the capital and are imposed by the 
American people on the politician-lobbyist-bureaucracy-news media 
system despite their resistance. Governing systems always focus on and 
cue off the American people. They begin to decline when they start 
shifting their focus to the power structures of the capital (state or 
federal). As one Reagan official said in 1972, ``when people in 
Sacramento start saying `we' and mean California state government we 
know they have been here too long. `We' means the people of 
California.'' And in fact it was the American voter who insisted on 
real change in 1994. Nine million more Americans turned out in 1994 
(from 1990) to support a positive agenda of reform, including 1994's 
crowning achievement of welfare reform. It was the American people who 
demanded welfare reform by 92% (including 88% of those on welfare). It 
was not the experts, the bureaucracy, or the lobbyists.
    4. Cheerful Persistence is Required. To successfully deliver large 
scale reform in a free society, it is necessary to have cheerful 
persistence. It is necessary to have a positive vision of a better 
future. Americans have always been stunningly optimistic and the 
optimistic positive leadership has almost always beaten the negative 
pessimistic leadership. It is also important to describe this better 
future in personal terms. It is necessary to describe what it will mean 
for you, your family, your children, and your grandchildren.
    5. Far Reaching Collaboration is Critical. Developing politically 
popular, philosophically correct, implementable in reality reform is 
very complex. It takes a longer time horizon, a more decentralized 
process of parallel effort, and a more collaborative system for the 
Executive-Legislative branches (including members of the Ways and 
Means, Agriculture, and Education and Workorce Committees) and the 
Federal-State systems to work together. The 1995 involvement of key 
Governors and their staffs in drafting the welfare reform bill is a 
classic case study in a collaborative approach that reached across 
formal boundaries to build an informal team for a specific purpose. 
This approach was absolutely necessary for the practical reason that it 
was the Governors themselves, and through them state governments, that 
would actually implement the policy reforms. Moreover, several key 
Governors, like Tommy Thompson (Wisconsin), John Engler (Michigan), and 
Mike Leavitt (Utah), had already started to lead the way in figuring 
out the type of welfare reforms that would work. It made complete sense 
to involve those who knew who to practically accomplish results. Their 
staffers were in the room with Congressional staffers bringing 
practical solutions to turn public policy ideas into reality. It was 
important to get the ideas from among the fifty laboratories of 
democracy in order to diffuse the best approaches across the country. 
It would have been impossible to craft a system which helped 60 percent 
of the people on welfare move into jobs or classes without the active 
help of the governors and those in their states who knew the realities 
of getting the job done at the local level.
    6. Big Change Always Requires Winning the Argument. Successful 
reformers understand the Margaret Thatcher rule that `first you win the 
argument, then you win the vote.'' They understand that defining the 
argument, choosing the right words, organizing the effort to educate 
and rally the country makes possible victories in elections or in 
Congress that would not otherwise be possible. Conversely, successful 
reformers are very sensitive to starting to lose arguments because they 
know that their votes will then be put at risk. From 1966 when Reagan 
first proposed it to 1996 when we passed it we had won the argument. 
Intellectual effort mattered. Charles Murray's Losing Ground and Marvin 
Olasky's The Tragedy of American Compassion were especially important 
in creating that victory.
    7. Words Matter. Successful reformers know that words really 
matter. Successful reformers MUST acquire the skills to communicate 
good policy. Any large scale reform initiative involves learning a new 
glossary and grammar. The new approach has to be outlined in words 
which the public either understands or has to learn. Then the words are 
connected together with a grammar which enables the new language to be 
used to communicate the reform vision.
    Again and again the right words to evoke the right images and the 
right choices make a big difference in the ability to win the argument. 
It is important that successful reformers define words that describe 
the desired future that people already understand and desire.
    Our vision for welfare reform was one where independence replaced 
dependency, where opportunity replaced poverty, where responsibility 
replaced irresponsibility, where self-sufficiency replaced 
helplessness, where caring replaced caretaking. Over time more and more 
Americans heard and believed in that vision.
    8. The Reforms Sought Must Be Consistent with Broad American 
Values. Successful reform can only be achieved if the goals advanced 
are consistent with broad American values.
    a. America is an Incentive Based Society. Americans are very 
responsive to incentives and very hostile to penalties or punishments. 
In America when your leaders make your life more difficult or more 
expensive your first reaction is to fire them. This intense opposition 
to being ``put upon'' runs deep in the American psyche. The 
Revolutionary War flag with a rattlesnake the slogan, ``don't tread on 
me'' is typical of this self reliant, populist suspicion of authority. 
It is a major reason tax increases as a strategy has done so badly 
since 1978 (when Proposition 13 in California first signaled a broad 
middle class resentment). In the absence of an undisputed crisis it is 
essential for successful reformers to find incentives to pull people 
into new behaviors and to avoid penalizing or punishing people out of 
the undesired behavior. To put the principle simply: Americans elect 
leaders to make their lives better and they will fire leaders who make 
their lives worse.
    b. America is an Entrepreneurial Society. The potential to have an 
incentive led program of reform is increased dramatically by the core 
nature of American society. It is the nature of America's 
entrepreneurial free market system based on science and technology to 
create MORE choices of HIGHER quality at LOWER cost. This historic fact 
is one reason rationing has never been a problem in America except when 
government interfered. This principle is also a great opportunity for 
successful reformers to provide better learning, better health, a 
better environment, and a more effective general system of government 
than any bureaucratic centralized red tape ridden model could produce.
    9. Opponents of Reform Must Be Forced To Carry the Burden of Their 
Positions. It is necessary to put opponents of popular reform on the 
defense, forced to explain the logic of their position. In the case of 
welfare reform, it meant that opponents had to defend a system that 
kept recipients of welfare in a hopeless system of poverty in which 
they were told not to help themselves, not to look for work, but to sit 
there and be quiet and wait for the next check. At some point, the 
opponents could no longer bear the burdens of their own position. So 
much so that by 1996, polls showed that 92% of the country favored 
welfare reform, including 88% of the people on welfare. When only 8% of 
the country agrees with you, it is hard to sustain a position even if a 
large part of that 8% is in the news media, the academic world, and the 
bureaucracy. By then, it was virtually impossible for the Congress to 
avoid passing it or the President to avoid signing it, which he did 
after vetoing it twice.
    10. Successful Reform Must be Citizen Centered. Successful reform 
on the scale of the 1996 welfare reform has to be citizen centered and 
movement driven. People have to decide it is ``their plan'' improving 
``their future''. Social Security in 1935 was not about FDR. It was 
about the American people. Welfare Reform was not about the Republican 
Party. It was about giving the poor a much better future. People in 
power have to constantly remind themselves that they are advocating the 
interests of the American people and not merely their own interest, If 
something is not working at the grassroots it may be that we need to 
rethink what we are doing. To repeat Joseph Napolitano's injunction 
``Never underestimate the intelligence of the American people nor 
overestimate how much information they have.''
APPLYING THESE SUCCESSFUL LESSONS TO SAVING THOSE WHO ARE STILL POOR, 
        POWERLESS, AND LEFT OUT OF THE AMERICAN DREAM
    The 1996 welfare reforms marked a dramatic change in American 
social policy. Yet, we cannot stop there if we are to advance the real 
change required to help the poor, the powerless and those who have been 
left out of the American Dream. Our Declaration of Independence 
declares ``All . . . are created equal . . . and endowed by their 
Creator with certain unalienable Rights, that among these are Life, 
Liberty and the pursuit of Happiness.'' It is clear that tragically too 
many Americans today lack the education, the personal skills, the 
habits, and the opportunities to pursue happiness, to be productive and 
therefore be prosperous.
    First, we must continue the successful welfare reform policies and 
pass any required modifications and extensions.
    We must then apply the successful lessons of welfare reform to two 
areas that people absolutely rely on government to get right: education 
and health. Without a proper education and without adequate health and 
health care, people simply cannot achieve success.
We Must Save Our Children From Failing Schools.
    We must face our crisis in education. A study sponsored by the Bill 
and Melinda Gates Foundation recently reported results that are deeply 
troubling.
    The study looked at graduation rates on a district-by-district 
level and found that they are shockingly lower than previously reported 
by the education bureaucracy. In big-city public school districts like 
Cleveland, Los Angeles, Miami, Dallas and Denver, fewer than 50 percent 
of high school students graduate on time. In three districts, the 
public schools graduate fewer than 40 percent of their students: In New 
York City, the graduation rate is 38.9 percent; in Baltimore, it's 38.5 
percent; and in Detroit, incredibly, only 21.7 percent of students who 
enter public high schools will graduate.
    Consider this finding for a moment. If only 21.7 percent of 
students graduate from Detroit schools on time, that means that 78.3 
percent of students fail to graduate. Almost 80 percent of students--
four out of five--are failed by our educational system. Why do we 
tolerate this level of failure? Cheating the children is wrong. The 
fact is, in most aspects of life, we don't. If a private company took 
the money from its customers and then failed 80 percent of them, it 
would be closed in a day.
    One of the most basic measures of the success of our school system 
is high school graduation. A high school diploma is the minimum 
requirement for successful participation in American life. The failure 
of our high schools to graduate their students isn't limited to Detroit 
or to our big cities. Nationwide, it is estimated that three of every 
10 students who start high school won't graduate on time. For 
minorities, these numbers are far worse. One of every two African-
American and Latino students won't graduate on time or graduate at all. 
So dramatic is the failure that today it is estimated that there are 
more African American males in prison than there are in college--a fact 
that is a national disgrace.
    We've all heard the rallying cries of ``Save the Whales'' and 
``Save the Rainforest.'' My view is that reports on our public schools 
like this latest one should have us all shouting ``Save the Children.'' 
Every time we allow policies that favor the education bureaucracy over 
our children, we not only hurt our children, we hurt our country and 
our prospects for future safety and prosperity.
    America abounds with more energy, resourcefulness and innovation 
than any nation in the history of mankind. We deserve an education 
system that nurtures and develops these qualities. ``Save the 
children'' isn't just a slogan, it's a call to win the future for all 
Americans, starting with our children. Let's not wait to get started.
We Must Save Lives and Save Money by Transforming Medicaid.
    Medicaid is a mess. It is an obsolete 1965 welfare state system 
with an assumption of irresponsibility and dependency on the part of 
the recipients and a micromanaged centralized bureaucratic control 
system with both state and federal layers of bureaucracy. Its thousands 
of pages of state and federal complexity are impossible to manage and 
make innovation very difficult and very slow.
    For forty years the combination of the U.S. Congress, the Federal 
CMMS bureaucracy and fifty state legislatures have interacted to 
produce a dance of loophole exploitation by states followed by loophole 
closings by the federal government followed by clever consultants 
finding new ways to cost shift.
    The result has been a money oriented red tape ridden culture which 
is a major contributor to health disparities, a significant source of 
cost shifting to private payers, and a significant burden on doctors 
and hospitals.
    As Medicaid has grown in size and cost, its implications for both 
the federal and state budgets have grown. We are entering a period when 
Medicaid will be an unavoidable major issue in our political-
governmental system.
    Today, 26 percent of the federal government's budget is spent on 
health-related programs. Healthcare spending will continue to rise 
disproportionately relative to other federal and state budget 
priorities. We simply cannot balance the federal budget over the long 
term if we do not deal intelligently with health. There will not be 
enough dollars or doctors to take care of us on our current trajectory. 
State budgets will not be able to cope either.
    A properly transformed Medicaid system should have at its core the 
principles of individual ownership, personal health, and the right to 
know price and quality of health and healthcare services. These would 
form the basis of a system centered on wellness, prevention, early 
testing, and incentives for healthy behaviors before, during, and after 
any illness.
    We must develop a genuine momentum for creating a 21st Century 
Responsible Citizen Medicaid System which will truly eliminate health 
disparities, improve health for the poor, maximize independent living 
and quality of life for people with disabilities, improve the 
satisfaction and lives of providers, and lower long term costs for the 
taxpayer.
    Finally, we must continue to assert the basic American values that 
have made this country a unique center of freedom and opportunity for 
people everywhere. Welfare reform was an important first step. We must 
continue to unleash the genius of free men and women, encourage 
dreamers, and create incentives for greatness.

                                 

    Mr. SHAW. Thank you, Speaker Gingrich. Governor Thompson.

 STATEMENT OF THE HONORABLE TOMMY G. THOMPSON, PARTNER, AKIN, 
    GUMP, STRAUSS, HAUER & FELD, AND FORMER SECRETARY, U.S. 
 DEPARTMENT OF HEALTH AND HUMAN SERVICES, AND FORMER GOVERNOR, 
                           WISCONSIN

    Mr. THOMPSON. Thank you very much, Mr. Chairman. I have 
submitted my report and I want to tell you that welfare reform 
is something that just didn't happen. It was a dreary, long 
work in progress. I would like to take the opportunity at this 
point in time to thank Senator Santorum for his dedication and 
his passion and trying to get things accomplished, and he has, 
and I am very supportive of what he has done and is trying to 
do.
    Newt Gingrich, the Speaker, I had the privilege of working 
with him and other Governors throughout the whole process in 
getting things done, and I certainly have to thank you, Mr. 
Chairman, because I don't know how many hours I spent in your 
office talking to you on the telephone about welfare reform 
during 1995 and 1996 and also had the opportunity to debate my 
good friend, Mr. Rangel, on welfare reform on national 
television more times than I care to recount, but you have 
always been a wonderful ally and sometimes a nemesis but it is 
always a pleasure to see you, Congressman Rangel. Many other 
people on this Committee on Ways and Means worked so hard 
during those times to come up with a bill.
    When I started back in 1987 on welfare reform, I started 
because people had been coming from all over the country to 
Wisconsin because we had high welfare payments. People were 
making a joke out of the fact that you can, from Chicago, get 
on a bus for $18 and go to Wisconsin and increase your welfare 
payments by $225. We had national TV programs talking about the 
people that were coming into Wisconsin to get on welfare.
    I sat down with several individuals and decided that I was 
going to really try and reform welfare. How I did it, Mr. 
Chairman and Members, is I used to bring in welfare mothers 
into the executive residence, when I was Governor, and I would 
ask them to have lunch, just with welfare mothers, and I would 
ask them ``why are you on welfare,'' and they said the reason 
we are on welfare is because it is the way for us to get health 
care.
    I said if I provided you with health care would you take a 
job and get off of welfare. The response was well, we have to 
have somebody to take care of our children. We can't get off of 
welfare if we don't have somebody taking care of our children.
    So, I said, and rightly so, if I provided health care and 
day care, would that be enough of an impetus for you to get a 
job and get off of welfare. They said yes, it would be, except 
we have no training. We haven't got the training. We don't have 
the education. I dropped out of school when I was 13 or 14. I 
was pregnant. I have never been back to school and I have never 
had a job.
    So, I said if I provided you with training, would you take 
a job. They said yes, but most of the jobs are away from where 
I live. I need transportation.
    So, I sat down and developed a program which would provide 
for health care, day care, transportation and training. As a 
result of that I went to Washington because I had to get 
waivers, and I started in 1987 with President Reagan. I am the 
only Governor I believe that had waivers in existence from 
President Reagan, the first President Bush, and President 
Clinton.
    We developed welfare programs along those waivers. Those 
waivers started to work and people started to stand up and take 
notice. Then in the nineties and 1991 and 1992 John Engler and 
Mike Leavitt got elected and they also then started working on 
welfare reform. We started a movement across America trying to 
compete with developing better and more exciting, innovative 
welfare programs to help individuals get out of poverty, and be 
able to have a job.
    I created a State EITC compatible with the Federal one, so 
it really made it worthwhile for an individual to have a job. 
As a result of that we were very successful in Wisconsin. We 
went from over 100,000 families, and the day I left we were 
down below 7,000. We had over a 90 percent reduction off of 
welfare in the State of Wisconsin. Not all, but a vast majority 
of those mothers who had children on welfare had a job that was 
paying much more than the minimum wage. They were much better 
off. Plus, having the Federal EITC, plus the State EITC, they 
were then able to have a decent life. They were able to then 
reduce childhood poverty in the State. We also became the State 
in which other States tried to copy.
    Then I had the privilege to work with you in Congress, with 
Speaker Gingrich, and other individuals to come up with the 
TANF program. I really sincerely believe it was a giant step 
forward in regard to reducing childhood poverty, and allowing 
individual mothers to have a way out of poverty and have a job. 
As a result of that, Congress has continued to work on it.
    I want to compliment you--I want to compliment this 
Committee on being able to pass the recent proposal that the 
President signed, in which you once again redirected the 
attention to those individual mothers who are not working and 
allowing for some type of intervention in order to help them 
get a job.
    I would like to also compliment Speaker Gingrich on his 
ideas, but I would like to take them one step further. I think 
if you are really going to be serious about welfare reform you 
are going to also have to consider how are you going to be able 
to make sure that mothers who are still on welfare are able to 
get the skills necessary to get a job.
    One of the best ways to do that I believe is by taking a 
look at the EITC, the vocational acts, and by giving mothers 
the opportunity, the training, the skills necessary in order to 
get jobs and also to focus in areas where the jobs are badly 
needed, especially in health areas.
    You could set up a program in which you could steer welfare 
mothers and be able to give them the encouragements to get into 
nursing, get into lab work, get into hospitals. We know there 
is a huge shortage out there. Hospitals are dying for that kind 
of capabilities and opportunities to have people trained in 
those kind of jobs.
    You can use the Welfare to Work Act, use the Vocational Act 
in order to really get mothers trained in those fields and 
those areas and you would be able to help them get off of 
welfare and get them the kind of income all of us would like to 
have. You would be making a giant step forward to getting 
mothers out of poverty and helping children.
    The second thing is I think you should also try to 
encourage other States, like Wisconsin, to have an EITC. It has 
worked out extremely well for individuals starting out in a 
minimum wage job in order to get off of welfare and be able to 
get the kind of training necessary to do it.
    I would just like to continue to compliment you, to 
continue to look at ways in which you are going to be able to 
help mothers find ways, find the training and the skills 
necessary to get off of welfare.
    I would like to thank my Congressman, Paul Ryan, for the 
introduction but also thank him for his leadership on this 
Committee and his leadership in Congress and compliment all of 
you on a bipartisan basis to bring this subject back in front 
of the American people so that we once again can focus on it, 
focus on poverty, focus on mothers and children and be able to 
give them the skills necessary to get off of welfare.
    I thank you for this opportunity, for me to come back in 
front of the Committee on Ways and Means and talk about a 
subject that I have been involved in now for well over 20 years 
and a subject that badly needs continued attention and 
nourishing from this Committee on a bipartisan basis.
    [The prepared statement of Mr. Thompson follows:]
  Statement of The Honorable Tommy G. Thompson, Partner, Akin, Gump, 
Strauss, Hauer & Feld, and Former Secretary, U.S. Department of Health 
   and Human Services, and Former Governor of the State of Wisconsin
Introduction
    Good morning Chairman Thomas, and Members of the Committee. I am 
honored to appear before you this morning to discuss the tremendous 
successes of the bipartisan 1996 welfare reform law, and ways to 
further build on the remarkable progress this initiative has had in 
terms of empowering families and individuals to become self-sufficient, 
all issues that I am so passionate and optimistic about.
    I would like to commend you, Mr. Chairman, and your colleagues for 
the role you have played in helping to focus attention on this 
important issue.
    I have been blessed to have had the opportunity to witness first-
hand the enormous impact welfare reform has had in helping families and 
individuals dependent on welfare obtain the tools and skills necessary 
to find lasting work that puts them on the path toward economic 
independence. As Governor of the state that led the nation in adopting 
innovative welfare reform policies and most recently as Secretary of 
Health and Human Services (HHS), the federal government's department 
responsible for implementing the country's welfare policies, I have 
seen with my own eyes the compassion that these reforms have provided. 
Ten years ago, the federal government took bold steps to put an end to 
the failed government assistance programs that perpetuated a cycle of 
dependency, non-work and non-marriage. For years, we followed this path 
and we knew where it led--generation after generation dependent on 
welfare--ongoing poverty and dependence.
    The federal government's welfare overhaul was modeled in large part 
after the dramatic success the state of Wisconsin had in helping 
families to end their dependency on welfare and achieve self-
sufficiency. Just as Wisconsin's reforms helped recipients of the 
program succeed beyond all expectations in terms of entering the 
workforce and reducing the state's caseload, America also has seen 
incredible progress because of the 1996 reform; national welfare 
caseloads have declined by almost 60 percent and nearly eight million 
parents and children no longer receive welfare; the overall poverty 
rate has dropped 7 percent and the child poverty rate has dropped 13 
percent, while the number of adults on welfare who work has more than 
doubled.
Wisconsin's Welfare Reform
    Let me tell you a little bit about what occurred in Wisconsin. In 
1996, as Governor, I signed into law Wisconsin Works, also known as W-
2, a landmark welfare-to-work program. The program required 
participants to work, while at the same time providing the services and 
support to make the transition to work feasible and permanent. W-2 
provided a safety net through child care, health care, transportation 
and training assistance. Wisconsin's monthly welfare caseload declined 
by more than 90 percent, while the economic status of those taking part 
in W-2 improved significantly.
    Welfare reform in Wisconsin began with one simple premise: ``for 
those who can work, only work should pay.'' The challenge we faced was 
to support people in their efforts to work within their abilities. The 
key was to invest in a system that aimed to reinforce behavior that led 
to independence and self-sufficiency, instead of sending checks out 
once a month and in effect not addressing the underlying cause of 
dependency. To me, the latter is not compassion. Expecting nothing in 
return and offering no real help is hardly compassionate. That is 
apathy. In Wisconsin, we refused to allow a morally bankrupt system to 
continue ruining lives; we scraped a decades-old system that had sadly 
become entrenched in our society. As Governor, I could not stand to 
lose one more generation to a welfare system that certainly made 
families no better off and often left them worse off than before they 
entered the system, a system that robbed families of their self-worth 
and dreams. So we did something. We decided to give these families a 
ladder so they could climb out of poverty; we gave them a ladder of 
opportunity called employment. Welfare told generation after generation 
of families they weren't worth anything and unfortunately, these 
families believed the naysayers. Nonsense. I believed, and continue to 
believe that every single person in this great county of ours is 
capable of contributing something to our society. Everyone has 
something they can do.
    Undeniably, Wisconsin's success in welfare reform is a reflection 
of how the federal government has listened and reacted to the needs of 
each and every state in this nation. It can also be said that the 
federal government's direction on welfare reform is a reflection of 
Wisconsin's welfare movement. Although from a national level, it 
appears that changes to state welfare policy took place within the 
larger context of federal welfare reform, it may be more accurate to 
say that changes to federal welfare policy took place within the 
context of Wisconsin welfare reform. The success in Wisconsin provided 
a blueprint for the Temporary Assistance for Needy Families (TANF) 
program. Together, the federal government and state governments have 
offered hope and opportunity to those most in need, and now more than 
ever, we must work together to continue to help those still in need by 
delivering them opportunities to find self-sustaining work.
Commend Congress for Its Leadership in Strengthening the 1996 Act
    I would like to commend Congress for its leadership in making 
comprehensive welfare reform part of the Deficit Reduction Act of 2005 
which was signed by the President in early 2006. In particular, the 
modifications to the caseload reduction credit included in the Deficit 
Reduction Act of 2005 will essentially require all states to achieve 
the goal of engaging at least 50 percent of those receiving cash 
assistance in work and work-related activities designed to promote 
self-sufficiency. This as well as other modifications to the 1996 law 
will help further guarantee that the underlying principle of successful 
welfare reform--that efforts should be focused on providing needy 
individuals and families with the opportunity to achieve self-
sufficiency through work and not simply cash transfers--is further 
strengthened.
    I can tell you that TANF has been a remarkable example of a 
successful Federal-State partnership. States were given tremendous 
flexibility to reform their welfare programs and as a result, millions 
of families have been able to end their dependency on welfare and 
achieve self-sufficiency. These new improvements to the TANF work 
requirements are a further example of the federal government working 
with states, and redoubling efforts to reach out to those in need.
Commend HHS Over its New Rulemaking to Address Welfare Reform's 
        Unintended Consequences
    The extraordinary success of the 1996 welfare reform in reducing 
caseloads brought about with it unintended consequences. Because of a 
caseload-reduction credit contained in the original 1996 act, fewer 
caseloads meant a corresponding decrease in the percentage of adult 
welfare recipients that were required to join the workforce.
    Thanks to Congress' action on this front, along with the hard work 
of those at the Department of Health and Human Services in issuing 
regulations in June of this year, participants in state welfare 
programs funded through the federal TANF block are more likely to 
secure real, meaningful work and stay on path to becoming self-
sufficient. By issuing these regulations and more precisely defining 
activities that qualify as work, HHS went a long way in helping to 
maintain the 1996 welfare reform law's intent to provide states with 
incentives to reduce caseloads. The regulations issued by HHS require 
education and training to be directly related to a specific job; allow 
participation in substance abuse, mental health and other 
rehabilitation services to count under the ``job search/job readiness'' 
work category; and further stimulate work by allowing countable 
participation to include actual hours and limited excused absences. In 
addition, the new regulations ensure greater state accountability by 
requiring all work activities to be supervised in order to count toward 
the participation rate; using federal reviews and the single state 
audit to monitor state compliance; and implementing a penalty for non-
compliance with work verification plan.
    HHS has taken a step forward in tightening worker requirement 
standards and ensuring that the purpose of the 1996 reform, to get 
those not working into the nation's workforce, is fulfilled.
Alarmist Rhetoric
    At the time welfare reform was dominating the headlines and news in 
1996, critics of the overhaul accused supporters of the reform as being 
anti-family, anti-child and offered dire warnings of the consequences 
of undertaking such reform, claiming that young children would be going 
hungry and abandoned at higher rates. These same skeptics predicted 
that the families receiving government assistance were at risk of 
sinking deeper into poverty and homelessness.
    Just as in Wisconsin, the federal government's efforts to improve 
the nation's welfare program have resulted in enormous progress. As 
mentioned earlier, the number of Americans free of public assistance 
point to the overwhelming success of the 1996 reform, almost eight 
million parents and children are no longer dependent on welfare. These 
raw statistics do not capture the hope and optimism that welfare reform 
has instilled in America's families. Instead of wallowing in the 
despair, mothers and fathers have more self-esteem, have found their 
dignity, and their children are doing better socially and in school.
    Together our work has had a profound impact on our nation's most 
vulnerable families. We have exceeded the most optimistic expectations 
by assisting millions of families in moving from dependence on welfare 
to the independence of work and we have provided a strong commitment to 
child care to ensure parents can go to work without worrying about the 
safety and well-being of their children.
    A second measure of success of welfare reform must be the direct 
impact the program has on its participants, their families and, most 
importantly, their children. This is why Wisconsin's reform included 
increases in the state's child care budget, including additional funds 
for day care start--up, and the recruitment of new day care providers. 
Wisconsin enacted meaningful programs that supported the recipients of 
welfare in their struggle for independence--programs for child care, 
health care, job search assistance and transportation.
    In addition, we must make sure that those who have found employment 
remain in the workforce. We must continue to make investments in 
supporting those who have made this critical first step toward success. 
Our bold welfare reform efforts demand that people push themselves 
toward success, at the same time we enable them to do so with strong 
supportive services.
    It is my belief that Congress' action in including provisions in 
the Deficit Reduction Act of 2005 to address harder-to-serve cases will 
help greatly in reaching out to those most vulnerable and those who 
have just begun employment. Congress can be proud of its leadership in 
taking steps to ensure that these segments of the population are 
provided with the extra help necessary to put them on the path to self-
responsibility, including: fully funding TANF and child care--making 
available $175 billion for this critical program; increasing mandatory 
child care funds by $1 billion; providing $750 million for healthy 
marriage and fatherhood services; providing more generous child support 
payment policy for families and encouraging parents in their efforts to 
leave welfare for work.
Conclusion
    In Wisconsin, and throughout America, welfare reform has 
demonstrated that states can best solve problems when given the 
flexibility and support to do so. In 1996, Congress gave the states the 
freedom to design their own welfare replacement programs and the block 
grants to support them. As a result, hundreds of thousands of families 
are climbing out of poverty and pursuing their piece of the American 
Dream. The new actions by Congress and the Department of Health and 
Human Services take further steps to build on the successes of the 1996 
welfare reform act.
    On the heels of the 10th anniversary of Congress' successful effort 
to reform the nation's welfare system, it is appropriate to draw 
attention to the urgent need to reform Medicaid. Medicaid does not 
adequately meet the health care needs of the individuals who comprise 
the incredibly diverse population served by the program. To help those 
who need it most, we must systematically examine the fundamental 
challenges faced by the Medicaid program and take concrete steps on the 
road to solutions. Every day new discoveries in drugs, devices, and 
medical procedures provide Americans with better, more personalized 
medical care. As significant as these medical advances may be, many 
Americans do not have access to lifesaving treatments and technologies 
because they cannot afford them. Congress must take creative and 
comprehensive action, as it did in reforming welfare, to strengthen 
Medicaid's ability to meet individualized needs, to empower individuals 
receiving benefits through the program, to improve the program's core 
structures, and to reach out to the uninsured.
    I would be happy to answer any questions you may have.

                                 

    Mr. SHAW. Thank you, Governor. I recall listening to these 
three witnesses. It is kind of like going back down memory 
lane. Senator Santorum, thank goodness we trained you on this 
side and you brought that knowledge over to the Senate, where 
you certainly were not only a leader here in the House on this 
particular subject but you led the way over in the Senate, 
which for a young Senator or a freshman Senator is not an easy 
task and I compliment you for what you did.
    Newt, I think you certainly brought this out as part of the 
Contract of America and a fulfilled promise to the people. 
Governor Thompson, I can't thank you enough for your experience 
that you shared with us in crafting this bill so that the 
mistakes that we would otherwise have made were avoided.
    Welfare reform was a rescue mission. It always was 
considered to be a rescue mission. It never was considered to 
be something punitive, as to take these deadbeats off of 
welfare. People were consumed with welfare because that is all 
they knew, and that is the tragedy of decades of neglect. I say 
neglect. Politicians were feeling better simply because they 
threw money out there. They didn't look into the problem and 
try to solve it. I think that is probably one of the brightest 
days in the Congress when we started really looking at it. 
Tommy, how you questioned these welfare mothers in finding out 
about why they were on welfare and going through the checklist 
is exactly what this Congress followed.
    These are very fragile people and we worked hard to see 
that they were not disadvantaged or they were not in any way 
punished for falling into a system that was not of their own 
creation.
    Paying people not to work, to have kids and not to get 
married is one of the most destructive formulas for behavior 
that I can possibly think of, and yet this government for so 
many years followed that route.
    When I was Mayor of Fort Lauderdale we ran some of these 
welfare programs and I found that--these were work programs; 
programs that were supposed to put people to work. I found that 
the biggest problem that we had is that there was always an 
alternative, and that was welfare, to finding a job.
    So, you had--so early on I realized that the enemy was 
really the Federal Government that was paying people to stay 
where they were. I will pay you to stay where you are; just 
don't get a job, don't get married, and continue to have kids 
and every year you will get a bigger check. That is absolutely 
unforgivable that Congress did that for so many years and they 
stood idly by and watched that happen.
    I remember some of the earlier days, and Tommy, I don't 
know whether you remember this or not, but you and I met on 
many, many occasions, but one of the first times, you expressed 
astonishment that Members of Congress were asking you for 
advice; you said that you didn't have to come up here and kiss 
anybody's ring. I said you don't have to kiss anything up here, 
you are our expert, you are the one that we are going to rely 
on to help us draft these things. There were other Governors. 
My own Governor Chiles of Florida, I talked to him.
    One of the earlier recollections I had of welfare reform, I 
called during the election process President George Bush, the 
older George Bush, and told him that I would very much like to 
see him put into his campaign welfare reform, and he 
indicated--at that time, he was way ahead of the polls--that 
they pretty much had their script written.
    It wasn't a month later that I woke up one morning to 
listen to President, or then Governor Clinton, say how he was 
going to change welfare as we know it today, and I just sat up 
in bed and I said that is our idea.
    That is the way it was. Even though President Clinton did 
veto it twice, much to his credit he finally signed it. I will 
say this, even though he had resignations within the White 
House, people were madder than hell that we were going to touch 
the unthinkable, do the unthinkable thing and touch the welfare 
system, actually expect more out of people and believe in the 
human spirit and push people forward. There were people 
resigning from his staff at the White House, but much to his 
credit, after he signed the bill, I remember Donna Shalala who 
fought us all the way, as soon as he signed it she set out to 
make it work, and she did. She now is President down at the 
University of Miami and I applaud her for her efforts in 
getting this thing jump started.
    We have talked about statistics. I think, Senator Santorum, 
I think you pointed out correctly the error in the statistics 
that we were talking about. The welfare caseloads are down 64 
percent, nearly 8 million parents and children no longer 
receive welfare. The overall poverty rate has dropped 7 
percent, the child poverty rate has dropped 13 percent, and 
poverty among children and female head of families, a group 
most likely to go on welfare, dropped 15 percent from 1996 to 
2004. I choose those years because those are the years that Mr. 
McDermott chose to put on the chart.
    We have given people a life. We have made these welfare 
recipients into role models for their kids. I will always 
remember one of the--I think it was Ms. Anderson from 
California, one of the State welfare directors who was telling 
us a story at the hearing about how this youngster went to 
school and was raising his hand, wanting to get recognized, and 
the teacher finally recognized him and said what do you want. 
He said my momma went to work today.
    You think these kids don't notice those things? Yes, they 
do. Now that kid has a role model and somebody to measure his 
life with. I think it is a wonderful thing.
    So, I think today is a day we celebrate, not just by 
patting ourselves on the back. The real champions of welfare 
reform are the single moms, those that had to do a scary thing: 
get rid of a life that they had become so comfortable in, and 
begin a new one that was adventuresome and was going to require 
that they actually leave the home.
    It was a great success, they are a great success, and I 
think they are the people we should be honoring for the work 
that we did. Mr. Rangel.
    Mr. RANGEL. I am so choked up, Chairman Shaw, by your 
remarks that I just have to take a deep breath. The Senator is 
leaving.
    Mr. SHAW. That was prearranged.
    Mr. RANGEL. It is a Republican rally. I can understand. You 
have got to campaign. There is nothing wrong with this. I 
really think it is exciting to see that we can praise the 
Republican leadership, and I had hoped that we would have 
Senator Clinton here. She might have had some recollections of 
the White House since statistically poverty went down each and 
every year that Clinton was in office and has gone up each and 
every year since it has changed.
    I don't think we can afford the luxury of all this patting 
each other on the back. I am so moved by what the Governor said 
and what Speaker Gingrich has said that I am prepared to take 
this to a new level because, let's face it, those who are still 
in poverty and still feel the pain would hardly be invited to 
attend this Republican rally, notwithstanding how good you feel 
about yourself.
    What we have to do, as we are doing in New York, is to have 
those who care, the churches, the synagogues, the Mayors that 
say we can do something about this. As Newt Gingrich has said, 
education, competition, good health, all of these things we 
have to come together, not as Democrats or Republicans. I do 
hope, Speaker Gingrich, that we can get together soon so that 
we can get you hooked up with what Bloomberg is trying to do 
because you can go to any poor neighborhood and know that 
poverty is so contagious; the schools are collapsed, kids make 
kids, people lose self-esteem. They don't work; they are 
unemployable. Half the kids can't even get in the Army if they 
wanted to get in.
    So, whether it starts with lack of education or the 
breakdown of the family or bum neighborhood, it doesn't make 
any difference. I can tell you I have come from a community of 
bums that were forced to volunteer in the Army, and the Army 
gets it. The Army gets it. Which shows that no matter how dumb 
you are, given support, you can be productive. That is what 
this country needs. We can't afford to have incompetents in 
jail, living off of the society and not being able to do 
anything.
    So, I am anxious to see how we can establish a vehicle of 
communication. I am not offended that this is a Republican 
rally. Do what you have to do. The polls look bad, and I 
understand, Mr. Shaw, but after that, or before then, people 
who are poor, poverty, they don't care whether we are 
Republican or Democrats. They want to be productive Americans. 
They want to be able to choose between the parties, and I want 
that to happen.
    So, I am glad that the Senator had to leave because he 
brings out the partisanship in me. I can't help myself, but 
you, Governor Thompson, you were never a Republican Governor to 
me. Your sincerity in trying to work out something was never 
challenged by anybody while you served with your government.
    Newt has gone out since he has left office, and you didn't 
have to remind us that we lost all the Chairmanships. I 
remember that far too well. So, I didn't need that, but you 
have done so much work in education, in medical experiences, 
that we can't afford to let our party labels interfere with the 
obligation that we have to the American people, so that I will 
be reaching out to you, Speaker Gingrich, to see what work you 
have done in making certain that education is not considered a 
local responsibility but a national priority.
    We cannot go into globalization, we cannot go into fair 
trade, we cannot even challenge a whole lot of these countries 
unless our country is prepared to say that we are productive, 
we are competitive. So, it has been a great experience for me, 
and it is not unusual that I have attended Republican rallies 
and something positive has come out of it. So, thank you for 
calling it. Thank you, Mr. Chairman.
    Mr. SHAW. Thank you, Mr. Rangel. I just point out to you 
when this bill got to the floor on July 18th, 1996, the 
President in the middle of a debate, a Democrat, President 
Clinton, came on the television and said he was going to sign 
it. After that 99 Democrats voted with the Republican majority 
in passing this bill. Because of that, I would say that the 
Democrats could certainly enjoy this victory lap along with the 
Republicans.
    Mr. RANGEL. Why weren't they invited to the party? We 
didn't have any witnesses up there. Why didn't you have Mrs. 
Clinton here?
    Mr. SHAW. You could have invited President Clinton. You 
know how the game is played.
    Mr. RANGEL. The game is played.
    Mr. SHAW. Mrs. Johnson.
    Mrs. JOHNSON. Thank you, Mr. Chairman. Welcome to our two 
special guests who were extraordinarily important to this 
process. In fact, I don't think this could have happened 
without the two of you sitting there, and I join my esteemed 
colleague, the kid from Wisconsin, in commending his 
description of you, the Honorable Secretary Thompson, as a 
pioneer. I don't want the moment to pass without noting that 
you have been an unequally aggressive and important pioneer in 
reforming Medicare, and while Members don't understand it, we 
actually -we have changed Medicare as radically as the welfare 
reform bill changed welfare. It just takes longer to do.
    With your leadership and our dedication we have moved 
Medicare to a preventive health and wellness system that is 
going to be far ahead any public or private system out there 
and is going to lead America into the future and give it the 
capacity to afford high quality, cutting edge health care, at a 
price we can afford.
    So, your leadership as the pioneer has been consistent 
throughout your public service.
    To Mr. Gingrich, this is not a Republican rally. We had 
some very good participation by Democrats; half the Democrats 
voted for it. This is an important anniversary because it 
doesn't just take a majority in the House to make change when 
change means breaking with the past. Medicare modernization 
broke with the past. Medicare isn't going to be an illness 
treatment system any more, it is going to be a health care 
system now. Welfare reform broke with the past. That is why top 
advisers in HHS resigned their jobs. They couldn't see the 
future.
    So, leadership was key to this, your leadership at the 
dais, the leadership of Congressman Clay Shaw on the Committee, 
and many Members. Mark my word, breaking through to change is 
hard.
    Now we have tried to break through the next level of change 
and what I am asking is what do you think the next steps are. 
In our next bill, which we had to compromise it down to get 
something passed, but it took this issue of work far more 
seriously. Work isn't just about today and tomorrow, it is 
about a career ladder, it is about rising salaries, it is about 
dealing with mental health so you can actually get into that 
work. It is about dealing with drug assistance.
    We were counting all those things as work. Tragically, we 
had to settle for a bill that didn't count clearly mental 
health treatment as work, drug assistance as work, career 
ladder, better career ladder building.
    Now, those are the only three things I have been able to 
think of that could dynamically change the current system to be 
more progressive and more aggressive in helping people move out 
of poverty to firm middle class independence. I am interested 
in your thoughts about what could be done, some progressive 
States are doing things, and I turn it over to you, Mr. 
Gingrich, and then to you, Mr. Thompson.
    Mr. GINGRICH. Let me also apologize for Senator Santorum 
having to leave. I want to pick up what you asked, Mrs. 
Johnson, and pursue what Mr. Rangel said, because I want to 
pursue where we could go from here. I think it is actually 
based on something the Governor said, which is, if you listen 
carefully to how he parsed through all the different problems a 
person who was poor had, they didn't fit one particular 
Committee. So, here is my initial observation about serious 
long-term change.
    If you could find a bipartisan group, and I think it has to 
be bipartisan, and it has to be Members who are prepared to 
spend long hours working with each other and getting to 
understand each other because this stuff is hard; you need to 
understand it may be a several year project. It is not going to 
be quick and easy.
    I would recommend that you start, that you agree in the 
conference and caucus that this is a big deal, that if we truly 
take as our goal, every American having the opportunity to 
pursue happiness, and we mean it, then that means you have to 
say all right, let's take the life of 5 or 10 poor 
neighborhoods, some big city, some small town, some rural, and 
let's go through exactly as Governor Thompson described. What 
are all the components that inhibit them today from pursuing 
happiness, and let's do it, and we did this, as Chairman 
Johnson will remember, we did this with Medicare reform in 1996 
where we had two major Committees work jointly in one room. We 
also did it as part of welfare reform because we had--pieces of 
welfare reform were in the Committee on Agriculture; food 
stamps, and pieces were over here in Ways and Means. We cut 
across boundaries.
    I just want to suggest to you that if you were to put 
together a genuinely bipartisan working group of people willing 
to put aside ideology and put aside partisanship, and go to the 
root of what blocks the poor from having the kind of future we 
want every American to have, you would be startled in a matter 
of months at how many things would surface, and how many 
potential opportunities there were for dramatic change.
    It won't happen though, if Republicans decide it has to be 
ideologically conservative and it won't happen if liberals 
decide you can't threaten any interest group. I think we have 
to decide, are we really prepared to say that saving the 
children and saving Americans who are currently outside the 
opportunity to pursue happiness is actually worth getting in a 
room, closing the door, working together as Americans, and 
trying to come up with truly bold solutions even if they cut 
across Committee jurisdictions, even if they cut across 
Department jurisdictions.
    I think that is the only way you can make the scale or 
breakthrough that you need to make. I yield to my good friend 
the Governor because he inspired that.
    Mr. THOMPSON. I would have to agree with Newt--Speaker 
Gingrich. I think you if you could set up a Committee that is 
bipartisan and is really going to focus on big issues to 
address, you can come up with some very positive solutions.
    I would like to just take it one step further, and that is, 
there are so many segments of our economy that are lacking with 
needs, and need employees and need talented employees, and I 
would strongly -as I mentioned in my testimony, I would 
strongly take a look at the health fields.
    In the health field--we have this huge problem in health 
care, and one of the big problems is we have no people, a lack 
of people, going in to being doctors, being dentists, being 
pharmacists, being lab technicians, and being nurses. There is 
huge need out there.
    Use the vocational programs, the apprenticeship programs to 
go the next step forward in welfare reform. In using the 
apprenticeship program, the vocational programs, there are 
opportunities to train people in these skills, and you would be 
able to give them good jobs, but at the same time, fulfill a 
badly needed situation in our health care field.
    Health care is not the only one. There are so many other 
segments of our economy that are lacking; that if we really 
started positioning our educational system to try to accomplish 
that, training people, educating people in that arena, you 
would be able to bring out a lot of individuals that are going 
to break down the walls of poverty, improve the opportunities, 
and improve the education system.
    It really gets back to education, Congresswoman Johnson. It 
is health care and an education that are the two big issues 
facing America. Poverty is the overall looming situation, but 
the solutions are education and health care, and that is what 
this Committee needs to address.
    Mr. SHAW. Mr. Stark.
    Mr. STARK. Thank you, Mr. Chairman. I am sorry that 
Santorum had to run away, but I wanted to crown him as the 
champion Pennsylvania Welfare Queen of all time. He took almost 
$100,000 from a Penn Hill School District near Pittsburgh to 
send his kids, who live in Virginia, to a cyberschool, and they 
are still trying to collect his overpayments back from him.
    Also, Santorum has been quoted as saying daycare money is 
excessive, unnecessary, and not the problem out there in 
America. He further says, Santorum says, child care is a 
Washington-based issue, it is not an issue in the States. I 
don't know about the State he lives in, but I think it is a 
state of dream world.
    Santorum's double standard is pretty obvious. He says, too 
many families with young children, both parties are working, if 
they took an honest look at their budget, they might find they 
both don't need to work. Then he says, poor women, who he 
believes should not be at home with their children, he has said 
they ought to go out and go to work. He has voted consistently 
for work-first legislation, against training and education 
opportunities for welfare recipients, of which I remind you, he 
is one of the largest welfare recipients from the State of 
Pennsylvania. I would like now to yield to the gentleman from 
Illinois Mr. Emanuel.
    Mr. EMANUEL. I would like to thank Mr. Stark. Some of us 
were there, both in 1991, when President Clinton gave the first 
speech he gave on the three pieces of the covenant, one of 
which was on welfare reform--and he didn't steal any ideas, Mr. 
Chairman, he offered his own ideas. It wasn't any Republican 
ideas. He was actually there in 1989 when President Reagan was 
negotiating the first welfare reform bill.
    Second, if you want bipartisanship on this issue, you don't 
start off with a partisan hearing.
    Third, when Newt Gingrich was there in 1996 and told 
President Clinton, if he vetoed the welfare reform bill, Newt 
Gingrich said to President Clinton, we will make you the 
stumbling block to welfare reform. Bill Clinton said, and I 
quote, ``Throw me into that briar patch.''
    It took two vetoes before you got a bill that had child 
care, health care, transportation assistance, and a work 
requirement and child support collection.
    Governor, you were in the room with Governor Carper and 
Governor Engler, who thanked President Clinton for giving 43 
waivers out of 50 States to put welfare reform in, and to force 
the Congress to finally move.
    Now, we can have a lot of rewriting of history, and we can 
have pompoms, but this man over here does not have long-term or 
short-term memory. What has happened here, welfare reform was a 
bipartisan issue that got done because President Clinton also 
led. A lot of other work happened in the Congress, but it was 
Democrat and Republican Governors, and you know that.
    Mr. THOMPSON. It was.
    Mr. EMANUEL. Now, you want to all thank each other and do 
your back-slapping, go ahead, but it did not happen without a 
President who showed leadership and without Members. I was in 
that room when that happened, and you thanked him for 43 
waivers that put welfare reform on the level at the State, so 
every State could do what it had to do. In addition to what was 
in that bill----
    Mr. THOMPSON. If the gentleman will yield.
    Mr. EMANUEL. No. Now, wait a second, Governor. Just wait 1 
second. What I saw here, some of us were present at history, 
and we are very, very fortunate for that. You did have a big 
leadership role, as did Governor Carper, now Senator Carper, 
who thanked President Clinton because there were 43 States that 
were launching welfare reform before that bill was signed. When 
that bill was signed, it allowed those States to go forward.
    Newt Gingrich, who told President Clinton, if you veto this 
bill, you are going to be a stumbling block, it took two vetoes 
until you increased child support. It gave parents who work 1 
year of transition Medicaid health care, gave them $790 billion 
for transportation assistance to move people from where they 
lived to where the jobs were, child support collection to make 
sure single mothers got a chance at work and provided for their 
kids, and it also included children's health care, which is why 
kids had health care that could go up, the only group in 
America over that 1996 to 2000. It included an increase in the 
minimum wage, doubling the EITC in 1997, expanding the EITC 
from 1993.
    So, extra pieces besides welfare reform were all key in 
reducing poverty, raising incomes, and getting 3 million 
children out of poverty. You cannot whitewash that history. It 
was not done as just a bunch of little Republican Caucus groups 
starting in 1989. I take offense that there would be an attempt 
to rewrite one of the great bipartisan acts, and that this 
Committee would start off with a partisan act, which was a good 
moment for bipartisanship.
    Second----
    Ms. HART. Will the gentleman yield?
    Mr. EMANUEL. No, I will not for this second, and I will 
finish with this thing. The irony that somebody would use the 
analogy in a welfare reform hearing to talk about the Medicare 
bill, which introduced an extension of corporate welfare, as a 
great analogy is ironic to me. If you want to talk about 
welfare reform, the next two stages are frontiers, and, I would 
agree with Senator Santorum, would be the father, which is 
absent. The first generation of welfare reform dealt with the 
single mother. If you want to really build on welfare reform, 
you would start with the father, and the absent father.
    Second of all, you would begin on corporate welfare, 
because asking one element of our society to assume 
responsibility and to leave the second element of society, the 
corporate America, off of the welfare reform agenda would be 
unfair to what our country is, which is we all go forward 
together. I appreciate the time, Mr. Chairman.
    Mr. SHAW. I would tell the gentleman from Illinois that in 
my comments I mentioned Governor Chiles. I also will concede 
that I kept in close contact with Governor Carper of Delaware 
during this period of time. I also mentioned in my opening 
statement that President Clinton ran on this subject back 
before the bill was actually passed.
    So, I think your charge that this is a partisan move is 
drastically unfair. Plus, I would like to point out to the 
gentleman that both requests the Democrats have made for 
witnesses are on the second panel. So, you could have brought 
Mrs. Clinton in here or you could have brought in the 
President.
    As a matter of fact, at a press conference I held 
yesterday, I invited Mr. Kleczka, who was on this Committee, 
who I think was a lone supporter on this Committee, as well as 
Governor Carper to that press conference, in order to talk 
about the 10 year anniversary. Mr. Herger.
    Mr. HERGER. I thank you, Mr. Chairman. I think it is 
regrettable that, at least in the last few minutes, the 
direction that this hearing seemed to be going in. There has 
been talk that it is a rally, and I would like to get back to 
that rally, but it is a rally not for one party or another 
party, the rally is really for the 64 percent of that welfare 
population that used to be on welfare that is now out being 
productive individuals in our society today; that are out there 
paying taxes; that are working with their families; that are 
beginning to realize the American dream. That is who the rally 
is really for, and the fact that, for the decades prior to 
1996, each decade since the sixties, the welfare rolls 
increased.
    Mr. THOMPSON. That is right.
    Mr. HERGER. They increased not only during the bad times, 
during the recession times, but they increased--even during the 
boom years of the eighties they increased.
    So, Mr. Secretary, Secretary Thompson, I want to thank you, 
and I want to thank everyone. I want to thank President Clinton 
for signing the bill and any Democrat that was involved, or 
anyone, period, who was involved for coming up with what I feel 
is the most gratifying issue that I have been involved with in 
the 20 years I have been in Congress, which is to be able to be 
out and seeing people helping themselves; to see that joy comes 
with people feeling that self-gratification when they are able 
to improve not only their own lives, but the lives of their 
family.
    Now, having said that, Mr. Secretary, I would like to ask 
you, someone who has been involved from the very beginning, 
what you feel the most important outcomes are of the 1996 
welfare reform.
    Mr. THOMPSON. Thank you very much. I would just like to 
answer Congressman Emanuel as he walks out. I would just like 
to point out that I mentioned in my opening remarks not once, 
but five times about being bipartisan.
    Second, I would like to refresh your memory, since you are 
talking about historical revisionism. It was Tom Carper and 
myself, appointed by President Clinton, to go all over the 
country and talk about welfare reform, and Tom Carper and I are 
still talking, on a bipartisan basis, about welfare reform. So, 
I think your comments directed at Newt Gingrich and me were 
absolutely off base, and I just wanted to point that out.
    In regards to your question, I think the fact that the 
American public recognized that there was a problem. I think 
the second thing that Congressman Shaw pointed out was that it 
was really the welfare mother that is the person that needs to 
be complimented for standing up and asking for help and getting 
help from States, and then the Federal Government.
    The fact that the Welfare Reform Act 1996 gave poor women 
an opportunity to get out of poverty is by far the best thing. 
It was the goal of the TANF legislation, and it absolutely did 
work; not in every case, but in a vast majority of the cases it 
did work. It gave that mother an opportunity to have a job, it 
gave her an opportunity to show to her children that there was 
a different way than just being dependent upon the Federal 
Government and the State government.
    Those are the laudable goals, and they did work, and I want 
to compliment you, Mr. Herger, because it would not have been 
possible without your support, Congresswoman Johnson, and 
especially Congressman Shaw, and a lot of other individuals and 
a lot of bipartisan effort around this Committee that supported 
it.
    Mr. HERGER. Well, thank you, Mr. Secretary. Again, I can't 
give enough good compliments for the Chairman of that 
Subcommittee who led the charge with the brutal type of 
criticism that he received, Chairman Shaw at that time, but it 
has certainly been my privilege to be able to follow him as 
Chairman of the Subcommittee on Human Resources on 
reauthorizing this.
    Mr. THOMPSON. You did a great job.
    Mr. HERGER. Our big challenge now--we are talking about 
that 64 percent, two out of three who were on welfare back 
prior to 1996, but are no longer on welfare now--of course, our 
big challenge now is that that one out of three that is left, 
that is remaining, to ensure that we help those individuals 
also find that same American dream. Thank you, Mr. Chairman.
    Mr. SHAW. Mr. Levin.
    Mr. LEVIN. I am next?
    Mr. STARK. If the gentleman would yield, I just wanted to 
commend the Governor of my natal State, who was Governor Heil 
at the time I was 16, but for staying and sharing with us his 
experience in this wonderful field. Thank you for the work you 
have done, Governor, and that is going to cost you some wall-
eyed pike from Wisconsin this time, not Canada.
    Mr. THOMPSON. Thank you very much, Congressman Stark. I 
appreciate that comment very much.
    Mr. LEVIN. I want to join in thanking you for staying here. 
Governor, you mentioned bipartisanship, but this whole 
atmosphere here has been one of partisanship. It was on the 
floor yesterday, and it is regrettable. I think it is 
unflattering for you all to participate in a process of 
flattering, rewriting history, and forgetting why the vetoes 
occurred. They occurred because there wasn't adequate child 
care, and there wasn't adequate health care. That is why the 
vetoes were brought about. Mr. Shaw, your being so partisan in 
approaching this doesn't do the cause of welfare reform any 
good whatsoever. Mr. Thompson, you have tried to divorce 
yourself from it.
    Mr. SHAW. Will the gentleman yield?
    Mr. LEVIN. No, I won't.
    Mr. SHAW. I didn't think so.
    Mr. LEVIN. I won't. Mr. Gingrich tried the same, but the 
whole atmosphere has been let's celebrate 10 years, as if 
President Clinton wasn't around, as if there weren't other 
Democrats who worked on this, as if there weren't legitimate 
differences about the absence of child care and health care in 
the bills that were vetoed and a product that eventually 
included them.
    The gentlewoman from Connecticut, you mentioned, and I want 
to now talk a bit about the future, the regret for there not 
being what was passed here, mental health, substance abuse, and 
career ladder provisions. You wrote that bill.
    We had an alternative that would take welfare reform to the 
next step and allow the States flexibility on mental health, on 
substance abuse, and, indeed, training for the career ladder 
opportunities. There was zero effort, Governor, to try to put 
together a Democratic and a Republican proposal. Zero.
    I will tell the reason why it was important to do this, 
and, Governor, I want to ask you about the analysis of the 
Wisconsin welfare reform program, and I ask you this without 
diminishing your effort.
    Here is what the Chapin report concluded: ``Even using this 
most inclusive measure of income,'' and that is all kinds of 
benefits, ``three out of four applicant families were still 
poor.'' In other words--and the other data shows the same 
thing. I can cite the Leaver material that shows that a 
substantial number of people who have moved from welfare to 
work remain in poverty, right?
    Mr. THOMPSON. Yes.
    Mr. LEVIN. So, the Democratic proposal was that we now take 
the next step and try to shape a program so that people who 
move from welfare to work move out of poverty. So, if you would 
comment on that Chapin Hall report.
    Mr. THOMPSON. Well, Congressman, there is no question there 
are still people on poverty and still people that are failing 
on the TANF program, but there is a lot more that are 
succeeding on it than are failing. You are never going to have 
complete success.
    Mr. LEVIN. No, but how about programs, minimum wage 
increases and others, so that people who move from welfare to 
work move out of poverty? How about more education opportunity?
    Mr. THOMPSON. I am a big supporter of increased education 
in the welfare.
    Mr. LEVIN. The bill we passed here limits the State's 
flexibility in terms of education provision for people who are 
moving from welfare to work.
    Mr. THOMPSON. You have to examine the education programs 
and find out if the education is going to be able to be 
utilized to get that individual or the group of individuals off 
of welfare into a job, and there needs to be more of that. 
There needs to be more targeted education, more vocational 
education, more apprentice education type of things in order to 
assist people in poverty to get into the jobs that are 
available.
    That is why I think a more targeted approach in education 
is a much better way to get people moved from welfare into a 
meaningful place of employment. I think there is a big 
difference between just giving, offering across-the-board 
education. I am looking at targeted education to get them out 
of welfare.
    Mr. SHAW. The gentleman's time has expired. Mr. McCrery.
    Mr. MCCRERY. Thank you, Mr. Chairman. I was also present 
during this history being made, and I can tell you that, yes, 
Democrats were involved, and certainly some Democratic 
Governors were involved in a very productive way, but for those 
of us who were promoting, at the time from a Federal level, a 
rather radical change in social policy, we did endure a lot of 
name-calling, a lot of accusations from the Minority that were 
not meant to be bipartisan. We endured that, and we finally got 
it done.
    Yes, there were some slight changes to the bill that the 
President finally signed, but as one of the Minority's 
witnesses on the next panel wrote in 1996: ``As noted, the 
Urban Institute projected the House version of the bill would 
push an additional 1.1 million children and a total of 2.6 
million people, including adults, into poverty. The provisions 
of the House bill that were central to the Urban Institute's 
analysis were changed only slightly in the final legislation.'' 
Now, that is the Minority's witness on the next panel, what she 
wrote.
    So, let us not completely rewrite history. We are thankful 
for getting nearly 50 percent of the Democrats in the House to 
vote for the final conference report, and I hope we can get at 
least 50 percent of the Democrats to work with us to improve 
what we have already done.
    If the opening statements we heard this morning, especially 
those from my friend from Washington, were simply meant to 
denigrate the results of the Welfare Reform Act, then I 
strongly disagree with those assertions. On the other hand, if 
their remarks were meant to underscore what Speaker Gingrich 
said in his opening remarks, that there is more to be done, and 
we need to work together to accomplish more, then I am on 
board, and I want to work with everybody on this panel, 
Democrat and Republican alike, to make further improvements in 
social policy in this country that will further reduce the 
benchmark for poverty in this country, like the Welfare Reform 
Act clearly did.
    So, I appreciate very much all the witnesses, Mr. Chairman, 
that came before us, and I would like to yield to my colleague 
from Michigan, Mr. Camp.
    Mr. CAMP. I thank the gentleman for yielding and would just 
say, having been here at the beginning on this, that his 
comments are right on. The central character of the three 
welfare reform bills remained unchanged through the legislative 
process, and that was to break the entitlement lock and to 
really have families move into independence. So, there really 
were some relatively minor changes. If that gave what we know 
as political cover to people to vote in the end, that was fine, 
but I am more interested in moving forward and how we do that 
in a way with Democrats and Republicans.
    Mr. Secretary, I know we are running out of time, but just 
in your opinion, the unfinished work of welfare reform, is it 
strengthening families and marriage, is it shoring up the roles 
of fathers, about which we've heard a lot of comments today? Is 
there anything that you see as something key we should be 
working forward on in the months ahead?
    Mr. THOMPSON. There is no panacea out there, as you know, 
Congressman. You have to block and tackle. It is in education, 
it is in bringing fathers back into the family, it is doing 
something about reforming our prisons, it is improving the 
quality of education, it is targeting education, it is doing 
more in the vocational areas than we have done before. All of 
these things have to be done in order to get people out of 
poverty and move welfare to the next step.
    You have said it as well as anybody, you and Congressman 
McCrery. We need to do this. We need to do it on a bipartisan 
basis. Hopefully, as you said, there is more work to be done. 
Let us get it at and let us see what we can do. It is a giant 
step forward.
    There is nobody asking to go back to AFDC, and I think that 
is always the test. Nobody is putting in a bill to go back to 
the failed policies, which would indicate to me that it is the 
right thing we did. We are moving ahead, and now we have to 
make some further innovations and further changes.
    Mr. CAMP. Also, the innovations all the way through the 
States, in terms of the work first programs, rather than having 
people just write checks, they actually try to find skills for 
folks and get them to work.
    Mr. THOMPSON. Absolutely.
    Mr. SHAW. Thank you, Mr. Camp, and I want to compliment the 
gentleman on his work on this.
    We have just a couple of minutes to get to the floor, 
Governor, but I want to thank you for being with us. You have 
made your mark here in Washington, and we very much appreciate 
it.
    Mr. THOMPSON. Thank you all, as always.
    Mr. SHAW. We will commence this hearing after a couple of 
votes, and we will start with the second panel.
    [Recess.]
    Mr. SHAW. The meeting will come to order. We now have our 
second panel: Ronald Haskins, a Ph.D., codirector of the Center 
on Children and Families at the Brookings Institute; we have 
Bishop Roy Riley, Chair of the Conference of Bishops for the 
Evangelical Lutheran Church of America, from Trenton, New 
Jersey; we have June O'Neill, who is Wollman Professor of 
Economics and Finance and director of the Center for the Study 
of Business and government, Baruch College, at the City 
University of New York, and she is the former Director of the 
Congressional Budget Office; we also have Sharon Parrott, who 
is the director of Welfare Reform and Income Support Division, 
Center on Budget and Policy Priorities; and Robert Rector, 
senior research fellow, welfare and family issues, Heritage 
Foundation.
    We have each of your full statements, which will be made a 
part of the record, and if you could try to keep your remarks 
to 5 minutes, we would appreciate it.
    Our first speaker will be Ron Haskins, who was the staff 
director of the Subcommittee on Human Resources during the 
writing of the welfare reform bill. We have heard a lot about 
history today. He has recorded it in his new book that has not 
even hit the shelves yet, but which I have twisted a copy out 
of his hand a while ago; and I can tell you, too, that we would 
not have had welfare reform had it not been for Ron Haskins. 
Ron?

STATEMENT OF RONALD HASKINS, CODIRECTOR, CENTER ON CHILDREN AND 
                FAMILIES, BROOKINGS INSTITUTION

    Dr. HASKINS. Thank you, Mr. Chairman, for those generous 
comments and mentioning that wonderful book.
    I am greatly honored to be here today before the Committee 
on Ways and Means to mark the 10th anniversary of welfare 
reform. It is the most important social legislation of our time 
and the most important achievement of the Republican revolution 
1994.
    I want to make five points. The first one is that this is 
clearly the most important social reform of our age. Years ago 
a famous program evaluator, many people consider the father of 
program evaluation, proposed what he called the iron law of 
social program evaluation. The iron law was that the expected 
intervention, the expected effect of any social intervention 
was zero. He wrote that because so many programs were not 
successful.
    We now have a random assignment study of Head Start, for 
example, that shows even Head Start, one of the most vaunted 
programs in the war on poverty, produces very, very modest 
effects.
    Against that record, now we come to welfare reform passed 
in 1996, and here are the effects that we should pay attention 
to, I believe.
    The rolls are reduced by 60 percent, the first continuous 
decline in the rolls. They have now declined for 11 years. Only 
once previously had they even declined 2 years in a row.
    Second, an unprecedented increase in employment for unwed 
mothers, about 40 percent over a 4-year period between 1995 and 
1999.
    Third, huge increases in earnings for poor and low-income 
mothers. According to the Census Bureau data, every year 
between 1993 and 2000 their income from welfare declined every 
single year, housing, food stamps, cash and so forth; and their 
income from earnings increased every year. At the end of the 
period, in constant dollars, they are better off by 25 percent. 
As a result of that, of course, poverty declined about 35 
percent.
    We had a lot of discussion about poverty this morning. 
Black child poverty reached its lowest level ever. The most 
important fact is that poverty among female heads reached by 
far its lowest level ever.
    So now, even after 4 years of continuous increases, we are 
still 20 percent below the poverty level that characterized the 
country in 1993. So, this is a huge achievement for low-income 
mothers and for American social policy.
    Second point. It saved money. The Congressional Budget 
Office estimated the bill would save $54 million, and it is 
very difficult to estimate, but I am virtually certain the bill 
saved more money than that. We can get into that in detail, if 
you want to, but especially the SSI provisions and the 
noncitizen provisions, I believe, in the long run, have saved 
much more money than originally estimated. So, all those 
achievements, but it saved money.
    Third, it wasn't just welfare reform that did it. We also, 
over the course of many years, the Congress, with this 
Committee right in the middle of all these legislative changes, 
created something I call the work support system. I think that 
is absolutely vital to understanding the impacts of this bill.
    The EITC, Medicaid changes, even changes in food stamps, a 
whole new child tax credit, the characteristic of all of these 
programs is that they support low-income working families. 
Before the mid-eighties, if you were on welfare and you took a 
job, you lost almost everything, including your Medicaid. By 
1996, when we passed this legislation, you were much better off 
if you took a job, because you got the EITC, you still get 
Medicaid, food stamps, and so forth. We more than doubled the 
spending on child care. So, there was a lot of support for 
working families.
    Point four: We always talk about welfare reform as 
tantamount to replacing the AFDC with TANF, but guess what, 
there were other provisions in the bill that--I see somebody up 
there might recognize quite a bit--and those, too, have been 
remarkably successful. The child care block grant has more than 
doubled the funding in child care; and, get this, as the rolls 
declined, the States had to spend the money on low-income 
families. That was part of our legislation. In 1 year, they 
used $4 billion of the very dollars that used to go to support 
mothers not to work to pay for child care so other mothers 
could work. Because of that and other provisions we put in the 
bill, child care more than doubled.
    Child support enforcement collections have more than 
doubled over the period. Paternity establishment has increased 
very substantially, about 50 percent. In 1 year we actually 
established more paternities than kids were born outside 
marriage, because we were establishing paternities from the 
past. So, it was another immensely successful outcome.
    Then, SSI for children, that we worked on very hard in this 
Committee. A recent RAND study estimated the SSI provisions for 
children themselves are now saving $2 billion a year because we 
were not admitting children to SSI who had extremely moderate--
and I even hesitate to use the word ``moderate''--disabilities. 
The General Accounting Office, of course, supported us on that 
judgment.
    The non-citizen provisions have worked exactly as planned. 
There is still a lot of partisan difference about this, but if 
you believe noncitizens should not be supported by taxpayers, 
they are not. They have fallen like a rock on all the welfare 
programs.
    Then, finally, drug addicts and alcoholics. There is no SSI 
benefits for drug addicts and alcoholics.
    I would like to draw the Committee's attention to one 
problem. I think there are several problems that are important, 
but I think the most important one is that there is a group of 
mothers at the bottom that I believe are worse off as a result 
of welfare reform. This is totally plausible. In the old days, 
they used to be able to go on welfare and stay forever. They 
can't do that anymore. They have addictions, they have lots of 
kids, and they have a lot of problems, some of which were 
discussed in a previous panel. I think the Committee should not 
forget those mothers, and we should urge HHS to do research on 
these families and find out more about them and try to help 
them.
    So, here is the bottom line. What works is work. Thanks to 
the provisions that were largely developed in this Committee 
and passed by this Committee, the world now agrees that what 
works is work. What we are developing now is work and not 
welfare dependency. Thank you.
    [The prepared statement of Dr. Haskins follows:]
Statement of Ronald Haskins, Ph.D., Co-Director, Center on Children and 
                    Families, Brookings Institution
    Chairman Thomas and Members of the Committee:
    It has been ten years since the welfare reform law was signed by 
President Clinton amid predictions of disaster from the left. Thanks to 
provisions in the legislation itself that provided millions of dollars 
for research, to an unprecedented level of research sponsored by 
foundations, to data reported by states to the federal government, and 
to national data collected and reported on a routine basis by the 
Census Bureau, a tremendous volume of information bearing on the 
effects of the legislation has been produced. In fact, there is 
probably more information about the effects of the 1996 welfare reform 
law than any other piece of social legislation enacted in recent 
decades.
    The most important reform was the replacement of the old Aid to 
Families with Dependent Children (AFDC) program with the Temporary 
Assistance for Needy Families (TANF) program.\1\ The research on TANF 
yields a coherent picture that will almost certainly stand the test of 
time. With its emphasis on work, time limits, and sanctions against 
states that did not place a large fraction of its caseload in work 
programs and against individuals who refused to meet state work 
requirements, TANF was a historic reversal of the entitlement welfare 
represented by AFDC. If the 1996 reforms had their intended effect of 
reducing welfare dependency, a leading indicator of success would be a 
declining welfare caseload. TANF administrative data reported by states 
to the federal government show that caseloads began declining in the 
spring of 1994 and fell even more rapidly after the federal legislation 
was enacted in 1996. Between 1994 and 2005, the caseload declined about 
60 percent. The number of families receiving cash welfare is now the 
lowest it has been since 1969, and the percentage of children on 
welfare is lower than it has been since 1966.\2\ Although it is often 
reported in the media that cash welfare caseloads increase during 
economic recessions and decline during recoveries, this claim is mostly 
false. In the forty-one years between 1953 and 1994, the number of 
families on AFDC declined in only five Only once--between 1977 and 
1979--did the caseload decline (by about 2 percent) two years in a row. 
By contrast, 2005 was the eleventh year in a row that the caseload 
declined. Clearly, we are in a new era of welfare use.\4\
---------------------------------------------------------------------------
    \1\ A remarkable characteristic of the 1996 welfare reform law was 
its breadth. Here I examine results only for the new TANF program. But 
in a forthcoming book (Ron Haskins, Work Over Welfare: The Inside Story 
of the 1996 Welfare Reform Law, Washington: Brookings, 2006), I review 
evidence on the effects of the law's provisions on family composition, 
Supplemental Security Income (SSI) for Children, SSI for drug addicts 
and alcoholics, public benefits for noncitizens, child care, and child 
support enforcement. In each of these social policy domains, the 1996 
law has had effects that range from substantial to dramatic. Among the 
more notable are a substantial reduction in the number of children with 
mild disabilities receiving SSI; a complete end to SSI benefits for 
drug addicts and alcoholics; an unprecedented reduction in the number 
of noncitizens receiving TANF, food stamps, SSI, and Medicaid; a 
doubling of funds for child care and extensive use of saving from 
welfare payments to pay for child care; and a doubling of child support 
payments and a substantial increase in paternity establishment. The 
original estimate of savings from the 1996 law by the Congressional 
Budget Office was $54 billion over seven years (Congressional Budget 
Office, ``Federal Budgetary Implications of the Personal Responsibility 
and Work Opportunity Reconciliation Act of 1996,'' CBO Memorandum, 
December 1996). Although there are technical problems with trying to 
estimate the accuracy of the CBO forecast, I have no doubt that the 
actual savings were several billion above the CBO estimate.
    \2\ Because the population increases every year, data on the number 
of children or families on AFDC or TANF over time can be misleading. 
Both the number of children and the percentage of all U.S. children on 
AFDC or TANF fell dramatically after 1994. The percentage of children 
on AFDC peaked in 1993 at 14.3 percent. It fell every year thereafter 
until reaching 5.3 percent in 2002. See House Committee on Ways and 
Means, 2004 Green Book, pp. 7-31. By way of comparison, in 1970 the 
percentage of children on AFDC was 8.8 percent, more than 65 percent 
higher than in 2002 (see Annual Statistical Supplement, Social Security 
Bulletin 13-11700 (Department of Health and Human Services, 2005), 
table 9.G1.
    \3\ Department of Health and Human Services, Administration for 
Children and Families, ``Cash Assistance for Needy Families, Aid to 
Families with Dependent Children (AFDC) and Temporary Assistance to 
Needy Families (TANF), Average Monthly Families and Recipients for 
Calendar Years 1936--2001,'' May 10, 2002, available at 
www.acf.dhhs.gov/news/stats/3697.htm.
    \4\ House Committee on Ways and Means, 2004 Green Book, section 7, 
pp. 27-37; Department of Health and Human Services, Indicators of 
Welfare Dependence: Annual Report to Congress, 2003 (Government 
Printing Office, 2003), appendix A, table TANF 1; for welfare caseloads 
information, see the Administration for Children and Families, 
www.acf.hhs.gov/newstat2.shtml.


[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

    Although caseload decline is an important outcome measure of the 
1996 reforms, how families fare after leaving welfare is of great 
importance. The next reasonable test of welfare reform, then, is 
whether mothers leaving welfare are working. Again, there is abundant 
information to answer this question. In fact, three lines of evidence 
can be aligned to produce a consistent story. The first set of evidence 
is dozens of welfare-to-work studies conducted since the 1980s. These 
gold-standard studies almost uniformly show reductions in caseloads and 
increases in employment attributable to work requirements, as long as 
the programs included job search requirements.\5\ The second line of 
evidence comes from more than forty state studies conducted since 1996 
of adults who left welfare.\6\ On average, these studies show that a 
little less than 60 percent of the adults leaving welfare were employed 
at any given moment and that over a period of several months or longer 
about 70 percent held at least one job (although there is good evidence 
that the share of leavers who were working declined somewhat since the 
recession of 2001).\7\
---------------------------------------------------------------------------
    \5\ Judith M. Gueron and Edward Pauly, From Welfare to Work (New 
York: Russell Sage, 1991); Jeffrey Grogger, Lynn Karoly, and Jacob Alex 
Klerman, Consequences of Welfare Reform: A Research Synthesis (Santa 
Monica, Calif.: Rand, 2002).
    \6\ House Committee on Ways and Means, 2000 Green Book, pp. 1471-
74, 1500-10. See also Gregory Acs, Pamela Loprest, and Tracy Roberts, 
Final Synthesis Report of Findings from ASPE's ``Leavers'' Grants 
(Washington: Urban Institute, 2001), pp. 23-47.
    \7\ Acs, Loprest, and Roberts, Final Synthesis Report, chap. 3.
---------------------------------------------------------------------------
    A third line of evidence, and the most definitive, is statistics on 
female employment for the nation as a whole.\8\ Census data shows 
historic changes in employment (defined as any earnings during the 
year) by single mothers, especially low-income single mothers (Figure 
1). From 1993 to 2000 the portion of single mothers who were employed 
grew from 58 percent to nearly 75 percent, an increase of almost 30 
percent. Even more pertinent to assessing the effects of welfare 
reform, employment among never-married mothers, most of whom join the 
welfare ranks within a year or two of giving birth, grew from 44 
percent to 66 percent.\9\ Before 1996 never-married mothers were the 
ones most likely to be school dropouts, to go on welfare, and to stay 
on welfare for a decade or more. Yet their employment over this period 
grew by 50 percent. Employment changes of this magnitude over such a 
short period for an entire demographic group are unprecedented in 
Census Bureau records.
---------------------------------------------------------------------------
    \8\ See the Bureau of Labor Statistics, http://stats.bls.gov/cps/
home.htm, for labor force statistics from the Current Population 
Survey. All the measures discussed in this section are point-in-time 
measures.
    \9\ Gary Burtless of the Brookings Institution, unpublished 
calculations using U.S. Bureau of Labor Statistics data.


[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

    So employment of poor mothers heading families has increased 
dramatically. But what about their income? One of the most frequent 
criticisms of the 1996 reforms was that mothers and children would be 
destitute. Members of the House of Representatives and the editorial 
boards of many of the nation's leading newspapers who opposed the 
welfare reform bill, used exceptionally colorful language to describe 
the afflictions to which the legislation would subject poor families 
and children.\10\
---------------------------------------------------------------------------
    \10\ Democrats on the floor of the House referred to the Republican 
bill as ``extreme,'' ``harsh,'' ``cruel,'' ``abusive,'' and ``mean-
spirited;'' they also said the bill ``attacked children,'' ``lashed out 
at children,'' and ``punished children;'' Bob Herbert of the New York 
Times said the bill conducted a ``jihad'' against the poor, that it 
``makes war on the kids of this country,'' and that it would 
``deliberately inflict harm'' on children and the poor. See Ron 
Haskins, Work Over Welfare, Chapter 8.
---------------------------------------------------------------------------
    Census Bureau data for female-headed families in the bottom 40 
percent of the income distribution for female-headed families (those 
below about $21,000 in 2000) show that their pattern of income shifted 
dramatically between 1993 and 2000.\11\ In 1993 earnings accounted for 
about 30 percent of the income of low-income, female-headed families, 
while welfare payments, including cash, food stamps, housing, and 
school lunch, accounted for nearly 55 percent. By 2000 this pattern had 
reversed: earnings had leaped by an astounding 136 percent, to 
constitute nearly 60 percent of income, while welfare income had 
plummeted by over half, to constitute only about 23 percent of income 
(Figure 2). As a result of the growth in earnings and legislated 
expansions of the EITC, income from the EITC more than tripled. Thus 
with earnings and EITC payments leading the way, the total income of 
these low-income families increased by about 25 percent over the period 
(in dollars adjusted for inflation).\12\ Even after the recession of 
2001, earnings remained above their 1993 level. The predictions of doom 
turned out to be wrong.
---------------------------------------------------------------------------
    \11\ These figures are from unpublished tables of demographic and 
economic characteristics of female family heads, distributed by income 
quintile, that are prepared by Richard Bavier of the Office of 
Management and Budget using the Census Bureau's Current Population 
Survey. Bavier makes these tables available to anyone who requests 
them. All figures are given in 2004 dollars.
    \12\ A study by two other researchers, using longitudinal data from 
the Survey of Income and Program Participation, shows the same pattern 
of increased work and earnings and declining poverty among families 
leaving welfare. See June O'Neill and M. Anne Hill, ``Gaining Ground, 
Moving Up: The Change in the Economic Status of Single Mothers under 
Welfare Reform,'' Civic Report 35 (Manhattan Institute Center for Civic 
Innovation, 2003).


[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

    The pattern is clear: earnings up, welfare down. This is the very 
definition of reducing welfare dependency. Most low-income mothers 
heading families appear to be financially better off, although work 
expenses and Social Security taxes consume part of their earnings,\13\ 
because the mothers earn more money than they received from welfare. 
Taxpayers continue making a contribution to the well-being of these 
families through the EITC and other work support programs, but the 
families earn a majority of their income. This explosion of employment 
and earnings constitutes an enormous achievement for the mothers 
themselves and for the nation's social policy.
---------------------------------------------------------------------------
    \13\ Jeffrey Grogger and Lynn A. Karoly, Welfare Reform: Effects of 
a Decade of Change (Harvard University Press, 2005), p. 156.
---------------------------------------------------------------------------
    Members of this committee will recall that one of the most 
frequently used arguments against the welfare reform legislation was 
that it would throw over a million children into poverty. This claim 
was based on a study conducted by the Urban Institute at the request of 
the President Clinton's Department of Health and Human Services.\14\ It 
is doubtful that any measure of the condition of the nation's children 
receives more attention than the poverty rate. Thus, the impact of 
welfare reform on poverty has great substantive and political 
importance.
---------------------------------------------------------------------------
    \14\ Sheila Zedlewski and others, ``The Potential Effects of the 
Budget Reconciliation Bill on Family Incomes'' (Washington: Urban 
Institute, 1995).
---------------------------------------------------------------------------
    Although child poverty dropped during the 1960s, after the early 
1970s it gradually drifted upward, primarily because an increasing 
percentage of American children were being reared in female-headed 
families, the family type with the lowest work output and the highest 
poverty rate.\15\ However, between 1994 and 2000, child poverty fell 
every year and reached levels not seen since 1978 (Figure 3). In 
addition, by 2000 the poverty rate of black children and of children in 
female-headed families was the lowest it had ever been. The percentage 
of families in deep poverty, defined as half the poverty level (about 
$7,000 for a mother and two children in 2000), also declined until 
2000, falling about 35 percent during the period.\16\ Even after four 
consecutive years of increasing child poverty between 2001 and 2004, 
poverty was still 20 percent below it 1993 peak.
---------------------------------------------------------------------------
    \15\ David J. Eggebeen and Daniel T. Lichter, ``Race, Family 
Structure, and Changing Poverty among American Children,'' American 
Sociological Review, 56 (1991): 801-17.
    \16\ Bernadette D. Proctor and Joseph Dalaker, Poverty in the 
United States: 2002 (Census Bureau, 2002), table 5; Douglas J. 
Besharov, ed., Family and Child Well-Being after Welfare Reform (New 
Brunswick, N.J.: Transaction, 2003), figure 4; Bureau of the Census, 
Poverty and Health Statistics Branch, Current Population Survey, Annual 
Social and Economic Supplements, December 14, 2005, table 3, available 
at www.census.gov/hhes/www/poverty/histpov/hstpov3.html.
---------------------------------------------------------------------------
    A special analysis by the Department of Health and Human Services 
(HHS) and the Congressional Budget Office provides a clear 
understanding of the impact of work on poverty rates among families 
headed by poor mothers. The analysis examined the changing impact of 
earnings and government taxes and transfer payments on poverty during 
the 1990s. In 1990 the poverty rate among children in households with 
an unmarried female head before any taxes or government transfers was 
50 percent. But in 1999 this poverty rate (which might be thought of as 
the market poverty rate, because it is computed without regard to 
government taxes or benefits) fell by 20 percent, to a little over 39 
percent. Virtually all this decline in poverty is attributable to 
increased employment and earnings by mothers during the 1990s.\17\
---------------------------------------------------------------------------
    \17\ This analysis retains the same thresholds as the official 
poverty index (about $13,300 for a family of three in 1990) but uses a 
broader definition of income than the official measure. House Committee 
on Ways and Means, 2004 Green Book, table H-21.
---------------------------------------------------------------------------
    The analysis then added various combinations of government 
transfers and taxes to market income among these unmarried mothers. One 
of the analyses shows that in 1990, before welfare reform, the 
combination of all government non-tax transfers such as cash welfare 
and food stamps reduced poverty by about 12 percentage points, from 
around 50 percent to a little more than 37 percent. Although the market 
poverty rate in 1999 was 11 percentage points lower than in 1990, 
government cash and in-kind transfers in 1999 still reduced poverty by 
almost an additional 10 percentage points, to a little under 30 
percent.
    The final step in the analysis was to examine the effect on poverty 
when income from the EITC was added and federal tax payments were 
subtracted from income. Not surprisingly, given the relatively low 
level of work and earnings in 1990, adding the EITC increased income 
only enough to reduce poverty by less than 1 percentage point. By 
contrast, in 1999 adding the EITC to income and subtracting federal 
taxes reduced the poverty rate by 4.50 percentage points. Based on 
total income, including both market earnings and all government taxes 
and transfers, poverty among single mothers and children was therefore 
36.8 percent in 1990, compared with 25.1 percent in 1999, a decline of 
nearly one-third. If the 1999 poverty rate had been the same as the 
1990 rate, nearly 4.2 million more single mothers and children would 
have been poor. The prediction that welfare reform would lead to major 
increases in child poverty was flawed.
    Promoting child well-being was a major goal of all participants in 
the 1995-96 welfare reform debate. Republicans argued that increased 
work by mothers on welfare would lead to positive impacts on children 
because mothers would be setting an example of personal responsibility, 
would impose schedules and order on chaotic households, and would 
increase family income. By contrast, many Democrats thought that 
welfare reform would be disastrous for children. They believed that 
mothers would not be able to find and maintain work, would hit time 
limits or be hit by sanctions, and would experience serious declines in 
family income, driving them into destitution. Perhaps the most frequent 
charge, based on a reputable study by the Urban Institute, was that 
welfare reform would throw a million children into poverty.\18\ There 
were also predictions that more children would be removed from their 
parents and placed in the child protection system.
---------------------------------------------------------------------------
    \18\ Zedlewski and others, ``The Potential Effects of the Budget 
Reconciliation Bill on Family Incomes.''
---------------------------------------------------------------------------
    Several types of research evidence are now available to make 
informed judgments about which predictions have come true. A reasonable 
place to begin is with broad survey data on the well-being of American 
children. As we have seen, poverty not only did not increase but 
actually declined every year between 1994 and 2000, with black child 
poverty reaching its lowest level ever. Although poverty increased 
after 2000, it remained well below its 1994 level. So great was the 
decline in poverty that, as Paul Jargowsky and Isabel Sawhill show, the 
number of neighborhoods with concentrated poverty fell precipitously, 
as did the number of neighborhoods classified as underclass because of 
the concentration of poverty and the high frequency of problems such as 
school dropout, female-headed families, welfare dependency, and labor 
force dropout by adult males. The authors conclude that the 1990s were 
a ``remarkable decade in which substantial progress was made.'' \19\
---------------------------------------------------------------------------
    \19\ Paul A. Jargowsky and Isabel V. Sawhill, The Decline of the 
Underclass, policy brief, Center on Children and Families (Brookings, 
2006), p. 6.
---------------------------------------------------------------------------
    Besides measures of poverty and underclass neighborhoods, a host of 
additional measures of child well-being is available. One of the best 
collections of national indicators is the Child and Youth Well-Being 
Index (CWI), published annually by Ken Land of Duke University with 
support from the Foundation for Child Development. The Land index 
reports twenty-eight key indicators of child well-being; these 
indicators are based on nationally-representative surveys, most of 
which have been administered annually since 1975. The overall index 
shows a clear pattern of changes over the past three decades. After a 
few years of modest changes in no clear direction, in 1982 the index 
showed a decline in well-being that lasted almost continuously until 
1995. Since 1995, the index shows an improvement in well-being in 
almost every year, more than recovering the ground lost in the 1980s 
and early 1990s. Using 1975 as the base year, the index descended to 
about 75 percent of its original level by 1995. Since then, it has 
increased by about 30 percentage points, to about 5 percent above its 
1975 level. The CWI is organized into seven domains, each of which 
measures an important dimension of child well-being such as economic, 
health, safety, and emotional and spiritual well-being. Most of these 
domains reflect the overall CWI pattern of continuous increases since 
1995. Only the health domain shows a decline, and this only because 
child obesity increased dramatically. Other measures of child health 
showed improvement. As Land concludes, ``Children are faring better in 
recent years.'' \20\
---------------------------------------------------------------------------
    \20\ Kenneth Land, Child and Youth Well-Being Index (CWI), 1975-
2004 with Projections for 2005, available at www.soc.duke.edu/cwi/.
---------------------------------------------------------------------------
    A similar conclusion is reached by the Federal Interagency Forum on 
Child and Family Statistics.\21\ The forum presents many of its 
indicators separately for various income and ethnic groups. In nearly 
every case in which indicators are presented in this way, low-income 
and minority children reflect the pattern of general improvement, often 
showing even greater improvement than white children and children from 
wealthier families. Similarly, Donald Hernandez of the State University 
of New York has studied ethnic differences in the Land index. Compared 
with the huge differences in the early 1990s between white children and 
both black and Hispanic children, both minority groups closed the gap 
with whites by about one-third over the last decade, both groups 
narrowing the gap on six of the seven index domains.\22\
---------------------------------------------------------------------------
    \21\ Federal Interagency Forum on Child and Family Statistics, 
America's Children: Key National Indicators of Well-Being 2005 
(Government Printing Office, 2005).
    \22\ Donald J. Hernandez and Suzanne E. Macartney, ``Measuring 
Social Disparities: A Modified Approach to the Index of Child Well-
Being (CWI) for Race-Ethnic, Immigrant-Generation, and Socioeconomic 
Groups with New Results for Whites, Blacks, and Hispanics,'' paper 
prepared for the forum, ``Review of the Child Well-Being Index,'' 
Brookings Institution, May 10, 2006.
---------------------------------------------------------------------------
    Another feared effect of welfare reform was an increase in the 
number of children taken from their destitute families by the foster 
care system.\23\ By the mid-1990s, the national foster care caseload 
had increased every year for fourteen consecutive years, rising from 
262,000 in 1982 to 507,000 in 1996. The caseload then increased over 
the next three years at approximately the same rate as in previous 
years. Then in 2000, for the first time in two decades, the foster care 
caseload began to decline and has declined every year since then, 
falling from 567,000 in 1999 to 518,000 in 2004, a fall of almost 10 
percent.\24\ Similarly, the incidence of child maltreatment of all 
types has declined in most years since 1993, falling by over 20 percent 
between 1993 and 1999, before rising somewhat beginning in 2000. 
However, the rate in 2001 was still well below the rate of the early 
1990s.\25\
---------------------------------------------------------------------------
    \23\ House Committee on Ways and Means, Contract with America: 
Overview, Serial 104-20, January 5, 10, 11, and 12, 1995, pp. 58-93.
    \24\ House Committee on Ways and Means, 2004 Green Book, section 
11, table 23; Department of Health and Human Services, Administration 
for Children and Families, Children's Bureau, ``Trends in Foster Care 
and Adoption, FY2000-FY2004,'' September 2005, available at 
www.acf.hhs.gov/programs/cb/stats--research/afcars/trends.htm.
    \25\ House Committee on Ways and Means, 2004 Green Book, section 
11, figure 1.
---------------------------------------------------------------------------
    In addition to these broad indicators of child well-being, there is 
a growing body of scientific research on the direct effects of welfare 
reform on children, including gold standard studies based on random 
assignment. Most of these studies were initiated before the 1996 
legislation, but nonetheless examined the effects of work programs 
similar to those mounted by states both before and after the 1996 
reforms. Pamela Morris of MDRC and her colleagues have reviewed the 
impacts on young children of seven random-assignment demonstrations, 
including thirteen employment programs in the United States and two in 
Canada, yielding data on 30,000 low-income children.\26\ Morris and her 
colleagues confined their review to children who were between the ages 
of two and nine when the programs began (between four and fifteen at 
the point of final data collection). Five results are notable: positive 
impacts on school achievement were evident among children whose mothers 
were in certain work programs; impacts were confined to children age 
five and under at the beginning of the studies; impacts were confined 
to work programs that increased family income by providing earnings 
supplements; impacts faded after three years; and positive impacts on 
school achievement were related to attendance at center-based child 
care programs during the preschool years. These results are broadly 
consistent with the large literature on effects of maternal employment, 
including the finding that when mothers' work leads to increased family 
income, young children often show modest improvement on measures of 
social and intellectual development.\27\
---------------------------------------------------------------------------
    \26\ Pamela Morris, Lisa A. Gennetian, and Greg J. Duncan, 
``Effects of Welfare and Employment Policies on Young Children: New 
Findings on Policy Experiments Conducted in the Early 1990s,'' Social 
Policy Report 19 (2005): 3-22.
    \27\ For reviews of the literature on the effects on children of 
working mothers, see E. Harvey, ``Short-Term and Long-Term Effects of 
Early Parental Employment on Children of the National Longitudinal 
Survey of Youth,'' Developmental Psychology 35 (1999): 445-59; Martha 
J. Zaslow and Carol A. Emig, ``When Low-Income Mothers Go to Work: 
Implications for Children,'' Future of Children 7 (1997): 110-15.
---------------------------------------------------------------------------
    A similar review by Lisa Gennetian of MDRC and her colleagues on 
the effects of work programs on adolescents complements the Morris 
review.\28\ The Gennetian review is based on pooled data from seventeen 
random-assignment programs. The nearly 6,600 participating children 
were between ages ten and sixteen at the beginning of the studies; at 
the point of final data collection they were between twelve and 
eighteen. Averaged across all the experiments, mothers participating in 
work programs, compared with mothers in the control programs, rated 
their children as performing below average in school. In addition, 
children in the experimental programs were slightly more likely to 
repeat a grade and to be enrolled in special education classes. They 
were not, however, more likely to be expelled from school, to drop out, 
or to have had (or have fathered) a baby. Data from the individual 
studies provide some evidence that the negative effects on school 
performance seemed to be concentrated in adolescents with younger 
siblings, suggesting that the poor school outcomes might be associated 
with early assumption of adult responsibilities because working mothers 
shared child care with their older children. Similar negative effects 
of maternal employment on adolescents have been noted by several other 
researchers and reviewers.\29\ Although these effects are modest and 
were not found in all of the individual studies, there is nonetheless 
reason for concern. Gennetian and her colleagues call for ``more 
investigation rather than . . . an immediate policy response.'' \30\
---------------------------------------------------------------------------
    \28\ Lisa A. Gennetian and others. How Welfare and Work Policies 
for Parents Affect Adolescents: A Synthesis of Research (New York: 
MDRC, 2002).
    \29\ Greg J. Duncan and P. Lindsay Chase-Lansdale, ``Welfare Reform 
and Children's Well-Being,'' in The New World of Welfare, edited by 
Rebecca M. Blank and Ron Haskins (Brookings, 2001); Jennifer L. Brooks, 
Elisabeth C. Hair, and Martha J. Zaslow, ``Welfare Reform's Impact on 
Adolescents: Early Warning Signs'' (Washington: Child Trends, 2001).
    \30\ Gennetian and others, How Welfare and Work Policies for 
Parents Affect Adolescents, p. 22.
---------------------------------------------------------------------------
    Taken together, the survey and experimental information available 
on the well-being of poor, low-income, and minority children in the 
decade following welfare reform does not justify the fears expressed by 
liberals. With some exceptions, measures of child well-being show that 
children, and especially poor and minority children, have generally 
lived under improved conditions and have shown modest gains on 
indicators of development since 1996. On the other hand, the hopes of 
conservatives about the impact of welfare reform on children have not 
been vindicated either. High-quality studies of welfare reform show 
that preschool children of families participating in welfare-to-work 
studies may experience modest gains in their development and behavior, 
but equally good studies show that adolescents experience modest 
problems in school performance. From the perspective of one decade, it 
does not seem likely that welfare reform will alleviate the serious 
lags in development and performance shown by children from poor and 
minority families. Direct interventions with these children will be 
necessary if the nation is to close the ability and education gaps 
between them and more advantaged children.
    Although welfare reform is a major cause of the dramatic rise in 
earnings and the decline in welfare dependency and child poverty, at 
least two other factors account for the improving financial well-being 
of female-headed families. First, the economy of the 1990s was 
exceptionally strong. By 2000 almost 137 million Americans had jobs, up 
by more than 16 million since 1993. Before the recession hit in 2001, 
64.4 percent of all noninstitutionalized adults in the United States 
were working, the highest share ever. Not surprisingly, the 
unemployment rate fell from 6.9 percent in 1993 to 4.0 percent in 2000, 
the lowest in several decades.\31\ Sophisticated statistical studies 
have been conducted by economists to determine the relative 
contribution of the economy, of welfare reform, and of other factors to 
the dramatic rise of work and earnings by low-income mothers heading 
families.\32\ These studies all show that both welfare reform and the 
booming economy are important, but there is little agreement about the 
relative contributions of each factor. However, previous economic booms 
did not lead to either the reduction in welfare rolls or the increase 
in work by low-income mothers heading families that were seen in the 
1990s.\33\ Without welfare reform cajoling and where necessary pushing 
mothers into the labor force, a growing economy would have had a more 
modest effect on the employment and earnings of these mothers, as was 
in fact the case during all previous economic expansions.
---------------------------------------------------------------------------
    \31\ Census Bureau, Statistical Abstract of the United States, 
2004--2005, p. 371.
    \32\ Rebecca M. Blank, ``Declining Caseloads/Increased Work: What 
Can We Conclude about the Effects of Welfare Reform?'' Economic Policy 
Review 7 (2001): 25-36; James P. Ziliak and others, ``Accounting for 
the Decline in AFDC Caseloads: Welfare Reform or the Economy?'' Journal 
of Human Resources 35 (2000): 570-86.
    \33\ It is difficult to discern a clear effect of the 1991 
recession on the welfare caseload. When the recession hit, the caseload 
had already grown in five of the previous six years, rising from 3.69 
million families in 1985 to 4.38 million families in 1991, during the 
healthy economy of the 1980s. The caseload continued to increase over 
the next three years, rising from 4.38 million families in 1991 to 5.05 
million in 1994, before its prolonged decline during the welfare reform 
period. By contrast, as we have seen, the welfare caseload continued to 
decline throughout and following the recession of 2001. Between 1983 
and the peak employment year of 1991, the employment-to-population 
ratio for never-married mothers rose from 34.5 to 44.0, or by 9.5 
percentage points. During the expansion of the 1990s, the comparable 
ratio rose from 43.4 in 1992 to 65.8 in 2000, an increase of 22.4 
percentage points. Clearly a lot more poor mothers went to work during 
the expansion of the 1990s than the expansion of the 1980s. Employment 
data is from unpublished calculations by Gary Burtless using Census 
Bureau data. Caseload information is from the Administration for 
Children and Families, available at www.acf.hhs.gov/news/stats/
newstats2.shtml.
---------------------------------------------------------------------------
    Second, beginning more than a decade before the 1996 reforms, the 
federal government made existing benefit programs friendlier to low-
income working families and created entirely new programs designed to 
help working families. These actions include expansions of child care, 
creation of the child tax credit, changes in the standard deduction and 
the personal exemption in the income tax code, changes in Medicaid, and 
above all several expansions of the EITC. Two studies by nonpartisan 
and highly respected congressional agencies--the Congressional Budget 
Office (CBO) and the Congressional Research Service (CRS)--provide an 
idea of the magnitude of these changes.


[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

    At the request of the Ways and Means Committee in 1997, CBO 
undertook a study to determine whether federal policy changes between 
1984 and 1998 had resulted in more support for low-income working 
families. CBO examined several major entitlement programs that help 
working families, including child care, the EITC, Medicaid, and the 
child tax credit. Taken together, we can label these and similar 
programs the nation's work support system, because the programs provide 
financial and in-kind support to poor and low-income working families. 
CBO calculated the benefits that would have accrued to low-income 
working families from the work support system under 1984 law and 
compared that level of support to the level under 1999 law. Because 
every work support program examined by CBO had been expanded or created 
since 1984, the analysis was expected to show an increased commitment 
by federal policymakers to low-income working families. But it is fair 
to say that even experts were surprised by the finding that if the work 
support system had remained as it had been in 1984, working families in 
1999 would have received only around $6 billion in government work 
support benefits (Figure 5). By contrast, the 1999 version of the work 
support system--that is, the one that actually existed in 1999--
provided nearly $52 billion in support to working families. In other 
words, the expansions in the work support system after 1984 resulted in 
working families receiving $46 billion more in cash and other benefits 
than they would have received if Congress and a series of presidents 
had not expanded the work support programs. It would be difficult to 
exaggerate the extent to which the nation's social policy to help low-
income families has shifted from one that provided most of its benefits 
to families dependent on welfare to one that provides enormous benefits 
to working families.\34\
---------------------------------------------------------------------------
    \34\ Congressional Budget Office, Policy Changes Affecting 
Mandatory Spending for Low-Income Families Not Receiving Welfare 
(1998).
---------------------------------------------------------------------------
    The second study, based on information computed by CRS, strengthens 
the CBO conclusion. Whereas the CBO study provides an estimate of 
changes in aggregate federal spending on work support programs, the CRS 
data can be used to compare the financial work incentive for a typical 
mother with two children on welfare in a typical state (Pennsylvania) 
in 1986 and 1997.\35\ For years, a major charge against the welfare 
system was that it posed a substantial disincentive to work because 
families that accepted jobs could be worse off working than on welfare. 
A mother and two children in a typical state in 1986 received about 
$8,970 in cash welfare and Food Stamps (all figures are in constant 
1997 dollars). If the mother worked and earned $8,000, her welfare 
income would fall drastically, to $1,900. She would also pay nearly 
$1,200 in federal taxes but would gain about $540 from the EITC. Thus 
for working full-time she would have net income of about $9,275, or 
about $350 more than if she had stayed on welfare. In addition, both 
the mother and children would lose their Medicaid coverage, the 
insurance value of which would be around $3,000, after nine months, and 
the mother would get very modest if any government help paying for 
child care. Clearly, a mother who elected to stay on welfare rather 
than accept a low-wage job in 1986 would be making a financially 
rational decision. By contrast, because of the broadening of the work 
support system and changes in welfare laws, by 1997 this same mother 
with a $10,000-a-year job (roughly equivalent to $8,000 in 1986) would 
have net income of around $15,350, or $7,550 more than the $7,800 she 
would have received if she had stayed on welfare. The EITC alone was 
worth an additional $3,000 in cash, and changes in federal income tax 
law had removed the mother entirely from paying income tax. Further, 
the mother would have Medicaid coverage for one year, and the children 
would be covered as long as the mother had low income. Finally, there 
was much more money available for child care in 1997 than in 1986. All 
in all, the work support system had made work a more attractive option 
for welfare mothers in 1997 than in 1986.\36\ Given that the EITC is 
pegged to inflation, that funds for child care have expanded 
dramatically since 1996,\37\ and that the child tax credit was made 
partially refundable in 2001, it seems likely that the work support 
system is even more generous today than it was in 1997. In any case, at 
the time the 1996 reforms were enacted, as well as today, the work 
support system provides compelling financial incentives for mothers to 
leave welfare even for low-wage jobs.
---------------------------------------------------------------------------
    \35\ House Committee on Ways and Means 1986 Green Book, p. 369; 
House Committee on Ways and Means 1998 Green Book, p. 408.
    \36\ House Committee on Ways and Means, 1996 Green Book, section 8, 
p. 399, table 3.
    \37\ Douglas J. Besharov and Caeli A. Higney, Federal and Sate 
Child Care Expenditures (1997-2003) (College Park, MD: Welfare Reform 
Academy, University of Maryland, May 2006).
---------------------------------------------------------------------------
    The positive impacts of the 1996 reforms on income, earnings, and 
poverty have been pervasive and, in some cases, profound. However, no 
policy produces all benefits and no costs. Although the 1996 law did 
not produce the failures predicted by its critics, it nonetheless has 
created challenges that states and the federal government should 
address. In my view, the most important of these challenges is the 
finding that there is a group of mothers at the bottom of the income 
distribution who appear to be floundering under the new and more 
demanding welfare system. Generally, these are mothers who live without 
another adult in their household and who do not have income from cash 
welfare, from employment, or from unemployment insurance. In the past, 
these troubled parents could stay on welfare for many years. Under the 
old AFDC program, the average length of spells for adults on the rolls 
at any given moment was twelve years. It would be naive to believe that 
all these welfare-dependent parents were suddenly capable of finding 
and retaining jobs for $7 or $8 an hour. A demanding welfare system 
requires at least some minimum level of competence and motivation, and 
not all parents have these minimum levels.
    There are several types of evidence that a number of mothers are in 
fact floundering. Surveys show that about 60 percent of the mothers who 
leave welfare are working at any given moment and that around 70 
percent have held at least one job since leaving welfare.\38\ The 40 
percent who do not work regularly raise some concern, but the 30 
percent who have not worked at all since leaving welfare raise even 
more serious concern. States frequently use sanctions and thirty-six 
states have policy that allows them to completely terminate cash 
benefits for rule infractions. At least one study found that mothers 
who were sanctioned off the rolls had characteristics that make it less 
likely they will be able to get and hold a job. More specifically, they 
are less likely to have a high school degree or job experience and more 
likely to have substance addictions, mental health problems, or three 
or more children than other welfare mothers.\39\ Also of concern are 
poor mothers heading families who are financially worse off since 
welfare reform passed. Kasia Murray and Wendell Primus have compared 
Census income data for mothers for the 1993-96 and the 1996-2000 
periods and found that that mothers in the bottom 10 percent of single 
earners actually lost income during the latter period.\40\ These 
findings are placed in a broader context by Rebecca Blank and Robert 
Schoeni from the National Poverty Center at the University of Michigan. 
Blank and Schoeni, using data from the Census Bureau's Current 
Population Survey, compared the change in income between the 1992-95 
period (before TANF) and the 1997-2000 period (after TANF). Controlling 
for factors such as family size and inflation, they plotted income for 
two groups: all families with children and families with children 
without both parents present. Blank and Schoeni find that all but the 
bottom 2 percent of families with children had improved their income in 
the late 1990s relative to the mid-1990s. Even in the case of children 
living outside a two-parent family, 92 percent of families improved 
their income. However, the bottom 8 percent declined.
---------------------------------------------------------------------------
    \38\ House Committee on Ways and Means, 2004 Green Book, pp. L24-
L31.
    \39\ Andrew J. Cherlin and others. ``Operating within the Rules: 
Welfare Recipients' Experiences with Sanctions and Case Closings,'' 
Social Services Review 76 (2002): 387-405.Thirty-six states have a 
policy that allows them to completely terminate cash benefits for rule 
infractions. See Department of Health and Human Services, Temporary 
Assistance to Needy Families Program (TANF): Fourth Annual Report to 
Congress, May 2002, p. 346. But see Jeffrey Grogger and Lynn A. Karoly, 
Welfare Reform: Effects of a Decade of Change (Harvard University 
Press, 2005), pp. 235-36, who conclude that there are too few studies 
to draw firm conclusions about the effect of sanctions.
    \40\ Kasia O'Neill Murray and Wendell E. Primus, ``Recent Data 
Trends Show Welfare Reform to Be a Mixed Success: Significant Policy 
Changes Should Accompany Reauthorization,'' Review of Policy Research 
22 (2005): 301-24.
---------------------------------------------------------------------------
    Blank and Schoeni explicitly tied their analysis to welfare reform 
by comparing states with strong cash work incentives (which allowed 
mothers who went to work to retain relatively more of their welfare 
benefit) and strong penalty incentives (strict time limits and strong 
sanctions) and found that both cash and penalty incentives were 
associated with higher income. The authors conclude that ``it is the 
more lenient states with softer penalties where children's income seems 
to have grown the least.'' \41\ Although the authors interpret their 
findings as ``good news,'' their work is similar to Murray and Primus's 
in showing that there is a group of mothers at the bottom--in this case 
about 8 percent of the distribution of female-headed families--that is 
worse off now than before welfare reform. This finding is reinforced by 
Census Bureau data analyzed by Richard Bavier of the Office of 
Management and Budget. Bavier finds a disconcerting increase in the 
number of mothers in the bottom fifth of income for female heads of 
families who report zero earnings and zero income from cash welfare 
(ignoring SSI). The number of mothers in this category increased in 
every year between 2000 and 2004, jumping by 60 percent over the 
period.\42\
---------------------------------------------------------------------------
    \41\ Ibid., pp. 307, 308.
    \42\ These figures are from unpublished tables of demographic and 
economic characteristics of female family heads, distributed by income 
quintile, that are prepared by Richard Bavier of the Office of 
Management and Budget using the Census Bureau's Current Population 
Survey. All figures are given in 2004 dollars.
---------------------------------------------------------------------------
    Several other researchers, including Robert Moffitt and Katie 
Winder at Johns Hopkins; Pamela Loprest, Sheila Zedlewski, and others 
at the Urban Institute; Sandra Danziger and Sheldon Danziger of the 
University of Michigan; and Robert G. Wood and Anu Rangarajan at 
Mathematica Policy Research report similar findings on increased 
hardship among mothers who leave welfare, live in a household without 
another adult, and do not have earnings.\43\ The studies by Wood and 
Rangarajan and the Danzigers and their colleagues are especially 
interesting because they both have many years of longitudinal data 
(data collected on the same subjects over time) on mothers who had been 
on welfare. Wood and Rangarajan followed a representative group of 
2,000 recipients who had received welfare in 1997 or 1998 in New 
Jersey. Although the group that was off welfare and employed increased 
from about one-third to one-half over the fifty-four-month follow-up 
period, the group of greatest concern--those who were off welfare but 
without a job--was consistently a little more than one quarter of the 
sample. Of this group, about 60 percent had other sources of income, 
including SSI, unemployment compensation, a working spouse or partner, 
or recent employment. Thus the mothers who were the least financially 
stable constituted about 40 percent of those who were off welfare and 
unemployed, or around 11 percent of the total sample.
---------------------------------------------------------------------------
    \43\ Robert Moffitt and Katie Winder, ``Does It Pay to Move from 
Welfare to Work? A Comment on Danziger, Heflin, Corcoran, Oltmans, and 
Wang,'' Journal of Policy Analysis and Management 24 (2005): 399--409; 
Pamela Loprest, ``Disconnected Welfare Leavers Face Serious Risks,'' 
Report 7, Snapshots of America's Families III (Washington: Urban 
Institute, 2003); Sandra Danziger, Elizabeth Oltmans Ananat, and 
Kimberly G. Browning, ``Childcare Subsidies and the Transition from 
Welfare to Work,'' Family Relations 52 (2004): 219--28; Robert G. Wood 
and Anu Rangarajan, ``What's Happening to TANF Leavers Who Are Not 
Employed?'' Issue Brief 6 (Princeton, N.J.: Mathematica Policy 
Research, 2003).
---------------------------------------------------------------------------
    All the evidence reviewed above, showing that mothers and children 
at the bottom of the distribution experience hardship, is based on 
income data. Surprisingly, consumption data provide a different 
picture. In studies using two nationally representative data sets, 
Bruce Meyer and James Sullivan show that the material conditions of 
low-income mothers, as measured by their consumption, improved somewhat 
after welfare reform.\44\ On the other hand, a large part of the 
additional consumption in the late 1990s appears to be related to work. 
More specifically, the mothers spent more on housing, food away from 
home, and transportation. Additional housing costs could well be 
explained by the fact that the federal housing programs in which many 
of these mothers participate charge families 30 percent of their 
income, with the remainder of the family's rent being paid by the 
government. If mothers earn additional money, they must pay 30 percent 
of it on housing: in effect, federal housing policy all by itself 
imposes a 30 percent tax on increased earnings. Additional spending on 
food away from home and transportation could also be associated with 
mothers working and needing to use some of their increased earnings to 
get to work and to eat out because of time pressures.\45\
---------------------------------------------------------------------------
    \44\ Bruce D. Meyer and James X. Sullivan, The Well-Being of 
Single-Mother Families after Welfare Reform, Policy Brief 33, Welfare 
Reform & Beyond (Brookings, 2005).
    \45\ Christopher Jencks, Scott Winship, and Joseph Swingle, 
``Welfare Redux,'' American Prospect 17 (2006): 36-40.
---------------------------------------------------------------------------
    Evidence on the well-being of mothers and children can also be 
gleaned from information on food consumption. Christopher Jencks, one 
of the major critics of the 1996 reforms, and his colleague Scott 
Winship conducted extensive analyses on the Food Security Supplement to 
the Current Population Survey for the years 1995-2001. Based on twenty-
eight questions related to food security, Jencks and Winship conclude 
that single mothers had fewer problems related to food in 2001 than in 
1995, the last year before welfare reform. Further analyses shows that, 
although the number of low-income mothers receiving welfare between 
1995 and 1999 fell from 58 percent to 29 percent, food-related problems 
dropped dramatically. The decline in food problems leveled off in the 
1999-2001 period, but food problems in 2001 were still substantially 
below the level of problems reported in 1995. Similarly, based on the 
Department of Agriculture's definition of food security, the percentage 
of food-insecure female-headed families declined from around 31 percent 
in 1995 to about 27 percent in 1999, as the welfare rolls were 
declining rapidly. Even during the period following the mild recession 
of 2001, the percentage of food-insecure families did not increase 
significantly, remaining below the 1995 level. The authors conclude 
that ``single mothers' material standard of living probably improved 
more during [the economic expansion of the 1990s] than during earlier 
ones.'' \46\ In an op-ed piece published in the Christian Science 
Monitor, the authors state flatly that their study of food problems led 
them to conclude that ``welfare reform worked.'' \47\
---------------------------------------------------------------------------
    \46\ Scott Winship and Christopher Jencks, ``How Did the Social 
Policy Changes of the 1990s Affect Material Hardship among Single 
Mothers? Evidence from the CPS Food Security Supplement,'' Faculty 
Research Paper RWP04-027 (Cambridge, Mass.: John F. Kennedy School of 
Government, 2004), p. 2.
    \47\ Scott Winship and Christopher Jencks, ``Welfare Reform Worked: 
Don't Fix It,'' Christian Science Monitor, July 21, 2004, p. 9.
---------------------------------------------------------------------------
    Income data thus suggest that there was a group of single mothers, 
comprising perhaps 10 percent of all single-mother families that had 
been on welfare, who were worse off following welfare reform. Data 
based on consumption and on food insecurity tend to offset this 
conclusion, although even here there is some evidence of problems at 
the bottom of the distribution. On balance, it seems prudent to 
conclude that scholars should examine this problem in much greater 
detail and search for solutions that will help mothers hold jobs. Given 
the research reviewed above showing an increase in the number of poor 
mothers with no obvious sources of income, more public and private 
funds should be devoted to conducting research and demonstration 
programs to determine how these floundering mothers can be helped. The 
trick will be to maintain a demanding welfare system that strongly 
discourages welfare dependency while simultaneously allowing states, 
counties, and cities enough flexibility to identify and help these 
mothers. Some mothers may never be able to achieve steady employment. 
Welfare programs should figure out how to help them without reducing 
the pressure on more capable mothers to leave welfare for work or to 
avoid welfare in the first place.
    Compared to any major change in social policy in the last several 
decades, I think it fair to conclude that welfare reform stands out as 
federal legislation that actually met its goals. The entire political 
spectrum was in agreement that mothers on welfare should become self-
sufficient. All but the left-most part of the spectrum agreed to 
support legislation that terminated entitlement cash welfare and 
replaced it with a system that required work. The data summarized above 
show that poor mothers on welfare responded exactly as they were 
expected to do--they went to work in droves. In addition, as 
Republicans predicted, they increased their family income and reduced 
the poverty rate of their children in the process. They left welfare 
for work, but government continues to support their efforts through 
child care subsidies, health insurance, food stamps, and above all, the 
Earned Income Tax Credit. There's something here for everybody to like: 
both more work and lots of government support--except now the bulk of 
government support is for those working, not those avoiding work. The 
results of major changes in public policy rarely work out this well.
    Now the question is: What's next? The obvious part of the answer is 
that states must continue to aggressively implement the work 
requirements in the TANF program. This Committee wisely led the way to 
fixing a glitch in the 1996 legislation that weakened the work 
requirement in the 1996 law. The first priority of this committee 
should be to ensure that states aggressively implement the new 
requirements. A second priority should be for this committee to work 
with the Agriculture Committee and the Banking Committee to strengthen 
the work requirements in the Food Stamp program and create strong work 
requirements for able-bodied adults in housing programs. If work 
requirements are successful in one program, I can see no reason why 
they cannot be successful in other programs.
    Beyond these obvious next steps, I think this committee has already 
taken the most important action that holds great promise for further 
reductions in poverty and improvements in child development and well-
being; namely, stimulating a national marriage movement. Years of 
research on poverty have convinced me that there are only three ways to 
reliably reduce poverty: economic growth, increased work, and increased 
marriage rates. Unfortunately, primarily because of low and often 
declining wages at the bottom of the income distribution, economic 
growth is less effective than in the past at reducing poverty.\48\ 
However, the nation's experience with increasing work levels following 
the 1996 welfare reforms shows unequivocally that increased work by 
mothers heading families drives down the poverty rate. Now comes 
marriage. Work that we have undertaken at Brookings provides solid 
evidence that increasing marriage rates to the level the nation enjoyed 
in 1970 would reduce poverty by almost 30 percent.\49\ In addition, as 
shown in a recent volume of the Future of Children, published by 
Brookings and Princeton University, the academic world is in almost 
unanimous agreement that increasing marriage rates would be good for 
children. This committee should provide strong oversight of its recent 
legislation that provides $150 million per year to stimulate healthy 
marriage and responsible fatherhood programs around the nation. In 
addition, the Committee should keep a close eye on the ground-breaking 
experimental research the Department of Health and Human Services is 
funding to test marriage education and other approaches to 
strengthening marriage. If some of these programs are successful, the 
Committee should make funds available to expand them throughout the 
nation. I believe the evidence strongly supports the view that if we 
can increase the nation's marriage rates, especially among poor and 
minority parents, the parents themselves, children, and the nation will 
greatly benefit. Not least among these benefits will be a declining 
need for government welfare programs.
---------------------------------------------------------------------------
    \48\ Sheldon Danziger and Peter Gottschalk, Diverging Fortunes: 
Trends in Poverty and Inequality (New York: Russell Sage Foundation, 
2006).
    \49\ Ron Haskins and Isabel Sawhill, ``Work and Marriage: The Way 
to End Poverty and Welfare'' (Brief #28), Washington, DC, Brookings 
Institution, September 2003; and Adam Thomas and Isabel Sawhill, ``For 
Richer or for Poorer: Marriage as an Antipoverty Strategy,'' Journal of 
Policy Analysis and Management, 2002, 21 (4), 587-599.

---------------------------------------------------------------------------
                                 

    Mr. SHAW. Bishop Riley.

STATEMENT OF BISHOP ROY RILEY, CHAIR, CONFERENCE OF BISHOPS FOR 
THE EVANGELICAL LUTHERAN CHURCH OF AMERICA, TRENTON, NEW JERSEY

    Bishop RILEY. Thank you. On behalf of the Evangelical 
Lutheran Church in America, the ELCA, a church of 5 million 
members and 10,000-plus congregations, we are truly grateful 
for this opportunity to testify about the implications of the 
Welfare Reform Act of 1996.
    I am Roy Riley. I serve as the Lutheran Bishop in New 
Jersey and as Chair of the ELCA Conference of Bishops, 
including 65 dioceses spread across the 50 States and the 
Caribbean. More importantly, I represent a faith community that 
is on the ground, engaged daily with people who live in 
financial poverty.
    In addition to those 10,000-plus congregations, Lutheran 
Services in America provides over $8 billion in services 
annually, services that touch the lives of 1 in 50 Americans. 
Lutheran Social Ministries in New Jersey has been the largest 
nonprofit provider of affordable housing in our State for a 
number of years. Individual congregations provide food and band 
together to provide shelter for the homeless, after-school 
programs for latchkey children of working parents, and the list 
goes on and on, but these determined efforts are not enough to 
stem the increasing tide of hungry, poor, and uninsured people 
in our communities.
    The Welfare Reform Act 1996 marked a fundamental shift in 
the way our government addresses antipoverty spending and seeks 
to help millions of Americans living in poverty. Among its 
stated aims were the strengthening of American families through 
various initiatives and the promotion of a work first culture. 
The question for the ELCA in 1996 was not about the necessity 
of welfare reform, nor in 2006 about maintaining a culture of 
reform. Our concern was then and is now the welfare reform that 
truly operates to strengthen American family life and creates 
meaningful work opportunities, moving people from poverty to 
sustainable livelihood. The spirit of this testimony, 
therefore, cannot be a celebration of unqualified success, but 
an acknowledgment of important commitments made but not yet 
realized.
    Our Christian faith communities--and here with your 
permission I will add a statement prepared by the leaders of 
five of these communities, Episcopal, Methodist, Church of 
Christ, Presbyterian, and Lutheran, our faith communities--
understand the witness of scripture to God's concern for the 
poor and oppressed and God's call to us to speak for them. The 
Bible describes the ministry of Jesus as good news for the poor 
and calls us to care for the least among us, but we are falling 
short of what God asks of us.
    Thirty-seven million Americans live below the poverty line, 
and 13 million of them are children. We have seen a 13 percent 
increase in requests for emergency food assistance. Many of the 
people that we are feeding in our soup kitchens are working 
poor, many of them working two jobs trying to make ends meet.
    Currently the national minimum wage of $5.15 per hour is 
about 68 percent of the poverty line, a $4,000 annual shortfall 
for a single parent with two children. The truth is that in 
most of our States, people cannot live on what we have defined 
as the poverty line.
    That welfare caseloads have been reduced dramatically is 
not finally the proof of successful welfare reform. Yesterday 
morning I was in Camden, New Jersey, the second poorest city in 
this country. Pastor Margaret Hertz Lane has served there for 
25 years in Camden, and she told me that one of the best 
components of the Welfare Reform Act was the job training 
programs that came early on, but in recent years, funding for 
those have been reduced.
    Child care, safe, affordable child care, has been critical 
to helping parents move from welfare to work. Thankfully, the 
funding for child care was increased for this year. Even so, 
due to inflation, this will not be sufficient to maintain the 
present levels of service.
    Finally, the stark realities are these: Many people in this 
Nation, especially the working poor, are only one health crisis 
and one missed paycheck away from homelessness and hunger. Too 
many families have one or both parents working two jobs because 
of the minimal hourly wage they earn, most of them without 
health insurance. That is not good for a family, and it is not 
good for children not to have that needed time with their 
parents.
    There will always be people in our society who need 
assistance because of mental and emotional challenges, 
addictions of all kinds. Some will not be able to support 
themselves. These are the chronically homeless. Welfare reform 
will never be a zero sum game. Our society will always have to 
maintain a safety net for the least of these. That is what 
compassion is all about. At the end of the day, the bottom line 
is this: Nearly 20 percent of the children in this, the richest 
Nation in the world, nearly 20 percent of the children live in 
poverty. Whatever else we have accomplished, whatever claims we 
make for our reforms, that fact remains.
    We can end poverty. We can do this together, government and 
faith communities together, but we must stay focused on the 
bottom line: It is those children. They are the first priority. 
The gap between the rich and the poor in this country gets 
wider every year. We must not hide from that truth.
    I thank you for your attention and your help.
    [The prepared statement of Bishop Riley follows:]
  Statement of Bishop Roy Riley, Chair, Conference of Bishops for the 
      Evangelical Lutheran Church of America, Trenton, New Jersey
    Good Morning Chairman Thomas, Ranking Member Rangel, Distinguished 
Committee Members and Fellow Panelists. On behalf of the Evangelical 
Lutheran Church in America (ELCA), a church of 5 million members and 
10,000 congregations, we are truly grateful for the opportunity to 
testify about the implications of the Personal Responsibility and Work 
Opportunity Reconciliation or ``Welfare Reform'' Act of 1996. I am Roy 
Riley, Bishop of the New Jersey Synod of the ELCA, and Chair of the 
ELCA Conference of Bishops, our national governing board of 65 Bishops.

    1. The Welfare Reform Act of 1996 marked a fundamental shift in the 
way our government addresses anti-poverty spending and seeks to help 
the millions of Americans living in poverty. Among its stated aims were 
the strengthening of American families through various initiatives and 
the promotion of a work-first culture--a reminder that the Temporary 
Assistance to Needy Families (TANF) block grant is indeed a temporary 
means of support for people moving from welfare caseloads.

    As a national church with ministries including advocacy, education, 
grant-making and social service, the question for the ELCA in 1996 was 
not about the necessity of reform nor in 2006 about maintaining a 
culture of reform. We can in principle support an emphasis on healthy 
family relations and the personal value of meaningful work and did so 
in our 1994 document ``Working Principles for Welfare Reform''. 
Instead, our concern was then and is now for welfare reform that truly 
operates to strengthen American family life and create meaningful work 
opportunities; that resulting policies truly improve the economy and 
move people from poverty to opportunity, from mere existence in 
forgotten alleys and shelters into meaningful and productive life 
together.
    The spirit of this testimony, therefore, unfortunately can not be a 
celebration of unqualified success but an acknowledgement of important 
commitments set down but not yet realized.

    2. The Scriptural witness on which the Lutheran tradition stands 
declares thematically God's concern for the poor and oppressed and 
God's call to speak for them. The Bible describes the ministry of Jesus 
as ``good news for the poor'' and details the content of biblical 
judgment as our awareness and treatment of ``the least among us.'' It 
bears noting that this well-known passage about judgment found in 
Matthew refers precisely to a gathering of nations, not individuals, 
and bears out Jesus' sense of concern that political and economic 
powers keep in mind the interests of those struggling to be heard.

    In addition, the long development of Lutheran theology envisions 
government structures as God's own potential good gift and instrument 
for ordered societies when it works from the broad interests of the 
common good. From our perspective therefore, public programs and 
government structures can be means to the greater ends of economic and 
social opportunity--particularly for the poor and oppressed whom God 
favors.
    From this biblical perspective, we can support welfare reform 
policies that aim to give families more meaningful time together and 
that seek to define work opportunities as valuable for the human 
experience. Our document ``Working Principles for Welfare Reform'' 
affirms that ``human beings have been created with moral agency and 
freedom and a power to act responsibly in light of particular 
circumstances.'' It also outlines the importance of work for human 
dignity and well-being. However, from this same Christian perspective, 
we can neither support nor celebrate welfare policy that maintains and 
expands a perpetual working underclass in our nation--that is, a 
significant part of American society pushed into jobs that keep 
families vulnerable and in low-income conditions, often below the 
poverty line itself.
    We are also in long-standing alliance with Lutheran Services in 
America, a health and human services network of almost 300 members 
providing services throughout all 50 states and the Caribbean. Its 
members deliver over $8 billion in services annually. A significant 
part of their important work is funded with public dollars and these 
are used efficiently and effectively to transform lives. However, even 
their courageous effort is not enough to stem the increasing tide of 
hungry, poor and uninsured people in our society.

    3. According to recent Census figures, the number of Americans 
living below the poverty line has increased every year since 2000 from 
11.3% in 2000 to 12.7 % in 2004. This now represents 37 million 
Americans. More particularly, this number includes about 13 million 
children representing about 18% of all children in the U.S. We also saw 
a 13% increase in requests for emergency food assistance, 54% of which 
came from families and 40% of which came from people with jobs. The 
Catholic Campaign for Human Development reports that in 2003, the 
middle year of the current poverty increase, more than two-thirds of 
all poor families with children included one or more individuals who 
worked. These individuals typically worked for combined family totals 
of 46 weeks per year.

    Yet our Lutheran state policy offices report dramatic reductions in 
state caseloads. In this context, it is difficult to herald caseload 
reduction as a measure of success. People are leaving welfare caseloads 
in dramatic numbers--so much is true. But where are they going? That 
question should haunt us and propel us forward toward better solutions.

    4. Helpful ways forward should relate to the current network of 
work supports to make work more meaningful and truly strengthen 
families of all shapes and sizes by giving them meaningful time 
together.

    Real wage values for low-wage workers have been stagnant at best 
and have fallen slightly since 2001 after a significant increase 1996-
2000. An emphasis on the importance of work therefore would be helped 
by raising the real value of the minimum wage on which most people 
cycling off of welfare rely. Currently, the national minimum wage of 
$5.15 is about 68% of the poverty line, a $4,000 annual shortfall, for 
a single parent with two children. Even states with a higher minimum 
wage could do more to reward work with an expanded Earned Income Tax 
Credit (EITC).
    In this same period, programs providing money for child care 
(CCDBG), social services (SSBG), and job-training (WIA) have lost value 
while the federal government has continued to impose restrictions--most 
recently work participation guidelines--that will squeeze state budgets 
further. We were pleased to see an increase for child care this year 
but note that this will not even meet present levels of service plus 
inflation. The new work participation guidelines for states are a 
strange development given the touted catalyst of state empowerment for 
the 1996 TANF law. In addition to those reductions mentioned, our 
annual budget process has further decreased benefits making it harder 
for TANF itself to make work work and support family life.

    5. In summary, welfare reform principles represent the best of our 
common purpose as Americans--supporting those who need help, 
emphasizing the dignity and importance of work, and attempting to 
strengthen family life. The ELCA affirms these principles and would 
like to testify to their manifestation among us. Unfortunately the 
economic reality in 2006 undermines broad claims at success. Families 
are stretched to the breaking point while working full-time for wages 
that keep them in a low-income status. There are an increasing number 
of poor, hungry, and uninsured Americans. Family and work are not well-
served by these policies and we can do better by our fellow citizens.

    The ELCA is grateful for the opportunity to testify this morning 
among these distinguished panelists. Our faith compels us to speak 
about social policy to civic leaders in terms of their own instrumental 
purpose and power. More specifically, however, we are compelled as 
Christians by Jesus who first publicly defined his own ministry in the 
words of the prophet Isaiah, ``I have been anointed to bring good news 
to the poor . . .'' Let's work to reshape welfare reform policy toward 
its own best intentions so that the poor among us also might see it as 
good news.

                                 

    Mr. SHAW. Thank you.

 STATEMENT OF JUNE O'NEILL, WOLLMAN PROFESSOR OF ECONOMICS AND 
 FINANCE, DIRECTOR OF THE CENTER FOR THE STUDY OF BUSINESS AND 
 GOVERNMENT, BARUCH COLLEGE, CITY UNIVERSITY OF NEW YORK, AND 
  FORMER DIRECTOR, CONGRESSIONAL BUDGET OFFICE, NEW YORK, NEW 
                              YORK

    Dr. O'NEILL. Mr. Chairman and Members of the Committee, I 
am pleased to be here today to comment on the outcomes of the 
1996 Welfare Reform Act. The 1996 legislation fundamentally 
changed welfare in the United States, and I believe the results 
have been truly gratifying.
    Within 5 years after enactment of reform, the number of 
families receiving welfare nationwide fell by half and continue 
to decline, despite the recession that began after 2000. Even 
in New York City, with its long history of high welfare 
participation, the caseload plummeted. In 1996, 10 percent of 
the city's population received welfare, double the national 
level. By 2006, the caseload in New York had declined by more 
than 60 percent.
    Initially many were concerned that efforts to move families 
off welfare would lead to wide-scale increases in child 
poverty, but those fears have not been realized. Single mothers 
increased their work participation, and their increased income 
from employment helped to reduce child poverty significantly. 
In short, the 1996 Welfare Reform Act worked in stark contrast 
to the decades of failed attempts.
    Why did the 1996 reform succeed when those before it had 
failed? The main policy response to the growth in welfare 
participation over the years was the provision of employment 
and training programs for welfare recipients, but those 
programs were ineffective because they never changed the 
incentives that encouraged welfare participation.
    Under the AFDC program, an eligible family was entitled to 
an income from welfare as long as it had a child under the age 
of 18 present in the home. Although the cash benefit provided 
by the program was usually modest, it was enhanced over the 
years by the addition of noncash benefits such as food stamps, 
Medicaid, and housing subsidies. Incidentally, those programs 
are not counted in the official poverty definition. A 
definition that includes those shows quite different 
percentages in poverty.
    At the same time, there were no demands made on adult 
recipients to work. The AFDC program was started in the 
thirties, when few women with children worked, and was intended 
to lend assistance when the father's support was lost through 
death or disability. Then and now the caseload has been mainly 
made up of female-headed families with children. Over the years 
the reason for lack of a father's support changed dramatically, 
and the vast majority of cases became eligible as a result of 
having had no marriage tie.
    The growth of the AFDC caseload was likely influenced by 
many factors; however, the financial incentive of the 
guaranteed income with no work requirement was clearly 
important.
    The welfare caseload grew explosively during the sixties 
and seventies, as the total benefit package was enhanced and 
eligibility liberalized. A large increase in the number of 
single-mother families was an important force sustaining 
caseload growth. A key issue, however, is the extent to which 
the AFDC program encouraged the formation of single-mother 
families, particularly those formed as a result of out-of-
wedlock childbearing.
    The 1996 reform brought a radical change to welfare, 
building on State experiments begun under AFDC waivers. Under 
the new law, welfare is no longer an entitlement either in 
terms of its financing or its philosophy. The TANF program is a 
block grant, and it is intended to serve as a temporary helping 
hand. Benefits are now restricted to a lifetime limit of 5 
years, and all adult recipients must fulfill a strict work 
requirement. The option of long-term welfare support has been 
eliminated, and work responsibilities now limit discretionary 
time while receiving benefits.
    My prepared statement reports in detail on the changes that 
have occurred in single mothers' welfare and work 
participation, wages and income, as well as on child poverty 
and the relation between those outcomes and welfare reform. I 
will note here only that there is now considerable agreement 
among those who have studied these issues that the positive 
outcomes we have observed are attributable, in large part, to 
welfare reform.
    By reducing welfare participation and increasing work 
participation, the 1996 welfare reform has succeeded in 
connecting a significant number of disadvantaged single mothers 
with the mainstream culture. In addition to increasing family 
income, one hopes that the broader knowledge and experience 
that comes from work will help these mothers become better role 
models for their children, thereby improving their life 
chances.
    Mothers who struggle with work are more likely to see the 
rewards that come from persistence in school and from 
appropriate behavior and will therefore provide wiser guidance 
for their children. This result is probably the single most 
important outcome. It is difficult, however, to care for a 
family as the lone provider and care giver. Although the 
increase in female-headed families has abated, we have not yet 
observed a significant increase in marriage and a decline in 
out-of-wedlock child bearing.
    The rise in out-of-wedlock births and the welfare culture 
that were at the center of the underclass did not occur 
overnight. I remain optimistic that the fading of welfare will 
in time spur an increase in marriage and planned marital 
births. There has been a sharp decline in teenage births, 
particularly among black teenagers, and that decline should 
enhance options for increased education and a more promising 
future for these young women. The recent spread of enthusiasm 
for reform in children's education also should be helpful for 
future generations.
    The reauthorization of the legislation and the continued 
emphasis on strict work requirements will help to sustain the 
gains that have already been made. Thank you.
    [The prepared statement of Dr. O'Neill follows:]
 Statement of June O'Neill, Ph.D., Wollman Distinguished Professor of 
 Economics, Zicklin School of Business, Baruch College, New York, New 
      York, and Former Director of the Congressional Budget Office
    Mr. Chairman and Members of the Committee, I am pleased to be here 
today to comment on the outcomes of the landmark welfare legislation of 
1996.
    The 1996 legislation fundamentally changed welfare in the United 
States. The results in many respects have exceeded the expectations of 
even the most optimistic supporters of the reforms. The most immediate 
and dramatic effect was the decline in the welfare caseload. After 
decades of caseload growth, within five years after enactment of the 
legislation, the number of families receiving welfare nationwide fell 
by 50% (Figure1). Despite the recession that began after 2000, welfare 
caseloads have continued to decline. Concerns that the emphasis on 
reducing welfare participation would result in wide scale increases in 
child poverty have not been realized. Single mothers increased their 
work participation and their increased income from earnings helped to 
sharply reduce child poverty. In short, the 1996 welfare reform worked, 
in stark contrast to the decades of failed attempts to reform the AFDC 
program (Aid to Families with Dependent Children)--the nation's prior 
welfare program, in place since the 1930s and terminated by the 1996 
welfare reform. In my testimony today I will summarize the findings of 
research that I and my colleagues have conducted analyzing the changes 
that have occurred in the economic well being of single mothers and 
their children and the role played by welfare reform after factoring in 
the effects of the economic expansion of the 1990s and other trends.
    Why did the 1996 reform succeed when so many before it had failed? 
The goal of welfare reform is to reduce welfare dependency by 
encouraging those already on welfare to find jobs and discouraging 
welfare entrance by reducing the incentive to go on welfare in the 
first place. The AFDC program as it was structured, however, encouraged 
welfare dependency. Under AFDC an eligible family was entitled to an 
income from welfare as long as it had a child under the age of 18 
present in the home. Although the cash benefit provided by the program 
was usually modest, it was enhanced over the years by the addition of 
non-cash benefits--food stamps, Medicaid, housing subsidies, WIC 
benefits. Moreover, no demands were put on the adult recipient to work.
    AFDC was started in the 1930s when few women with children worked 
and was intended to lend assistance when the father's support was lost 
through death or disability. Eligibility then and now has been based on 
both family structure and income; and the composition of the caseload 
has been mostly made up of female-headed families with children under 
the age of 18. But over the years the reason for lack of the father's 
support changed and the vast majority of cases became eligible as a 
result of having had no marriage tie.\1\
---------------------------------------------------------------------------
    \1\ Dave M. O'Neill and June E. O'Neill, ``Lessons for Welfare 
Reform: An Analysis of the AFDC Caseload and Past Welfare-to-Work 
Programs,'' W.E. Upjohn Institute for Employment Research, Kalamazoo, 
Michigan, 1997.
---------------------------------------------------------------------------
    The growth of the AFDC caseload was likely to have been influenced 
by many factors--demographic, economic, cultural and programmatic. 
However, the financial incentive of a guaranteed income with no work 
requirement was clearly important. The welfare caseload grew 
explosively during the late 1960s and 1970s as welfare benefits were 
enhanced and eligibility liberalized.\2\ The increase in the number of 
single-mother families was an important force sustaining caseload 
growth. A key issue, however, is the extent to which the AFDC program 
encouraged the formation of single-mother families, particularly those 
formed as a result of out-of wedlock childbearing by teenage girls.
---------------------------------------------------------------------------
    \2\ O'Neill and O'Neill. Ibid. (Ch.2).
---------------------------------------------------------------------------
    The main policy response to AFDC caseload growth over the years was 
a series of initiatives providing employment and training programs for 
welfare recipients. The hope was to encourage caseload reduction by 
enhancing the skills and therefore the potential earnings of welfare 
recipients. In addition, new financial incentives to work were provided 
by ``disregarding'' a portion of earnings in determining financial 
eligibility. But these programs never proved effective because they 
provided no real incentive to leave welfare for work.\3\
---------------------------------------------------------------------------
    \3\ There is reason to believe that the disregards actually 
increased the caseload. O'Neill and O'Neill, ibid.
---------------------------------------------------------------------------
    The 1996 welfare reform brought a radical change to welfare, 
building on experiments begun under AFDC waivers in a number of states. 
Under the new law, welfare is no longer an entitlement either in terms 
of its financing or its philosophy. As its name suggests, TANF 
(Temporary Assistance to Needy Families) is intended to serve as a 
temporary helping hand. TANF benefits are restricted to a lifetime 
limit of five years and all adult recipients must fulfill a strict work 
requirement. It is no longer possible for a single mother to count on 
guaranteed long-term income support without any work responsibilities. 
The choice of being on welfare is ultimately eliminated and work 
responsibilities limit discretionary time.
    The discussion that follows reports on the changes that have 
occurred in single mothers' welfare and work participation, their 
earnings and income, child poverty and the relation between those 
outcomes and welfare reform.\4\
---------------------------------------------------------------------------
    \4\ The research reported on here is based on a series of Civic 
Reports published by the Manhattan Institute, suitably updated: June 
O'Neill and M. Anne Hill, ``Gaining Ground? Measuring the Impact of 
Welfare Reform on Welfare and Work,'' Civic Report #17, July 2001; June 
O'Neill and M. Anne Hill, ``Gaining Ground, Moving Up: The Change in 
the Economic Status of Single Mothers Under Welfare Reform,'' Civic 
Report #35, March 2003; June O'Neill and Sanders Korenman, ``Child 
Poverty and Welfare Reform: Stay the Course,'' Civic Report #44 
December 2004.
---------------------------------------------------------------------------
Changes in Welfare Participation and Work Participation
    Figure 2 depicts the dramatic decline in welfare participation and 
rise in the work participation of single mothers after the introduction 
of welfare reforms (indicated by the line showing the percentage of 
single mothers exposed to state welfare waivers prior to the 
implementation of TANF and then to TANF, which was universally 
implemented by the start of 1998). The pattern of change suggests that 
the economy alone is unlikely to have been the motivation for the 
changes after 1996. Welfare participation only slightly declined and 
work participation only slightly rose during the expansion of the 1980s 
and then reversed course during the weaker economy of the early 1990s. 
With the improvement of the economy aided somewhat by the 
implementation of state waivers after 1992, welfare participation again 
began to decline and employment to rise. But the changes after the 
implementation of TANF are of much larger magnitudes than had been seen 
before. The welfare participation rate dropped from 34% in 1995 to 10% 
in 2001 and has since remained at about that level.\5\ The percent 
employed rose from 61% in 1995 to 73% in 2000. With the weakening in 
the economy after 2000, the percent employed declined to about 69% in 
2003 and has remained at about that level through 2005. That is still a 
remarkable change from 1995 when the unemployment rate was 5.6%, about 
the level of the past three years.
---------------------------------------------------------------------------
    \5\ The rise in 2003 to 12.6% was undoubtedly influenced by the 
recession and likely reflects receipt of state funded public assistance 
as well as TANF. The welfare participation rate is based on receipt of 
welfare or cash public assistance reported to the census. The caseload 
data shown in figure 1 are based on the number of recipient families on 
the AFDC/TANF caseload as shown on state administrative records
---------------------------------------------------------------------------
    Single mothers with weak work related skills and other deterrents 
to labor market success have always had the highest rates of welfare 
participation. It was commonly thought that these women would lag 
behind as they were expected to have the greatest problems finding and 
keeping jobs. Yet disadvantaged groups have experienced larger declines 
in welfare participation and larger increases in work than more 
advantaged single mothers. In the decade before the 1996 reform more 
than half of single mothers who are high school dropouts were typically 
on welfare; by 2004, only 19% were on welfare--more than a 60% decline. 
At the same time, the employment of these women rose sharply. Only 
about a third of single mothers who were high school dropouts were 
employed before the reform. In the last three years close to half were 
employed.
    The trends in welfare and work participation by race are shown in 
Figures 3 and 4. In the years before welfare reform, black and Hispanic 
single mothers were much more likely to be on welfare than white non-
Hispanic women. The decline in their welfare participation after reform 
was huge, narrowing the racial difference. The gains in employment made 
by black and Hispanic mothers are equally impressive. Between 1995 and 
2005, Hispanic single mothers increased their employment participation 
by 17 percentage points (from 47% to 64%); black single mothers 
increased their employment rates from 55% to 65%. Single mothers who 
are white and non-Hispanic increased their employment rates over the 
same period by only four percentage points--from 69% to 73%. But their 
employment participation had always been higher and their exposure to 
welfare lower.
Earnings and Income
    How has the large exodus from welfare influenced the economic well 
being of single mothers? Do they earn enough to compensate for the loss 
of welfare benefits? Women on welfare typically have less education 
than the general population, and if they have been on welfare for a 
number of years and have little work experience they are likely to 
start with low wages when they do go to work. Yet despite the influx of 
former welfare recipients into the workforce of single mothers, the 
average hourly earnings of single mothers did increase moderately after 
1995 (Fig. 5). Among all single mothers ages 18-44, the hourly wage 
increased by 7% after adjusting for inflation. Among single mothers 
with the least education--high school dropouts--the real wage increased 
by 4%.
    The Earned Income Tax Credit (EITC) is an important supplement to 
the incomes of low wage earners. The total cash income of single 
mothers including enhancement from the EITC increased by 12 % between 
1995 and 2004 after adjusting for inflation, even though the percent 
receiving welfare declined from 29% to 10% (Table 1). Single mothers 
also receive non-cash benefits and many live in a household with a 
partner or relatives. These other sources greatly increase the 
resources available to single mothers. In 2005 the comprehensive 
measure of income--what I call ``full income'' added 70 percent to the 
mother's own cash income (line 5 of Table 1).
    Among single mothers who were high school dropouts the percent 
receiving welfare benefits declined sharply and the percent receiving 
earnings rose from 48% in 1995 to 59% in 2004. Also as shown in Table 
1, their total cash incomes including the EITC increased by 10% in real 
terms over the 1995-2004 period. Again, their cash incomes were 
substantially enhanced by non-cash benefits and by income from partners 
or others with whom they shared a household.
Child Poverty
    The poverty rate of children in single-mother families has always 
been higher than the poverty rate of children in married couple 
families, in part because of the obvious fact that married couples 
potentially, and nowadays mostly, have two earners (Figure 6). In 
addition, the relative dependence of single mothers on welfare for a 
long time meant that a major source of the cash income of single 
mothers was a relatively low benefit that was unlikely to grow with the 
economy. During the 1980s and early 1990s the poverty rate of children 
in single mother families was close to 50% compared to about 10-12% for 
children in married couple families. Starting in 1994, the poverty rate 
of children in both kinds of families began to decline with the onset 
of economic recovery. But this time the poverty rate of children in 
single mother families fell more rapidly, narrowing the gap in poverty 
between the two groups of children. Between 1995 and 2000 the child 
poverty rate for those in single mother families declined from 43% to 
33%. With the weakening of the economy the poverty rate of children in 
single mother families increased to 35% in 2003 and rose a bit more in 
2004. but still remains well below the child poverty rate that 
prevailed in the pre-TANF period.
    In evaluating poverty rates it is important to note that the way 
income is measured substantially affects the rate. Figure 6 shows 
poverty calculated two ways. One is based on a definition of income 
that counts only the cash income of the household. The other is based 
on ``full household income,'' a measure that includes the EITC and the 
value of non cash benefits and also deducts tax payments. The 
percentage of children in poverty is considerably lower based on the 
full income definition, particularly for children in single mother 
families.
    The poverty rates of black and Hispanic children have long been 
considerably higher than the poverty rates of white non-Hispanic 
children in part because of lower earnings of parents but also 
importantly because of the higher proportion of single mother families 
and their greater reliance on welfare. The sharpest declines in child 
poverty have been among black and Hispanic children (Table 2).
The Contribution of Welfare Reform
    The close association between the enactment of the 1996 reforms and 
the ensuing decline in welfare participation, the rise in the 
employment of single mothers and the decline in child poverty point to 
the reform as a prime mover in these trends. The particularly 
pronounced changes in these outcomes for groups with greater welfare 
participation reinforces the point. The fact that the recession that 
began after 2000 did not erode these gains strongly suggests that the 
economy was not the main reason for the changes, although it 
undoubtedly was a contributing factor. It is difficult statistically to 
estimate the effect of a program change over time. Nonetheless, I and 
others have conducted analyses to estimate the contribution of reform, 
the economy and other forces to the various outcomes of concern. 
Although the estimates vary, most find that reform has been a major 
force.\6\
---------------------------------------------------------------------------
    \6\ See the review in Rebecca Blank, ``Evaluating Welfare reform in 
the United States,'' Journal of Economic Literature, Vol. 40, No.4, 
1105-1166. Dec. 2002.
---------------------------------------------------------------------------
Concluding Thoughts
    By reducing welfare participation and increasing work 
participation, the 1996 welfare reform has succeeded in connecting a 
significant number of single mothers with the mainstream culture. In 
addition to increasing family income, one hopes that the broader 
knowledge and experience that comes from work, will help these mothers 
become better role models for their children, thereby improving their 
life chances. Mothers who struggle with work are more likely to see the 
rewards from persistence in school and appropriate behavior, and 
provide wiser guidance to their children.
    It is difficult, however, to care for a family as the lone provider 
and caregiver. One of the outcomes that many have hoped would emerge 
from welfare reform is an increase in marriage and decline in out-of-
wedlock childbearing as the marriage alternative of long-term 
government support was significantly weakened. A surge in marriage has 
not occurred, though the increase in female--headed families has 
abated.
    Most encouraging though is the sharp decline in teen birth rates, 
which fell by 33% between 1991 and 2004 (by nearly 50% for black 
teenage girls). Women with an out-of-wedlock first birth as teenagers 
have had a high probability of going on welfare and of becoming welfare 
dependent.
    The rise in out-of wedlock-births and the welfare culture that was 
at the center of the underclass did not occur overnight. I remain 
optimistic that welfare reform will spur a reversal of those trends. 
The recent spread of enthusiasm for reform in children's education 
should be helpful along those lines as well.



[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

    Mr. SHAW. Thank you, Dr. O'Neill. Ms. Parrott.

   STATEMENT OF SHARON PARROTT, DIRECTOR, WELFARE REFORM AND 
INCOME SUPPORT DIVISION, CENTER ON BUDGET AND POLICY PRIORITIES

    Ms. PARROTT. Good afternoon, Mr. Chairman and Members of 
the Committee, and thank you for this opportunity to appear 
before you today.
    I am Sharon Parrott, and I am the director of welfare 
reform and income support policy at the Center on Budget and 
Policy Priorities. The center is a nonpartisan research and 
policy organization here in Washington.
    The last decade has seen significant changes, both positive 
and negative, in the system of supports for low-income families 
with children. Many of the successes have been detailed by 
other panelists, so in my limited time I will concentrate on 
some of the more troubling trends, because those are an 
important part of the story and framework for future 
improvements.
    I will make three key points. First, the effects of the 
1996 welfare law have been more mixed than many people may 
realize. Second, States adopted some policies that promoted 
work and others that restricted poor families' access to 
assistance. Finally, there are steps Congress can and should 
take that could help ensure that fewer families are left 
behind.
    Point one: The traditional story told about TANF--caseloads 
fell, employment rates rose, child poverty fell--is incomplete. 
Throughout the nineties, TANF caseloads and child poverty did 
both fall. The reasons for this are varied. Welfare reform was 
certainly one piece of the story, as was the strong economy and 
the expansions in those work supports that both Dr. Haskins and 
Governor Thompson talked about this morning. After 2000, when 
the economy fell into recession and the labor market softened, 
unemployment rose, and child poverty, including deep child 
poverty, children living below half the poverty line, 
increased.
    During that period, though, TANF caseloads continued to 
fall. This meant an increasing number of very poor families 
with children did not receive TANF assistance or the 
employment-related help that should come with that assistance. 
The TANF program now serves a much smaller share of the 
families that are poor enough to qualify to receive it as 
compared to the former AFDC program.
    In the mid-nineties, 80 percent of families poor enough to 
qualify for AFDC and meet the other eligibility requirements 
participated in the program. In 2002, just 48 percent of 
families poor enough to qualify for TANF under their State's 
eligibility rules received that assistance. As a result, a 
growing number of single mothers now fall into a no work and no 
welfare category.
    In fact, and this key point is not widely understood, more 
than half of the decline in the number of families receiving 
TANF reflects a drop in TANF receipt among families poor enough 
to qualify for it, rather than a drop in the number of families 
poor enough to qualify for TANF.
    Now my second point. Over the past decade States have 
adopted a number of generally positive TANF-related policies 
that promote work. These include expanding welfare-to-work 
programs, adopting make-work-pay policies, and expanding child 
care assistance, as well as improving the collection of child 
support.
    States also have adopted some policies that restrict poor 
families' access to assistance, such as making it difficult for 
families to complete the application process and aggressive 
sanctioning of families off of TANF when they don't meet 
program requirements.
    Now, what is important about the sanctions story is that 
research has consistently shown that a significant share of 
those sanctioned have serious barriers to employment that are 
impeding their ability to meet program requirements. These are 
not, the research tells us, primarily families that are 
thumbing their noses at requirements, but families with serious 
problems that aren't getting the help they need.
    Unfortunately, the inflexible nature of the TANF 
requirements in the recent Deficit Reduction Act and 
restrictive new regulations increases the risk that States will 
adopt new strategies for reducing TANF caseloads rather than 
reducing need.
    Simply stated, the cheapest and easiest way for a State to 
meet the new work requirements is to help fewer poor families. 
States may or may not act accordingly, but the incentive is 
quite clear.
    A recent report by Mathematica Policy Research, 
Incorporated, provides new information about the problems faced 
by the families left behind by welfare reform. This was a study 
of long-term TANF recipients in St. Paul, Minnesota, and it 
found that a large share of these recipients had low levels of 
basic cognitive functioning, IQs of less than 80, as well as 
high rates of serious mental and physical health problems, and 
very little education. Some parents could not read simple 
words, some could not lift a gallon of milk, some could not 
leave their homes due to anxiety disorders or had debilitating 
bouts of depression, and some were unable to follow simple 
instructions or tell time.
    In many cases, parents with these kinds of problems around 
the country have been terminated from the TANF program. If we 
are serious about ensuring that children's basic needs are met, 
then the very real limitations of some of the poorest parents 
in our country, as well as their capabilities, will have to be 
addressed. States will need both resources and flexibility to 
do the right thing.
    The final point I would leave you with is that there are 
steps the Federal Government can and should take to ameliorate 
some of the negative consequences of the 1996 law that will not 
undermine some of the positive effects the law has had.
    Most States clearly do not think that the Deficit Reduction 
Act and the new TANF regulations give them the flexibility they 
need to create appropriate employment programs for those 
hardest to serve. It is not too late to revisit the inflexible 
nature of these Federal rules, or, at the very least, monitor 
their impacts closely.
    Congress also can promote welfare reform goals by improving 
other supports outside of TANF, including the unemployment 
insurance system, so low-wage workers can qualify; and doing 
more to provide work supports, like child care, health care, 
and housing assistance; and expanding training opportunities, 
as Governor Thompson talked about, for both low-skilled mothers 
as well as men.
    Finally, the 1996 law's treatment of legal immigrants was 
quite troubling. I want to commend to the Committee H.R. 899, a 
bipartisan bill introduced by Representatives Cardin and 
English, which would provide a modest extension of the SSI 
eligibility period for refugees and other humanitarian 
immigrants who are elderly or have serious disabilities. The 
1996 law set an artificially short deadline for refugees to 
naturalize, one that is particularly inappropriate in a post-9/
11 world.
    Thank you again for the opportunity to testify today.
    [The prepared statement of Ms. Parrott follows:]
   Statement of Sharon Parrott, Director, Welfare Reform and Income 
        Support Division, Center on Budget and Policy Priorities
    Good morning, Mr. Chairman and Members of the Committee, and thank 
you for this opportunity to appear before you today.
    My name is Sharon Parrott, and I am the Director of Welfare Reform 
and Income Support Policy at the Center on Budget and Policy 
Priorities. The Center is a nonpartisan research and policy 
organization based in Washington, D.C. I have researched and analyzed 
welfare reform issues for more than 12 years. In addition to my work at 
the Center, in 1999 I was detailed for almost two years to the District 
of Columbia's Department of Human Services, where I helped to implement 
the 1996 welfare law and was able to get a first-hand look at the 
opportunities and challenges that the law created.
    The 1996 Personal Responsibility and Work Opportunity 
Reconciliation Act (PRWORA) established the Temporary Assistance for 
Needy Families block grant, changed the way in which child care 
assistance was financed, created new tools for collecting child support 
owed to families and changed how child support collections are 
distributed, and made a set of cuts in other low-income programs, 
including the Food Stamp Program and the Supplemental Security Income 
program. Over the past ten years, a number of changes have been made to 
these provisions. Some (though certainly not all) of the cuts in 
benefits to certain legal immigrants have been restored; some cuts to 
the Food Stamp Program have been reversed; regulatory changes have been 
made that reduced the number of children who could have lost SSI 
benefits under the 1996 law; and the recent Deficit Reduction Act has 
made important changes to TANF in reauthorizing the program.
    The impacts of all of these aspects of the 1996 law are important 
and worthy of discussion, but this hearing--and this testimony--focus 
on the impact of the TANF-related aspects of the legislation. This 
testimony discusses four areas:

      Trends in TANF caseloads, employment rates, and poverty: 
It is widely known that TANF caseloads have dropped dramatically since 
1996. It is not well known that more than half of this drop reflects a 
sharp decline in TANF receipt among eligible families, rather than a 
decline in the number of families poor enough to qualify for TANF. TANF 
caseloads have continued to decline since 2000, despite increases in 
poverty and deep poverty (families living below half of the poverty 
line) and declines in employment among single mothers that have 
occurred since 2000. In other words, TANF has become less effective at 
serving those who are eligible for the program and need help both in 
making ends meet and preparing for employment.
      The choices states have made in their TANF programs: 
Under TANF, states have adopted various policies to promote employment 
among single mothers. These include new employment and training 
activities, income-disregard policies that help ``make work pay,'' 
expanded work supports (most notably child care assistance), and 
improved child support enforcement. Some of these policies also 
benefited low-income families not receiving TANF benefits, helping them 
remain employed and off of TANF. Some states also have adopted policies 
and procedures that have served to restrict poor families' access to 
assistance, including aggressive sanction policies and policies that 
make it difficult for families to apply for assistance.
      How families that find employment, and those that do not, 
are faring: In part as a result of TANF, employment rates among single 
mothers are higher today than in the mid-1990s (though they have fallen 
in recent years). Most TANF recipients who find jobs are financially 
better off than when they were on TANF. However, most earn low wages 
and experience periods of joblessness. Many other families are unable 
to move from welfare to work; some join the growing group of poor 
families that have neither jobs nor assistance from TANF or another 
income support program. Research shows that a large share of families 
that are unable to move from welfare to work have serious barriers to 
employment, including significant physical and mental disabilities.
      Next steps for improving outcomes for families and 
children: Many of the TANF provisions included in the Deficit Reduction 
Act (DRA) passed earlier this year could exacerbate the decline in TANF 
participation among eligible families and further increase the number 
of poor families with neither a job nor income support. The DRA gives 
states a strong incentive to assist fewer families--especially the 
families that most need help, those with barriers to employment--
because it raises states' work participation targets while 
simultaneously narrowing the range of welfare-to-work activities that 
can be counted toward those targets. These restrictions will make it 
considerably harder for states to design welfare-to-work programs 
tailored to recipients' needs.

    Congress can take a number of steps to ameliorate the DRA's 
potential negative effects and address some of the disturbing trends 
that have emerged over the last decade. It can revisit some of the 
detailed rules related to the work participation rate and, in 
particular, give states more flexibility in designing welfare-to-work 
activities. Congress also can take steps to require that state TANF 
programs are measured not only by how well they engage recipients in 
work activities, but also by how well they provide a safety net for the 
most vulnerable children. Congress also can strengthen work supports 
such as child care assistance and health care, change Unemployment 
Insurance rules so that more low-wage workers qualify, invest in 
building workers' skills, and raise the minimum wage. And, Congress 
should modify the punitive time limit on SSI assistance that the 1996 
law imposed on extremely poor refugees and asylees who are either 
elderly or have serious disabilities.
    This testimony focuses primarily on TANF programs (and programs 
funded with maintenance-of-effort [MOE] funds) that provide basic 
income assistance to poor families with children. It is important to 
note, however, that the TANF block grant and associated MOE funds are 
used to fund a broad array of human service programs, including child 
care and other work supports, services to abused and neglected children 
and families at risk of abuse and neglect, youth development programs, 
and more. Nationally, spending on cash assistance and welfare-to-work 
programs comprised just 41 percent of overall TANF and MOE spending in 
2004 (the last year for which data are available). While the federal 
rules for programs that provide TANF or MOE-funded income assistance to 
low-income families with children are very detailed, there are few 
rules and little oversight on how states spend TANF and MOE resources 
in other areas. A discussion of the issues related to how TANF and MOE 
funds are spent in other program areas is outside the scope of this 
testimony, however.
Trends: Caseloads, Employment, and Poverty
    Most discussions of TANF focus on three sets of trends--the decline 
in the TANF caseload, the increase in employment rates of single 
mothers during the 1990s and the subsequent decline in employment rates 
since 2000, and the decline in child poverty during the 1990s and the 
subsequent increase in poverty since 2000.
    While important, these three sets of trends miss important 
additional information about the functioning of the TANF program and 
the impacts on low-income families over the last decade. Examining a 
broader set of indicators reveals these important facts:

      Child poverty fell during the 1990s, but has increased 
significantly in recent years as has the number of children living 
below half the poverty line. This suggests that a combination of 
economic factors and benefit policies have resulted in worsening 
conditions for the poorest families with children in recent years. This 
trend also suggests that the TANF program is not serving as an 
effective bulwark against deep poverty for many families. Overall child 
poverty remains lower today than in the mid-1990s.
      Employment rates among single mothers are higher today 
than in the mid-1990s, but they have fallen in recent years. This shows 
that both public policies and the broader labor market are both 
important factors affecting the employment rate for this group.
      TANF programs now serve a smaller share of very poor 
families than were served in the former AFDC program. This means that 
there is a growing number of poor families in which the parent is not 
working and the family is receiving neither income assistance nor help 
in finding employment through TANF. Indeed, more than half (57 percent) 
of the decline in the number of families receiving assistance through 
AFDC or TANF since 1996 is attributable to the decline in the 
proportion of families eligible for assistance who are served by TANF, 
rather than to a decline in the number of families poor enough to 
qualify for TANF.

    The following is a more detailed description of the important 
trends related to employment rates, caseloads, and poverty:

      Caseloads: As has been well documented, the number of 
families receiving assistance (in either a TANF--or MOE-funded program) 
has fallen dramatically since 1994. Caseload decline began prior to the 
enactment of PRWORA and accelerated after the enactment of PRWORA.

    Caseloads continued to fall after 2000, even as poverty--and deep 
poverty--among children began to rise. Between 2000 and 2004, the 
number of children living in families with cash incomes below half of 
the poverty line increased by 758,000, while the number receiving 
assistance through TANF or MOE programs fell by 509,000. In other 
words, at a time of rising need, states' TANF programs were assisting 
fewer children.

      Employment rates: Employment rates among single mothers 
rose during the late 1990s, from 61.7 percent in 1995 to 73 percent in 
2000. Since 2000, though, employment rates among this group have 
fallen, reaching 69.1 percent in 2005.
      Poverty: Child poverty overall and poverty among single 
mother families fell during the 1990s. In 1993, some 22.5 percent of 
children were poor according to the official Census definition of 
poverty; in 2000, child poverty stood at 15.9 percent. After 2000, 
however, poverty began to rise. In 2004--the latest year for which data 
are available--child poverty had risen to 17.5 percent, still below its 
levels in 1993 and 1996, but significantly above its 2000 level. 
Between 2000 and 2004, an additional 1.4 million children fell into 
poverty.
      Deep poverty: In recent years, the number of children 
living below half of the poverty line has increased substantially. 
Between 2000 and 2004, the number of children with cash incomes below 
one-half of the poverty line increased by 758,000. These are the 
families that could most benefit from TANF assistance programs and 
associated welfare-to-work programs, but as the number of children 
living in these very poor families increased since 2000, the number of 
children receiving TANF (or MOE funded) assistance declined. (Even when 
other noncash benefits such as food stamps are counted, the number of 
children in families with incomes below half the poverty line increased 
substantially over this time period.)
      Proportion of families eligible for TANF assistance who 
receive aid: Since the 1996 law was enacted, the proportion of families 
eligible for state TANFassistance that actually receive assistance has 
fallen dramatically. During the first half of the 1990s, data from the 
Department of Health and Human Services (HHS) show that more than 80 
percent of families that met the eligibility criteria for the former 
AFDC program received assistance through that program. AFDC's 
participation rate had remained at about this level since at least 
1981, the first year for which data are available. By 2002--the last 
year for which data are available--just 48 percent of families eligible 
for assistance received help through TANF or a separate MOE-funded 
state program.\1\

    \1\ U.S. Department of Health and Human Services, Indicators of 
Welfare Dependence 2005, http://aspe.hhs.gov/hsp/indicators05/
ch2.htm#ch2_4.

    This is a dramatic change. It means that fewer than half of the 
families that are poor enough to qualify for TANF--which, in most 
states, means that the family has income well below the poverty line--
actually receive assistance from the program. Very poor families that 
do not receive TANF miss out not only on the income assistance that 
could help these families meet their children's basic needs, but also 
on programs that could help them prepare for and find employment.
    The decline in the proportion of families eligible for TANF that 
receive assistance from the program is a significant factor behind the 
decline in the TANF caseloads. In fact, if TANF programs continued to 
serve the same proportion of eligible families that they did in the mid 
1990s, the number of families receiving TANF (or aid through an MOE-
funded program) would stand at roughly 3.2 million, rather than the 
current levels of roughly 2 million.
    Stated another way, more than half--57 percent--of the decline in 
TANF caseloads since 1996 is due to a decline in the extent to which 
TANF programs serve families that are poor enough to qualify, rather 
than to a reduction in the number of families who are poor enough to 
qualify for aid. Despite this dramatic change, little research has been 
done to understand why the change occurred and what it means for poor 
families and children.

      Single-mother families that are jobless and not receiving 
TANF (or MOE) assistance: As the proportion of very poor families that 
receive assistance through TANF programs has fallen in recent years, 
the number of single-mother families that are jobless and are not 
receiving TANF benefits has increased markedly. A recent Center 
analysis of TANF administrative data and Department of Labor data 
suggests that the average monthly number of single mothers who are 
neither employed nor receiving assistance through TANF increased by 
more than 1 million from 1995 to 2002. Similarly, annual Census survey 
data show a rise in jobless single mother families that do not receive 
assistance through TANF, Supplemental Security Income, Unemployment 
Insurance, or Social Security. Even after adjusting for the known 
problem of the undercounting of TANF and unemployment insurance 
recipients in the Census data, the number of single mothers working 
less than half the year and receiving no assistance from these income 
support programs increased by more than 700,000 between 1995 and 2004.
The Role of TANF and other Factors
    The trends discussed above have no single cause. Several 
researchers have tried to disentangle the causes of the rise in 
employment rates and declines in TANF receipt among single mothers 
during the 1990s. Most have concluded that a combination of factors 
contributed to the increased employment rates, including the strong 
labor market, TANF policies, improved work supports such as increased 
child care assistance, a strengthened EITC, and the expansion of 
Medicaid and SCHIP to children in low-income working families. 
Determining the relative importance of each factor and the synergy 
among them has proven difficult, but conservative and progressive 
researchers alike typically ascribe less than half of the increase in 
employment rates to TANF-related policies.\2\ (The ways in which TANF 
programs promoted work is discussed in more detail below.)
---------------------------------------------------------------------------
    \2\ See, for example, ``The Effects of Welfare Policy and the 
Economic Expansion on Welfare Caseloads: An Update,'' Council of 
Economic Advisors, August 3, 1999, http://clinton4.nara.gov/WH/EOP/CEA/
html/welfare/nontechv3.html; Gary Burtless, ``The Labor Force Status of 
Mothers Who Are Most Likely to Receive Welfare: Changes Following 
Reform,'' Brookings Web Editorial, March 30, 2004; and ``The Past and 
Future of Welfare Reform,'' by Douglas Besharov, the Public Interest, 
Winter 2003.
---------------------------------------------------------------------------
    Similarly, the poverty trends discussed above--including both the 
reduction in child poverty in the 1990s, the rise in child poverty 
since 2000, and the increase in children in single-mother families 
living below half the poverty line--have multiple causes. These include 
the broader labor market and the effectiveness of assistance programs 
such as TANF, food stamps, EITC, the Unemployment Insurance program, 
and SSI in reducing the extent and depth of poverty.
    The importance of work-promoting policies outside of TANF--such as 
the expansions of the EITC in 1990 and 1993, the Medicaid and SCHIP 
expansions of the late 1980s and 1990s that enabled parents to leave 
welfare for work without jeopardizing their children's health care 
coverage, and increased support for child care assistance (through both 
CCDBG and TANF funding)--should not be underestimated. These policies 
created an environment where work was rewarded and supported. 
Unfortunately, progress on this ``make work pay'' agenda has stalled in 
recent years. Funding shortfalls have resulted in a contraction of 
child care assistance, state and federal law changes may make health 
care for children in low-income working families less, rather than 
more, available, and the real value of the minimum wage now stands at 
its lowest level since 1955.
    While TANF's role in some of the other recent trends--such as the 
extent to which families that are poor enough to qualify for TANF do 
not participate in the program--is easier to determine, it is not 
entirely clear which state programmatic choices have led to this trend. 
Many TANF programs now send a clear signal to applicants and recipients 
that the program is temporary and that they should do everything they 
can to find jobs and stay off the program. Some states discourage 
families from applying for assistance, place requirements on families 
before their TANF application can be approved, quickly terminate 
assistance to families for missing appointments with caseworkers or not 
completing paperwork, and/or end assistance to families that do not 
meet work or other requirements. Such policies and procedures can 
reduce the extent to which eligible families receive assistance from 
TANF.
State TANF Policies Designed to Help Families Move from Welfare to Work
    While work participation had long been required of many welfare 
recipients under AFDC, TANF brought a renewed emphasis that recipients 
were required and expected to participate in work activities. The work 
participation rates in the 1996 law spurred states to revamp their 
welfare-to-work programs. While the caseload reduction credit (which 
reduced the work participation rate that a state was required to meet) 
ultimately meant that the participation rates were not difficult for 
states to achieve, state employment and training programs often were 
designed around meeting the work rates and achieving caseload 
reduction.
    States sought to enforce a strong work message and help families 
find work in several ways: through employment and training activities, 
policies that ``make work pay,'' supportive services that helped make 
work possible for many families (most notably child care assistance), 
and improved child support enforcement (which helped some families 
leave TANF due to a combination of earnings and child support). Some of 
these policies, such as expanded child care assistance and improved 
child support collections, also benefited low-income families not 
receiving TANF benefits, helping them remain employed and off of TANF.

      Employment and training activities: States increased 
their employment and training activities under TANF, although state 
investments were still limited--states spent less than 10 percent of 
federal TANF and state MOE funds on work-related programs in FY 2004, 
according to HHS data. Some states developed innovative programs to 
help those with the greatest barriers to employment prepare for and 
find jobs and to help recipients build their skills so they could 
secure more stable employment, with better wages and advancement 
opportunities. Others did little in these areas, focusing their 
programs on a narrow set of job search activities.
      Making work pay: Under AFDC, when a parent found a job 
the family's AFDC benefit was soon reduced nearly dollar-for-dollar to 
offset the increased earnings. This meant that few AFDC recipients were 
employed, because even very low earnings made a family ineligible. 
Under TANF, in contrast, nearly all states expanded their earnings 
disregard policies (many had done so through waivers even before the 
1996 law was passed) so that more families could work without losing 
eligibility for cash welfare, although families still lose eligibility 
in many states when their earnings reach very low levels.

    Research has shown consistently that expanded earnings disregards 
improve employment outcomes for TANF recipients. Moreover, evaluations 
by the research institute MDRC show that the only welfare-to-work 
programs that consistently improve employment outcomes, reduce poverty, 
and improve children's education outcomes are those that increase 
assistance to working families. The increased earnings disregards 
states put in place are one reason that among TANF recipients engaged 
in work activities, the most common activity they are participating in 
is private employment.
    It is important to note that the make-work-pay policies that states 
adopted in their TANF programs supplemented a much large set of make-
work-pay policies initiated at both the federal and state levels, such 
as Medicaid and SCHIP expansions and expansions in the EITC, discussed 
above.

      Child care and other work supports: The total amount 
spent on child care assistance for both TANF recipients and low-income 
working families increased substantially in the years following the 
enactment of PRWORA, though this progress has stalled in recent years. 
In 1997, some $4 billion was spent on child care. This increased to 
$11.9 billion in 2004. (The amount spent on child care actually peaked 
in 2003 and then declined somewhat as states began to reduce the amount 
of TANF spent on child care.) \3\

    \3\ These figures reflect nominal spending on child care and are 
not adjusted for inflation. If the figures are adjusted for inflation, 
the real increase in child care spending over this period totals more 
than 150 percent.

    States increased child care assistance primarily for families not 
receiving TANF cash assistance. (Prior to the 1996 law most states 
provided child care assistance to AFDC recipients who were working or 
in employment programs.) Increasing the availability of child care to 
low-income working families--those who had recently left welfare for 
work as well as those who had not recently received TANF--helped those 
families retain employment. Research has shown that child care 
assistance improves employment outcomes and can help families stay 
employed and off welfare.\4\
---------------------------------------------------------------------------
    \4\ For a brief review of the research on the impact of child care 
assistance programs on employment, see, ``Child Care Assistance Helps 
Families Work: A Review of the Effects of Subsidy Receipt on 
Employment,'' by Hannah Mathews, Center for Law and Social Policy, 
April 2006.
---------------------------------------------------------------------------
    In addition to child care, some states provided other forms of work 
supports to families transitioning from welfare to work and other 
working-poor families. These supports, which included transportation 
assistance, help purchasing a car, and one-time help to cover work 
expenses such as new uniforms, were less widely available and extensive 
than child care assistance programs.

      Improved child support enforcement: As noted above, 
PRWORA made important changes to the child support enforcement program 
that significantly enhanced states' ability to collect child support 
from noncustodial parents. A report by the Center for Law and Social 
Policy summarized the results:

    Child support collection rates have more than doubled since 1996, 
when Congress overhauled the program as a part of welfare reform. In 
2004, 51 percent of families in the child support program received 
child support, up from 20 percent in 1996. Collected dollars increased 
from $12 billion to $22 billion. This amounts to an 82 percent increase 
in collections, despite an 18 percent decline in the child support 
caseload.\5\
---------------------------------------------------------------------------
    \5\ Vicki Turetsky, ``The Child Support Program: An Investment that 
Works,'' July 2005.
---------------------------------------------------------------------------
    The improvement in child support collections has enabled some 
families to leave TANF and other families to avoid applying for TANF 
assistance. Research has shown, for example, that former TANF 
recipients that receive child support payments are less likely to 
return to TANF and that families that receive child support income have 
better employment outcomes.\6\
---------------------------------------------------------------------------
    \6\ Ibid.
---------------------------------------------------------------------------
    In addition to these policies, states also used time limits and 
sanction policies to limit assistance to families and to enforce work 
requirements. Research on time limits is surprisingly limited and may 
reflect the fact that caseload declines were driven largely by policies 
other than time limits. There is substantial research on sanction 
policies--both on their effectiveness at improving participation in 
required activities and on the characteristics of sanctioned families. 
While sanctions appear an important part of enforcing work 
requirements, there is no research to suggest that full-family 
sanctions--which most states have now adopted--are more effective than 
partial sanctions at gaining compliance with work requirements. And, as 
is discussed below, there is substantial evidence that a significant 
share of recipients who are sanctioned for failing to comply with 
program activities have barriers to participation that may be impeding 
their ability to comply.
How Families That Left Welfare for Work--and Families Left Behind--Are 
        Faring
    As discussed above, employment rates among single mothers have 
increased since the mid-1990s, and TANF policies and programs played a 
role in that increase. During the 1990s, HHS sponsored a series of 
studies of families that left TANF programs. Taken together, these 
studies showed that about three in five former TANF recipients were 
employed at any given time during the year after they left TANF, and 
about three-quarters worked at some point during that year. Only about 
one-third worked all four quarters of the year.
    Wages of former TANF recipients were low--typically $7 to $8 per 
hour--but employed former recipients nonetheless had higher incomes 
than when they were on TANF. Most former recipients worked nearly full 
time in the months in which they were employed.\7\ Employed former 
recipients benefited from an expanded EITC and other work supports that 
were strengthened in the 1990s.\8\
---------------------------------------------------------------------------
    \7\ Gregory Acs and Pamela Loprest, ``Final Synthesis Report of 
Findings from ASPE 'Leavers' Grants, Urban Insitute, 2001.
    \8\ The HHS-sponsored studies of former recipients were completed 
prior to the economic downturn and the subsequent rise in poverty and 
decline in employment rates among single mothers. Given the recent 
declines in employment rates among single mothers, employment rates 
among former TANF recipients may also be somewhat lower now than in the 
late 1990s.
---------------------------------------------------------------------------
    Most recipients who left TANF and found jobs saw some wage 
advancement, but it was typically limited, and many experienced 
significant spells of joblessness after leaving welfare for work. 
Evaluations have shown that, designed properly, welfare-to-work 
programs that include strong job development and skill-building 
components can improve the likelihood that recipients find ``better'' 
jobs--that is, jobs that pay higher wages, provide some benefits, and 
offer opportunities for advancement.
    The highly successful welfare-to-work program evaluated in 
Portland, for example, was able to help recipients secure higher paying 
jobs that offered more opportunities for advancement than the jobs that 
recipients typically find. The Portland program was able to do this by 
working with recipients to identify their career interests and job 
skills, providing training opportunities to recipients that enabled 
them to secure occupational certificates for high-demand jobs, and 
linking job training and job search activities so recipients were 
pursuing jobs that matched their new skills.
Families Left Behind
    While many families make the transition from welfare to work, 
others do not. Some of these families become part of the growing group 
of poor families that are jobless and do not receive assistance from 
TANF or another income support program, while other families continue 
to receive TANF over long periods of time. Some families cycle between 
periods in which they receive TANF, periods in which they do not 
receive TANF and are working, and periods when they are neither working 
nor receiving TANF assistance (or aid from another income support 
program).
    Families that are sanctioned for failing to comply with TANF 
program rules (typically work program requirements) often become part 
of the ``no work, no welfare'' group, at least for a period of time. An 
extensive body of research has emerged to suggest that these families 
often have serious barriers to employment--including disabilities--that 
may limit their ability to meet program requirements. For example, a 
study of sanctioned families in Illinois and South Carolina by 
Mathematica Policy Research, Inc. found that recipients with mental and 
physical health problems, those caring for family members or friends 
with health problems, and those with less education were significantly 
more likely to be sanctioned than other recipients.\9\
---------------------------------------------------------------------------
    \9\ LaDonna Pavetti, et al., ``The Use of TANF Work-Oriented 
Sanctions in Illinois, New Jersey, and South Carolina,'' Mathematica 
Policy Research Inc., April 2004.
---------------------------------------------------------------------------
    Research also has shown that families whose benefits are terminated 
for noncompliance with program requirements often remain jobless; 
employment rates are much lower for sanctioned families than for 
families that left TANF for other reasons.\10\ Many families experience 
significant material hardships after being sanctioned off TANF. A 
Mathematica review of research on sanctioned families concluded, 
``Sanctioned recipients are more likely to experience material 
hardships than their non-sanctioned counterparts. Material hardships 
TANF recipients face include borrowing money to pay bills or falling 
behind on payments, not having enough food, problems paying for medical 
care, and experiencing a utility shut-off, among others.'' \11\
---------------------------------------------------------------------------
    \10\ For a review of this research, see `` Review of Sanction 
Policies and Research Studies,'' by LaDonna Pavetti, 2003.
    \11\ Ibid, page 17.
---------------------------------------------------------------------------
    Research on long-term TANF recipients also sheds light on the 
characteristics of families that are not successfully making the 
transition from welfare to work. A recent in-depth study of long-term 
TANF recipients in St. Paul, Minnesota found that a large share of 
long-term recipients--those about to reach the 60-month time limit--had 
low cognitive functioning (defined as an IQ of below 80) and serious 
physical ormental health problems that limited their ability to hold a 
job. The problems documented by caseworkers were severe. One parent was 
unable to lift a gallon of milk because of health problems; another 
suffered from depression so severe that she was unable to maintain 
basic hygiene. Some parents had such low cognitive functioning that 
they could not read simple words, identify numbers, or tell time.\12\ 
It is important to note that families with these characteristics 
sometimes are among the long-term TANF recipients and sometimes are 
part of the ``no work, no welfare'' group, depending on a particular 
family's circumstances and the time limit, sanction, and other policies 
in place in the state.
---------------------------------------------------------------------------
    \12\ LaDonna A. Pavetti and Jacqueline Kauff, ``When Five Years Is 
Not Enough: Identifying and Addressing the Needs of Families Nearing 
the TANF Time Limit in Ramsey County, Minnesota,'' Mathematica Policy 
Research, Inc, 2006.
---------------------------------------------------------------------------
    Some states have developed innovative programs to help recipients 
with disabilities and other barriers move toward employment. Vermont's 
TANF agency, for example, has partnered with the state's vocational 
rehabilitation agency to develop a set of specialized services for TANF 
recipients with disabilities. At a recent meeting of the American 
Public Human Services Association, a state agency official from Vermont 
noted that programs exist that can help many TANF recipients with 
disabilities, but they take time and resources. She noted that 
recipients who participate in the vocational rehabilitation agency's 
program spend an average of 15 months in the program; many require 
modifications to the standard TANF work requirements because of their 
disabilities.
The Next Ten Years
    The TANF reauthorization provisions included in the Deficit 
Reduction Act (DRA) passed earlier this year are forcing states to 
reexamine their TANF programs. Renewed interest in welfare reform and 
innovation is welcome. However, many of the DRA's provisions could 
exacerbate the more troubling trends discussed above.
    The DRA requires states to meet significantly higher work 
participation rates and, when coupled with the interim final 
regulations recently issued by HHS to implement the new law, will 
considerably reduce states' flexibility to design welfare-to-work 
programs tailored to the needs of individual recipients. In fact, 
programs that are designed to address two of the biggest problems that 
have emerged over TANF's first decade--that parents who leave welfare 
for work often earn low wages and have unstable employment, and that 
many families with the greatest barriers to employment are being left 
behind--often will no longer count toward states' TANF work 
participation requirements.

      The new regulations severely restrict the extent to which 
states can receive credit toward the participation rate for welfare-to-
work activities that are designed to help those with the greatest 
barriers to employment become job ready. The regulations give states no 
credit toward their work requirements when parents with disabilities 
participate in welfare-to-work activities that have been modified 
(either the activity itself or the number of hours it must be 
performed) to reflect the recipients' disabilities. The regulations 
make clear that HHS wants states to try to help TANF recipients with 
disabilities prepare for employment and that states are obligated under 
the Americans with Disabilities Act to ensure that their programs make 
reasonable accommodations to ensure that program requirements are 
appropriate for individuals with disabilities. Yet the rules, 
themselves, inhibit states in both of these areas.
      The DRA statute and regulations significantly restrict 
the extent to which states can count programs designed to improve 
parents' skills toward the work rate. The statute limits vocational 
educational training programs to 12 months, and to no more than 30 
percent of a state's welfare-to-work program participants. The 
regulations place further restrictions on the types of skill-building 
programs that can qualify as vocational educational training.

    The new work participation rates in the DRA are not accompanied by 
any significant new resources. The $200 million per year in additional 
child care resources included in the DRA is not even sufficient to 
ensure that federal child care funding simply keeps pace with 
inflation. In fact, the Administration's own 2007 budget documents show 
that it expects the number of low-incomechildren receiving child care 
assistance to fall to 1.8 million in 2011, down 650,000 from the 2.45 
million children who received child care assistance in 2000. This 
represents a projected 26 percent decline in the number of children 
projected to be served in child care assistance programs.
    The rigidity of states' new work rules, coupled with a lack of 
additional resources, gives states a clear incentive to reduce their 
caseloads further, regardlessof whether the number of families in need 
declines as well. The cheapest and easiest way for a state to meet the 
new work rules and avoid fiscal penalties is to assist fewer poor 
families. As the last decade has shown, it is entirely possible for 
many states to implement policies and procedures that will drive very 
poor families from the TANF program and swell the already large group 
of families that are jobless and not receiving income assistance from 
TANF or other cash aid programs.
    Over the past six months, I have talked to numerous state officials 
and others around the country about the new DRA requirements. All 
understand the incentives embodied in the law to reduce caseloads by 
any means. While many state officials express concerns about taking 
steps to further restrict access to assistance for poor families, the 
message being sent by the federal legislation and regulations is clear.
    When asked what I think states should do in light of the DRA, I 
recommend that states consider their own welfare reform and anti-
poverty goals and then design programs to meet those goals, with the 
federal work requirements as a constraint but not the driving force 
behind their decision making. With ingenuity and hard work, states can 
develop a set of programs--some supported by TANF and MOE funds, others 
entirely state funded--that can serve the needs of poor families and 
help the state meet its federal TANF requirements.
    TANF, and in fact welfare reform in general, is at a crossroads. If 
states simply seek to meet the new TANF rules in the simplest and least 
expensive manner, then increasingly the nation's poorest families will 
not be able to obtain basic assistance and those with the greatest 
needs will be left further behind. If, on the other hand, states take 
this opportunity to establish high-quality programs that help parents 
build their skills, address barriers to employment, and provide needed 
income support to families when they need it, perhaps some of the most 
disturbing trends discussed above, such as increases in deep poverty, 
could be ameliorated.
    Unfortunately, without modifications to the DRA or the recently 
released interim final regulations, federal law will not encourage 
states to follow the better of the two paths.
    Promoting Employment and Improving the Safety Net for the Poorest 
Families
    There are steps Congress can take to ameliorate the DRA's potential 
negative effects and, more broadly, address some of the disturbing 
trends that have emerged over the last decade.

      Provide states with greater flexibility to design 
welfare-to-work activities that can help recipients build skills so 
they can secure better jobs, including activities that can help those 
with the greatest problems overcome their barriers to employment. 
States should be held accountable for helping parents find employment, 
but they should be given more latitude to develop programs that work 
and should then be judged on the outcomes.
      Measure TANF programs not only by how well they engage 
recipients in work activities, but also by how well they provide a 
safety net for the most vulnerable children. Some families need only 
temporary help during short periods of unemployment; others need help 
for longer periods of time; still others face very serious challenges 
that limit their ability to earn enough to support a family. While one 
goal of TANF is to help parents move from welfare to work, another 
should be to serve as a bulwark against deep poverty. State TANF 
programs should be measured to see how well they serve this safety-net 
function. Caseload declines that do not result from reductions in need 
should not be rewarded.
      Ensure that the TANF block grant does not continue to 
lose pace to inflation. The basic TANF block grant already has lost 22 
percent of its purchasing power since 1996 and by 2011 its inflation-
adjusted value will fall 30 percent below its 1996 level. As the value 
of the block grant erodes, states will have fewer resources to provide 
welfare-to-work, child care, and basic assistance to poor families with 
children.
      Strengthen work supports. Research has consistently shown 
that policies that make work pay and provide supports to working 
families--such as child care assistance that enables parents to work--
improve employment and earnings among low-income families. Yet only a 
minority of families that qualify for child care assistance receive it, 
primarily as a result of the limited child care funds available. This 
limits parents' employment prospects and reduces low-income children's 
chances of receiving high-quality early education.

    Providing more resources for child care and early education would 
promote employment and broadly shared education goals. Similarly, many 
low-income working parents lack health insurance; they are priced out 
of the private health insurance market and are ineligible for publicly 
subsidized coverage. Expanding health care coverage to these parents 
would help them get the health care they need to be more effective 
employees.

      Improve the Unemployment Insurance program so more low-
wage workers can qualify for UI during temporary periods of 
joblessness. Many low-wage parents who lose their jobs must turn to 
TANF for help because they do not qualify for UI benefits as a result 
of the program's outdated rules. By changing UI rules related to the 
``base period'' that is used to calculate UI eligibility, part-time 
workers, and the circumstances under which people who leave their jobs 
for family and other reasons can receive UI benefits, Congress could go 
a long way toward ensuring that low-wage workers who lose their jobs 
qualify for UI benefits.
      Invest in skill building. The data are clear: 
increasingly, the U.S. economy demands workers with skills. Workers 
without skills are consigned to low-wage jobs, often with declining 
real wages and few opportunities for advancement. Against this 
backdrop, it is important that we develop new ways to ensure that 
individuals of all ages--children, young adults, and adults--have 
opportunities to develop the skills needed to succeed in the workplace, 
including access to meaningful and quality vocational educational 
training, certificate programs, and college.
      Raise the minimum wage. The minimum wage has remained 
frozen since 1997 and has fallen to its lowest inflation-adjusted level 
since 1955. Available evidence suggests that modest increases in the 
minimum wage will not result in employment losses and will provide a 
needed pay raise to millions of low-wage workers.

    A final area of needed improvements concerns legal immigrants. A 
large share of the budget cuts contained in PRWORA fell on legal 
immigrants, many of whom were made ineligible for benefits such as food 
stamps and SSI. Immigrants are nearly twice as likely to experience 
poverty as citizens. Congress and both President Bush and President 
Clinton have taken some action over the last decade to curb some of 
these cuts, such as in SSI and food stamps. More needs to be done, 
however, to ensure that legal immigrant families have access to work 
supports that can help them make ends meet if they earn low wages, as 
well as a safety net if they fall on hard times.
    Among the most vulnerable immigrants are extremely poor refugees 
and asylees (and other immigrants admitted for humanitarian reasons) 
who either are elderly or have serious disabilities. Under PRWORA, they 
were limited to seven years of SSI benefits unless they became 
naturalized citizens. The rationale behind the time limit was that 
refugees and other humanitarian immigrants should be able to complete 
the citizenship process in seven years.
    Unfortunately, it often takes significantly longer than seven years 
to become a citizen--particularly after the events of September 11, 
which have placed new burdens on the immigration system. Some elderly 
individuals and individuals with severe disabilities face formidable 
challenges to completing the naturalization process within the time 
allotted. (Securing a waiver of this requirement can be difficult and 
time-consuming.) Currently pending before the committee is H.R. 899, a 
bipartisan bill introduced by Representatives Cardin and English, which 
would provide a modest extension of the SSI eligibility period for 
refugees. The Cardin-English bill would help to address the problems 
the time limit poses for these refugees and thereby to help an 
extremely poor and vulnerable group to avoid utter destitution.

                                 

    Mr. SHAW. Thank you. Mr. Rector.

STATEMENT OF ROBERT RECTOR, SENIOR RESEARCH FELLOW, WELFARE AND 
               FAMILY ISSUES, HERITAGE FOUNDATION

    Mr. RECTOR. Thank you, Chairman Shaw.
    The Welfare Reform Act 1996 had four principal goals: The 
first, to reduce debilitating long-term welfare dependence; the 
second, to increase employment among single mothers; the third, 
to reduce or at least slow the rapid increase of out-of-wedlock 
childbearing; and the fourth, to reduce child poverty.
    The act was a resounding and unprecedented success in 
respect to all four of those measures, especially when compared 
to the old system of welfare which created a system of 
permissive entitlement which was very resilient and very, very 
difficult to change.
    The Minority Members of this Committee had 25 years to 
alter that old system, and under that old system, child poverty 
over a quarter of a century actually increased. It is in that 
context of 25 years of unmitigated failure that the assessment 
of this welfare reform has to take place.
    First of all, on caseloads, we are all aware that the 
caseload post-welfare reform dropped by 60 percent, but it is 
important to look back, all the way back to 1950, and to 
recognize that this was the first time the caseload had ever 
seriously declined. A lot of people attribute that caseload 
decline to a good economy, but in the charts I provided in my 
written testimony, we see eight periods of prior economic boom 
in which the caseloads either remained flat or actually 
dramatically increased during some of those periods. It is only 
in the nineties that the caseload goes down.
    What is the difference? The difference is that welfare 
reform changes the incentive system. It makes it no longer 
possible to receive a welfare check by remaining idle, and it 
requires constructive activity as on obligation of receiving 
aid. As soon as you do that, the caseload begins to drop, and, 
more importantly, the number of new entrants into the new 
system goes down.
    While the caseload is going down, coincident with that we 
see an unprecedented surge in the employment of single mothers 
that has been spoken to and documented overwhelmingly by many, 
many different witnesses, and as that employment goes up, the 
welfare caseload goes down.
    Remember that every mother that was on AFDC was, by 
definition, poor, because the benefits weren't sufficient to 
raise the income above poverty.
    As the caseload goes down, what we see is an unprecedented, 
absolutely historically unprecedented, decline in child 
poverty, particularly black child poverty, which had remained 
virtually unchanged for a quarter of a century. All of a sudden 
it drops from around 42 percent in 1995 down to 30 percent in 
2001. Poverty of children in single-mother families, again, was 
basically unchanged for a quarter of a century, and drops an 
unprecedented 10 percentage points in about 5 years.
    This is quite contrary to the predictions that were made by 
most of the Members of this Committee on the Minority and most 
opponents of this act. For example, Ms. Parrott predicted that 
the act would result in a large increase in poverty, especially 
among children, and that this increase in poverty would not 
occur during a recession, but it would actually occur even 
during good economic times.
    If we were to look at the impact of this reform overall 
over the 10 years since it was enacted, what we see is that 
during the period of economic expansion, it was an 
unprecedented success in reducing poverty. Nothing could 
compare to it previously in the history of this program.
    During the period of recession and recovery, the recession 
beginning in 2001, what we have to recognize is that in every 
previous period of recession, child poverty went up. In most 
recessions it went up quite sharply, particularly among black 
children.
    So, how did this recession differ? Well, with the reform 
system, child poverty did go up, but it went up quite modestly, 
probably less than in most previous recessions. So, overall we 
could say that in the period of boom, the system dramatically 
outperformed pre-reform welfare. In the period of recession, it 
did at least as well if not better than the pre-reform system. 
This was overwhelmingly a huge success.
    Finally, I would say something that we really haven't paid 
attention to. At the time of reform, one out of three children 
was born out-of-wedlock. The out-of-wedlock birthrate had been 
rising at roughly 1 percentage point per year for close to 25 
years. Senator Moynihan used to say it looked like a line drawn 
with a ruler, going virtually straight up. In the mid-nineties, 
that straight-up increase all of a sudden pauses, and it goes 
up very little over the next 10 years.
    If in fact the increase in out-of-wedlock childbearing 
continued in the pre-reform rate--today, we have 34 percent of 
children born out of wedlock--if it had continued in the pre-
reform rate, we would today have around 43 or 44 percent of 
children born out of wedlock.
    As a result of the change in the growth of out-of-wedlock 
births that occurred in the mid nineties, there have been 1.4 
million fewer children born out of wedlock over the last 10 
years. That is a huge success and one that is rarely talked 
about, but is of enormous importance. I would conclude by 
saying that the next step we have to do is look further in 
finding ways to increase marriage and reduce out-of-wedlock 
childbearing. Thank you.
    [The prepared statement of Mr. Rector follows:]
Statement of Robert Rector, Senior Research Fellow, Welfare and Family 
                      Issues, Heritage Foundation
    My name is Robert Rector. I am Senior Research Fellow in Welfare 
and Family Issues at The Heritage Foundation. The views I express in 
this testimony are my own, and should not be construed as representing 
any official position of The Heritage Foundation.
    Ten years ago, President Bill Clinton signed legislation 
overhauling part of the nation's welfare system. The Personal 
Responsibility and Work Opportunity Reconciliation Act of 1996 (P.L. 
104--193) replaced the failed social program known as Aid to Families 
with Dependent Children (AFDC) with a new program called Temporary 
Assistance to Needy Families (TANF). The reform legislation had three 
goals: (1) to reduce welfare dependence and increase employment; (2) to 
reduce child poverty; and (3) to reduce illegitimacy and strengthen 
marriage.
    At the time of its enactment, liberal groups passionately denounced 
the welfare reform legislation, predicting that it would result in 
substantial increases in poverty, hunger, and other social ills. 
Contrary to these alarming forecasts, welfare reform has been effective 
in meeting each of its goals.

      Child poverty has fallen. Although opponents of reform 
predicted it would increase child poverty, some 1.6 million fewer 
children live in poverty today than in 1995.
      Decreases in poverty have been greatest among black 
children. In the quarter century prior to welfare reform, the old 
welfare system failed to reduce poverty among black children. Since 
welfare reform, the poverty rate among black children has fallen at an 
unprecedented rate from 41.5 percent in 1995 to 32.9 percent in 2004.
      Unprecedented declines in poverty also occurred among 
children of single mothers. For a quarter-century before welfare 
reform, there was little net decline in poverty in this group. 
Povertywas only slightly lower in 1995 (50.3 percent) than it had been 
in 1971 (53.1 percent). After the enactment of welfare reform, the 
poverty rate for children of single mothers fell at a dramatic rate, 
from 50.3 percent in 1995 to 41.9 percent in 2004.
      Welfare caseloads were cut in half. The AFDC/TANF 
caseload dropped from 4.3 million families at the time PRWORA was 
enacted to 1.89 million today.
      Employment of single mothers has surged. The employment 
rate of the most disadvantaged single mothers increased from 50 percent 
to 100 percent.
      The explosive growth of out-of-wedlock childbearing has 
come to a near standstill. For thirty years prior to welfare reform, 
the percentage of births that were out-of-wedlock rose steadily at 
about one percentage point per year. The out-of-wedlock birthrate was 
7.7 percent in 1965 when the War on Poverty started; by 1995 it had 
reached 32.2 percent. Following welfare reform, the long-term rapid 
growth in out-of-wedlock birth rate ended. Although the rate has 
continued to inch up slowly, the increase is far slower than in the 
pre-reform period.

    Some attribute these positive trends to the strong economy in the 
late 1990s. Although a strong economy contributed to some of these 
trends, most of the positive changes greatly exceed similar trends that 
occurred in prior economic expansions. The difference this time is 
welfare reform.
Predictions of Social Disaster Due to Welfare Reform
    Ten years ago, when the welfare reform legislation was signed into 
law, Senator Daniel Patrick Moynihan (D-NY) proclaimed the new law to 
be ``the most brutal act of social policy since reconstruction.'' \1\ 
He predicted, ``Those involved will take this disgrace to their 
graves.'' \2\
---------------------------------------------------------------------------
    \1\ Cited in Arianna Huffington, ``Where Liberals Fear to Tread,'' 
August 26, 1996, at http://www.arianaonline.com/columns/files/
082696.html.
    \2\ Cited in ``Welfare as They Know It,'' The Wall Street Journal, 
August 29, 2001, p. A14.
---------------------------------------------------------------------------
    Marian Wright Edelman, president of the Children's Defense Fund, 
declared the new reform law an ``outrage . . . that will hurt and 
impoverish millions of American children.'' The reform, she said, 
``will leave a moral blot on [Clinton's] presidency and on our nation 
that will never be forgotten.'' \3\
---------------------------------------------------------------------------
    \3\ Children's Defense Fund, ``Edelman Decries President's Betrayal 
of Promise `Not to Hurt Children','' July 31, 1996.
---------------------------------------------------------------------------
    The Children's Defense Fund predicted that the reform law would 
increase ``child poverty nationwide by 12 percent . . . make children 
hungrier . . . [and] reduce the incomes of one-fifth of all families 
with children in the nation.'' \4\
---------------------------------------------------------------------------
    \4\ Children's Defense Fund, ``How the Welfare Bill Profoundly 
Harms Children,'' July 31, 1996.
---------------------------------------------------------------------------
    The Urban Institute issued a widely cited report predicting that 
the new law would push 2.6 million people, including 1.1 million 
children, into poverty. In addition, the study announced the new law 
would cause one-tenth of all American families, including 8 million 
families with children, to lose income.\5\
---------------------------------------------------------------------------
    \5\ Cited in ``Urban Institute Study Confirms that Welfare Bills 
Would Increase Child Poverty,'' Center on Budget and Policy Priorities, 
July 26, 1996.
---------------------------------------------------------------------------
    The Center on Budget and Policy Priorities asserted the new law 
would increase the number of children who are poor and ``make many 
children who are already poor poorer still. . . . No piece of 
legislation in U.S. history has increased the severity of poverty so 
sharply [as the welfare reform will].'' \6\
---------------------------------------------------------------------------
    \6\ David A. Super, Sharon Parrott, Susan Steinmetz, and Cindy 
Mann, ``The New Welfare Law,'' Center on Budget and Policy Priorities, 
August 13, 1996.
---------------------------------------------------------------------------
    Patricia Ireland, then president of the National Organization for 
Women, stated that the new welfare law ``places 12.8 million people on 
welfare at risk of sinking further into poverty and homelessness.'' \7\
---------------------------------------------------------------------------
    \7\ Quoted in Lisa Bennet-Haigney, ``Welfare Bill Further Endangers 
Domestic Violence Survivor,'' National NOW Times, January 1997.
---------------------------------------------------------------------------
    Peter Edelman, husband of Marian Wright Edelman and then Assistant 
Secretary for Planning and Evaluation at the Department of Health and 
Human Services, resigned from the Clinton Administration in protest 
over the signing of the new welfare law. In an article entitled ``The 
Worst Thing Bill Clinton Has Done,'' Edelman dubbed the new law 
``awful'' policy that would do ``serious injury to American 
children.''\8\
---------------------------------------------------------------------------
    \8\ Peter Edelman, ``The Worst Thing Bill Clinton Has Done,'' The 
Atlantic Monthly, Vol. 279, No. 3 (March 1997), pp. 43--58.
---------------------------------------------------------------------------
    Peter Edelman believed the reform law would not merely throw 
millions into poverty, but also would actively worsen virtually every 
existing social problem. ``There will be more malnutrition and more 
crime, increased infant mortality, and increased drug and alcohol 
abuse,'' claimed Edelman. ``There will be increased family violence and 
abuse against children and women.'' Moreover, the bill would fail even 
in the simple task of ``effectively'' promoting work because ``there 
simply are not enough jobs now.'' \9\
---------------------------------------------------------------------------
    \9\ Ibid.
---------------------------------------------------------------------------
What Actually Happened
    In the decade since the welfare reform law was enacted, social 
conditions have changed in exactly the opposite direction from that 
predicted by liberal policy organizations. As noted above, child 
poverty, black child poverty, and poverty of single mothers have 
declined substantially. Employment of single mothers increased 
dramatically, and welfare rolls plummeted.
    Opponents of reform would like to credit many of these positive 
changes to a ``good economy.'' However, according to their predictions 
in 1996 and 1997, liberals expected the welfare reform law to have 
disastrous results during good economic times. They expected reform to 
increase poverty substantially even during periods of economic growth; 
if a recession did occur, they expected that far greater increases in 
poverty than those mentioned above would follow. Thus, it is 
disingenuous for opponents to argue in retrospect that the good economy 
was responsible for the frustration of pessimistic forecasts since the 
predicted dire outcomes were expected to occur even in a strong 
economy.
Plummeting Welfare Dependence
    The designers of welfare reform were concerned that prolonged 
welfare dependence had negative effects on the development of children. 
Their goal was to disrupt inter-generational dependence by moving 
families with children off the welfare rolls through increased work and 
marriage. Welfare reform produced unprecedented reductions in welfare 
dependence.
    The caseload in the former AFDC (now TANF) program reached its all 
time high of 5.04 million families in March of 1994; it fell modestly 
over the next two years as states experimented with welfare to work 
programs in anticipation of the federal reform legislation. By the time 
PRWORA was enacted in August 1996, the caseload had fallen to 4.3 
million. Passage of the national reform legislation was followed by a 
further dramatic plunge in caseloads By June 2005, the caseload had 
fallen to 1.89 million, less than half the level at the time PRWORA was 
enacted.
    Contrary to conventional wisdom, the decline in welfare dependence 
was greatest among the most disadvantaged and least employable single 
mothers--the group with the greatest tendency toward long-term 
dependence. Specifically, dependence fell most sharply among young 
never-married mothers who have low levels of education and young 
children.\10\ This is dramatic confirmation that welfare reform 
affected the whole welfare caseload, not merely the most employable 
mothers.
---------------------------------------------------------------------------
    \10\ June E. O'Neill and M. Anne Hill, ``Gaining Ground? Measuring 
the Impact of Welfare Reform on Welfare and Work,'' Manhattan Institute 
Civic Report No. 17, July 2001, pp. 8, 9.
---------------------------------------------------------------------------
    Some would argue that the positive effects noted above are the 
product of the robust economy during the 1990s rather than the results 
of welfare reform. However, the evidence supporting an economic 
interpretation of these changes is not strong.
    Chart 1 shows the AFDC caseload from 1950 to 2004. On the chart, 
periods of economic recession are shaded, and periods of economic 
growth are shown in white. Historically, periods of economic growth 
have not resulted in lower welfare caseloads. The chart shows eight 
periods of economic expansion prior to the 1990s, yet none of these 
periods of growth led to a significant drop in AFDC caseload. Indeed, 
during two previous economic expansions (the late 1960s and the early 
1970s), the welfare caseload grew substantially. Only during the 
expansion of the 1990s does the caseload drop appreciably.
    How was the economic expansion of the 1990s different from the 
eight prior expansions? The answer is welfare reform.


[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

    Chart 1 does show that the national TANF decline has slowed 
appreciably during and after the last recession, which began in March 
2001. Critics of reform might argue that this shows the state of the 
economy has been the dominant factor in the reduction of dependence. 
While it is true that the slowdown in the economy has affected the 
decline in caseload, however, it is important to note the vast 
difference in trends before and after welfare reform. Prior to the mid-
1990s, the AFDC caseload remained flat or rose during economic 
expansions and generally rose to a substantial degree during 
recessions. Since welfare reform, the welfare caseload has plummeted 
downward during good economic times and declined slowly during the 
recession.
    Thus, while the state of the economy does have an effect on AFDC/
TANF caseloads, irrespective of economic conditions, the difference in 
caseload trends before and after reform is enormous. This difference is 
clearly due to the impact of welfare reform policies.
    Another way to disentangle the effects of welfare policies and 
economic factors on declining caseloads is to examine the differences 
in state performance. The rate of caseload decline varied enormously 
among the 50 states. If improving economic conditions were the main 
factor driving down caseloads, the variation in state reduction rates 
should have been linked to variation in state economic conditions. On 
the other hand, if welfare polices are the key factor behind falling 
dependence, the differences in reduction rates would have been linked 
to specific state welfare policies.
    A 1999 Heritage Foundation study, ``The Determinants of Welfare 
Caseload Decline,'' examined the impact of economic factors and welfare 
policies on falling caseloads in the states.\11\ This analysis showed 
that differences in state welfare reform policies were highly 
successful in explaining the rapid rates of caseload decline. By 
contrast, the relative vigor of state economies, as measured by 
unemployment rates, changes in unemployment, or state job growth, had 
no statistically significant effect on caseload decline.
---------------------------------------------------------------------------
    \11\ Robert E. Rector and Sarah E. Youssef, ``The Determinants of 
Welfare Caseload Decline,'' Heritage Foundation Center for Data 
Analysis Report No. CDA99--04, May 11, 1999.
---------------------------------------------------------------------------
    One reason for the reduction in caseload decline after 2001 was a 
lack of vigor in state work programs in recent years. By 2001 most 
states had met their federal goals for caseload reduction. In the 
absence of federal pressure to further reduce dependence and increase 
work, state welfare bureaucracies slackened their efforts and many 
began to drift back toward a traditional role of mailing out welfare 
checks.
Welfare Reform and Increased Employment
    Welfare reform coincided with dramatic increases in the employment 
of single mothers. Contrary to conventional wisdom, employment has 
increased most rapidly among the most disadvantaged, least employable 
groups. During the late 1990's:

      Employment of never-married mothers increased nearly 50 
percent.
      Employment of single mothers who are high school dropouts 
rose by two-thirds.
      Employment of young single mothers (ages 18 to 24) nearly 
doubled.\12\

    \12\ O'Neill and Hill, ``Gaining Ground? Measuring the Impact of 
Welfare Reform on Welfare and Work,'' pp. 10--14.

    Thus, against conventional wisdom, the effects of welfare reform 
have been the greatest among the most disadvantaged single parents--
those with the greatest barriers to self-sufficiency. Both decreases in 
dependence and increases in employment have been most dramatic among 
those who have the greatest tendency to long-term dependence; that is, 
among the younger never-married mothers with little education.
    How important was a strong economy to these employment increases? 
Dr. June O'Neill, former Director of the Congressional Budget Office, 
examined changes in welfare caseload and employment from 1983 to 1999. 
Her analysis showed that in the period after the enactment of welfare 
reform, policy changes accounted for roughly three-quarters of the 
increase in employment and decrease in dependence. By contrast, 
economic conditions explained only about one-quarter of the changes in 
employment and dependence.\13\
---------------------------------------------------------------------------
    \13\ Ibid., Table 4, p. 22.
---------------------------------------------------------------------------
Welfare Reform and Reductions in Child Poverty
    Mothers on welfare are automatically poor since in no state are 
welfare benefits high enough to give a family an income above the 
official poverty thresholds. Consequently, it should be no surprise 
that, as families left welfare and the employment of single mothers 
dramatically increased, poverty decreased. The decrease in poverty 
among the two groups most affected by reform, black children and 
children of single mothers, was steep and unprecedented.

      Less Child Poverty. The child poverty rate has fallen 
from 20.8 percent in 1995 to 17.8 percent in 2004. Though liberals 
predicted that welfare reform would throw more than 1 million 
additional children into poverty, there are some 1.6 million fewer 
children living in poverty today than there were when welfare reform 
was enacted.\14\
---------------------------------------------------------------------------
    \14\ U.S. Census Bureau, Income, Poverty, and Health Insurance 
Coverage in the United States: 2004, August, 2005, p. 52.
---------------------------------------------------------------------------
      Less Black Child Poverty. The decline in poverty since 
welfare reform has been particularly dramatic among black children. As 
Chart 2 shows, for a quarter-century prior to welfare reform, there was 
little change in black child poverty. Black child poverty was actually 
higher in 1995 (41.5 percent) than in 1971 (40.4 percent).

    With the enactment of welfare reform in 1996, black child poverty 
plummeted at an unprecedented rate, falling to 30.0 percent in 2001. 
Over a six-year period after welfare reform, 1.2 million black children 
were lifted out of poverty. In 2001, despite the recession, the poverty 
rate for black children was at the lowest point in national 
history.\15\ In the last few years, the recession and its aftermath has 
pushed the black child poverty rate up slightly (to 32.9 percent in 
2004), but the rate remains roughly one fifth lower than in the period 
prior to reform.
---------------------------------------------------------------------------
    \15\ Ibid., pp. 53, 54. The figures in the text refer to black 
``related children in families.'' These figures are used because they 
are the only figures for black child poverty that are available back to 
1970. The poverty rates for black ``related'' children are nearly 
identical to the poverty rate figures for all black children but are 
consistently 0.2 to 0.4 percentage points lower.


[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

      Less Poverty Among Children of Single Mothers. Since the 
enactment of welfare reform, the drop in child poverty among children 
in single-mother families has been equally dramatic. For a quarter-
century before welfare reform, there was little net decline in poverty 
in this group. Povertywas only slightly lower in 1995 (50.3 percent) 
than it had been in 1971 (53.1 percent). After the enactment of welfare 
reform, the poverty rate for children of single mothers fell at a 
dramatic rate, from 50.3 percent in 1995 to 39.8 percent in 2001. In 
2001, the poverty rate for children in single-mother families was at 
the lowest point in U.S. history.\16\ Although the poverty rate for 
children of single mothers has inched up slightly during the recent 
recession and its aftermath, reaching 41.9 percent in 2004, it still 
---------------------------------------------------------------------------
remains far below the pre-reform levels. (See Chart 3.)

    \16\ Calculated from the Historical Poverty Tables, Table 10, on 
the U.S. Census Bureau Web site at www.census.gov/hhes/poverty/hispov/
hstpov10.html.

    What was the contribution of a strong economy to the dramatic drop 
on child poverty in the late 1990's? Overall, the health of the economy 
in the mid and late 1990s did serve as a positive background factor 
contributing to positive changes in welfare dependence, employment, and 
poverty. It is very unlikely, for example, that dramatic drops in 
dependence and increases in employment would have occurred during a 
prolonged recession. However, it is also certain that good economic 
conditions alone would not have produced the striking changes that 
occurred in the late 1990s. It is only when welfare reform was coupled 
with a growing economy that these dramatic positive changes occurred.
Further Research on Welfare Reform and Child Poverty
    An important paper by Dr. Rebecca M. Blank, former member of the 
Council of Economic Advisers in the Clinton White House, examined the 
link between welfare reform and child poverty.\17\ Professor Blank 
analyzed the income of families with children from 1992 to 2000 and 
found that incomes rose for all but the bottom 2 percent of families 
with children. Moreover, poor families showed greater income gains than 
higher-income families, ``suggesting that most poor families 
experienced larger income gains than did most middle and upper-middle 
income families.'' \18\
---------------------------------------------------------------------------
    \17\ Rebecca M. Blank and Robert F. Schoeni, ``Changes in the 
Distribution of Children's Family Income over the 1990's,'' paper 
prepared for annual meetings of the American Economic Association, 
Washington, D.C., January 2003.
    \18\ Ibid., pp. 3, 4.
---------------------------------------------------------------------------
    Dr. Blank's analysis showed a direct link between state welfare 
reform policies and rising incomes among poor families. States with 
welfare reform programs that offered ``strong work incentives'' showed 
greater increases in the income of single parents with children than 
did states with weak work incentives. Moreover, at the bottom of the 
distribution, states with strong work incentives have the smallest 
share of children in families with negative changes in income, while 
states with the weakest work incentives show the highest share of 
children with [decreases in income].\19\
---------------------------------------------------------------------------
    \19\ Ibid., p. 7.
---------------------------------------------------------------------------
    In other words, states with strong welfare work incentives had 
fewer families that lost income than did states with weak welfare work 
incentives. Blank found that these income differences were the result 
of state welfare policies rather than differences in state economies.
    In addition, Dr. Blank examined the effects of tough welfare reform 
``penalties'' on the incomes of poor single-parent families. Examining 
the impact of stricter time limits and strong sanction policies that 
``provide a strong enforcement mechanism for women to participate in 
welfare-to-work programs,'' she found that tough welfare policies had a 
positive effect in raising the incomes of poor families. Overall, 
states with stricter time limits and stronger sanction policies were 
more successful in raising the incomes of poor children than were 
states with lenient policies. Dr. Blank concluded that states with 
strict or moderate penalties for not working consistently show higher 
income gains among poor children throughout the income distribution 
than do states with lenient penalties. . . . [I]t is the more lenient 
states with softer penalties where children's income seems to have 
grown least.\20\
---------------------------------------------------------------------------
    \20\ Ibid., pp. 8, 9.
---------------------------------------------------------------------------
Welfare Reform and the Recent Recession
    When welfare reform was enacted, liberal opponents predicted that 
it would yield sharp increases in poverty even in good economic times; 
the effects of reform during a recession were expected to be 
disastrous. As noted, liberal predictions about the negative effects of 
reform during good economic times have been proven completely 
erroneous. In addition, the disastrous effects expected of welfare 
reform during an economic downturn failed to materialize during the 
last recession.
    Historically, during a recession, overall child poverty rises by 
two to three percentage points. For example, during the economic 
downturn in the early 1990s, the overall child poverty rate rose from 
19.6 percent to 22.7 percent. Historically, black child poverty rises 
more sharply during a recession. During the back-to-back recessions in 
the early 1980s, for example, black child poverty rose by more than six 
percentage points, from 40.8 percent in 1979 to 47.3 percent in 1982. 
During the recession of the early 1990s, black child poverty rose by 
roughly three percentage points from 43.2 percent to 46.3.
    By historic standards the increase in child poverty during the last 
recession has been fairly modest. Overall child poverty rose by 1.6 
percentage points from 16.2 percent in 2000 to 17.8 in 2004. Black 
child poverty actually declined in the first year of the recession and 
then rose by almost three percentage points, from 30.0 percent in 2001 
to 32.9 percent in 2004.\21\
---------------------------------------------------------------------------
    \21\  U.S. Census Bureau, op. cit., pp. 52-55. Black poverty 
figures are for related children in families; the 2004 black child 
poverty figure is for children identified as black alone or black 
combined with other races.
---------------------------------------------------------------------------
    In terms of its impact on child poverty, we may assess welfare 
reform as follows.

      During the period of economic growth in the late 1990's 
the post-reform welfare system dramatically out-performed the pre-
reform welfare in reducing poverty.
      During the recent recession and slow recovery, welfare 
reform did at least as well as, or slightly better than, the pre-reform 
system in its impact on poverty.

[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

Slowdown in the Rise of Out-of-Wedlock Childbearing
    After the beginning of the War on Poverty, the illegitimacy rate 
(the percentage of births outside of marriage) increased enormously. 
For nearly three decades, out-of-wedlock births as a share of all 
births rose steadily at a rate of almost one percentage point per year. 
Overall, out-of-wedlock births rose from 7.7 percent of all births in 
1965 to an astonishing 32.2 percent in 1995.
    However, as Chart 4 shows, in the mid-nineties the explosive growth 
in illegitimacy came to an end. Although the percentage of births that 
were out-of-wedlock inched slowly upward, the rate of increase in 
recent years has been only a fraction of the rapid annual increase that 
occurred routinely in the three decades before welfare reform. Between 
1995 and 2003, the overall out-of-wedlock childbearing rate rose 
slightly from 32.2 percent to 34.6 percent. This was about a fourth of 
the rate of increase that occurred annually prior to welfare reform. 
The black out-of-wedlock childbearing rate actually fell from 69.9 
percent in 1995 to 68.2 percent in 2003. The white non-Hispanic rate 
rose modestly from 21.2 percent in 1995 to 23.6 percent in 2003.
    As noted, between 1965 and 1995, out-of-wedlock childbearing 
increased at roughly one percentage point per year. As Chart 5 shows, 
if this rate of increase had been sustained, out-of-wedlock 
childbearing would have risen to 41.6 percent by 2003. Due to the 
slowdown from the mid-1990's on, the actual increase was far lower; 
34.6 percent of children were born out-of-wedlock in 2003. The actual 
rate was thus seven percentage points lower than it would have been if 
the pre-reform trends had continued.
    As a result of the slowdown in the rise of illegitimacy over the 
last decade, around 1.4 million fewer children were born out-of-
wedlock. This has enormous positive implications for child poverty and 
welfare dependence in the nation.
    The shift in the growth rate of out-of-wedlock childbearing is 
quite dramatic. The onset of welfare reform is the most plausible 
explanation for this substantial change. Welfare reform affected out-
of-wedlock childbearing and marriage in two ways.

[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

    First, the public debate about welfare reform sent a strong 
symbolic message that, in the future, welfare would be time-limited and 
that single mothers would be expected to work and be self-reliant. This 
message communicated to potential single mothers that the welfare 
system would be less supportive of out-of-wedlock childbearing and that 
raising a child outside of marriage would be more challenging in the 
future. The reduction in out-of-wedlock births was, at least in part, a 
response to this message.
    Critics might argue that illegitimacy initially slowed in 1994, two 
years before the enactment of PRWORA. But, as noted, much of the impact 
of welfare reform on childbearing was driven by strong symbolic 
messages sent to young women at risk of out-of-wedlock childbearing. 
These symbolic messages began well before the enactment of legislation. 
Symbolically, welfare reform began when candidate Bill Clinton promised 
to ``end welfare as we know it'' during his 1992 presidential election 
campaign. As president, Clinton repeated the ``end welfare'' promise, 
and he was the first president to speak forcefully about the harm of 
out-of-wedlock childbearing. The symbolic messages of welfare reform 
and personal responsibility were amplified as the Republicans took 
control of the House of Representatives in 1994 and continued loudly as 
reform was debated in Congress over the next two years. Thus throughout 
the mid-1990's many young low income women would have been aware that a 
dramatic change in welfare was ``in the air.'' This is likely to have 
had a significant effect on child-bearing behavior.
    Second, reform indirectly reduced welfare's disincentives to 
marriage. Traditional welfare stood as an economic alternative to 
marriage, and mothers on welfare faced very stiff financial penalties 
if they did marry. As women leave AFDC/TANF as a result of welfare 
reform, fewer are affected by welfare's financial penalties against 
marriage. In addition, some women may rely on husbands to provide 
income that is no longer available from welfare. Thus, as the number of 
women on welfare shrinks, marriage and cohabitation rates among low-
income individuals can be expected to rise.
Future Policies
    Welfare reform has been successful; however, that success has been 
limited by a number of factors. First, although the federal government 
operates over 50 means-tested welfare programs, reform was largely 
restricted to one: Aid to Families with Dependent Children. Second, the 
federal work requirements which pushed state welfare bureaucracies to 
promote work and reduce dependence were always too lenient. After 2000, 
most states had met their caseload reduction goals and few faced 
federal pressure to further reduce dependence or increase work. As a 
result, most state welfare bureaucracies coasted and began to slip back 
into a traditional check-mailing mode. Third, while the law set clear 
goals to reduce out-of-wedlock child-bearing and increase marriage, 
nearly all state bureaucracies simply ignored these goals. In 
consequence, nearly a decade was lost that should have been spent 
experimenting with programs to strengthen marriage.
    In the future, the following steps should be taken to advance the 
goals of welfare reform.

      TANF work requirements should be strengthened. In 
particular, states should not be permitted to give TANF benefits to 
recipients who consistently refuse to work or prepare for work.
      Work requirements should be established in parallel 
programs such as Food Stamps, public housing, and Medicaid.
      Marriage must be strengthened. In the TANF 
reauthorization passed in January of this year, Congress provided $100 
million per year in funding for a healthy marriage initiative to 
strengthen marriage in low income communities. This sum amounts to 
about one penny for marriage for every $15.00 spent subsidizing single 
parents. Future funding for the healthy marriage initiative should be 
substantially increased to help develop vitally needed programs.
                                 ______
                                 
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privately supported, and receives no funds from any government at any 
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    The Heritage Foundation is the most broadly supported think tank in 
the United States. During 2004, it had more than 200,000 individual, 
foundation, and corporate supporters representing every state in the 
U.S. Its 2004 income came from the following sources:
    Individuals, 56%
    Foundations, 24%
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of major donors is available from The Heritage Foundation upon request.
    Members of The Heritage Foundation staff testify as individuals 
discussing their own independent research. The views expressed are 
their own, and do not reflect an institutional position for The 
Heritage Foundation or its board of trustees.

                                 

    Mr. SHAW. Thank you. I am going to commence with the 
Members that did not have a chance to question in the first 
round. I will start out with Mr. English.
    Mr. ENGLISH. Thank you.
    Dr. Haskins, it is a real privilege to have you back here. 
I hadn't planned to ask this question, but there is so much 
partisan smoke that seems to have intruded on this proceeding 
that I think it would be important maybe to clear the air.
    We had one of the Members here say that they were there at 
the beginning, but I was there at the beginning, and I remember 
you being there at the beginning. I understand there were a 
series of versions of welfare reform that were actually vetoed 
before a final version was approved.
    Now, I have heard this being described as, the other side 
voted against the flawed versions, but voted for the refined 
version at the end. Isn't it true that what the House produced 
initially included more funding for child care than the 
President had originally asked for, and weren't they 
essentially similar bills that were vetoed before we sent one 
to the President, that he finally in the election season 
approved. Is that a fair recount?
    Dr. HASKINS. Yes, I believe it is. I would say the two most 
important changes in the bill the President finally signed, one 
was in Medicaid. The intent was the same in both cases, but the 
language in the first version was a little short. It wasn't 
great language. We fixed that language, so that every kid would 
be covered by Medicaid. If you look at Medicaid coverages, they 
have skyrocketed since the bill passed. The intent of Mrs. 
Johnson and others was to make sure that no child lost 
Medicaid, and that was achieved.
    The other change, which was bigger, and wasn't a change in 
the philosophy, was just more money for child care. I think we 
added something like $3 billion or maybe $3.5 billion, but I 
would point out to you that we added child care dollars to the 
bill at almost every stage in the legislative process. We added 
money on the House floor in Mrs. Johnson's amendment, money was 
added in the Senate, and then when the President said you 
needed more money, and more money was added to child care in 
the Senate.
    So, other than those two changes, there may have been some 
fairly other cosmetic things, but I think it is correct to say 
the bills were similar. I think at the time, the Center for 
Budget and Policy Priorities put out a number of documents 
saying that the bills were essentially similar.
    Mr. ENGLISH. I want to follow up on that, Dr. Haskins. That 
is, I think, an excellent objective take on what happened. 
Rather than focus on the political environment, I would like to 
maybe get your assessment on some of the statistics that we are 
considering in evaluating welfare reform.
    We have heard a lot today about poverty and how the poorest 
of the poor who should be the focus of our concern continue to 
struggle despite our best efforts. What troubles me is, I know 
that there is also consumption data that shows that the 
material conditions of low-income mothers, as measured by their 
consumption, has improved significantly after welfare reform.
    I wonder if you could talk a little bit more about the 
consumption data that you discuss in your testimony, and what 
it shows in terms of the improvements for these families; and 
perhaps how income data should maybe be viewed as a statistic 
that we view with a nuance. Can you respond?
    Dr. HASKINS. I think there is a very substantial mystery 
here. If you look at income data and compare it to consumption 
data, especially at the bottom distribution, they tell a very 
different story, and it is hard to understand why.
    The difference in the story is exactly the one that you 
mentioned. If you look at income data, there is a problem at 
the bottom of the distribution. This has showed up in study 
after study. Maybe 400,000 or 500,000 mothers have less income 
in constant dollars than they had when welfare reform was 
passed.
    If you look at consumption data, their consumption patterns 
are not worse. So, they are apparently not worse off. Also, I 
would add at this point, one of the severest critics of welfare 
reform was Sandy Jencks at Harvard, who is easily one of the 
five most respected social scientists in the country, and he 
recently published an article, the headline was: Welfare Redux. 
That was based entirely on food consumption and food problems, 
which have declined, according to him, and even are lower in 
this recession than previous recessions.
    So, again, if you look at consumption, the picture at the 
bottom looks better. Even so, I am somewhat taken by the income 
data, and I am concerned about this. I think we should be 
concerned about those Moms at the bottom.
    Mr. ENGLISH. My time has expired, but, Dr. Haskins, if you 
could, I would welcome a citation on that study because I would 
be very interested to read it.
    Mr. Rector, I had intended to pose the same question to 
you, but if you wish, I would welcome you to respond in 
writing. Thank you, Mr. Chairman.
    Mr. SHAW. Mr. Becerra.
    Mr. BECERRA. Thank you, Mr. Chairman.
    Thank you to all the witnesses for being here.
    I wish I could have been here to ask the first panel some 
questions. I was very disappointed that two of the three 
panelists in the first panel were not able to stay to respond 
to questions.
    Mr. Chairman, I think it is important that, when people 
come to testify, they don't forget that they are here also to 
field questions, so we can have a full discussion of the 
issues. It is unfortunate that Mr. Gingrich and Senator 
Santorum did not feel it important enough to stay, at least as 
long as the Members who are here, to try to respond to 
questions.
    Mr. SHAW. Would the gentleman yield? Both the gentlemen 
told us in advance that they had schedule problems and did have 
to leave early. I tried to get as many Members on both sides of 
the aisle, not favoring one side of the aisle, before their 
departure.
    Mr. BECERRA. Mr. Chairman, I would hope we in the Committee 
try to make sure that anyone who wishes to testify before the 
Committee recognizes that all of us would like to ask questions 
of the witnesses, especially when they make statements that we 
don't fully agree with at times.
    Ms. HART. Would the gentleman would yield?
    Mr. BECERRA. Certainly.
    Ms. HART. Too many Members decided they needed to 
pontificate before the poor witnesses were allowed to speak, 
and that put us behind, unfortunately. That is really what the 
problem was. I yield back.
    Mr. BECERRA. I would say to the gentlelady, the only folks 
who spoke before the witnesses were the people that are 
entitled to speak; that is the Chair, the Ranking Member, the 
chair of the Subcommittee and the Ranking Member of the 
Subcommittee. So, if there was pontificating, it was bipartisan 
pontificating.
    It strikes me as odd that about the only thing missing from 
this hearing is the big banner that says ``Mission 
Accomplished.'' It seems like we are patting ourselves on the 
back when all the numbers tell us that the situation is getting 
worse. It is almost as if we are reading the book, The Tale of 
Two Cities, but in this case, the tale of two periods.
    If you look at 1996 to 2000, you are right, the welfare 
rolls did decrease, poverty rates did decrease, children in 
poverty did decrease. Ever since 2000, in other words, ever 
since this President took office, those numbers have gone back 
up, so the progress that was made from 1996 to 2000 has been 
lost, and now we are in reverse.
    So, like the previous ``Mission Accomplished'' sign, I hope 
that we recognize that there is still a great deal to do. I 
believe it was Senator Santorum--I wish he had been here so I 
could have asked the question, but I guess he was trying to say 
that the poverty rates for black children are getting better. 
Of course, if you look at this whole picture with a blurred 
lens from 1996 to present, perhaps it looks that way; but if 
you look at the reality of today and what is going on, the 
poverty rates for African-Americans and certainly for African-
American children, as for Latino kids and Latino families and 
other people of color, are on the rise, and I would be deadly 
concerned about anyone who is trying to say that we have 
accomplished something there with regard to people who are 
struggling very hard to work and finding it very difficult.
    I have a chart here that unfortunately is probably 
difficult to see that talks about poverty rates among African-
American children. Again, it is the tale of two periods. From 
1996 to 2000, they do drop. From 2000 to 2004, the latest 
numbers that we have, they have gone back up. So, I hope that 
we recognize that there is still a lot of work to do.
    [The exhibit follows:]

[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
    
    Most of us are very concerned that the programs that also 
led toward that drop, and I think Ms. Parrott tried to make 
reference to some of those, are also empty from this tale that 
is being told. It is an incomplete story, as far as I am 
concerned, when you don't include the fact that during that 
period where we saw a decrease in poverty rates for America's 
kids--if you look at this, it correlates perfectly with when we 
passed an expansion of the EITC for low-income families so they 
could keep more of the money that they worked so hard to earn, 
and also, as was mentioned before, when we saw the last 
increase in the minimum wage. That is when you can see that the 
rates really begin to decline.
    Unfortunately, even a modest increase in the minimum wage 
and even a modest allowance under the EITC for poor families to 
keep their take-home pay, at some point is eroded by inflation 
and sure enough, this is what you see; it is now beginning 
under the Bush years, poverty rates continue to increase.
    So, I think what it says to us is, we still have lots of 
work to do. It should be done on a bipartisan basis. Before we 
put up that ``Mission Accomplished'' sign, I hope we recognize 
that there is still much for us to do.
    I would hope that, and maybe I can end with this one 
question to Ms. Parrott, and that is, what do we do to try to 
meld what was done through welfare reform with policies that 
will help in the area of child care, which, I think, is where 
we desperately need some assistance for women who are on 
welfare?
    Ms. PARROTT. I think there is no question that the work 
support system that, again, Dr. Haskins did talk about was a 
major factor in some of the improvements that we saw in the 
late nineties; the EITC, as you mentioned, expansions in 
Medicaid and CHIP, and also child care. The amounts on child 
care went up quite substantially during the nineties and into 
the early part of this decade and have since started to 
decline, and in fact we are now in a situation where States are 
actually cutting back their child care programs, so that they 
can provide child care to fewer children in low-income working 
families than they once did because of funding constraints.
    As you may know, the President's 2007 budget documents 
actually show a decline in the number of children that will 
receive child care assistance under current funding levels. In 
fact, by 2011, the number of children that would receive child 
care assistance is more than 600,000 fewer children than 
received it in 2004.
    So, what that means is that this is a real gap. We have a 
minority of children who need child care assistance, who 
qualify for child care assistance under the child care 
eligibility rules that get help paying for child care. That is 
a problem for two reasons. It is a problem because parents, if 
they don't have access to child care assistance, may not be 
able to hold their jobs with stability, and it is holding a job 
with stability that can help them move forward in the labor 
market.
    It is also a problem on the child development side, that if 
we want young children in poor families to show up to 
kindergarten ready to learn, they need the same kinds of 
quality early education programs that their more affluent 
counterparts receive.
    It is really important that, at the Federal and State 
levels, additional resources be devoted to child care and that 
it be viewed both as a work support as well as something that 
is good for education and good for child development. Thank 
you.
    Mr. BECERRA. Thank you, Mr. Chairman.
    Mr. SHAW. Your time has expired. Mr. Beauprez.
    Mr. BEAUPREZ. Thank you, Mr. Chairman. I believe my 
colleague, Mr. Camp, has a question, so I will yield.
    Mr. CAMP. I thank the gentlemen for yielding. I would just 
like to submit for the record a 2005-2006 civil grand jury 
final report in the State of California which found that up to 
half of the money appropriated for CalWorks, which is the child 
care program in California, is lost due to fraud and poor 
oversight as estimated by the County of Los Angeles Department 
of Public Social Services.
    [The information follows:]
MILLIONS OF TAX DOLLARS LOST TO CHILD CARE FRAUD
EXECUTIVE SUMMARY
    Millions of tax dollars have been lost to fraud from child care 
funds allocated by the State of California and administered by the 
County of Los Angeles Department of Public Social Services (DPSS) in a 
program entitled California Work Opportunity and Responsibility to Kids 
(CalWORKS). As currently administered, the program is equivalent to an 
A TM for thieves. Our research included previous civil grand jury 
reports, audits, contracts, other documents, and interviews with over 
100 individuals involved in the CalWORKS program.
    This 2005-2006 County of Los Angeles Civil Grand Jury investigation 
revealed:

      Only 28% of the children placed with license-exempt child 
care providers were verified as present with their child care provider, 
according to the April 2005 California Department of Education (CDE) 
Error Rate Study Report.
      Forty-nine (49) individuals who cheated the CalWORKS 
child care program of $3,421,578, between September 2004 and February 
2006, have been successfully prosecuted by the County of Los Angeles 
District Attorney.


------------------------------------------------------------------------
                DATE                    DISPOSITION          AMOUNT
------------------------------------------------------------------------
September 9, 2004                    13 Convictions     $925,000
------------------------------------------------------------------------
December 9, 2004                     12 Convictions     $500,000
------------------------------------------------------------------------
January 26, 2006                     10 Convictions     $1,200,000
------------------------------------------------------------------------
February 23, 2006                    14 Convictions     $796,578
------------------------------------------------------------------------


      Up to 50% of the more than one billion dollar CalWORKS 
program may be lost due to fraud and poor oversight as estimated by 
several of the DPSS personnel.
    The 2005-2006 County of Los Angeles Civil Grand Jury recommends 
that DPSS require verification in each step of the CalWORKS process to 
ensure that parents have the work opportunity intended, that children 
are cared for in healthy, safe environments while their parents are 
working, and that tax dollars are used as authorized. Our study shows 
that child care welfare fraud is a continuing burden on the taxpayer. 
There is an urgent need for prompt and thorough implementation of our 
recommendations.
BACKGROUND
    In 1996, the Federal Personal Responsibility and Work Opportunities 
Reconciliation Act combined Federal funds for child care for welfare 
recipients. In 1998, California enacted the CalWORKS welfare to work 
program to conform to this law. The CalWORKS program includes monthly 
cash aid for eligible welfare recipients and former recipients, 
including child care support, and monthly cash aid for certain children 
until the age of 18.

      CalWORKS Stage 1 is administered in the County of Los 
Angeles by DPSS which receives its funds from the California Department 
of Social Services (CDSS). The funds include monthly cash aid to a 
parent in the welfare to work program who is enrolled in a job 
training, work, or school program. In addition to cash aid, paid child 
care and ancillary services are available for up to 6 months or until 
work and child care become stable enough for the parent to achieve 
independence. When the work income level increases to a predetermined 
amount, cash aid is discontinued but child care support can continue 
for up to 24 months.
      CalWORKS Stages 2 AND 3, administered by the California 
Department of Education (CDE), provide child care to parents whose 
stable circumstances permit them to transition off cash aid but still 
need child care support. CalWORKS allows parents or guardians of 
eligible children under the age of 18 to receive monthly cash aid. 
Until the age of 18, the child or children of an undocumented parent, a 
handicapped parent, or a child being raised by someone other than the 
parent, if approved for eligibility, can receive monthly payments up 
to: 1 child--$359, 2 Children--$584, 3 children--$723. . . .

    This 2005-2006 County of Los Angeles Civil Grand Jury chose to 
study the Stage 1 program administered by the Department of Public 
Social Services.
    The County of Los Angeles DPSS contracts with 13 Alternative 
Payment Providers (APPs) for the administration of the Stage 1 CalWORKS 
program. The APPs receive $127.69 per month per case to manage the 
child care program and process payments. CDE contracts with the same 
APPs to administer the Stage 2 and Stage 3 programs.
    The DPSS contract with the APPs provides funds for outreach to 
inform the citizens of the County of Los Angeles of the availability of 
this child care welfare program, in order to increase the number of 
parents and children in the program. We are not aware of any DPSS 
direction or any studies to evaluate the effectiveness of this outreach 
program.
    In Stage 1, parents are not required to sign their children in and 
out at their child care provider's site, although Stage 2 and 3 have 
this requirement. The absence of these attendance sheets and the 
failure of DPSS to require the APPs to verify and copy only original 
documents, rather than accepting copies by mail, provides an 
opportunity for fraud. Verification that signatures match signatures on 
file is not always done. Procedures for processing records are not 
routinely followed. Our investigation found a multiplicity of 
procedural errors and omissions. The APP contracts lack specificity and 
controls. Widespread abuse of this process has created a program 
culture that encourages fraud by parents, child care providers, and 
agency employees.
    Several studies have been conducted during the past two years 
documenting problems with the CalWORKS program. These studies include:
    1. The California Legislature directed the CDE to perform an 
analysis of administrative error and the potential for fraud in the 
local operations of CalWORKS and APP Child Care Programs. The CalWORKS 
Error Rate Study Report completed in April, 2005 revealed the following 
results.

----------------------------------------------------------------------------------------------------------------
                                      Attendence  Verified     Attendence  Not Verified    Visit Could Not  Be
                                  ------------------------------------------------------         Arranged
                                                                                        ------------------------
                                      Percent       Number       Percent       Number      Percent      Number
----------------------------------------------------------------------------------------------------------------
Licensed Family Child Care Home      44.6          123          17.8          49           37.7         104
----------------------------------------------------------------------------------------------------------------
License-Exempt Trustline Approved    28.4          42           16.9          25           54.7         81
----------------------------------------------------------------------------------------------------------------
License-Exempt and Trustline         28.4          113          16.3          65           55.3         220
 Exempt
----------------------------------------------------------------------------------------------------------------

     The study included random visits during the hours the, ``. . . 
child was expected to be present.'' Providers were first contacted by 
phone to explain the child's name had been randomly selected, the 
caller was to confirm the provider's current address, and the caller 
asked permission to verify whether the, ``. . . children were in 
attendance during the certified hours of care.''
    ``If the provider declined a visit or if the provider could not be 
contacted, the reviewer classified the case as 'visit could not be 
arranged.' In some instances where the provider could not be contacted, 
if time were available, reviewers drove to the facility. If there was 
no one at home to contact, or if the occupants did not answer the door, 
cases were recorded as 'visit could not be arranged'. In a few 
instances, the provider's address may have been in a locked complex 
that was not accessible to the reviewer or the environment may have 
posed safety issues for the reviewer. In these instances, the case was 
also recorded as 'visit could not be arranged'.''
    Children's attendance could be verified in 44.6% of Licensed Family 
Child Care Homes and in only 28.4% of both License-Exempt Trustline 
Approved and Trustline Exempt.
    2. As reported to the Board of Supervisors, on August 3, 2005, DPSS 
recognized a need to employ an outside auditor to study the APP payment 
system. The results of this study have not yet been released.
    The CalWORKS eligibility determination and enrollment process 
involves: a receptionist, a case opening clerk, an eligibility worker 
(screener), an intake worker, a Home Interview Program (HIP) worker, an 
eligibility worker supervisor, a Greater Avenues to Independence (GAIN) 
worker, and a case maintenance worker. After the case is approved, the 
GAIN worker provides the orientation and appraisal: motivational 
training and supportive services and evaluation of the applicant's need 
for child care. If appropriate, the GAIN worker refers the parent to an 
APP child care resource and referral representative. The APPs 
administer the child care portion of the program as specified in a 
contract between DPSS and an APP.
    This complex process triggers concern about actions taken. How 
often does DPSS verify that actions are performed at the proper time or 
done at all? Can DPSS verify the existence of a child care facility or 
that children assigned to that facility were there as reported? Do the 
APPs monitor the child care provider's performance for DPSS? Does the 
agreement between the APPs and the child care providers protect the 
interests of the child, the parent, the County and the State?
    The parents eligible for the welfare-to-work program receive 
monthly cash payments and are provided with child care support 
determined necessary to enable them to work and become independent. 
Parents are allowed to choose the child care provider for their 
children. These child care providers are considered ``an employee of 
the parent.'' The providers are classified as:
    (1) Non-exempt (State) Licensed Family Child Care facilities: These 
child care providers are on the APPs' resource and referral list. 
Parents are given a choice of child care providers from this resource 
and referral list.
    (2) License-exempt, Trustline approved: These child care providers 
are family Members or anyone other than licensed providers chosen by 
the parents to supervise their children. ``Trustline approved'' means a 
background check is conducted which includes fingerprinting the child 
care provider.
    (3) License-exempt, Trustline-exempt: These child care providers do 
not have licenses and include only: aunt, uncle, grandmother, 
grandfather, great aunt, great uncle. There is no background check and 
no fingerprinting.
    This category requires a ``Health and Safety Self-Certification'' 
form. All of the information on this form is provided by the child care 
provider and is approved by the parent who maintains all responsibility 
for the child care provided.
MAGNITUDE OF THE CalWORKS PROGRAM
    The County of Los Angeles CAO's office provided the following data 
which shows the magnitude of the CalWORKS program.
    Actual 2004-2005 revenue total of $1,100,359,265.00 includes:
    1. State appropriation, $628,383,480.00
    2. Federal appropriation, $436,583,422.00
    3. Miscellaneous Revenue, $11,361,798.00, includes expired and 
never cashed warrants (checks) returned by the post office and return 
of overpayments.
    4. Sales tax realignment, $5,304,677.00, the state sets aside sales 
tax money to reimburse counties for social services and this amount is 
the CalWORKS portion.
    Welfare fraud in the DPSS program has been studied many times. A 
July 8, 2003 study by the County of Los Angeles Auditor-Controller's 
office contains 20 recommendations for improved processing of claims. A 
response report dated February 7, 2006 titled ``Department of Public 
Social Services Report to the Audit Committee, Regarding the Status of 
Recommendations in the Welfare Fraud Prevention Program Review'' has 
been carefully reviewed by this Grand Jury. DPSS states all but one of 
the recommendations have been implemented for up to 3 years. In view of 
this report of implementation, there should have been a considerable 
decrease in the incidence of welfare fraud. THIS HAS NOT HAPPENED. Our 
study shows that welfare fraud is a continuing burden on the taxpayer.
METHODOLOGY
    Previous Civil Grand Jury reports and the ``CaIWORKS Error Rate 
Study Report,'' prepared by the CDE, dated April 2005, show evidence of 
procedural failures. We studied other audits, reports, letters, 
documents, and contracts, together with information about child care 
welfare fraud arrests and prosecutions. Additionally, we met with and 
interviewed over 100 individuals involved in the CalWORKS process. 
Visits were made to DPSS offices, GAl N offices, and several APP 
facilities to observe the administrative process.
FINDINGS AND RECOMMENDATIONS
    The first seven Findings and Recommendations refer to the contract 
between the County of Los Angeles Department of Public Social Services 
(DPSS) and the Alternative Payment Providers (APPs). By incorporating 
the recommendations into the contract, mandatory contract compliance 
will ensure a process that better serves the needs of all involved 
parties.
    Finding 1. Although the child care payment amount is based on an 
approved number of child care hours, DPSS does not verify the actual 
number of attendance hours and does not require the APPs in the current 
contracts to verify the number of hours provided.
    Recommendation 1. There should be random and unannounced visits at 
least once every ninety days to the child care sites to verify the 
childrens' presence. This verification should be done either by DPSS or 
be required by the APPs in revised DPSS-APP contracts.
    Finding 2. Although DPSS procedures require original documents from 
parents and child care providers, copies are often accepted.
    Recommendation 2. DPSS should require the APPs to accept only 
original documents or copies that have been seen and annotated by DPSS.
    Finding 3. Although the CalWORKS California-administered Stage 2 
and 3 child care programs require sign-in and sign-out sheets for 
children in day care, the County of Los Angeles-administered child care 
Stage 1 program has no such requirement.
    Recommendation 3. DPSS should require by incorporation in the APP 
contract daily parental sign-in and sign-out sheets.
    Finding 4. Signatures of the parent or child care provider on forms 
being processed by the APPs are not always matched to other documents 
in the file.
    Recommendation 4. DPSS should ensure by monthly file reviews that 
signatures on signature cards in files match the signatures of the 
parent and child care provider. The Auditor-Controller and contracts 
department of DPSS must also have access to these records for audits. 
These requirements must also be included in the APP contract.
    Finding 5. Agreements between the APPs and the child care providers 
may not stipulate all the requirements of DPSS and the State-required 
child health and safety issues.
    Recommendation 5. DPSS should review the DPSS-APP contracts and 
agreements to ensure that child health and safety requirements are 
addressed by both the APPs and child care providers.
    Finding 6. A Contract Monitoring Project and a Contract Monitoring 
Division Report, both completed by the County of Los Angeles Auditor/
Controller, cited the following:

      A parent reported that neither she nor her child had 
received services from the child care provider for which the County was 
billed $12,400.
      A parent case file did not contain a copy of the day care 
provider's current business license, taxpayer identification number, or 
Social Security number as required by the contract.
      Child care payments were made to child care providers for 
parents who were not qualified or enrolled in any activity which 
qualified them for benefits.
      DPSS was billed twice for the same retroactive services.

    Recommendation 6. Each step of the DPSS process should be verified, 
and APP contracts and files should be monitored and audited: to prevent 
paying for child care not provided, to ensure that parents are eligible 
for child care support, to eliminate double billing, and to ensure that 
documentation required by the contract is in place through random 
reviews of APP files. DPSS has the primary responsibility for 
verification and should request assistance as needed from the Auditor-
Controller, District Attorney and Chief Administrative Office.
    Finding 7. The APP child care outreach marketing program lacks 
County of Los Angeles direction. We are not aware of documentation as 
to the effectiveness of this program, the reach of the marketing, media 
used, or responses.
    Recommendation 7. Marketing of the APP CalWORKS child care outreach 
program should be regularly evaluated by DPSS to determine its 
effectiveness.
    Finding 8. DPSS and the APPs communicate primarily through the GAIN 
Employment Activity and Reporting System (GEARS) computer system which 
is maintained by DPSS. The APPs report that when the system is down, 
data communication with DPSS ends. The GEARS system is supposed to 
provide the APPs with correct and current information. However, we are 
told the data on the GEARS system may be out of date by as much as one 
to 2 weeks.
    Recommendation 8. DPSS should designate staff and a contact phone 
number for the APPs to call for case information when the GEARS data 
system is down and circulate a memo to all APPs with this information. 
DPSS should ensure that participant data is entered into the GEARS 
system daily.
    Finding 9. Some personnel of DPSS and APPs advise that changes in 
employment, job training, or school hours are entered into the GEARS 
system by DPSS only at the beginning of the month. If any of these 
hours of attendance change on the 2nd of the month or thereafter, the 
full payment for child care continues until the end of the month.
    Recommendation 9. Any changes in attendance should be entered daily 
on the GEARS system by DPSS to eliminate overpayment.
    Finding 10. The DPSS process requires that the parent report their 
attendance at school or training. APP personnel and DPSS investigators 
indicate that self-certification is not always reliable.
    Recommendation 10. The school or the training site should send to 
DPSS a monthly attendance verification based on records which are 
retained by the school or training site and made available to county 
auditors.
    Finding 11. Any changes in the parent's schedule that would affect 
child care hours are reported by the parent on a Quarterly Report (QR?) 
form supplied by DPSS.
    Recommendation 11. Any changes in the parent's schedule that would 
affect child care hours should be reported monthly instead of quarterly 
and verified by DPSS to eliminate overpayment for child care. This 
monthly report and the record of its verification should also be 
available to county auditors.
    Finding 12. Not all DPSS forms specify that the parent or child 
care provider is signing under penalty of perjury.
    Recommendation 12. DPSS should require that all forms are signed 
under penalty of perjury.
    Finding 13. Alleged child care fraud is referred by the APPs to the 
DPSS Welfare Fraud Prevention section. This section checks the referral 
to ensure that all pertinent documents are attached to the referral. 
DPSS investigates the allegations of fraud and may refer the case to 
the County of Los Angeles District Attorney for prosecution. The Civil 
Grand Jury is concerned that in a 1 year period hundreds of referrals 
from the APPs to the DPSS Welfare Fraud section resulted in only ten 
referrals to the District Attorney's office. Some DPSS Welfare Fraud 
Prevention section personnel have inadequate training to detect 
evidence of fraud.
    Recommendation 13. DPSS should develop and implement an enhanced 
welfare fraud detection and investigation training program for 
employees in the Welfare Fraud Prevention section in conjunction with 
the Los Angeles County District Attorney and receive periodic State and 
local training. Personnel trained and employed by this program should 
be compensated commensurate with their increased responsibilities.
    Finding 14. Misrepresentation of employment is a major source of 
welfare fraud:
    Some parents in the welfare-to-work program earn very little 
income--a few hundred dollars per month--but are reimbursed thousands 
of dollars per month for miles driven and child care expenses.
    The same person (child care provider) who is paid by the County to 
provide child care services may also be receiving In Home Support 
Services (IHSS) from the County. The IHSS worker is provided to 
individuals to assist them in activities of daily living. A CalWORKS 
participant/parent could be employed to provide IHSS services to the 
same person (child care provider) providing their child care. There is 
no cross check.

      Fictitious names of employers and places of employment 
have been ``verified'' by phone calls made to co-conspirators.
      Some parents work as aides with the IHSS Program and 
receive thousands of dollars in mileage.
      Some parents claim to work for relatives.
      Some parents conspire with friends or relatives to 
fraudulently claim child care benefits and split the money.
      Some parents claim to provide tutoring during the hours 
the child is in school.
      Some child care providers claim hours for care during the 
hours the child is in school.

    Recommendation 14. If the parent is working for cash or for 
relatives, the payer should sign, under penalty of perjury, certifying 
the hours, the amount paid, and the work accomplished. A cross check 
between child care provider services and IHSS services, requiring 
copies of tax returns, and random field checks at the employment 
location should be mandatory. DPSS should eliminate child care 
allowance if employment legitimacy cannot be determined.
    Finding 15. DPSS has stated that: ``There is no limit, currently, 
to the number of hours allowed to the parent for paid child care per 
day.''
    Recommendation 15. Any paid child care in excess of 10 hours per 
day for 5 days per week or 12 hours per day for 4 days per week should 
be monitored and verified on site by DPSS.
    Finding 16. Trustline Registry Form: this form ``. . . was created 
by the California Legislature to offer parents, employment agencies, 
Child Care Resource and Referral Programs (APPs and DPSS), and child 
care providers access to a background check conducted by the California 
Department of Social Services (CDSS) which includes checks of the 
California Criminal History System and Child Abuse Central Index (CACI) 
at the DOC and FBI records.'' This form is processed for DPSS by the 
appropriate State licensing department and the State advises that it 
may take 6 weeks or more to complete.
    Recommendation 16. Trustline Registry Form background check must be 
approved and received by DPSS prior to any authorization for child care 
(including License-exempt and Trustline Exempt). DPSS should work with 
the State to expedite the Trustline Registry Form.
    Finding 17. The County of Los Angeles Administrative Memorandum 
Number 0010, dated 5-22-00, defines a license-exempt provider's own 
children in the following way: ``The definition of a license-exempt 
child care provider's own children include all grandchildren, nieces, 
nephews, and first cousins for whom child care services are being 
provided. These children are considered immediate family Members and 
there is no limitation on the number that may be cared for. In 
addition, the license-exempt provider may also provide child care 
services for the children of one other family. Child care payments may 
be authorized during the same time period for all of the children whose 
parents are participating in CalWORKS welfare-to-work activities or 
working.'' This broad, unlimited definition of license-exempt 
provider's own children encourages fraud and abuse of the system.
    Recommendation 17. The definition of ``own children'' should be 
limited to only the biological or legally adopted children of the child 
care provider. A limit should be placed on the number of children cared 
for by one child care provider, based on the capacity of the provider 
and the site, to provide safe and healthy child care.
    Finding 18. DPSS contracts with outside agencies to provide 
services for the GAIN case management in two new GAIN regional offices 
to perform vital steps in the CalWORKS process. These contract worker 
positions include caseworkers, supervisors, and clerk typists.
    Recommendation 18. Contract agency employees should be required by 
DPSS to undergo the same background checks required of DPSS employees 
in the same job category.
CONCLUSION
    The Los Angeles DPSS CalWORKS program, with a budget in excess of 
one billion dollars, is huge and complex. The California Department of 
Education Error Study Report statistics, interviews with individuals 
convicted of welfare fraud, and the continuing multiple arrests by the 
District Attorney's office confirm the need for immediate tightening of 
program controls. As currently administered by DPSS, the CalWORKS 
program invites fraud estimated at 50% by some DPSS and APP personnel. 
Fraud is less likely to occur in a program with increased supervision, 
regularly scheduled training, and checks and balances for each step of 
the process. The citizens of Los Angeles County deserve better so their 
tax dollars are used wisely and more eligible parents and children can 
be helped.
GLOSSARY
    APP--Alternative Payment Provider (State and County)
    CACI--Child Abuse Central Index (State)
    CalWORKS--California Work Opportunity and Responsibility to Kids 
(State and County)
    CAO--Chief Administrative Office (County)
    CDE--California Department of Education (State)
    CDSS--California Department of Social Services (State)
    DOC--Department of Corrections (State)
    DPSS--Department of Public Social Services (County)
    DSS--Department of Social Services (State)
    FBI--Federal Bureau of Investigation (Federal)
    GAIN--Greater Avenues to Independence (County)
    GEARS--Gain Employment Activity and Reporting System (County)
    HIP--Home Interview Program (County)
    IHSS--In Home Support Services (County)

                                 

    Mr. CAMP. I am certainly sympathetic to the call for more 
funding for child care. We did provide a billion dollars in 
additional child care funds over the next 5 years as part of 
the Deficit Reduction Act to which the President signed in 
February 2006 but this report suggests a significant amount of 
current child care spending in our Nation's largest State is 
wasted, which is a major concern, and I think that is something 
the Committee may want to take a look at. I thank the gentleman 
for yielding.
    Mr. BEAUPREZ. Thank you. Reclaiming my time. Something that 
jumped out at me--and I honestly don't remember who made the 
point in the first panel--is that government is not very good 
at giving love. I saw a tragic statistic recently that in low-
income families, the children who most desperately need a 
fighting chance at that thing we call the American dream--to 
get a good education, earn their way out of poverty--in the 
first 4 years of life they experience a total of a mere 25 
hours of lap time; storytelling, reading to children.
    Obviously, an education is necessary. I think the first 
panel emphasized that. I think we would all agree. So, too, is 
parents being parents. Bishop Riley, I am sure it is just a 
constraint on time, but I would guess in your profession that 
you agree with that, and that stronger marriages and especially 
fatherhood a bit beyond the biological part of fatherhood is 
something that you find important, strong marriages and parents 
being around. Mr. Rector, you opined on that need.
    I would ask both of you, from your perspectives, which I 
guess is fairly expansive, now if we have made progress, and I 
submit that the evidence is pretty clear we have made progress 
since the 19nineties, since this act was put in place, and we 
want to take it to the next level, I think that is an area to 
target, improved education especially for the most needy. I 
think one of the ways to do that is by giving the little ones a 
fighting chance once they get to school to be ready to learn. 
So, that goes back to the parental responsibility.
    How can we accomplish that mission? Bishop Riley first, and 
then Mr. Rector, time permitting.
    Bishop RILEY. I think you are absolutely correct. I think 
probably the main way is to take as much stress off of those 
family situations at home as we can. One of the ways that I try 
to highlight it is the fact that so many of the working poor 
people, people who have jobs that are working or having to work 
two jobs and so the children are getting left out. You are 
absolutely right, at the youngest age, those first 4 years, 
which are critical; that is when we need the parents to be at 
home more.
    You just can't make it at $5.50, $5.27 an hour. New Jersey 
is its own case. I understand that, but the living wage in New 
Jersey is between $17 and $19 an hour. That is what it costs if 
you rent a house or rent an apartment and pay for food and so 
forth.
    Mr. BEAUPREZ. I understand that. If I can interject though, 
and I am working from memory here, so pardon me if I am wrong, 
but I believe in some of our minority communities, as much as 
80 percent of the children are being born out of wedlock. I 
don't think that raising the minimum wage is necessarily going 
to solve that problem.
    Don't we have a moral, cultural crisis going on in this 
country? I was hoping you of all people would tell us that.
    Bishop RILEY. I don't have the statistics in my own State 
or across the country at hand. I can certainly get those. I 
think that if children--and children are born out of wedlock; I 
understand that. Part of that is because the children that are 
having the children were not cared for appropriately as they 
were coming up. They didn't learn what they needed to learn 
coming up.
    Mr. BEAUPREZ. I accept that. Mr. Rector, quickly if you 
care to.
    Mr. RECTOR. You have hit the absolutely critical issue; 34 
percent of children are born out of wedlock. In the United 
States, it is one child about every 20 seconds.
    Mr. BEAUPREZ. Thirty-four in total.
    Mr. RECTOR. Among minorities, 69 percent; Hispanics, 45 
percent. This is the overwhelming cause of child poverty. It is 
the overwhelming cause of all the social problems that this 
Committee deals with, and this is the thing that we have to 
begin to address.
    I really think that one of the failures in the last 10 
years was that State governments were supposed to experiment 
with programs to increase marriage, and with the exception of 
Oklahoma, most did not. We really have to pursue this much more 
strongly.
    I would commend to you a book called, Promises I Can Keep, 
by Kathryn Edin of Rutgers University. She is a liberal 
sociologist, but she is probably the greatest expert on single 
parents on welfare, and effectively, when you read this book, 
what you see, and out-of-wedlock child bearing is almost 
exclusively restricted to the least advantaged mothers, the 
ones with the lowest education, the ones that are going to have 
the most difficulty going it alone; those are the ones that go 
without marriage.
    What you see among them is, in the middle class, typically 
the history is, you develop a relationship. You get married. 
Then you have children. Among the lower socio-economic white, 
black and Hispanic, that is actually reversed. They have 
children. They have children deliberately. It has nothing to do 
with an absence of birth control. They have children 
deliberately then they try to find a relationship, and then 
they think about getting married in their thirties. They don't 
see a problem with this. They are not hostile to marriage.
    One of the most important things we can do for this group 
is to say, this is a really bad life plan, particularly for 
your children. You need to think about this in a different way. 
I think we will have a wonderful audience once we begin to 
communicate our concerns. They are looking for a better way to 
raise children. We just have to start to talk to them.
    Mr. SHAW. Ms. Tubbs Jones.
    Ms. TUBBS JONES. I am so happy this hearing on welfare has 
not become a sociological study of minority families and what 
they choose to do. The reality is there is a huge issue with 
regard to children being born out-of-wedlock, but we are not 
going to resolve it, as to whether or not what happens with 
that, in this 5 minute piece here, and I would ask my 
colleagues to think about some of the statements that they have 
made in this hearing and contemplate the impact that they will 
have on people who are listening to what they are saying.
    I am just stunned, and you have kind of taken me out of the 
point where I wanted to go with this. The reality is, and I 
have a study that was done at Case Western Reserve University, 
which is the university that I graduated from, with regard to 
what has happened to welfare leavers in Cuyahoga County--a 
welfare leaver is someone who has left welfare--and the impact 
that it has had.
    It says that 79 percent of welfare leavers were employed at 
some point during their first 6 months off welfare, but only 60 
percent of the leavers were able to secure mainstream 
employment having an official State wage record.
    I am so tired of hearing you all talk about people are off 
welfare and people are much better off. They are not better 
off. They are standing in lines at churches and all kinds of 
places looking for supplements for these minimum wage jobs that 
they have, and they are still in poverty even at work. They are 
at work without any type of support.
    One of the things that we don't talk about is that if 
people are not receiving a welfare check, what type of income 
or support are they receiving from the government? Are they 
receiving child care? Are they receiving training? Are they 
receiving some type of medical care? The reality is, if we add 
those numbers up, it may be greater than the welfare check that 
they were receiving initially.
    Let me go on to the report before I just go out of whack on 
you all with regard to the statements that you are making. The 
survey results indicate that low-level education, low-paying 
jobs, that people leaving welfare were left to--had low levels 
of education. They found low-paying jobs with limited access to 
benefits and experienced all kinds of hardships following their 
coming off of welfare.
    They have problems with renting. They have problems with 
paying their electric, their utility bills. They have problems 
with being evicted. They have problems supporting their 
children. Part of the reason we are talking about families with 
children who have not been sat on a lap and read to, is because 
many of these parents work so many long hours that, by the time 
it is all over with, by the time they get home with a low 
amount of education, their ability to then have a discussion 
with their child may well be limited.
    I would say to my colleagues, if we really want to address 
this issue, if we really want to be on point of what we are 
doing with low income and minority families, let's sit down 
collectively. I am awaiting the opportunity as a Democratic 
Member of the Committee on Ways and Means to sit down and have 
a discussion with my colleagues on any issue at all on any 
subject.
    The 4 years I have been on the Committee, we have yet to 
sit down and have a lengthy discussion with regard to 
legislation. This is one of the issues that is key and very 
important to me and the constituents I represent. Because I 
happen to be the only African-American woman on this Committee, 
it is particularly important for me to be able to be a voice 
for the young minority women across this country who want to be 
heard and don't want to be identified as this group that 
doesn't want to go to work or this group that doesn't want to 
take care of their children or doesn't want to be educated.
    One of the problems with the welfare program is that--TANF 
program--there are young women who want to be educated, but 
because of the rulings with regard to going to school instead 
of going to work, it restricts them from improving their 
education. That is a real problem within the welfare program. 
They can be educated, but it is not a long enough time. They 
still have to go to work without having the opportunity to take 
care of their children.
    You all get a life here and stop identifying and pointing 
out problems with minority women across this country and get on 
the point of being morally correct. If you are morally correct, 
then you are going to take care of the least of those in this 
country. I yield back the balance of my time.
    Mr. SHAW. Ms. Hart.
    Ms. HART. Thank you, Mr. Chairman. I am going to yield to 
Mr. Beauprez 30 seconds. He wanted to follow up on something 
that wasn't quite finished.
    Mr. BEAUPREZ. Dr. O'Neill, only if you have got a very 
brief answer to my question. You looked like you wanted to 
offer it. Otherwise, submit it for the record. Either way.
    Dr. O'NEILL. It is a very brief answer. This really 
pertains to--it has to do with mothers reading to their 
children. I worked on an extensive research project using 
national level data that also had data on children's 
performance and I looked at the effect of parental background 
on performance.
    This is a published article, and I can send you the 
citation for it. One thing that really struck me was that--this 
was before welfare reform--women on the AFDC program who did 
not work read to their children less than any other women, 
holding constant education, race, anything that you can think 
of.
    So, it wasn't that they spent all their time taking care of 
their children; they were less likely to take their children to 
a park. They were less likely to do any kind of child 
development activity, and those children turned out really very 
badly. They started school so poorly prepared that it would be 
extremely difficult for those children to ever catch up.
    I really believe that if you could do a similar study 
today, you would find that women who now work know the 
importance of education and, therefore, are spending more 
developmental time with their children because they don't want 
their children to follow in their footsteps.
    Mr. BEAUPREZ. If you could get me that article, I would 
very much appreciate it. I thank the gentlelady from 
Pennsylvania.
    [The information follows:]
    At the hearing of July 19, 2006 on the outcomes of the 1996 welfare 
reform I alluded to research I had conducted on the determinants of 
cognitive achievement by pre-school children, with particular reference 
to disadvantaged children and those growing up in homes with welfare 
dependent mothers (prior to welfare reform). The article that contains 
this research is entitled ``Family Endowments and the Achievement of 
young Children with Special Reference to the Underclass,'' authored by 
M. Anne Hill and June O'Neill, published in the Journal of Human 
Resources, XXIX.4. The relation between mother's welfare participation 
and a child's achievement is discussed starting on page 1089 (section 
V.4). As noted, one reason why children from welfare families had low 
levels of achievement is that their mothers were less likely to read to 
them than was the case in non-welfare families. (Women on welfare more 
than half the years since the birth of their first child read to their 
children on average 1.8 days a week compared to an average of 2.8 days 
a week for mothers who were never on welfare despite the fact that 
mothers with significant time on welfare worked less than other 
mothers.)

                                 

    Ms. TUBBS JONES. Will with gentlewoman yield?
    Ms. HART. Actually, no, because I have very little time. 
Sorry about that.
    Ms. TUBBS JONES. I will get some time from someone else. 
Thank you.
    Ms. HART. Okay. I am going to have to make a statement 
first, and then I am going to ask a question if I have time. I 
have spent a significant amount of time as an elected 
legislator on the State level while welfare reform was 
happening and implementing it and, then, of course, now for the 
last 6 years here, and have always held roundtables, small 
intimate groups of people who are involved in social services 
and also those who have been recipients of them, including 
welfare, to come and sit down and tell me how it works for 
them; tell me what the challenges are; tell me what the 
problems are; tell me what works for them; tell me what 
doesn't.
    Invariably the people who have come in to talk to me who 
have moved from welfare to work have had positive things to say 
about their self-esteem and the confidence and hope for their 
future as a result of the welfare reform. I am going to put 
that out there because that is what I see; that is what I hear.
    The negatives that I hear, which we have heard from the 
gentlewoman from Ohio, are that these women come in and want to 
have an education, and I think that is great because I wanted 
to have an education, too, and so does everyone else who is 
struggling and wants to move forward in the world. The 
difference is, I had to work and go to school so that I could 
pay for it. I think that the welfare reform's goal was to help 
people understand that you need to work to get the reward.
    Now that I have said that, I am going to ask Dr. O'Neill to 
reflect upon a little bit of what I said, and please tell me if 
you believe it has resulted in more work and also along with 
that the opportunity to get--to move up the ladder, whether it 
is taking some classes and getting educated or just moving up 
the ladder and getting a better job where you start working.
    Dr. O'NEILL. I teach at a city university, and many of my 
students, I would say most of my students, work, and most of 
them take classes at night. Many of the women have children--
maybe the men have children, too--and it is very difficult, but 
they manage. It takes them longer to get their degrees than 
somebody who is able to go full time during the day.
    I agree with you; there are people struggling to get an 
education, and they do so. Under the welfare reform initiatives 
of the past, the policy was to provide training--various kinds 
of training and education programs, but they had little or no 
impact. It is difficult for the government to know what kind of 
training program somebody needs.
    When you go out to work, you get an idea of what it is you 
might like to do, and you learn what kind of training you would 
need to get there. You might work as a helper at a hospital and 
say, gee, I would really like to be a nurse, a registered 
nurse, and then you would have a goal for yourself. You don't 
know those things if you have never had any exposure to work.
    Knowing that welfare is not a long-term option in itself 
will increase peoples' motivation. They know they are going to 
have to do something to support themselves, and they will think 
more about education. There has been an increase--the education 
of single mothers has increased, just looking over the past 10 
years. I wouldn't be surprised if the daughters growing up in 
homes with former welfare recipients--and I would hope the 
sons, too--are acquiring more education because they see what 
their mothers are going through.
    Ms. HART. I am sure we can actually find some statistics 
that show that, but I see I have run out of time. If you can 
find some.
    Dr. O'NEILL. It doesn't happen overnight.
    Ms. HART. Thank you. I yield back.
    Mr. SHAW. Mr. Thompson.
    Mr. THOMPSON OF CALIFORNIA. Thank you, Mr. Chairman, thank 
the witnesses for coming.
    I am really least concerned about who takes credit for 
doing what and more concerned about making sure that we can 
improve a welfare system that would provide opportunities for 
people to go to work and help for kids who are born into these 
families.
    I did the--I wrote the welfare reform legislation for the 
State of California when welfare reform passed back in the 
early nineties, and I spent a lot of time involving myself, 
trying to figure out as much as I could, spent time with 
welfare recipients. I found that there were three basic types: 
There were those who had fairly good support and were clearly, 
with very little help, going to make it and not only leave 
welfare but stay off of welfare. There were some who didn't 
have the traditional family help and support, but with a little 
help from the government, they had a shot at breaking the cycle 
and getting into the workforce, and maybe if things fell their 
way, they would be able to stay employed and stay off the 
welfare rolls. The third group were people who were--just 
didn't have much of a shot.
    We tried to craft a program in California that helped those 
folks get into the workforce and stay in the workforce. Those 
people who had the least chance at all of becoming employed and 
getting out and staying out, we tried to craft a program that 
would certainly recognize that children shouldn't be punished 
and needed to be given some direction.
    We did it with bipartisan support. It was a Democratic 
legislature, a Republican Governor, and we did it by really 
emphasizing the need for State flexibility, something that has 
worked incredibly well in California.
    The thing that worries me the most is, as we move forward, 
the reduction in that State flexibility. I think States have a 
pretty good handle, and we heard from Governor Thompson today 
who explained this specifically as it pertained to Wisconsin. I 
think States have a pretty good handle on how to make this 
happen. I believe if we truncate that flexibility, that we are 
going to find ourselves in a bigger mess than some suggest we 
were before this all happened.
    The other thing that concerns me greatly is this push to 
increase the work hours and how that relates to communities. I 
represent some who are suffering economically right now. I have 
seen a loss in jobs, no reason of their own. This is something 
that has happened because of other things.
    If there are fewer jobs, there are fewer work 
opportunities. The same thing can be said about some of the 
programs we have put in place to help in regard to substance 
abuse and mental health problems. If we are going to reduce 
those and expect people to go out and become employed, we are 
just absolutely fooling ourselves. We need to be able to 
provide that support.
    It was mentioned, health care, child care, training and 
transportation. If we skimp on this, it is going to come back 
to revisit us in a much more costly manner than it is right 
now.
    So, I think whoever said it earlier, that we need to be 
working together on these things, and my point is, I hope I 
made clearly, that State flexibility and employment 
opportunities--we are just having a press opportunity. I think 
that is a grave mistake.
    I yield the remainder of my time to Ms. Jones.
    Ms. TUBBS JONES. Thank you very much, Mr. Thompson. I 
appreciate it.
    What I wanted to read to you is a story out of the 
Cleveland Plain Dealer today, a study that was done by Margy 
Waller. In her study, she advised on welfare issues to the 
President of the United States, Bill Clinton. What her research 
focused on, was how much Ohio and two other States now spend on 
transportation, day care and other services that help poor 
people get to work.
    In 2004, for example, Ohio spent 63 percent of its welfare 
budget on non-cash services. So, not only is welfare reform not 
lifting Americans out of poverty, it is also keeping them 
dependent on government handouts, she says. National data from 
the U.S. Department of Health and Human Services backs that up. 
In 1997, only 27 percent was spent, but by 2004, 57 percent was 
spent on these non-cash services.
    Another point is that people receiving only those noncash 
benefits, such as day care, are not counted in the State's 
caseload numbers, so when officials say Ohio's caseload dropped 
from 186,000 families in 1996 to 82,000 last year, they are not 
including families who get bus passes, job training or any of 
the many other benefits besides the check.
    I just want to register for the record that it is a fallacy 
to say that there is a drop in numbers, caseloads, when in fact 
people are still receiving benefits, so there are people who 
are still on welfare and working. Thank you.
    Mr. SHAW. Mr. Chocola.
    Mr. CHOCOLA. Thank you, Mr. Chairman. Thank you all for 
being here. Dr. Haskins, I wasn't here when welfare reform was 
passed. Today's hearing reminds me of something I read 
recently: They'll forgive you when you're wrong, but they'll 
never forgive you when you're right.
    I do have an acquaintance that is involved in welfare 
reform and welfare-to-work programs every single day, and that 
is the mom of my chief of staff, and she actually asked me to 
pass along a story and see if she could get your insight on a 
question she had.
    She is the manager of a workforce development program for a 
hospital in Arizona and has oversight responsibilities for a 
welfare-to-work program called Learn, Earn, Advance and Prosper 
(LEAP). She has seen a lot of great success stories. One of 
those was a woman who was living in her car with her four 
children; she had a drug dependency. She entered the 10-week 
job training program under the welfare-to-work program.
    She then became employed by the hospital and continued her 
education and training in an 11-month program and became a 
surgical tech making $14.18 an hour, which was a great success 
story, but unfortunately, it didn't end there.
    After a year on the job, she decided she didn't like her 
work hours, and she had not used up her 5 years of eligibility 
under welfare and went back on welfare because she didn't like 
the hours.
    So, the question that I was asked to pass along is, do any 
of you see a way to strengthen welfare to make sure that those 
situations don't happen where those people that have 
alternatives aren't on the welfare rolls at the expense of 
those that are truly needy and don't have those alternatives?
    Dr. Haskins.
    Dr. HASKINS. I think there is plenty of flexibility in the 
legislation that now exists. The State can require that mother 
to work. She doesn't have a choice; she has to work, or they 
cut off her benefits. That was the thing that was the most 
lacking from AFDC; the State did not have that control. 
Recipients were entitled to benefits, and there was very little 
you could do to force them to lose the benefit. In 36 States 
now, you can lose an entire benefit. In every State, under the 
Federal legislation, you must reduce the benefit if the mother 
refuses to meet the work requirements. So, Arizona could 
control that problem.
    Mr. RECTOR. It is the same thing; the real answer there is 
that you should basically try to have no period in which a 
mother is simply collecting a check and required to do nothing 
in exchange for that check. Once you make the precondition for 
getting the check that you have to be engaged in community 
service or preparation or something, then this woman's options 
are to either work or get on welfare and do something that is 
an awful lot like work. To the extent that you do that, people 
will not stay on welfare; they will take jobs instead. That is 
the core of the reform; that is what drove this reform to 
success.
    The problem is that it takes a lot of bureaucratic work to 
have this continuous engagement. It is hard to do 
administratively. So, in Arizona and most other States, at 
least half the caseload is not doing anything at any given 
point in time. What we have to do is continue to push them so 
that from the minute someone joins the system, the system can 
be more generous.
    Tommy Thompson raised the TANF benefit in his State, but 
from the minute they get on the system, they have to be engaged 
in steps moving toward self-sufficiency. That would change the 
options that that woman had, and would have moved her in a much 
more positive direction.
    Mr. CHOCOLA. Anybody else?
    Bishop RILEY. It would be helpful to know what caused the 
hours to be difficult or disagreeable.
    Mr. CHOCOLA. I don't have that specific information.
    Bishop RILEY. I can imagine that that created concerns at 
home with her family. I think we really need to know more about 
what caused that person to drop out.
    Mr. CHOCOLA. I think we have learned a lot of lessons in 
welfare reform. Do any of you have any suggestion on how we 
could apply those lessons to other government reforms we need 
to implement, such as Medicare, Medicaid?
    Mr. Rector, do you have any ideas?
    Mr. RECTOR. Absolutely. One thing I would like to say is, I 
would commend this Committee because this Committee did welfare 
reform, but this Committee only reformed one of 50 major means-
tested programs. The real failure in welfare reform was that 
the same reforms that Ways and Means did on AFDC should have 
been done in food stamps; they should have been done in public 
housing, which covers--in many cases, it is the same person 
getting both food stamps and AFDC.
    We made AFDC into a work-based system with reciprocal 
obligations where we said: We want to aid you; in fact, we can 
even be more generous in aiding you, but we expect you to take 
activities to become self-sufficient. We have not done that in 
food stamps, and we have not done that in public housing, and 
that is really the next step of reform, as well as really 
taking the idea of trying to help couples have healthy 
marriages. Those are the two next steps in reform.
    Mr. SHAW. The time of the gentleman has expired.
    Mr. Rangel.
    Mr. RANGEL. Thank you, Mr. Chairman. Welcome back, Dr. 
Haskins. Good to see you.
    Dr. HASKINS. Mr. Rangel, good to see you, too.
    Mr. RANGEL. If I recall, you were chief of staff in the 
Subcommittee on Welfare that drafted this legislation. Why do 
you think you are here this afternoon? What is this all about? 
You worked with this House; there is no legislation before us, 
no proposals here. Why are we here now before the election?
    Dr. HASKINS. I think there is an aspect of a 10-year 
celebration, which is appropriate, but if all the witnesses and 
as far as I can tell most of the witnesses have done what I 
did, which is seize the occasion to mention things that need to 
be changed as well as things that are good; they are not 
incompatible.
    Mr. RANGEL. Do you think it is time for a celebration?
    Dr. HASKINS. Oh, absolutely. I think the bill has been very 
successful, and it can be more successful. There are still 
problems remaining.
    Mr. RANGEL. Was it part of the objectives of the majority 
at that time to end aid to dependent children as an 
entitlement?
    Dr. HASKINS. Yes.
    Mr. RANGEL. Then you really don't believe that the Federal 
Government should have the responsibility for mothers and 
children.
    Dr. HASKINS. Oh, no. That is a leap that I totally disagree 
with, and I have never said anything or written anything that 
would be consistent with that claim. The Federal Government 
still has the responsibility but does not have the 
responsibility to maintain people when they don't have to work.
    Mr. RANGEL. No, no. I am talking about, if you didn't 
believe it should be an entitlement, that means the person is 
not entitled under Federal laws; we can tell them----
    Dr. HASKINS. That is correct. Two points.
    Mr. RANGEL. Basically, did the basic responsibility not 
shift to local and State government?
    Dr. HASKINS. We still have Medicaid, still have food 
stamps, school lunch. We still have a lot of entitlement 
programs----
    Mr. RANGEL. I am talking about welfare, Doctor.
    Dr. HASKINS. They are means-tested programs.
    Mr. RANGEL. Don't you think that should be ended, too?
    Dr. HASKINS. No, Mr. Rangel, it was a deal. You are 
familiar with deals. We will keep an entitlement for Medicaid, 
for food stamps, but in the cash program, if you want the 
benefit, you have to work, end of story.
    Mr. RANGEL. You are talking faster than I can think. Isn't 
the ultimate goal to end entitlements?
    Dr. HASKINS. No, no. The ultimate goal was to end the 
entitlement to the cash benefit.
    Mr. RANGEL. Forget the deal. Do you think Medicare should 
continue to be an entitlement?
    Dr. HASKINS. Yes.
    Mr. RANGEL. Medicaid?
    Dr. HASKINS. Yes.
    Mr. RANGEL. Welfare an entitlement.
    Dr. HASKINS. What do you mean by welfare? Not cash?
    Mr. RANGEL. Aid to dependent children.
    Dr. HASKINS. No.
    Mr. RANGEL. Okay. In other words, though, now we have 
shifted the responsibility to the State government, and we will 
decide how much money and under what conditions we give them. 
The reason why I am not prepared for a celebration is that 
everyone agrees that while you tackle one part of how families 
receive resources, no one can challenge the fact that poverty, 
living conditions, lack of education, unemployability, drugs 
and all of these things are part of this problem; and even 
though our Committee did not have jurisdiction, it is clear to 
me--and I will go to Dr. Rector--that if you are so concerned 
about kids having kids, isn't there a relationship, Doctor, 
between poverty and kids having kids, whether they are black or 
white? Isn't there a relationship between whether the parents 
had kids out of wedlock, isn't there a relationship between 
poor communities and bad schools with kids being out of 
wedlock? Someone said it was all morals, but isn't there 
statistically a connection between these things?
    Mr. RECTOR. There is a strong connection between low levels 
of a woman's education and low socio-economic status and having 
children out of wedlock.
    Mr. RANGEL. Kids who don't believe they have a future are 
more inclined to do these things?
    Mr. RECTOR. I think it is a little more complicated than 
that, and I would really commend to you this book by Kathryn 
Edin at Rutgers called, Promises I Can Keep.
    Mr. RANGEL. Wouldn't she say----
    Mr. RECTOR. What she says is basically that these young 
women, white, black and Hispanic, are very, very pro-child. 
They have children as young adults, and it is the most 
important thing in the world to them.
    Mr. RANGEL. Of course. My time is limited, but that is not 
inconsistent with what I am saying. I have seen some of these 
stupid kids. They want kids like they are dolls. They are not 
going to lose anything. There is no job to be lost. There is no 
college degree that is going to set them behind. So, we are 
saying the same thing. What I am hoping we can do, however, is 
to find some way, since you don't have just 2 years, as we do, 
and you don't have limited jurisdiction, to look at the broader 
question to see what we can do beyond welfare to avoid people 
from having to have the children to be on welfare.
    To me, you all know that poverty and lack of education play 
a big role, and I don't know whether you were here when Speaker 
Gingrich was here, but I think the best thing that came out of 
this Committee was to talk about poverty.
    Let me thank the religious leaders because sometimes, 
Bishop, this St. Matthews thing about the less among us when we 
are dealing with the moral majority is not included--we need a 
lot of help here from our spiritual leaders, a lot of help on 
the question of the lesser of our brothers and sisters. It 
could help us legislatively, and I thank you for your 
courageous presentation today.
    Mr. SHAW. Mr. Levin.
    Mr. LEVIN. As a gentleman who was actively involved in 
welfare reform 10 years ago, I want to say something, why I 
object to the partisan umbrella under which that has been put.
    Dr. Haskins, you and I talked 10 years ago. I just wanted 
to review the changes that were made from the bill that was 
vetoed to the bill that was signed. You minimize it; $4 billion 
in child care; that is not minimal. The provision essentially 
block granting food stamps was dropped. The provision that 
block granted school lunch programs was dropped. The two-tier 
system for SSI was dropped. The provisions regarding Medicaid 
were changed.
    So, when Mr. English asked you the question, I just want to 
tell you point blank that I think you are going along with this 
effort to minimize the efforts that were made by the President 
and others to make some substantive, significant changes in the 
bill that he vetoed. I think that effort sells that effort 
short, and it sells you short.
    Let me give you have my second objection to the way this--
--
    Dr. HASKINS. Can I make a brief comment on that?
    Mr. LEVIN. Very brief because I want to make another 
comment.
    Dr. HASKINS. Thirty seconds: First of all, I think most of 
the changes you mentioned were made before it got to the 
President. A number of changes were made in the Senate, 
especially about the food stamp----
    Mr. LEVIN. After the veto.
    Dr. HASKINS. No, no, before the veto. We will go look it 
up, but I think that is correct. Second, this is the main 
point; I wrote a book about this. I gave the President immense 
credit at every stage along the way. I do not minimize his 
credit whatsoever.
    Mr. LEVIN. You certainly minimized his and other efforts in 
your answer to Phil English, and it is very obvious--it was 
painful for me as someone who respected your interests to hear 
you go along with it. You don't need to do that. You are no 
longer a Senate staffer or a House staffer.
    Second, there is a legitimate issue here, and that is 
whether we need a second step in welfare reform and what it 
should be and whether there needs to be, now, a greater 
emphasis on as people move from welfare to work, they move out 
of poverty. There is a difference of opinion there.
    Those of us on the Democratic side, however we voted 10 
years ago, strongly feel that the facts show that there has to 
be a much greater emphasis, as people move from welfare to 
work, that they move out of poverty.
    That is why in our bill we had different provisions for 
education and different provisions for medical care and more 
money for child care. I just want to refer to this data, and 
there are others. This is from the new hires database: 60 to 70 
percent of the people who move from welfare to work earn less 
than 42 percent of the median average wage in their States.
    There is a problem, as people move from welfare to work, 
whether they are going to become self-sufficient, income-wise, 
or whether simply you need to say to them, get to work and 
automatically something will happen. I think the data and the 
experience shows that it isn't automatic, and there have to be 
some other support systems. There is a legitimate difference 
there.
    To celebrate, I think, in addition to marking the progress 
to date, we have to tackle the challenge ahead, and there is a 
difference of opinion here as to whether we should do that and 
how we should do it. I say forthrightly that there is a 
challenge ahead; there has to be a second stage. That has to be 
the opportunity for people to move up the ladder and not simply 
stay on the first rung. That isn't good enough; that isn't good 
enough.
    I hope this Committee in the future will be able to do 
something we haven't done on a bipartisan basis. There was zero 
consultation between the majority and the minority on the bill 
that passed a few months ago, zilch, zilch, because there has 
been an effort to twist welfare reform for partisan purposes, 
instead of taking the next steps to make it work better.
    Mr. SHAW. Mr. McDermott.
    Mr. MCDERMOTT. Thank you, Mr. Chairman.
    I can't help thinking about a book I read about the poor 
houses during the famine in Ireland when I listen to you, Mr. 
Rector. Sounds to me like that is what we ought to do is put 
them in there and separate the men from the women. They didn't 
get any kids born that way. It was really a very effective 
system.
    I can't help but listen to Bishop Riley, and when you say, 
it takes $17 an hour to live at a minimum level in New Jersey.
    Ms. Parrott, what I want to know from you is, we have had 
increasing child poverty for the last 4 years under this 
Administration, and in this budget, we cut almost $11, $12 
billion from student loans; we cut $7 billion from Medicaid and 
CHIP.
    Tell me what needs to be done to make this system begin to 
take children out of poverty, since that is really the focus 
here. It is not bad mothers and teenage pregnancy and all that 
stuff. That is all irrelevant. These are kids who need some 
kind of something, and we leave them in poverty. How do we get 
them out of it given the system that is on the ground today? 
What should be the three or four things that you would put at 
the top of your list?
    Ms. PARROTT. I think there are pretty clearly two groups--
and people do sometimes move between these groups--that we 
really need to think about when it comes to poor families with 
children. One is the group of people that we have been talking 
about most recently in the exchange, which are low-income 
working families, working poor families, where parents work and 
work relatively consistently, although most working poor 
families have periods of unemployment and they remain poor, 
however one defines that, below poverty, just below the poverty 
line and really struggle to make ends meet.
    I think there are ways we can strengthen the work support 
system so that they are better able to make ends meet and have 
more stability for their children, things like ensuring that 
families have the child care they need, strengthening the EITC, 
strengthening minimum wage.
    Remember that, in the nineties, the goal was to have full-
time minimum wage work, plus the EITC, plus food stamps bring a 
family to the poverty line.
    Mr. MCDERMOTT. What would the minimum wage be today if it 
had been indexed to inflation like our salary is in the 
Congress? We get a COLA every year. What would it have been?
    Ms. PARROTT. I didn't bring the numbers, but I am happy to 
provide them to you and the Committee.
    Because of the erosion in the minimum wage, that full-time 
minimum wage work combined with EITC and food stamps now leaves 
a family of four below the poverty line. We have missed that 
target.
    I think there are things in the work support system--and 
the other thing I would mention that is quite important is 
health care for parents. We have extended Medicaid eligibility 
to children in working poor families, and that has been a major 
improvement in our work support system. It is still the case in 
most States that parents, when they leave welfare for work, 
after a period of time aren't eligible for health care 
coverage. That means that they don't have access to the kinds 
of health care they need to remain productive employees in some 
circumstances.
    Mr. MCDERMOTT. You mean, there is not an entitlement across 
the country for adults to receive Medicaid, that that is done 
State by State, as Mr. Rector says is the way to do it?
    Ms. PARROTT. The eligibility threshold is done State by 
State. In most States, the eligibility threshold means you have 
to be well below the poverty line, often below 50 percent of 
the poverty line, in order to qualify for Medicaid. In fact, 
some States have started scaling back health care coverage for 
parents under budget pressure. That is certainly, I think, a 
big hole in our work support system.
    I think there are two other things that are important to 
keep in mind when thinking about next steps, and one is this 
issue of an economy that increasingly demands skills. Some of 
you may have seen the Washington Post story in the last couple 
of days, maybe it was last week, that talked about--at least in 
this area and it is true around the country--the increasing 
extent to which the economy demands skills, and people without 
skills fall further and further behind.
    So, I think that we have to take a step back and say, how 
do we create a system, a work development system that 
recognizes not everybody got the education they should have 
when they were children, not everybody went to college, for a 
whole variety of reasons, and how do we get people skills so 
they can succeed in a high-skill-demand economy? I think there 
is a lot of work to be done around that.
    I do want to take a moment, though, to talk about a second 
group of families, and these are the families that Dr. Haskins 
mentioned and the people really left behind, the people that 
are doing worse.
    I think we now have a lot of research to show what kinds of 
problems those families face. Very serious disabilities in some 
cases, very low cognitive functioning, substance abuse issues, 
domestic violence issues and that both the TANF system as well 
as other supports need to take those problems seriously, and 
States need both resources and flexibility to develop programs 
that make sense for those families and not have a one-size-
fits-all ``everybody goes into this work program or you are 
off;'' that kind of structure is what leaves very poor families 
both without work and without welfare.
    Mr. MCDERMOTT. Is that the work incentive block grant you 
are talking about or the social services block grant that we 
have cut? Are those the issues that you think should be 
increased or the money should be put back in?
    Ms. PARROTT. I think there are several places where those 
most disadvantaged families could get more help. One is through 
a more flexible TANF structure, so States could use their TANF 
dollars in that way. The social services is certainly a place 
where some of those social services have historically been 
funded out of. On the training and workforce development side, 
it has seen significant budget cuts over time.
    Mr. MCDERMOTT. Thank you, Mr. Chairman.
    Mr. SHAW. The time of the gentleman has expired.
    Ms. Parrott, in reviewing your testimony before the Center 
on Budget and Policy Priorities, you stated that most TANF 
recipients who find jobs are financially better off than when 
they were on TANF. You also stated that the wages of former 
TANF recipients were typically $7 to $8 an hour, well above the 
current minimum wage of $5.15.
    You further went on to testify that child poverty overall 
and poverty among single-mother families fell during the 
19nineties and overall child poverty remains lower today than 
in the mid nineties.
    In 1993, some 22--I am still quoting from you--22.5 percent 
of the children were poor, but by 2004, poverty was 7.5 
percent, a 22-percent decline during the period which included 
a recession.
    Those are your words, not mine, but I compliment you for 
making that observation then which emphasizes other than what 
you have testified to today.
    Also, I think that there is a misimpression out there that 
we have slashed welfare benefits. In 1995, the typical family 
was receiving $7,000. Today, that is up to $16,000. One of the 
big differences is that we are investing in people, investing 
in their future; we are not just subsidizing them. We are 
teaching them to fish, not just handing them fish and requiring 
they do not have a fishing poll. We have now $4 billion of 
unspent TANF funds that are in the States awaiting to be spent.
    The problem is--and I am troubled by the accusations of 
this being a partisan hearing. The minority party was entitled 
to invite anyone they wanted to testify on this panel, and they 
picked two very fine witnesses, Bishop Riley and Ms. Parrott. 
Then we get criticized for not inviting Mrs. Clinton. She 
certainly would have been welcome, and I think actually I would 
love to have seen President Clinton here.
    I think I have tried to make it clear all the way through 
this hearing that this was a bipartisan effort as it ended up. 
It started as a partisan effort; there was no question about 
it. The Republicans pushed it, and in Committee, we were 
blocked by the Democrats.
    That wasn't the final outcome. When you are talking about 
the success of a program that many of the Members of this 
Committee eventually voted for and supported and have talked 
about, that that is a partisan issue? We went through this 
debate yesterday on the floor, and I thought it was absolutely 
ridiculous because the bill that was on the floor yesterday 
said nothing about the Republican party, said nothing about the 
Democrat party, didn't trash President Clinton. As a matter of 
fact, I was very generous to him in my statement. I managed the 
time, and I was also very generous to him today in this 
hearing. Where in the world people get so defensive, I really 
don't know. I think it is indicative of the atmosphere that is 
up here on the Hill today, and I think it is something that we 
need to change because we are talking about people that 
Republicans and Democrats care about and care about deeply. We 
viewed welfare reform as a rescue mission, nothing more, 
nothing less. We did accomplish that.
    Mr. Becerra referred to this as ``mission accomplished.'' 
Yes, we accomplished the first part of that, but the terrorists 
are still out there, just as in Iraq. What we need to do is to 
work together and pull together to tie these strings up. This 
hearing wasn't captioned I don't believe as a celebration; it 
simply was a meeting to review the outcomes of the 1996 welfare 
reforms 10 years later.
    It is something we should do on this Committee more often. 
We should go back and review just about everything this 
Committee does, whether it be tax policy or whatever it is, and 
we should meet and see what can bring us together rather than 
split us.
    When we finally find something that both parties want to 
take credit for, for gosh sakes, what are we fighting about? We 
may have different views as to where we should go from here, 
but welfare reform has been a success, and it has been a great 
rescue program that has given people credit, given people 
control over their lives that they didn't have.
    So, I think we need to do a better job in communicating 
with each other.
    Dr. Haskins, I would like to give you the last word. You 
are very much responsible for why we are today.
    Dr. HASKINS. Well, thank you for that. I would say the most 
important thing to say is that this--you can call it 
celebration or whatever--it is a very important function in 
Committees to provide oversight, and I think most Committees do 
far too little of it, and this law above all others is the most 
important welfare reform, most important social policy of our 
lifetime. So, the Committee has an obligation to look back over 
it.
    Then I would conclude by saying that there is no 
legislation that has been as successful as welfare reform. It 
has done everything that its authors intended it to do. It was 
passed on a greater bipartisan basis than the Medicaid and 
Medicare legislation in 1965. So, I think celebration is 
appropriate, notwithstanding the fact that there is still a lot 
left to do.
    Mr. SHAW. Thank you, Dr. Haskins. Thank you all for being 
here today. Your testimony was very helpful.
    We are adjourned.
    [Whereupon, at 2:03 p.m., the Committee was adjourned.]
    [Submissions for the record follow:]
    Statement of Russell Sykes, Office of Temporary and Disability 
                      Assistance, Albany, New York
The Success of Welfare Reform in New York State
    Chairman Thomas and distinguished members of the Committee on Ways 
and Means, thank you for the opportunity to provide testimony on the 
unprecedented success that New York State has achieved under welfare 
reform.
    Under Governor Pataki's leadership, New York State has actively 
applied the principles of personal responsibility through 
implementation of a ``require work--reward work'' philosophy, even 
before it became a federal mandate through the 1996 Personal 
Responsibility and Work Opportunities Reconciliation Act. This 
philosophy is put into practice through the following primary elements 
of welfare reform in New York State:
    First, we put the primary focus on work, rather than dependency and 
entitlement to benefits. Cash assistance is intended to be temporary 
and each adult is expected to participate in work activities and other 
services to support quick entry into the workforce.
    Second, in order to ensure that work is rewarded, and that those 
who go to work are better off than they were on welfare, we strongly 
emphasize supports for those who leave welfare for work. These supports 
include a generous earned income tax credit to supplement low wages and 
significant investments in child care, transportation and health care 
coverage.
    Last, New York has aggressively improved our performance in 
collecting child support from non-custodial parents. Far too many 
children in New York have had to depend on the earnings of just one 
parent, which is too often not sufficient to meet even basic needs. 
Economic and other types of support for these children from non-
custodial parents--mostly fathers--are key to their well-being.
    New York's ``require work-reward work'' philosophy has been 
validated by remarkable results and continues to be the underpinning 
for the major success of current welfare-to-work efforts along with 
numerous policy changes and the reinvestment of TANF block grant funds 
to spur ongoing caseload declines, help more low-income female heads of 
household to enter and retain employment and reduce both overall and 
child poverty.
    I would like to take this opportunity to provide a brief summary of 
some of the achievements that New York State has accomplished under 
welfare reform.
New York's `work first' approach has resulted in a historic reduction 
        in welfare dependence.
    When the Pataki Administration came into office in January 1995, 
1,643,832 individuals in New York State received welfare cash 
assistance. This translated into roughly one in twelve individuals 
statewide who were receiving some form of welfare . . . and in NYC, it 
was one in seven.

[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

    Today, the number of individuals receiving case assistance has 
fallen by over one million to 577,246individuals, a reduction of 64.9 
percent. We can proudly state that only 1 in 32 people statewide 
receive welfare benefits, and in NYC only 1 in 20. People are moving 
away from a dependence on government and towards self reliance and 
productivity. I am please to report that the number of individuals 
dependent on welfare continues to decline.
Require Work, Reward Work: New York consistently emphasizes the 
        importance of work.
    Prior to welfare reform, work was neither expected nor rewarded in 
the old system. Few families on welfare had earned income.
    Today, those who can work must do so as soon as practicable. Those 
who do not immediately secure employment are required to participate in 
work preparation activities that incorporate work experience with other 
program supports. Lastly, those who are temporarily unable to work are 
expected to participate in rehabilitative services to restore the 
ability to work.
    Under the old welfare system, less than 10 % of families on welfare 
in New York State had a parent or other adult engaged in work 
activities, including education, work experience or job search. Today, 
more than 45% of families receiving welfare are engaged in work 
activities, including employment.
    In New York State, almost 20% of adult individuals in families 
receiving temporary assistance have been determined unable to 
participate in work requirements due to a medical or mental health 
condition. However, as I mentioned earlier, these individuals are not 
ignored. We expect those who can benefit from rehabilitation or 
treatment to participate in such treatment to improve their ability to 
participate in work activities and to become employed.
    New York has also achieved a significant increase in the labor 
force participation and employment rates of single mothers, 
particularly single mothers with a strong likelihood of receiving 
welfare. As welfare use declined, work rates for women with children 
rose dramatically.

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    The work rate of single mothers in New York State, a group with 
high welfare rates, increased from a three year moving average of 54 
percent in 1994, to 73 percent in 2004, a 35 percent increase in the 
employment rate of single mothers.
    For never married single mothers--a group with a very high 
likelihood of receiving welfare and a low likelihood of working in 
1994--work rates increased from 41 percent in 1994 to 71.5 percent in 
2005, an increase of 74 percent in their employment rates.
    Work has truly become the cultural expectation for those on welfare 
as the receipt of assistance has transformed from a permanent, 
dependency-based entitlement to a temporary benefit provided to those 
on the road to self--sufficiency.
Once employed, New York continued to support working families
    New York's ``require work, reward work'' philosophy also provides 
significant ongoing income support to working families, most notably 
through the federal and state Earned Income Tax Credit (EITC) and child 
care subsidies to help ensure those who work are able to meet basic 
needs and are indeed better off than those on welfare.
    Families have been able to make the transition to work as a result 
of our emphasis on work supports and strategies that decrease the need 
for welfare benefits. Those who are receiving assistance and enter the 
workforce receive a generous earned income disregard which enables the 
family to retain almost 50% of earnings before the welfare grant is 
reduced. This enhancement strongly encourages parents to work and helps 
families become economically independent as they work their way off 
welfare. The fact that over 20% of those still receiving cash 
assistance have earnings is evidence that work supports encourage 
individuals to enter the workforce.
    In addition to the earned income disregard, low-income families 
that work are also eligible for a range of work supports that they may 
receive without the trappings of welfare. These supports include the:

      EITC: New York's Earned Income Tax credits claimed rose 
from $78M in Tax Year 1994 to $681.4 M in Tax Year 2003. In the same 
period the number of claimants rose from 950,000 to 1,348,000. The 
maximum state benefit for a family with 2 or more children increased 
from $190 in 1994 to $1,320 in 2005. This is in addition to the maximum 
federal benefit for these same families of $4,400. This maximum 
combined EITC turns a $6.75/hour job into a $9.68/hr. job in New York
      Child Care: Last year NY spent $867 million on child care 
subsidies for NY families.
      Food Stamps: Federal food stamp benefits are an important 
tool to supplement the income of working families and New York has 
promoted the availability of such benefits. Since 2001, the number of 
food stamp recipients who do not receive cash assistance has increased 
by more than 365,000 or 77%.
      TANF funds are also appropriated each year to support 
State administered welfare-to-work (WTW) initiatives that support a 
range of services that help individuals obtain or maintain employment. 
Over 300 contracts are in place which provide a variety of WTW 
programs, activities and services that combine work or work experience 
with services including adult basic education and training, offer 
employer wage subsidies, or provide auto loans and car repairs for 
employed individuals These contracts provide an important resource for 
local districts seeking to engage public assistance families in 
activities that we lead to employment and independence, while counting 
for federal participation rate purposes. Further, as part of their plan 
for self-sufficiency, former public assistance recipients who have 
gained employment can avail themselves of numerous services under these 
contracts during this transition period to promote job retention and 
advancement. And, many programs are available to low-income families 
not receiving welfare so they may upgrade basic skills.
Reduction in Child Poverty
    In addition to significant reductions in the number of individuals 
receiving cash assistance and increases in engagement, the large-scale 
substitution of work for welfare by single mothers has had another 
large and significant effect: major reductions in poverty for children 
in New York State.

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    The official poverty rate for children in female-headed families 
declined from 57.7 percent in 1994 to 43.9 percent in 2004, a decline 
of 14 percentage points or 24% lower than the rate in 1994.
    For all children, the official poverty rate declined from 26.2 
percent in 1994 to 20.5 percent in 2004, a decline of 6 percentage 
points or 22% lower than the rate in 1994.
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Increase in Child Support Collections
    While many individuals are aware of the major changes in welfare 
use and labor force participation that have occurred as a result of 
reform, few are aware of the major improvements that have occurred in 
New York's ability to collect child support.
    Child support collections, which help keep families out of poverty 
and off of welfare, have risen steadily since 1995. Last year, a record 
$1.5 billion in child support was collected, with more than a half-
billion dollars going to 226,000 families formerly on public 
assistance. There has also been a notable increase of more than $1,100 
in average yearly collections per case.

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    Additionally, the trends in support order establishment and 
paternity establishment show substantial improvements. Support order 
establishments have increased from 56 percent in 1995 to 78 percent in 
2005.

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    Paternity establishments in New York have increased dramatically, 
from 45 percent in 1995 to 77 percent in 2005.
Increased Federal Requirements under TANF Reauthorization
    The evidence I have presented today is encouraging. The work-
focused welfare system of today is clearly a major improvement over the 
system of the past, which focused mainly on maintaining eligibility for 
aid. In the history of major government attempts to fight poverty, the 
welfare reforms initiated in 1995 clearly stand out as one of 
government's true successes.
    The success of these reforms has benefited hundreds of thousands of 
children and families in our state.
    New York has made great strides in assisting families to become 
self-sufficient through employment and achieving federal work 
participation rates and we have no quarrel with the philosophy of 
recently enacted TANF reauthorization or published interim final TANF 
regulations that urge us to dig deeper into our remaining caseload to 
extend the similar benefits of work and work supports. However, we are 
concerned with certain aspects of the interim final TANF regulations 
that unnecessarily limit the very flexibility that states have utilized 
to vastly reduce caseloads over the past ten years and move more female 
heads of households into the labor market than ever before. The failure 
to account for the necessary interaction among some of the core work 
activities for instance could pose problems (e.g. the fact that 
incidental job search outside of the 4-6 week limits is and should be 
an embedded activity in work experience and community service). In some 
instances HHS has also too narrowly defined their regulatory authority 
under the DRA and therefore not looked at areas such as penalty 
provisions and relief. We are concerned that by not addressing 
necessary changes in this and several other areas the overall TANF 
regulations may become incongruent with current realities.
    We agree that more can and should be done to improve our ability to 
help families transition from welfare to work, both because it makes 
them better off economically and will help the state meet increased 
federal participation rates. We are committed to achieving these 
federal requirements and are engaged currently in an ongoing dialogue 
with DHHS in order to clarify the intent of several areas of the 
interim regulations. I would encourage you to ensure that the 
requirements imposed by the interim final TANF regulations support 
States' efforts to help needy families and maintain the success that 
welfare reform has had to date. We are optimistic that we will meet the 
All Families Work Rate and will share our comments to HHS on the 
interim final TANF regulations with you when they are finalized.
    I also respectfully request that Congress reconsider the benefit of 
a separate two-parent participation rate, especially a ninety percent 
participation rate which is almost certainly unattainable without a 
significant caseload reduction credit. We should support marriage with 
the same vigor we have supported work and not impose more stringent 
program requirements on two-parent families.
    As a nation, each state, each locality and millions of families 
have benefited from the changes prompted by the welfare reform efforts 
of the past ten years. The results have led to unprecedented cultural 
changes regarding how temporary welfare benefits are delivered and the 
expectations we have of those who receive such benefits. While there is 
always room for further improvement, the outcomes to date under TANF 
are undeniably a success. I urge Congress to ensure continued program 
and funding flexibility to support the ability of states to continue 
and expand upon of these historic successes.
    Thank you for this opportunity to highlight for the record some of 
the success that New York State under Governor Pataki's leadership has 
achieved under the initial stage of welfare reform.

                                 

                       United States Conference of Catholic Bishops
                                                     August 2, 2006
Representative Bill Thomas, Chairman
Ways and Means Committee
United States House of Representatives
Washington, DC 20515

Dear Chairman Thomas:

    On behalf of the United States Conference of Catholic Bishops, I am 
pleased to submit these comments to be part of the record of the Ways 
and Means Committee's hearing on welfare reform and the Temporary 
Assistance for Needy Families (TANF) program. I would like to thank you 
and your committee for continuing to examine this very important topic. 
The welfare policies Congress helps to shape are an important part of 
our nation's effort to serve the common good by addressing the needs of 
the most vulnerable families among us.
    Our nation, the most prosperous on earth, as a whole is blessed to 
enjoy material plenty--but too many among us still experience want in 
the midst of plenty. Too often, overcoming poverty has been neglected 
in the national dialogue. Our nation must focus on tackling the 
persistent problem of poverty, and that is the spirit which should 
animate our welfare policy.
    As the U.S. bishops wrote in their statement, A Place at the Table, 
to truly address poverty in our nation we must recognize and build on 
the essential roles and responsibilities of four institutions. Debates 
about how to address poverty in the United States too often focus on 
just one of these four foundations, but all are essential:

      Families and individuals must work for and respect their 
own dignity, rights and responsibilities and those of others.
      Community organizations and faith-based institutions help 
families by helping them make good choices, assisting with material 
needs and working to overcome discrimination and injustice.
      The private sector--the marketplace and institutions of 
business, labor and commerce--contributes to the common good through 
production and the creation of jobs, and should do so in a way that 
reflects our society's values and priorities. A key measure of the 
marketplace is whether it provides work at adequate wages, especially 
for those on the margins of economic life.
      Finally, government has an essential role and 
responsibility in serving the common good, providing a safety net for 
the vulnerable, helping to overcome injustice and addressing problems 
beyond the capacity of individual or community efforts

    The bishops approach TANF in the context of the Church's experience 
living with, serving, and including among its members the poor and 
vulnerable. We meet the poor in our parishes where we worship together 
and work together for the betterment of our communities. The Catholic 
Church is the largest non-governmental provider of human services to 
poor families, through our soup kitchens, shelters and Catholic 
Charities agencies. Our community has lived with the realities of 
welfare reform, encouraging and helping people to make the transition 
from welfare to work. But we also live with those who are left behind, 
who turn to our parishes, eat in our soup kitchens, sleep in our 
shelters and ask for our help.
    Our advocacy on behalf of poor families, including welfare reform, 
reflects both our experience in serving the poor and Catholic social 
doctrine. The Catholic community has consistently worked for welfare 
reform policies which protect human life and dignity; strengthen family 
life; encourage and reward work; preserve a safety net for the 
vulnerable; build public/private partnerships to overcome poverty; and 
invest in human dignity.
    Experts reviewing the impact of welfare reform over the past ten 
years can produce numbers backing up both the claims that reform was a 
wonderful success or a failure. Welfare caseloads have decreased 
dramatically, and both poverty rates and single mother employment rates 
have improved over ten years. On the other hand, not all those who 
leave welfare have gone on to find jobs. Child poverty has increased 
since 2000, and the number of children in deep poverty--below 50% of 
poverty--has also gone up. Single mother employment rates have also 
gone down recently. And while welfare reform is surely part of the 
reason for some of the success, the strong economy of the 1990s also 
played a part.
    Statistics can be useful, but we must always look behind them and 
keep in mind the real families, real individuals, and real children 
whose lives have been and will be deeply affected by welfare policy. 
Policy makers face an ongoing opportunity and challenge: to tackle the 
persistent problem of poverty and the tragedy of so many families 
living without hope in our nation. The goals of national welfare policy 
should be to reduce poverty in this, the most prosperous of nations, 
and to improve the lives of our children.
    The recent changes in TANF did include some positive steps forward. 
The U.S. bishops have supported funding for programs to support healthy 
marriages and strong families; research and technical assistance 
focusing on family formation and healthy marriage activities; and 
effective fatherhood programs, which was passed into law. The TANF 
changes also included some additional funding for child care, and did 
not increase the weekly work hours required of recipients.
    However, there is room for more improvements in TANF. The 
additional child care funding will not be enough to meet the need. 
Changes in work rules could put additional burdens on both states and 
families, especially two-parent families. The U.S. bishops will 
continue to work to end the five-year waiting period imposed before 
legal immigrants can be eligible to receive TANF.
    What is needed now is a broad commitment, by all our society's 
institutions, to combat poverty. TANF is an important part of that 
commitment; so is making the refundable child tax credit available to 
more low-income working families, making sure all families eligible for 
the Earned Income Tax Credit receive it, and maintaining a strong food 
stamps program. We also need to find ways to create jobs that support a 
family; to increase affordable housing; and to ensure that everyone has 
access to health care. Families and individuals, government and the 
private sector, faith-based organizations and community groups, must 
strive in their own realms and work together towards the goal of ending 
poverty in our nation. We urge Congress to take the lead and forge a 
bipartisan dialogue that looks at both new and familiar ideas for 
fighting poverty.
    Our faith teaches that the moral measure of our society is how we 
treat the least among us (Mt. 25). Our national policies, including 
welfare policies, should be judged on the basis of their effectiveness 
in alleviating the poverty of our sisters and brothers and in helping 
their families to live in dignity. We look forward to working with 
Congress to achieve these goals.
            Sincerely,
                       Most Reverend Nicholas DiMarzio, Ph.D., D.D.
                                                 Bishop of Brooklyn
                                Chairman, Domestic Policy Committee

                                  
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