States Handled Welfare Reform, So Why Not Use Them Again?

The Congress is about to reauthorize for at least five more years the hugely successful welfare reform of 1996 with some useful changes proposed by President Bush. When it was about to be enacted in 1996 its opponents such as Sen. Daniel Patrick Moynihan (D.-N.Y.) and the Urban Institute predicted that “. . . within a year there will be a million children starving in the streets,” and that states will “. . . race to the bottom.”

We who were proposing the historic reform challenged our opponents to name the governor, legislators, and states that would send their poor children to the streets to starve. Well, it is nearly seven years later and children are not starving in the streets, the nation’s family welfare rolls have been cut in half and most mothers are supporting themselves and their children. The states have proven that they can do the job if given the responsibility.

No other country in the world has as its basis a government that was established by independent states and has grown by adding states with the same authority as the original 13. Each state has a chief executive, and a legislature elected by its citizens and a court system responsible to its people. They have power to raise taxes and pass all laws not in conflict with the Constitution.

They are close to the people and are in a much better position to determine need, enforce work requirements, and determine disability. So let’s use them to follow up on family welfare reform by giving them the authority, responsibility and financial incentive to reform the other major welfare programs. These programs are: Medicaid, food stamps, and the Supplemental Security Income Program for the Disabled (SSID). All are open-ended entitlement programs and contain much waste fraud and abuse.

Solution for Medicaid

Medicaid should not be confused with Medicare. Medicaid provides health care for welfare families and for persons who are on welfare because of their age or disability and have little or no income. Medicare is a health care insurance program for the employed or retired after they reach the age of 65 or become disabled. They have contributed to Medicare throughout their working life with mandatory withholdings from their wages.

Medicare is administered by the federal government. Medicaid is administered by the states and paid for by an open-ended federal-state matching program. The governors are screaming for increased federal matching for Medicaid spending. This would be the worst way to go. Federal matching simply causes more, not less, state spending since the more the state spends the more federal money flows in.

The solution, as with family welfare, is to replace Medicaid with finite block grants to the states so that the states will have a financial incentive to ensure that waste is reduced or eliminated. Federal mandates should be removed or reduced to give states the ability to design systems to meet their individual needs. The money they save will stay in the state as a reserve against bad times or be used for other necessary state health needs.

Controlling Food Stamps

The food stamp program is worse. The federal government pays the full cost of food stamps and the states administer the program, paying half of the administrative costs. There is no incentive to eliminate fraud and abuse, since all the money saved is federal money and it costs the state money to administer anti-fraud and waste programs.

In addition the federal government sets eligibility standards and benefit levels that may not be synchronized with state standards for their family cash welfare programs.

The food industry strongly defends the food stamp program, but we can continue to print the food stamps. Instead of being an open-ended entitlement program for individuals, it should be replaced with finite block grants of stamps to the states, with eligibility and benefit requirements set by the state as they do now with family welfare. Instead of sending a check, the federal government can deposit a truckload of food stamps each month in the state and let the state decide how to distribute them. The savings from the fraud and abuse that is eliminated stays within the state, giving the state a strong incentive to see that the stamps go only to those who need them.

Ending SSID Fraud

The third program to be reformed as we did with the family welfare program is SSID (Supplemental Security Income Program for the Disabled). This is the program for people who are too disabled to work and have little or no income.

In 1971 when I was welfare director for Gov. Reagan in California, the states still administered this program. I found that throughout California non-disabled people were being admitted to the welfare rolls as disabled. It was particularly bad in the Haight- Ashbury District of San Francisco where long-haired hippy doctors were issuing papers declaring their hippy friends disabled. We started a complete review of the cases throughout the state and cleaned the rolls.

In 1973, however, the Nixon Administration moved SSID from state to federal administration with some states adding supplements to the federal grants. Knowing when someone is actually disabled and the degree of disability is difficult at best, but certainly cannot be done accurately at the national level. The requirement is that disability must be expected to last for at least a year, but in many instances disability ends and the persons remain on the rolls.

It has been reported that, indeed, some states have been moving their family welfare recipients to the federal disability rolls when in fact the people are not truly incapable of supporting themselves. In addition, SSID recipients are automatically eligible for Medicaid, for which the states are financially obligated to pay half the cost.

The states were handling this program quite well until it was removed from them in 1973, and it should be block-granted to them, just as was done with family welfare. Much of the fraud and abuse can be detected and eliminated by the states and their counties, which are much closer to the people than the federal government. The money saved can stay within the state to be used for other pressing needs for disabled people. .

We have proven that by ending the individual entitlement nature of family welfare and replacing it with finite block grants the states have been responsible and rolls have plummeted and thousands of families are self supporting. The dire predictions of opponents of welfare reform that the states would “rush to the bottom” and that a million children would be starving in the streets did not happen because states are responsible and care about the welfare of their people.

Now that that argument is over, we should build on this success by doing the same with the three remaining welfare entitlement programs. It could be made voluntary for each state, but states that do not take it should receive no additional federal funding. Any governors or state legislators who do not accept the challenge would be sending a message to its voters that they are afraid to accept the responsibility. I am sure that other citizens more willing and able to do so would contest them in the next election.