Newt Gingrich - Welfare and Unemployment
Extending Benefits and a 1% Spending Cut
In July of 2010 Congressman Gingrich appeared on Fox News and stated that if President Obama would agree to a 1% reduction in spending levels, then Republicans would agree to extending unemployment benefits.
Republican Governor's Association Speech
In December of 2010, Congressman Gingrich gave a speech to the Republican Governor's Association in which he discussed items that Governor's could do to regain authority from the federal government. One of those items was change the distribution of welfare payments.
1. Turn the $132 billion spent on unemployment compensation last year into a human capital development fund by requiring every person who can't find a job to take a training program in return for their compensation. Paying people to do nothing for 99 weeks is as wrong in unemployment compensation as it was in welfare. This is an opportunity to dramatically enhance the working skills of the American people at no new cost.
Fox News / Google Debate
On September 22, 2011 Congressman Gingrich participated in the Fox News / Google debate. In that debate he was asked about extending unemployment benefits and stated that he was deeply opposed to giving people money for doing nothing.
KELLY: Speaker Gingrich, this next one's for you. You criticized extending unemployment benefits, saying that you were, quote, "opposed to giving people money for doing nothing." Benefits have already been extended to 99 weeks, and they are set to expire soon. If you were president today, would you extend unemployment benefits? And if not, how do you justify that to the millions of unemployed Americans who are looking in earnest and whose families are depending on those checks?
NEWT GINGRICH, FORMER SPEAKER OF THE HOUSE: Well, what I've said is that I think unemployment compensation should be tied directly to a training program. And if you have to -- if you don't have a job and you need help, then in order for us to give you the help, you should sign up for a business-led training program so that that 99 weeks becomes an investment in human capital, giving us the best-trained workforce in the world so you can get a job.
But I believe it is fundamentally wrong to give people money for 99 weeks for doing nothing. That's why we had welfare reform.
(APPLAUSE)
And, frankly, the easiest thing for Congress to do, if the president sends up a proposed extension, is to allow all 50 states to experiment at the state level with developing a mandatory training component of unemployment compensation, so you'd have 50 parallel experiments, and not pretend that Washington knows best or that Washington can solve the problem by itself. But I believe deeply, people should not get money for doing nothing.
Unleashing Growth and Innovation to Move Beyond the Welfare State
On November 21, 2011 Congressman Gingrich released a plan to address health care, social security, and welfare reform. Nine of the pages of the 49 page plan are dedicated to welfare reform. Those pages are shown below.
Step 2: Fundamentally Reforming The Welfare Empire
The term “welfare state” is inadequate to describe America’s means-tested welfare complex targeted to the poor. What we have is a welfare empire involving perhaps 185 joint federal/state means tested welfare programs, including Medicaid,Food Stamps, 27 low income housing programs, 30 employment and training programs, 34 social services programs, another dozen food and nutrition programs,another 22 low income health programs, and 24 low income child care programs,among others.
Federal and state governments spend close to a trillion dollars a year just on these means tested welfare programs, not counting Social Security and Medicare.That is roughly $17,000 per person in poverty, over $50,000 for a family of three living in poverty. The Census Bureau estimates that our current welfare spending totals four times what would be necessary just to give all of the poor the cash to bring them up to the poverty line. Charles Murray wrote a whole book, In These Hands, documenting that we spend far more than enough to completely eliminate all poverty in America. This dramatic overspending leaves wide scope for reforms that would be far more effective in reducing poverty, while still saving taxpayers a fortune.
President Lyndon Johnson launched the “War on Poverty” with a series of landmark bills in 1964 and 1965. These initiatives marked the beginning themodern phase of the American welfare state, as a number of services for low-incomeAmericans that had previously been provided by states, communities and charitable organizations all of a sudden became institutionalized in federal programs.The price tag has been staggering: Between 1965 and 2008, the federalgovernment spent about $16 trillion (in 2008 dollars) on means-tested programsfor low-income Americans.
Have this massive cost served to raise tens of millions out of poverty? Hardly
The massive economic growth in the two decades immediately following the Depression and World War II created wealth that was shared by many income groups. The national poverty rate fell from 32% in 1950, to 22.4% in 1959, to 12.1%in 1969, just as War on Poverty programs were beginning to take effect.
However, since 1969, the poverty rate has actually risen. 41 years and nearly$16 trillion later, the poverty rate now stands at 15.1% (2010), three percentage points higher than at the outset of Johnson’s grand initiative.
The War on Poverty: Why Did it Fail?
The explanation for the failure of the War on Poverty is rooted in two fatal design flaws: the welfare programs actually removed incentives for low-income Americans to work, and the guidelines of a number of the federal programs actually made it a disadvantage to live in a two-parent household.
With fewer low-income Americans working, and their family structures disintegrating, its no surprise that we've made little progress combatting poverty over the last four decades.
Let ’s first look at work incentives.
In the years immediately prior to Johnson Administration, nearly two-thirds of households in the bottom income quintile were headed by someone who worked.Thirty years later, this number had fallen by half: In 1991, only about a third of those heading the lowest-income households were working, and only a third of those working were working full time.
How did this happen? It certainly was not because of a lack of jobs. During the Reagan years alone, American businesses created nearly 20 million new jobs,and the unemployment rate hovered around 5% by the late 1980s.
Rather, it was rooted in the way that Washington had structured these new welfare programs. The federal government offered benefits that were wide-ranging and lucrative, though there were only weak, and sometimes non-existent requirements for recipients to attempt to find work in order to qualify for benefits.In fact, many of these benefits were available only to those who were underemployed or unemployed.
If a low-income American entered the workforce, he would immediately lose many of his federal welfare benefits, and on top of that, he would have to start paying payroll and income taxes. As it turned out, for a number of individuals,entering full-time employment became too “expensive” compared to staying at home and collecting benefits–this phenomenon came to be called the “welfare trap.”
So millions of low-income Americans weighed the costs and benefits of working full-time, versus the costs and benefits of remaining out of the workforce,and simply decided it was a better deal to substantially reduce or eliminate their work effort altogether.
The Welfare Empire and Family Breakdown
On top of this, many of the War on Poverty programs perversely and unintentionally incentivized family breakdown and having children out of wedlock.The cause of this also comes back to the demographic requirements one must satisfy to qualify for these benefits.
Generally speaking, War on Poverty welfare programs were designed primarily for families with children. If you were able-bodied and have no dependents, you were typically on your own, as most welfare programs are closed to you and you are expected to support yourself.
Therefore, it became advantageous under these programs to have children,which is not necessarily a bad thing in itself. However, the results became disastrous when coupled with a second rule: if the mother was married to a husband who made more than a certain amount of income, the family’s benefits were lost.
In tandem, these two requirements created a situation where having a child out of wedlock became the surest way to generous government benefits.
Robert Rector of the Heritage Foundation puts it bluntly: “Welfare…converts the low-income working husband from a necessary breadwinner into a net financial handicap. It transformed marriage from a legal institution designed to protect and nurture children into an institution that financially penalizes nearly all low-income parents who enter into it.”
Inevitably, American families broke down. At the beginning of the War on Poverty, the 7% of babies were born to unmarried parents. Today, nearly two in five children are born out of wedlock.
This tragedy has hit the African-American community the hardest. At the outset of the War on Poverty, well over half of African-American babies were born to two-parent families. As welfare programs that penalized two-parent families began to take effect, this rate plummeted. In 1965, the rate of births out of wedlock for African-Americans was 28%. It skyrocketed to 49% in 1975, to 65% in 1990, to about 70% today.
The disaster is not limited to one community. The Caucasian out-of-wedlock birth rate was one in 25 in 1965; it is one in four today. And for white Americans lacking a high school degree, about half of babies are born out of wedlock today.
Poverty and having children out of wedlock go hand in hand. According to the 2010 US Census, the poverty rate for married couples with children was 8.8%,compared to 40.7% for female-headed households with children. The relative rates for Caucasian families were similar: Two-parent households had a poverty rate of 8.4%, while households with unmarried mothers had a poverty rate of 37.8%. In African Americans, the household poverty rate is 12% when both parents are present; it nears 50% when the family is led by a single mother.
A tragic effect of this is that having children out of wedlock begets more poverty. Children raised in single-parent households are seven times more likely to become welfare recipients once they reach adulthood. The cycle of poverty becomes stifling, yet the government continues to incentivize much of the behavior that prevents low-income Americans from breaking free.
Returning to pre-War on Poverty marriage patters would be a key step in alleviating modern day poverty. According to Rector, “if poor women who give birth outside of marriage were married to the fathers of their children, two-thirds would immediately be lifted out of poverty. Roughly 80 percent of all long-term poverty occurs in single-parent homes.”
Winning the War on Poverty: The Success of the 1996 Welfare Reform
But an historic turning point in welfare policy was achieved with the enormously successful 1996 reforms of the old Aid to Families with Dependent Children (AFDC) program. Those reforms, spearheaded by then-Speaker of the House Newt Gingrich, implemented the ultimate welfare policies favored by President Reagan and his long time welfare adviser Robert Carleson, as explained in Carleson's recent posthumously-published book
Government Is the Problem:Memoirs of Ronald Reagan’s Welfare Reformer.The reform returned the share of federal spending on the AFDC program to each state in the form of a “block grant” to be used in a new welfare program redesigned by the state based on mandatory work for the able bodied. Federal funding for AFDC previously was based on a matching formula, with the federal government giving more to each state the more it spent on the program, effectively paying the states to spend more. The key to the 1996 reforms was that the new block grants to each state were finite, not matching, so the federal funding did not vary with the amount the state spent. If a state’s new program cost more, the state had to pay the extra costs itself. If the program cost less, the state could keep the savings.
To give the states broad flexibility in designing the new replacement program, the entitlement status of AFDC was repealed. As a result, federal mandates imposed on the states were eliminated, with one remaining adopted in the legislation: a requirement for able-bodied individuals to work in order to receive federal aid. The reformed program was renamed Temporary Assistance to Needy Families (TANF).
The liberal veterans of the Great Society lashed out at the new reforms. New York Senator Daniel Patrick Moynihan billed the legislation as “the most brutal act of social policy since Reconstruction,” and an Urban Institute report predicted that
within years, over a million children would be pushed into poverty.These predictions could not have been further from the truth, and welfare reform was a historic success. The rolls for the old AFDC program were reduced by two-thirds across the country. States that were most aggressive in implementing strong work requirements saw rolls dropping even more dramatically: Wyoming(97%), Idaho (90%), Florida (89%), Louisiana (89%), Illinois (89%), Georgia (89%),North Carolina (87%), Oklahoma (85%), Wisconsin (84%), Texas (84%), Mississippi(84%). A decade after the reforms in 1996, the percent of the population receiving cash welfare under the TANF system had fallen to 0.1% in Wyoming, 0.2% in Idaho,0.5% in Florida, 0.6% in Georgia, Louisiana, North Carolina, and Oklahoma, and0.7% in Arkansas, Colorado, Illinois, Nevada, Texas and Wisconsin.Nationwide,the percentage of American children on AFDC/TANF was reduced from 14.1% in1994 to 4.7% in 2006.
At the same time, because of the resulting increased work by former welfare dependents, the incomes of the families formerly on the program rose by 25%, and poverty among those families plummeted. By 2001, nearly three million children had been lifted out of poverty. Within five years of the passage of the bipartisan reforms, child poverty had dropped by nearly a quarter, child poverty in single-parent households reached an all-time low, and nearly two-thirds of those who left welfare were gainfully employed. Ron Haskins of the Brookings Institution reports, “[B]y 2000 the poverty rate of black children was the lowest it had eve rbeen.”
As a result, total federal and state spending on welfare in constant dollars dropped 31% between 1995 (under the AFDC program) and 2006 (under TANF),and down by more than half of what it would have been under prior trends.
Even President Obama, who was opposed to welfare reform at the time, now acknowledges it as a historic reform that lifted millions from poverty. When asked at the Saddleback Church debate in 2008 about the most significant policy position that he has changed his mind on, he replied:
"I think that a good example would be the issue of welfare reform, where I always believed that welfare had to be changed. I was much more concerned ten years ago when President Clinton initially signed the bill that this could have disastrous results. I worked in the Illinois legislature to make sure that we were providing childcare and health care, other support services for the women who were going to be kicked off the roles after a certain time. It had -- it worked better than, I think, a lot of people anticipated. And, you know,one of the things that I am absolutely convinced of is that we have to have work as a centerpiece of any social policy."
This illustrates the entitlement reform theme that through fundamental structural reforms we can achieve the social goals of those programs far more effectively, ultimately serving seniors and the poor far better, at just a fraction of the costs of the current old-fashioned programs.
Expanding the Lessons of 1996 to Dozens of Other Means-Tested Programs
There is a path forward that will liberate millions more Americans from poverty. The question is whether we will continue to rely on the failing and destructive structures of the welfare empire, or we will innovate our way to a new system that promotes growth, implements smart policies that require work, and ultimately creates more wealth and opportunity for everyone.
The 1996 legislation was an unprecedented success, but there are many other areas of the welfare state that are ripe for reform. The same reforms can and should be extended to all of the remaining 184 federal means tested welfare programs (See Appendix A).
The federal welfare bureaucracy would be substantially pared down as control of these initiatives is handed back to the states. It also follows the spirit of the Tenth Amendment in restoring power to the states. Instead of “one size fits all” federal programs, state and local officials will be liberated to innovate and tailor the programs so they are best suited for the needs of their communities.
States would then be free to each completely redesign welfare for their state.But if they would provide assistance to the able bodied only in return for work first,they can completely eliminate the work disincentives of welfare. Moreover, the minimum wage, plus the Earned Income Tax Credit (EITC), plus the Child Tax Credit are enough by themselves to bring every family out of poverty with full time employment. To the extent each state is successful in finding private work for the poor, the cost of ending poverty would be borne primarily by private employers paying wages in return for work, rather than taxpayers.
Consequently, instead of taxpayers paying the bottom 20% in income not to work, as taxpayers do today, employers would be paying them to work. As a result,the bottom 20% would be contributing to the economy, rather than drawing out of it through public support financed by taxpayers.
Additionally, any individual who cannot find work and collects unemployment benefits (currently a joint state-federal program, with federal taxes paying for a majority of the program) will be required to participate in a job-training program. We can better help these Americans by requiring them to participate in real training programs in private companies, in exchange for temporary unemployment aid.
Our goal is to convert the time and money now lost to a maintenance unemployment program into a human capital investment program that increases the competitiveness of the American worker in the world market in a time of dramatic scientific and technological change.
This program should be delegated to the 50 states so each can experiment with the best way to use unemployment compensation as a job training program.
Through required work, the welfare incentives for family breakup and births out of wedlock would also be eliminated entirely. No automatic benefits would be handed out any longer for bearing a child out of wedlock. If the mother has a child without a husband, then the mother must go to work to support the child.Thus, the new system will instead provide incentives to raise children in two-parent households. Since living together will reduce living expenses that the couple will have to work to pay for in any event, the incentives are for family unification rather than family breakup.
Liberating Low-Income Americans While Fixing Fiscal Challenges
With all the programs of the current welfare empire estimated together to cost $10 trillion over the next 10 years, the resulting savings to the taxpayers would be several trillion just in those first 10 years alone. In his book America’s Ticking Bankruptcy Bomb, Peter Ferrara estimates approximately $3.25 trillion in savings by the federal government and approximately $1.4 trillion in savings by the states over the next decade. Indeed, while substantial costs would remain for a program like Medicaid, the above incentives would likely drive down costs for most of the remaining programs by more than half. But at the same time, poverty in America would decline substantially, with nearly all able-bodied people who can secure employment earning sufficient income to climb above the poverty line.
Sponsored and Cosponsored Legislation
This representative has not been identified as sponsoring or cosponsoring significant legislation related to this title.