Home > Federal, National, State > The End of Federalism: Obamacare’s Negative Impact on States; Obama’s Budget Demolishing Welfare Reform; Obamas New Poverty Measurement

The End of Federalism: Obamacare’s Negative Impact on States; Obama’s Budget Demolishing Welfare Reform; Obamas New Poverty Measurement

January 15, 2010


Factsheet on January 20, 2010 2010 Index of Economic Freedom: America, No Longer the Land of the Free Unprecedented Decline for United States U.S. Drops from “Free” to “Mostly Free”: For the… Read more
Factsheet on December 14, 2009 The Debt Limit: When Is Enough Enough? Why the Debt and the Debt Limit… Read more Factsheet on October 16, 2009 The End of Federalism: How Obamacare Will Impact States More Medicaid Mandated Expansions: All the health bills before Congress depend on a massive Medicaid expansion to expand coverage. If Congress raises eligibility to 133% of the federal poverty level, 33 states would… Read more

Obamas New Poverty Measurement

Published on March 8, 2010 by Robert Rector

This week, the Obama administration announced it will create a new poverty-measurement system that will eventually displace the current poverty measure. This new measure, which has little or nothing to do with actual poverty, will serve as the propaganda tool in Obama’s endless quest to “spread the wealth.”

Under the new measure, a family will be judged “poor” if its income falls below a certain specified income threshold. Nothing new there, but, unlike the current poverty standards, the new income thresholds will have a built-in escalator clause: They will rise automatically in direct proportion to any rise in the living standards of the average American.

The current poverty measure counts absolute purchasing power — how much steak and potatoes you can buy. The new measure will count comparative purchasing power — how much steak and potatoes you can buy relative to other people. As the nation becomes wealthier, the poverty standards will increase in proportion. In other words, Obama will employ a statistical trick to ensure that “the poor will always be with you,” no matter how much better off they get in absolute terms.

The Left has promoted this idea of an ever-rising poverty measure for a long time. It was floated at the beginning of the War on Poverty and flatly rejected by Pres. Lyndon Johnson. Not so President Obama, who consistently seeks to expand the far-left horizons of U.S. politics.

The weird new poverty measure will produce very odd results. For example, if the real income of every single American were to magically triple over night, the new poverty measure would show there had been no drop in “poverty,” because the poverty income threshold would also triple. Under the Obama system, poverty can be reduced only if the incomes of the “poor” are rising faster than the incomes of everyone else.

Another paradox of the new poverty measure is that countries such as Bangladesh and Albania will have lower poverty rates than the United States, even though the actual living conditions in those countries are extremely bad. Haiti would probably have a very low poverty rate when measured by the Obama system because the earthquake reduced much of the population to a uniform penniless squalor.

According to Obama’s measure, economic growth per se has no impact on poverty. Since the beginning of the 20th century, the incomes of nearly all Americans have increased sevenfold, after adjusting for inflation. However, from Obama’s perspective, this increase in real incomes had no impact on poverty, because the wages of those at the bottom of the income distribution did not rise faster than the incomes of those in the middle.

What has the Obama measure to do with actual poverty? Not much. For most Americans, the word “poverty” suggests destitution: an inability to provide a family with nutritious food, clothing, and reasonable shelter. But only a small number of the 40 million per­sons classified as poor under the government’s current poverty definition fit that description. Most of America’s poor live in material conditions that would have been judged comfortable, or even well-off, two generations ago.

The government’s own data show that the typical American defined as poor (according to the traditional, pre-Obama poverty measure) has two color televisions, cable or satellite service, a VCR or DVD player, and a stereo. He also has a car, air conditioning, a refrig­erator, a stove, a clothes washer and dryer, and a microwave. He is able to obtain medical care. His home is in good repair and is not overcrowded. By his own report, his family is not hungry, and he had suf­ficient funds in the past year to meet his family’s essential needs. While this individual’s life is not opulent, it is far from the stark images conveyed by the mainstream media and liberal politicians.

Clearly, “poverty” as currently defined by the government has little connection with “poverty” as the average American understands it. The new Obama poverty measure will stretch this semantic gap, artificially swelling the number of “poor” Americans, and severing any link between the government’s concept of poverty and even modest deprivation.

In honest English, the new system will measure income inequality, not poverty. Why not just call it an “inequality” index? Answer: because the American voter is unwilling to support massive welfare increases, soaring deficits, and tax increases to equalize incomes. However, if the goal of income leveling is camouflaged as a desperate struggle against poverty, hunger, and dire deprivation, then the political prospects improve. The new measure is a public-relations Trojan horse, smuggling in a “spread the wealth” agenda under the ruse of fighting real material privation — a condition that is rare in our society.

True, the new Obama measure will not, at present, alter benefits or expand eligibility for welfare programs. But the new measure does establish a new philosophy of poverty. For the first time, the government is planning to define poverty as a problem that can never be solved by the American dream: a general rise of incomes of all Americans across society over time. By definition, poverty can now be solved only by the dream of the Left: massive taxes on the upper and middle classes and redistribution to the less affluent. In effect, the Obama poverty measure sets a new national goal of class warfare and income redistribution.

Of course, massive “wealth spreading” is already under way. This year, government will spend some $900 billion on means-tested aid for the poor and low-income persons, around $9,000 for each American in the low-income third of the population. According to the Left, that’s not nearly enough. The new poverty measure will use deception to promote a much larger welfare state. Taxpayers, beware.

Robert Rector is a senior research fellow at the Heritage Foundation.


How President Obama’s Budget Will Demolish Welfare Reform

Published on February 25, 2010 by Kiki Bradley and Robert Rector

President Obama’s budget seeks to overturn the fundamental principles of welfare reform. To accomplish this, his budget would:

  • Create a new funding system to reward states for increasing the size of their welfare caseloads; and
  • Eliminate the only remaining federal program to strengthen marriage at a time when the unwed birth rate is approaching 40 percent.

Congress is looking at opportunities to fulfill President Obama’s request to undermine welfare reform. Specifically, it is considering attaching the President’s request to extend and expand the Temporary Assistance for Needy Families (TANF) Emergency Fund to pieces of legislation currently moving through Congress. This anti-reform fund pays states “bonus” money for increasing the size of their welfare caseloads without any incentives to place people into jobs and off of the dole. If the TANF emergency fund is extended, the tremendous success of the 1996 welfare reform law will continue to be undermined, and the federal government will return to the failed pre-reform policy of rewarding states for increasing welfare dependence.  

The Obama budget also eliminates all funding for the Marriage and Fatherhood grant program, which has served to advance and encourage healthy marriages in low-income communities and strengthen relationships between fathers and children. Despite the fact that the collapse of marriage is the prime cause of child poverty and welfare dependence, the Obama Administration plans to terminate all federal activity designed to strengthen marriage. Instead, Obama will dramatically expand the over $300 billion the government spends each year subsidizing single parenthood. His Administration will also continue government welfare polices that penalize lower income couples that do marry. Through these changes, the Obama Administration is endorsing the death of marriage in lower-income communities.

Reversing the Success of Welfare Reform

The old welfare system, Aid to Families with Dependent Children (AFDC), paid states according to the size of their welfare caseloads. This practice of rewarding states financially for increasing their caseloads was ended by legislation included in the 1994 Contract with America, which transformed AFDC into the TANF program. Success of the program led to millions of families leaving the welfare rolls for gainful employment, and the child poverty rate dropped.

Last year, a little-known provision included in the stimulus package reversed the successful provisions of welfare reform and undermined the important work TANF had accomplished. The stimulus package created a new $5 billion program called the TANF Emergency Fund, which pays states 80 cents on the dollar for every new case that enters their welfare caseloads above the size of their caseloads in 2007 or 2008. This was a return to the old AFDC-style system that rewards states for growing caseloads instead of shrinking them. In addition, the federal matching rate is much higher in this new fund than in the old AFDC system.

Although touted as a “temporary” program, the TANF Emergency Fund has reappeared in the President’s 2011 budget with an additional $2.5 billion in funding.[1] According to the Department of Health and Human Services, where this program is administered, states have drawn down only $1.2 billion of the $5 billion allotted.[2] Yet the Administration wants to add another $2.5 billion, and Congress appears poised to act on this request in short order.

The proposal also increased the matching rate from 80 percent to 100 percent for one of the three eligible categories. Therefore, states would receive full reimbursement for a portion of their welfare caseloads. The size of TANF caseloads has been growing. It is natural to believe in an economic downturn that the safety net of the cash welfare would have an uptick; however, the new TANF Emergency Fund provides a clear fiscal incentive for states to increase the size of their welfare caseloads.

A Contingency Fund Already Exists

The President and Congress have attempted to justify the creation of the TANF Emergency Fund because of the current recession. However, this is a farce: The1996 welfare reform law already included a $2 billion contingency fund for just these kinds of circumstances. The structure of the fund was tied to increased unemployment in a state and intentionally avoided tying the additional funding to the size of the caseloads.

The new and expanded TANF Emergency Fund directly ties funding to caseload growth, not economic factors in the state such as unemployment. If the President and Congress were serious about helping states in this challenging economy, they could have just increased funding for the contingency fund. But they deliberately chose not to do this and instead took a course of action that reverses the success that welfare reform achieved and intentionally grows the size of the welfare state.

Like Obama, Congress Has Plans to Undo Welfare Reform

Shortly after the President’s 2011 budget was released, Congressman Jim McDermott (D–WA), an influential and high-ranking member of the House Ways and Means Committee and chairman of the subcommittee with jurisdiction over TANF, quickly moved to introduce legislation that not only would fulfill the President’s request to extend and expand the TANF Emergency Fund but would go much further toward bringing back the old AFDC financing system.

Unlike the President’s request, McDermott’s bill does not limit spending on this program to an additional $2.5 billion. Rather, it includes an open-ended new entitlement that would allow the states to draw down “such sums” as necessary without being capped. The only limitation is that no state can receive more than 50 percent of its annual TANF block grant level.

The message that this bill sends to states is clear: The more people you put on your welfare rolls, the more money you will receive in reimbursement from the federal government. This is exactly the opposite structure of the 1996 welfare reform model that sent a fixed amount of money to states whether or not their caseloads grew.

At the moment, it is unclear whether Congress will act on the President’s $2.5 billion request or the open-ended funding structure included in McDermott’s bill. Either way, states will be actively rewarded with taxpayer funds for increasing the size of their welfare caseloads. Although both the President’s request and McDermott’s bill claim that the change will be extended for only one year, the reality is that Congress will almost certainly extend the program year after year after year—just as it is now extending the TANF Emergency Fund, which was created in last year’s stimulus package.

Eliminating the Importance of Marriage in Low-Income Communities

Five years ago, President Bush signed into law the reauthorization of TANF, which created a new $150 million grant program to promote healthy marriages and responsible fatherhood in low-income communities. The tiny grant funded programs that taught relationship skills, the benefits of marriage, and the tools necessary to build strong marriages and promote the active involvement of fathers in the lives of their children. It also funded advertising campaigns to get out the message of marriage’s importance and the benefits of such unions.

Unfortunately, President Obama’s budget would terminate this program and in its place create another expensive jobs and employment program—a new $500 million program cleverly named the “Fatherhood, Marriage, and Families Innovation Fund.” However, summary documents from the Administration reveal that this is actually just another jobs program and has little to nothing to do with promoting healthy marriages in low-income communities.[3] Without strong marriage promotion, the familial and financial situations in high-risk communities will not improve any time soon.

Obama’s Revival of Johnson’s Failed War on Poverty

The Obama budget is sending a clear message to members of high-risk communities: “Stay on welfare and don’t get married.” This message, however, is the very reason poverty continues to be a problem in the U.S. and why Lyndon Johnson’s War on Poverty failed. While there was brief success in reversing this trend after the 1996 welfare reform initiative, President Obama and his counterparts in Congress are intent on reviving the failed policies of the past and enslaving more low-income families onto welfare and into intergenerational poverty and government dependence.

Katherine Bradley is Visiting Fellow in the Richard and Helen DeVos Center for Religion and Civil Society and Robert Rector is Senior Research Fellow in the Domestic Policy Studies Department at The Heritage Foundation.

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