Carleson on welfare

On the 10th anniversary of the signing of the federal welfare reform bill--one of the most successful public-policy initiatives of my lifetime--Susan Carleson has shared with me some reflections on the subject. Susan is the widow of Bob Carleson, who from a background as a city manager was put in charge of welfare reform by Gov. Ronald Reagan and contributed heavily to Reagan's successful California welfare reform of the early 1970s. Bob came to Washington in the 1980s, worked in the Reagan administration, and thereafter crusaded quietly and with good humor for welfare reform. He died recently--not famous but I am sure with the satisfaction that he had contributed mightily to the improvement of life in America.

But I'll let Susan speak for herself. Here's the heart of a letter she sent me by E-mail.

The real dynamic that has made the 1996 welfare reform work is being ignored. While everyone is touting the mandatory work requirement, the key to the reform's success was the elimination of the federal open-ended matching requirement for state AFDC spending-- replacing it with clean, finite block grants to the states.

Under the old system, the states were encouraged to increase their welfare caseloads in good economic times and bad--simply to get the federal matching funds. Bob figured this out a long time ago and argued for years that the solution was to give the states a finite amount of money without federal strings attached and let them design their own programs to take care of their needy populations. If a state reduced its rolls and saved money it would be permitted to keep it--to spend on other related needs or to put away in a "rainy day" fund for when they did need it.

It was not until the Republicans gained control of Congress in 1994 that this concept had political viability. Bob was the one who pushed for the original welfare reform bill in the Contract for America to be replaced with the repeal of AFDC, replacing it with finite block grants. He knew that the incentives in the AFDC program had to be reversed--states had to be made responsible for their spending decisions--and rewarded if they did a good job.

Pat Moynihan predicted that giving the states a finite amount of money would cause a "race to the bottom"--throwing millions of children out in the streets. Bob knew better--he, like Ronald Reagan, trusted the states to do the right thing--after all the same voters who elect federal officials vote for state and local officials. He knew that no state would take actions to harm their poor, and at the same time, if state officials didn't prudently spend their resources, the voters could vote them out at the next election.

Bob originated the concept of the block grant when he was Ronald Reagan's welfare director when during the course of designing the California welfare reform he discovered that the federal rules and regulations had the states hamstrung--they even prohibited any kind of work requirement!

Bob had wanted a clean "no strings" block grant bill in 1996 but went along with adding a very general work requirement knowing that the states would, by necessity, have to enforce work as a disincentive for people to apply for welfare in the first place and to enable them to get able-bodied recipients off the rolls. Bob knew by experience that once you let the crafty federal bureaucrats write the rules, a "yes" could be turned into a "no" and a "no" into a "yes."

The block grants did reverse the incentives of the states to expand their spending, and the same concept should be used to get other open-ended entitlement programs like Medicaid under control. The formula worked for welfare--it can work for other programs, too.