Monday, February 16, 2009

Will Obama "spendathon" kill welfare reform?

Watching events unfold in a refreshingly detached fashion, from "across the pond," yesterday's Sunday Times had a story angle on Barack Obama's stimulus bill I haven't yet seen -- explaining that the massive infusion of money to the states will obliterate, and probably reverse, gains made in the area of welfare reform since the mid-1990s.

The story goes beyond the bill's possible implications for welfare reform, however, pointing out that, despite having successfully muscling the bill through Congress, Obama is making the sort of missteps a relative novice might be expected to, and that even backers of the president's plan seem to be harboring doubts about whether it's the right medicine for an ailing economy.

It's the sort of reporting one isn't yet getting from the American media, which still seems too bedazzled by Obama's star power.

Here are the highlights:

Obama warned over ‘welfare spendathon

The new administration's economic stimulus plan may undo reforms that cut the dole queues, critics say

RONALD REAGAN started it, Bill Clinton finished it and last week Barack Obama was accused of engineering its destruction. One of the few undisputed triumphs of American government of the past 20 years – the sweeping welfare reform programme that sent millions of dole claimants back to work – has been plunged into jeopardy by billions of dollars in state handouts included in the president’s controversial economic stimulus package.

As Obama celebrated Valentine’s Day yesterday with a return to his Chicago home for a private weekend with family and friends, his success in piloting a $785 billion (£546 billion) stimulus package through Congress was being overshadowed by warnings that an unprecedented increase in welfare spending would undermine two decades of bipartisan attempts to reduce dependency on government handouts.

Robert Rector, a prominent welfare researcher who was one of the architects of Clinton's 1996 reform bill, warned last week that Obama’s stimulus plan was a “welfare spendathon” that would amount to the largest one-year increase in government handouts in American history.

Douglas Besharov, author of a big study on welfare reform, said the stimulus bill passed by Congress and the Senate in separate votes on Friday would “unravel” most of the 1996 reforms that led to a 65% reduction in welfare caseloads and prompted the British and several other governments to consider similar measures.

Though some researchers have questioned the true impact of Clinton’s “workfare” reforms, they were wildly popular with millions of US taxpayers tired of subsidising what many saw as a generation of slackers.

Despite dire warnings that reduced benefits for single mothers and deadlines on entitlement would create a social calamity – one liberal senator warned at the time that children would be “sleeping on grates” – the 1996 reforms cut welfare rolls from more than 5m families in 1995 to below 2m a decade later without a discernible increase in hardship . . .

. . . .Rector, a senior scholar at the conservative Heritage Foundation, argued that Obama’s spending proposals in effect encouraged individual states to add more families to their welfare rolls; the more Americans sign on to the dole, the more state budgets will benefit from US Treasury payouts. “They have completely overturned the fiscal and policy foundations of welfare reform,” Rector complained . . .

. . . While some scholars are beginning to suspect that Clinton’s welfare reforms were fatally flawed – or at least viable only during an economic boom – Republicans are not alone in fearing that Obama’s hastily concocted package is the first step towards the creation of a quasi-socialist welfare state.

Even Mickey Kaus, a prominent liberal blogger, has denounced what he describes as the “get more people on welfare” provisions of Obama’s bill. Writing at Slate, the political website, Kaus said: “Lack of jobs isn’t a reason to loosen work requirements . . . Have the Dems never heard of ‘workfare’?

“Give recipients useful community service work, and if they do the work, then they get the [welfare] cash.”

The paper notes that Obama's polling numbers remain strong, despite a series of gaffes, including those involving cabinet picks, which led the new president's chief of staff, Rahm Emanuel, to deny that it was “amateur hour” at the White House. But "the dangers are beginning to pile up for the novice president and his struggling economic crew," according to the Times, as the unprecedented scope of the "rescue" plan clashes with America's latent skepticism about big-government solutions, which tend to be wasteful and ineffective.

"In Wisconsin, the state that forged a pioneering path in welfare reforms in the 1990s, residents were astonished by a newspaper investigation that disclosed that a $340m (£236m) programme offering taxpayer-financed child care to low-income working parents was riddled with fraud and expensive loopholes.

In one case, a family of four sisters who had 17 children between them put all of them together, took it in turns to babysit them and over the past three years claimed $540,000 (£374,000) in perfectly legal state childcare subsidies.

Examples like that fuel American suspicion that so-called “big government” invariably turns out to be inefficient, expensive and easily exploitable. And there has been no bigger government action in the US than the stimulus package presented by Obama."

Average Americans seem genuinely conflicted over the stimulus package, torn between their fear that even worse might occur without dramatic government action (a feeling nurtured, ironically, by a president who only weeks ago was preaching the virtue of "hope" over "fear") and their recognition that a government "rescue" also carries huge risks, in terms of wasted money and expanded government power. But now we'll never know whether doing much less, in terms of government intervention, would have been better in the long run.

The dye is cast, as they say. And it's the color of red ink.

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