Does the United States Government Generate Poverty?

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Introduction

Despite record growth in terms of real gross domestic product (GDP) per capita in the last three decades, U.S. poverty rates have changed very little in the face of such robust growth (Hoynes et al., 2006, p. 47). The U.S. government has spent nearly $668 billion on poverty reduction in 2012, yet the poverty rate has remained stable at 15 percent (Danziger, 2013, p. 1). In human terms, this is about 46.2 million people in the U.S. that live in poverty (U.S. Census Bureau, 2012, p. 3). This begs the question as to whether or not the U.S. government's programs focused on poverty reduction actually work to sustain poverty rather than reduce it.

While many programs fall under the collective "welfare state"¬–a system whereby the government undertakes and protects the health and well-being of its citizens, especially those in financial or social need, by means of grants, pensions, and other benefits–this paper will focus specifically on the Temporary Assistance for Needy Families (TANF) program. When most Americans think of welfare, they think of TANF's cash benefit program (Tanner, 2012, p. 2). The federal government provides assistance through TANF as a means-tested grant to each state in order for them to run their own welfare programs, but the U.S. economy remains stagnant, welfare programs are being slashed.

Through a closer look at America's TANF program, much is revealed regarding poverty alleviation or the lack thereof within the U.S. This paper will argue that the key to actually reducing poverty requires reforming the purposes and assumptions upon which the TANF program was built. As it stands, it seems that the answer to the question at hand is a resounding, "yes." Accordingly, unless government programs should focus on bridging inequality gaps highlighted in the TANF research, the programs and policies it puts forth will likely not reduce poverty but in fact, help generate it.

Purpose/Objective

The purpose and overall objective of this research paper are to uncover whether or not U.S. federal government policies aimed at reducing poverty, in fact, generate it. In September, the U.S. Census Bureau reported that the poverty rate in America did not change between 2011 and 2012, remaining at a stable 15 percent (U.S. Census Bureau, 2013, p. 1). Accordingly, this means that poverty today is, in fact, higher than it was in the early 1970s, the decade that marks the hay day of programs associated with the welfare state in America (Danziger, 2013, p. 1). Paraphrasing a member of Congress who is outspoken on the subject, Republican Paul Ryan and many others are dismayed as to "how the federal government can spend over $15 trillion in fighting poverty and still have the highest poverty rate" in recent U.S. history (Danziger, 2013, p. 1). This research paper aims to get to the bottom of this conundrum.

Research Question

Does the United States government generate poverty in the U.S.? More specifically, do federal programs aimed at reducing poverty, in particular, the program for Temporary Assistance for Needy Families (TANF), actually work their intended goal? When TANF was passed in 1996, the federal government laid out four purposes to this legislation: (1) providing assistance to needy families so that children may be cared for in their own homes or the homes of relatives; (2) end dependence of needy parents by promoting job preparation, work and marriage; (3) prevent and reduce the incidence of out-of-wedlock pregnancies; and (4) encourage the formation and maintenance of two-parent families (Department of Health and Human Services, 2012, p. 310). To this end, do the four purposes of the TANF program and their corresponding economic indicators evidence that TANF is helping end poverty or actually contributing to it?

Research Methodology

In order to effectively answer this research question, results depend on the framing of the issues. As such, the methodology for this research will focus on the Temporary Assistance for Needy Families (TANF) program, reviewing its success based upon its four purposes for existence and its corresponding economic indicators. According to the law, the purpose of the TANF program is to increase state flexibility in operating programs aimed at: (1) providing assistance to needy families so that children may be cared for in their own homes or the homes of relatives; (2) end dependence of needy parents by promoting job preparation, work and marriage; (3) prevent and reduce the incidence of out-of-wedlock pregnancies; and (4) encourage the formation and maintenance of two-parent families (Department of Health and Human Services, 2012, p. 310). Based these stated assumptions, this research paper will provide a critical analysis of the TANF program via four general indicators of poverty associated with the four aims, respectively: (1) measurement of child support payments; (2) unemployment rates and types of jobs held; (3) teen pregnancy rates; and (4) prevalence of female heads-of-households for TANF recipients.

Literature Review

This paper examines the relationship between the U.S. federal government's premiere means-based grant program on poverty reduction–TANF–and the current rising rates of U.S. poverty. Despite the incredible amount of money the U.S. government spends on poverty reduction, there has not been a requisite reduction in the poverty rate in terms of TANF (Cancian, 2000, p. 1). As such, recent literature on the structure of TANF and its federal poverty reduction programs that create the "welfare state" is reviewed in this section. It is important to note that political theories behind the existence of the welfare state impact poverty methodology as opposing approaches have disparate ideological beliefs. As such, this review attempts to use non-partisan sources.

Under TANF, the federal government provides a block grant to the states based on an intricate list of requirements. States then use these funds to operate their own programs, but they must also spend some of their own dollars or else they face severe fiscal penalties. Since the four TANF goals are extremely general, states can use TANF funds more broadly than compared to other federal poverty reduction programs (Schott, 2012, p. 1).

From an institutional perspective, TANF often forces states to play a zero-sum funding game, where shares of federal funding depend on differential relative success in achieving policy objectives (Snarr, 2012, p. 1753.). This is precisely why analyzing TANF based on its intended purpose is so important in scrutinizing its success. The current institutional structure incentivizes states to mimic and improve upon more successful counterparts to recapture a larger share of TANF block grants (p. 1754). However, if the relative success of the program is based on flawed approaches to relieving poverty, it becomes easy to see why the U.S. can spend so much on poverty reduction and see so little results.

Subsequently, in conjunction with TANF's first purpose, an understanding of the interaction of child support and welfare is crucial. Child support is considered to be one key factor in increasing self-sufficiency among low-income families (ASPE, 2003, p. 3). This is because child support income substantially reduces poverty for those women who receive it and women who receive child support are more likely to exit welfare and not return (p. 23). However, the proportion of welfare recipients receiving child support and not exiting the system has been increasing considerably in the past two years (p. 3) suggesting that there is a disconnect between the two policies as well as insufficient funds to the families for both.

Finally, considering TANF provides cash benefits to low-income (and primarily female-headed) households with children, it is expected to increase incomes of the poor. However, this has little effect on the poverty rate in economic calculations because TANF transfers are phased out at income levels well below the poverty line (Hoynes et al., 2006, p. 61). Thus, actually measuring poverty reduction by only looking at the poverty rate is not a useful measurement when analyzing TANF. As such, this paper will focus on a critical analysis of the four objectives of TANF and discuss each in turn.

Findings & Analysis

Breaking down TANF in terms of its four initial aims reveals many of the weaknesses of the program. First, a deeper analysis of child support and its historic interaction with TANF reveals that increasing child support for families is critical for families to exit the welfare system (Gassman-Pines, 2013, p. 172). However, state welfare reform policies are cutting benefits to both programs, which may account for the increase in the number of families receiving child support within the TANF system and not subsequently exiting its use.

Second, the complexity and rigidity of TANF work requirements force states to design work programs that tend to compromise rather than promote the goal of connecting parents to work (Schott et al., 2013, p.1). Since state TANF programs focus on hourly wages to calculate work rate, states do not have to move TANF recipients to actual paid employment to meet the rate (p. 2). Moreover, tracking and documenting every hour of each recipient's work is burdensome and costly and money could be better spent providing direct services to individuals rather than on data input.

Third, in conjunction with TANF's third purpose, one of the most effective ways of preventing out-of-wedlock pregnancy is through comprehensive sex education (Sawhill, 2001, p. 6). However, this requires state-funded sex education, which is severely lacking and highly politicized. This point also applies to the fourth and final purpose of TANF, encouraging two-parent households as a means to reduce poverty. Since comprehensive sex education reduces teen pregnancy (Thomas, 2012, p. 280), and teen pregnancy is attached to low numbers of two-parent households (Maynard, 2008, p. 4), this approach can be seen as killing two birds with one stone.

Conclusion and Recommendations

It is fairly easy to see that the current framing of welfare as it relates to the TANF program is seriously flawed. Not only are the assumptions upon which the program was created outdated and prejudicial, but the program's structure does much to not alleviate poverty and may, in fact, exacerbate it. Today, overall federal TANF funding is actually lower (even when adjusted for inflation) than when TANF began, despite the much higher rates of unemployment and poverty (Pavetti et al., 2011, p. 2). Consequently, reform is in order.

According to the research, the following recommendations are appropriate. First, since the share of welfare recipients receiving child support has steadily increased over the years without the corresponding exit of those families from the system, state welfare reform policies should place a stronger emphasis on child support enforcement, specifically to female heads of households. Second, the federal government should hold states accountable to actual outcomes (i.e. whether TANF recipients not only find jobs but keep them) as opposed the simply whether or not recipients participate in certain work activities. Redistributing resources to directly serve those individuals rather than track hours would save on both time and money. Third, states should increase efforts to fund sex education in order to reduce out-of-wedlock pregnancy as well as increase the chances of two-parent households, thereby lessening the chance for eviction. This is likewise important because focusing on women helps reduce poverty rates in general (Almond, 2011, p. 388).

In sum, the reforms necessary to ensure that one of the major federal programs to reduce poverty actually reduces poverty are not necessarily economically intuitive. As it stands, it seems that how TANF's current structure does more to generate poverty, or at best sustain current poverty rates, than to reduce it.

Bibliography

Almond, D., Hoynes, H. & Schanzenbach, D.W. (2011, May). Inside the war on poverty: the impact of food stamps on birth outcomes. The Review of Economics and Statistics 93(2): 387-403. Print.

Assistant Secretary for Planning and Evaluation (ASPE), U.S. Department of Health & Human Services, 2013 Poverty Guidelines (2013).

Assistant Secretary of Planning and Evaluation (ASPE), U.S. Department of Health and Human Services. (2003, April 11). Support and TANF Interaction. Retrieved from http://aspe.hhs.gov/hsp/CS-TANF-Int03/

Cancian, M. et al. (2000 May). Before and after TANF: the economic well-being of women leaving welfare. Institute for Research on Poverty Special Report 77. Retrieved from http://www.ssc.wisc.edu/irpweb/publications/sr/pdfs/sr77.pdf

Danziger, S. H. (2013, September 17). The mismeasure of poverty. The New York Times. Retrieved from http://www.nytimes.com/2013/09/18/opinion/the-mismeasure-of-poverty.html?_r=0

Gassman-Pines, A. & Hill, Z. (2013, September 1) How social safety net programs affect family economic well-being, family functioning, and children's development. Child Development Perspectives 7(3): 172-181.

Hoynes, H. W. & Schanzenbach, D. W. (2011, September 1). Work incentives and the food stamp program. Journal of Public Economics, 96(1): 151-62.

Hoynes, H. W., Page, M. E. & Stevens, A. H. (2006, Winter). Poverty in America: Trends and Explanations. Journal of Economic Perspectives, 20(1): 47-68.

Maynard, R. A. (2008) Kids having kids: Economic costs and social consequences of teen pregnancy. New York: The Urban Institute.

Pavetti, L. & Schott, L. (2011, July 14). TANF's inadequate response to recession highlights weakness of block-grant structure. Center on Budget and Policy Priorities. Retrieved from http://www.cbpp.org/files/7-14-11tanf.pdf

Sawhill, I. V. (2001, October) What can be done to reduce teen pregnancy and out-of-wedlock births? Brookings Institute. Retrieved from http://www.brookings.edu/research/papers/2001/10/childrenfamilies-sawhill.

Schott, L. (2012, December 4). Policy basics: an introduction to TANF. Center on Budget and Policy Priorities. Retrieved from http://www.cbpp.org/cms

Snarr, H.W., Friesner, D. & Underwood, D. A. (2012, March 12). Evaluating evolutionary changes in state TANF policies. Applied Economics Letters 19(17): 1753-58.

Thomas, A. (2012, May 1) Three strategies to prevent unintended pregnancy. Journal of Policy Analysis and Management, 31(2): 280-311.