Myth: Welfare is to blame for runaway government spending.
Fact: Middle-class entitlements are to blame for runaway government spending.
Summary
The two largest welfare programs for the poor, AFDC and food stamps,
each take up only 1 percent of the combined government budgets. Attempts
to expand the definition of "welfare" to make this figure larger
will inevitably include popular middle class programs like Medicaid and
student loans.
Argument
One of the most popular myths is that welfare is a serious drag
on the economy. Actually, it barely registers on the radar screen. The
most vilified form of welfare is Aid to Families with Dependent Children
(AFDC), which allegedly gives poor mothers a financial incentive to avoid
work and have babies. Yet in 1992, AFDC formed only 1 percent of the combined
federal and state budgets. Food stamps also took up 1 percent. Both programs
cost $24.9 billion each, comprising 1 percent each of the combined federal,
state and local budget of $2,487 billion. (1)
Comparing the size of federal AFDC to other federal programs puts a
great deal in perspective:
Federal AFDC Expenditures as Compared to Federal Spending in Other
Areas (1993) (2)
Agency $ billions
--------------------------
AFDC 12
Medicaid 76
Medicare 131
Defense 281
Social Security 305
To rescue their point that welfare is responsible for runaway government
spending, conservatives must expand the definition of "welfare"
as much as possible. Unfortunately, AFDC and food stamps are by far the
largest welfare programs for the poor, and any expanded definition is going
to include popular middle class programs like Medicaid, student grants,
school lunches, and pensions for needy veterans. In other words, conservatives
must villainize the middle class if they wish to villainize the poor. But
for the moment, let's give them the benefit of the doubt, and accompany
their line of argument to the end:
Many conservatives expand "welfare" to include all one-way
transfers of cash, goods or services to persons who make no payment and
render no service in return. The Library of Congress provides a list of
such programs (which will be included in the appendix below). In 1992,
these expenditures for combined federal, state and local governments came
to $289.9 billion, or 12 percent of the combined budget of $2,487 billion.
(3) Keep in mind that this 12 percent includes such popular middle class
programs as Medicaid, student grants, school lunches, pensions for needy
veterans, etc.
If conservatives are still frustrated that this does not prove their
point that government is drowning in welfare, then they might try expanding
"welfare" to include all social welfare expenditures, which include
every entitlement program under the sun, including Social Security and
Medicare. (Forget, for the moment, that the middle class is defending these
programs with bazookas and rocket launchers.) In 1992, these expenditures
comprised 62 percent of combined government outlays. However, at least
at the federal level, these benefits are paid to literally every income
bracket, and in a remarkably proportional manner:
Distributions of Federal Funds by Income Bracket, Compared to Distribution
of Households by Income Bracket, CY 1991 (4)
Percent of Percent of
Income all households all benefits
-----------------------------------------------
Under $10,000 16.4% 17.8%
$10,000 - $20,000 18.8 21.7
$20,000 - $30,000 17.0 17.2
$30,000 - $50,000 23.6 21.8
$50,000 - $100,000 19.1 15.9
Over $100,000 5.1 5.6
As the above chart shows, the conservative's absurdism is now complete;
he has declared class war against every member of society. But at least
he has proven his point.
Return to Overview
Endnotes:
1 Library of Congress, Congressional Research Service, "Cash
and Noncash Benefits for Persons with Limited Income: Eligibility Rules,
Recipient and Expenditure Data, FY 1990-92," Report 93-832 EPW, and
earlier reports; U.S. Bureau of the Census, Government Finances, series
GF, No. 5, 1992.
2. Historical Tables, Budget of the United States Government, Fiscal
Year 1995 (Washington, DC: United States Government Printing Office),
tables 3.2, 5.1, 16.1.
3. Library of Congress.
4. Benefit distributions by income bracket are based on unpublished
CBO analysis of Current Population Survey (Census) and Statistics of Income
(IRS) income data. Benefit payments tabulated here (a total of $534 billion)
represent the 81 percent of federal entitlement outlays in 1991 that could
be allocated by income bracket. They include Social Security (OASDI), Railroad
Retirement, civil service and military retirement, veterans' cash benefits,
Medicare, Unemployment Insurance, workers' compensation, Food Stamps, AFDC,
SSI, and the Earned Income Tax Credit. Although consistent data on the
other 19 percent of federal benefit payments are not available, it is unlikely
that inclusion of the remaining entitlement programs (ranging from Medicaid
to farm price supports)would significantly alter the overall benefit distribution.
Source: Neil Howe, How to Control the Cost of Federal Entitlements: The
Argument for Comprehensive "Means-Testing" (National Taxpayers
Union Foundation; 1991).
APPENDIX A
The following is a breakdown of the larger welfare budget. This
is not a list of social welfare spending, but rather the type of welfare
that comes under the most criticism: one-way transfers of benefits that
require no immediate service or payment in return. Technically, Medicaid
is the largest item, but this is a special exception, since about three-fourths
of Medicaid goes to the elderly, the blind and the otherwise disabled.
Conservatives object to excluding Medicaid as welfare income for the
poor. But early in 1996, a distinguished National Academy of Sciences panel
issued a major report on how poverty should be measured. It concluded that
health care coverage, both public and private, should not be included as
income. Part of the reason is because Medicaid is an insurance program,
and its payments go directly to doctors and hospitals, not to insured families.
Families cannot use Medicaid to purchase basic necessities like food, clothing,
shelter, etc.
The purpose of the following list is to show two things. First, AFDC
and Food Stamps are by far the largest items on the welfare budget, since
they are usually awarded together to welfare recipients. Critics of welfare
who try to add up every form of welfare imaginable and then claim that
Welfare Queens live on $20,000 a year will find there is not enough money
in the budget to make that an across-the-board generalization. Furthermore,
the same people do not collect these programs; they are spread across the
population, and are often exclusionary by law.
Second, it shows how much of the welfare budget goes to things like
school loans, job training and veteran's medical care. Some liberals, like
James Carville, have argued that one of the largest items, the Earned Income
Tax Credit, fails to qualify as welfare at all, since it is a tax refund
that workers earn. (This author disagrees; all tax breaks are welfare,
whether given to the poor or the rich.)
Combined Federal, State and Local Welfare Budget, 1992 (millions)
Medicaid $118,067
AFDC 24,923
Food Stamps 24,918
Supplemental Security Income 22,774
Lower income housing asst. 12,307
Earned Income Tax Credit 9,553
Veterans medical care 7,838
Stafford loans 5,683
Social Services (Title 20) 5,419
Pell Grants 5,374
Low-rent public housing 5,008
General medical assistance 4,850
Foster Care 4,170
School Lunch 3,895
Pensions for needy veterans 3,667
General Assistance 3,340
Head Start 2,753
Food supplements,
Women, infants and children 2,600
Training for disadvantaged
youth and adults 1,744
Low-income energy assistance 1,594
Rural housing loans 1,468
Indian Health Services 1,431
Summer youth employment 1,183
Maternal and child health 1,059
JOBS and WIN 1,010
Job Corps 955
Child care block grant 825
School Breakfast 782
Child care for AFDC 755
Nutrition Program for Elderly 659
Housing interest reduction 652
Child and adult care food program 624
"At risk" child care 604
Source: Library of Congress, Congressional Research Service, "Cash
and Noncash Benefits for Persons with Limited Income: Eligibility Rules,
Recipient and Expenditure Data, FY 1990-92," Report 93-832 EPW and
earlier reports.