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11/01/93 - Backgrounder #09 - The Welfare State, Poverty, and Economic Opportunityby Randall Holcombe
November 1, 1993 Executive Summary
- President Lyndon Johnson's War on Poverty promised to alleviate poverty, improve the economy, and lessen the social and political divisions in American society. Its results have been the opposite.
- Thirty-five percent of Americans were living below the poverty line in 1950. Starting in 1950 this rate declined steadily to 13 percent by 1968, four years after the start of the War on Poverty. Today the poverty rate remains at 13 percent.
- People stay poor because the welfare system destroys their incentive to work. A mother receiving $10,000 in welfare who gets a job paying $7 an hour ($14,000 a year) immediately loses her welfare payments. After paying for child care, transportation, and clothing costs, she may actually take home less by working than by not working.
- The out-of-wedlock birth rate among American blacks in the mid-1950's was 20 percent. By 1989, it had reached 65 percent. The fact that Sweden, until recently the world's preeminent welfare state, has a 50 percent out-of-welfare birth rate, dispels the myth that births out of wedlock have anything to do with race or with black culture.
- One-half of the single parent households in the U.S. live in poverty, whereas only 6 percent of two-parent households do. More than 70 percent of the juveniles in state reform institutions are from single-parent households. Children from these families generally perform less well in school.
- The system can be reformed. President Clinton, in his address to Congress in January of 1993, proposed to limit benefits to two years, after which recipients would have to work to receive ongoing payments. This reform should be implemented. In addition, mothers already on welfare should not receive increased benefits when they have additional children. Other reforms that link benefits to responsibilities should also be consider
Backgrounders
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