You want to read Christopher Jencks’ review of a new book on the extreme poor in America. It’s a serious indictment of federal policy in dealing with the poorest of the poor, part of a much broader problem of states having leeway to take federal money earmarked for particular programs and divert it to the general fund if they can find ways not to pay it out.
The most obvious explanation for the increase in extreme poverty between 1996 and 2011 is that jobs were harder to find in 2011, but that is only half the story. Until 1996 single mothers with no income were eligible for Aid to Families with Dependent Children (AFDC). Edin and Shaefer argue that extreme poverty rose after 1996 because Congress replaced AFDC with an even less generous welfare program called Temporary Assistance for Needy Families (TANF). Because TANF benefits are much harder to get than AFDC benefits were, parents who cannot find a job are more likely to find themselves penniless.7
Prior to 1996 each state had its own AFDC program, with the federal government paying about half the cost in rich states and far more than half in poor states. States could set their AFDC benefits as high or low as they wanted, but in each state the eligibility rules had to meet a variety of federal requirements, one of which was that all legally eligible applicants were entitled to benefits. A state could not turn away eligible applicants because the legislature wanted to use the money for some other purpose or because a caseworker thought an applicant had loose morals.
All states still get federal money to cover part of TANF’s cost, but they now have more leeway in deciding how to spend such money. They can divert federal TANF funds to programs like financial aid for college students and pre-kindergarten programs, for example. Such programs are worthwhile, but they do nothing to help poor single mothers pay their electric bill or their rent. States also have almost complete freedom to decide what applicants must do to qualify for benefits and retain them. States can also shorten the federal time limit on TANF eligibility.
If states cut the cost of TANF by reducing the number of recipients, they can use the savings for other purposes. That gives state officials a strong incentive to discourage TANF applications. Potential applicants may have to spend weeks applying for jobs before they can apply for TANF. Or they may have to produce documents that they cannot find or do not know how to get. Understaffed welfare offices can create long lines that discourage applications. Many TANF applicants also report having been turned down with no explanation at all.
I am writing a review for another publication that touches on this issue of diversion of federal money and it’s simply hard for me to believe that federalism is an effective form of govenrment. Having this much state control over funding, wages, benefits, educational policy, etc., is disastrous, leading to huge disparities between states on all sorts of matters. The ability to states to exercise this much leeway, basically stealing federal money for its general fund and then justifying cutting taxes on the wealthy is a sign of the deep dysfunction plaguing the United States.