Myth: Welfare is to blame for runaway government spending.
Fact: Middle-class entitlements are to blame for runaway government spending.
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.
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
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).
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.