Welfare Reform not a Disaster, Interlude; or What Do We Mean When We Say Aid

Those of you who want to argue that something being “just symbolism” are invited to consider the fate of “Aid to Families with Dependent Children.”

AFDC is clear and precise. It tells us that we are helping a specific set of people: Families with Dependent Children. Not just the father and the mother, but the next generation of human capital as well. The people who are supposed to be the cogs in the engine of capitalism.

A funny thing happened on the way out of “welfare reform” (discussed by Robert here and here): the program got renamed to “Temporary Assistance for Needy Families.” Note that the emphasis is now on the transience of the assistance, and the families are described as “needy” before they are families. No mention of children at all; might well be great-grandma and a bunch of septagenerians living on their Social Security checks and whatever they stuffed under the mattress in the manner of John Updike’s father.*

Another “funny” thing that happens on the way through welfare reform is that state block grants lead to strange allocations.

There is a version of this in international development; let’s call it the Easterly Paradox.** Generally, what you do is look at the aid a country officially received over the past X number of years (X generally >20) and declared with a Harumph! that, if the people had been given that money directly, they would have $XX,XXX each.

What you don’t bother mentioning is that 85-90% of that money—75% if the country is extremely lucky—went to domestic supppliers of “intellectual property.” That is, it went to U.S. management consulting teams (generally at full retail) who “taught” people their method of irrigation or record-keeping or something else that was essential.***

Short version: our foreign aid budget subsidizes domestic firms significantly more than it produces actual foreign aid.

You would think, though, that the same thing would not happen domestically. But it appears you would be wrong.

Using the recently-released Statistical Abstract data, following are graphic displays of the amount of money allocated to TANF that was actually spent as aid from 2003 to 2006. (Click individual graphics to enlarge.)

Note: The following graphic is accurate. The state of Mississippi in 2004 spent a negative US$7MM on TANF aid.

In summary, for the four years of most recent data, the U.S. has averaged spending less than 50% of the monies allocated to TANF on providing actual Assistance to Needy Families.

The next time someone tells you we spend too much money on helping people, point out that most of that money goes to people who are employed as administrators, counselor, and finance officers.

*Let’s ignore the anecdotal evidence that, if there was one reason that Naderites kept citing for their opposition to Gore, it was “welfare reform.”

**Pause while three people get the joke.

***See Paul O’Neill’s exasperation in Ron Susskind’s The Price of Loyalty when he tried to explain that transporting water to a village on a small scale would cost $25,000, not the $25MM-ish that Arthur Andersen had told the local leaders.