NCPA - National Center for Policy Analysis

Welfare Fails the Poor

March 3, 2004

In 2000, the United States spent $25.5 billion dollars on welfare, with about half of those funds coming from state governments. Despite the vast resources spent on welfare to help the poor, Michael Tanner of the Cato Institute says that welfare has done more harm than good.

One of the biggest problems with welfare, Tanner says, is the perverse incentives it gives recipients to have children -- arguably the underclass' largest problem. While women do not get pregnant just to get welfare benefits, removing the economic consequences of out-of-wedlock births takes away a major incentive to avoid them. More than three-fourths of more than 20 major studies on welfare recipients show a significant link between benefit levels and out-of-wedlock childbearing.

Unfortunately, the non-economic consequences of illegitimacy, such as delinquency, mental illness and child abuse, have a tendency to perpetuate the problem. Also, children of single-parents are major contributors to neighborhood crime. Research shows that a 50 percent increase in welfare benefit levels leads to a 117 percent increase in the crime rate among young black men.

Welfare has hurt the poor in other ways, says Tanner, including:

  • Welfare pays better than work for many recipients, thus eroding the incentive to find employment and working out of poverty.
  • Welfare promotes intergenerational dependence -- 29.3 percent of recipients had parents who received welfare as children and a remarkable 7.5 percent are third-generation recipients.
  • Saving and the accumulation of wealth -- one of the most important ways to break out of poverty -- is discouraged through low asset eligibility thresholds.

Even the financing of welfare has deleterious effects on the poor -- for example, taxes on investment prevent job creation, and government spending on inefficient programs crowds out more efficient private-sector spending.

Source: Michael Tanner, "The Poverty of Welfare: Helping Others in Civil Society," (Washington, D.C.: Cato Institute, 2003).


Browse more articles on Tax and Spending Issues