The Welfare System’s Perverse Incentives Undermine Self-Sufficiency

Jay Wesley Richards

Federal, state, and local governments in the United States today spend enough on means-tested welfare programs that if all of the welfare bureaucracy just got out of the way and cut checks to the 40 million poorest Americans, they could give each and every one of them roughly $20,000 a year: $20,000 for each poor individual, $40,000 for every impoverished couple, and $80,000 for every family of four in this group. If handing out money is really the way to solve poverty, then why don’t we just do that?

When President Johnson championed a “War on Poverty” as part of his Great Society in the mid-1960s, he pledged to eliminate domestic poverty. Today, over 80 means-tested welfare programs are providing cash, food, housing, medical care, and targeted social services for poor and low-income Americans — and this does not include Social Security, Medicare, unemployment insurance, and veterans’ benefits.

By 1970, the government was already spending over $175 billion a year (in fiscal year 2015 dollars) on such programs. With few exceptions, welfare spending has gone up every year, no matter who is in the White House. In the decade from 2005 to 2015 alone, spending on those 80 welfare programs went up $288 billion (in 2015 dollars). Federal, state, and local spending now totals more than $1 trillion annually.

If domestic poverty had disappeared as a result, debates about the cost of welfare programs might be left to the accountants and budget wonks, but the percentage of the population that the government deems below the poverty line — which today is roughly 15 percent — has barely budged in the intervening 50 years. Worse, the poverty rate was declining steadily in America until the war on poverty ramped up in earnest.

Part of the reason for the persistently high poverty rate is the fact that the government does not count most welfare benefits in its calculation of poverty. Another factor is that the welfare system has failed to promote self-sufficiency. Our sprawling welfare state has often discouraged work, the normal way individuals and families have emerged from poverty. Less than 3 percent of Americans who work full-time meet the government’s definition of poverty. [1]Surely, welfare programs should be designed to encourage recipients to find work rather than to become government dependents. However, the vast majority of welfare programs fail to promote work.

The Welfare Reform Act of 1996 managed to reform one program — Aid to Families with Dependent Children (AFDC) — by adding a work requirement. Opponents cried that it would create an epidemic of homelessness and poverty among single women and their children. In fact, former recipients did not become homeless: They found jobs, dignity, and a way out of poverty. Now, under President Obama, even that modest reform has been undone.

Besides creating perverse incentives, the welfare system also encouraged negative social patterns — from long-term unemployment and dependence on government to substance abuse and unwed births — that have trapped millions in a multigenerational cycle of poverty. An intact family with a married mother and father may be the best way to prevent childhood poverty in the U.S., so any rational welfare program should promote marriage for parents, not undermine it. Yet the welfare system is rife with marriage penalties.

Too often, debates over welfare spending assume that if the government spends enough, poverty can be vanquished. Materially speaking, government could spread the wealth to raise living standards. But that is quite different from increasing self-sufficiency, which should be the goal of welfare policy. Yet, if many of the policies actually exacerbate dependence, then increases in spending are doubly bad. They waste precious tax resources and harm recipients.

This is why simply cutting fat checks to 40 million Americans would not solve the poverty problem either. The war on poverty would become, in essence, a more lavish and efficient delivery vehicle for a cultural toxin that the welfare system is already delivering far too abundantly — sapping initiative, undermining dignity, accelerating family breakdown, and encouraging the cycle of poverty, even intergenerational poverty.

Most Americans want a social safety net that provides necessities for those who cannot help themselves, and they want to help the poor and unemployed find meaningful work. It does not follow, however, that a massive welfare state funded and controlled by the federal government is the best way to do that. The evidence of the past half-century shows just the opposite.

The time has come for a serious conversation about reforming the nation’s safety net, which is not so much a springy net as it is a massive, expensive, and sticky spider’s web.

Jay Wesley Richards is an Assistant Research Professor in the School of Business and Economics at The Catholic University of America and Executive Editor of The Stream.

Next Up in the Poverty and Dependence Section:

Subsidized Housing Participation


  1. Carmen DeNavas-Walt and Bernadette D. Proctor, “Income and Poverty in the United States: 2014,” U.S. Department of Commerce, Economics and Statistics Administration, U.S. Census Bureau Current Population Reports No. P60–252, September 2015, (accessed April 22, 2016).

© 2016 by The Heritage Foundation. All Rights Reserved.

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2016 Index of Culture and Opportunity

The Social and Economic Trends that Shape America

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