The welfare reforms of 1996 replaced Aid to Families with Dependent Children (AFDC) with Temporary Assistance for Needy Families (TANF) as the primary safety for the poor. But the Great Recession has exposed the failure of TANF as a safety net to catch American families as they experience hardship.
As the Great Recession has pulled more and more Americans into poverty, families’ primary safety net should be TANF, complemented by programs such as SNAP (formerly the Food Stamps program). However, as Figure 1 shows, as SNAP levels have responded to increasing unemployment, TANF recipient levels have not.
The decline in TANF participation has at the same time been accompanied by a 56 percent increase in single-mother families in extreme poverty.
SNAP levels have generally followed unemployment and poverty. Yet there are 3.14 million families eligible for TANF who are not receiving benefits. Why is TANF not providing assistance to Americans who need it now more than ever?
The answer is that the TANF program has significantly reduced the number of welfare recipients even prior to the recession: since TANF was enacted, the number of recipients has fallen by almost from 4.8 million families in 1996 to 1.7 million families in 2008.
However, this outcome has been achieved in part by a significant reduction in the number of eligible families participating, from 84 percent of eligible families in 1995, to 40 percent of eligible families in 2005. The U.S. Government Accountability Office (GAO) estimates that 3.14 million eligible families did not receive assistance in 2005.
Although the U.S. House of Representatives’ Ways and Means Committee estimates that 25,000 to 30,000 families are cut off from TANF benefits each year because they lose eligibility due to time limits, most of the decline in welfare recipients is due to drops in the percentage of eligible families receiving TANF benefits.
This is primarily due to the structure of the program, which incentivizes states to cut caseloads and has led to increased barriers of access for eligible recipients.
TANF is distributed to states via block grants, and states are able to use leftover TANF funds for other services which may garner more public support, such as childcare and child welfare services. States therefore have incentives to cut TANF costs for use in other programs.
The “caseload reduction credit” further increases states’ incentives to reduce caseloads without regard to cause. The credit allows states to sidestep financial penalties for failing to fulfill work program participation requirements if they reduce overall TANF caseloads. As a result, the GAO reports that, “nearly all states have at least one type of diversion strategy” to keep applicants from receiving assistance.
Clinton-era welfare reform was intended to reduce welfare dependency by increasing employment levels of potential welfare recipients. However, new restrictions to access were not accompanied by compensating guarantees of employment, which eventually leaves unemployed families without support. Now welfare reform and efficiency in implementing TANF seems to be equated with reducing caseloads regardless of need.
The Great Recession has served to highlight how many Americans have been and continue to be hurt by this outlook. Temporary Assistance for Needy Families now provides a safety net that is far too porous. As Americans continue to fall through the holes in this jobless recovery, the primary safety net designed to catch them needs to be repaired.
Blank, Rebecca. Improving the Safety Net for Single Mothers Who Face Serious Barriers to Work
. The Future of Children 183-197 (Fall 2007). Available at: <http://www.futureofchildren.org/usr_doc/7_09_Blank.pdf>
Government Accountability Office. Temporary Assistance for Needy Families: Implications of Changes in Participation Rates. GAO-10-495T March 11, 2010. Available at: <http://www.gao.gov/products/GAO-10-495T> 
Government Accountability Office. Temporary Assistance for Needy Families: fewer eligible families have received cash assistance since the 1990s, and the Recession’s impact on caseloads varies by state.
February 2010. Available at: <http://www.gao.gov/highlights/d10164high.pdf>
Committee on Ways and Means U.S. House of Representatives. Background Material and Data on the Programs within the Jurisdiction of the Committee on Ways and Means 2008. (also known as “Greenbook 2008”). 7-83 (2008). Available at <http://waysandmeans.house.gov/Documents.asp?section=2168> 
Government Accountability Office. Temporary Assistance for Needy Families: Implications of Changes in Participation Rates.
GAO-10-495T March 11, 2010. Available at: <http://www.gao.gov/products/GAO-10-495T>