This webpage covers ideas for cost savings related to the welfare system – overall reform is shown on the Welfare Reform Page.
The goal of Cost Savings – Fix the welfare system to be more effective and save billions of dollars.
The antipoverty programs of the Federal government are very expensive when calibrated against the number of people in poverty. By coordinating the entire system and focusing on those most in need, we could lower our costs by at least a third and save over $100 billion annually (See Welfare Reform Page).
The Poverty Gap and Cost Savings
Each year, the federal government spends more money on welfare than it takes to lift all Americans out of poverty. The difference totaled $344 billion in 2022. Here is a full analysis of the poverty gap and welfare spending. If the welfare system was revamped, it could save as much as $200 billion a year and be more effective at eliminating poverty in America.
Why is our current system so expensive?
Because our system is poorly targeted.
We pay people above the poverty level. Some individuals and families above the poverty level receive benefits. Each program has unique qualification standards, and most include people with income over the poverty threshold. For example, SNAP is available up to 130% of the poverty threshold, and WIC is at 185% of the threshold. Both are food programs. Programs such as EITC and Pell Grants are available to people well above the poverty threshold. With such uncoordinated qualification standards, we treat the poor inconsistently and unfairly. Some people receive benefits that many Americans would label as not poor and therefore not deserving -see Welfare Examples.
· We move some people in poverty to well above the poverty level – Some people start out in poverty, but combined benefits from multiple programs move them to well above the poverty threshold. This is because benefits from one program are not considered in qualifications for another program. There is no cap on the total benefits people can receive, nor is there a limit to the number of programs in which people can participate. With no coordination of program benefits, some people get very few benefits while others participate in several programs. The result is that we are inconsistent with the support we give to the poor.
· Administrative costs are high – Eight large Federal Agencies administer the 13 antipoverty programs. Each agency has its own databases, procedures, forms, and policies, which makes the overall system very expensive to manage.
Fix welfare Improper Payments
Welfare improper payments totaled $162 billion for the year 2022. See the full analysis here. Improper payments include a wide variety of errors, from improper documentation to outright fraud. Many of the errors stem from inaccurate or fraudulent representations of those seeking the benefits. The improper payments total 13% of all welfare payments. This costs taxpayers billions each year and adds to the deficit. A concentrated effort needs to be focused on fixing these errors, which would include revamping the welfare system to make it simpler and easier to manage. See more on the Welfare Reform Page.
Across the Board Cutback
The most straightforward way of cutting costs would be to cut back the federal programs across the board. However, the income qualification standards are so diverse between the various programs that an across-the-board cut would hurt the poorest Americans disproportionately. It makes more sense to cut out the higher-income people from receiving welfare and focus on the poorest Americans.
A fairer way to lower costs is to put a cap on total benefits. This cap could be set based on a percentage of the poverty threshold. For example, once an individual or family has been raised to a set percentage of the poverty threshold, for example, 100% or 125%, of the threshold, they have hit their maximum benefit. This would require coordination of all the programs that operate independently today. The Welfare Examples Page demonstrates the inequities and unfairness of our system, which can be fixed to save billions.
Additional resources regarding cost savings
Heritage Foundation – The Unsustainable Growth of Welfare. Link
Get rid of “cliffs” and add “something for something” to our welfare program
Our current welfare system discourages some recipients from making too much money at a job and losing more benefits than they would receive in job income. This traps some individuals and families in poverty. The system also pays benefits to the poor with no expectations of anything in return, such as work training and community service. This is not a call for government employment of those on welfare, but instead turning our programs into a “hand up” instead of just a “hand out” as exists today. This philosophical change would help foster pride, help the poor acquire new skills and independence, and tell the poor they have an important contribution to make to the productivity of the nation. Such changes would save billions over time. See more details on the Welfare Reform Page.