Economy & Trade

By Hilary Masell Oswald, Contributing Editor

It’s hard to keep up with the federal dollars flying hither and yon these days. And it’s especially hard to keep track of how many dollars the government spends on means-tested welfare (read: aid to the poor), in part because welfare spending is stretched across 13 government departments and agencies, 17 budget functions, and 71 separate programs. By comparison, Social Security and Medicare are listed as two distinct line items on every federal budget document.

So it might come as a surprise that President Obama plans to spend $10.3 trillion on welfare over the next 10 years. That’s $250,000 for each poor person currently living in this country.

These data come from an eye-opening report released this month by researchers at the Heritage Foundation, who unearthed the truth about how much the government is spending on welfare—and how ineffective the War on Poverty has been in the 45 years since its inception.

Consider these findings:

• Welfare to poor and low-income families is now the third most expensive government function after aid to the elderly in the form of Social Security and Medicare and after education. We spend less on national defense than on welfare.
• Welfare spending in 2008 was $714 billion. That’s 13 times greater than welfare spending in 1964, when President Lyndon B. Johnson started the War on Poverty.
• During his bid for the presidency, Obama repeatedly bemoaned the fact that the war in Iraq cost each American household about $100 each month. By comparison, welfare spending costs each American family $560 per month this year; next year, that number will jump to $638.
• And speaking of war, the federal and state governments spent $15.92 trillion (adjusted 2008 dollars) on welfare from 1965 to 2008. By comparison, the cost of all American wars since the Revolution is $6.39 trillion (adjusted 2008 dollars).

So what exactly are we getting for this significant investment? Not much, which is shocking. One of the report’s most amazing findings is that the annual welfare expenditures are more than sufficient to end poverty. Yep, that means that if the government converted all of this spending into cash, we could raise the incomes of all of the country’s poor families above the poverty line. We’re spending four times the amount needed to achieve this goal.

How can we be spending so much money and still have such apparent poverty? Part of the answer is that families living at or below the poverty line aren’t the only ones who qualify for welfare; families living on incomes below 200 percent of the federal poverty level ($44,400 for a family of four) receive welfare benefits, too. That’s one-third of U.S. families, according to the Heritage report.

Another reason—beyond campaign-year rhetoric—that we’re led to believe that we have such poverty in the U.S. comes from the way the Census Bureau measures a family’s income. It ignores all but about four percent of welfare expenditures as income. Food stamps, food aid, housing subsidies, health care benefits, the Earned-Income Tax Credit and other refundable credits don’t count.

As an added bonus, when it measures economic inequality, the Census does not take into account welfare received by the poor and taxes paid by the rich—thereby illustrating a greater wealth-discrepancy than actually exists. So Americans think we’re plagued by greater and greater poverty, and politicians spend more and more taxpayer dollars fighting a losing battle.

Certainly, all of this spending is hardly President Obama’s fault. Welfare spending has grown year-over-year since 1965. Under President George W. Bush, for example, spending grew by one-third (after adjusting dollars for inflation). (This makes a person wonder what Obama meant, exactly, when he proclaimed in 2007 that Bush “slashed programs to combat poverty.”)

But we’re facing unprecedented growth in welfare spending: President Obama’s budget documents reveal that in the first two years of his presidency, he will boost federal spending on welfare by $263 billion—an increase two-and-a-half times greater than any increase in U.S. history. Lucky taxpayers, this increase is the equivalent of $3,400 in spending for each taxpaying household in the country.

The report’s authors note that the War on Poverty was never supposed to be such an extraordinary expense. President Johnson’s aim was to cure and prevent poverty and boost self-sufficiency, not launch a program of welfare handouts to an ever-growing group of recipients. But, the authors note, “Current political discourse refuses to recognize or even mention the principal causes of poverty: the lack of work and the decline of marriage. To acknowledge those issues would be to ‘blame the victim’”—a political liability for any elected official.

So what’s to be done? The report outlines nine proposed changes, which include providing accurate information to elected officials about current spending levels; avoiding unnecessary expansions of the welfare state (such as the Making Work Pay tax credit that Obama is proposing); refusing to grant amnesty to illegal immigrants; requiring able-bodied, non-elderly welfare recipients to work or prepare for work as a condition of aid; and replacing Medicaid for families with children with a medical voucher system.

In short, the problem is big, but there are reasonable solutions. First, though, Americans must demand that their elected officials face the truth about what constitutes poverty, how dollars are spent most effectively to help the poor and why this war rages on, despite the vast resources we’ve spent in our failed effort to win.

To read the entire Heritage report here.