In 1996, then-President Bill Clinton signed the Personal Responsibility and Work Opportunity Act, replacing the New Deal-era federal assistance program Aid to Families with Dependent Children (AFDC) with the more restrictive Temporary Assistance for Needy Families (TANF). Even over a decade ago, the resulting argument was familiar: the program was said to disincentivize work. Others argued that an excessively restrictive replacement program would increase child poverty and needlessly plunge many single mothers into unemployment.  

Fast forward to today, we hear similar debates in Congress over potential changes to the Child Tax Credit (CTC). President Biden temporarily expanded the CTC as a part of the American Rescue Plan Act by increasing benefits, expanding eligibility, and allowing for monthly payments. Many advocates, scholars, and legislators have argued that these expanded benefits should be made permanent, citing the critical role that the expanded CTC played in the record decline in child poverty that occurred in 2021. Opponents argue that the expanded CTC has too few work incentives and that high benefits would encourage unemployment. Senator Mitt Romney (R-UT), in an attempt to accommodate both perspectives, has released a plan that expands the CTC in some respects but also cuts certain critical benefits, such as the Earned Income Tax Credit (EITC). So what can we learn from the 1996 reforms to the AFDC to help us strengthen the CTC today?  

The 1996 reforms were initially viewed as a success. Most preliminary data seemed to suggest that it led to increases, on average, in both employment and total income for single mothers, while also leading to decreases in welfare usage and poverty rates. Since TANF added work requirements and time limits, a decline in caseloads was to be expected, but the changes in employment, income, and poverty rates seemed to suggest that the proponents of welfare reform were correct — the AFDC was needlessly keeping single mothers out of the workforce. 

Later research found that these average estimates did not paint the full picture. Subsequent studies that analyzed how mothers at different wage levels were impacted by the reforms have found that welfare reform seriously hurt mothers at extremely low-income levels. Various researchers have found that the relative income levels of women from the lowest income percentiles declined significantly following the reforms, as extreme poverty rates increased. Further, while employment did increase on average, many of the jobs these women took up had very low pay and minimal benefits. This is all on top of the fact that the transition from the AFDC to TANF disproportionately hurt women of color, which is unsurprising given that vicious racialized stereotypes, such as that of the ‘Black welfare queen’, helped propel the issue of welfare reform to the national stage. Plenty of these women were not able to find employment even after being kicked off the AFDC. Many researchers have even cast doubt on the idea that the reform led to a significant increase in employment, demonstrating that a large portion of the observed employment increase can be explained by the steadily growing economy of the '90s. Finally, even if the initial results were not incredibly harmful due to the favorable economic conditions of the ‘90s, when the economy collapsed in 2008 TANF was unable to accommodate the significant rise in poverty due to its highly restrictive nature. TANF has not been nearly as effective at reaching families in poverty as the AFDC, and this can largely be attributed to its modest benefits and strict limitations. 

We know now that President Clinton’s welfare reform hurt those who were most in need, even though this is the exact group that social benefit programs ought to protect. But we can learn from these past mistakes as we look at the expanded CTC, which was incredibly effective at reducing child poverty, particularly for households of color.  

Alternative proposals simply do not do as good of a job at reaching those who are in the greatest need of federal support. By limiting benefits for single-parent households, for example, Sen. Romney’s proposal would unnecessarily hurt single mothers, who are undoubtedly the recipients of the CTC who have the lowest income and are disproportionately BIPOC. Further, by providing nothing in benefits to families making no income, Sen. Romney’s proposal would fail to provide for our nation’s most vulnerable families.  

When we eliminated the AFDC, those who were already struggling the most in our economy were penalized. Let us not make the same mistakes this time, particularly when we have the opportunity to reaffirm our commitment to families across the country. Join Prosperity Now this Thursday, November 17th for our Build Back for Justice Day of Action to let Congress know that we need to reinstate the expanded Child Tax Credit.