Lessons of welfare reform, 10 years on

President Bush's new Treasury chief, Henry Paulson, made his debut speech this week, calling for reform of entitlement programs such as Social Security. Such action, however, requires a Congress like that of 10 years ago, which did act by reforming welfare.

In August 1996, President Clinton signed a bill – passed with Republican support – that was designed, in his grand words, to "end welfare as we know it." Though millions of Americans still need government cash payments, and poverty rates are still too high, Washington and the states did learn valuable lessons from this historic policy shift that can be applied to many federal programs.

The main lesson is that it is far easier and far better to nudge employable and healthy people to stay off government assistance than was once believed.

Asking Americans now to retire later and work longer, for instance, could help the finances of Social Security. Asking people to take more responsibility for their health will help reduce the costs of Medicare and Medicaid.

The 1996 law, which created a program called Temporary Assistance for Needy Families, restricted recipients to only five years of benefits while setting up better ways for them to find work and offering financial incentives such as the Earned Income Tax Credit and child care.

Welfare rolls have since been reduced by more than half. More single women with only a high school degree or less have found jobs. The law was also a main reason for declines in poverty among blacks and children (although poverty remains high among Hispanic immigrants).

Beyond these welcomed results is a deeper, immeasurable shift in attitudes away from a sense of dependency and victimhood.

Government is seen less as a solver of social problems and more as a source of empowerment. Simply redistributing wealth through taxes becomes less important than innovative programs that create opportunities for jobs and education. An individual needing help is treated with greater respect for his or her abilities to grow and live a sustainable life.

Government becomes less of a safety net and more of a springboard.

Despite these reforms, welfare has hardly ended, mainly because of potential barriers to employment for millions.

Work is difficult for people who are mentally ill, addicted to drugs or alcohol, disabled, or have disabled family members. Many parents who seek welfare also have a record of being investigated on suspicion of child abuse or neglect. Their needs can now be more easily identified with fewer people on welfare and can be better addressed with the same spirit of innovation as the 1996 law. Many state welfare offices still need to become better skilled in dealing with the more intractable personal problems.

Congress can muster a bipartisan spirit when the right ideas come along. It did so with welfare reform and again in 2001 with the No Child Left Behind act that is holding public schools accountable for the learning achievements of students.

Big challenges lie ahead in reforming Social Security, Medicare, and even farm subsidies. It's worth celebrating the 10th anniversary of welfare reform.