Are Welfare Programs Worth What They Cost?

In 2011, 14.6% of households in the United States were below the poverty line, according to these statistics.  That represents 16.8 million households.  That same year, the federal government spent $746 billion on means-tested welfare programs, according to this report recently released by the Congressional Research Service.  If that money were divided up and given to those families below the poverty line, each family would receive $44,405, enough to put them well above the poverty line.

That $746 billion includes only federal government means-tested programs, so does not include Social Security and Medicare, the nation’s two largest redistribution programs.  It also does not include veterans benefits, even when those benefits are means-tested.  This is money that is specifically targeted to the needy.

That $746 billion does not include any state or local government spending; only federal spending.  State and local government spending on Medicaid alone totaled $166 billion in 2011.  If that were added to federal means-tested welfare programs and also divided among families below the poverty line, each family could receive $54,286 a year.

In 1970 the percentage of families below the poverty line was 10.9%, well below what it is today, according to Table 5 here.  The poverty problem is worse today than at the early stages of the War on Poverty.  According to the government’s own statistics, welfare programs do not reduce poverty.  We are spending enough on means-tested welfare programs to lift all poor households in the United States well above the poverty line; yet poverty remains.

Welfare programs may have been designed with good intentions, but more than four decades after initiating a War on Poverty, those programs should be judged on their results, not on their intentions.

Randall G. Holcombe is Research Fellow at the Independent Institute and DeVoe Moore Professor of Economics at Florida State University. His Independent books include Housing America: Building Out of a Crisis (edited with Benjamin Powell); and Writing Off Ideas: Taxation, Foundations, and Philanthropy in America .
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