Our Self-Sabotaging Social Safety Net

When it comes to antipoverty programs, policymakers often ignore the role of family and marriage. Nobel laureate and University of Chicago economist James Heckman is famous for his research showing the significant positive effects of early education investments for disadvantaged children. But Heckman is quick to caveat that this state intervention falls flat on its face without attention to the family.

“Nobody wants to talk about the family, and the family’s the whole story,” says Heckman.

Heckman continues: “It’s amazing to me, when we see these high rates of return on early childhood programs, and I’ve written about them, we get returns of about 13% per annum. I’m willing to bet that if we really evaluated what the benefits were of a mother working with the child, we’d find rates of return of more like 30 or 40%. But nobody has ever studied it.”

Not only have policymakers and social scientists too often ignored the role of the family when creating new social safety net programs, there is a high possibility that existing welfare programs—in place in the United States since the 1960s—lead to higher rates of family fracture for the poor and working class participants. Depressingly, welfare’s marriage penalties have been ignored by both the political right and left.

Why Marriage Matters for Children

Marriage is increasingly understood by social science as being a top, if not the number one, driver of outcomes for children. Children who come from a home where one parent—usually the father—is absent often display signs of uncertainty about the future, even at a young age. Young girls and young boys often react differently to father-absence. One of the most comprehensive studies ever done on juvenile delinquency, by two University of California researchers in 2002, found that “the most critical factor affecting the prospect that a male youth will encounter the criminal justice system [even when controlling for factors such as race and income] is the presence of his father in the home.”

According to Raj Chetty, a Harvard researcher, the number of two parent families in a neighborhood is a primary factor in predicting rates of upward income mobility later in life. This is true even when controlling for variables such as the quality of schools, race, or ethnicity.

Family structure impacts choices kids will make as adults, as children with absent fathers are more likely to drop out of school, go to jail, and suffer mental health problems. Research by David Autor and David Figlio studied, and rejected, the idea that these effects are due to bad neighborhoods and schools. Instead, “neighborhoods and schools are less important than the “direct effect of family structure itself.”

How Welfare Penalizes Marriage

First, welfare in America has a marriage penalty because family eligibility only bumps up slightly when two earners are counted relative to one earner. Consider a young couple, unmarried, who have just birthed a child of which both are the biological parents. The mother earns $40,000 per year, and welfare programs she is enrolled in cut off at $50,000 per year. The father earns $50,000 per year, so the couple’s combined income is $90,000.

If the couple marries, the authorities know that they are married and automatically count their combined incomes. Because the combined income is well above the welfare eligibility threshold, the mother loses her benefits.

If the couple cohabitates and reports their cohabitation status to authorities, the couple’s income is also counted together, and mom loses her benefits—food stamps, housing subsidy, and childcare assistance that she relies on to keep her job. But the couple can easily cohabit and not report this to authorities—studies show this happens frequently—in which case the mother will continue to qualify for welfare. The problem is that, relative to marriage, cohabitation is uniquely unstable and thus not ideal for children. Most couples facing this choice choose to cohabit or break apart, which is at least partly why marriage rates have plummeted in America, with the decline completely concentrated among poor and working class Americans.

Let’s back up from the example to see what’s going on. Simply put, welfare rules count the incomes of both biological parents as long as they are under the same roof, married or unmarried. It’s just possible to hide cohabitation from authorities, while it is impossible to hide marriage records (in my state of Minnesota, county welfare officials have a system called “MOMS” to look up marriage records going back over a hundred years). So, in practice, welfare has a marriage penalty. On paper, welfare also penalizes joint biological parents both living with their child. Perversely, a non-biological parent (the live-in boyfriend) can be made known to authorities, yet his income will not be counted toward welfare eligibility. This incentive is bad policy on its face. To wit, children with an unrelated adult in the home are 11 times more likely to suffer abuse, and when abuse does occur, it is statistically more severe.

This is the system that policymakers, Democrats and Republicans, have seen fit to leave unattended and unmodified. On the other hand, consider the federal tax code. If a couple is married filing jointly, their next marginal tax rate kicks in at a combined earning amount well-above the dollar amount that this marginal rate kicks in for a single person (e.g., a married couple might pay 25% on every dollar above $100,000, but a single filer will pay 25% starting at every dollar they earn above $70,000). And the federal tax code becomes even more pro-marriage as couples reach higher tax brackets.

Apathy on the Right and Left

The political Left has historically downplayed the role of the father in the home. When former Democratic Senator Daniel Patrick Moynihan, in his younger years before being elected to the U.S. Senate, authored a 1965 report about family breakdown in the black American community, he was excoriated by liberal groups, who thought Moynihan placed too much emphasis on the importance of a father. Today, the social science is undeniable, and leading liberal researchers like Elizabeth Sawhill and Melissa Kearney tout the importance of marriage for children’s outcomes. Yet the Left still has a strong underlying trend of being agnostic toward marriage, and when crafting new social policies—such as Obamacare’s Medicaid expansion—Democratic politicians defaulted to the old framework, creating new marriage penalties in the process.

The political Right, however, is quick to talk about the importance of marriage. But for all the talk about traditional marriage, the political Right has paid little attention to the bottom-half of income earners who used to get married, but where marriage has relatively disappeared over the last 50 years.

Rightwing commentators often blame “culture” for the marriage decline. And while it is true that people tend to follow the decisions of those around them, we cannot ignore the effects of public policy. When a working-class couple with combined income of about $50,000 to $80,000 per year face marriage penalties totaling between $5,000 to $8,000 per year (discounting Medicaid losses), it seems silly not to acknowledge the impact of these penalties on a couple’s decision-making. Indeed, it is highly likely that many of the cultural breakdowns that conservative Americans decry in America’s lower classes are the result of family fracture and the disappearance of marriage, not the cause.

The 1996 welfare reforms paid lip-service to marriage, but that piece of the legislation carried no real reform and no teeth. Instead, these reforms reduced cash welfare and replaced it with block-granted programs to state bureaucracies, along with nudging states toward work requirements. Programs still provided generous payments for rent, food, and daycare; they just no longer came in the form of cash.

Today, very few states have even considered removing welfare marriage penalties. Instead, Republicans push for work requirements to welfare—not a bad concept in theory, but complicated, bureaucratic, and easy to game in practice. One conservative group advocating for work requirements for food stamps even claimed that food stamps had “no marriage penalty” but later admitted that the program does in fact have marriage penalties because “couples can conceal relationships so fraud prevention is a must.” Unmentioned is that this fraud prevention requires more bureaucracy and would take us back to the perverse “man in the house” rules of the 1960s, where government workers would show up at public housing during the week to check on a family and ensure that dad wasn’t home.

No Easy Answers

To be fair to the politicians, there are few easy answers here. One simple solution would be to end the rule that doesn’t count the income of an unrelated able-bodied adult in the home toward welfare eligibility—the rule that, as currently crafted, penalizes joint biological parents both living with their child. But this doesn’t fix the underlying fact that welfare programs in practice penalize marriage by not accounting for a second adult’s earnings power and often drop off quickly if a person earns too much (a phenomenon known as a “welfare cliff”).

There are several potential solutions, none of them foolproof. One solution is to follow the federal tax code and increase the eligibility threshold for married couples—including a gradual phase out for the welfare program so that it is less generous to high earners and doesn’t suddenly drop off if a recipient earns a dollar too much. I have previously argued for this approach, starting with a program that is inherently pro-work, is limited in most states, and has large marriage penalties: the childcare assistance program.

The most ideal solution, a complete overhaul of American welfare, is unfortunately the least likely to occur. Several years ago, Senator Mitt Romney introduced a bill, the Family Security Act, which would change the Child Tax Credit into cash payments that occurred throughout the year. This would give $350 per month to families ($4,200 per year) for each child under 6, and $250 per month ($3,000 per year) for children age 6 and over, with the maximum monthly payment to a family capped at $1,250 per family ($15,000 per year). The benefit phases out at high income levels which account for marriage—$200,000 for single filers and $400,000 for married filers. Payments would start within four months of a child’s due date. Romney’s plan paid for itself by eliminating cash welfare (TANF), the Child and Dependent Care Tax Credit (CDCTC), the anti-marriage “head of household” tax filing status, the daycare and SALT deductions that go to high income earners, and by rolling back the Earned Income Tax Credit (EITC). In short, Romney creates a marriage-neutral policy and pays for it by removing anti-marriage policies. But the plan didn’t go far enough.

The plan should increase the payout for severely disabled children—such as children with Down syndrome—with no drop in payout after the child reaches age 6. Next, cutting the EITC’s, TANF’s, and head of household’s marriage penalties isn’t enough. Section 8 housing vouchers and public housing, as we currently know it, should end. There is gross inequity with these programs, they trap people in poverty with marriage and work penalties, and it is bad public policy to concentrate poor persons in the same buildings in urban areas, where good work can often be scarce. Food stamps can be replaced too. As a welfare program is removed, the Child Tax Credit can be made more generous. And lower income persons can receive more generous payouts still, just as long as the benefits don’t dramatically shift downward lower upon greater earnings or marriage. Meanwhile, Section 8 and other programs like food stamps could remain, at a much smaller scale and lower cost, for adults without children who are disabled.

A Serious Discussion

Many might balk at these proposed solutions, but any discussion should acknowledge the dire consequences of America’s existing anti-poverty framework on family formation. Large structural changes are needed, or we will not achieve better results. At the very least, an honest conversation needs to start occurring among policymakers. Too often, as Dr. James Heckman notes, we ignore these issues completely. When creating policies and programs, policymakers need to consider the impacts on family and family incentives. Without this attention, even a well-thought policy is doomed to fail.

“We do want to harvest the powerful force of love and attachment to the child. That is such a powerful force,” says Heckman. “I wish the family would get back into more of the center of our lives.”

Willis Krumholz
Willis Krumholz
Willis Krumholz is a research fellow with the Archbridge Institute. He works in the financial services industry and lives in Minnesota, where he is a licensed attorney and a Chartered Financial Analyst (CFA) Charterholder. He received a JD/MBA from the University of St. Thomas.
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