By Zachary Parolin
The provision of cash assistance to low-income families is widely acknowledged as an essential tool for combating child poverty and material hardship. After the introduction of the Temporary Assistance for Needy Families (TANF) program in 1996, however, the provision of means-tested cash assistance for jobless, able-bodied families in the U.S. rapidly declined. In 1993, just three years before the passage of the legislation that introduced TANF, annual cash assistance allocations amounted to $34.3 billion in 2016 USD. By 2016, annual cash assistance allocations had declined to $7.8 billion, a 78 percent decrease from 1993, despite total TANF spending remaining relatively stable over time.
In the midst of an economic crisis induced by the Covid-19 pandemic, the need for cash support is even more apparent. Families with children are currently experiencing high rates of food insufficiency, missed or delayed rental payments, and high levels of anxiety. Few appear to be receiving cash support from the TANF program. What explains the steep decline in cash support from TANF throughout the past two decades? This is the question I investigate in a study forthcoming at the journal Demography.
Perspectives of the decline in cash assistance
The sources of the decline of TANF cash assistance are contested, but prior research suggests that the decline of cash support can be grouped into three sets of potential explanations: declining need for TANF cash assistance, declining participation in TANF cash assistance among low-income households, and declining benefit levels among families actually receiving cash support. I briefly discuss these three perspectives.
First, some studies observe that there is declining need for cash assistance, in part due to
rising employment rates among single mothers (the primary beneficiaries of TANF support). In the study, I formally define “need” as when a household meets the income-based eligibility requirements for TANF cash assistance in the household’s respective state and year. If declining need were to be the dominant driver of declines in cash assistance, then we should find that improving living conditions of low-income families across the U.S. can largely explain the decline of TANF support.
Second, some studies point to declining participation in cash assistance among low-income families. I measure “participation” as the share of families in need (those meeting the income-based eligibility requirements for TANF) who actually receive cash support from TANF in a given year. Low rates of participation can likely be attributed to barriers to benefit access, including stringent participation requirements, lifetime time limits as low as 12 months, harsh sanction policies, and other administrative burdens that inhibit low-income families from applying for or receiving cash support.
Third, prior work has signaled that declining benefit levels can help to explain the decline in TANF. I measure “benefit levels” as the average benefit value among households receiving cash support from TANF in a given year. In most states, TANF benefit values are not updated for inflation and, consequently, decline in real value each year. In all but three states, the generosity of TANF benefits has declined from the mid-1990s onward. It is possible, then, that declining benefit levels are a primary source of the decline of overall cash assistance allocations.
(Another possible explanation is that the amount of federal support that state governments receive to run their TANF programs has declined in real value over time. However, as I discuss in the full paper, the evidence casts doubt on the argument that declining “block grant” values can explain a meaningful share of the decline of cash support. Thus, I do not discuss the value of the block grants in this summary.)
Declining participation in cash assistance among low-income families explains the majority of TANF’s decline
Which of these three perspectives best explains the decline of cash assistance from TANF? In the full paper, I elaborate on the data, methods, and accounting framework for decomposing the sources of TANF’s decline. Here, however, I simply summarize the key findings.
Figure 1: Decomposition of cumulative changes in TANF cash assistance allocations by changes in need, participation, and benefit levels
Note: Vertical line represents transition from Aid to Families with Dependent Children (AFDC) to TANF. “Need” refers to changes in share of households meeting income-based eligibility criteria for AFDC/TANF cash assistance. “Participation” refers to share of households in need who actually receive cash assistance. “Benefit levels” refers to mean level of benefit values among households receiving TANF cash support.
Figure 1 visualizes the cumulative decline of cash assistance from TANF (gray area) from 1993 to 2016, as well as the share of the cumulative decline that can be explained by changes in need (left panel), participation (middle panel), and benefit levels (right panel) in the black areas.
The findings suggest that only around one-fifth of the decline in cash assistance from TANF can be attributed to changes in “need,” or, put differently, due to improvements in the economic wellbeing of low-income families. Specifically, I find that the rising employment rates among single parents, changes in the incidence of single parenthood, and changes in other compositional factors can explain only 21 percent (around $5.5 billion) of the decline in TANF cash assistance allocations.
Instead, declines in the receipt of TANF cash assistance among households meeting the income-based eligibility standards (“participation”) contributed to more than 50 percent of the overall decline in cash assistance. Nearly all of the decline in participation remains unexplained by compositional differences in the income-eligible households. Instead, as I detail in the full paper, federal and state policy decisions designed to inhibit access to cash assistance have led to a sharp decline in participation among families who otherwise meet the income-based eligibility requirements. Had the share of low-income households receiving cash support not changed from 1993 onward, cash assistance spending from TANF would have been about $15 billion higher in 2016.
Declines in TANF benefit levels explain about 27 percent of the overall decline in TANF allocations. This decline is due to the non-indexation of TANF benefit values in most states, as demonstrated in the full paper. Had benefit levels remained constant, cash assistance spending from TANF would have increased by about $7.6 billion in 2016.
There is enough money in the TANF program today to lift all single-mother households out of poverty
To summarize, changes in the economic wellbeing of U.S. households only explains about 21 percent of the decline in cash assistance from TANF between 1993 and 2016. The rest of the decline is attributable to declining participation among low-income families (52 percent) and declining benefit levels (27 percent). In the paper, I ask, how much more would state governments spend on TANF cash assistance today if participation rates and benefit levels would have remained constant from 1993 to 2016, rather than declining? The results are startling: state governments would spend about $19.2 billion more in cash support in 2016 in this scenario. To put $19.2 billion in context: it is more than the minimum amount of resources necessary to lift all single-mother households out of poverty in 2016.
Notably, such a policy shift would require no new redistributive program or allotment of federal funds. The counterfactual addition of $19.2 billion in cash assistance, combined with observed spending on cash assistance, is still less than the total sum of funds that states currently spend on all activities within the TANF program (around $31 billion in 2016). Instead of going toward cash assistance, however, states are currently using their TANF budgets on a broad range of other programs and services, including funding for overnight camps, textbook subsidies for college students, childcare support, scholarships for college students from well-off families, estimations of the monetary value of Girl Scouts’ volunteer time, Alternative to Abortion programs, compulsive gambler assistance, funding for foster care, funding for family-related judicial administration, transportation assistance, the creation of a university volleyball court, speaking fees for professional athletes, domestic violence services, grants to non-profit organizations, and more.
Put simply, state governments have enough funds within the TANF program today to make large reductions in child poverty. Particularly in the midst of the Covid-19 pandemic, state governments should ensure that they use their TANF budgets to provide direct income support for families in need.
About the Author:
Zachary Parolin is a post-doctoral researcher at Columbia University’s Center on Poverty and Social Policy and a Stone Center Affiliated Scholar.
Related Research: These findings are from “Decomposing the Decline of Cash Assistance in the United States, 1993 to 2016,” forthcoming from Demography. A pre-print version can be accessed here.