Is America doomed to repeat its welfare mistakes?
That’s the question on the 30th anniversary of the 1996 welfare reforms, which President Clinton signed on August 22. The law empowered millions of families to move from welfare to work, but it has since been replaced by an even more costly and harmful welfare state. Over $18 trillion in welfare spending later, President Trump championed an even bigger reform in the law he signed last summer. It represents historic progress, yet its success depends on tireless enforcement against states and bureaucrats that want to undermine it. The next welfare reform is already needed — sooner rather than later.
Even now, the 1996 welfare reform stands out as one of the most transformative policies in recent history. The law famously targeted the country’s main cash welfare program, which had trapped families in poverty and dependency for decades. It created a new program — Temporary Assistance for Needy Families — that connected mostly single mothers to work. By 2005, TANF caseloads had dropped by nearly 60%, saving taxpayers billions of dollars while improving millions of lives.
Yet the progress with cash welfare was overshadowed by a backward slide in food stamps. While the 1996 law created much-needed work requirements for able-bodied adults, it had Swiss cheese levels of loopholes. State officials and federal bureaucrats conspired to the point that, in 2023, about 95% of able-bodied adults on food stamps were not covered by work requirements. Meanwhile, other welfare programs not touched in 1996 have exploded. ObamaCare and pandemic-era policies expanded Medicaid to previously inconceivable levels of more than 100 million recipients, a huge percentage of them able-bodied men with no disabilities.
The painful result: As of last year, federal welfare spending was 2.7 times higher than it was in 1996, even adjusting for inflation. Welfare is more expensive, expansive, and extreme than ever.
TRUMP TRIES TO CUT BLUE-STATE MEDICAID FRAUD AND SAVE MORE GREEN
Enter President Trump. The One Big Beautiful Bill Act enacted unprecedented reforms to both food stamps and Medicaid. The loopholes that states use to avoid food-stamp work requirements have almost all been closed, and Medicaid now has its first-ever work requirements. Most importantly, states are now on the hook for high misspending in both programs. If they tolerate waste, fraud, and abuse, they have to pay a portion of the programs’ costs — a powerful incentive to apply work requirements and shrink welfare rolls. My organization estimates that at least 10 million people could move from welfare to work under the law, far more than under the 1996 reform. Separately, President Trump is allowing local authorities to enact a work requirement in public housing — a major and much-needed move.
Yet just like after 1996, states are looking to avoid responsibility and worsen the welfare crisis. The worst loopholes are in Medicaid, where states can let recipients self-attest to their medically frail status. If recipients don’t provide documentation within six months, they’re supposed to be removed from the program. At least 30 states have admitted they plan to use self-attestation, and, based on a court filing, at least 25 states and D.C. have acknowledged they could simply remove these people at the six-month mark, then let them re-enroll for another six months. This never-ending cycle is a recipe for more, not less, abuse of programs meant for truly needy Americans.
COALITION OF 25 STATES SUES TRUMP ADMIN OVER MEDICAID WORK RULE DESIGNED TO PREVENT FRAUD
There’s also a food-stamp carve-out that lets states delay financial penalties if their misspending is high enough. The measure was supposed to give the worst offenders more time to design solutions, but bad actors are misspending more so they can delay penalties. Four states and D.C. have cleared that threshold. Several others, like New York, appear set to follow suit. Illinois and Delaware saw massive increases in waste, fraud, and abuse over the last year, and New Mexico openly admitted it’s using this strategy. Ultimately, states want to kill the reform or at least delay penalties, which the current Senate Farm Bill draft unfortunately does. Accountability should be tightened, not loosened, delayed, or eliminated.
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The Trump administration has just over two years to crack down on gimmicks. It must also police the overwhelmingly liberal federal bureaucracy so the law isn’t gutted from within. Other loopholes and tortured legal interpretations may take years to manifest. Democratic administrations have a history of taking a mile when statutory text only gives them an inch. While the new welfare reforms will help millions of people achieve financial independence and save huge sums of taxpayer money, constant vigilance is required to prevent President Trump’s achievements from being undermined or ignored long-term.
Most of all, Congress should already be thinking about the next welfare reform, and it can’t take another 30 years. The welfare state is still growing larger by the year, sapping the American spirit of hard work and personal agency. The next stage is to shrink programs more dramatically, eliminate unnecessary and harmful handouts altogether, and eliminate all loopholes and waivers, period. The 1996 reform was good. President Trump’s reforms are great. The next welfare reform must be exceptional — and imminent.
