CONCORD, N.C.-As Washington's budget battles continue, welfare expenditures are often the prime example of spending that hurts the people it's supposed to help-but one $59 billion program, the Earned Income Tax Credit, is mainly an exception.
Lorie Conley benefits from that program. Her uniform T-shirt is stained with marinara sauce and minestrone soup after a lunch shift in the kitchen of the Olive Garden in Concord, N.C., just north of Charlotte. Her emotions are frayed after hours of pulling hot plates of lasagna and gathering cheese graters scattered across the counters. She's tired and she's dirty, but as she absentmindedly twirls her fork in a plate of pasta, her mind is still working, doing the math.
Conley, a single mother, raises three children and makes $12.35 an hour as a culinary assistant. "A lot of times, it takes every single thing I get on my check to pay bills," she said. Her problem now, after working at Olive Garden for five years, is that her preteen son has juvenile diabetes. "I can't have just any babysitter watch him," she said. "I need someone who knows what to do if he gets sick or goes unconscious." She changed her work availability to fit her son's needs, unable to leave him at night. Since switching to lunch shifts, her 40 hours are down to 25.
Conley works hard to provide for her kids. She rides the bus to cut down gas costs. She discontinued cable television in her apartment. And she is thankful for the one governmental program for the poor that most conservatives like, the Earned Income Tax Credit. The EITC last year provided Conley with a $5,000 check.
She used the money to buy school clothes for her children, to pay her rent in advance, and to save for education: She plans to attend Rowan-Cabarrus Community College and earn a degree in accounting.
First enacted in 1975, the EITC is a federal tax credit for low-income workers. Hailed as an alternative to traditional, handout-based welfare programs, supporters of the EITC say it encourages work and stimulates the economy. While federal welfare programs can keep families from working for fear of losing benefits, the EITC recipients must work to be eligible, and as families increase their income the credit decreases at a slower rate than the income increases.
Della Knowles, a social worker in Cabarrus County, which includes Concord, contrasts the money distributed through the EITC with money handed out to people not working. "Most people who are on welfare believe they are entitled to that welfare," she said. "I think it's a broken system. It's draining our economy." Knowles understands the need for temporary assistance. When her husband was laid off, she enrolled her children in Medicaid for a year. Speaking of the welfare programs, she said, "That's what all these programs were supposed to be-they were supposed to be temporary." She sees the EITC as a greater benefit to society. "The EITC is a reward for people who aren't on all these programs."
Conley is not unusual. I interviewed Laura Stevens, who works as a server at Olive Garden and trainer averaging 25-30 hours of work each week. She studies at a local community college with a full class load and is a single mom to two young girls. The financial strain of supporting her family on a tip-based income has caused Stevens to consider welfare as an alternative, but not seriously enough to pay a visit to the Division of Social Services. She doesn't want her girls growing up in government housing, concerned for their safety. "If I don't need it, I don't want it," she said. Instead, when she isn't working, she focuses on school with plans to establish a nursing career.
Like Conley, Stevens uses the tax credit to pay her bills in advance. "It puts me ahead massively." She also deposits $1,800 in savings each year for her daughters' college education, and uses what's left over to buy them birthday presents. Reflecting on what life would be like without the EITC, her hands instinctively cupped her face. "It would be horrible," she said. "My kids wouldn't have a birthday."
Qualifications for a family to receive the EITC are based primarily on income and dependent children. The maximum credit is $5,666, with money sent as part of an individual's tax refund check. Conley's annual income of less than $16,000 brought her that $5,000 check. Amy Hiester, a server with one dependent child, who makes between $150 and $400 a week in tips, received a $3,000 credit.
The EITC has its flaws. In 2005 the U.S. Government Accountability Office expressed concern about fraud. Former Rep. Ernest Istook, R-Okla., in 2008 complained that "one-fourth to one-third of these EITC returns are based on illegal multiple returns, phony Social Security numbers, and claims of nonexistent children or even make-believe spouses." A study in 2009 by Edwin Rubinstein, president of ESR Research, an economics consulting firm, also reported on fraud and inaccuracy within the program.
But the EITC is clearly superior to welfare programs that typically penalize work effort: The EITC rewards work. While many of the recipients are single parents, the credit is available to two-parent families when one parent works and the other takes care of the children. Expansion of the EITC during the 1990s encouraged hundreds of thousands of men and women to leave welfare and take low-paying jobs that helped them develop skills and work habits.
Those appeals to conservatives indicate why the program that began in 1975 gained expansion through the Reagan Tax Reform Act of 1986 (and further expansion in 1990, 1993, and 2001). EITC recipients who claim credits wrongly can be made ineligible for two years if the IRS determines the error stems from "reckless and intentional disregard" of the rules, and for 10 years in the case of a fraudulent claim. Conservatives are calling for improved enforcement.
-Christina Darnell is a North Carolina journalist
WASHINGTON-The 1996 welfare reforms, passed by a Republican Congress and signed by Democratic President Bill Clinton, have cut welfare caseloads by more than half. The reforms, designed to reduce incentives to be on welfare and move able-bodied people into work, have been generally successful, but some aspects of the program still need reforming: Welfare-related spending is one of the highest categories of government spending, according to Robert Rector of the Heritage Foundation, rising precipitously since 1996. States maintain lax work requirements. Also, many measures in the bill to promote marriage have been undermined-Rector has said that nearly all of the states have ignored those measures.
Rep. Jim Jordan, R-Ohio, the head of the Republican Study Committee, introduced a new measure to reform welfare reform in March. Jordan's proposal caps total welfare spending to pre-recession levels, adjusted for inflation, once the unemployment rate returns to 6.5 percent. The bill would hold the now-40 million Americans on food stamps to work requirements. (The 1996 reforms raised work requirements only for recipients of the Temporary Assistance for Needy Families program.) States would have to ensure that a small percentage of recipients spend at least 15 hours a week either working, searching for a job under a supervisor, doing community service, receiving education or job training, or completing drug or alcohol treatment.
If states reduce their food-stamp caseloads, they receive a quarter of the money saved back as a grant that they can use for programs for the poor. The bill also includes a "self-sufficiency incentive" that would set aside $300 million in grants for up to three states that have the highest rate of families moving above the poverty line in the previous fiscal year. Finally, the reform bans welfare funds from being used to pay for abortions, except for cases of rape, incest, or to preserve the life of the mother.
The debt ceiling and the 2012 budget are chief on the minds of legislators, so Jordan's reform may not move forward as a stand-alone bill, at least not anytime before appropriations are completed later this year. Elements of it are more likely to be integrated into other legislation. For example, House Budget Committee Chairman Paul Ryan incorporated the food-stamp work requirements into his 2012 budget that debuted in April.