Commentary
11:34 am
Wed November 30, 2011

Is a four year cap of welfare benefits costing more than it saves?

Earlier this year, the legislature passed a new law that cuts people off cash welfare benefits forever after four years.

That’s not necessarily four years in a row. That means you are limited to 48 months of benefits, lifetime, even if you have three little kids, say, and have no other means of support.

There are a few temporary and special hardship special exemptions, but the bottom line is that about 40,000 people, three-quarters of whom are children, have been cut off.

This originally was supposed to happen October 1, but a federal judge ruled that the state hadn’t given them adequate notice. But after a number of  court procedures, those benefits—which averaged about $500 a family—stopped this month.

That may sound like a fairly brutal policy to put in place at Christmas time. To those who are middle-class, however, the poor are often relatively invisible, and many of us haven’t thought much about them since the policy took effect.

They did briefly get noticed earlier this week, when a huge snafu developed over the so-called “rocket docket” hearings. About a thousand people appealed the cutoff of their benefits, and the Department of Human Services decided to schedule hearings on all of them over the last two days, mostly via teleconference.

Trouble was, hundreds showed up Monday morning only to find the department not ready, which led to a backlog and spontaneous protests. We don’t know how these cases were resolved; participants will have the decisions mailed to them.

What I did learn is that there’s a real question as to whether all this saves any money. In fact, according to the Michigan League for Human Services, it is pretty clear that, at least in the short run, throwing people off welfare may cost the state more.

I talked to Gilda Jacobs about this Monday. A former state senator, she is now president of the non-profit, non-partisan League. She told me, “it is really a case of the state cutting off its nose to spite its face.” Among the things that most people don’t realize, she said, is that Michigan does not subsidize food aid for people, the federal government does.

In the most recent year available, Michigan paid out $2.1 billion in welfare benefits—all federal dollars. The only cost to the state was $142 million to run the program.

Now, we are giving up a lot of that by ending benefits. It’s more than that, actually, since this money tends to be spent immediately, having a snowball effect on the economy.

“There’s even more irony,” Jacobs told me. Some of these people are bound to end up in homeless shelters. Under the new law limiting benefits, the state will pay to keep those who lost their benefits in a shelter for up to 90 days.

For a family of three, that will cost the state $1,600, about three times what they were getting in cash benefits.

We haven’t even begun to calculate what the social costs will be when thousands of parents and children without any benefits are going to have to find some way to eat. We have, indeed, limited welfare. The question is, how long can we afford the price?