Caroline Wendzel is a staff writer and second-year MPP student.

Temporary Assistance for Needy Families (TANF)—or “welfare”—is one of the most well-known governmental programs aimed at reducing poverty among children and families. Despite this, the program serves only a small portion of families and individuals experiencing poverty, and those that are served often face significant barriers to securing and maintaining benefits long enough to achieve full economic self-sufficiency. To improve TANF’s ability to assist impoverished children and families and break the cycle of poverty, policymakers should consider:

• Increasing TANF funds overall by indexing funds to inflation, 
• Increasing access to existing TANF funds by reforming “work-first” policies, and
• Decreasing obstacles to sustaining TANF benefits by minimizing benefit cliffs. 

Background of the TANF Program

TANF is a cash welfare block grant program dedicated to low-income single women with children, two-parent families with children, and pregnant women, providing over $16 billion in total aid each year. Federal TANF dollars can be used as direct cash-based assistance to families. They may also fund other programs, provided the dollars are used to fulfill at least one of the block grant’s four statutory goals—to provide assistance to impoverished families, support economic mobility, promote two-parent families, and reduce pregnancies outside of marriage. TANF benefits are allocated directly to states, territories, tribes, and the District of Columbia, which then distribute them to eligible families.

Ensuring TANF cash assistance is available and easily accessible provides both direct benefit to families experiencing poverty and indirect benefit to society at large. In the short term, cash assistance is associated with reduced material hardship, food insecurity, child maltreatment, and family homelessness. In the long term, cash payments are associated with improvement of children’s overall life prospects, including long-term health and educational attainment. Based on this research, improving the availability and dissemination of cash assistance is a logical choice to help families and increase long-term economic mobility.

Increasing Value of TANF Cash Benefits

Welfare caseloads have decreased substantially since the introduction of TANF. From 1994 to 2016, caseloads dropped by nearly 75%. In September 2023, TANF served over 2.8 million individuals, in contrast with the 5.4 million individuals served in March 1994 by TANF’s predecessor, Aid to Families with Dependent Children (AFDC). Although TANF may have succeeded in lowering welfare caseloads, research suggests it has failed to mitigate poverty. Today, TANF cash assistance reaches just 23 out of 100 families with incomes below the federal poverty line, compared to 68 families per 100 reached by AFDC in 1996. 

Even families that do receive benefits generally do not receive enough to lift them out of poverty. As of 2023, cash benefit values are at or below 60% of poverty line incomes in all states, and below 20% of the poverty line in 15 states. One of the most glaring reasons for these low payments is that the amount of federal TANF dollars awarded to states each year has not changed since its creation in 1996. This has led to a 40% reduction in the grant’s value due to inflation. Indexing funds to inflation would increase the grant’s overall value and provide a greater pool of money for states to draw from to provide cash assistance. This would give states the ability to increase the value of cash benefits to families currently receiving them, as well as the ability to provide benefits to more families. 

Because states ultimately decide how TANF funds are used (i.e. whether funds are used for cash welfare, given to broader programs aligned with TANF statutory goals like childcare, or left unspent), more work on the state level is needed to ensure access to and the value of cash assistance.  However, increasing the overall value of the grant is an essential first step. 

Reforming Work-First Policies

One of the notable hallmarks of the TANF program—differentiating it from its predecessor, AFDC—is its “work-first” policy. This policy requires 50% of all families and 90% of two-parent families in a state to be engaged in work or “work activities,” or states risk losing funding. A state can lower these percentages if they reduce their caseload from FY2005 levels (beginning in 2026, states can measure caseload reduction from FY2015 levels). In effect, states are incentivized to get prospective and current benefit recipients into work as quickly as possible, without regard for job quality or potential for upward mobility. States are similarly incentivized to transition benefit recipients off of TANF as quickly as possible to reduce caseloads.

In this way, TANF’s “work-first” policy can be counterproductive. To avoid losing benefits, recipients may be compelled to take dead-end jobs—often, the very same jobs they held that led them to need TANF in the first place. This causes many low-income parents to cycle on and off benefits with little to no economic progress. 

One way to escape this cycle of poverty is by completing a postsecondary degree. Across genders, races, and income levels, completing a bachelor’s degree improves lifetime income. College completion confers generational benefits as well—the median wealth of a second-generation college graduate is 40% greater than that of a first-generation college graduate, and children of college graduates are more likely to attend college than children of parents without degrees.

Only 10% of TANF parents have completed postsecondary education, and few are able to pursue such education while receiving TANF benefits. By federal law, participation in “vocational education (higher education, and educational programs that prepare recipients for higher education)” can only count as a work activity for 12 months of a parent’s lifetime, and only 30% of a state’s TANF recipients are permitted to count vocational education as a work activity at one time.

Policymakers should consider taking the following actions to promote greater educational access:

• Allow states to count vocational education as a work activity for 60 months of a parent’s lifetime (the maximum allowed amount of time a person can receive TANF benefits), with flexibility to extend coverage past 60 months as necessary, and
• Expand the number of a state’s TANF recipients that are permitted to count vocational education as a work activity to 100%.

Minimizing Benefit Cliffs for Long-Term Economic Mobility

Even when families can access adequate benefits, other policies may hinder their ability to do so successfully. One of the most prominent of these policies is the “benefit cliff.”

In a benefit cliff scenario, when a family increases their earnings to a certain point, it simultaneously experiences a sudden decrease in benefits. This happens in many cases because most states have absolute (as opposed to gradual or tiered) TANF income thresholds. This means that if a family’s income rises over a certain set limit, even by just one dollar, their benefits are immediately reduced or cut entirely. Families may also encounter “benefit plateaus,” where benefits decrease proportionally with each additional dollar earned, making it impossible to get ahead. Because the value of the benefits often exceeds the amount a person can earn from a gradual wage increase, this can disincentivize work even among those who want to be employed. To mitigate this issue, policymakers should consider amending TANF to require states to introduce gradual or tiered TANF income thresholds.

Conclusion

To decrease poverty among American families, making changes to the TANF program is essential. Increasing TANF funds overall by indexing funds to inflation, increasing access to existing TANF funds by reforming “work-first” policies, and decreasing obstacles to sustaining TANF benefits by introducing gradual or tiered income thresholds for TANF participants are three evidence-based ways to start. Although these solutions are not a complete panacea, they would be a massive step forward in breaking the cycle of poverty for millions of low-income families.

Photo courtesy of Dvir Adler on Unsplash.

The views expressed in Policy Perspectives and Brief Policy Perspectives are those of the authors and do not represent the approval or endorsement of the Trachtenberg School of Public Policy and Public Administration, the George Washington University, or any employee of either institution.