Newspaper article St Louis Post-Dispatch (MO)

Savings Plan Just May Save Welfare Reform

Newspaper article St Louis Post-Dispatch (MO)

Savings Plan Just May Save Welfare Reform

Article excerpt

The welfare plan that President Bill Clinton announced last week falls far short of his campaign pledge to "end welfare as we know it."

It addresses, but doesn't eliminate, some of the perverse incentives in the current system, which penalizes people for earning money and for saving money.

The boldest part of the plan - a two-year limit on welfare benefits for women under age 23 - is likely to prove disappointing.

Under Clinton's plan, recipients have to enroll in job-training programs, and the government will create a job for anyone who can't find one at the end of two years. Republican critics will charge that the plan merely substitutes welfare jobs for welfare benefits - and the track record of government job-creation programs isn't very good.

The counter-argument is that even a government-subsidized job adds to one's self-respect and creates skills that can lead to a better job later on.

But the job-training and subsidized-jobs programs add to the cost of welfare, and that's why Clinton is limiting the two-years-and-out program to women under 23. As such, it should be characterized more as an interesting experiment than as true welfare reform.

Another interesting - and far less costly - experiment in Clinton's package is the brainchild of a St. Louisan, Michael Sherraden.

Sherraden, the Benjamin E. Youngdahl professor of social development at Washington University, helped convince Clinton to try something called an Individual Development Account, a program in which government matching funds encourage the poor to save money.

Clinton proposes spending $100 million to set up pilot development-account programs - a tiny part of the $9.3 billion welfare package, but a huge conceptual step away from old-style welfare thinking.

The current welfare system is built around an income-support approach, Sherraden explained. By focusing on wealth-building instead, he said, the government could help people cushion themselves from layoffs, illness and other economic shocks.

It also could help them become goal-oriented, saving toward a child's education or a down payment on a house, instead of perpetuating a month-to-month, welfare-check-to-welfare-check existence. …

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