Comparing Historic Welfare Reforms: 1996 and 2025

The One Big Beautiful Bill (OBBB) contains many important policy victories for America. Perhaps the most hotly discussed aspect of the law is its reforms to the largest federal welfare programs, Medicaid and the Supplemental Nutrition Assistance Program (SNAP, aka. food stamps). This is not the first time that concerns about excessive spending and welfare dependence have spurred legislative action. In 1996, Congress passed the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA), a sweeping welfare overhaul. At the time of passage, the Congressional Budget Office (CBO) estimated that the PRWORA would save $54.6 billion (close to $100 billion today after adjusting for inflation) over a six-year span. Critics claimed that the reforms – most notably placing requirements on able-bodied recipients to seek or obtain employment – would lead to widespread deprivation. Instead, the sharp decline of welfare enrollment was coupled with reductions in poverty. Further, states that leaned into reforms saw the best results. However, subsequent policy changes undermined many of the gains that began in 1996. The passage of the Affordable Care Act (aka. Obamacare), along with legally dubious administrative actions during the Biden administration, greatly expanded welfare eligibility and benefits. As a result of those policies, federal spending on welfare programs soared to $1.2 trillion per year. Caseloads also exploded: 41 million people are on food stamps and 98 million receive Medicaid. Both welfare spending and enrollment are far removed from what would be expected based on current poverty and unemployment statistics. The OBBB seeks to address this through a combination of “community engagement” requirements (80 hours per month of work, volunteering, or education), fighting rampant improper payments, and paring back gimmicks that state governments use to extract extra cash from Uncle Sam through the welfare system. CBO projects more than $1 trillion in welfare savings over 10 years from the OBBB, exceeding the annual adjusted savings from the 1996 reform more than sixfold. Breaching the $1 trillion savings threshold in a single bill is laudable, especially after Congress spent years avoiding meaningful spending restraint. Unfortunately, much as the 1996 reforms were met with criticism, the OBBB’s welfare changes are also under assault. Critics claim that welfare has now been “slashed” or “gutted,” even though the savings merely slow the growth of a welfare system that CBO estimated would cost more than $13 trillion from 2025 through 2034. Supporters of the OBBB must make the case that these welfare reforms are not only necessary to rein in unsustainable spending growth but would be morally justified even if they saved a much smaller amount. For example, the “community engagement” standard not only reduces unfair transfers from workers to healthy non-workers but also encourages the non-workers to seek opportunities that will put them on a path to economic success and self-fulfillment. The idea that it is “cruel” to move healthy people off the dole is profoundly anti-human. Implementing procedures to reduce improper and duplicative enrollments ought to be common sense, yet critics conflate any savings from welfare programs as disenfranchising poor children and the disabled. This is exactly backwards: removing ineligible adults from programs will make resources more available for the neediest. There is an understandable impulse for legislators who backed the OBBB to focus on promoting its pro-growth tax cuts. However, avoiding or minimizing discussion of changes to Medicaid and food stamps allows critics to set the narrative, which can lead to the public having the wrong impression about the law’s positive effects. That would make it more difficult to enact additional spending reforms in the future. The 1996 welfare reform was a tremendous accomplishment. The welfare reforms contained in the OBBB are even more economically substantial, and the American people deserve to hear the truth about this momentous victory.