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On April 10, 2018, President Donald J. Trump signed the Executive Order on Economic Mobility. President Trump’s plan outlines nine “principles of economic mobility” that are bound to lift struggling Americans towards self-sufficiency. Among these principles are boosting employment, promoting stable families, and choosing federalism over top-down programs.
Despite the economy thriving and labor markets tightening, enrollment of able-bodied adults in welfare programs such as Medicaid and Supplemental Nutrition Assistance Program (SNAP) is at historic highs. Today, 16 million able-bodied adults receive SNAP benefits and 28 million able-bodied adults receive Medicaid benefits. President Trump wants to get these folks back to work and out of dependency.
The results will lead to faster economic growth, greater income for Americans, and smaller federal expenditures. A mere 2.4 percent of year-round full time workers are in poverty in the United States. With work requirements enforced for able-bodied adults, many Americans will earn their way out of poverty and resources will be preserved for the neediest Americans, such as those with disabilities or young children.
President Trump’s Executive Order launches a full review of regulations for all government assistance or “welfare” programs. Heads of affected departments must submit compliance reviews to the Office of Management and Budget (OMB), President Trump, and his policy team after 90 days. Affected departments include Treasury, Agriculture, Commerce, Labor, Health and Human Services, Housing and Urban Development, Transportation, and Education.
The reviews must seek to maximize workforce participation. Each department will outline its procedures for issuing waivers, exemptions, and exceptions for welfare work requirements. Department secretaries will determine whether these procedures are consistent with federal law. Assistance programs that do not have work requirements will be reviewed and the possibility of adding work requirements will be assessed. President Trump wants each department to follow the law and enforce the work requirements that his predecessor, President Obama, failed to respect.
Work requirements are important because they encourage labor participation that otherwise would not exist. Welfare inherently disincentives work. In economics, this is known as the “income effect.” As people receive money from government, some may prefer leisure instead of additional work. With work requirements in effect, able-bodied adults will have to work to earn benefits. The income effect and resulting labor disincentives will be greatly lessened.
Best of all, beneficiaries will see their incomes greatly boosted under work requirements. When Maine enacted work requirements, incomes for able-bodied adults who received benefits grew by 114 percent. Kansas exhibited similar results. Both states witnessed near 80 percent caseload decreases for able-bodied adults.
One area where work requirements are badly needed is SNAP. SNAP enrollment skyrocketed under President Bush and reached greater heights post-recession under President Obama. Recession-minded policies eased work requirements and in some cases issued state-wide waivers that allowed “able bodied adults without dependents” (ABAWDs) to earn benefits indefinitely without work. As of 2014, 4.72 million ABAWDs received SNAP benefits.
Work requirements for able-bodied Medicaid recipients will also help boost incomes and reduces expenditures. President Trump’s administration already approved new requirements in Kentucky, Arkansas, and Indiana. Further changes towards self-sufficiency in federal rules and state plans are welcome.
President Trump’s Executive Order on Economic Mobility is a significant step forward in the fight for substantive welfare reform. Work requirements will foster self-sufficiency by growing incomes, reducing government spending, and preserving benefits for the needy.