The OBBB Includes Conservative Welfare Reforms Worth Expanding

Republicans have plenty to tout in their One Big Beautiful Bill (OBBB), including its extension of the 2017 Trump tax cuts, improved border security, and strengthened national defense. . . But the new law is also noteworthy for leaning on key welfare reforms with a proven track record of success.

Those policies—namely, applying work requirements and creating a financial interest for states to limit benefit rolls—achieve significant benefit savings now and should be expanded in the future to further boost work and keep federal deficits in check.

The Congressional Budget Office (CBO) estimates the law will yield almost $1.1 trillion in savings through significant reforms of Medicaid and food stamps, two of the fastest-growing benefit programs in recent decades. That naturally drew the ire of liberals like House Minority Leader Hakeem Jeffries (D-NY), who argued the legislation “guts Medicaid” and “rips food from the mouths of children, seniors, and veterans.” Despite accusations of “massive cuts,” under the new law, federal spending will grow from $7 trillion now to over $10 trillion in 2034.

Several of the biggest savers reprise past policies designed to tame welfare benefits. First, the OBBB expands work requirements for able-bodied adults receiving Medicaid and food stamps. As Trump administration officials noted in a New York Times opinion, work requirements are widely supported and were a signature feature of the bipartisan welfare reforms Bill Clinton signed in 1996. That historic law ended a New Deal-era program that entitled nonworking parents to limitless welfare checks and replaced it with the Temporary Assistance for Needy Families (TANF) program, which expects adults to work or train as a condition of eligibility. The results were remarkable, with more parents going to work, poverty falling, and caseloads ultimately plummeting 85 percent.

The OBBB revives those lessons by creating a “community engagement requirement” that expects able-bodied adults on Medicaid to engage in part-time work, education, or community service. While a notable change, states could require such engagement in as few as two months per year. That belies opponents’ superheated rhetoric and suggests the policy can be strengthened.

It’s a testament to Medicaid’s enormous size that even this part-time, part-year requirement on some adults is projected to save $325 billion over 10 years. That’s roughly twice the inflation-adjusted savings forecast for the entire 1996 welfare reform law over a similar period.

The OBBB also strengthens the work requirement for able-bodied food stamp recipients, adding another $70 billion in savings. These reforms can and should be expanded to expect recipients of public housing and other benefits to similarly prepare for work instead of perpetually depending on taxpayer aid.

Driving these large savings is a simple fact: for able-bodied adults, federal taxpayers today support all food stamp and most Medicaid costs. Those federal commitments are open-ended, so states often welcome bigger caseloads that confer more federal funds.

That dependency-inducing dynamic has contributed to soaring food stamp and Medicaid caseloads, especially in blue states. It also contrasts sharply with the TANF program, whose fixed federal block grant (which hasn’t been adjusted even for inflation since 1996) and required state match promote smaller caseloads and less spending. Since the mid-1990s, the number of households on food stamps has grown from twice to now over 20 times the number on TANF.

That’s the backdrop for a second major conservative change in the OBBB. For the first time, the new law expects states to contribute to food stamp benefit costs, which were previously fully federally funded.

The initial state share is small—between five and 15 percent, keyed to state improper payment rates. But even this modest change will save federal taxpayers $40 billion over a decade while focusing states on reducing food stamp caseloads, which at over 42 million recipients today include a staggering one in eight US residents. The small state share can and should grow in the future, and similar cost-sharing efforts should apply to other federally funded programs. Uncle Sam has proven he can’t afford his benefit promises, and states can and should assist with programs benefiting their residents.

A generation ago, applying work requirements and giving states a financial incentive to control benefit claims proved a powerful combination for reducing welfare caseloads and costs. More importantly, those changes helped parents go to work and escape poverty.

The OBBB smartly dusts off that playbook, achieving important savings while pointing to further changes that will promote more work over welfare and help keep federal deficits in check.

Matt Weidinger is a senior fellow and Rowe Scholar in opportunity and mobility studies at the American Enterprise Institute (AEI), where his work is focused on safety-net policies, including cash welfare, child welfare, disability benefits, and unemployment insurance.

Reprinted with permission from AEI.org by Matt Weidinger.

The opinions expressed by columnists are their own and do not necessarily represent the views of AMAC or AMAC Action.