Poor Disabled Children Pushed Off of SSI Because of Welfare Reform Had Horrible Lives

When people talk about the 1996 welfare reform bill, they tend to focus on the law’s destruction of Aid to Families with Dependent Children (AFDC). And for good reason. According to Danilo Trisi’s analysis of TRIM microdata, extreme poverty among children nearly tripled in the years after the new welfare regime was implemented.

But welfare reform did not just gut AFDC. It also made deep cuts to the Supplemental Security Income (SSI) program for poor disabled people. According to new research, this change had similarly horrific results.

The contemporary discourse around the SSI cuts mirrored that of the discourse around welfare reform more generally. Major publications pleaded with President Clinton to avoid savage SSI cuts, something he could have done because the welfare law gave his administration the power to make the final SSI eligibility rule. But the Clinton administration ignored the pleading and instead issued a rule that it said would throw 135,000 poor disabled children off the SSI rolls.

In addition to making it harder for poor disabled children to receive SSI benefits, the welfare reform bill also made it harder for them to stay on those benefits when they became adults. Prior to welfare reform, when a poor disabled child turned 18, they could continue receiving SSI benefits. After welfare reform, poor disabled children had to be reassessed at age 18 under much stricter SSI eligibility criteria. Needless to say, as a result of this change, many more were dumped off the rolls than before.

The only upside of this particular policy reform was that it accidentally created the conditions for a quasi-random experiment. Poor disabled children who hit age 18 before the welfare law took effect were treated differently than those who hit age 18 after the law took effect. Because the assignment of children into the pre-reform and post-reform groups was arbitrarily based on when they were born, it is possible to cleanly study what effect the reform actually had.

Manasi Deshpande did exactly that in a paper published last year, which was recently written up on the Microeconomic Insights website. As you might expect, the results of the study were not pretty.

According to Deshpande, disabled youth removed from the SSI rolls under this change earned an average of just $4,400 per year on the labor market, an amount that was just one-third of the already-meager benefits they would have received had they stayed on SSI. Many earned nothing. Additionally, these youth did not see their earnings increase as they aged. Rather they consistently hovered in the $4,000 to $6,000 range for the rest of their adulthood.

Deshpande also found that the parents of these disabled kids did not increase their own incomes in response to their kids getting cut off from benefits. So the loss of income was not able to be offset by increased assistance from family. Additionally, the siblings of disabled kids booted off the SSI rolls in this way ended up with substantially lower earnings in their adulthoods as well.

What this research tells us is that welfare reform did not just blow a hole into the US poor relief system that subsequent generations of women and children have fallen into. It also screwed the contemporary generation of poor disabled children for the rest of their lives, condemning them to scrape together scant earnings in order to lead lives of crushing poverty.