This following quote appears in one of the many articles in a new American Prospect special on Welfare Reform. (There are some good links on the main page of this section.) It deals with the question of why things have not turned out as bad as many thought:
“So why were the prophets of doom wrong? One answer is that almost everyone underestimated the extent to which government support for the poor was being redirected to people with jobs. Soon after Clinton took office in 1993, he persuaded Congress to expand the Earned Income Tax Credit (EITC). Today the EITC distributes more money to working parents than AFDC ever gave to mothers who stayed at home. For a minimum-wage worker with two children, the EITC means a 40 percent increase in annual earnings. More aggressive child-support enforcement has increased some working mothers’ incomes even further. Extending Medicaid coverage to some of the working poor has also reduced some mothers’ out-of-pocket medical spending, although much remains to be done in this regard.
TANF also gave states block grants that did not shrink as the welfare rolls shrank and allowed states to use these grants for child-care subsidies, which made it much easier for single mothers to survive on what they earned in low-wage jobs. Unfortunately, these subsidies are now in jeopardy, partly because the recession is putting pressure on state budgets and partly because the administration wants to force states to use their TANF money in other ways.
The net result of these changes is that the old “welfare state” is becoming what one might call a “wage-subsidy state,” in which government assistance is tied to employment. By asking more of those who get government largesse, the new wage-subsidy system has substantially reduced political hostility to public spending on the poor. This is especially true at the state level. (In Washington the hard right is still riding high, and the Democrats remain reluctant to oppose the Bush administration even when it tries to limit states’ ability to run welfare.) ”