This is the Cato Daily Podcast for Wednesday, February 18th, 2009.

I'm Caleb Brown. The stimulus legislation signed by President Obama

contains money for all kinds of changes, including provisions that

chip away at the welfare reforms in the 1990s, all the while encouraging states to spend more

than they otherwise would on welfare programs.

So says Cato Institute Senior Fellow Michael Tanner.

One of the keys behind welfare reform was the idea that they were going to stop the individual

entitlement to welfare and the idea that the more people who signed up for

welfare the more money states got and they were going to change that to a block grant or states got a certain amount of money and then that created incentives for them to reduce the

number of people on their welfare rolls.

The stimulus bill does away largely with that restriction that creates a new $5 billion

pot of money that the states can use to fund new welfare recipients. So if their

welfare rolls grow they get more money. If you add more people on welfare, you get

more federal money. All the incentives are to do that. Even worse, it doesn't matter

why those new recipients are going on welfare, whether it's because your state has a high unemployment

rate or the economic crisis is worse in your state, you can add people to your welfare

role simply by reducing the welfare restrictions you used to have under welfare reform if you

change your time limit from two years to five, if you do away with your work requirements.

That means you'll have more people on your welfare roles and the feds will give you more money.

Again all the incentives are in the wrong direction.

How does this differ from the way we fund S-CHIP or Medicaid right now?

Well, in many ways it's much like we fund S-CHIP and Medicaid, and that's one of the problems

...