Reproductive Penalties in Welfare Policy: Poverty Rate Response to Family-Cap Repeals under the Temporary Assistance for Needy Families Program

Since the 1996 welfare reform replaced Aid to Families with Dependent Children (AFDC) with Temporary Assistance for Needy Families (TANF), many states adopted “family-cap” policies that deny additional cash benefits following the birth of an additional child. Proponents argued that these caps would reduce government dependency and discourage nonmarital birth, while critics said family caps would only deepen poverty and harm children. This paper examines whether repealing family-cap policies improves economic outcomes for low-income families. Looking at staggered repeals of family caps across U.S. states between 1996 and 2021, I employ a difference-in-differences framework with state and year fixed effects to estimate the impact of repeal on state-level poverty rates. The results indicate that repealing family caps reduces poverty annually by approximately 0.93 percentage points on average. Event-study estimates show no evidence of differential pre-trends and reveal that poverty reductions emerge two years post repeal and grow over time, peaking at four years post repeal. These findings challenge the behavioral-deterrence rationale underlying family caps and suggest that repeal enhances economic security among vulnerable families, pointing to the need for a revaluation of the purpose of U.S. welfare policy.