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In the United States, welfare benefits for individuals and families with low or no income were almost non-existent before the Great Depression of the 1930s. The economic crisis left 1 in 4 workers unemployed, prompting the federal government to address income security as a national issue. The Social Security Act of 1935 was a pivotal response, establishing two major “social insurance” programs: Social Security and Unemployment Compensation. Additionally, the Act launched federal grants to support state welfare programs for low-income elderly individuals and families with children. These programs evolved into Supplemental Security Income (SSI) for the elderly, blind, and disabled, and Aid to Families with Dependent Children (AFDC). Medicaid and food stamps, federally funded “in kind” benefit programs, supplemented these efforts. Those not meeting eligibility criteria for federal programs may qualify for state or local relief, often called general assistance.

In 1996, Congress passed the Personal Responsibility and Work Opportunity Reconciliation Act (Welfare Reform Act), which brought significant changes. The law eliminated AFDC, imposed permanent ceilings on federal welfare funding, and allocated block grants to states to administer their own welfare programs. For instance, under the 1996 law, federal funds can only provide a total of five years of aid over a family’s lifetime. The law also excluded legal aliens from receiving SSI benefits. The Contract with America Advancement Act of 1996 further restricted SSI disability benefits by ensuring that drug addiction or alcoholism could not be a material factor in a disability claim.

Welfare laws governing entitlement and benefits are complex, especially for individuals or families involved in multiple programs. Federal law applies to federal benefits like SSI and federally funded state-administered benefits like Medicaid. Both federal and state programs must adhere to Constitutional standards when setting eligibility rules and application procedures.

See: Laws and Welfare Reform Overview

[Last updated in July of 2024 by the Wex Definitions Team]