The liberal blogger Mickey Kaus once thought he was paranoid for predicting that the Democrats, once in power, would immediately try to undermine welfare reform.</p><p>As he wrote last week, &#8220;If only for political purposes, I figured, Dems would have to wait a few months or years before sabotaging Bill Clinton&#8217;s major domestic achievement. It took them two weeks.&#8221;</p><p>Before the 1996 welfare reform law, Washington doled out more money every time a new family was added to the welfare rolls. If caseloads fell, states got less money. The system created a strong incentive to boost caseloads.</p><p>Reform ended the open-ended welfare &#8220;entitlement&#8221; and replaced it with a program called Temporary Assistance for Needy Families. Instead of linking funding to caseloads, the law replaced that money with block grants and gave states the policy goal of reducing the rolls.</p><p>The measure generated tremendous controversy, but it was effective. Caseloads declined by two-thirds. Millions of recipients formerly dependent on government made the transition from welfare to work.</p><p>Now we learn that the stimulus bill, signed Tuesday by President Barack Obama, will unravel much of the &#8217;96 legislation.</p><p>Robert Rector of the Heritage Foundation &#8212; who helped write the &#8217;96 law &#8212; says the stimulus measure would effectively give states bonuses for boosting caseloads. The new system, he says, is actually worse, because the payoff for increasing caseloads will be much higher than under the old program, Aid to Families with Dependent Children.</p><p>In a paper written with Katherine Bradley, Rector said that under the stimulus measure, &#8220;the federal government will pay 80 percent of cost for each new family that a state enrolls in welfare.&#8221;</p><p>The policy goal of moving families to self-sufficiency has been largely replaced by a system that rewards states for increasing dependency.</p><p>Certainly, in a sour economy more funding is required for those in need, and the &#8217;96 law allowed for such a circumstance. It created a contingency fund to allocate more money to states during economic downturns. The extra amounts, however, were linked to unemployment, not to welfare caseloads.</p><p>&#8220;We anticipated this problem in writing the law in &#8217;96,&#8221; Rector said in a telephone interview. &#8220;Those funds can be released whenever state unemployment levels go over a certain amount. If the Democrats wanted to put more money in that, I wouldn&#8217;t make any objection. &#8230; What they did was wipe that out and replace it with this new fund that specifically rewards states for increasing caseloads.&#8221;</p><p>The 80 percent reimbursement rate will change the terms of the welfare debate to something resembling the Medicaid debate.</p><p>Frequently, Medicaid advocates argue that any attempt to reduce caseloads amounts to &#8220;turning down federal money,&#8221; since Medicaid &#8212; which has come close to bankrupting many states &#8212; reimburses states at levels up to 3-to-1. The program has a built-in incentive for expansion.</p><p>The ratio for welfare under the stimulus bill will be even higher: 4-to-1.</p><p>Kaus, the blogger, notes that the stimulus package doesn&#8217;t wipe out all of the &#8217;96 law. The old AFDC &#8220;entitlement&#8221; hasn&#8217;t been restored. Aid to families, at least on paper, is still supposed to be temporary rather than open-ended, as in the old system. The work requirements remain, at least formally. States still have latitude to proceed as they see fit.</p><p>But that 4-to-1 match will serve as a powerful incentive to once again drive up caseloads.</p><p>What&#8217;s galling is that this dramatic shift in policy happened in the shadows with little open discussion. As Kaus noted, most Americans thought the debate over work and welfare was settled more than a decade ago.</p><p>The situation creates an opportunity for a reporter to ask a pointed question at Obama&#8217;s next news conference: &#8220;Mr. President, exactly when did you acquire a mandate to wreck welfare reform?&#8221;