It is now generally acknowledged that the economy entered recession in December 2007, and has since lost 6.9 million jobs. In August 2009, the Congressional Budget Office (CBO) issued its revised economic outlook, forecasting a return to economic growth in the last half of 2009, but with the unemployment rate continuing to rise through 2010, topping 10% by mid-2010. This has raised the profile of economic insecurity caused by the recession. Individuals and families who were economically disadvantaged before the recession hit are particularly at-risk of economic insecurity. This report discusses the potential role that the Temporary Assistance for Needy Families (TANF) block grant to states may play in mitigating the effects of the recession for poor families with children. The TANF block grant is best known as a funding source for cash welfare. However, it also funds a wide range of benefits, services, and activities for disadvantaged families with children, as well as programs to achieve the goals of reducing out-of-wedlock pregnancies and promoting two-parent families. Many children were in families that were already poor as the economy entered recession. The child poverty rate in 2007, the last full year of an economic expansion that dated back to 2001, stood at 18.0%—higher than the rate for the elderly (9.7%) or that for non-aged adults (10.9%). In the recession year of 2008, the child poverty rate rose to 19.0%. High poverty rates among families with children are correlated with certain characteristics. Children in female-headed families are more likely to be poor than those in married couple families. Additionally, those in families with young parents, parents with low levels of educational attainment, and racial and ethnic minority children were more likely to be poor than their counterparts in other groups. Current public policy toward low-income families with able-bodied adults emphasizes work. This work-based approach toward economic disadvantage and poverty among children evolved over several decades, culminating in several legislative initiatives in the mid-1990s. The Earned Income Tax Credit (EITC), an earnings supplement usually received as a tax refund, was expanded and its amount increased by legislation in 1993. Health care from Medicaid was gradually expanded to cover all poor children, followed by legislation in 1997 that established the State Children's Health Insurance Program (SCHIP). The TANF cash welfare system of today reflects a historical legacy of controversy. Federal involvement in funding cash welfare for needy families dates back to the Great Depression, and concern about risks to the economic security of families. At the time, the major risk addressed by policy was the loss of the earnings of one parent (the father) because of death. However, "welfare" issues were entwined with many of the social changes in the second half of the 20 th Century. The increase in women's labor force participation raised the expectation that mothers heading families work. Welfare raised racial issues, as an increasing share of the welfare caseload became nonwhite. Payments that went primarily to fatherless families also raised issues of personal responsibility and morality. Welfare increasingly became a program associated not with economic risks, but with the personal characteristics and behavior of its recipients. The 1996 welfare reform law ( P.L. 104-193 ) substantially altered the policy landscape for low-income families. It ended the New Deal program of Aid to Families with Dependent Children (AFDC) and with it the entitlement to needy families for cash assistance. AFDC was replaced by the TANF block grant, with work participation requirements and time limits for cash welfare recipients. The 1996 welfare reform also significantly increased federal funding to the states to subsidize child care, further supporting work among low-income families. Partially as a result of the policies put into place in the mid-1990s, and partially as a result of the economic boom that followed, the welfare caseload plummeted and work among single mothers increased. In December 2008, the cash welfare caseload had fallen to 65% below the December 1994 caseload figure. Child poverty declined from 1994 through 2000, but the welfare rolls declined faster. As a result, fewer poor children were in families receiving cash welfare, though a greater proportion of poor children were in families with earnings. The period after 2000 saw slower economic growth than in the late 1990s, and child poverty rose, but the welfare rolls still declined. In 2008, the welfare recipiency rate among poor children stood at 22%—down from about 60% before welfare reform. The current recession is the second one to test the work-based policies put into place in the mid-1990s and directed toward poor families with children. The first recession was the relatively mild one in 2001. The unemployment rate in this recession—standing at 9.7% in August 2009—far surpasses the peak unemployment rate of 6.3% reached in 2003 after the 2001 recession. Table 1 provides the unemployment rate for all workers, and then for some groups that are at risk of being economically disadvantaged. Since the beginning of the recession in December 2007, unemployment rates for all groups have increased as the economy slumped. As expected, those in groups at risk for being economically disadvantaged had higher unemployment rates than the overall population. These groups—women maintaining families, those with no high school diploma, African-Americans, Hispanics, and young adults—had unemployment rates well into the double-digits. Though not all unemployed workers in at-risk groups are in families with children, many are. The most visible indicator of economic disadvantage is the poverty rate. Historically, child poverty rates have increased during recessions and fallen during periods of economic growth. The child poverty rate tends to peak after the low-point of the economic cycle. During the decade of the 1980s, the child poverty rate peaked in 1983, a year after the end of the back-to-back recessions of 1980 and 1981-82, and in the 1990s it peaked in 1993, two years after the 1990-91 recession. Figure 1 shows the historical trend in the child poverty rate and compares it with the trend in the unemployment rate. While there is a clear association between the two indicators, the child poverty rate is affected by more than just the national economy. The child poverty rate remained high in the 1980s, as the percent of children living in female-headed families increased. The child poverty rate also increased after the 2001 recession. It rose from its low point of 16.2% in 2000 to 17.8% in 2004, before falling for a couple of years, and then rising again to 18.0% in 2007. The child poverty rate rose with the higher unemployment rate in 2008, reaching 19.0%. There is cause for concern about the state of the "safety net" for workers and families who were economically disadvantaged before the recession. Unemployment insurance (UI) is the primary government program to help the involuntarily unemployed replace a portion of their lost earnings. However, UI was not designed to provide benefits to all unemployed persons. New entrants and those re-entering the workforce after prolonged absences are not eligible for UI. Even among job losers, UI receipt is not universal. UI requires sufficient recent employment (and a minimum amount of earnings in a recent period) to be eligible for benefits upon becoming unemployed. Additionally, some unemployed persons already have exhausted their weeks of unemployment benefits. Research shows that low-wage workers, part-time workers, and women, have lower rates of UI receipt when they become unemployed. Additionally, policies to increase the financial rewards from work and the welfare reforms of the 1990s helped spur more single mothers into the workforce. Those who leave welfare for work often fail to stay employed. Studies of those who left welfare indicate that, among those who left welfare for work, only between 30% and 50% stayed employed all four quarters after leaving the rolls. A study of welfare leavers in four large states (Florida, Ohio, Michigan, and Texas) showed that of all welfare leavers who became unemployed, only 13% drew UI. Less than 25% of unemployed leavers applied for UI. Most of those who applied for UI were monetarily eligible (earned sufficient wages), but many failed to receive unemployment benefits for other reasons. Voluntarily quitting a job often disqualifies a person from receiving UI, and in many states a person who quits for "family" reasons (e.g. caring for a sick child, need to align hours to accommodate family responsibilities, etc.) cannot receive UI. During a recession, those who leave jobs for such reasons have to compete in a more difficult labor market along with others. Many states also bar unemployed persons available only for part-term work from receiving UI. The second tier of the safety net for families with children are programs that provide benefits based on financial need. Before the economy entered recession, poor children were far more likely to be in families receiving benefits from the food stamp program (now renamed Supplemental Nutrition Assistance Program, or SNAP), and health care than cash welfare. Figure 2 shows the number of children in families receiving cash welfare, compared with children in SNAP/Food Stamp households and children enrolled in Medicaid in both FY1995, before the enactment of welfare reform, and FY2007. The other two programs had more child recipients than cash welfare in both years. However, by FY2007 the number of children benefitting from SNAP/food stamps and Medicaid dwarfed the number of children in families receiving cash welfare. By FY2007 there were 3.1 million children in families receiving cash welfare, compared with the 12.7 million children in food stamp households and the 23.5 million children enrolled in Medicaid. The American Recovery and Reinvestment Act of 2009 (ARRA, P.L. 111-5 ) provides states with incentives and funds to rethink the safety net for disadvantaged families with children.