By the time President Bill Clinton completed his first year in office in 1994, the number of families receiving assistance under the welfare program known as Aid to Families with Dependent Children (AFDC) had reached an all-time high of 5 million. Such a large number of recipients bolstered the claims of welfare’s critics, who warned that once young mothers were on welfare, there were few incentives for them to leave, since the package of benefits often surpassed what could be earned through work in the private sector. With many Democrats and Republicans alike coming to share this view of welfare as causing dependency, welfare reform moved to the forefront of political debate.

The 1994 congressional elections gave Republicans control of Congress and strong support for their “Contract with America” platform of conservative reforms, which included a plan for welfare reform called...