The holiday season offers a renewed sense of hope for many American families. But for those stuck in poverty, that hope can be short-lived. One of the most perplexing aspects of America’s social welfare system is that it works against two critical factors for families wanting to escape poverty: work and marriage. With help from federal lawmakers, state leaders can fix these perverse disincentives.

In 2024, more than 12 percent of Americans received federal assistance to help purchase groceries, and one in four relied on government-provided health coverage through Medicaid or the Children’s Health Insurance Program as of August 2025. Millions more benefited from childcare assistance, rental subsidies or other federally supported services.

The United States is a generous nation, and most agree that low-income households deserve help from their fellow Americans when times are tough.

But that help should not inadvertently trap people in poverty and government dependence by disincentivizing healthy, working-age adults from working more hours, pursuing higher wages, or marrying out of fear of ending up financially worse off. The current haphazard design of the social welfare system — a mismatch between government benefit rules and income gains — does exactly that.

These dynamics create a cruel reality: increase your earnings through a raise, a promotion, working more hours, or getting married, and risk erasing that income with a loss in government benefits, making your hard work effectively meaningless to your family’s bottom line.

A stark example: an analysis by the Federal Reserve Bank of Atlanta found that a hypothetical family in Washington, D.C. receiving a full package of government safety-net benefits would be no better off financially earning $65,000 per year compared to earning just $11,000 because of how their benefits would phase out. The implications of these flawed benefit rules are not hypothetical. According to a nationally representative survey of low-wage workers, 22 percent reported taking some action to avoid triggering a benefits-cliff. Importantly, roughly one in 10 younger adults ages 18 to 25 years reported avoiding marriage in order to avoid a cliff.

The need for reform is clear, as we recently argued in a report along with several colleagues. The solutions and how to enact them are less so. A common response is universal benefits or more government assistance higher up the income scale to allow for a more gradual phase out of benefits. But this approach creates more government dependence among American households rather than encouraging independence and hope. This would also require substantial new federal resources at a time when budget deficits are already unsustainable.

That’s why we need a new approach that starts with the states.

While it is true that the federal government establishes the rules that create the problem of benefit cliffs (and therefore must do their own part to fix them), it is also true that the federal government gives states some authority to waive those rules, which states can use to test new and innovative strategies to reduce benefit cliffs. During welfare reform in the 1990s, states acted as laboratories of innovation using these types of flexibilities — resulting in one of the most consequential social policy reforms of our generation.

Simply put, states cannot wait for Congress alone to fix this problem, and they can’t use the expansion of a flawed system as the solution. States have other tools at their disposal, and with just a little bit of help from congressional lawmakers, they can again be laboratories of reform.

Congress should pass legislation that empowers states to be innovators, such as giving them authority to combine funding streams and set benefit rules, while also holding them accountable for achieving positive outcomes for families. States should then embrace their roles as innovators; just like what they did during welfare reform. Giving states greater flexibility while holding them accountable for results is an approach that should earn strong bipartisan support.

Those eager to escape poverty through work and marriage deserve a social welfare system that clears their path so they can once again feel the hope that the American Dream is within reach for their families. State leaders have a responsibility — now and throughout the year — to help make this a reality.