RONALD REAGAN started it, Bill Clinton finished it and last week Barack Obama was accused of engineering its destruction. One of the few undisputed triumphs of American government of the past 20 years – the sweeping welfare reform programme that sent millions of dole claimants back to work – has been plunged into jeopardy by billions of dollars in state handouts included in the president’s controversial economic stimulus package.

As Obama celebrated Valentine’s Day yesterday with a return to his Chicago home for a private weekend with family and friends, his success in piloting a $785 billion (£546 billion) stimulus package through Congress was being overshadowed by warnings that an unprecedented increase in welfare spending would undermine two decades of bipartisan attempts to reduce dependency on government handouts.

Robert Rector, a prominent welfare researcher who was one of the architects of Clinton's 1996 reform bill, warned last week that Obama’s stimulus plan was a “welfare spendathon” that would amount to the largest one-year increase in government handouts in American history.

Douglas Besharov, author of a big study on welfare reform, said the stimulus bill passed by Congress and the Senate in separate votes on Friday would “unravel” most of the 1996 reforms that led to a 65% reduction in welfare caseloads and prompted the British and several other governments to consider similar measures.

Though some researchers have questioned the true impact of Clinton’s “workfare” reforms, they were wildly popular with millions of US taxpayers tired of subsidising what many saw as a generation of slackers.

Despite dire warnings that reduced benefits for single mothers and deadlines on entitlement would create a social calamity – one liberal senator warned at the time that children would be “sleeping on grates” – the 1996 reforms cut welfare rolls from more than 5m families in 1995 to below 2m a decade later without a discernible increase in hardship.

In the American political lexicon, welfare has since become a dirty word – often referred to as the W word – and nothing arouses US tabloid ire more than the hint that taxpayers’ money is being wasted.

When it emerged that Nadya Suleman, the mother of octuplets born in Los Angeles last month, was a “single mom” with six children already and was relying on welfare assistance, she was transformed overnight from fertility goddess to the target of death threats.

Obama argued last week that his bill was essential for reviving the US economy and protecting victims of the credit crunch. Yet his Republican rivals have seized on the billions lavished on new welfare spending to stir the conservative faithful from their postelection misery and reunite the opposition.

“If you like government dependence, you will love the plan they are jamming through Congress,” declared Michael Steele, the new chairman of the Republican National Committee.

Rector, a senior scholar at the conservative Heritage Foundation, argued that Obama’s spending proposals in effect encouraged individual states to add more families to their welfare rolls; the more Americans sign on to the dole, the more state budgets will benefit from US Treasury payouts.

“They have completely overturned the fiscal and policy foundations of welfare reform,” Rector complained.

Supporters of the bill argue that the current crisis is so grave that intellectual quibbling about the nature of welfare has to take second place to the upheaval transforming millions of American lives.

“How can you tell someone who has lost his income to look for another job if there aren't any more jobs?” asked one Obama backer.

While some scholars are beginning to suspect that Clinton’s welfare reforms were fatally flawed – or at least viable only during an economic boom – Republicans are not alone in fearing that Obama’s hastily concocted package is the first step towards the creation of a quasi-socialist welfare state.

Even Mickey Kaus, a prominent liberal blogger, has denounced what he describes as the “get more people on welfare” provisions of Obama’s bill. Writing at Slate, the political website, Kaus said: “Lack of jobs isn’t a reason to loosen work requirements . . . Have the Dems never heard of ‘workfare’?

“Give recipients useful community service work, and if they do the work, then they get the [welfare] cash.”

Returning to Chicago for the first time since his inauguration last month, there were other pressing matters on Obama’s mind – not to mention the minds of millions of Americans still enthralled by his every move. Where would he take his wife Michelle for a romantic Valentine’s dinner? How much time would he spend in the gym? Would he fit in a game of basketball?

Opinion polls last week showed that for all his administration’s errors in his first three weeks in office, the new president has lost little of his personal appeal. He continues to enjoy an average 64% approval rating.

Yet after another fracas over the withdrawal of the Republican senator Judd Gregg as Obama’s choice for commerce secretary – the second time a nominee has given up the post – Obama’s chief of staff, Rahm Emanuel, was obliged to insist that it was not “amateur hour” at the White House.

Obama also stumbled over a curious claim that his stimulus plan would enable Caterpillar, one of America’s leading manufacturers of heavy earth-moving equipment, to start rehiring workers. He was promptly contradicted by the company’s chief executive, who said he had no such intention and was planning more lay-offs.

The dangers are beginning to pile up for the novice president and his struggling economic crew. Tim Geithner, his treasury secretary, tripped up with opaque attempts to explain how the administration would fix the banking crisis, while from every corner of the country there were alarming indications that increased government intervention in the lives of ordinary Americans could prove an invitation to waste.

In Wisconsin, the state that forged a pioneering path in welfare reforms in the 1990s, residents were astonished by a newspaper investigation that disclosed that a $340m (£236m) programme offering taxpayer-financed child care to low-income working parents was riddled with fraud and expensive loopholes.

In one case, a family of four sisters who had 17 children between them put all of them together, took it in turns to babysit them and over the past three years claimed $540,000 (£374,000) in perfectly legal state childcare subsidies.

Examples like that fuel American suspicion that so-called “big government” invariably turns out to be inefficient, expensive and easily exploitable. And there has been no bigger government action in the US than the stimulus package presented by Obama.

Few dispute the need for some kind of stimulus, but has Obama got the details right? The Republicans do not think so and, led by Gregg, they are already shunning the president’s bipartisan overtures.

Perhaps more worrying for the president is that some of his natural liberal supporters are not feeling all that confident either. In a telling commentary last week, Paul Krugman, the 2008 Nobel prize-winning economist, declared that Obama’s stimulus victory “feels more than a bit like defeat”.

Krugman added: “I’ve got a sick feeling in the pit of my stomach – a feeling that America just isn’t rising to the greatest economic challenge in 70 years.”

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