This paper was written in response to a 1997 Council of Economic Advisers (CEA) report on sources of variation across states in use of Aid to Families with Dependent Children. The authors believed that the analysis presented in that report is flawed and were concerned about policy implications that may be drawn from CEA's conclusions. They examine CEA's method and results and discuss problems with those results. An appendix that discusses relevant issues raised by the CEA report is included.