He played the hatred of white 'Murica like a cheap Atari by invoking a stereotype that turned into a fact among Republicans.
Welfare queen" was a term out of many other dumb terms coined by Saint Reagan, this time to refer to people who scam the government through the welfare system to live easy on taxpayer money without trying to work. Reagan gave a very memorable speech in 1976 which described a welfare queen drawing an easy living by scamming veteran's and Social Security benefits from four (fake) dead husbands, as well as using eighty different aliases. The closest case to the one he described was of a single woman who scammed the government out of $8,000,[1] and who, upon further investigation, wasn't emblematic of welfare users in general. [2] Whoops. (Also, welfare fraud was probably the least evil crime she committed, also being suspected of kidnapping and murder.)
Today, "welfare queen" has evolved into a more general version of dog whistle politics against the new evil of "entitlements."
It plays very well into pitting people of different classes and races against each other. Race resentments very much factor into this, since only certain kinds of people (disadvantaged minorities) are portrayed living on welfare.[3] Many opponents of welfare use the welfare queen stereotype as a way to rile up members of the lower middle class and working poor against those on welfare/unemployment/Social Security/Medicaid benefits. This is by making wild claims that welfare queens are living "high on the hog" while the poor folks have to work hard to barely scrape by.[4]