Network News

X My Profile
View More Activity

The problem with charity

Donations to private charities fell by 11 percent last year. That's the steepest one-time drop in 20 years, and it came, of course, just as the need for the services that those charities provide exploded.

Charity is counter-cyclical. When the economy is booming and there's less need, there's also more capacity. When the is worse and there's more need, donations dry up and there's less capacity. That's not a criticism of charities: It's hardly their fault. And nor is it a criticism of the people who donate -- or stop donating -- to charities. When you're worried about paying your mortgage, it's harder to help other people pay theirs.

But it's a big part of why we need a robust, federal safety net that's immune -- in a way state-funded programs like Medicaid are not -- from the ravages of the business cycle. One of the smartest things we could do would be to federalize the funding for Medicaid and unemployment insurance, or at least create some automatic formulas in which a rise of X amount in the unemployment rate triggered a rise of X percent in the size of the federal contribution.

By Ezra Klein  | October 25, 2010; 2:44 PM ET
 
Save & Share:  Send E-mail   Facebook   Twitter   Digg   Yahoo Buzz   Del.icio.us   StumbleUpon   Technorati   Google Buzz   Previous: Remembering Paul Wellstone, cont'd
Next: This might be the most devastating ad of the election

Comments

Your worldview and partisan bias are showing, as usual.

You write this as if government tax receipts were not also coutner-cyclical, and as if governments can simply create money out of thin air.

You also cite one statistic and generalize it across all of existence. The 11 percent drop is for "the nation's biggest charities", not all charities. I doubt there are available statistics, but I suspect neighbors giving directly to neighbors, and activity at small charities, such as local churches, may tell a different story.

Posted by: Qwerty5 | October 25, 2010 2:59 PM | Report abuse

Medicaid isn't just state funding. The feds match it, at a minimum of dollar of federal funds for each state dollar. And it a lot of poorer states, it's a lot higher. And that doesn't count the enhanced FMAP for CHIP.

Posted by: NoVAHockey | October 25, 2010 3:12 PM | Report abuse

Your worldview and partisan bias are showing, as usual.

You write this as if government tax receipts were not also coutner-cyclical, and as if governments can simply create money out of thin air.

You also cite one statistic and generalize it across all of existence. The 11 percent drop is for "the nation's biggest charities", not all charities. I doubt there are available statistics, but I suspect neighbors giving directly to neighbors, and activity at small charities, such as local churches, may tell a different story.

Posted by: Qwerty5 | October 25, 2010 3:36 PM | Report abuse

Qwerty5, nowhere does Ezra say that tax receipts go down with a bad economy, but the feds can deficit spend, unlike most state governments. This allows federal spending to expand during bad times and contract during good times, when less help is needed from the feds.

And Ezra's statistic may not be universal, but your "I think neighbors might probably give more during down times" is less useful.

Posted by: MosBen | October 25, 2010 3:44 PM | Report abuse

The full phase-out of the estate tax may have had an effect here. Estate taxes have long been a significant motivator for charitable donations.

Posted by: FrancesLee | October 25, 2010 3:54 PM | Report abuse

Don't tax revenues suffer from the EXACT same problem? What smart charities, and smart states, (and smart people) do is to have a rainy day fund.

Why isn't unemployment insurance fully covered by premiums?

Posted by: staticvars | October 25, 2010 4:27 PM | Report abuse

"the feds can deficit spend"... at the moment. This too is subject to change, which means that savings -- money put aside during times of plenty to satisfy needs in times of lean -- might be the real solution to the cyclical shortfalls: if we all know there is a cycle, it seems wise to plan for 'em.

From a taxpayer standpoint, it's very true that "when you're worried about paying your mortgage, it's harder to help other people pay theirs." It's a key message in the Tea Party argument against the policies of the social-democratic Obama/Pelosi Regime and it's refreshing to hear Klein acknowledging the point. It really is difficult for most hard-working taxpayers, struggling to pay their own debts, to help able-bodied citizens defined as "needy" by a distant, irresponsible, and unresponsive federal government.

Posted by: rmgregory | October 25, 2010 4:47 PM | Report abuse

"This allows federal spending to expand during bad times and contract during good times, when less help is needed from the feds."

MosBen,

Does federal spending ever actually go down?

The only two times I've found in the past 60 years are 1954 (post Korean War) and 2010 (due to TARP repayments and lower GSE outlays - $67 billion decrease in spending turns into a $246 billion increase excluding TARP and GSE payments).

Federal government social benefits grew 6.9% per year - faster than nominal GDP growth - from 2003-2007. Even from 1991-2000, government social benefits grew at a 5.1% annual pace. From 1982-1989, social benefits grew at a 6.4% annual pace.

The track record is social benefits grow at about the pace of nominal GDP during expansions, and then at double digit rates during downturns (when GDP isn't growing much, if at all).

Posted by: justin84 | October 25, 2010 5:39 PM | Report abuse

Well run charities have endowment funds and spending policies specifically designed to cushion them against erratic donations. These policies will not necessarily safeguard against economic crashes, but then neither will the federal government.

Posted by: bgmma50 | October 25, 2010 10:13 PM | Report abuse

It's amazing how many contributors weren't in the US the last two years. Here in the US, employment and tax receipts crashed in a way not seen since the 1930's. Rainy day funds and unemployment balances have already been tapped and exhausted. Most states needed to slash social services and use federal funds to balance budgets.

Why would charities be better off than the states? Most are dependent on donations. If you are scared about your employment, you can't avoid taxes, but you can keep more of your money in your own till.

Posted by: KenZ1 | October 26, 2010 4:45 PM | Report abuse

Post a Comment

We encourage users to analyze, comment on and even challenge washingtonpost.com's articles, blogs, reviews and multimedia features.

User reviews and comments that include profanity or personal attacks or other inappropriate comments or material will be removed from the site. Additionally, entries that are unsigned or contain "signatures" by someone other than the actual author will be removed. Finally, we will take steps to block users who violate any of our posting standards, terms of use or privacy policies or any other policies governing this site. Please review the full rules governing commentaries and discussions.




characters remaining

 
 
RSS Feed
Subscribe to The Post

© 2010 The Washington Post Company