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Posted at 10:48 AM ET, 11/22/2010

Weekend column

By Ezra Klein

Some heterodox thoughts on charity.

By Ezra Klein  | November 22, 2010; 10:48 AM ET
 
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Comments

Don't forget a big reason to support government in the charitable mix--many charities get funds from the government! The recession was a double whammy, because government funding went down when individual contributions did.

Also, do not be so sure the charities are more effective than government. If you look at the BBB or charitywatch.org, some suck up a lot of money on overhead. And if Mr. Cantor is comforted by the presence of charitible work in medicine, maybe he would like to get rid of his health insurance and throw himself onto the mercy of charitable medical care.

Posted by: ciocia1 | November 22, 2010 11:07 AM | Report abuse

The fallacy of 'uninsured' equals 'can't-get-care' aside, Ezra and big-government wonks will never be able to rationale this simple fact in their narrow-minds: if I walk in to the local non-profit health clinic and write them a check for $1,000, guess how much goes to the clinic and the practicioners caring for the uninsured? Answer: $1,000.

Now, if I have to send that same $1,000 to Washington, D.C., first, and then it has to get distributed out to the HHS via annual appropriations, then it gets portioned out to the individual state agencies, then it gets parceled out to the county agencies, then it gets divided up to the municipality/city agencies....you see where I'm going.

I'm not sure exactly how much of that $1,000 I sent to Washington in the form of income taxes gets back to the local health clinic, but anyone with even a grain-sized sense of reality understands it's far less than $1,000.

So progressives, the simple fact remains....local solutions work better than national ones, and in most every case other than national security local solutions will be more efficient.

Now, if Ezra wants to make the point that the government's role is to FORCE charitable giving in hard times, then he can make that case....but to say the government is more effective due to their 'larger scale' is laughable in any economic breakdown of how charitable efforts work.

Posted by: dbw1 | November 22, 2010 11:20 AM | Report abuse

"Too often, people think of the work of charities as at odds with, or simply separate from the work of government. Consider, however, the politically engaged nonprofits that dot not just Washington but also many state capitols and international cities. These are charities that are in the business of making government work better.

At their best, they act as force multipliers. If you donate money to a food bank, it can provide only as much food as your money can buy. If you donate it to a nonprofit that specializes in food policy issues, it can persuade legislators to pass a new program - or reform an existing one - that can do much more than any single food bank. "

Government is fundamentally different from charities due to the coercive nature of government and the voluntary nature of charity. You either obey the law, or (if you get caught and can't buy your way out of the problem) men with guns come and put you in jail.

Charity relies on persuading the donor that what you are doing is worthwhile and worth contributing for. Government policy nonprofits rely on persuading legislators that what they propose is worth taking money from other people (or going into more debt).

Policy advocates should always keep in mind when proposing a new government program "Is this worth throwing someone in jail for?" which is the consequence of tax evasion. I would submit that a lot of the things that charities do (like the food bank in Ezra's example) aren't worth putting people who don't want to contribute to them in jail for.

Posted by: jnc4p | November 22, 2010 11:58 AM | Report abuse

"The Center on Philanthropy's survey of high-net-worth households found that 42 percent lacked confidence in the government to solve "domestic or global" problems but that only 5.5 percent lacked confidence in the ability of nonprofits to do the same. But that's backward: Blunt and inefficient as the government is, it has the resources and scale to solve global and domestic problems. Nonprofit groups, by contrast, ameliorate them in the absence of a more permanent solution. In the 1920s, many seniors relied on charity to get by. But it wasn't until we passed Social Security that those seniors found real security."

The inefficient government gobbles up trillions upon trillions of dollar each year, crowding out private charity.

People will take action to the extent that they feel they need to. If they are on their own, the vast majority will save and insure themselves. If there is poverty and no safety net, people will contribute in large amounts.

On what basis should we expect large charitable efforts to alleviate poverty if the government is already committing something like $2 trillion+ to the problem via dozens of federal, state and local programs? It's easier not to give if you don't have to - and it's harder to give after paying 20%-40% of your income to the government.

"In the 1920s, many seniors relied on charity to get by. But it wasn't until we passed Social Security that those seniors found real security."

American GDP per captia in the 1920s was lower than in modern day China.

Both the ability to save and the ability to give were much weaker in those days than the present.

It would be like attacking welfare and transfer payments by criticizing the English poor laws.

Social Security's benefit formula would have impoverished most seniors if wages were still at levels seen in the 1920s. The typical unskilled factory worker made $283.31/wk in 1925 in 2010 dollars. Economic growth is the true key to security.

In any case, most people can provide their own security - a true safety net for 'security' purposes does not have to cost $650 billion annually for something like 38 million elderly.

Posted by: justin84 | November 22, 2010 12:13 PM | Report abuse

"That's the problem with charity - at least some of it: It's pro-cyclical. In good times, when people are flush, donations flood in. In bad times, they dry up"


Sounds just like tax revenues...

Posted by: krazen1211 | November 22, 2010 1:29 PM | Report abuse

"The inefficient government gobbles up trillions upon trillions of dollar each year, crowding out private charity."

Much of what charities GET comes FROM the inefficient government. Many services to the poor are not directly performed by the government, but contracted out to nonprofits.

"If there is poverty and no safety net, people will contribute in large amounts."

There is no evidence to suggest this. In fact, from what we know about charitable giving, the wealthiest tend to give to nonprofits that benefit themselves the most--ballets, universities, prep schools,etc.--while the people closest to poverty tend to give to institutions that support the poor.

"American GDP per captia in the 1920s was lower than in modern day China.
Both the ability to save and the ability to give were much weaker in those days than the present."

Since giving is relative to the amount one has, the low-taxed people of the 1920s could have given a much larger portion of their income to charities, but when the Depression came, all the holes in the social safety net showed up, and the government had to step in.

Posted by: ciocia1 | November 22, 2010 5:56 PM | Report abuse

"Much of what charities GET comes FROM the inefficient government. Many services to the poor are not directly performed by the government, but contracted out to nonprofits."

Really?

I'd love to see the following data points from you, with sources:

Total amount of government welfare spending, including Social Security, TANF, Medicare, Medicaid, SCHIP, Supplemental Security Income, Unemployment Insurance, EITC, Section 8 Housing Assistance, Food Stamps, Indian Health, etc.

Total amount of federal dollars "contracted out" to nonprofits.

Ratio of the first to the second.

My guess is that the topline will be ~$2.5 trillion, and the second line will be ~$10 billion, with a ratio of government spending to nonprofit outlays ~250:1.

"There is no evidence to suggest this. In fact, from what we know about charitable giving, the wealthiest tend to give to nonprofits that benefit themselves the most--ballets, universities, prep schools,etc.--while the people closest to poverty tend to give to institutions that support the poor."

You mean the people who shell out nearly half of their income in taxes - a large chunk of which goes to government transfer programs - are deciding to fund other activities? What a shocker that one is.

The evidence you allude to is from the period of the welfare state. There is evidence that the New Deal reduced charitable giving to the poor by 75-80%.

/cite
As long as the government remains the dominant provider of aid to the poor, charity dollars in the United States will not go to the poor but will continue to provide significant support to other causes, helping the arts, museums, universities, medical research, and religion.
/ end cite

http://www.econlib.org/library/Enc/Charity.html

"Since giving is relative to the amount one has, the low-taxed people of the 1920s could have given a much larger portion of their income to charities, but when the Depression came, all the holes in the social safety net showed up, and the government had to step in."

Your math doesn't work. GDP per person in the 1920s was about 1/9th the current value. We could tax away 80% of the income of all Americans (ignoring supply side effects) and they would still have more than hypothetical untaxed Americans in the 1920s. When looking at discretionary income in particular, it is orders of magnitude higher today than in the 1920s, even accounting for the tax differential.

Government action intensified and prolonged the Depression, and created much of the misery that the government decided it had to step in for.

Consider that in 1920-1921 there was a severe depression, with prices and nominal GDP falling by more than in any single year before or since. Harding slashed spending and taxes, running a surplus throughout and by 1923 we were back to full employment.

Hoover and FDR both aggressively intervened in the economy, and the U.S. was in Depression from 1929-1941.

Posted by: justin84 | November 23, 2010 10:02 AM | Report abuse

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