Myth: Welfare can be replaced by charity.

Fact: Charity is too under-funded, too localized, too mismatched and too ill-suited to replace welfare.



Summary

Americans would have to make at least 10 times the donations they currently give to charity to fully replace government social spending. And there is no reason to believe that people who so bitterly hate paying taxes would gladly surrender an equal amount to charity. Arguments that charities can do the job better than government are na´ve - most charities are small, highly localized and ill-suited to responding to national disasters or shifting economic trends. About 90 percent of charity funds are both collected and spent locally, which means that rich communities tend to have well-funded charities, and poor communities tend to have poorly funded ones. For this reason, only 10 percent of all charitable donations are directed to the poor. Re-allocating charity donations to the communities that need them most will incur intense political opposition from the communities that fund them.



Argument

Many conservatives argue that if government welfare were eliminated, charity would take up the slack in helping the nation's poor and needy.

In his book, The Tragedy of American Compassion, Marvin Olasky detailed many of the conservative arguments against government welfare and its damaging effects on charitable giving. He argued that what the poor needed were not anonymous welfare checks that seduced and trapped them into dependency. What they really needed was human contact: face-to-face consultations with charity workers who would take a personal interest in their plight and help them work through their problems. Olasky argued that these charity workers would not always see an automatic cash handout as the best solution to the needy person's problems. Rather, "tough love" might be needed instead: getting over a drug addiction, finding motivation to work, getting a deadbeat dad to pay child support, etc. Continuing this train of logic to its end, Olasky argued that churches were superior to government officials in dispensing moral advice; indeed, he called conversion to Christianity "the key to poverty fighting."

Olasky also articulated a second objection against welfare: that it drives away potential charitable donors who do not agree with the government's value-free giving. For example, many potential donors would like to give to the arts, but are already paying taxes that go to support objectionable art like the Mapplethorpe exhibit. Or they would like their donations handled by charities they can trust to teach traditional family values and a proper work ethic. Many conservatives would feel more inclined to give if they agreed with the philosophy of the charitable organization.

Before addressing these arguments, let's briefly review several basic facts about charitable giving in the U.S.

Charity in the United States

In 1993, Americans contributed $126 billion dollars to charity. This averages out to $880 per contributing household, or 2.1 percent of contributing household income. For all households, that works out to $646 per household, or about 1.7 percent of household income. (1) In general, the poor give a greater percentage of their income to charity than the rich. Consider:

Household income and percent given to charity (1993) (2)

                      Percent of income 
Income level          given to charity
--------------------------------------
Under $10,000         2.7%
$10,000 - 19,999      2.3
$20,000 - 29,999      2.7
$30,000 - 39,999      2.0
$40,000 - 49,999      1.3
$50,000 - 59,999      1.1
$60,000 - 74,999      2.3
$75,000 - 99,999      2.0
Over $100,000           ?

There are statistical difficulties in determining the percentage of charity donated by those in the richest group, because this group includes billionaires as well as those making "merely" $100,000 a year. However, even if better research clarifies this question, we should remember that different income groups make different types of charitable contributions anyhow. The rich tend to donate to "rich" charities; the poor tend to donate to "poor" charities.

Charity experts have long known that donors give to charities with whom they identify and from whom they might reasonably expect something in return. (Indeed, the Olasky argument above strongly suggests this.) While the very poor tend to donate more to the Salvation Army, the very rich tend to donate more to the arts, humanities and sciences. Because the rich still donate more in absolute dollars, this has caused a serious mismatch between donations and allocations. Only about 10 percent of charitable contributions are specifically directed to the poor. (3)

Furthermore, charities are highly localized. Most are small neighborhood organizations that are tied to their immediate community by their charters, service missions, support bases, and relationships with trustees. They reflect their neighborhood's values, religious preferences, interests, problems and, above all, income. As charity expert Julian Wolpert writes: "Most of the donations that charities raise go to support community churches and synagogues, Y's, museums, public radio and television, universities, and parochial schools -- the services that donors themselves use -- and these funds are largely unavailable for helping the neediest." (4) For these reasons, almost 90 percent of all charity funds are both raised and spent locally. (5) But what this means is that communities with high incomes tend to enjoy well-funded charity programs; those with low incomes tend to suffer poorly-funded ones. This is exactly backwards from the way it should be. It would be more logical to see well-funded organizations transfer their help to the communities that need it most, but their ties to the local community prevent them. Even re-allocating funds within a community is difficult. For example, if an epidemic breaks out in a local community, an educational charity cannot re-allocate its funds or resources to help out a health charity. The situation is akin to a fire department being unable to help out the police department during a crime wave.

The following chart shows how the $126 billion in charitable donations was allocated in 1993:

Allocation of charitable donations (1993) (6)

Type of                  Percent of
organization             total collections
------------------------------------------
Church or religion       45.3%
Education                12.0
Human Service            10.0
Health                    8.6
Unclassified              8.5
Arts, culture and 
humanities                7.6
Public/societal benefit   4.3
Environmental/wildlife    2.5
International             1.5

Most donations go to churches, but churches are an excellent example of the localized nature of charities. And churches with even national charity campaigns hardly spend a substantial amount of their money on helping the poor. Until recently, the Seventh-day Adventist church had one of the most enviable records of charity collections of any U.S. religious denomination. Yet its department devoted to helping out the poor and needy -- the Dorcas Society -- received only a tiny fraction of the church's donations. Instead, the vast majority went to church administration, religious and educational facilities, and a remarkable world-wide missionary effort to convert other nationalities to their faith. (7)

In a thorough review of charities in the United States, Wolpert summed up the problems of replacing welfare with charity this way:

The Liberal Response

In 1992, Hurricane Andrew devastated Southern Florida, leaving 137,000 homes destroyed or damaged and 250,000 people homeless. Imagine, for a moment, that there was no federal emergency response, and that charities and private organizations were responsible for the cleanup and recovery. Of course, most of the charities in Southern Florida were destroyed along with everything else, so local charities would be of little help. By definition, the charity response would have to come from other communities -- but, as we have seen, most charities are small and tied to their local communities, and not designed to export their help. Clearly, a disaster the size of Hurricane Andrew calls for a national response -- but how is a neighborhood charity in Seattle, Washington going to ship its few volunteers and resources all the way to Florida?

If thousands of independent, local charities from all across the nation tried to help out the victims of Hurricane Andrew, the resulting confusion, duplication of effort and the lack of a clear, overall strategy would waste much of their time and effort. In this respect, the federal government has a huge advantage over thousands of isolated, disparate charities; it can draw on deep strategic reserves and allocate them according to an organized plan. Furthermore, the operations required to fight a national disaster are far different from the ones required to fight local neighborhood problems. Small charities are not even suited for these different mission requirements.

Many conservatives -- Olasky among them -- concede that the federal government is more efficient at handling national disasters like the Great Depression. However, they argue that in a normally functioning economy, charities are sufficient to handle the everyday poverty they find.

But this is not true either. Our economy is dynamic, and hard times may hit one region one year, another region the next. Many will recall the film Roger and Me, which detailed the horrific unemployment and economic devastation that visited Flint, Michigan when General Motors closed down its auto plants and moved them to Mexico. This single business decision resulted in years of hardship -- but the city is recovering today. California is another example; it did not recover with the rest of the nation after the 1991 recession, and its poverty rate remained high. Yet, within a few years, the state returned to a booming economy.

Economic twists and turns like this are almost impossible to predict. When they do hit a region, the very charity organizations that would help it -- the local ones -- are the least able to help, since they suffer too. So a national charity organization would have to set up offices in these temporarily stricken regions, only to uproot them when good times returned and move them to the next stricken region. That is expensive, and a waste of resources. Compare that to the current federal system, which already has offices everywhere (doing more than just welfare); this makes it much simpler to divert the required funds to the appropriate regions. And as we have seen, charitable donors tend to donate only to their own communities; we should expect to find little support for national charities that spend most of the donor's money elsewhere. Indeed, the current federal system is unpopular for exactly that reason.

Furthermore, charity is a drop in the bucket compared to all the social spending conducted by the government. The total assets (as opposed to merely the income from endowments) of America's 34,000 foundations add up to only about 10 percent of current government expenditures for social welfare and related domestic programs. (9) As Senator Daniel Patrick Moynihan says, "There are... not enough social workers, not enough nuns, not enough Salvation Army workers" to care for the millions of people who would be dropped from the welfare rolls.

To replace welfare with charity, our society would have to boost its charitable giving tenfold. Which raises an interesting point: conservatives bitterly assail the federal government for making them pay taxes to help the poor. Why, then, would they turn around and happily surrender an equal amount to charity? The answer, of course, is that they would not. Once conservatives are freed from their obligation to help the needy, charitable donations will continue to languish as they always have.

Here conservatives might return to Olasky's argument: that they would feel more inclined to give to charities that espoused traditional family values and conservative morals. But, as we have seen, Olasky's idea of charity is to dispense advice, not funds. There is no question that a charity that simply tells the needy, "Get a job," is less expensive to run. But it should be pointed out that Olasky's entire argument is really a disingenuous change of subject. The original argument was that charity could replace welfare. In Olasky's world of privatized philanthropy, this is not the case; welfare would be eliminated but charity donations would not rise to replace it. This is a different argument, one about the benefits of eliminating most financial aid to the poor, not replacing it.

Finally, there is a matter of accountability. Private charities are notorious for spending 90 percent of their revenues on administrative costs. Many will certainly remember the fund-raising efforts of Jim and Tammy Faye Bakker, who raised millions ostensibly to spread the word of God -- but actually spent it on themselves. In such cases, a donor's only recourse is to stop giving once the scandal breaks. These scandals are often belated, because the media does not actively search out scandals in the private sector; they need to be tipped off to them. The scandal may put this fraudulent charity out of business, but there always seems to be another to take its place.

By contrast, the federal government is held much more strictly accountable for its actions. The media conducts an intense and proactive search for scandals in government, and their discovery becomes front page news. This results in enormous political pressure to correct deficiencies. Just one example is FEMA -- the Federal Emergency Management Agency. This is the agency commissioned with helping Americans recover from natural disasters. Under President Reagan, the nature of these disasters was assumed to be nuclear, and the agency poured millions into the creation of nuclear-proof command and control structures that would survive and "win" a nuclear war. Needless to say, it was completely unprepared to deal with the many natural disasters that were actually occurring. It took FEMA three days just to show up after Hurricane Andrew, and they snarled its victims with an unforgivable amount of red tape. Media reports sparked such public outrage that Senate hearings were held. Senator Fritz Hollings called FEMA "the sorriest bunch of bureaucratic jackasses I've ever known." (10) Under the intense glare of the national media, reforms occurred. James Lee Witt took over the ailing organization and completely turned it around. Today, it is one of the best functioning agencies in government, and is winning praise even from its former critics.

In sum, the claim that charity can replace federal social spending -- and do it better -- is a hopelessly unfounded one.

Return to Overview

Endnotes:

1. Total contributions: AAFRC Trust for Philanthropy, New York, NY, Giving USA, 1993. Household contributions: Giving and Volunteering in the United States, 1994 ed. (Washington, D.C.: Independent Sector, 1994).

2. Giving and Volunteering in the United States, 1994 ed.

3. Julian Wolpert, "What Charity Can and Cannot Do" (New York: Twentieth Century Fund Press, 1996).

4. Ibid.

5. Ibid.

6. Giving USA, 1993.

7. Early personal experiences of author.

8. Wolpert.

9. Ibid.

10. Daniel Franklin, "The FEMA Phoenix," Washington Monthly, July 1995.