Myth: Welfare can be replaced by charity.
Fact: Charity is too under-funded, too localized, too mismatched and too
ill-suited to replace welfare.
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.
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%
Human Service 10.0
Arts, culture and
Public/societal benefit 4.3
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
- There is a serious mismatch between the location of charitable resources
- There is a mismatch between the kind of programs that attract charitable
donations and the kind that benefit needy people.
- Charities are severely limited in their freedom to shift their efforts
to the places and programs that are in the most trouble.
- The voluntary hand of charity as a substitute for government entitlements
might involve objectionable religious, political, and social intrusion
into the lives of many people. (8)
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
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
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,
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).
6. Giving USA, 1993.
7. Early personal experiences of author.
10. Daniel Franklin, "The FEMA Phoenix," Washington Monthly,