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 naïve - 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:

• There is a serious mismatch between the location of charitable resources and needs.
• 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)

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