Tag: charity

Americans Are Far More Compassionate than “Socially Conscious” Europeans

When I’m in Europe giving speeches and participating in conferences, it’s quite common that folks on the left will attempt to discredit my views by asserting that Americans are selfish and greedy.

Since I’m generally sympathetic to Ayn Rand’s writings, I don’t see anything wrong with people striving to make themselves better off. Moreover, Adam Smith noted back in 1776 that the desire to earn more money leads other people to make our lives better. One of his most famous observations is that, “It is not from the benevolence of the butcher, the brewer, or the baker, that we can expect our dinner, but from their regard to their own interest.”

But, for the sake of argument, let’s accept the premise of my statist friends in Europe and simply look at whether their assertion is correct. Are Americans more selfish and greedy that their counterparts across the ocean?

The most obvious way of testing this proposition is to compare rates and levels of voluntary charity. Selfish and greedy people presumably will cling to their money, while compassionate and socially conscious people will share their blessings with others.

So how does the United State compare to other nations? Well, I’m not a big fan of the Organization for Economic Cooperation and Development, but the bureaucrats in Paris are quite good at collecting statistics from member nations and producing apples-to-apples comparisons.

And if you look at rates of “voluntary private social expenditure” among nations, it turns out that Americans are easily the most generous people in the developed world.

Voluntary Social Expenditure in OECD Nations

Market Structure & Barriers to Entry in Education Tax Credit Programs

I want to thank John Kirtley for his gracious reply to my criticism of his policy guidelines. He has spilled a tremendous amount of blood, sweat, and tears on the ground fighting to establish, protect, and expand the largest private school choice program in the country, and I, quite simply, have not. I think this kind of policy debate is good for the health of the school choice movement, however, so on it goes …

Andrew Coulson posted a response to many of John’s points, but I think some areas deserve an expanded treatment. One of the primary issues in our discussion is centralization vs. diversification of scholarship organizations. I did not claim there was a “mandated” monopoly, which I take to mean government-mandated. Step Up for Students is, however, the only active scholarship organization in the state. It became the sole scholarship organization through hard work and good performance. John mentions Microsoft in his defense of market dominance, but Microsoft never fully monopolized any product or service. There is, however, a literal monopoly of the education tax credit system that was produced and is maintained by problematic provisions in the credit program that create a very high barrier to entry. The structure of the education tax credit in Florida all but ensures a monopoly in the education tax credit program.

For the first six years of the program, scholarship organizations were required to spend 100 percent of the credit funds they raised on scholarships. In other words, they had no money for overhead, which made establishing and running a scholarship organization difficult and expensive … a non-profit would need to seriously cannibalize its established charitable funding, likely already committed, and/or fundraise along two separate tracks for administrative and scholarship funding.

To put this in context, Charity Navigator, which rates non-profits, considers it acceptable for a charity to spend close to one-third of its revenue on non-program expenses. Even the 4-star rated Inner-City Scholarship Fund spends over 13 percent of its revenue on overhead expenses.

Scholarship programs, especially ones with relatively high compliance costs such as requiring detailed checks on a family’s income, require significant but entirely normal overhead spending. Furthermore, local scholarship organizations in a decentralized system act as more than a high-volume processor of financial applications. They act as community organizations that consider the needs and struggles of individual families and children, which requires spending more time and resources on each family. A 10 percent overhead allowance is eminently reasonable, indeed, within the bounds of best practices for such charities. Denying any overhead to non-profits ensured that few charitable organizations would be capable of fundraising and processing scholarships under the law.

Exacerbating this problem, scholarship organizations are not allowed to target the use of scholarship funds they raised to particular kinds of educational environments. What this means is that a non-profit would have to a) cannibalize money raised from other sources and for other purposes, and b) possibly fund educational environments that directly conflict with their conscience, mission, or best judgment. For instance, a Catholic charity would be required to fund an atheist, Wiccan, Protestant fundamentalist, Lutheran, Islamic, or any other school which met the basic requirements of the legislation. Even a non-sectarian scholarship organization is required to issue scholarships to any school, regardless of quality, as long as it meets the basic legal requirements.

In addition, the Florida tax credit applies only to corporate taxes, the vast majority of which are paid by large corporations based outside of the state of Florida. This means that fundraising is relatively difficult and time-consuming, not to mention extremely volatile, as large corporations shift revenue and expenses to minimize their tax burden year to year. It can take two years for a large corporation to begin disbursing funds after first being solicited. And fundraising requires expensive out-of-state traveling.

The corporate-only credit acts as an additional barrier to entry that grows over time and with centralization. Step Up for Students entered this constrained market efficient and well-capitalized, and spent the next decade bringing on the biggest corporate taxpayers in Florida as donors. A new entry into the credit scholarship realm would need to raise very substantial funds for fundraising for years before they saw a return in credit donations. Even should the very high quality of Step Up decline in the future, its relationships with the biggest donors, scale, and general dominance would pose a very formidable wall to climb for any non-profit. Indeed, it is far more likely that the state government would intervene long before any non-profits entered the market to impose the discipline of competition.

With extremely high start-up costs, low return for many non-profit missions, a fully established monopoly, and no profit motive or access to investment funding, the Florida education tax credit scholarship organization opportunities are all but nonexistent under current law.

Rich People Should Help the Poor by…Making Smart Investments and Earning Big Profits

There’s a very provocative article on the New York Times website that criticizes Steve Jobs for his supposed lack of charitable giving:

Surprisingly, there is one thing that Mr. Jobs is not, at least not yet: a prominent philanthropist. Despite accumulating an estimated $8.3 billion fortune through his holdings in Apple and a 7.4 percent stake in Disney (through the sale of Pixar), there is no public record of Mr. Jobs giving money to charity. He is not a member of the Giving Pledge, the organization founded by Warren E. Buffett and Bill Gates to persuade the nation’s wealthiest families to pledge to give away at least half their fortunes. (He declined to participate, according to people briefed on the matter.) Nor is there a hospital wing or an academic building with his name on it. …the lack of public philanthropy by Mr. Jobs — long whispered about, but rarely said aloud — raises some important questions about the way the public views business and business people at a time when some “millionaires and billionaires” are criticized for not giving back enough… In 2006, in a scathing column in Wired, Leander Kahney, author of “Inside Steve’s Brain,” wrote: “Yes, he has great charisma and his presentations are good theater. But his absence from public discourse makes him a cipher. People project their values onto him, and he skates away from the responsibilities that come with great wealth and power.”

But why, to address Leander Kahney’s criticism, should we assume that Mr. Jobs has done nothing for the poor? He’s built a $360 billion company. That presumably means at least $352 billion of wealth in the hands of people other than himself. And that doesn’t even begin to count how consumers have benefited from his products, the jobs he has created, and the indirect positive impact of his company on suppliers and retailers.

To give credit where credit is due, the article does present this counterargument. It reports that Mr. Jobs told friends, “that he could do more good focusing his energy on continuing to expand Apple than on philanthropy.”

This is a critical point. Do we want highly talented entrepreneurs and investors dropping out of the private sector and giving their money away after they’ve reached a certain point, say $5 billion? Or do we want them to focus on creating more wealth and prosperity?

Interestingly, Warren Buffett used to understand this point (before he started arguing that politicians could more effectively spend his money). And Carlos Slim Helu still does:

Mr. Jobs, 56 years old, is not alone in his single-minded focus on work over philanthropy. It wasn’t until Mr. Buffett turned 75 that he turned his attention to charity, saying that he was better off spending his time allocating capital at Berkshire Hathaway — where he believed he could create even greater wealth to give away — than he would ever be at devoting his energies toward running a foundation. And last year, Carlos Slim Helú, the Mexican telecommunications billionaire, defended his lack of charity and his refusal to sign the Giving Pledge. “What we need to do as businessmen is to help to solve the problems, the social problems,” he said in an interview on CNBC. “To fight poverty, but not by charity.”

None of this is to say that charitable giving is wrong. I’m proud to say that my employer, the Cato Institute, refuses to accept money from government. This means we are completely dependent on private philanthropy.

But those of us who work at Cato understand that creating wealth—maximizing the size of the economic pie—is the most important priority. And if the pie is big, generous people then have more ability to make contributions to worthy causes such as school choice scholarship funds, the Salvation Army, or (ahem) America’s best think tank.

Thursday Links

  • DON’T FORGET: Our fiscal policy conference, “The Economic Impact of Government Spending,” featuring Senators Bob Corker (R-Tenn.) and Mike Lee (R-Utah), former Senator Phil Gramm (R-Tex.), Representative Kevin Brady (R-Tex.), and other distinguished guests, begins at 2:00 p.m. Eastern today. Please join us on the web–you can watch the conference LIVE here.
  • Atlas Shrugged Motors presents the Chevy Volt.
  • The parable of the Good Samaritan teaches us about the moral value of voluntary charity toward the needy–it says nothing about using coercive government programs of the modern welfare state.
  • It is not the role of the Court to rewrite laws for Congress.
  • The failed “war on drugs” has reshaped our budgets, politics, laws, and society–and for what?

Tax Cuts vs. Government Checks … NRO Conclusion and Correction

VerBruggen signs off on the tax cut/government check debate by doubling down on the core issue; he believes that there is no meaningful difference between government spending and a tax cut.  I will quote him in full: “If some libertarians want to keep insisting that there’s a meaningful difference between (A) the government spending $500 on something and (B) a person “donating” $500 to that thing and then getting a $500 break on his taxes in return, there’s nothing I can do to stop them.”

In this, he has the company of the 9th Circuit and the Progressive wing of SCOTUS.

VerBruggen has also rightly asked for a correction to one of the numerous quotes I pulled from his blog posts on tax cuts vs government spending. I thank him sincerely for reading through to the end of my interminable post. The correct quote is below, with the omitted, qualifying language in italics, a new note on charitable giving and government spending, and my otherwise unchanged commentary:

He insists that “much (most?) deducted charity spending does not offset government spending in the slightest,” yet also agrees that “voucherizing the tax subsidies for charity would remove the incentive to donate” to the range of charitable and social welfare activities the government supports. [Note: There is much evidence that government spending on “charity” crowds out charitable giving. And most, not to mention much, charitable giving in the U.S. is devoted to health, educational, social welfare and religious organizations which in turn focus on assistance to the poor, health and educational activities. Needless to say, the government is deeply involved in health, education and welfare spending. See the index of Arthur Brooks’ fascinating book, Who Really Cares, for more details.]

Charity does not reduce pressure on the welfare state? The billions of dollars donated to health, education, welfare … these offset nothing in the public sector? In the absence of tax expenditures for employer-provided health care, how likely is it that the U.S. would have retained a relatively robust private medical market?

The charitable deduction allows the people who earned the money our governments spend on public “charity” to keep some portion of what the government would otherwise have spent on government “charity” or some other wasteful project.

If VerBruggen is concerned that the tax burden will marginally increase on some citizen as the result of another’s charitable deduction then the answer is to balance that lost revenue with a reduction in government “charity,” not to eliminate the deduction.

Perhaps most concerning is VerBruggen’s breezy assumption that all income belongs to the government. He insists that “taxpayer money is already allocated” in the form of deductions for charity, and therefore that “voucherizing the total amount of the deductions wouldn’t change that …”

Really? Tax credits and deductions belong to the taxpayer who earned them. They are not government funds; that is a legal and logical statement. To insist otherwise is to argue that all income is the governments, and what it does not claim is ours. The money that a taxpayer spends is HIS money, not the government’s.

And, as is noted above, voucherizing charitable deductions will convert a huge portion into direct welfare payments and eliminate the core of the charitable act; giving away one’s own money.

To Kill ACORN, Kill the Programs

Last year, when the issue of defunding ACORN was a hot-button issue, I told countless radio talk show audiences that the focus should be on eliminating the underlying fuel that created the organization—the flow of federal subsidies.

Chris Edwards pointed this out in September. If Congress simply stops subsidizing ACORN, its activists will reincorporate under new names and again become eligible for funds. Alas, that’s precisely what ACORN is currently doing.

From FoxNews.com:

One of the latest groups to adopt a new name is ACORN Housing, long one of the best-funded affiliates. Now, the group is calling itself the Affordable Housing Centers of America.

Others changing their names include what were among the largest affiliates: California ACORN is now Alliance of Californians for Community Empowerment, and New York ACORN has become New York Communities for Change. More are expected to follow suit.

A comment from Frederick Hill, a spokesman for Republicans on the U.S. House oversight and government reform committee, doesn’t indicate that the GOP has quite received the message:

To credibly claim a clean break, argued Hill, the new groups should at least have hired directors from outside ACORN.

It appears that for many Republicans, attacking ACORN represented political opportunism, not a statement about the proper role of the federal government.

Further rendering the GOP’s ACORN agenda moot was last week’s ruling by a U.S. District judge that singling out ACORN for defunding is unconstitutional. It truly boggles the mind what passes for constitutional and unconstitutional in this country.

Tuesday was the birthday of James Madison, the “Father of the Constitution.” Reflecting upon Madison’s wise words, it’s hard to understand how the federal “community development” programs that have funded ACORN could pass constitutional muster:

“The government of the United States is a definite government, confined to specified objects. It is not like state governments, whose powers are more general. Charity is no part of the legislative duty of the government.”

“[T]he powers of the federal government are enumerated; it can only operate in certain cases; it has legislative powers on defined and limited objects, beyond which it cannot extend its jurisdiction.”

“With respect to the two words “general welfare,” I have always regarded them as qualified by the detail of powers connected with them. To take them in a literal and unlimited sense would be a metamorphosis of the Constitution into a character which there is a host of proofs was not contemplated by its creators.”

“If Congress can do whatever in their discretion can be done by money, and will promote the general welfare, the government is no longer a limited one possessing enumerated powers, but an indefinite one subject to particular exceptions.”

See this essay for reasons why these HUD community development programs should be abolished.

ObamaCare Would Crowd Out Voluntary Charity

From Father Robert A. Sirico, via the Laticonomics blog:

I also worry about the “crowding out” effect that this vast expansion of the government into health care will have on voluntary charitable action. Somewhere along the line we have lost sight of the fact that charity and health care was not an invention of Washington bureaucrats. How did the more than 600 Catholic hospitals and clinics, and many more hospitals bearing the names Jewish, Presbyterian, Methodist, Adventist and Baptist, get built in this country? It wasn’t through the sufferance of government. Faith is the source of these works, not policy initiatives. Faith, because it involves the entire scope of the human person, body and soul, has not only a larger claim on our allegiance but a deeper commitment to our well being. Our faith communities know us as persons, not as welfare case numbers or voting blocs.

For more on how government crowds out faith-based and other private charity, see here.