Arnold Kling  

Let the Debate Begin

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So says Uwe E. Reinhardt.

Even the word private in "private charitable giving" is not completely accurate. A more accurate term would be "private donations coupled with involuntary, tax-financed public subsidies."

If progressives want to attack private charity because they prefer government spending, we should have that debate. There is not much to be said on behalf of private charity, other than:

1. I think that a higher percentage of private charity goes to causes that I can support, even taking into account the fact that I think that too much of it goes to overbuilding college campuses.

2. Private charity reflects voluntary civic virtue, as opposed to the exercise of coercive political power.

3. Private charities generally try to operate sustainable budgets.

4. Government power is already too overwhelming relative to private charities, to the point where many private charities exist solely to lobby the government.

For those libertarians of a civil societarian persuasion, there are few issues more important than defending private charity from these attacks by progressives.

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CATEGORIES: Political Economy

COMMENTS (5 to date)
jeff writes:

I read Reinhardt as attacking the tax deduction, not private charity per se.

Hyena writes:

Most people who believe the government should run leftist programs probably believe that people have a right to the benefits those programs would provide.

Private charity is no more a solution under that rubric than asking thieves to return stolen property. It's also why none of them take libertarian arguments seriously, both sides mutually reject the premises of the other.

Henry writes:

Arnold, do you support the tax deduction for charitable giving? As a Hayekian and a realist, I want to support it; as a crazy libertarian, I think I have to oppose it on principle. From your comments I suspect you are more of a Hayekian/realist than a libertarian on this issue (and in general).

@Jeff: I did feel that Reinhardt was attacking private charity. He distinguishes between charity for the poor and donations that support public goods, and he argues that the latter makes up the bulk of private donations in the US (though I find the data unconvincing). I read the article as implying that the former is more worthy.

Salem writes:

I live in the UK, where one of the main initiatives of the new government is the "Big Society." Basically it is the idea that government should gradually step back and allow the space to be filled by private groups such as charities, citing Arnold's (2), (3) and (4) but also a (5) - the Hayekian argument that because charities are more local and closer to the ground, they can be more effective than a distant central bureaucrat.

What is interesting about this is that many of the loudest howls of protest have been from - you guessed it - charities. It's not merely that many private charities exist merely to lobby the government, but many more are piggybacking on government both in terms of their funding and in terms of their operation. They are not really "private" charities in any real sense - they have become creatures of government. In the same way that much of what we call the "free market" really isn't, the same goes for private charity. So I agree with Arnold (and David Cameron!) that it would be better if we could get to a situation where more government functions were performed by private actors, the question of how we get from here to there is a tricky one.

Reinhardt, however, I just don't understand. He's very happy to have compulsory taxation to support museums, schools, parks, etc, but when they're supported by private charity suddenly these functions become unworthy? Besides, tax deductions are not a public subsidy - unless you believe that the government owns all a private citizen's wealth. Rather, tax deductions are a reduction in the subsidy a citizen pays the government.

Shangwen writes:

I am not going to comment on the tax issues, but I will speak to the operational side as the former director of two different non-profits that were funded by a mix of private and public funding.

Most non-profits that deliver health and social services are eligible for government funding, and will usually get a majority of their revenue from public funds through a mix of fee-for-service, special grants, and ongoing operating funds. There are a small number of charities that exist solely on private funds either because they are ineligible for public money or choose not to seek it.

The eligible charities typically receive a large majority of their funding from the government. Because that money is easier to obtain (writing grants once a year, or less, versus constant pressing of the flesh for $25 gifts), they rationally try to optimize government funding over private funding. This is solely because they want to reduce the work involved, though at most non-profits there are always those who believe the government should fund them fully. There are several consequences to this.

First, related to Arnold's fourth point, many charities in this position end up chasing government policy and funding trends, and end up designing programs around them; in other words the government leads (or decides) on what issues should be supported and how they should be handled. Thus, if a government decides that the problems of ethnic group X are best handled by members of group X, charities will start competing with each other to acquire staff, volunteers, and board members with the appropriate surnames, skin tones, or genotypes so that they can parade these facts in their applications. If the government decides that poverty will be eliminated in five years by raising the reading scores of eight-year olds, suddenly everyone becomes an expert on education (or how to help ex-hookers get jobs, or treat depression in war refugees, etc etc).

In other words, two consequences include the recognition that claims of expertise are easy to make and dress up in grant applications, and the second is that the presumed philosophical autonomy goes out the window once the money gets easy. Suffice it to say that one organization where I worked was a Catholic charity that was incentivized to add abortion to its list of options presented to pregnant teens. Government grant reviewers also do not double-check on the claims of expertise. What tends to count more is the proportion of trendy language.

As charities grow in their dependence on government funds, the share of mind that government occupies for administrators and board members grows dramatically. Although government money is much easier to get and keep flowing, the relationship is very different from that with private donors. A big private gift, like half a million, takes a lot more time to get, but on the other hand the organization's commitment in the exchange is usually limited to conspicuous recognition of the donor, and assurance that the money is well spent. Secure government money, on the other hand, is like marrying into a religion that requires full conversion. In some cases, circumcision, change of clothing style, and revising your circle of friends go along with the new religion too. Organizations are dramatically changed once the government can claim ownership of the activity. Private donors do not ask to measure the square footage of offices, the ethnic ratios of staff groups, the wording of web pages, or other minutiae. They simply ask (maybe) that the money be well spent and that they be informed of the progress of the gift. This leaves more room for innovation, whereas with government funding you are handed the innovation in a binder.

It is true that programs funded by private gifts, especially solely funded that way, are leaner, more responsive, and more cost-effective. I certainly saw that with a clinic we had that was entirely funded by private gifts. On the other hand, neither government funding/capture nor private funding seems to be a solution to the problem of charities advocating ineffective solutions ("eliminating poverty" by giving out blankets) or operating as really dubious mom-and-pop organizations (under-trained staff and zealous volunteers), but that has more to do with the intuitive appeal of bad ideas rather than funder identity. Private charities advocate for a small number of popular problems; government programs throw tons of cash at bad solutions. Which is the worse outcome?

On balance, my preference is still for private charity and far fewer tax deductions. My final observation would be that government funded charities, over time, become increasingly designed for the middle-class, while the problems of the very poor and isolated get left behind. In that sense, they simply become clones of the welfare state, and that is reason enough to reject government funding as a legitimate model.

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