December 26, 2005

Passage of the Day: The Wall Street Journal on American Charity

Filed under: Economy,Quotes, Etc. of the Day,Taxes & Government — Tom @ 12:30 pm

Follow-up post: A Tsunami of Waste: Dollars Squandered, Accountability Blown Off
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I’m glad someone circled back to the comments made a year ago by an internationalist ingrate to make these points (link requires subscription) before 2005 ended:

Sweet Charity

Americans are “stingy.” This was the accusation hurled at the U.S. almost exactly one year ago today by Jan England, United Nations Undersecretary for Humanitarian Affairs, immediately after the Asian tsunami disaster.

Even by U.N. standards, it was a particularly absurd anti-American slur — although it no doubt expresses the view of many foreign elites, who have come to believe that government is the only true source of goodness and charity. In the weeks and months that followed the tsunami, American citizens dug deep into their wallets, donating some $1.78 billion to the relief effort in Asia — dwarfing the contributions of other developed nations. Since October Americans have also contributed $78 million to assist the casualties of the Pakistan earthquake.

And lest there be any doubt that the Good Samaritan ethic is alive and well in America, consider the latest totals of charitable giving to help the New Orleans victims of Hurricane Katrina. The Center for Philanthropy at Indiana University announced last week that the total value of private donations in response to Hurricanes Katrina and Rita has reached $3.12 billion, thus “setting what is believed to be a record for a single disaster and recovery effort.” This tsunami of aid dollars was donated in just three and a half months.

More astounding still is that this Gulf Coast aid is only a little more than 1/100th of what Americans donate to charities and churches every year. The quarter trillion dollars a year that Americans provide to sustain the Red Cross, the Salvation Army, Catholic Charities, the American Cancer Society, their local churches, universities and such is greater than the entire GDP of most countries. Bill and Melinda Gates have given more dollars to fight AIDS and malaria in Africa than have many nations. And all of this comes on top of the $1 trillion in taxes that Americans pay each year to support government income-transfer and benefit programs.

This generosity in money and volunteerism has been a hallmark of American society since its earliest days.

….. What impels Americans to engage in such kindness to strangers? We suspect that Americans give to private charities because they recognize that these initiatives work best. Bobby Jindal, the Congressman from New Orleans whose own home was badly damaged by flood waters, tells us that “by far the most effective relief efforts have come from private charitable aid organizations. FEMA and other state/local government agencies set up bureaucracies and red tape, while private businesses and charities moved in swiftly to alleviate the human suffering on the ground.

….. the Tax Foundation has provided compelling evidence that over the past 50 years — as tax rates on the highest earners have fluctuated from a high of 90% to a low of 28% — American giving has hardly deviated from 2% of personal income. In the 1980s, as tax-rate reductions reduced the value of the charitable tax deduction by about half, the level of charitable giving nearly doubled. This suggests that charitable giving would continue to flourish under a flat-rate tax system with no deduction.

Which brings us back to the charge that Americans are Scrooges in providing international aid. The World Bank recently lectured the U.S. government to double its level of foreign aid. Never mind that the U.S. is now spending tens of billions of dollars in what is nothing if not a massive humanitarian mission to restore civil society and democracy to Iraq and Afghanistan. And never mind the humanitarian aid provided by the U.S. military in Pakistan and after the tsunami.

But yes, it’s true, that when it comes to funding self-serving bureaucracies that don’t produce results — such as much of the U.N. and most other multi-government foreign-aid schemes — Americans are skeptics. For good reason. Study after study has documented that there is no correlation between the amount of foreign assistance a nation receives and its subsequent rate of economic development. Think Africa, which has received hundreds of billions of dollars in aid to little positive effect. This suggests that the optimal amount of U.S. government development aid may be zero.

But at the same time, when it comes to private Good Samaritan undertakings that do alleviate poverty and despair, Americans are second to none, giving three to four times the amount of “official” foreign aid, according to Ian Vasquez of the Cato Institute’s Global Liberty Project. That’s not stingy. It’s smart.

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