Government As Charity

Matt Zwolinski:

About $3.2 million was given to reduce the [US] debt in 2011. … Why so little? One possible explanation is that people are selfish. … But this explanation is difficult to square with the large amounts of money that Americans give to charity each year – over $300 billion in 2009. … I suggest … most people know that there are better and more efficient ways of using their money to help other people than giving it to government.

The usually sharp Will Wilkinson invokes free rider problems, and misses the point. But like Arnold Kling, Bryan Caplan gets it:

Despite widespread nationalist and statist sentiments, Uncle Sam’s share of the charity market is microscopic – less than .001%. How very odd. … If you ask “Why don’t people give more money to my charity?,” the best answer is that people hold your charity in low esteem. Similarly, if total donations to the U.S. government add up to a few million dollars a year, the best explanation is that people see lots of better ways to spend not just their dollars, but their charitable dollars. I do wonder, though: Could the U.S. government attract a lot more donations with better marketing? … What if Congress publicly acknowledge the ten biggest donors in an annual ceremony?

That 0.001% stat is striking, and worth pondering. Most tiny charities can say their donations are low because few have heard of them, or because most who have don’t have a visceral scene of what they really do. But everyone knows about government debt, and a lot about what it pays for.

Now if we counted the value of time donated, we’d get a bigger figure, as many donate time to local government-run schools, sport leagues, hospitals, police, and roads. So it seems to be non-local government that donors neglect. For some perspective, here is a breakdown of annual US donations:

  • Money: 300B$: Religion 33%, Educational or youth service 26%, Social or community service 14%, Health 8%, Civic, political, professional, or international 5%, Sport, hobby, arts 4%, Environment/animal 2%.
  • Time: ~3B hrs: Religion 35%, Education 14%, Foundations 11%, Human services 9%, Health 8%, Public-society benefit 8%, Arts, culture, humanities, 5%, International affairs, 5%, Environment/animal 2%.

Admittedly, charity donations are far from a direct measure of people’s estimates of social value – charity isn’t about helping, after all. People like to meet and associate with others who donate to the same cause. Even so, it is worth pondering why non-local government gets so few donations of time or money.

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  • http://www.uweb.ucsb.edu/~criedel/ Jess Riedel

    My reading of Wilkinson was that he mistakenly assumed that individual donations had zero marginal effect. (Using his example: he neglected the fact that if I alone eat fewer hamburgers then, on average, a few less cows will be slaughtered over my lifetime.) Is that the idea?

    In Wilkinson’s defense, one could argue that dollars donated to the federal government are much more likely to be canceled by reduced taxes (because of lawmaker’s incentives) than dollars donated to charity are to be canceled by reduced donations from others. In other words, it does seem likely that money falling from the sky into the government’s lap will be translated into tax cuts, whereas money falling into charity’s lap will likely be spent on the cause.

    • http://daedalus2u.blogspot.com/ daedalus2u

      Who are the major recipients of US government “charity”?

      The rich through tax cuts and favorable tax rates on capital gains.

      Corporations through corporate welfare.

      The military industrial complex.

      What other “charities” donate to these groups?

      • Miley Cyrax

        “The rich through tax cuts and favorable tax rates on capital gains.”

        The government merely taking less on capital gains than income on a percentage basis is not “charity.”

        Agreed on corporate welfare and military industrial complex.

      • http://un-thought.blogspot.com/ Floccina

        Corporations through corporate welfare.

        Corporations are not people so you are not done there. You need to ask and who benefits from Corporations have more money? Executives, employees, customers and investors?

  • http://contrarianmoderate.wordpress.com Ben

    The obvious answer is that government doesn’t typically hire people to run around asking for donations, but I suspect that’s not what you’re looking for.

    My guess is that a significant number of people believe that they personally are able to direct their charity dollars towards a better recipient than government, but that most other individuals are not able to direct their charity dollars towards a better recipient than government (and/or aren’t making large enough charitable donations), so they’ll take what they can get.

    Warren Buffett would rather rich people donate to the Gates Foundation than to the government. He supports the Buffett rule rather than a policy forcing rich people to donate to the Gates Foundation for pragmatic, not idealistic ones.

    • http://www.uweb.ucsb.edu/~criedel/ Jess Riedel

      The obvious answer is that government doesn’t typically hire people to run around asking for donations, but I suspect that’s not what you’re looking for.

      Do you really think this is the reason that people don’t donate to the government? You predict that if the government spent as much on fundraising as a typical charity, they would collect a similar amount of money?

      • http://contrarianmoderate.wordpress.com Ben

        I strongly suspect that government could increase voluntary contributions by 2-4 orders of magnitude with a half-decent marketing team behind the effort. I don’t think it’s good policy, but if we’re going pretend that the 0.001% figure is meaningful, it’s worth pointing out that government’s losing a game that it’s not even trying to play.

  • Pyramid Head

    Well, most people think they already pay more than their fair share in taxes to the federal government. Its no wonder they don’t want to give anymore to the same guys…

  • Vladimir

    I agree with the thrust of this post. However, donations of time and money to political parties (including campaigning) should be counted in the government’s pile. That is analogous to many charitable efforts.
    It is misleading to only look at the amount “given to reduce the [US] debt” compared to all charitable donations.

    • Matthew C.

      I don’t think so.

      Donations of time and money to political parties is about seizing the distribution of taxes and the police power, nothing like giving money to the government.

  • Carl Shulman

    Government performs a huge number of activities: handing money to old people and the poor, foreign aid, science, education, wars, police, etc. Giving tax dollars to the US treasury indiscriminately funds the whole mix.

    But people and groups have particular preferences: some would rather fund their own alma mater than education as a whole, others want to help the truly needy global poor (they can give to foreign aid orgs, or instead to a government that spends a tiny fraction on foreign aid), etc. As long as you have some preferences among the activities government funds, then you would do better to fund those in a more focused manner. But you could still support a rise in tax revenue, since that would also take money from those who support other priorities, and from the politically apathetic.

    Note that people donate billions of dollars for political campaigns, and also donate significant amounts to support other organs of government (fundraising for firefighter and police widows, etc, donations to the Smithsonian museum).

    There is also the fact that the US government gets to set tax rates and spending based on what the elected leadership chooses. One can think that if the government needs more money, it should simply raise taxes accordingly or borrow.

    • http://www.permut.wordpress.com Michael Bishop

      Carl nails it. I’m not saying this “donations to government” comparison is 100% pointless, but it’s worth a lot less than some seem to think. Government does a lot of things. Even if everyone were rational consequentialists and donations to charity WERE strictly about improving people’s lives, nobody would donate to government. It’s hard to know exactly what I’m buying when I donate to Population Services International, but at least I know I’m not buying bombs.

      • Konkvistador

        Clearly you should cheat as much as possible on your taxes and give the profit to charity.

    • http://facelessbureaucrat.blogspot.com Bill Harshaw

      Absolutely right. People like to see their money make a difference, which you can’t see by giving dollars to the government. (Just look at all the different levels of donation recognized in a Kennedy Center program, or the naming of college buildings, etc.)

      I’d also argue that many, many people make “donations” to the government, in that they sell their services to the government for less than fair market value. Forget about the average bureaucrat, but Tim Geithner and the average Peace Corps or Foreign Service type certainly are contributing to the government.

  • lemmy caution

    In the comments to one of your links someone makes the PBS/cable distinction. People donate to PBS but they don’t donate to their cable company.

  • Poelmo

    People already pay taxes, so why pay more to government in the form of charity? I can also imagine there are a lot of conscious objectors: “they’re just gonna spend my money on futile wars and tax cuts for oil companies and billionaires!” (and it’s conservative equivalents).

    In most democracies voters are in favor of paying taxes, they just disagree on how high those taxes should be and what they should go to, so it’s not true that people don’t want to give money to the government at all. I’m pretty sure that if government forced everyone to donate $100 a year to the Red Cross the voluntary donations on top of that $100 would soon dry up.

  • Marcus

    I guess I’m surprised that two very smart people (Hanson and Caplan) see the comparison of donations to government to donations to actual charities as somehow useful.

    Government is not only not a charity, it’s forcing us to pay lots of money already.

    Why would people view government as some kind of alternative to charities? With limited funds, but desire to donate to a worthy cause, why would *anyone* donate to an entity they have already give lots of money to? Regardless of how the money would be spent? Not to mention no one is bugging them/making them feel guilty for *not* donating to the government, unlike what most charities are doing 24-7.

  • Miley Cyrax

    You don’t get the same warm fuzzy feeling or laudation from the PC crowd for donating to the government. Just as donations to white-only scholarships or East Asian math clubs aren’t too popular.

    Warren Buffett could put his money where his mouth is and just donate to the government quietly. But no, instead he wants praise for “nobly” championing a cause that’s putatively against his self-interests.

    As Hanson knows, it’s a status game.

    • Poelmo

      Warren Buffett IS putting his money where his mouth is: if the Buffett Rule had not been filibustered Buffett himself would have had to pay more taxes from then on. Anyway, if he was the only one paying it would be a drop in the ocean, he plans to do more than that. Why he does it, we don’t know, maybe he’s feeling guilty about how he made his fortune, maybe he just wants to be liked, does it really matter? Does a teacher or fireman care why Buffett wants to pay more taxes? Personally I think it’s easy for Buffett, an elderly billionaire, to be generous, but apparently even that is too much to ask for the likes of the Cock Koch Brothers, though maybe they’re too busy getting teenagers killed.

      Stop shooting the messenger and get to the issue: why are billionaires paying less taxes than secretaries?

      • Miley Cyrax

        No, the issue is why or why not people donate to certain causes, e.g. the government, in which case the messenger is extremely relevant.

        And that’s precisely my point: If Buffett wanted to put his money where his mouth is, he would donate regardless of Congressional developments. But no, it’s about making grandiose remarks in the press, signaling that he’s generous and noble.

      • Vaniver

        Stop shooting the messenger and get to the issue: why are billionaires paying less taxes than secretaries?

        Taxes and tax rates are different things. Buffet paid $7M in taxes last year; that’s a lot of secretaries.

  • wophugus

    It’s not just government. Why don’t people donate more to Ikea? Or McDonalds? Or Apple? There are clearly people who love these companies products and think the companies are serving a social good (namely, the social good of providing them with furniture and hamburgers and cell phones that people really want).

    The answer is that people don’t think of those organisations as charity cases. Ikea and Mconalds and Apple all make money and are all going to keep chugging along. They don’t need injections of free money the way, say, someone trying to provide more mosquito netting to poor people needs free money.

    If people don’t donate to the government there are two possibilities: 1. They just think the government doesn’t do anything much worthwhile, despite being a charity case that needs their money. 2. They think the government doesn’t need the money, that the deficit isn’t a problem and that the government has the means to keep funding itself at the level they prefer over the long term.

    I know the libertarian wants the answer to be number one, but to me it is pretty obviously number 2. People are confident that the US government over the long term doesn’t need their money. As an example, think about WWII. The US government was quite openly begging for money then, but not as charity. Rather, the US government wanted people to by war bonds (and they did!). Everyone knows the US is good for its debts, so when it wants more money it just borrows more. As such, people don’t feel the need to give it money for free. Maybe they are wrong and borrowers are going to drive up interest rates on T-bills any day now, but I don’t think that’s how people think. It certainly isn’t, given current interest rates on government debt, how the markets think.

    • Tyrrell McAllister

      This seems like the right answer to me: People just don’t think of the federal government as a charity case.

      Another reason for this, besides the ones you listed, might have to do with how people see their own status relative to the federal government. The government is a very high-status entity in our society, in the sense that it is a powerful and useful ally. So, even if we think that the government needs our money, it still doesn’t seem appropriate to us to think of it as a charity case. We see ourselves as holding a different status relationship towards our charity cases.

      Suppose that you do see the government as needing you money, and you have sympathy for the government’s needs. You’re still not going to see the government as a charity case for the reason above. Instead, you might think of the government more like a powerful lord to whom you can offer up tribute to curry favor. Then your choice to give will be heavily influenced by whether you expect any favor to be bestowed on you in return.

    • Doug

      Okay, sure. But how many Apple customers publicly support Apple raising its prices, and make suggestions to that effect on comment cards?

      It’s one thing not to voluntarily pay more to an organization, it’s another to advocate everyone to pay more, but refuse to do so yourself when given the option. You hear many people complain that iPads are just too darn cheap?

      The question comes down to, why do individuals who vote for higher taxes not voluntarily pay more themselves if they think its a good thing. One reason could be that they believe in free rider effects. Another could be that voting is essentially costless in terms of having an effect on policy, but you get a social benefit from associating with cool cats like George Clooney and Bill Maher.

      An individual voting for tax-raisers increases your expected tax bill by less than a penny, since the probability of your vote deciding an election is far less than one in a billion. The government donations are a lot closer to how most people would decide if they could anonymously push a button (with no personal social/political benefit) that would raise their’s and everyone else’s taxes.

      • wophugus

        “The question comes down to, why do individuals who vote for higher taxes not voluntarily pay more themselves if they think its a good thing.”

        Because raising taxes can, for example, solve the deficit problem, and a personal donation can’t? I don’t even see the issue here. Lots of people support painful policies that solve problems but don’t support painful policies that don’t solve problems. Just off the top of my head, I know a lot of people — economists, even — who support regulating green house gasses but who don’t personally try to cut down their carbon footprint. Any problem you can think of that springs from the federal government not having enough revenue is pretty much out of your power to solve with donations. It could be solved, however, with a tax increase.

        Having figured out why people support taxation who don’t donate, you go on to ask why they vote for higher taxes. “Why do people vote for candidates who support their policies when the opportunity cost is so high compared to their chance of influencing policy” strikes me as a separate mystery, unrelated to this one.

  • http://entitledtoanopinion.wordpress.com TGGP

    I mostly agree with Bryan on the revealed preference of donations, but I’m still surprised donations are as HIGH as reported. I guess I had a really extreme prior, completely unjustified considering the size of the U.S and all the strange behavior exhibited by admittedly small subsets of its population.

    Ben, good piont about Gates Foundation > government > where Buffet expects other rich people to put their money. Although that now makes me curious of how divergent Gates/Buffet are from other super rich people. And do folks in finance (which has received a lot of attention for its growth) differ systematically in their giving?

    Pyramid Head, a lot of people do indeed think they pay too much, but Buffet and some others have said they personally pay too little.

    Carl, the above example of donating to a political party seems analogous to donating to one’s alma mater. But are other charitable destinations really so rivalrous?

    Poelmo, I’m confused by the bit about killing teenagers, and Buffet doesn’t pay less taxes than his secretary in absolute dollars. The claim is that he pays less as a percentage of total income because capital gains is taxed at a lower rate than labor income.

    • Poelmo

      @TGGP

      Gross negligence (which they had been warned about) in Koch Industries pipeline construction and maintenance led to two teenagers getting blown up in 1996.

      About secretaries and such. Yes, of course it’s about percentages of income, I was hoping this blog was the sort of place where I wouldn’t have to explain that.

  • MPS

    The problem with this analysis is that the government has access to enormous resources. I think people don’t volunteer to give more money to the government because they think it incentivizes the bad behavior of not raising more money according to a more fair system of taxation.

    I think it’s similar to why people would be less likely to give money to a big business, even if it appeared temporarily in some sort of circumstantial need.

    • Wonks Anonymous

      This gets me wondering why people still donate money to Harvard, which has such a large endowment it really doesn’t need any more.

      • MPS

        Giving money to Harvard has a lot to do with status affiliation.

        However, I really think this is a separate point. Harvard does not have other means to raise the money it raises via donations. In particular, Harvard can charge more tuition, but it is limited by a commitment toward financial aid, and by a commitment that those funds generally support its education mission and student life. It can apply for more federal grants, but grant money is highly constrained. To expand research programs and build new buildings and other things, it needs donations.

        This is different than the government. The government can use tax revenue to pay for all the things it currently uses debt to pay for.

  • Jamie_NYC

    I don’t take credit for this explanation, but it seems convincing to me: maybe what Buffett et al. really want is a more egalitarian society, not help for the poor etc. In that case, individual donations to the government don’t make much sense: huge expense by oneself, for negligible benefit. The only way to achieve a more egalitarian society is to make ‘donations’ mandatory.

    That would also explain why B. and others can never explain what is it that they object to when asked to increase the amount that they pay in taxes voluntarily. I have watched Buffett being asked that question on tv: he just replied something like “I’d be happy to donate if others do too”, and then they went easy on him. The problem with saying “I want a more egalitarian society” is that it’s not a moral position, it’s a personal preference.

    • wophugus

      I’ll be sure to tell Rawls that he writes about personal preferences, not moral systems.

      • Konkvistador

        The veil of ignorance is I think a laughable concept once one really internalizes that values of different (even human!) minds differ.

        His whole “theory of justice” more or less collapses after one takes that pillar away.

    • Poelmo

      @Jamie_NYC

      Yes, obviously Buffett is trying to actually help solve underlying problems instead of just covering up the symptoms with charity.

      @Wophogus

      You bring up some good points.

  • Evan

    Robin says:

    Admittedly, charity donations are far from a direct measure of people’s estimates of social value – charity isn’t about helping, after all. People like to meet and associate with others who donate to the same cause.

    Charity is about helping. People just have messed up intuitions about how best to help. You are right that the reason our intuitions are so messed up is probably that those intuitions evolved for purposes of signalling, rather than helping. But that doesn’t mean people really have some other hidden purpose than helping. It just means they’re confused.

    Similarly, politics is about policy, people just have confused intuitions about how to affect policy. Protesters really think the government will listen to them. Anarchists really thought blowing stuff up, assassinating people, and burning down storefronts would somehow affect policy. Their beliefs weren’t correct, but they were sincere.

    I think these revealed-preference-signalling theories should be called “Bizarro-Behaviorism. Behaviorists believed that people had no internal mental states, everything a person does is just a stimulus and response. Bizarro-Behaviorists believe that people have no stimulus and response reactions, everything a person does is a rational, calculated choice designed to achieve an explicitly defined goal. It seems to me that both these views are mistaken, and that some sort of compromise view is correct. Some of the things people do are rational choices, but others are knee jerk responses and others still are instinctual.

    @wophugus

    People are confident that the US government over the long term doesn’t need their money. As an example, think about WWII. The US government was quite openly begging for money then, but not as charity. Rather, the US government wanted people to by war bonds (and they did!). Everyone knows the US is good for its debts, so when it wants more money it just borrows more. As such, people don’t feel the need to give it money for free. Maybe they are wrong and borrowers are going to drive up interest rates on T-bills any day now, but I don’t think that’s how people think.

    I think you’ve got it exactly right. The comparison to war bonds was eye-opening.

  • Granite26

    Is it possible that a certain amount of military service should be considered charity donations of time? Or do we totally discount the notion that some percentage of people take some form of a pay cut to work for the military?

    More likely, soldiers accept more risk of death than they would for purely financial reasons due to patriotism. I would propose comparing the pay rates of professional mercenary groups to the pay rate of soldiers with similar experience and risk factors.

    I’m thinking more about the national guard than the regular military here, but I suppose both apply.

  • http://eradica.wordpress.com Firepower

    The amount given as charity to the US debt is so insignificant because despite rumors of stupidity, wealthy folks with that kind of scratch to spare DO have some intelligence.

    And, don’t wish to harm an addict further, by giving the addict what got it into trouble

    in the first place…

  • http://un-thought.blogspot.com/ Floccina

    I just wrote a check for $60 to NPR as I did last year but oddly enough if I had to pay a subscription of $60/year to listen I would probably not get the subscription. I am weird.

    Anyway I have long that they NASA should be funded through donation and I think that it might end up with more money if it were.

    • http://daedalus2u.blogspot.com/ daedalus2u

      If NASA didn’t have to deal with the micro-management nonsense from Congress, they could get a lot more done with the money they do get.

      • Matthew C.

        Hear, hear!

        Make NASA a charity so they can be free from congressional meddling.

  • Michael Wengler

    As small as the amount of charity given to the US government is, I bet there is an even smaller amount given to for-profit companies.  Or even to non-profits like the New York Stock Exchange ( which is no longer a non-profit but was for a long time) unless something that classed legally as “donations” was really something else.  

    Most people with money have the US Gov’t taking tens of thousands of $s more per year from them in taxes than they give to any charity.  Certainly the gov’t takes from me more than my total charitable giving by a factor of a few.  Even if I wasn’t overwhelmed by the gov’t’s ability to get more money if it wanted to without relying on donations, I am already so far over my “quota” of what I would give to gov’t as to have zero motivation to help an institution that through it’s own craziness manages to make it look like it needs donations.  

    I wouldn’t be surprised if the bulk of contributions to the US Gov’t come from people with very low tax liability.  

    ***
    I do donate to public schools: to the public schools my children attend.  I donate to a private foundation formed to support these particular schools and I believe this is very much the common model in California where public schools are as stupidly starved of public money as they are anywhere else in the universe.  Of course I do not donate directly to the school any more than I would donate to AT&T (my telecom, wireless and cable provider) or any more than I would choose to flush my money down a toilet bowl (which I think would probably be close to equivalent to donating to the US Gov’t considering dollar bills are essentially obligations of the US Gov’t.)  

    ***

    Do lottery ticket sales count as donations to gov’t?  I don’t think they should, and yet they are voluntary, stupid, and go straight to gov’t.  
    If the gov’t did ever get any traction marketing itself as a worthy recipient of voluntary charity dollars, I would need something pithy to put next to my “The Lottery is a Tax on People Who Can’t Do Math”  bumper sticker.