| Federal Unemployment Assistance: | $373 billion |
| Medicare: | $484 billion |
| Other Health Services: | $324 billion ($255 billion to Medicaid) |
| Unemployment: | $109 billion |
| Other Income Assistance (TANF, earned income, child tax credits): | $161 billion |
| Housing Assistance: | $59.6 billion |
| Diability Payments: | $8.3 billion (amazing how $8.3 billion sounds small…) |
| Social Security: | $819 billion |
| World’s most expensive welfare system: | Priceless |
Numbers pulled from:
- US Government Revenue - revenue link
- US Federal Budget – spending link
If you’ve never seen the MasterCard Priceless commercials, please check out the following videos. You can also check them out if like me, you think Peyton Manning is a great actor.
- Peyton Manning MasterCard Commercial #1
- Peyton Manning MasterCard Commercial #2
- Peyton Manning MasterCard Commercial #3
Federal government welfare payouts constitute $1.5 trillion (39.5% of budget) without social security, and $2.3 trillion (60.5%) with social security. In fiscal year 2012, the federal government collected $2.5 trillion in revenue. Thus with social security included, our entire budget is almost consumed just with welfare spending. Good thing our government can print money and sell debt to finance the additional $1.3 trillion in spending ($3.8 trillion total expenditures by US government in 2012).
To bring additional significance to these numbers, the most frequent government spending criticism I hear is foreign aid and military. Perhaps shockingly, these only account for $0.043 trillion (1.1%) and $0.75 trillion (19.7%) of the budget respectively. Total welfare spending almost doubles the amounts of these two budget items combined, and consistently fails to produce desirable outcomes.
Of the four advantages cited in part one of my private charities writings, I would like to expand upon economic reason. I admit the economic reason to favor private charities seems distant and cold. However, I want the most bang for my buck, and any inefficient use of limited resources is a major concern of mine.
It is admittedly difficult to know the extent of inefficiency and estimates range from 30 to 85% of government funding assigned to public assistance programs reaches beneficiaries. Likely the true figure lies in middle, maybe ~55%. Inefficiencies occur for any number of reasons but include costs to:
- Collect funding (IRS record keeping and audits)
- Distribute these funds to various programs (Medicare/Medicaid, Unemployment, etc.)
- Distribute to beneficiaries (Verify beneficiary eligibility)
- Perform audits to prevent waste, abuse, and fraud
- Inefficiencies from beneficiaries receiving assistance that helps, but often is not what they actually need
- A medical analogy would be a child suffering from an ear infection receiving Tylenol or ibuprofen. While undoubtedly helpful, the child needs an antibiotic to relieve the primary cause of suffering rather than simply having his/her secondary symptoms managed.
References -
Center on Budget and Policy Priorities
Mises Institute
The Independent Institute
MediaMatters for America
Admittedly, private charities will also incur most, if not all of the above listed expenses. However, according to Charity Navigator, private charities often incur fewer of these expenses when compared to their public counterpart. Charity Navigator has found more than half of private charities pass through greater than 75% of the funding received to intended beneficiaries, with more than seventy percent of private charities passing through at least 65%. (Government programs may pass on ~55%)
I also believe private charities utilizing local citizens, as opposed to Washington D.C. bureaucrats potentially thousands of miles away, have a much greater understanding of the needs of their intended beneficiaries. Not only do local charities have a greater understanding of needs, but they are in a much better position to hold beneficiaries accountable and prevent the waste, fraud, and abuse of services.Lastly, I believe a competitive environment continually increases the efficiency (and effectiveness) of almost all things (businesses, athletes, musicians, etc.). Unfortunately the government does not compete with private charities as their source of revenue is forced taxation and printing money. By removing forced support of government assistance programs, competition will be increased amongst charities, which I believe will translate into greater efficiency and effectiveness of all charities.
Of note, I have no problem with governments operating charities. I just want to see the playing field leveled. Rather than government charities relying on forced taxation, they should only be able to spend what their donors choose to give them. Thus, if one believes the government is the best charity to support, they can continue to donate their time, talents, and treasures. However, for those individuals who do not believe the government is in the best position, I can choose to support any number of other charitable organizations.
Therefore, the economic reason I favor private charities is due to the combination of increased efficiency, accountability, and competition coupled with decreased waste, fraud, and abuse.
Next Week's Topic: Book Review #1: End the Fed
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