Private Charities Part III: The Outcome Reason

What do Rita Mae Brown, Albert Einstein, and Narcotics Anonymous all have in common?


Answer: They have all been referenced as originators of the quote:

Insanity: Doing the same thing over and over again but expecting different results.

Our federal government spends a record amount of money year after year while simultaneously seeing increased poverty rates. I am mystified by the repetitive act of taxing citizens to administer billions of dollars worth of public assistance programs with extremely lackluster results. When will we refuse to accept the status quo of poor outcomes?

If the inefficient use of resources is not a compelling reason to favor private charities, perhaps analyzing outcomes will strike a chord. The outcome reason I favor private charities is in part linked very closely to the economic reason as secondary to increased efficiency, I believe private charities are able to meet a greater number of needs with the same amount of resources.

Private charities exhibit greater freedom to tailor assistance to individuals and their particular situation compared to public assistance programs providing assistance geared towards a generic population in a one-size fits all manner.

Secondary to increased freedom, rather than throwing money at a failing situation, private charities are able to identify and address specific causes of why an individual is in need. Throwing money at failing situations is a soapbox of mine. Do we believe it is a good idea to invest our limited resources on failing systems? Isn't this backwards? Shouldn't we be striving to create an environment where successful entities and systems are rewarded and not failing ones? 

Currently there are financial incentives in place if an individual is content with a standard of living provided by wealth redistribution (welfare payments) to remain on government assistance rather than seek to get off. In addition, by the government basing the majority of assistance programs off of income, there is also an incentive for people to participate in tax evasion such as doing business only in cash payments. Such waste, fraud, and abuse of tax evasion and public assistance programs greatly frustrates me.

Your support or disapproval regarding throwing resources at failing entities and systems likely flows from your beliefs on how entities end up in need of assistance. If you believe individuals already have the knowledge, skills, and discipline to be successful, and are only in need of assistance due to unforeseeable circumstances, than simply throwing money at the situation is logical. However, if you believe those in need often (clearly not every time) require assistance due to lack of knowledge, skills, and discipline, then you will be more inclined to support teaching and mentoring as opposed to throwing money at a problem with a high potential to repeat itself. Again, one definition of insanity is doing the same thing over again and expecting different results. I fear this is a flaw of our current system.

No significant learning occurs without a significant relationship. 

• Dr. James Comer

Dr. James Comer’s research has shown learning and lasting change takes hold more often when a significant relationship exists. I attempted to find Dr. James Comer’s or Ruby Payne’s definition of “significant relationship”, but was surprisingly unsuccessful. Listed below are links to Dr. James Comer and Ruby Payne’s research. If anyone finds how they define significant please email me! 

Sources

Dr. James Comer - Leave No Child Behind: Preparing Today's Youth for Tomorrow's World
Dr. James Comer - What I Learned In School: Reflections on Race, Child Development, and School Reform

Ruby Payne - A Framework for Understanding Poverty
Ruby Payne - Understanding Learning: the How, the Why, the What
Ruby Payne - Building Bridges Out of Poverty

Regardless of the definition, it is highly improbable the government fits the mold of Dr. Comer’s criteria. As private charities will have the freedom to implement the most effective methods of providing sustainable change, I believe better outcomes will be achieved due to the relational nature of private charities as compared to large, impersonal government interventions.

Although not as strongly, I believe private charities also have the unique potential to increase the passing on of knowledge, skills, and abilities to friends, family, and future generations. I believe those who have been given much tend to give much themselves. Thus, rather than the benefits of welfare ending with a cash payment to a recipient, I believe those who have been given the resources to no longer require assistance will have a higher probability of passing these skills on to friends, family, and their children and grandchildren. Give a man a fish and you feed him for a day, teach a man to fish and you feed him for a lifetime.

I believe private charities produce superior outcomes due to increased efficiency, greater freedom to implement entity specific assistance, addressing actual causes of need, and a greater passing on of knowledge, skills and abilities to friends, family, and future generations. Based on the graphs above, it appears the current welfare system is not working, and I believe it is insane to continuing perpetuating a failed system while simultaneously expecting different results.


Next Week’s Topic: Book Review I: End the Fed

Private Charities Part II: The Economic Reason

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