Acton Commentary

What Gives? The Possibilities of Private Charity


With red ink predicted as far as the eye can see due to soaring state and federal budget deficits and with overall economic recovery still a hope to be realized, there is one area of the economy that is thriving despite all predictions to the contrary--private charity. According to Giving U.S.A.'s annual report, published by the American Association of Fundraising Counsel (AAFRC), Americans gave an estimated $240.92 billion to charity in 2002. Even more surprising, Giving U.S.A. reports that, in a year that was very hard on the corporate bottom line, charitable contributions by corporations and corporate foundations came in at $12.19 billion, an 8.8% increase over the previous year. The fact that charitable giving remains so high even while economic growth is so low runs counter to the arguments of many who advocate statist models of charity. Given the disparity between the dire predictions of self-interested stinginess employed by welfare state advocates and the truly expansive nature of American generosity, one is led to inquire: What gives? Contrary to the agitations of many on the political left, America is a generous nation, and as a matter of fact, the most generous nation in the world. While it is true that American culture is often overly materialistic, there is also a deep current of altruism that pervades the American character. Leo P. Arnoult, chairman of the AAFRC Trust sums up this spirit: “(Charitable) giving did hold its own in spite of reports of great difficulty in fundraising. Giving is still pervasive and broad, perhaps because our culture treats all philanthropic activity, even the widow's mite, respectfully.”

It is this culture of respect for philanthropic activity, which is the concrete realization of people's desire to assist in addressing legitimate charitable needs, that motivates the vast majority of charitable giving, Obviously, this remains true even when the “bottom line” is much diminished due to economic circumstances. This reality undermines the “selfishness thesis” that underwrites much welfare state advocacy. Most welfare state advocates have a low estimation of the potential of altruism, generally preferring schemes of income redistribution over individual charity in meeting the needs of people.

Given the pervasive and resilient character of American charitable giving, the present high levels of charitable giving point out the wisdom of further realizing in policy those incentives that would increase the ability of private charity to meet the needs of the common good. A policy agenda that recognizes the power of private charity could go far in strengthening the culture of respect for philanthropic activity that characterizes the citizenry of this nation.

Recognizing and incentivizing the power of private charity is absolutely essential in encouraging civil society solutions to our nation's social ills. Back in April, one step in this direction was the passage of the CARE Act in the United States Senate. The positive--though paltry--measures proposed in this legislation would accomplish a great deal in bolstering charitable giving through the use of tax incentives. The Senate legislation allows non-itemizing taxpayers to take deductions for donations to charity and would allow older Americans to take a deduction for charitable gifts made from their retirement accounts.

Currently, the measure is stalled in the House of Representatives over a controversial provision that would force charitable foundations to spend more of their assets on an annual basis. Given the enthusiasm that the House leadership has shown in the past for incentivizing the funding entities of civil society, it remains unclear why they would needlessly attempt to micromanage an important source of private sector charity. Congressional intransigence on this matter could lead to harmful effects for philanthropy in 2003.

Despite more than two years of negative economic news, American charitable giving is at record levels, consisting of more than 2% of the gross domestic product of the United States. It is now time for leaders at all levels to reject the selfishness thesis that permits only the paltriest incentives for private charity. Adopting a pro-growth agenda for private charity will ensure, even in bad economic times, that individual generosity will remain a growing and vibrant sector of the U.S. economy.