Of late, the comparatively good news on the U.S. economy suggests the worst of the recession is behind us. Nonetheless, millions remain out of work; federal food and nutrition assistance outlays – one measure of the number of people struggling to get by—were at an all time high in 2013.
On the political right, it’s a refrain that this is a problem for private charities to deal with, because the government is spending too much on safety net programs. Yet charitable donations fell during the recession, as rich people became less generous. What’s more, financing to charities that are actually trying to help the poor are tiny compared to undersized official safety net programs. All of which demonstrates why we can’t leave social protection to charitable donations.
The Great Recession has been worse for the poor than the rich in America. According to the Federal Reserve, the wealth share of the top three percent climbed from 45 percent of all wealth in the country in 1989 to 52 percent in 2007 and then kept on rising through the recession, to 54 percent in 2013. Top incomes didn’t do quite as well –the income share of the top 3 percent of Americans was 31.4 percent in 2007, fell during the recession and is only back to 30.5 percent in 2013 (that still means the top three percent have more than ten times the share of income than they have of population). At the other end of the scale, about 37 million people were in poverty at the start of the recession. compared to 45 million in 2013 according to the Census Bureau.
Demand for safety net support is high, and the ability of richer Americans to finance it is undiminished. Yet the Chronicle of Philanthropy reports that Americans who earned $200,000 or more reduced the share of income they gave to charity by 4.6 percent from 2006 to 2012.Those who earned less than $100,000, meanwhile, increased their giving by about the same percentage. The miserly behavior of the rich is why total 2013 charitable giving as a percentage of GDP, at 2.0%, was below the pre-crisis 2007 level of 2.1%.
By international standards, Americans as a whole remain generous in their overall charitable giving. Amos Zehavi of Tel Aviv University has looked at levels and recipients of charitable donations across countries. He’s found that Americans give about twice the dollar amount per person to charitable causes than people in the UK, for example.
But not all charitable donations help the poor. Though massive donations to Harvard or the Central Park Conservancy may make the world a nicer place, their impact on the quality of nutrition enjoyed by people in poverty is likely to be marginal at best. A report by Giving USA suggests only about 12% of donations went to charities involved in providing “human services.” When you look at donations to charities that provide social services to help people in poverty, the picture of America’s comparative generosity changes dramatically, according to Zehavi: the average American donates 25% less than the average British person to charities that are set up to help the poor and needy at home.
Compared to charitable support for domestic poverty relief, U.S. government safety net programs are large and strongly counter-cyclical – growing as the economy weakens. According to the White House Office of Management and Budget, unemployment assistance climbed from $33 billion in 2007 to $158 billion in 2010, before declining back to $68 billion last year. Food and nutrition assistance rose from $54 billion in 2007 to $110 billion in 2013, the Earned Income Tax Credit from $38 billion to $58 billion in 2013. These three safety net programs alone total $236 billion, compared to $40 billion of private charitable giving to human services. While charitable support was at best stagnant during the recession, government safety net spending on these three programs increased 89% between 2007 and 2013.
Despite seemingly high levels of government spending, the U.S. safety net is much less efficient than other countries’ at raising poor people out of poverty. U.S. taxation and transfer policy does less to reduce inequality than any other OECD country apart from South Korea, Switzerland and Chile. The U.S. is the tenth most unequal country in terms of income in the OECD before taxes and transfers are taken into account. After taxes and transfers, the U.S. rises to fourth most unequal, behind only Turkey, Chile and Mexico.
Poor people in the United States see less charitable support than their peers in Europe and less official support as well. It’s theoretically possible that if public programs like food and nutrition assistance were cut, marginally reducing tax burdens, people would give some of the money they saved to charity. But given the small percentage of donations that go to poverty relief, poor people would undoubtedly be left even worse off by such a change – and in any international comparison, things already look pretty bleak for them.
For all of the great work of organizations that help the homeless and destitute in the U.S., charity is simply no substitute for the government safety net. Low levels of financing that decline when the need is greatest are a recipe for even worse inequality and even greater hardship among America’s most needy.
Kenny is a senior fellow at the Center for Global Development and author of The Upside of Down: Why the Rise of the Rest is Great for the West.
