It is the Christmas season and with the economy experiencing high unemployment, many people are donating to charities. Arthur Brooks, Who Really Cares, notes that conservatives are more generous than liberals and religious people are more generous than secular people. I read today that Cuomo, the ne governor of New York, gave approximately $2,000 when his income exceeded 1.5 million dollars and gave nothing when his income was near $300,000. Liberals believe that charity is carried out through the coercion of taxes. I am being charitable if I support raising your taxes and transferring that money to others. One problem is that the liberals never point out the relative inefficiency of public income redistribution programs. Public income redistribution agencies are estimated to absorb about two-thirds of each dollar budgeted to them in overhead costs, and in some cases as much as three-quarters of each dollar. Robert L. Woodson (1989, p. 63) calculated that, on average, 70 cents of each dollar budgeted for government assistance goes not to the poor, but to the members of the welfare bureaucracy and others serving the poor. Michael Tanner (1996, p. 136 n. 18) cites regional studies supporting this 70/30 split.
In contrast, administrative and other operating costs in private charities absorb, on average, only one-third or less of each dollar donated, leaving the other two-thirds (or more) to be delivered to recipients. Charity Navigator (www.charitynavigator.org), one of several private sector organizations that rate charities by various criteria and supply that information to the public on their web sites, found that, as of 2004, 70 percent of charities they rated
spent at least 75 percent of their budgets on the programs and services they exist to provide, and 90 percent spent at least 65 percent. The median administrative expense among all charities in their sample was only 10.3 percent. (See http://mises.org/journals/jls/21_2/21_2_1.pdf )
Each year my employer pushes hard on each employee to contribute to the United Way. I received approximately ten emails from officials at the University asking me to donate. I refuse to donate to United Way because of some of the groups United Way associates with. Moreover, United Way pays executives $300,000 salaries and flies them first class. But, most importantly, United Way keeps around 17% of revenues raised to cover overhead. Then when United Way distributes money to its associated charities they hold on to approximately thirty percent of the funds they receive. This would appear to make United Way a very inefficient charity – of each dollar raised only a little more than fifty cents goes to the people in need.
