Helping the Poor: Washington Welfare or Private Charities

What would you think of a doctor who prescribed the same treatment to every sick person he treated, whether the patient had a cold or lung cancer? Yet, isn't that the way we handle welfare today? The fourth-generation welfare mother, the educated person temporarily on hard times, the drug addict, the man who is simply incapable of holding a job – they're all treated pretty much the same by federal welfare policy.

But they aren't the same. They're more than case numbers; they are people, individuals. Not surprisingly, a comprehensive study by Mary Jo Bane and David Ellwood of Harvard University found that poor people are just as diverse as nonpoor people. They have diverse reasons for being poor and respond to diverse incentives.

So just as in medicine, the better the provider knows the recipient, the more likely that welfare funds will be spent in a way that benefits both the individual and the community. Giving block grants to the states to handle their own welfare programs is a step in the right direction, but it only transfers welfare responsibility from a federal bureaucrat to a state bureaucrat. A much more fundamental change is needed. We must break free of the idea that only government – at whatever level, federal, state or local – holds the answer to social problems. Generally it's not so. It certainly isn't so in the case of welfare.

Thirty years of experience and scholarly studies confirm that the current welfare system discourages work and encourages dependency, single motherhood and the breakup of families. People may complain about the monetary cost, but the real cost is the social and psychological cost in lives damaged or destroyed, children deprived of opportunity, increased crime and violence, and the creation of a permanent underclass of people with no hope.

Where welfare is concerned, there is already a better answer than government programs. There is mounting evidence that private charities do a better job of getting aid to those who need it most, encouraging self-sufficiency and self-reliance, strengthening the family unit, and using resources efficiently.

Private charitable efforts are not insignificant: In 1991, private charities provided more than $100 billion in cash and $76 billion in volunteered time for health, education, and welfare.

The best private charities believe that most people can and should support themselves and their families. They tailor aid accordingly. They get aid to those who need it most and provide help without encouraging dependency. They encourage or require aid recipients to contribute labor to the charity itself. One might say private charities take just the opposite approach from government welfare: whereas it often takes a long time to get on government welfare rolls, it is easy to stay on. Conversely, it is easy to get aid from a private charity, but hard to keep getting it.

Government programs spent about $350 billion on means-tested welfare programs last year – the federal share being about $240 billion. Instead of talking about reducing welfare spending, why not channel these funds to the private charities or local government programs that do the best job of helping the poor? Instead of sending these billions to Washington, let each taxpayer decide which anti-poverty effort to support. Here's one way this could work:

Create a dollar-for-dollar tax credit for individual contributions to anti-poverty programs operated either by state or local governments or by private sector charities. That is, for every dollar individuals give to such programs, up to say $3,000 – which is about what the median household now pays in federal income taxes – they could take a dollar off their tax bills. One estimate is that this could move a large portion of the $240 billion the federal government is spending now to private charities and state and local governments.

Only one person in three believes they get good value for tax dollars spent on social welfare programs. But three out of four contributors to private charities feel their contributions are put to good use. So, almost everybody who pays income tax would actively think about the best way to provide charitable services to needy people, and would be likely to pay close attention to how the private charity – or the local or state government if that's what that taxpayer chose – is using the money. After all, the poverty programs would now be run by people in your own home town.

It was early in this century when doctors first understood enough about medicine to begin customizing medical treatment to fit the patient's needs. It would be fitting if we could end the century with the same kind of progress in welfare for the poor.