Book Notes: The Dangers of Federal Charity

I thought this weeks reading serves as a very good warning to the dangers of the federal government getting involved in charities.  Mr. Folsom was looking back at the New Deal, but I believe we could apply lessons form the New Deal to today’s debate on federal spending.

First, federal charity retards private charity.  If individuals are taxed so that the federal government can provide charity, then there is less money going from private individuals to those same charities.  Since we all know that the federal government is a classic example of inefficiency, then we must also recognize that the money the feds spend on charities, or for “charitable” purposes is less than private individuals will spend on that same cause.

Mr. Folsom gives an example of this in Chapter 6 of New Deal or Raw Deal.  in 1887, a drought hit a number of counties in Texas.  Some of the farmers lost their crops.  Texan politicians pressured congress into giving Texas $10,000 in free seeds.  Once the bill made it to President Cleveland’s desk, he vetoed it.   President Cleveland’s reason?

“I can find no warrant for such an appropriation in the Constitution,”  Cleveland said.  Such aid would “destroy the partitions between proper subjects of Federal and local care and regulation.”  He added, “Federal aid, in such cases, encourages the expectations of paternal care on the part of the Government and weakens the sturdiness of our national character.”  As for Texas, Cleveland noted, “the friendliness and charity of our countrymen can always be relied upon to relieve their fellow citizens in misfortune.”

As Folsom points out, President Cleveland was correct.  Contributions to from across the nation exceeded $100,000.  This is ten times more than what Texas politicians were trying to take from federal taxpayers.  We can also look at the charitable giving after 9/11, the 2004 Tsunami, and the devastation  in Haiti to know that Americans do a good job providing charitable giving out of their own pockets without the help of the federal government.

We can take one other warning from these chapters too.  Folsom points out that the the Federal Relief Act and the Works Progress Administration became very political.  The money doled out by the federal government became less about what state or community needed it and more about what state or community might be needed in the next election.    Again, quoting Folsom:

The WPA hourly pay scale for skilled workers ranged from 31 cents an hour in Alabama, Kentucky, Tennessee, and Virginia, to $2.25 an hour in New Jersey.  New Jersey, unlike those southern states, was a swing state, and Mayor Frank Hague of Jersey City had been the key for Roosevelt narrowly carrying the state in 1932.

So tax payer funds were used by Democrats to try to repay for votes in past elections, and to pay for votes in future elections.  The Southern state were strong Democratic states, therefore they didn’t need additional money from the feds.  However, a state like New Jersey could vote Republican, so tax payer money was used to prevent that.

There is a lot of good information in these chapters.  As we look at the debate over current spending, we should remember these lessons from the New Deal.  We can cut aid to the poor and other charities because private citizens and charitable organizations will take care of this need.  There may be some out there that have the most noble of intentions when using tax payer money for charities.  However, I suspect most simply want to buy more votes for the next election.

For Next Week: I am going to read to the end of Chapter 10 for next weeks book notes.