This article is also viewable online at the WSJ website, by WSJ subscribers.

COMMENTARY

The Way We Give Now

Last week, 50,000 nonprofit executives participated in Philanthropy Day, an annual event held at locations all across America to celebrate charitable giving and discuss the challenges the nonprofit sector faces in raising money. The event received some attention from the press because of the humanitarian disasters over the past 12 months -- the South Asian tsunami, the Gulf Coast hurricanes and the earthquake in Pakistan -- which have stimulated more than $3 billion in private donated relief from ordinary Americans. And this is only a small fraction of the more than $250 billion that Americans will donate to all charities, churches and other causes in this record-breaking year for giving.

But this attention to American giving has lately provoked dark charges that much of this astonishing generosity is not really "charity" at all. The New York Times, for example, reported last week that American philanthropy is "turning away from Americans most in need of charity." The basis for this assertion is the fact that, while charitable donations in America have increased over the past 50 years, the share of donations going to human service organizations (such as soup kitchens and homeless shelters) has fallen. Larger percentages have gone instead to organizations that allegedly serve donors' interests, such as symphony orchestras, elite hospitals and environmental causes. This giving, the argument goes, is not really charitable because it does not help America's needy.

But this argument is fallacious, in light of the facts. First, the explosion in dollars donated more than makes up for the lower percentage given to human services. Even with population growth, the inflation-adjusted, per-capita amount given by Americans to human service charities was 14% higher in 2004 than it was in 1960. Second, over the same period, the percentage of the American population living in poverty fell by half, and the amount of real federal government payments to the poor increased by more than 500%. In other words, there is still great need in the U.S., but it has clearly decreased over the last 50 years -- while private charity to alleviate this need has not. Furthermore, real private giving to all causes in America increased five-fold since 1955, meaning that more and more of the nonprofits helping the underprivileged -- from universities, to churches, to political advocacy organizations -- are funded through private donations.

To suggest that donors give to the "wrong" causes is a cynical technique to neutralize the obvious goodness of America's givers, who are often wealthy or religious. But the "uncharitable charity" argument is also frequently used as an indirect way to advocate for more generous government social spending. For example, last week, the CEO of one large national human services nonprofit told the press that, "agencies have become increasingly dependent on public sector funding because nongovernmental funding simply hasn't kept pace." This familiar argument, however, tends to mistake the cause and effect in nonprofit funding. In fact, there is abundant research showing that it is government funding itself that displaces private giving for human welfare organizations, at the rate of about 35 cents per dollar of government subsidies. And the research shows that a major reason for this is that nonprofit executives tend to become lax in fundraising when governments step in. Private givers can hardly be blamed for this situation.

None of this is to argue that there are no pressing human service needs in America, nor that people give "enough" to these causes, nor that government should not subsidize nonprofits. But a reasonable debate on these difficult issues can never begin by disingenuously degrading the value and virtue of America's charitable givers.