No Good Billionaires–Myth 1: Charity Is Better Than Government Handouts

Charitable donations can not replace government programs.

Isn't it refreshing to see a story about someone giving back?

Not every wealthy person is Ebenezer Scrooge, clutching every penny for himself. Some of the wealthiest people on Earth also realize how fortunate they are to have been so blessed, so they share the wealth. When they open their pocketbooks, they aren't stingy.

Just look at Jeff Bezos, who recently announced he was donating $100 million to food banks to help America get through the coronavirus. Wow! That's so much money, and he's just giving it away! It's way more than you or I or several families put together are likely to earn in our entire lifetimes! It's more money than you could fit in your fridge in stacks of $100 bills—unless you're Nancy Pelosi.

If you had that much money in a bank account with just 1% interest compounding annually, you and me and those several families could easily live off that interest without ever touching the principal! Forever! Come to think of it, it's kind of more money than any one person could ever need or even spend on anything reasonable.

Sure, if you want your own private jet to shuttle you around the world eating dinner off the naked bodies of a series of celebrities, you could spend that much pretty easily, but if you just want to have a good, satisfying life, $100 million in the banks isn't much better than an $80,000 salary—depending on factors like your debt burden and the cost of living where you live.

So why don't any one of these mega-billionaires like Mark Zuckerberg, Bill Gates, Elon Musk, and Michael Bloomberg—if they really are as generous as they seem—just give away their riches and secure a place in history as the person who personally ended world hunger or homelessness in America? They could even keep a few hundred million to continue living like kings (or at least like Warren Buffett).

Surely it must not be that simple? Because if this was just a matter of private greed preventing that kind of transformational change, governments would surely have used their ability to levy taxes for the public good to seize that fallow wealth and make the world a better place. There has to be some reasonable explanation for why they don't just give it all away. Surely...

In this series we'll look at myths around philanthropy, including the notions that it's possible for billionaires to be generous, that their "wealth" is substantially different than money, that their private foundations do a lot of good, and that they are patrons of the arts.

But to start things off, let's look at one of the simplest explanations for this disconnect.

Myth: Charity Is Actually Better Than Taxation

What you'll hear

Government intervention is a blunt instrument, and charity is a scalpel.

The government is okay at helping people, but charity is really the way to go. Private individuals aren't hampered by government bureaucracy and can respond more efficiently and directly to needs as they occur. Over time we should try to shift toward a more voluntary charity-based model of social assistance, rather than relying on big government.

Why It's wrong

Actually the opposite is true.

During economic downturns, when the need is greatest, government assistance like unemployment, food stamps, and welfare kick in automatically to help those in need. They're called automatic stabilizers, and they help to mitigate the impact of these crises and make it easier to shift toward recovery.

Automatic stabilizers | National income and price determination | AP Macroeconomics | Khan Academy www.youtube.com

Meanwhile the wealthy are often anxiously tending to their own floundering finances or businesses amid the tumult and aren't as likely to open their checkbooks for charity. What this means is that charitable giving actually declines when people need it the most.

On top of that, as bad as politicians often are at being responsive to the needs of their constituents, at least they have constituents. By contrast, there's nothing to stop the wealthy from holing up in their gated compounds, beholden to no one and only responsive to the needs of the rarefied elites they know—donating to foundations developing a cure for gout or gene therapy to treat Habsburg Jaw.

To the extent that they are aware of the plight of others, it's often connected to their religious affiliation, which is why religious charities—that often spend money on churches and missionary work and who proselytize to the needy—are among the largest charities in the US.

If you don't mind someone else's idea of God determining which causes are important and who gets helped, then charity is a great way to go. For the rest of us, higher taxes on the wealthy—and reducing the amount they can dodge those taxes through, say "charity"—would be better.

In this sense, a blunt instrument is often exactly what we need—just a flood of money going to everyone who might realistically need it. And while government bureaucracy is annoying and should be cut where possible—particular when it comes to overzealous means testing—the fact that the federal government deals with such massive sums of money actually makes it possible to consolidate administrative overhead.

All this means that the government can actually use its resources for the public good far more efficiently than a bunch of disparate charitable foundations. In other words: Taxation and government handouts are (generally) much better than charity.

Charity: how effective is giving? | The Economist www.youtube.com

While charitable donations have the added value of making rich people feel good and earning them some good PR, they aren't actually better for the world—or even nearly as good—as a robust social safety net. That means we should really limit the amount of taxes that can be written off through charitable donations.

Of course, without that tax incentive a lot of charities might receive substantially less in donations from the ultra-wealthy. But in that case we would have to ask: Are Billionaires really that generous? Check out our next installment to find out.

5 Charities You Can Donate to During COVID-19

Feeling generous?

The Trump Administration's solution to aid the 16 million Americans who are out of a job thanks to coronavirus? One big, shiny, $1,200 check.

As MarketWatch explains, "The Internal Revenue Service will send $1,200 payments to individuals with adjusted gross income below $75,000 and $2,400 to married couples filing taxes jointly who earn under $150,000. The government will also pay $500 per qualifying child." That plan is a little skewed—$1,200, after all, isn't even enough for one month's rent for a studio in NYC's outer boroughs. And for everyone who's receiving the check, there's someone else who, fortunately, is able to work from home and hasn't faced a huge setback due to COVID-19.

If you're one of the lucky ones, or if you're just feeling generous, here are just a few good causes that deserve your donations to help those in need.

WeCount!'s Immigrant Worker COVID-19 Fund: Florida nonprofit WeCount! is on a mission to address the gap in medical support for undocumented immigrants, emphasized by COVID-19.

Immigrant Worker Safety Net Fund: National Day Laborer Organizing Network allocates cash donations to worker leaders, organizers, and volunteers who have already contracted the COVID-19, as well as undocumented laborers who are especially vulnerable to the virus, such as those over 60 or with preexisting health concerns.

National Bailout: Prisons, jails, and detention centers have raised big health concerns in the coronavirus's wake. National Bailout is galvanizing funds to get people out, in an effort to slow the spread. The organization also already hosts an annual #FreeBlackMamas campaign to specifically help incarcerated black mothers each Mother's Day, but donations are welcome and encouraged year-round.

Restaurant Workers' Community Foundation: With restaurants limited to takeout only, many folks in the service industry are taking a major hit. RWCF's emergency relief fund collected $2.8M since its launch in late-March. Of that, half goes directly to individual restaurant workers, 25 percent to non-profits serving restaurant workers, and another 25 percent for zero-interest loans to keep restaurants running.

Coalition for the Homeless: Homeless people are predisposed to major risks year-round, but the pandemic has brought additional attention to their health care. In New York City, the Coalition for the Homeless is providing temporary safe housing to the community thanks to donations.

The Five Best Aid Organizations to Give To

Choose to give where your money will go the farthest.

Everyone can agree that giving to charity is a worthwhile way to use one's money. But it's not as simple as just writing a check. You want to make sure your money is going somewhere where it'll be put to good use. With so many options out there, how can you make sure you're putting your money into worthy causes? To help you on your quest, we've compiled a list of the top 5 aid organizations to give to in 2019.

Children International

Children International is an organization who has the broad mission of ending childhood poverty across the globe. Their primary means of doing this is by allowing donors to sponsor a child, regularly donating to provide the child with healthcare, education, food, shelter, etc. Charity watchdog gives this foundation an A rating, as they offer 84% of their earnings to children in need, with only 16% going to overhead costs.

American Civil Liberties Union (ACLU)

This organization aims to "maintain and advance civil liberties, including, without limitation, the freedoms of association, press, religion, and speech, and the rights to the franchise, to due process of law, and to equal protection of the laws for all people throughout the United States and its jurisdictions." The ACLU is one of the most powerful groups fighting to protect American citizens today, and decidedly a very worthy cause to donate to.

National Wildlife Federation

The National Wildlife Federation aims to protect American wildlife and wilderness by educating Americans about the importance of nature and fundraising money for environmentalist programs. They only spend 13% of their income on overhead, meaning you can be sure your donation isn't going towards some rich person's personal fortune, but is actually going towards protecting America's quickly dwindling natural beauty.

National Alliance to End Homelessness

This organization's mission is simple: end homelessness in America. They focus primarily on issues of policy and education, empowering legislators and communities to take steps to support disenfranchised Americans without housing. They give an incredible 92% of their proceeds to their cause, making them one of the most responsible charities on this list.

American Foundation for Suicide Prevention (AFSP)

Suicide is an ever-growing crisis in the United States, but thanks to organizations like the AFSP, people are becoming more and more educated about the truth of mental illness. They raise awareness, fund scientific research, and provide important resources and aid to those affected by suicide.