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The Ludwig von Mises Institute

Tu Ne Cede Malis

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The Free Market
The Mises Institute monthly, free with membership


May/June 1997
Volume 15, Number 5

 

Charities on the Dole
Jeffrey Tucker

 

On the presidential campaign trail, Bob Dole spoke often about his own private charity, the Dole Foundation. He used it to showcase his personal compassion for those in need, particularly people with disabilities. 

In televised debates, he conjured up images of himself and his wife digging into their personal savings to make it all possible. "Don't talk about it much," he would demure. Dole may appear to be a skinflint, but here is proof that he cares after all. 

It wasn't true. 

The Dole Foundation is a project of the United Cerebral Palsy Association (operating budget: $540 million). Fully 80 percent of the UCPA's funding comes straight from the taxpayer's wallet. Voluntary contributions are only 11 percent, less than the percentage the UCPA spends on pro-welfare political lobbying. The Doles do not fund the Dole Foundation. Taxpayers do. No wonder he doesn't talk about it much. 

The foundation's literature says it places people with disabilities in jobs. Fine idea. But, it turns out, not every job will do. No, the foundation "trains 12 students" to work at a Washington, D.C., "Head Start location," a tax-funded, government-run, pre-school baby-sitting center. Every serious study done on Head Start shows it to be a colossal failure, but for building state power, it does wonders. 

Despite first impressions, then, the Dole Foundation is just another molehill on the vast welfare wasteland, in which taxpayers are tyrannized in thousands of ways to pay for thousands of failed programs. Here's compassion, as understood by the former Senate Majority Leader, after 30 years of backing every major increase in the welfare-regulatory state. 

It's not the usual understanding of charity most Americans have. Every year, Americans give between 2 and 3 percent of their income to worthy causes, creating a massive "third sector" totaling $130 billion per year. It's living proof that the free economy isn't all about buying and selling, but is also about financial sacrifice and charitable work. 

But the provision of charity--like profit making itself--isn't always what it seems. The bane of free economies has long been the businessman who eschews market competition to seek favors from the state. He slants the process in his favor, using an unfair advantage or imposing disadvantages on his potential competitors. Tariffs, subsidies, anti-trust regulations, licensure restrictions--the examples are endless. 

The U.S. government has pioneered the practice of doing the same for charitable organizations. Instead of keeping private charities private, the government gives some special favors over others, providing they are willing to do the government's bidding. As more and more of the welfare state has been contracted out, the number of charitable organizations with their own hands out keeps growing too. 

For older organizations, it relieves them of the burden of fund-raising, and also of providing the types of charitable and educational services people are willing to support through free-will donations. These days, some organizations are created solely for the purpose of being vessels of government largesse. 

Government at all levels funds the nonprofit sector to the hilt, corrupting the idea of compassion. Thirty-nine of the largest one hundred charities received $3.5 billion in government finance in 1995. And charities that take the government dollar invariably become part of the problem by spending part of their budget to lobby for ever more government money. 

Take a look at Catholic Charities, the once venerable institution founded in 1919 as a way of helping (and evangelizing) individuals and families in need. Today, it's the top recipient of government booty (two-thirds of its $1.9 billion budget), as well as the country's most overrated social service provider. For the most part, Catholic Charities does contract work for government programs, like providing legal services, drug education, immigrant counseling, and the like. And when it is not administering the welfare state, it is lobbying for an ever bigger one. 

Early in the 104th Congress, when real welfare reform stood a chance of passage, Catholic Charities brought the weight of ecclesiastical authority to bear against any budget cuts, and provided the crucial moral argument to beat back the reform. Says Catholic Charities head Fred Kammer, "the federal government and most of its social programs do work well"--and for his organization they certainly do. Moreover, he says, "taxes are good, and paying taxes reflects our moral obligations and should call forth greater personal political responsibility"--failing to mention that taxes keep him employed and very powerful. 

Catholic Charities, along with 750 other groups, is part of a Washington lobbying arm called the Independent Sector. This misnamed organization secures government funding for those lucky enough to be on its membership rolls. According to Daniel Oliver, writing in Alternatives in Philanthropy, this is the heart of its institutional mission, and it has been very effective. 

Now look at the peculiar case of Habitat for Humanity. Next to the Salvation Army (which also gets government money), Habitat is surely the most universally beloved charity of the day. Don't attempt to rise to high office without a Polaroid proving that you helped build a Habitat house. If you can swing a hammer with the best of them, you care about your fellowman. 

In fact, Habitat is the most poorly understood of all charities. Its founder, Millard Fuller, is undoubtedly a socialist, as is clear from his writings. That doesn't mean that he can't make a contribution through his deeds, if not his words. Many people must think he does: Habitat raises more money in private donations than the Boy Scouts. "It has been said that people will support anything they can take a picture of," says Fuller, a fund-raising genius. Thus his organization attracts 200,000 volunteers working for 1,500 affiliates in 1,300 U.S. locations and 50 different countries. 

Habitat's pitch is perfectly tailored to our times. The organization does not give handouts; it requires the poor to contribute "sweat equity" to building their own houses and then pay between $38,000 and $80,000, albeit without interest. Let's overlook the subtle upbraiding of interest-charging and profit-making private builders and renters with whom Habitat is in rigorous competition. Habitat can do this because its labor is largely free, its materials are largely donated, and state and local governments grant much of the land it builds on. The final house then becomes a Habitat asset, free and clear, which is then sold on a twenty-year payback plan. Habitat also encourages the beneficiary of this charity to "tithe" to the organization even after the house is paid off. 

Through this strategy, it's easy to forego interest charges. But imagine the outcry if any profit-making venture were caught sneakily selling the goods and services that were donated to it, while driving out businessmen who pay wages (and all the government-mandated benefits) and purchase materials. But somehow Habitat has been able to put a humanitarian gloss on all this, while steadily becoming the 20th largest homebuilder in the country. In fact, it fully expects to be number one in three years. "That will probably also make us the number one home builder in the world," says Fuller, who is otherwise ideologically opposed to big business. 

All this fancy finance, and even the socialist ideological orientation, might be irrelevant but for one major problem: Habitat for Humanity is on the federal take. In March of 1996, it was awarded a highly unusual $25 million federal grant. Just imagine how "charitable" you could be with that kind of cash. By comparison, National Public Radio rakes in a paltry $1.2 million. This fact alone makes Habitat for Humanity part of the nation's vast and growing network of charities on the dole. 

The feds have spent their money wisely. Fuller now is leader of a special-interest stampede for more housing subsidies issued through HUD's Section 8 program. As a beneficiary of housing subsidies himself, he's no disinterested observer, much less the visionary humanitarian who relies solely on voluntary efforts. 

Most charities struggle by without government money. But of America's 100 largest charities, only 18 do not belong to Independent Sector and receive no government grants or contracts. Many educational institutions (like the Mises Institute) refuse the money for principled reasons. Others are just overlooked by the government because they are going about their work quietly, focused on their mission and not on gaining favors from the state. 

Tax-taking charities don't qualify as charities at all. After all, when we speak of the free-market economy, we don't include government-run operations like the Post Office or government-backed corporations like Bechtel. We mean the global network of competition and cooperation that forms the very basis of prosperity and civilization without relying on the taxing power of the state. Here is the true independent sector, the essence of true voluntarism. 

Real charities are also part of the market because they provide essential goods and services on a voluntary basis, as much a part of the natural order of liberty as any capitalist enterprise. And they are just as susceptible to corruption when they jump into bed with the state. Both their means and their ends are transformed. 

If either business or charity wants to be taken seriously as a contributor to society, let it renounce its dependence on government. Let it provide goods and services people are willing to pay for voluntarily. Until then, taxpayers are right to doubt its sincerity, just as they doubted that of the namesake of the Dole Foundation.

__________________________

Jeffrey Tucker is editor of The Free Market.

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