Sunday, August 21, 2011
How the Federal Government Decimated Private Charity
In 1887, as the state of Texas faced a long and debilitating drought, the United States Congress passed an appropriation to help Texas's beleaguered farmers. As it reached President Grover Cleveland's desk, he vetoed the bill. He stated his reasoning: "I can find no warrant for such an appropriation in the Constitution." Such federal aid, he said "weakens the sturdiness of our national character. The friendliness and charity of our countrymen," he continued, "can always be relied upon to relieve their fellow citizens in misfortune."
Donations to the plight of the drought-stricken Texans came in from all over the country, which equaled more than ten times the amount that Congress had intended to appropriate.
The ability of private charities, along with state and local governments, was scarcely questioned until the Great Depression. Herbert Hoover signed into law the Smoot-Hawley Tariff Act, which exacerbated the economic problems that the United States Federal Reserve had already caused and made more acute.
The economic malaise had become so pronounced by the middle of 1932, that many voices began to call for a federal solution to the problem, which was quite ironic in that the cause of the economic crisis had been the federal government itself. Amid the federal-government-caused crisis, the ironic siren call for federal government to supersede private charity proved irresistible.
Many private charities were staunchly opposed to the federal government relief programs being contemplated. Organizations such as the Red Cross were well aware that their ability to help the indigent would be decimated as federal government usurped private giving in the form of higher taxes. This is just what occurred.
The Emergency Relief and Construction Act of 1932 appropriated $300 million to provide emergency relief to the various states. Ironically, the $300 million appropriation came from taxes exacted from the same people of the same states that were to be given the emergency relief. The inefficiencies are obvious. This time, unfortunately, Grover Cleveland was not on hand to veto this clearly unconstitutional appropriation.
Of the $300 million emergency funding, eight states took none of it, Massachusetts being one of the most prominent. Various philanthropic drives and local programs allowed Massachusetts to completely provide for itself during the crisis. They received no forgiveness from the federal government however, as taxes from Massachusetts were still exacted to pay for other states that had not many any such attempts at frugality, the most profligate being the state of Illinois, which made off with $55 million dollars of the relief money--almost 20% of the national total.
Shortly after taking office, FDR signed into law the Federal Emergency Relief Administration, substantially increasing what the Hoover administration had sadly put into motion, and making things far worse. Federal relief policies became incentives to such inefficiencies as states exaggerating what they needed for relief and making only abysmal attempts to raise local funding for their own assistance. More destructively, increases in federal taxation decimated private philanthropy.
Enough years have intervened since the Great Depression that we have all but forgotten what life was like before then. Before that time, private charities and state and local governments were more than matches for the economic relief problems that faced them. Happily, they still can be, if the federal government would gradually extricate itself from the welfare mess that it has caused.
Significantly, trillions of dollars in debt and projected debt have proven that the Federal Government is not fit for the task that it took for itself using the backdrop of the Great Depression as its excuse. The sooner we figure out that individuals can take care of their fellow man much more effectively than a faceless bureaucracy, the better off we'll be.
For more details, see chapter 6 of New Deal or Raw Deal? by Burton Folsom