Monthly Archives: September 2012

Democrat Nostalgia?

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Further evidence as to how detached most Democrat elites are from the United States military was given at the Democrat Convention last week:

On the last night of the Democratic National Convention, a retired Navy four-star took the stage to pay tribute to veterans. Behind him, on a giant screen, the image of four hulking warships reinforced his patriotic message.

But there was a big mistake in the stirring backdrop: those are Russian warships.

While retired Adm. John Nathman, a former commander of Fleet Forces Command, honored vets as America’s best, the ships from the Russian Federation Navy were arrayed like sentinels on the big screen above.

These were the very Soviet-era combatants that Nathman and Cold Warriors like him had once squared off against.

“The ships are definitely Russian,” said noted naval author Norman Polmar after reviewing hi-resolution photos from the event. “There’s no question of that in my mind.” Continue reading

Can the Private Sector Support What the Public Sector Claims To? (Part III)

This is the third part in a three-part series.  Part I can be found here, and Part II can be found here.

The Philosophy

Once the numbers are put to rest, the rest of the argument in favor of private giving over compulsory giving via a system of taxation is easy.  The philosophical argument can be broken down into two parts: one based on human teleology and the second based on a phenomenology of gift.

First, all being is in the process of becoming.  That is, all being has a certain perfection, a telos, towards which it tends.  A chair has the natural tendency to tend towards being that perfect chair after which it was designed.  Aristotle called this the final cause, and noted its place of prominence among the four causes of being, the other three being the material, the formal, and the efficient.  Humans, however, are unique in the material universe in that we can actively choose whether or not to tend towards that perfection of being fully human.  This is the gift of freedom that we are endowed with.  Of course, this freedom is not to be seen as merely the ability to choose between contraries, but rather as a freedom for excellence, as the ability to choose the good.  One might say that the ability to choose the good is part and parcel of what it means to be human.

When a human person acts charitably he is acting in a way fully consistent with that call to freedom.  It is the virtues that perfect the human person, and charity is among the most important of the virtues.  The curious thing about the virtues is that the only way to acquire them is to practice them.  They are habits.  The only way to become courageous is to act courageously, and the only way to become charitable is to perform acts of charity.  Thus, when a person acts freely in performing an act of charity, he is not only helping out his fellow members of the human race, but he is also serving to become a better person himself.  Further, the free act of giving has an impact on the recipient that extends past the offered resources.  The recipient recognizes the act of charity for what it is, and that act in turn becomes a model of charity in his own life.

In contrast to this, compulsory giving has nothing of the benefits shared by a voluntary act.  The agent, being forced to offer the money or service, is not acting in freedom, and thus it has no impact on his life of virtue.  Similarly, beyond the actual dollars and cents, the recipient of the tax dollars comes to see the funding as an entitlement rather than a freely offered act of charity.  Obligation replaces virtue, and the obligatory acts freezes both parties at the level of obligation, not allowing them to advance in virtue.  It should come as no surprise that modernity find these ideas difficult to understand.  Ever since William Ockham and his fellow Nominalists, even general morality has focussed exclusively on obligation rather than virtue.

Yet the perfection towards which a human person must strive is experienced in the human heart as a call to gift.  The deepest desire of the human condition is to give one’s self away and to receive another who is called to do the same.  In a paradoxical manner, we find our fulfillment by emptying ourselves to one another.  This call to become gift explains a myriad of human experiences like falling in love, risking one’s life for a person in danger, and acts of selflessness that seem to come naturally.  It explains the natural institution of marriage, the begetting of children, and dying for a cause.  We seek forever to give ourself away.

This is precisely why crowd our rates are not dollar for dollar.  Economists may refer to this as the “warm glow” effect, suggesting that people give because they receive some psychological benefit, an injection of happiness if you will, from the act of giving.  While there is a grain of truth to this, it is not the whole picture.  People give because they were made to give.  They become fully human in the very act of giving.  Private charitable giving is completely consistent with this call to be gift to one another, both for the giver and the recipient.  It is also why compulsory giving in the form of taxation never settles well with the one being taxed.  Deep down, people want to give – they don’t want to forced into virtue.

 

The Theology

The call to charitable acts is prevalent throughout the Gospels, and indeed the entire collection of Scriptures.  As a member of the Universal Church, one cannot dispense with the obligation to assist those less fortunate among us.  Yet the call to charity can never be disassociated from the call to spread the Gospel to the four corners of the earth.  Pope Benedict XVI tells us in Deus caritas est:

“The increase in diversified organizations engaged in meeting various human needs is ultimately due to the fact that the command of love of neighbour is inscribed by the Creator in man’s very nature. It is also a result of the presence of Christianity in the world, since Christianity constantly revives and acts out this imperative, so often profoundly obscured in the course of time … For this reason, it is very important that the Church’s charitable activity maintains all of its splendour and does not become just another form of social assistance …

“We are dealing with human beings, and human beings always need something more than technically proper care. They need humanity. They need heartfelt concern. Those who work for the Church’s charitable organizations must be distinguished by the fact that they do not merely meet the needs of the moment, but they dedicate themselves to others with heartfelt concern, enabling them to experience the richness of their humanity …

“[C]haritable activity must [not] leave God and Christ aside. For it is always concerned with the whole man. Often the deepest cause of suffering is the very absence of God. Those who practise charity in the Church’s name will never seek to impose the Church’s faith upon others. They realize that a pure and generous love is the best witness to the God in whom we believe and by whom we are driven to love. A Christian knows when it is time to speak of God and when it is better to say nothing and to let love alone speak. He knows that God is love (cf. 1 Jn 4:8) and that God’s presence is felt at the very time when the only thing we do is to love. He knows—to return to the questions raised earlier—that disdain for love is disdain for God and man alike; it is an attempt to do without God” (paragraph 31).

Private giving is free to be an act rooted in the call to follow Christ and preach His word.  This also raises the practical problem of government funds applied to social causes.  When giving becomes compulsory, there enters the possibility, and perhaps even the inevitability, of the funds being used in a manner contradictory to the consciences of individual taxpayers.  Herein lies the debate about tax dollars being used to fund abortion and contraception.  Yet these two issues are not the only ones on the table.  Nearly everyone has a list of causes that would be objectionable to their conscience, and natural outrage would be expressed if they were to be forced to donate to these causes through the tax system.  This reality is often used as an argument for taxation: if we left it to the individual giver, would there not be causes that would go unsupported?  It is an illusion to think that taxes ensure a baseline of morality.  Instead, they merely reflect the opinions of those in power, those elected officials tasked with budgeting the tax dollars.

Yet it remains true that the purpose of politics is justice as well as charity.  Is not the function of government to maintain some level of fairness and equality?  True, but it would be a mistake to think that this comes in a manner contradictory to charity.  The virtues are never in conflict, but rather support and strengthen one another.  Blind redistribution of wealth through compulsory giving, i.e. taxes, fails to incorporate man’s call to charity.  Even if it would lead to a more just economic reality, the picture would be incomplete at best, for as St. Paul reminds us, without charity, we are nothing.  Yet this takes us full circle to the mathematical argument in the first section that suggests that the monies available to a social cause are not increased by government subsidies, but all things considered, they are actually decreased.  It is really a loose-loose situation.  On the other hand, if we keep charity first and allow private giving to do its thing, justice follows as well.  This flip side is a win-win situation.

Finally, to echo the philosophical argument of person-as-gift, Pope Benedict offers the following:

“Saint Paul, in his hymn to charity (cf. 1 Cor 13), teaches us that it is always more than activity alone: ‘If I give away all I have, and if I deliver my body to be burned, but do not have love, I gain nothing’ (v. 3). This hymn must be the Magna Carta of all ecclesial service … Practical activity will always be insufficient, unless it visibly expresses a love for man, a love nourished by an encounter with Christ. My deep personal sharing in the needs and sufferings of others becomes a sharing of my very self with them: if my gift is not to prove a source of humiliation, I must give to others not only something that is my own, but my very self; I must be personally present in my gift” (34).

Conclusion

The philosophical and theological arguments are clear: the world and mankind are better off if social causes such as poverty are funded through voluntary private giving.  Man is made to be gift, and he fulfills his destiny insofar as he gives of himself freely.  The only argument that could stand up against this is the practical argument that private giving would be unable to fund social causes: mankind, poisoned as he is by original sin, would fail to selflessly give what is necessary to solve the problem.  Whether or not a cause can be completely funded is not the issue.  There are many social causes that will never be solved this side of heaven.  The issue is whether or not government taxation has an actual positive effect on the particular social cause – this is where the mathematical arguments from part one become so important.  It seems that compulsory giving through taxation actually serves to decrease the amount of funds actually available to a cause.  Once the economic argument falls, it seems that there is nothing left to justify government involvement in social programs.

Spitting in the Face of Uncle Sam: Part II

 

Yesterday I wrote a post, which may be read here, detailing how an Egyptian mob, inflamed by allegations about a movie attacking Mohammed, stormed our embassy.  The embassy issued a truly craven statement apologizing for the fact that Americans in this country still enjoy freedom of speech:

The Embassy of the United States in Cairo condemns the continuing efforts by misguided individuals to hurt the religious feelings of Muslims – as we condemn efforts to offend believers of all religions. Today, the 11th anniversary of the September 11, 2001 terrorist attacks on the United States, Americans are honoring our patriots and those who serve our nation as the fitting response to the enemies of democracy. Respect for religious beliefs is a cornerstone of American democracy. We firmly reject the actions by those who abuse the universal right of free speech to hurt the religious beliefs of others.

When it became obvious that many Americans found this cowardly in the extreme, the embassy initially stood behind its statement with these tweets:

This morning’s condemnation (issued before protest began) still stands. As does our condemnation of unjustified breach of the Embassy.

We condemn the continuing efforts by misguided individuals to hurt the religious feelings of Muslims— US Embassy Cairo (@USEmbassyCairo) September 11, 2012

The embassy has since deleted these tweets, not realizing what a futile action this is in the age of the internet.

Mitt Romney has responded:

 “I’m outraged by the attacks on American diplomatic missions in Libya and Egypt and by the death of an American consulate worker in Benghazi.  It’s disgraceful that the Obama administration’s first response was not to condemn attacks on our diplomatic missions, but to sympathize with those who waged the attacks.”

After remaining silent throughout the day, the Obama administration finally responded….to Mitt Romney: Continue reading

Spitting in the Face of Uncle Sam

 

Today on the eleventh anniversary of 9-11 an Egyptian mob stormed our embassy in Cairo and burned our flag.  The rioters were offended by a film that they allege is insulting to Mohammed.  The ringing response of our embassy to this insult to this country on today of all days?  An announcement perhaps that the US will no longer waste sending billions of dollars a year in foreign aid to a people who obviously despise us?   A recall of our ambassador?  A warning to the Egyptian government that repetitions of this type of behavior will lead to a severing of diplomatic relations?

No, after getting down on their hands and knees presumably, this is what the officials at our embassy said: Continue reading

Tribute in Light – A Picture From a Reader

A reader sent me this shot of a test run of the Tribute in Lights. As he and a friend finished dinner and walked out of the Fraunces Tavern at the corner of Broad Street and Pearl Street last night, they noticed the lights were on for a moment, jumped into the car, and drove over to West Street to get this shot. It is taken from the sun roof of the car, paused at a lightd right next to the Battery Garage where the lights are set up.

Courtesy of Mr. Steve Tirone, Senior Business Analyst at TIAA-CREF. Thank you Steve! Continue reading

Can the Private Sector Support What the Public Sector Claims To? (Part II)

This is the second part in a three-part series.  Part I can be found here.  Part III can be found here.

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Crowding out on its own can never make a case for the privatization of social services.  Even with government crowd out, the total amount of money raised for a particular cause is higher with government involvement (or equal in the case of total crowd out).  For instance, if a cause is funded entirely by the private sector, say at $100, and the government steps in with a $50 subsidy.  Supposing the crowd out rate is 60%, the private donations drop by $30 because of the $50 government “donation.”  However, the total gift to the charity is now $120 (the government’s $50 plus the private sector’s $70), which is higher than the purely private $100.

However, this doesn’t take into account the efficiency contrast between the private and public sector.  Here is where my model begins to take shape.  For starters, suppose that the government operates with a 30/70 split and the private sector operates with a 70/30 split and a modest crowd out rate of 60%.  Let’s follow that tax dollar collect by the government.  Suppose that the government collects and budgets $1 in taxes for a social cause.  The amount of money actually going to the cause, after the deduction for administrative expenses, is $0.30.  However, that tax dollar also causes a crowd out of 60%, or $0.60 in private giving.  No, in fairness, the private giving also has its administrative expenses, so the actual causes experiences only 70% of the $0.60 in decreased funding, which amounts to $0.42.  The end result is that the extra $0.30 injected by the government is more than counteracted by a drop in $0.42.  Thus, the government involvement actually causes a drop in funding for the actual cause.

One is free to play with the numbers, of course.  We were conservative in our estimates of private giving efficiencies and crowd out rate.  If we continue to hold the private efficiency rate at 70/30, it turns out that the crowd out rate can drop to around 43% before we hit the break even point.  This is a comfortably low number by all accounts in the literature.  Yet even this assumes a modest 70/30 private giving efficiency.  If we adjust this to the median, which is closer to 90/10 (10% administrative costs), we find that the crowd out rate can fall as low as 33% before we hit the break even point.  What this tells us is that for more than half the charities, there is a substantial decrease in actual available funds when the government raises taxes to subsidize the programs.  Were such a reality to be understood and made public, it would cause a fiscal scandal greater than any experience by the few immoral and manipulative bad apples in the world of private charitable organizations.

Now, we should admit that this is based on a definition of “crowd out” that can be unclear in the literature.  Many authors use the term without defining whether the crowd out percentage is a function of the taxed dollar ($1) or the final injection after administrative costs are factored out ($0.30).  We assumed the later because in the two mathematical models (Krause and Andreoni) we were able to follow actual variables, and it was the taxed dollar that resulted in the crowd out.  However, is a subsequent paper, Andreoni himself seems to be leaning towards the later definition.  If that is true, the situation changes*.  It turns out that total available post-administrative funds is increased by government involvement in all cases (and only breaks even if private giving is perfectly efficient and crowd out is 100%), but the increase is such a small percentage of the total taxes collected (between 10% and 13% using the same efficiency and crowd our assumptions), that the expenditures become difficult to defend from any reasonable moral perspective.  Such a reality, even in this case, would cause a public scandal if it were explained to the average voter.

If their are economists among us who can clarify this definition with a solid reference, I would be more than grateful to hear an answer.  I have at least ten papers from economics journals on my desk, none of which are specific enough on the definition of crowd out to decide this point.

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 * In the case that crowd out is defined as a function of the money spent on the actual cause by the government rather than the taxed dollar, the mathematical exercise is a bit more complicated.Out of the dollar collected via taxation, only $0.30 of it is going to make it through the bureaucratic structures of the government.  When the $0.30 is injected into the cause, it results it a decrease of $0.18 (60% of of $0.30) of private giving due to crowd out.  Of course, this is a decrease in $0.18 of giving, not of actual money to the cause.  In fairness, even the private charity has its administrative costs.  Thus, the decrease is private funding is only 70% of the $0.18, or $0.126.  Nevertheless, the total difference made by the government $1 is the $0.30 decreased by the crowded out $0.126, which comes to $0.174.  Therefore, it is a mistake to think that he government gets even its 30% of the dollar for the social cause.  The net gain experienced by the cause is only 12.6%.  Think about this on a larger scale.  In order for the government to make a $1,000,000 difference in a cause, it must collect $5.75 million in tax money.

One is free to play with the numbers to see the impact of combining efficiency and crowd out rates.  Our experiment was based on a conservative 70% private giving efficiency and a modest 60% crowd out.  If we assume the median private giving efficiency of 90% and Andreoni’s 70% crowd out rate, the net government difference on the tax dollar falls to 11.1%.  So to raise that $1,000,000, the government would have to collect over $9 million in taxes.

Notice that the cause is still “technically” better off.  Even in the more extreme case, the cause still gets its additional $1,000,000 in funding.  In fact, this will always be the case.  While the combined rate falls as private efficiency and crowd out rise, even with a private efficiency of 100% and a crowd out of 100%, the government simply replaces every dollar in the social cause.  Yet the replacement come at quite a cost to the taxpayer.  If a private charitable organization were to operate on these dismal percentages, it would make the front page of the New York Times in the most scandalous of manners.

 Read Part III here.

The White House and Sexualityism

While I understand the USCCB’s commitment to framing the HSS Mandate exclusively in terms of religious liberty, I have been, since the beginning, reminding people that it is in fact a contraception issue. Politically it may make sense to focus on religious liberty, but morally, the two are inseparable. Well-known law professor Helen Alvaré has a very well-written piece at the Witherspoon Institute:

It should be noted that sexualityism is no more than a theory about a claimed cause of women’s happiness—i.e., that its growth is directly proportional to women’s ability to express themselves sexually without commitment and without the possibility of children. The HHS mandate stands on this theory. In a world of easy availability of birth control and abortion, the only reason for a federal mandate for a “free” and universal supply is to try to send the sexualityism message. The White House has all but come out and said: “women of America, vote for the incumbent this presidential election year because he supports women’s equality and freedom, which he understands to include at the very least nonmarital and nonprocreative sexual expression.” Why else choose Sandra Fluke—an affluent, single, female law student, who demands a taxpayer-subsidized, 365-day supply of birth control as the price of female equality—as your spokeswoman? While every savvy media outlet understands the political theater going on here with the whole “war on women,” anti-Republicans message, still when the White House uses its powerful bully pulpit to send such a message, cultural damage is done.

Read the rest here.

Unforgettable Flight 93

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When they got up that morning eleven years ago the very last thing that the 33 passengers and the seven crew of United Flight 93 expected was to be engaged in a life and death struggle to retake an airliner that was headed to Washington DC as a terrorist missile.    All they expected the day to bring was a hum drum flight from Newark to San Francisco.  Just ordinary people living their lives.  Their occupations included pilot, first officer, flight attendant, an environmental lawyer, the owner of a public relations firm,  university students, a senior vice president of a medical development company, a sales representative for Good Housekeeping magazine, a manager of a US Wildlife animal refuge, an arborist, an account manager for a corporation, an ironworker, retirees, a computer programmer, a computer engineer, a lobbyist for the disabled, a real estate agent,  an executive vice president of a corporation and a free lance medical writer.  They were wives, husbands, brothers, sisters, sons and daughters, all with unique histories and lives, with little in common except that they happened to be on board Flight 93 when the world changed.

The plane took off at 8:42 AM Eastern Time.  Four terrorists had boarded amidst the other 33 passengers.  The terrorists began to hijack the plane at 9:28 AM, soon after both the hijacked airliners had struck the Twin Towers in New York City, and just brief minutes before a fourth airliner was hijacked in Washington and slammed into the Pentagon.  At 9:28:17 AM a member of the cockpit crew shouted “Mayday! Mayday!” over the radio, with sounds of violence in the background.  35 seconds later someone in the cockpit shouted over the radio, “Mayday!  Get out of here!  Get out of here!” Continue reading

Can the Private Sector Support What the Public Sector Claims To?

This is the first part in a three-part series.  It raises an issue that I have been thinking about for over three years, and I have finally nailed down some sources and drawn the whole argument together.  I will issue the next two parts over the course of the week.

 

The Problem

With the pending election there has been a resurgence of discussion about privatizing certain industries, e.g. health care, education, etc.  Further, the Democratic Convention suggests that the Democratic party is the party that cares about a shared responsibility for the collective mankind, establishing a suggested radical individualism present among Republican.  More simply put, the Democrats are often portrayed as the party that cares about the poor, while the Republicans are the party that cares only about themselves.  Paul Ryan has maintained that he is fiscally conservative in part because he does care about the poor.  His prudential judgement has led him to believe that the best way to help the poor is through fiscal monetary policies.

However, when the proposal to privatize any government service arises, alongside we find a familiar, and seemingly difficult to overcome, argument.  Just as an example, let’s take education.  Were we to privatize our education system completely, would that not leave several individuals in a position of not being able to afford tuition.  There are, after all, people in tax brackets that pay less in education taxes than it costs for the government to educate their children, just as there are those who pay more in education taxes than the cost of education.  This is the point of taxes for social services: a redistribution of wealth.  It is misunderstood that those who would defend a privatized system are selfishly attached to “my money” and somehow prioritize the individual over the community.  This is a red herring, though; the discussion is not about the priority of the individual or the community, but rather about the best way to serve the community, through tax dollars or private charitable giving.  Those who cannot afford tuition would be helped in the same way that many are now helped who cannot afford other necessities: through freely offered private charitable giving.  Typically, the next objection is that this is overly optimistic about human generosity.  In other words, the amount of freely offered charity will not be able to sustain the need, and hence compulsory giving, i.e. taxes, is necessary.  My aim is to defend that in most cases a privatized system will out-give compulsory giving  via taxation and that freely offered charity enjoys philosophical and theological advantages over dollars extracted through a tax system.

 

The Numbers

My thesis is that private funds will be able to account for the drop in funding by eliminating the taxes that current fund the social service.  To see this, we need to discuss two economic realities.

The first is the efficiency with which the government, and by contrast the private sector, provides social services.  Robert Woodson (1989), in Breaking the Poverty Cycle: Private Sector Alternatives to the Welfare State, has calculated that, on average, 70% of the funds collected through taxes dedicated to social services goes not to the social service itself, but instead to administrative bureaucracy.  This means that for every dollar collected by the government, only 30 cents actually goes towards the service.  Michael Tanner corroborates this 70/30 split through several regional studies in The End of Welfare (1998).  In contrast to this, the same administrative/service split in the private sector is reversed.  Only one-third of privately collected monies goes towards administrative services, and two-third goes towards the actual cause.  According to Edwards (“The Cost of Public Income Redistribution, 2007), 70 percent of newer charities, as rated by Charity Navigator, spend at least 75% of their budgets on the programs and services they exist to provide.  90% spend at least 65%, and the median among all charities in the sample was 90.7%.

The reason for this is basic competition.  Private sector charities are under strong pressure to operate efficiently because donors want to know that a large percentage of their gifts go to support the appointed cause.  Programs that operate inefficiently will cease to attract donors and eventually cease to exist.  True, there are some very unethical charities out there that take advantage of donors’ money, but over time and with adequate exposure, competition solves this problem.  In contrast, government lacks the motivation experienced by private charitable organizations to operate at efficient levels.  There is an ironic turn of events in this: according to Edwards,

“Those operating at levels of inefficiency comparable to the average government agency are often prosecuted – by the government (which never applies the same standards or threat to its own agencies – for fraud.  Pressure on private charities to avoid such prosecution, and the bad publicity and loss of public trust resulting, is strong.”

The contrasting levels of efficiency between the public and private sectors means that the government has to raise over twice as much money in taxes as the private sector would have to raise in donations in order to provide the same service (assuming the private sector operates at a 70% efficiency level).  In other words, if a social service costs 21 million dollars, the government would have to extract 70 million dollars in taxes in order to cover the cost.  The private sector would have to raise only 30 million dollars.  This assumes a generous 70/30 split in the private sector.  As stated earlier, the median is closer to a 90/10 split, and in this case the private sector would only have to raise 23.3 million dollars, only a third what the government requires.

The second economic reality is what is known as “crowding out.”  The idea is that, as the government collects tax money and budgets it towards a social cause, private donors become less likely to donate their own funds.  In other words, the government support “crowds out” private donations.  Arthur Brooks in “Is There a Dark Side to Government Support for Nonprofits?” (2000) lists four reasons why crowding out occurs.  The most obvious is that a cause that already receives funding from a third source (government or otherwise) is unlikely to appear as “in need” and therefore unlikely to attract additions donations.  Second, “subsidies to non-profit firms may make them appear to private donors ‘non-mainstream’ and, hence, in need of non-market support.”  Third, private donors often want to know they have some control over the organization they choose to support.  Finally, since government support is taxed-based, it decreases the amount of disposable income that private donors can direct towards charitable causes.  (This last effect is compounded by the relative inefficiency with which government social programs operates.)

Crowd out rates are measured as percentages of a dollar that are “crowded out” for every government dollar added.  For instance, a 70% crowd out rate means that for every tax dollar the government collects for a cause, the private donations are reduced by 70 cents.  “Total crowd out” is a dollar-for-dollar exchange, so for every dollar injected by the federal government, exactly one dollar of private donations is eliminated.  Anything less is considered “partial crowd out.”

The literature that measures crowd out rates falls generally into three categories: real world data, theoretical models, and theoretical controlled experiments.  Unfortunately, crowd out rates based on real world data are across the board.  Brooks summarizes some of the studies which quote real world rates anywhere from 1.8% to 66%.

The theoretical models depend in part on the assumptions made about givers.  In one model, charity is determined exclusively by the need of a particular cause, in which case crowd out rates are total (dollar-for-dollar).  The idea is that a cause only needs a finite amount of money and people are willing to pay to see that finite amount met.  If the government steps in and meets part of the requirement, the private donors, sensing the need has been decreased, will decrease their donations dollar for dollar.  If the government decreases their support, private donations step back in and pick up the slack, again dollar-for-dollar.  The crowd out rate in such cases is 100%.  Other models suggest that people give not simply to satisfy a social need, but also for personal satisfaction, a “warm glow” effect.  James Andreoni is a leading expert in this area, and his models predict a minimum of 71.5% crowd out rate (“An Experimental Test of the Public-Goods Crowding-Out Hypothesis,” 1993).  A third model attempts to consider the effect of giving competition.  The idea is that donors are more likely to give at a particular level based on what their peers are giving.  In this case, Alan Krause (“On the Crowding-Out Effects of Tax-Financed Charitable Contributions by the Government,” 2011) predicts that crowding out may be attenuated by such competition, but the situation is highly unstable.  If even a single person has some motivation to drop their giving, others will follow suit in the face of government subsidies and crowding out rate approaches total.

The third category in the literature is controlled theoretical experiments.  Generally this falls into the mathematical area of Game Theory.  Andreoni is again an expert in this field, and his experiments have corroborated his theoretical rates, in one case 71.5% and in another up to 84%.  Another experiment (“An Experimental test of the crowding out hypothesis,” C. Eckel, et. al., 2003) attempted to separate groups into those who knew that third party funds were coming from tax dollars (“no fiscal illusion”) and those who were unaware of the source of the new funds (“fiscal illusion”).  In the case of fiscal illusion, the authors found no evidence of crowding out, but in the case where donors were aware that tax dollars were subsidizing the cause, crowding was almost total.

In the face of these three categories of results, we are forced to ask: which ones are “better”.  In other words, if were are going after actual crowd out rates, would it not make sense to trust those that are data driven?  No, says Andreoni.  The problem with the data-driven results is that they are incapable of separating out a vast range of influences.  In other words, it is nearly impossible to have a “control” in the real economic world.  For instance, “it is impossible to know whether the incomplete crowding-out found [in the literature] is the result of certain institutional features not captured by the model, or whether it is due to individual preferences that are different than those assumed in public-goods models.”  The purpose of the laboratory experiments is to provide such a control.  Keep in mind that the laboratory experiments are not entirely mathematical – they involve real people making real decisions.  It is also telling that the lab experiments are consistent with the theoretical models developed elsewhere in the literature.

All told, the present author is comfortable in making the assumption that average crowd out rates are at least at the 60% level, that is, for every dollar injected by the government into a social cause, 60 cents is taken out in private donations.  Given the theoretical models and the laboratory experiments, which typically come in around 70%, I feel that this is a generous assumption for my purposes.

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Part II can be found here.
Part III can be found here.

Obama Picked Up: What’s Wrong With This Picture?

(Photo credit: Pablo Martinez Monsivais/AP)

The story goes like this (emphasis not mine):

In Florida for his bus tour on Sunday, President Barack Obama made an unannounced stop at Big Apple Pizza and Pasta in Ft. Pierce. There, the shop’s owner, Scott Van Duzer, lifted the president off the ground”

Obama entered the shop saying, “Scott, let me tell you, you are like the biggest pizza shop owner I’ve ever seen,” according to a White House pool report.

Van Duzer, 46, is a big guy: He is 6′ 3″ tall and weighs 260 pounds.

After Obama was lifted up, he said “Look at that!” Man are you a powerlifter or what?”

He continued, according to the pool, talking about Van Duzer’s big muscles.

“Everybody look at these guns,” he said. “If I eat your pizza will I look like that?”

Van Duzer, by the way, is a registered Republican who voted for Obama in 2008 and says he will do so again in November.

“I don’t vote party line, I vote who I feel comfortable with, and I do feel extremely comfortable with him,” he told the press pool.

Usually I don’t write about just politics, but as a matter of principle, I found this incident deeply disturbing. It’s dishonest; it’s propaganda, and propaganda can be dangerous. I may not be a specialist in matters of security, but any average citizen can see that this is totally staged.

When the President is in public, the Secret Service agents wear him like cologne (sorry, my husband’s descriptor). This is standard procedure, not just for Obama, but for any president, especially since the assassination of President Kennedy. Do you see a Secret Service agent anywhere in the shot? Nope.

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Sixteen Trillion Reasons to Vote Against Obama

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The national debt is now north of sixteen trillion dollars,  5.4 trillion of the debt having been incurred under President Obama.  Go here to view a real time debt clock.  Our gross national product for this year is estimated to be 15.84 trillion dollars.  Anyone who cannot see the financial precipice that we are at is a blithering idiot, and Obama is counting on his or her vote.

Father Barron Reviews For Greater Glory

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The Blu Ray and DVD releases of For Greater Glory are coming out on September 11, 2012For Greater Glory tells the story of the Cristeros who bravely fought for religious freedom and the Church in the 1920s in Mexico.  I heartily recommend this film.  The above video is Father Robert Barron’s insightful review of the film.   (I believe he is too sanguine as to the effectiveness of purely non-violent movements in the face of regimes who don’t care how many people they kill, but that is a debate for another day.)   The below video has additional remarks by Father Barron on the film.  Go here for my review of the film. Continue reading

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