Thursday, January 1, 2015

Are Charities a Scam?

Is the entire concept of "Charity"  - as well as its specific implementations - flawed?

I already know what the response to this posting will be from emotional thinkers"How Dare You!" they will say, "Charity is the greatest thing on the planet!  You heartless cruel bastard!"

But then again, those are emotional thinkers.   As I have noted before, in any discussion, you have to challenge the premise.   And when it comes to charities, the premise is that charities are all wonderful organizations and like Mother Theresa, do wonderful things for humanity.  But of course, even Mother Theresa has her detractors - is it really a wonderful thing giving sick people a nice place to die while neglecting the overall population problem, simply because it conflicts with your religious views on contraception?  But I digress.

Actually, if you think about it, what a wonderful way to prevent any criticism of your organization or a societal scheme!   If you can stifle debate about a topic by decrying any discussion of it as horrific, then you can pretty much do as you please in this world - and get away with it.  I am not saying all charities do this - only that the more dodgy of them (even "legitimate" ones) use this cloak of sanctimoniousness to not only stifle debate - but to get others to stifle debate for them.  Pretty neat trick.  Sort of like religion - even to question it is to be deemed heretic and thus burned at the stake.

At this time of year, many folks are thinking of donating to charities, not because they get a warm and fuzzy feeling at Christmastime, but because they are looking at their 2014 tax bill and seeking deductions.  Oh, get over it.  That is how people think.  And charities play to this, too, telling you (or implying) that you can deduct the cost of your car from your taxes, even though it is a worn-out clunker.  Sadly, this isn't true.  But it illustrates how folks donate to charity with less-than-charitable intentions, and how organizations pander to this need, often making money in the process.

Others are truly more altruistic - donating to charities while heavily in debt.  Sadly, these "charities" are often churches, who pressure their parishioners to "tithe" even as they suffer with staggering debts and bills.  And yes, it is true that the poor donate a lot to charity - but the "charities" in question are usually their local church, not the local homeless shelter.

But there are a number of issues with regard to charities.   The obvious issues are the blatantly fraudulent charities that just take money and steal it.  But there are also "legitimate" charities that use most of their money to pay salaries to family and friends.   Even really legitimate charities, which spend most of their money on actual programs (as opposed to salaries and fundraising) pay their directors hundreds of thousands of dollars - if not millions - a year.   And yes, some fly in private jets - or allegedly use charity money to pay for their airfare for their book tour.   But underlying that, of course, is the very question of why charity is needed in the first place.

1.  A Thousand Points of Light:   George Bush posited that help for the needy should come from charities - preferably church-based charities - rather than the U.S. Government.   And between the two Bushes, a lot of money was diverted from the government to religious-affiliated organizations in the name of charity.  Charity begins at home.  It certainly helps with re-election.

But this raises an interesting question:  A society that needs charities to help out the less fortunate is a society that is not functioning at an optimal level.   Oscar Wilde, who said a lot of nonsense about Socialism, made one salient point:
"There is also this to be said. It is immoral to use private property in order to alleviate the horrible evils that result from the institution of private property. It is both immoral and unfair."
So the Bill and Melinda Gates foundation spends money to help us little people.   That's great.  Makes Bill Gates look like a nice guy.   But Gates is the same guy who made huge profits off the backs of us all, but owning the monopoly on an operating system (that many argue is inferior to others) and working hard to maintain that monopoly.   We are were all made a little poorer, so that he could be an awful lot richer.   And the solution is that he gives away a pittance and we are supposed to be happy?

Or take Andrew Carnegie.  He gave away nearly all his money, building libraries and doing other good deeds for our society.   But to get this money, he had to do a lot of bad deeds to our society.  The man whose steel business was stolen from him by Andrew Carnegie is no doubt chagrined when his son comes back from the "Carnegie Library" in town, telling Dad what a wonderful man Andrew Carnegie was.  But more on that later.

Should we be relying in charities to take up the slack in terms of supplying everyday needs for our citizens, or to direct research for cures to illnesses - or whatever?   Why should we rely on an inefficient patchwork of organizations - many of whom have huge fundraising costs and redundant overheads- to pay for these things?   Wouldn't it make more sense to have one organization, that didn't spend all its overhead on fund-raising, to figure out who really needs the money (as opposed to which charity is deemed most fashionable or has the best fund-raising gimmick) and then distribute it more efficiently?

Of course, that smacks of Socialism - and we are against that, because for the most part, it doesn't work, or work very well.   Socialist economies end up loaded with layers of bureaucrats, each with their own agenda (job preservation being #1) and often distributing money even more inefficiently than charities.   As a result, more money is needed, and of course, this comes from your tax dollars.

So maybe there is no easy answer to this.   But it is an interesting question - and one I am not sure I can answer.

2. Do Charities Work?  One of the problems with our technological society is that for each new piece of technology we create, it is possible to populate the planet with a million more people.  So we do.   Since the 1700's, people have been predicting that the world supply of food is limited, and that eventually, the world population will be such that famine and starvation - and wars - will result.  However, the world population has continued to grow, as each new innovation increases crop yields, improves efficiency, reduces pollution, or whatever.

Charities fall along the same line.   You improve sanitation and reduce infant mortality in the slum tenements of the early 1900's and the end result is more people.   You cure diseases and reduce infant mortality in Africa, and the result is a continent overflowing with people.   A each new illness or disease is cured, we all end up living longer - and keep reproducing at the same rate as we did when mortality rates were ten times as high.  The end result is inevitable.

Margaret Sanger - an early "reformer" - once embraced the "science" of Eugenics.   Many folks felt at the time that too many of the very poor were reproducing and that eventually our gene pool would devolve over time (perhaps the rise of the WWF is proof of this?).  Maybe they were right - it seems our culture does get dumber and dumber over time.

Or maybe they are wrong.   Reformers have been warning about this for hundreds of years.  Jonathan Swift proposed (sarcastically) that perhaps the overpopulating (and starving) Irish could eat their babies.  Today, of course, there are more Irish living in the United States than in Ireland.   Migration solved the population crises, at least for the time being.

But of course, since then, the "science" of Eugenics has been denounced, particularly after horrors of World War II and the post-war racism that exists even today.   The subject is now taboo.   But of course, it is only a matter of time before genetic engineering takes the place of Eugenics, and that will be particularly horrifying to watch.   Hopefully, I won't be here to see it.  Once again, I digress.

(Digressing further - some argue we should colonize the Moon or even Mars.  How do you think that would play out, in terms of social order?   Could we just allow anyone to reproduce anytime as much as they wanted?   Or would population - by necessity - be controlled, and who could reproduce and with whom - if we were not all just genetically engineered - would be tightly controlled.  Taking this thought experiment a step further, how is the harsh Martian enviornment different from an overpopulated Earth?)

The point remains, though, whether charities are effective, both on the scale of humanity and on an individual scale.   For the individual, when handouts are provided, they serve not only to help an individual person, but also to enable certain types of lifestyles.   There are many homeless people who prefer their drug- and alcohol-soaked street living, raising money for their habits by begging and harassing people on the street or stopped at a stoplight.   Since their basic needs (food, clothing, shelter) are provided by charities, they can devote 100% of their begging money toward drug and alcohol habits.

It raises the question - are we enabling this behavior or helping people?   And the answer is probably "a little of both".   People will gravitate toward places where handouts are given, or the panhandling is lucrative.

3. Is Charity Necessary?   This leads to the next point - in a Socialist Society, is charity really necessary?   Shouldn't the basic "safety net" for the "less fortunate" be provided by the government - and not some patchwork of religious-based charities?  Should medical research depend on how fashionable the disease is or how trendy the fundraising gimmick?  Shouldn't these things be decided at a societal level?

Tough question - and one which the two parties have strong opposing viewpoints about.   The reality is, of course, that we live in a socialist country.   Maybe not as socialist as Norway or something, but socialist, nevertheless.  It tickles me that these teabaggers decry "socialism" but at the same time, say, "Don't touch my Social Security and Medicare!"

Take the case of the "shoeless beggar" that came out last Christmas.  Everyone felt warm and fuzzy about a policeman buying a "homeless" man a pair of shoes for Christmas.  Back then, we still liked the police - amazing how public opinion can change in 12 months.

But the story took an odd turn.   The next day, the man showed up again, shoeless, as not having shoes turned out to be his "thing" for generating sympathy.   He had a family, and the self-righteous manned the blogosphere to condemn them for "not taking care" of their Dad.  But of course, the kids were quick to point out that growing up with a Dad like that was anything but a Swiss Picnic.

And as reporters dug deeper, they found out that he had an apartment (and commuted to his job as beggar) as well as multiple forms of government assistance.

Yes, just because you are homeless doesn't mean you are broke.   You can qualify for Medicaid, Food Stamps, an "Obama Phone" as well as subsidized housing - just because you don't make a lot of money.    Once you hit age 62, you qualify for Social Security, SSI, and Medicare.  Granted, you won't get rich this way, but you won't starve either.

And that brings up another salient point - in America, the greatest health problem among the poor is obesity not malnutrition.   Smoking related illnesses and drug- and alcohol-related illnesses are not far behind.  There are people in other countries who probably need our charity more than folks here in the US.  But donating overseas, as we shall see, gets problematic as well.

That's why, when I hear these charity pitches on television that say, "thousands of children go to bed hungry every night in America!" I have to wonder.   If they are not getting enough to eat, it is because their parents are falling down on the job.  Between food stamps and various food banks, free meals, and the like, there is really no reason to "go hungry" in America, unless you work at it.  Or at least that is the way it should be.   People should not be reliant on the vagaries of charity to stay alive and fed.

4.  Charity Scams:  There are two kinds of scams that go on with charities.   First, there are people who scam charities, like this lady, who allegedly tried to sign up for charitable donations, using the names of 11 of her neighbor's kids.   Apparently she also posted pictures of herself with these kids, asking for "help" on social media.

She went to jail.  But the panhandler who has a sign saying "just evicted, three children, please help!" but uses your money for drugs and alcohol (and was not "just evicted" and does not have "three children") is, of course, not prosecuted.   Like our shoeless man in the example above, there are a lot of people who really don't "need" charity, so much as want it.

Some friends of mine work at the local soup kitchen and food bank, and one quit in disgust after one year, when some folks in a luxury SUV drove up, demanding a free box of food.   They drove around the block and came back and demanded a second box.   When someone pointed out it they already received one, they replied, "That was for our friends in the back seat, we want one, too!"

And the charity gave them one.   It is very hard to "vet" the recipients of your largess, and as a result, there are people who will scam charities for free things.  My friend at the soup kitchen reports that in addition to homeless people, locals and neighbors of the soup kitchen will get in line - well dressed and well-presented - to get a free meal as well.   To them, it is not a "need", but hey, they are giving away a free meal next door, and Momma don't feel like cooking tonight, so why not go?

Most charities have no way of vetting their recipients, so their attitude is, "if you claim you need it, that's OK with us!" and they hand out goods and food.   And that is likely the Christian thing to do, and Christians are regularly patsies, turning the other cheek and all.   And some might argue that the amount of fraud involved is small.   Perhaps.   But increasingly, it is lucrative.

You see, since most stores have generous return policies, people can return items donated to them by a charity and get a refund or a store credit.    So you sign up for free toys from a charity, "for the kids" and then take them back to Wal-Mart for a store credit, which you then use to buy a pre-paid credit card, or to just buy something else you want instead.   And some grocery stores will even take back packaged foods, as well.   So there is a financial incentive to scam charities like this.

And even "innocent actors" are, in effect, scamming charities sometimes, when they ask for wants rather than needs.   My late sister used to get loaves of government cheese  because her husband cashed his paycheck at the bar, and thus they were "poor".   But at the same time, she had cable TV.  When she came crying to me about how hard she had it, I pointed out that she could increase her disposable income by $60 a month (the going rate back then) if she cut the cable and just watched free television off-the-air.   And like most folks, she had a lot of justifications as to why this hole in her budget was "necessary" and not optional.   I suspect her situation is not an anomaly - that there are a lot of folks out there who collect from charity, on the grounds they are "poor" while at the same time, living a fairly affluent lifestyle (by world standards).   As I noted in another posting, with all the government handouts it is possible to receive, even a family with one person making "minimum wage" can lead a lifestyle that is indistinguishable from the median income middle-class of the US.  Only in America can you drive to the poorhouse in your car.

On the charity side, there are a number of scams.   There are just local fraudsters, who panhandle or put up postings on social media, with a long-winded sob story, begging for money.  There are fly-by-night charities that have sound-alike names that call and ask for donations - and then steal your credit card number.   There are "legitimate" charities that cannot be prosecuted for fraud, but spend over 90% of the money they raise on fundraising activities and salaries for the leaders (and their family members).   And then there are really legitimate charities, that actually spend more than half the money raised on the object of the charity - but still pay the leaders million-dollar salaries and fly them around in first class, or on private jets.   They ask us to sacrifice for charity, but of course, make no such sacrifices themselves for a cause they should be believing in more than us.

Then there are the Islamic charities that are touted at your local mosque, which turn out later on to be diverting money to terrorists.   Some fun, eh?   (The Catholics did the same thing, back in the day, raising money at local Churches in the US to fund the IRA.   "Give us the guns to do the job!" was their pitch.)

These raise troubling issues about charities.   All I can say is, vet them well.  You want to make sure they are not scams just ripping off people.   And you want to make sure they are not being scammed by people ripping them off.

5. Can you afford it?     It has been said that poor people give to charity more than the rich do.   This site claims otherwise - that the average person gives about 2% to charity, while the very rich (over $500,000 a year) give 3%.   What is interesting, is that the poorer person is more likely to give this money to their local church.   So in a way, they are not so much giving to charity as giving to themselves, as a donation to fix the roof of a church that you use is not really donating to others.   Of course, many churches have outreach programs and try to help the less fortunate - and thus donations that pay for this, actually help others.

The get-out-of-debt guy site has many pleas from people who got into debt over their heads.  The most comical one I read was a person wondering whether they should be tithing 10% of their pre-tax income to the church, while their credit card debt continued to climb.   In effect, they were bankrupting themselves to fund a church.  It is no different that the guy who claims to have credit problems, while at the same time refusing to sell his hobby car, boat, or Harley.

If you are heavily in debt and going further in debt, you are insolvent.   This is no time to be pious or try to make yourself feel superior to others by donating to charity - other than to donate cast-offs to the local church or Salvation Army (and get a tax deduction).

Get your own house in order before you rush out to help others.   This is not selfishness, but your obligation under the unwritten social contract.

6.  Is Throwing Money at a Problem the Best Way to Solve It?   When you hand out lots of money and things to people, a predictable pattern emerges.   This is not to say that people are evil or nasty (well, human nature, based on survivalism, is) but that when someone gets something for "free" they fail to value it.   When you tell someone a house is free, they don't say, "Gee, I will cherish this house forever!" but rather, "Well, this dump is free, and when I get done trashing it, I can get another one for free, too!"

And that was the problem with Section-8 and other government housing programs, in a nutshell.  Unless you are prepared to enforce discipline, no one will value what you give away.   And some public housing programs are starting to do this - insisting that drug-dealing relatives are no longer allowed to live with Momma.

As the "Reversal of Fortune" movie illustrated, the symptom of homelessness is a lack of money.   But the cause is something deeper - a complete lack of financial discipline, usually caused by a lack of financial skills and knowledge.   And for some folks, learning these skills just isn't in the cards - ever.

7. Why are you giving?  Numbers by themselves mean nothing.   For the very poor, donating to charity doesn't do much in terms of tax consequences.   A charitable deduction isn't going to lower your taxes much when you are in the 15% bracket - assuming you pay any taxes at all.  And, as noted earlier, the poor mostly donate to their local church - no doubt to feel pious, and in response to social pressure from their congregation.

The rich, on the other hand, need the tax deductions, and donating to charities is one way of lowering your tax bill (by about 50 cents for every dollar you contribute).    But, in addition to taxes, the rich get far more bang for their buck than the poor do.   If a poor person donates $100 to the hospital fund, they might get their name mentioned somewhere.   The rich person, donating $1,000,000 gets the wing of the hospital named after them.

And this applies to other local charities  - the symphony, the museum, the ballet,  and so forth.   If there is a program listing donors, or a plaque out front listing "diamond contributors" the rich are sure to get their names on there.   After all, it is a means to acceptance by society and also a little free advertising, particularly if your company is named after you (for example, a car dealership or the like).

When you make a lot of  money you make a lot of enemies.   People resent the rich - and often rightly so.  So you donate a few million to some cause, and now you are made out to be Mr. Nice Guy that everyone loves - even though the amount you donated is trivial compared to your overall wealth.

And where and how you donate often can be used to achieve your own political ends.   The Susan Koman "pink ribbon" organization has come under some criticism for taking in a lot of donations (many of them from major corporations, who use this pink ribbon as an effective product promotion and advertisement) but spending not an awful lot on cancer research.   Moreover, the organization, it turns out, has a conservative bent, and got into some hot water over trying to bounce Planned Parenthood from its donation list.  So naturally, this organization is a favorite of conservatives.

And a lot of organizations are even more directly political or moral.   Many if not all church-based charities not only help feed the poor, they preach to them as well.  So if you want to support your particular brand of religion, you can donate to an affiliated charity.

For some, this can be problematic, as many charities are operated in anything but a transparent manner.  In Islam, for example, adherents are encouraged to donate to charity.   And many do - only to later find out that the Islamic Charity they donated to was diverting some of its funds to help terrorists.  When the FBI knocks on your door, suddenly being charitable seems kind of risky.

But there are charities galore which are legitimate and promote everything from abortion rights to anti-abortion, to gay rights, to whatever.   If you are really wealthy and have a political agenda, well, you now have power to change the world.

And as we discussed previously here, money is really just an indicia of power over others, and for the very wealthy, charity is a neat way of exercising power - while appearing to be a benign and benevolent billionaire.

Does this mean all charities are a scam?   Well, yes and no.  One thing that annoys me about large mega-charities (and other non-profits) is that they pay their leaders hundreds of thousands of dollars a year - if not millions, in salary.  There is a lot of "profit" in non-profit.

* * *
Should you give to a charity?   That is up to you.  For myself, I try to give to local charities or donate my time or materials.  No one is drawing down a million-dollar salary at the local thrift shop.  The mega-chain of thrift shops, on the other hand, has a CEO raking in the bucks.  Being small means they can't afford that kind of overhead.  Being local means you can check them out a little easier.

Donating to charities you've never heard of, or have familiar-sounding names, over the phone or by Internet, is often risky.  Many are just come-ons and frauds, and just put most of the money in their pockets.   Slick places like that will claim that the solicitation brochure they mailed you was an "educational program" so they can claim a higher program/expense ratio.  Many put family members on the payroll, so it doesn't seem like the CEO is making too much money off the gig (but when you combine the family incomes, they are taking in a million or more).   Running a charity should not be so profitable!

The big nationwide charities?   I used to contribute to United Way, and ran United Way Campaigns at GM, UTC, and the USPTO.   No more.  Since they busted the head of the United Way for buying hookers and limos with the charity money, I realized the organization had grown too large.  Then there were the political fights between Planned Parenthood, Catholic Charities, and the Boy Scouts (all were recipients of United Way monies).   Many donors would ask me about this - and you can direct your money be given to a particular charity, or not to another.

Why not just cut to the chase and donate directly to the charity of your choice?   Seems to me that United Way is just adding an extra layer of complexity to the situation.

But for me, it is a trust issue.  And I'll just put a stop to flames from United Way flunkies who would say, "Well, that was an isolated case with the national headquarters, and he went to jail!"   That may be true, but trust, with me, is not something to be so casually broken and then mended.   "Come on back!  We won't screw you this time!"   Uh, right.  Sure.   Sorry, but I would not accept that line from a for-profit business.  Why should I make an exception for charity?  I'll tell you what, if you sell that new headquarters building, live in slum shacks for a year, on a salary of $20,000 each, maybe I'll think about it.  You have to do penance, not just say, "problem solved!"   Not when my money paid for hookers and limos.

Similarly, I no longer donate to PBS, after one reader pointed out that his local PBS station raised 10%  of its revenue from "listeners like you" and spent 10% of its revenue soliciting donations.  In other words, the place is being run by those "foundations" and companies whose names you hear in the little mini-advertisements all the time on the air.   And when the Koch brothers donated to NPR, well, the environmental desk went bye-bye.  PBS is just a commercial network at this point, and NPR is just a paid content provider.  There are people there pulling down millions in salaries.   I'd donate to them if I was making more than them.   I don't donate to organizations that pay people more than me - they don't really need the money that badly.

And how effective are your donations, really?   Do these organization really need my $100, or do they really run on the millions donated by Bil and Melinda Gates?

So, do you donate to charity and if so, to who or whom?  It is not an easy answer.  For me, donating to charities that "help" people in the United States - the wealthiest country in the world - seems kind of stupid.  You are giving money to people who already have money.  Donating money to really needy people in the world - like in Africa - arguably is a better bet, but some even say that aid to this beleaguer continent is backfiring - putting local farmers out of business and causing disruptions in the economy - as well as allowing dictators and corrupt governments to thrive.

I wish there was an easy, clear-cut answer to all of this - because as I see it, there isn't.

One thing I do know is this:  People who claim to be "better than us" because they donate to charity or run a charity or work for a charity, are real assholes.   True altruism is anonymous.   Once you attach your name to a good deed, it no longer is altruistic.