There is belt-tightening across the nation. Sales at retail stores dropped in November, and sellers are bracing themselves for a paltry Christmas season. The reasons are obvious. The unprecedented decline in stock market and home values has eaten away at families' savings. Companies are laying off workers and cutting back their hours. People are rationally responding by cutting back to preserve what they have.
Charitable organizations are feeling the effects of the economic downturn, too. A recent news story entitled "Giving season struggles to earn its name" lamented that this year's charitable giving total is unlikely to top last year's total of $306 billion. It will be only the second time in 40 years that charitable giving failed to grow from one year to the next.
Certainly, that's bad news for organizations that depend on private contributions, particularly given that the poor economy will increase demand for many charitable services. Yet there is a very "glass half-full" way of looking at the statistics: Americans' ongoing willingness to give, even as their household wealth shrinks by trillions of dollars, is testimony to the true generosity of our citizens.
Americans stand out in the world for their commitment to private charity. Americans don't lead the pack just in terms of total dollars donated but also when giving is measured as a percentage of gross domestic product. In 2005, private giving in the United States was 1.67 percent of GDP, more than twice the next most charitable country, the United Kingdom, which gave away just 0.73 percent of its GDP.
A recent report released by the Philanthropic Collaborative shows that Americans' commitment to charitable giving is more than a sign of compassion. It's also an important investment in the country's well-being. The report measures the impact of private and community foundation giving, and it suggests that the grants made by these organizations produce very large economic returns. The authors estimate that each dollar of grants provided by the foundations generates $8.58 of economic benefit.
As the report notes, it's hard to capture in a single statistic all the ways charitable activity benefits society. The value of providing education services to at-risk youth, for example, most likely is much greater than just the increase in earning potential of the recipient. Yet the obvious savings and positive impact these activities generate can be gleaned from examples like the Jewish Social Services Agency, which provides "quality in-home eldercare at an annual cost of $5,000 to $6,000, compared to nursing home care which costs an average of $96,000 per-person, per-year."
This year, it is more important than ever to recognize the critical role charitable activities play in improving our lives, not just because it is traditionally a time of giving but also in light of the massive government response to the economic crisis. Treasury is injecting hundreds of billions of dollars directly into formerly private companies at the same time the debt on the Fed's balance sheet has grown to over $2 trillion. While many argue this response is necessary to stabilize the economy in the short run, any money the government "borrows" to respond to the economic downturn will need to be paid back by taxpayers at some point in the future. In essence, we are all poorer because of it. If this public activity crowds out private activity, including private charity, there is a very real chance we could all be worse off.
The wide range of charitable activities highlighted in the report—disease prevention, programs for those transitioning out of the criminal justice system, job training programs, arts programs for low-income children, library and other educational programs, wildlife and historic preservation programs, the list could go on and on—suggests another reason our charitable organizations are so important. They get people involved and keep them committed.
It is not just those who work for charities but each person who donates to one of those organizations or volunteers there who are involved in making their community a better place. The personal involvement—the decision to give away part of your income, your time, indeed your life—is itself a moral good.