Many of the most important and serious conservative intellectuals today seem to have concluded that criticizing national government welfare policy spending is no longer worth the cost of being considered miserly, uncharitable, and even immoral.
Citing America's iconic early foreign observer Alexis de Tocqueville, he noted that America had long been known for relying on volunteers and communities rather than government to promote social welfare.
"Then, suddenly," Murray noted, "Sometime during 1964-65, in the middle of an economic boom, this consistent trend was reversed." Murray identified a "Causal relationship" in explaining that decline as resulting from the mass increase in national government spending under Lyndon Johnson's "Great Society" welfare programs.
With generous benefits to the needy, why would the average taxpayer not say, "I pay my taxes and the government uses it for welfare so why should I contribute to charity?" That "Government spending crowds out private philanthropy," he argued, "Has been demonstrated in a number of technical analyses," which he cited and explained.
As Mercatus Center economists Matthew D. Mitchell and Jakina R. Debnam have noted, taxation can have a similar effect in the sense that "Capital used by the government is capital that cannot be used by private business," including charities.
"As the government borrows, competition in the market for loanable funds increases, raising the price of borrowing, or the interest rate, for private investors. For firms, this means an increase in the cost of doing business," crowding out "Companies and projects that would have otherwise been profitable" with a lower interest rate.
As far as taxes and spending, Mitchell and Debnam note that for the period prior to the 2008 Great Recession, European economists Andrew Mountford and Harold Uhlig had calculated that "a 2 percent increase in government spending will-under the best scenario-lead to a less than 2 percent increase in GDP in the short-run." But eventually, "The tax increases needed to finance this spending will result in a more than 7 percent contraction in GDP." The Congressional Budget Office estimated that that such crowding out would "Reduce inflation-adjusted gross domestic product per person by 6 percent in 2025 and by 15 percent in 2035," a $1.2 trillion loss that could not be used for individual, market, or charitable purposes.
Economist James L. Caton noted that by 2021 Federal Reserve Quantitative Easing had led the Fed to park significant government deficit spending into its private balance accounts rather than selling bonds into the market.
Analyzing the available data comparing private AAA-rated bonds and the Fed funds rate, Caton found that keeping new money out of the financial system allowed the Fed to keep its federal funds rate artificially lower than otherwise, giving it an advantage over private rates, "Meaning that public [government] borrowing becomes relatively cheaper," crowding out lending for private businesses and charities.
A study of charitable giving to major organizations by academics James Andreoni and A. Abigail Payne found that government grants to charities result in significant reductions in private charitable fund-raising.
In a more extensive study, Andreoni and Payne analyzed government grants and results data "On more than 8,000 charities operating in the United States. We measure an overall level of crowding out of about 75 percent: private donations fall by about three quarters of the amount of government grants." Apparently, the "The bulk of the crowding out, 70 percent, is due to a change in fundraising" administration rather than direct individual refusals to contribute.
https://www.aier.org/article/big-government-welfare-funding-crowds-out-beneficial-social-behavior/
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