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A Better Way to Help the Unfortunate

Posted on the 03 December 2023 by Smallivy

A Better Way to Help the Unfortunate


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Part of the reason for trying to become financially independent is to be able to help the unfortunate.  It is great to be able to help a neighbor after a house fire, a family whose breadwinner loses a job, a single mother with the modest income, or an alcoholic on the streets recover and get back into society.  Bad things do happen to people.  Also,  sometimes bad choices leave people in great need.  It is important for a society to provide at least a basic level of support for those who cannot take care of themselves and help those who made bad choices turn their lives around.

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Public welfare provided through the government, however, has been a dismal failure in the United States.  Despite the introduction of various social programs by Franklin Roosevelt as part of the New Deal in the 1930’s and the expansion of programs under Lyndon B Johnson in the War on Poverty in the 1960’s, there remain many people in poverty.  In fact, social programs can make the problem worse by encouraging people to not work and not better themselves.  As a result there are millions of people who could make a contribution to society but choose not to.  They never get the experience of doing things for other people.  Nothing is expected of them.

Part of the problem is that benefits are centrally controlled and given out by individuals who have little incentive to prevent fraud and waste.  While there are diligent individuals working in welfare offices, the rules and difficulty changing anything make it easy to just ignore signs of fraud or just not investigate too deeply.  When rules are made to combat fraud by central planners, those committing the fraud find ways around the rules while those in legitimate need find it more difficult. What ends up happening is some people still game the system but it becomes really difficult for those who truly need help to get it.

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A Better Way to Help the Unfortunate

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A better way: Go private

Like many things, distributed, local control would be far more effective.  Local offices would know what was needed in their area, could get to know the people seeking benefits and help them get to the point where they would no longer need hand-outs, and could do a better job of identifying those who were just taking advantage of the system.  They would also be more likely to design programs that really helped people, such as training programs, rather than just hand out checks and debit cards.

It is unreasonable to expect local control through a government program. Everything gets centralized. Those who work within the system will know things are wrong and don’t work well, but feel powerless to change anything. Those who try find that their efforts are pointless and give up.

To get to a truly efficient and effective system, we need to change to a private system. Or, actually, many private charities and groups. These groups would be far more flexible and people finding that a group isn’t working could change things or change to other groups that are effective.

Let the people giving the money help control fraud

If giving were localized, instead of having funds taken by force by the government and then centrally managed, donors would find the programs that were effective and support them and not support those that were ineffective or fraudulent.  It is different when you see your own money being used.  People wouldn’t accept lavish offices or wasteful spending by the charities.  Local giving would also eliminate a lot of government administrative personnel that central control requires.

Rather than an act of Congress being needed to end waste and abuse, which usually just results in more bureaucracy and an even worse system, fraud and waste would be eliminated as donors shifted their donations to other, more effective groups. People could simply vote with their wallets.

Sounds great! How do we get there from here?

So here’s the idea to make it happen:  Make charitable contributions for charities that cover specific needs (such as food, clothing, shelter, and job training) tax credits, such that each dollar donated would result in one dollar less in taxes owed, up to 10% of one’s income.  The government would then reduce the amount of welfare provided based on the money that is donated to charities that meet the same function.  For example, if money is donated to food pantries in an area, the government would reduce or eliminate the provision of food stamps in that area.  If money were donated to a group that provides housing assistance for low-income renters, federal housing payments would be reduced, and so on.

A Better Way to Help the Unfortunate

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The SmallIvy Book of Investing, Book 1: Investing to Grow Wealthy

Because individuals would be paying the money to taxes anyway if they did not donate, and because many individuals like to have control over where their money goes and to have the money used locally, it is likely that most required charity would be met without any government money being needed.  Because there was less money being paid to people to administer the charity (particularly high level, highly paid individuals), and because there would likely be less fraud with local control, the amount of money going to help people would increase while the amount paid by donors would be less than they were paying in taxes.

So what do you think?  Would this be a better way?  How would we get it started?

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Disclaimer: This blog is not meant to give financial planning advice, it gives information on a specific investment strategy and picking stocks. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

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