Comparing Presidents, Charitable Giving

This post looks at charitable giving over time, and, in particular, broken out by Presidential administration. Because I recently had a post on regular church attendance, and because religious contributions are a very big percentage of charitable contributions in general, the post also shows religious charity as a percentage of total charity.

The data on charity used in this post is the data used by Thomas A. Garrett and Russell M. Rhine of the Federal Reserve Bank of St. Louis in their recent working paper entitled Does Government Spending Really Crowd Out Charitable Contributions? New Time Series Evidence.

The data was kindly provided by Thomas A. Garrett in private correspondence. Because the data comes from their paper, because their paper is fascinating in its own right, and because results have some bearing on this post, I’d like to spend a moment on some points raised by their paper.

1. The causality tests … reveal that government spending does not cause charitable giving, but that charitable giving causes government spending. This suggests that past studies may not be capturing a causal relationship between government spending and charitable giving, but rather they are just capturing a significant correlation between the two variables.

2. First, we find strong evidence that a change in wealth, as measured by the S&P 500, has a positive and significant effect on all categories of charitable giving.

3. Weak evidence is provided that changes in GDP and marginal tax rates effect charitable giving. Year-to-year changes in GDP have a positive and significant effect on charitable contributions to education only, thus providing some evidence that charitable contributions to education are procyclical.

4. Of all contribution categories, the evidence suggests that only education giving is sensitive to changes in economic conditions and taxes.

5. Finally, the coefficient on the recession dummy variable is only statistically significant in the models of charitable giving to education…. on average, charitable contributions to education are 0.51 to 0.53 percentage points higher during a recession year relative to non-recession years. This supports the idea that budget cuts or reductions in spending growth during recessions may entice more contributions to education if the public fears education services will be reduced. This again reflects the sensitivity of education giving to changes in economic conditions.

In addition to data used by Garrett and Rhine, in this post I also use GDP from the BEA’s NIPA Table 1.1.5.

OK. Now for some graphs….

Some summary tables…

Garrett and Rhine’s notion that charitable giving is tied to increases in the economy and income goes some way toward explaining the results… but not all the way, when you look at things by administration. The fact that charitable giving saw its second highest increase under GHW doesn’t fit with increases in charity being correlated with increases in real GDP per capita or disposable (and after change in debt obligation) real income, but those variables, especially the second one, do seem to make sense in explaining the order in which the other Presidents appeared in the sample. What’s up with GHW? I have no idea. I would note that the result is basically due to the big jump from Reagan’s last year to GHW’s first year, and otherwise, there isn’t anything that would indicate there was such a big increase in giving during the GHW years. One other notable factor… as in many of these series we’ve looked at so far, things haven’t gone so well in the GW administration.

In any given case, given the tight relationship between real disposable income (after accounting for increases in debt) and charity, it would seem that the easiest way to get people to give more is to make them richer. Whether in general the wealthy give more to charity than the poor or not, on the other hand, I cannot answer.

Now, another point. I had a few posts pointing out that in my opinion, many donations to religious organizations are very different from charity regardless of how the law treats them. I realize that not all readers agree, but I think its supported by the facts. Regardless, the biggest jumps in religion’s share of the charity dollar have occurred under GW, Reagan, and Carter. Arguably, these are the Presidents most associated with faith in the public mind. So it may be that the President’s bully pulpit influences how charitable dollars get allocated.

Next post in the Comparing Presidents series… it just occurred to me, I haven’t looked at the stock market!