Charitable Giving

This is the time of year when many people reach out to their favorite charities.  Consider a charity that is helping with disaster relief after SuperStorm Sandy, provides meals for families and seniors, provides housing assistance for those in need, and so much more.  No, it is not the Red Cross, the Meals on Wheels program or Habitat for Humanity.  The charity is the U.S. government.  They are desperately in need of funds.  As they help clean up after Sandy, they have not even finished paying for damages from hurricane Katrina that battered Louisiana, Mississippi and Alabama in 2005.  Anyone can donate online at the U.S. Treasury.  As with other charities, you can use a credit card.

During and since the drafting of the U.S. Constitution over two hundred years ago, we have argued over the wording of the “general welfare” clause of the Constitution (Article 1, Section 8).  James Madison, a Federalist and chief drafter of the Constitution, said that the phrase was a limited power conferred on the federal government; that “general welfare” meant that welfare which applied to all the people.  You can read Federalist Paper No. 41 for his more lengthy explanation of this controversial phrase.

The anti-Federalists, always suspicious of the powers given to a large and powerful central government, replied that “general welfare” could mean anything.  What, they argued, was to prevent this newly formed Federal Government from becoming a charity?

Madison scoffed, arguing that the taxing power was restricted to only those taxes which were uniform throughout the country.  The taxing power is specified in the same sentence as the “general welfare” clause, separated only by a semicolon.  Therefore, it was preposterous that anyone could argue that “general welfare” could mean anything.

Alexander Hamilton, also a Federalist and an advocate of a strong Federal Government, argued that the “general welfare” clause was essentially a plenary power given to Congress, in line with its power to spend.  To the anti-Federalists, this violated the spirit of the Constitution which was designed to enumerate, or limit, the powers of central government.

In short, Madison says general welfare is limited by the taxing power that immediately follows.  Hamilton says it is not limited because Congress’ power to spend is not limited. 

United States vs. Butler in 1936 and Helvering vs. Davis in 1937 were two Supreme Court decisions that sided with Hamilton.  What the anti-Federalists had warned about was about to come true.  The U.S. Government was on its way to becoming – over the next 75 years – the largest charity in the world.

Some think that charity should be part of a government’s role; although some of those would argue that charity should not be the chief role of a government, as it is now.  Some argue that charity should not be in the hands of government.

Many of us will receive appeals from many charities during this season of giving.  The Treasury does not mail appeals for money despite the fact that it is performing the same helpful acts as other charities.  Charity Navigator, a charity watch dog organization, does not rate the U.S. Treasury for its management of the funds it receives.  But the Treasury really does need the money as it helps to feed, cloth and house millions of people each month.  

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