Friday, July 21, 2006

Is it better to give $37 billion or $1,000?

There's been much ado lately over Warren Buffett's announcement that he's donating $37 billion to charity. Now, don't get me wrong-- Buffett's gift will probably help millions of people, and he does deserve a round of applause. But I'm not so sure the standing ovation is warranted.

Yes, $37 billion is a lot of money. A whole lot of money. More than the GDP of about 2/3 of the world's countries. Yet is his gift 37,000,000 times more admirable than a $1,000 gift? I don't think so. In fact, in a lot of cases, I think the $1,000 gift is more admirable.

Although the percent of households that give to charity increases steadily as family income goes up (from 50-60% up to 80-90%), the percent of income that's donated is actually higher among the lower-income givers than their middle and upper class counterparts. And it's even more dramatic than it looks. Someone earning $30,000 a year who gives 5% away has $28,500 to live on; someone earning $300,000 a year who gives 5% away has $285,000 to live on. So what if the second person gives a dollar amount that's 10 times higher? They also have $250,000 more for themself. (And that's not to mention the difference in the tax deduction benefits, if the $30,000 earner itemizes at all.)

This is part of my problem with the hurrah over Buffett's decision. Yes, it's wonderful for him to give away $37 billion. But he's still got $7 billion for himself. It's not like this is a deeply painful act of self-sacrifice. At a certain point-- a point that Buffett passed long ago-- money is just numbers and figures, and it doesn't matter if he has $1 billion or $10 billion or $100 billion.

Of course, there are plenty of other rich people who give nothing or a pittance. But I'm not sure how much this reflects positively on Buffett as it reflects negatively on people like the five Waltons who would rather preserve their $16 billion (each!) for their own family instead of giving it away to help thousands of other families-- and/or instead of squeezing every dime out of their store employees and the workers at the sweatshops they contract with for their products.

To his immense credit, Buffett seems to have a handle on all of this himself. He sounds like a a good guy and a modest one, and from what I've read, he probably doesn't believe he deserves all this fuss, either. He even called the donation "a non-event for me... in some ways." He says of himself and his late wife: "To the extent we did amass wealth, we were totally in sync about what to do with it - and that was to give it back to society. In that, we agreed with Andrew Carnegie, who said that huge fortunes that flow in large part from society should in large part be returned to society." And that "I would argue that when your kids have all the advantages anyway, in terms of how they grow up and the opportunities they have for education, including what they learn at home - I would say it's neither right nor rational to be flooding them with money. In effect, they've had a gigantic headstart in a society that aspires to be a meritocracy." Good for him.

But there are also countless everyday people out there who stretch to cover the basics for their own families, and still make it a priority to donate money to people in need, to tithe to their church, to take time at the end of a long hard day to volunteer. When they give to others, they can feel the hit hard in their own lives, but they do it anyway because they believe it's the right thing to do. In my book, those are the real heroes.


Tiredbuthappy said...

Good post, Penny. I think you're right that more personal sacrifice equals more virtue, but I'd also like my giving to be shrewd enough to have maximum impact. A lot of the folks who give regularly give to things I think are not very helpful to the world, and sometimes even harmful (like Christian mission work, some of which brings needed medical care etc to folks in developing nations, but some of which is just downright ugly proselytizing). But a lot of folks give to essentially good causes but choose organizations who spend a huge percentage of what they take in on slick advertising, etc.

J.D. said...

Great post. I keep meaning to write something about charitable giving, but just cannot find the words. You did a great job here, and I'll be sure to refer back to you if I ever get my piece finished! :)

Debt Free said...

More admirable should not be confused with better. Better would denote the gift's ability to help people. Obviously, Buffet's 37 is going to help many, many more people. Great post nonetheless.