Why give now?

At home, social-services groups and charities face enormous budget shortfalls just as demand is intensifying. Abroad, systemic increases in food prices have pushed the number of people facing starvation to nearly 1 billion.

In normal times, American generosity is legendary. Between 65 and 85 percent of families make charitable donations every year. In 2003, the average donated was more than $1,800. But in the midst of a financial crisis, a seized-up economy, home foreclosures, and half a million jobs lost last month alone, how can Americans be expected to just … give money away?

Because helping those in the greatest need – either through private giving or public aid – is not only the right thing to do, it's also in our singular best interest.

Research shows that people who give just wind up happier than those who don't. In a study of survey data from 30,000 people, Arthur Brooks of Syracuse University in New York found that people who gave to any charity were 43 percent more likely than non-givers to report being "very happy." They were 68 percent less likely to report having felt "hopeless."

There even appears to be a multiplier effect. Katherine Carman of Tilberg University in the Netherlands found that people seated in cubicles near people who give actually become more generous. "Economic theory says I should want to free ride on other people's contributions," she said. "But in real life, we live in social groups. My research shows that if you give more, I will give more."

To focus your giving on what you care about, new websites target contributions to specific causes. RedefineChristmas.org mobilizes giving with meaning. ChangingThePresent.org lets you give friends or family a stake in a wide range of effective humanitarian and environmental projects. And JustGive.org lets you send a gift card that can be used at any of 1.7 million charities around the world.

Now it's time for the public sector to follow suit, by targeting American aid dollars more directly and effectively to those in the most extreme poverty – and focusing on what works.

At a time of limitless demand for federal dollars, it will be a political challenge for the Obama team to fulfill the campaign pledge to double US assistance (even though poverty-focused aid is less than 1 percent of the US budget). Yet it could change the game by pushing harder to generate more certain results per dollar spent – branding its efforts around the quality, not quantity, of funding.

Consider two steps:

•First, focus US aid on the last billion – the very worst-off who scrape by on incomes a fifth of those in mid-tier developing countries (which struggle, but where survival isn't in question).

Seventy percent of the poorest nations live in Africa, yet only a third of US direct assistance goes there. We send as much aid to Russia as we do to 20 sub-Saharan nations combined. This lack of focus inflicts an intolerable opportunity cost, for which the very poorest pay with their lives, dying by the millions every year.

Focusing aid and development on the last billion – combined with a platform of clear, consistent metrics for project evaluation to be shared by NGOs and foundations – will generate breakthrough results. Not to mention happier taxpayers.

•Second, create a single US authority with a mandate to cut extreme poverty in half by 2015. Today some 50 federal agencies own a piece of the problem, and they're legislated into straitjackets of competing "directives," many of which contradict efforts to end extreme poverty, and often perpetuate it.

Whether through a rewrite of the Foreign Assistance Act or new legislation, a single US authority should lead the world by example – focusing on the last billion and making poverty-focused economic development as pivotal to American standing as diplomacy and defense. House Foreign Affairs Committee chairman Howard Berman has said he wants to see foreign assistance "reinvented." It's time.

Americans are only too happy to give when they know their dollars make a difference. As individuals, we can tap technology to make it easier to direct donations to effective projects. As a nation, particularly in hard economic times, our policy should be to prioritize and concentrate resources on the very worst-off.

It feels good to give. It feels even better when we know that what we give works.

• Tom Coleman, formerly at the Chicago Board of Trade, is a microfinance consultant. Mark Lange is a consultant and former presidential speechwriter.