I think the arguments over economic efficiency are useful, but miss the big picture.
The biggest problem with government charity is that it is socially disruptive. When you subsidize something, you get more of it. Now, that’s true if charity is private or public, but there’s a big difference - public charity is faceless, and tends to be seen as an entitlement. This leads the receivers of it to become embittered and demanding of more.
Private charity tends to be seen for what it is - charity. People tend to feel grateful for receiving it. In addition, private charity is much more personal - the people actually giving their time and money are the ones who meet the poor and work with them. The public employees who meet the poor are more likely to be career civil servants. This is why the success rate tends to be so high with private charities in terms of getting people back on their feet again. One of the reasons the Bush administration had so much agreement from Democrats regarding their private charity initiatives is simply because the success rate among them is so high it really can’t be disputed.
Government charity tends to just grow the number of people receiving it, and tends to distort society. For example, here in Canada the liberals keep pushing for universal subsidized daycare. Is there anyone who thinks that making day care free won’t result in an explosion of people putting their kids in day care? Of course it will. It’ll also lead to an increase in the birth rate, because one of the biggest limiting factor in having children is being able to afford to raise them while working. The net result will be a huge cost to the government, which will require higher taxes, which will reduce the incentive to work even more.
Private charity can be more discriminate. The poor woman down the street who needs to work might find a helpful community home to look after her children after school - this is a common form of private charity. But that same community home is not likely to take in the kid of the two yuppies down the street who are looking for a way to get both of them back to work so they can buy a new SUV.