Archbishop Charles J. Chaput has an excellent piece in the current edition of First Thing on the current threat to Catholic charities and the historical relationship between the Church and state in America:
As a result, the original links between freedom and truth, and between individual rights and moral duties, are disappearing in the United States. In the name of advancing the rights of the individual, other basic rights--the rights of religious believers, communities, and institutions--and key truths about the human person, are denied.
In squeezing the Church and other mediating institutions out of the public square, government naturally assumes more power over the nation's economic and social life. Civil society becomes subordinated to the state. And the state then increasingly sees itself as the primary shared identity of its citizens. But this is utterly alien to--and in fact, an exact contradiction of--what America's founders intended.
America's original vision conforms closely with subsidiarity, a core principle of Catholic social teaching. Through mediating institutions like the Church, America has always sought to meet people's needs at a local and even personal level, thereby keeping the state properly limited. As civil authorities intrude on the daily work of mediating institutions, they also substitute themselves for the role of the Church and other similar groups. These tendencies are reinforced by a strong secularist spirit among America's knowledge classes. In education, scientific circles, and the mass media, religion is often seen as a backward social force, a source of division and violence. The language of pluralism and diversity is misused to advance the antidemocratic goal of marginalizing believers and religious communities from the national conversation.
Today's distaste for religion among America's leadership classes has created disarray in our civic philosophy. The American proposition, while nonsectarian in nature, has always been marked by a belief in God’s sovereignty over human affairs and the importance of religion in personal and public life. The secularization of America's political and intellectual life has weakened these tenets that shaped our common identity. Without God, without the natural-law and the natural-rights tradition, we no longer have any broadly shared moral consensus in which to ground our politics, and from which to draw a common purpose.