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In the Fight Over Big vs. Small Government, Philanthropy Has Forgotten the Poor

William A. Schambra

Philanthropy’s standing with the policy makers in Washington, D.C., has reached an all-time low. A prime reason foundations have earned that status is that they have lost sight of their primary obligation to support the poor.

Philanthropy, for instance, regards the charitable tax deduction as the sine qua non of its work. And yet President Obama, in spite of his service on several foundation boards in the years before he ran for president, has repeatedly attempted to reduce that deduction.

Likewise, during the recent presidential election, the Republican candidate Mitt Romney proposed a general cap on tax deductions that would no doubt have fallen particularly hard on charitable giving.

Adding insult to injury, during the recent negotiations over the fiscal cliff, policy makers treated the charitable deduction as a mere pawn in the political chess game, as if it were just another pesky loophole for the wealthy that should be closed so the federal government could collect more tax revenue.

This is a far cry, indeed, from the almost hallowed status the deduction enjoyed until recent times.

Only after wealthy and powerful foundations had spent substantial sums on wealthy and powerful K Street lobbyists was Congress reminded that in fact philanthropy isn’t at all about the wealthy, it’s about the poor. 

After all, the argument went, the poor and their nonprofit representatives would suffer most directly from a diminished deduction.

How could Congress have forgotten this? I would suggest it’s because philanthropy itself has forgotten this.

For all the diverse and worthwhile purposes it pursues in America, philanthropy should ultimately be about the poor. But it recalls this truth only when visions of revenue windfalls begin to dance in Congressional heads.

Both conservative philanthropy and liberal philanthropy have lost sight of this truth in their fierce and unrelenting ideological struggle over the issue of big vs. small government—a struggle that shows no sign of abating.

Ironically, both sides insist that the well-being of low-income people is at stake in this struggle.

Conservatives, for instance, argue for a smaller federal government. They do so because it would sustain not only a more vigorous marketplace but also a more robust civil society. Civil society, not government, is the best instrument to meet the needs of low-income people, in this view.

For poverty all too often results from the breakdown of the critical civic institutions like family, neighborhood, and voluntary associations that shelter and nurture the most vulnerable among us.

When big government begins to assume that function, conservatives argue, it only further erodes civil society, while doing a woefully inadequate job as a substitute.

But if this argument is valid, then conservative philanthropy should accompany its opposition to big government with a massive commitment to big civil society. That is, it should devote itself first and foremost to supporting and strengthening the nonprofit organizations that serve low-income people.

Yet conservatives frequently forget their responsibility for nurturing civil society.

Another argument for smaller government—that it will liberate the energies of entrepreneurial individuals within the marketplace, thereby producing greater wealth—tends instead to dominate conservative discourse.

That argument brings with it a formidable array of allies: wealthy individuals and corporations and their libertarian-leaning think tanks, journals, and activist nonprofits.

Civil society tends to disappear from the libertarian perspective, because once government is reduced, the marketplace can take care of the rest. There is no intermediate layer between oppressive state and free individual.

So philanthropy, in this view, needn’t be wasted on civil society. Rather, it should be devoted entirely to winning the intellectual and political battle for smaller government and freer markets by supporting activist nonprofits deeply engaged in electoral warfare.

This was the brand of conservatism fully on display in the 2012 election. No wonder a majority of the voters felt that conservatism cared only about the wealthy and not the vulnerable.

As for progressive philanthropy, it supports big government because it believes that is the best way to meet the needs of low-income Americans. But it, too, has taken its eye off the ball.

Government today is big and getting ever bigger not because we’re spending more to meet the needs of the poorest among us. Rather, our bulging domestic budgets are increasingly devoted to Social Security and Medicare for the swelling ranks of the elderly, many of whom are by no means poor; to interest on a rapidly growing public debt; and to massive retirement and health-care benefits for government employees.

Entirely aside from the allegedly mean-spirited fiscal doctrines of conservatism, indisputable budget realities themselves are eroding discretionary spending for the poor while we struggle to meet our entitlement obligations.

Liberal philanthropy has, over the past decade, devoted itself more and more to advocacy on behalf of greater government spending. Limited foundation dollars can’t do much to solve problems directly, so the reasoning goes, but they can mobilize the much more substantial resources of government for that purpose.

But indiscriminate support for more spending only means that foundations end up carrying water for wealthy elderly Americans, powerful labor unions, well-paid government employees, and other distinctly nonpoor constituencies that have powerful vested interests in federal and state spending.

For liberal philanthropy to be true to its professed end of serving the poor, it should not lobby generically for more spending. It should instead become much more discerning and demanding about where that spending goes.

It should seek ways to redirect government dollars away from the professional providers of services to their impoverished recipients.

When President Obama recently asked progressive foundations and nonprofits to support his proposed tax increase on the wealthiest Americans, for instance, they should have taken that opportunity to ask for a serious conversation about who would benefit from enhanced revenues.

But to undertake that conversation would mean challenging the prerogatives of some powerful traditional political allies, who tend to elbow aside the poor in the struggle for shares of government spending.

It seems, then, that conservative philanthropy has lost sight of the poor in its struggle for smaller government, while liberal philanthropy has done the same in its struggle for larger government.

So when philanthropy argues that Congress shouldn’t reduce the charitable deduction because it would harm low-income citizens the most, it should rightfully feel a pang of conscience. For it seems to recall its obligation to the poor only in moments of political crisis.

Behind these failures, though, I think there’s an encouraging possibility.

Over the years, I’ve been struck by the degree to which many of my progressive friends tend to admire the same sort of nonprofit leaders I do: scrappy, self-sacrificing, outspoken grass-roots champions of low-income communities who organize their neighborhoods to work on their own behalf, doing for themselves what they can and applying political pressure where necessary for the resources to do yet more.

I tend to emphasize what such groups can do for themselves, while my progressive friends tend to emphasize what such groups should claim from others.

But there is, I would maintain, a remarkable degree of overlap.

If, as I suggest, the needs of the poor demand that conservative philanthropists challenge their libertarian, free-market allies, while progressives challenge their well-heeled government allies, perhaps the stage is set for an alliance.

Such an alliance would not require abandoning core principles. Conservative philanthropy will always be more sympathetic to the market, and liberal philanthropy to government.  But on the critical importance of vigorous, aggressive, grass-roots civic groups for low-income communities, I think we can agree and work together.

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