Thursday, July 2, 2009

Obama to Search for "Most Promising" Nonprofits in America: A Reason to Use the Tax Code instead of Direct Appropriations to Fund Charities

On June 30, 2009, according to the Chronicle of Philanthropy, the White House announced that administrative officials will search for "worthy" charitable recipients of a $50 million fund designed to help charities expand innovative social projects:

Surrounded by more than 100 philanthropic leaders in the East Room of the White House, Mr. Obama said he was glad there were some “deep pockets” in the audience, as he also wants corporations and foundations to chip in to help the administration create a “new kind of partnership between government and the nonprofit sector.”  Our nonprofits can provide the solutions,” he said. “Our government can rigorously evaluate these solutions and invest limited taxpayer dollars in ones that work.” But, he said, private donors are needed to provide seed capital, matching funds, and strategic advice.

The Social Innovation Fund, described in flowerly optimistic language on the White House Blog, was part of the Edward M. Kennedy Serve America Act (signing video of signing ceremony and link to million page act) though Congress has yet to appropriate the money.  Perhaps this is the charitable version of an "unfunded mandate."  Still, I don't want to be too cynical about the initiative just yet.  But I'd rather hold my applause until the checks are sent.  Who can complain, though, when the government wants to give $50 million to charitable organizations.  Ok, here is food for thought:  The Nonprofit Sector is known as the Independent Sector for a reason.  It is independent and not beholden to either government or business. In an ideal world, it should receive all of its funding from grass roots sources so that it may maintain its independence and indeed, its appareance of independence.  Once the government starts doling out funds in a selective manner to nonprofits selected this administration or that, we should expect that only those charities whose political inclinations are in line with the doler-outers will receive funds.  Will the Obama administration, for example, direct funds to the conservative Heritage Foundation?  Probably not; if I were in charge the public interest law firm that challenges all sorts of affirmative action efforts -- the Center for Law and Justice, I think is their misnomer --  would not get a red cent!  Hey, I am just being honest.  I'd find some way to label them "unworthy".  See, that's the problem with what seems like a good idea.  It has to be administered by people on an official level.  In this case, it seems innocuous enough but wait until a liberal think tank gets a grant but a conservative one does not.  Or in some future administration, a conservative group gets funded but a liberal one doesn't.  Good intentions don't always lead to good results.  The point is, if nonprofits ought not finacially support any particular governmental philosophy, perhaps the opposite is true.  That's my point of view.


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I think the intention of the Social Innovation Fund is to focus on those charities that aren't inherently partisan - if you notice the different groups Obama mentions in his speech, the nonprofits focus on issues like education, youth development, etc. and basing their decisions on impact metrics (which might slant partisan, but not to the degree you mention).

I share some of your concern that the government is entering a space that is fundamentally supposed to be independent of government control, but people still have the freedom to refuse government money or to establish organizations that would not receive government money. In this case, the relevant question is whether the government better serves the goals of society by establishing its own organizations with that $50M or by scaling already successful nonprofits (obviously, Obama believes the latter).

Lastly, I don't think using the tax code provides any significant additional protection from partisanship when compared to direct appropriations. In either case, you have to deal with people who can always influence policy decisions with partisan politics (with the tax code, who's to say that the Exempt Organizations division of the IRS won't be any less influenced by partisanship?). And with the tax code, you won't be able to discriminate between better performing and under performing nonprofits.

Posted by: Tony Wang | Jul 2, 2009 12:06:19 PM

Good points all, though I think you are describing how the fund might work in a perfect world. Even "nonpartisan" organizations must inherently be influenced by whatever political philosophy pervades the thoughts of their leadership. This is ok, but when the government begins to fund nonprofits on a more substantial scale we might expect that individual political beliefs will bend to the will of those in power. With regard to my point that the use of the tax code is less fraught with government influence, my meaning is that grass roots individuals can pick and chose who they will support, of course based on their own political viewpoints. It is not the influence of politics that worries me, as I think even the nonprofit that disdains all government support must be led by persons with poltical viewpoints. Instead it is the influence of any present administration's politics that worries me. That is, it is the impact of official government policy, it seems to me, that would weaken the independent sector's usefulness.

Posted by: Darryll Jones | Jul 3, 2009 8:41:38 AM

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