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Forbes.com

 

Obama's Misguided SOTU Call To Philanthropy

January 29, 2014

By Howard Husock

Those concerned about the vitality and independence of America’s private philanthropy can take some solace from what President Obama did not say in his State of the Union address Wednesday night. He did not, for instance, as he did in regard to aspects of the corporate tax, call the charitable tax deduction a tax loophole that needed to be closed, because the wealthy are the ones who most often claim it. That sort of tax "reform" would likely lead to a reduction of charitable giving in the billions of dollars.

What appeared, however, to be a friendly overture to philanthropists by the President in regard to his effort to expand pre-K education, especially for disadvantaged children, actually holds its own significant dangers. The risk, in this case, is not so much a decline in charitable giving but, rather, a reduction in its independence, the result of what might be called the smothering embrace of government.

"And as Congress decides what it’s going to do," said the President, "I’m going to pull together a coalition of elected officials, business leaders, and philanthropists willing to help more kids access the high-quality pre-K that they need. (Applause.) It is right for America. We need to get this done."

As inoffensive as this might seem on the surface, it’s part of a concerning trend in the policy of this White House. As it has previously, the Obama Administration makes clear its view that philanthropy should align its giving with the goals enunciated by government. This is the guiding philosophy of a signature (although small) Obama initiative called the Social Innovation Fund, through which the White House (through the Corporation for National Service) directs some $45 million annually to large private foundations—so-called "intermediaries"—which provide matching monies and, in turn, choose smaller organizations across the country to deliver services.

Key here is the fact that the areas on which the grants, and the private matching funds, must focus, are selected by the White House. The three are called Youth Development, Economic Opportunity and Healthy Futures. The effort to enlist philanthropy to provide matching funds for pre-K programs is cut from the same cloth. It’s certainly possible that some excellent early education programs could be fashioned from a combination of public and private support. But it’s also possible—indeed, there’s plenty of history to suggest—that such programs become bureaucratized and rule-bound, and attract less committed and idealistic staff members than those supported strictly through private sources. Such are the problems that arise when government tries to deliver personalized social services.

There is, as well, what the economists call an opportunity cost for philanthropy. The causes the White House identifies, such as pre-K, may be good ones—but they will also tend to drive out new, creative ideas that politicians can’t even conceive of.

Finally, there’s an even broader implicit threat: the assumption that, because private philanthropy relies for growth on favorable tax treatment, government has a call on them—that private foundations are another piggy bank from which elected officials have the authority to make withdrawls. And just as General Motors GM +1.17%, having been bailed out by Washington, will have a hard time resisting calls to manufacture low-profit electric cars, so, too, will private philanthropy have a hard time telling the White House that it would prefer to support pre-K programs that don’t get government funding—or that it doesn’t like the educational philosophy of programs receiving taxpayer support. All this is on the fairly distant horizon, to be sure—but the threats are there.

Ironically, there was one previous President most associated with an effort to bring private philanthropy into partnership with government—and his is a name one can be sure President Obama would never invoke. As described by the historian Oliver Zunz in "Philanthropy in America", Herbert Hoover naively believed that private funds would be sufficient to limit the federal role in coping with natural disasters.

One aspect of what Zunz calls "Hooverism" is particularly revealing—and relevant to the Obama proposal. The philanthropist Julius Rosenwald, responsible for building Sears into the Walmart of its day, appealed to Hoover to use federal monies to match his own investments in the education, health and employability of poor blacks in the South. As Zunz writes, "That role the federal government was not yet willing to play, even at a modest level". Rosenwald himself went on to support the construction of more than 5000 so-called "Rosenwald schools" throughout the South, helping to mitigate the evils of the Jim Crow "separate-but-equal" era. It’s a story that makes clear that government does not always know best—and the importance of preserving the independence of philanthropy.

Original Source: http://www.forbes.com/sites/howardhusock/2014/01/29/obamas-misguided-sotu-call-to-philanthropy-a-smothering-embrace/

 

 
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