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Philanthropy is on a collision course with presidential campaign politics

The tension between the haves and have-nots that is fueling this year's presidential campaigns is also provoking soul-searching among not-for-profit organizations. Here's an opinion by Tom Watson, president of the consulting firm CauseWired.

By Tom Watson

Ever wonder why Franklin Delano Roosevelt’s profile appears on the ten-cent coin?

It’s a story of philanthropy, activism, and democracy, and it holds lessons for U.S. philanthropy on the cusp of a national election year — and at a time when the nonprofit world faces increased scrutiny and skepticism, as well as potentially roiling structural changes.

Seventy-eight years ago this month, President Roosevelt created the National Foundation for Infantile Paralysis, as an extension of his Warm Springs Foundation, to fight the disease that cost him his mobility.

With the help of the radio star Eddie Cantor, the organization started a national fundraising campaign in celebration of President Roosevelt’s birthday in 1938. It was christened "the March of Dimes," as a play on the name of the popular newsreel series The March of Time. Tens of thousands of letters, each with a dime inside, flooded the White House, and over the next few years, the campaign became a well-organized national crusade. From its founding to the discovery of the Salk vaccine in 1955, the organization raised and spent nearly a quarter-billion dollars on a solution that science achieved.

In 1946, a year after Roosevelt’s last birthday, the U.S. government put FDR’s profile on the dime in memory of him.

Thus, the president who brought the nation back from the Great Depression and led it through the Second World War is part of everyday pocket change not for those accomplishments, but for the creation of a kind of democratic philanthropy that still represents the best of American civic life.

The original March of Dimes is often held up as an exemplar of that rare democratic philanthropy, and rightly so. And it seems to me, as we start a national election year, that the growing debate over income inequality and the role of wealth in our society puts the nonprofit sector on a collision course with electoral politics. The year 2016 will be one of soul-searching in U.S. philanthropy, precisely because of the same forces and trends being debated by the candidates for president.

Eight years after the 2008 market crash and the onset of the Great Recession, voters will choose President Obama’s successor in an atmosphere of political standoff, economic stagnation for many, and outright anger, in many cases based on class, race, or gender. And although the U.S. economy has recovered from the depths that defined that last open national election and its aftermath, the middle class is shrinking while those in top tier of assets and income distribution have increased their share of overall wealth.

Philanthropy has followed along closely; overall giving has recovered, and we see new wealthy donors making their mark by giving away their fortunes.

But the same economic and class debate that will roil this spring’s primary election season for both Democrats and Republicans also shadows the world of American giving — without the ballot boxes and vast public debate.

Despite our "ice -bucket challenges," our crowdfunding sites, our social networks, and our Giving Tuesdays, democracy itself remains the greatest challenge to American philanthropy — and perhaps even the most important long-term threat to the structures that define the nonprofit sector in the United States.

This not a March of Dimes era. Indeed, it is more clearly a Mark Zuckerberg era than a Facebook era. The disparity between democratic philanthropy and its plutocratic cousin is nowhere more apparent than in the importance placed on the Facebook co-founder’s commitment to giving away much of his vast personal fortune compared with the potential of the largest digital social network in the nation.

Mr. Zuckerberg’s billions may create major causes and eventually steer public policy, but many nonprofits will struggle to find in their budgets the money required to purchase desperately needed social-media eyeballs from his advertising department. If there’s a better example of the power gulf in American philanthropy, I’m not sure what it is.

Nonprofit organizations and foundations (and their benefactors) are granted an extraordinary exemption under our tax system — they do not have to support our communitarian public structure with their dollars — and in return, they are expected to produce extraordinary results. Those results might be feeding the hungry in soup kitchens, housing the homeless, caring for the sick and elderly, educating children, protecting the environment, fighting disease, or eradicating poverty, a range of palpable human services leading to the saving of a life or the nourishing of a person. Extraordinary results might also include enriching our culture through the arts, encouraging scientific exploration, supporting research and activism, or promoting the kinds of structural changes that might, in theory, make modern life better for the society that grants a tax-free privilege.

In other words, for every billionaire’s dollar donated under Warren Buffett’s Giving Pledge, there is a cost to the taxpayer; it means fewer dollars for public budgets that we the people (in theory) control through the ballot box, and more for the budgets of causes that are often controlled by those who fund them.

As Gara LaMarche, a veteran of big foundations and head of the Democracy Alliance of major progressive donors, wrote in a widely discussed 2014 essay on democracy and philanthropy that "however many well-intentioned and high-minded impulses animate philanthropy, the favorable tax treatment that supports it is a form of privatization."

Which, of course, it is. We can all admire the leadership of the Bill & Melinda Gates Foundation, for example, while admitting that its huge endowment unquestionably steers the public policy of our republic.

Of course, that’s a somewhat academic view. Back here on earth, where I work as a consultant to important causes and nonprofit organizations, new major donors entering the philanthropic arena are cause for hope, if not celebration. Yet I wonder, even in that context (or maybe especially so), whether we as citizens extract enough for the tax deductions we bestow on philanthropy.

I’m particularly interested in how grant seekers can get more information, especially in a networked world in which vast databases should be able to put donor research at anyone’s fingertips.

But to be brutally honest, public philanthropic data is scant — and seems purposely so.

What once seemed fair in the annual filing of a skimpy 990 IRS form now seems a bit undemocratic. Shouldn’t we know more about major donations? About how nonprofits spend their tax-free dollars? About how foundations fund theirs?

This information exists, of course. This is generally a well-audited sector, especially among larger and more influential organizations.

Putting myself in the shoes of those doing the fundraising at nonprofits (as I usually do), I can see how an increase in mandatory disclosures for foundations and others donors would help those who do great work find the money they need, without putting a large burden on their benefactors.

I suspect, however, that the large foundations and biggest donors are happy with fairly sketchy disclosure requirements, and that the sector will be dragged into a more transparent world, and not vice versa. I fear that greater disclosure threatens the big money. The balance of power between those writing the checks and those doing the work seems even more unbalanced now than it once did.

As Aaron Dorfman, executive director of the National Committee for Responsive Philanthropy, commented a couple of years ago: "What I’m left with is the sense that, on the issue of transparency, the more things change, the more they stay the same."

That power disparity between donors and causes — often between foundations and nonprofit organizations — is as great a gulf as any other in civil society.

In this dawning election season, I’m struck by how open the calls to use tax-exempt philanthropic dollars to change public policy really are.

Consider two recent (and, in my view, excellent) essays by two very different philanthropic leaders.

In a New York Times op-ed piece in December, Darren Walker, the Ford Foundation’s president, amplified his foundation’s newly explicit focus on justice in its grants program with a call for extending action for social change beyond giving.

"Feeding the hungry is among our society’s most fundamental obligations, but we should also question why our neighbors are without nutritious food to eat. Housing the homeless is an imperative, but we should also question why our housing markets are so distorted. As a nation, we need more investment in education, but not without questioning educational disparities based on race, class, and geography."

This is a call for public action (by the public and for the public) — but also for public policy.

The former mayor of New York City, Mike Bloomberg, was even more explicit about the role of tax-exempt funds in pushing government policy in his annual letter on his foundation’s philanthropic priorities.

"Modern philanthropy began as a substitute for government," he wrote. "Where government failed, philanthropists stepped in, providing food for the poor, hospitals for the sick, and libraries, museums, and colleges for the masses. Philanthropy continues to play a vital role in all of these areas. But some still see philanthropy as an alternative to government. I see it as a way to embolden government."

I purposely picked two philanthropies whose major efforts at social change I generally agree with and admire. Moreover, their approach to strategic philanthropy — and the leverage large-scale financial commitments can have over how government tackles social problems — holds real promise for positive results in, for example, improving gun safety or leading the effort to achieve criminal-justice reform.

Yet I still worry about the vote-free license that is granted to big philanthropy.

As Pablo Eisenberg, a Chronicle of Philanthropy columnist, wrote in The Chronicle in 2013: "Strategic philanthropy might be less worrisome if it were not practiced so often by very large foundations run by small, insular boards that do little to tell the public how they make decisions."

This tension has existed — and likely will continue to exist — between traditional foundations and major donors and the programs they support. That relationship has long been debated. What makes this moment more interesting, and somewhat more troubling, is the kind of social-change investments that occur beyond even our rickety and nontransparent formal philanthropic system.

The Chan-Zuckerberg Initiative, created as a limited-liability corporation, is more like a dragon in a smallish cave than a canary in a coal mine; it places billions of "for good" dollars beyond even the skimpiest public scrutiny.

As I wrote last month, it may be time for Congress to act. The tax code and its definition of private foundations may be fatally compromised by the couple’s decision to put their social-change money into an LLC, especially if other young philanthropist-investors take that path.

It’s another step in what David Callahan of Inside Philanthropy calls "Omidyarism" after the eBay co-founder’s form of investing in companies, making donations, political action, and paying for media use.

The Internet billionaire Sean Parker neatly encapsulated the "new philanthropist" view in his widely-shared "hacker philanthropy" essay in The Wall Street Journal last year: "How do these individuals, accustomed to unleashing massive social changes that span the globe, make a lasting contribution in their charitable lives and find satisfaction in doing so?"

Those with large fortunes will continue to want to use those fortunes for the public good. For this, nonprofits should be thankful. Yet the tension will continue to grow between democratic philanthropy of the classic March of Dimes moment (and modern descendants like Giving Tuesday) and a more plutocratic model in which big money sets the agenda.

The kind of access and transparency offered by digital networks seems an obvious rallying point for reform and inclusion.

After all, the public records of political candidates and public companies (and many other areas of life) are more illuminating than those of nonprofits and foundations.

Adding more "dark money" — even for causes we love and support — does not always serve democracy well. Yet data alone can sometimes be a thin solution.

"Digital tools and infrastructure are not innately democratizing," wrote Lucy Bernholz, the technology and philanthropy analyst, in the Brazilian newspaper Gazeta do Povo. "As they’ve become common, the thing they’ve created is a need for more equitable access to them. They will not counteract apathy or powerlessness or structural exclusion."

National elections can be clarifying moments.

As America begins the actual process of choosing candidates for the first White House race in eight years, the political parties are debating public policy and social change. No one expects philanthropic tax policy or nonprofit record-keeping to occupy a central position in the national debate, but the election arrives at a time of both change and tension in the nonprofit world.

Less than a month before the first votes are cast in the 2016 election, our cultural climate favors increased transparency, demands more scrutiny, and nurtures distrust in large public institutions — perhaps more than at any other time in my adult lifetime. The ideas of power, access, democracy, and privilege are very much on the table, and it’s vital that nonprofits pay attention — not just to the policy debates, but to the mood of the people.

Tom Watson is president of CauseWired, a consulting firm that advises nonprofits, and a lecturer at Columbia University. He is a regular columnist for The Chronicle of Philanthropy.

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