Friday, January 22, 2016

Philanthropy, American Style

The Philanthropy Roundtable has published its most recent Almanac of American Philanthropy. The report offers lots of possibilities for browsing.  For example, there's a lengthy list of of "Great Philanthropy Quotations,"  "Timeline of American Philanthrophy: 1936-2015,"  a "Philanthropy Hall of Fame," and more. Alex Reid, a tax attorney who was a former counsel to the Joint Committee on Taxation of the U.S. Congress, offers a rock-ribbed historical and philosophical (if not especially economic) defense of why charitable contributions should be tax-deductible. But as is my wont, I'm inevitably drawn to the graphs and figures.

For example, here's a graph of giving over time, with the top line (measured on the left axis) showing total real charitable giving in the US, and the bottom line (measured on the right axis) showing per capita giving. As the report points out, another way of describing these figures is that Americans give about 2% of GDP: "But it’s interesting that even as we have become a much wealthier people in the post-WWII era, the fraction we give away hasn’t risen. There seems to be something stubborn about that 2 percent rate."

Where do the charitable donations go? As the report notes, donations to "religion" end up being spent in a variety of areas: "Much religious charity, however, ultimately goes into sub-causes like relief for the poor, medical care, education, or aid sent to low-income countries or victims of disaster."

And for all the talk of charitable giving by big foundations, the vast majority of charitable donations are by individuals. About two-thirds of Americans donate to charity, including over 90% of those with annual incomes above $125,000.

Here's a graph showing "Output of the Nonprofit Sector" as a share of GDP. A few points about this calculation are worth remembering: 1) With some industries, like steel mills or haircuts, it's relatively easy to measure output. With the nonprofit sector, what you're really measuring is money spent, rather than outcomes provided; 2) Volunteer time of over 8.1 billion hours per year isn't counted in the "output" statistics of nonprofits, for example, because although it would have a market value well above $100 billion (depending on how you value people's time), it's not paid for; 3) Also, it turns out that some charities registered with the IRS are counted as "businesses," rather than as nonprofits. That said, it's still interesting that, as the report notes: "For perspective, consider that annual U.S. defense spending totals 4.5 percent of GDP. The nonprofit sector surpassed the vaunted “military-industrial complex” in economic scope way back in 1993."

If one looks at private philanthropy as a share of GDP, Americans lead the high-income countries of the world, with Canada in second place.

Finally, there's a potentially interesting discussion topic for students--and for us all, really--on the subject of "Good Charity, Bad Charity?" The Almanac takes the following stance:

Some activists today are eager to define what is good or bad, acceptable or unacceptable, in other people’s giving. Princeton professor Peter Singer has lately made it almost a career to pronounce that only certain kinds of philanthropic contributions ought to be considered truly in the public interest. Only money given directly to “the poor” should be counted as charitable, he and some others argue.
Former NPR executive Ken Stern constructed a recent book on this same idea that charity must be “dedicated to serving the poor and needy.” Noting that many philanthropists go far beyond that limited population, he complains that it is “astonishingly easy to start a charity; the IRS approves over 99.5 percent of all charitable applications.” He disapprovingly lists nonprofits that have “little connection to common notions of doing good: the Sugar Bowl, the U.S. Golf Association, the Renegade Roller Derby team in Bend, Oregon, and the All Colorado Beer Festival, just to name a few.”
Is that a humane argument? Without question, the philanthropy for the downtrodden launched by people like Stephen Girard, Nicholas Longworth, Jean Louis, the Tappans, Milton Hershey, Albert Lexie, and Father Damien is deeply impressive. But the idea that only generosity aimed directly at the poor (or those who agitate in their name) should count as philanthropic is astoundingly narrow and shortsighted. Meddling premised on this view would horribly constrict the natural outpouring of human creativity.
Who is to say that Ned ­McIlhenny’s leaps to preserve the Negro spiritual, or rescue the snowy egret, were less worthy than income-boosting? Was the check that catalyzed Harper Lee’s classic novel bad philanthropy? Were there better uses for Alfred Loomis’s funds and volunteer management genius than beating the Nazis and Imperial Japanese military?
Even if you insist on the crude utilitarian view that only direct aid to the poor should count as charity, the reality is that many of the most important interventions that reduce poverty over time have nothing to do with alms. By building up MIT, George Eastman struck a mighty blow to increase prosperity and improve the health and safety of everyday life—benefiting individuals at all points on the economic spectrum. Givers who establish good charter schools today are doing more to break cycles of human failure than any welfare transfer has ever achieved. Donors who fund science, abstract knowledge, and new learning pour the deep concrete footings of economic success that have made us history’s most ­aberrant nation—where the poor improve their lot as much as other citizens, and often far more.
And what of the private donors who stoke the fires of imagination, moral understanding, personal character, and inspiration? Is artistic and religious philanthropy just the dabbling of bored and vain wealthholders? Aren’t people of all income levels lifted up when the human spirit is cultivated and celebrated in a wondrous story, or haunting piece of music, or awe-engendering cathedral?
When a donation is offered to unlock some secret of science, or feed an inspiring art, or attack some cruel disease, one can never count on any precise result. But it’s clear that any definition which denies humanitarian value to such giving, because it doesn’t go directly to income support, is crabbed and foolish. Much of the power and beauty of American philanthropy derives from its vast range, and the riot of causes we underwrite in our millions of donations.
In practice, my own answer to all those rhetorical questions is that my personal tax-deductible giving goes to a range of cause that include the arts, education, and conservation, as well as to activities supporting the poor. But one can make a case that it's too easy to use tax deductible contributions, and that the rules should be tightened.