How far can philanthropy go to fill government gaps?

0:01NPR.

0:11This is The Indicator from Planet Money. I'm Waylon Wong. And I'm Stephen Massaha, here with two facts. The first is that Americans are some of the most generous givers in the world. In fact, Americans give even more than Canadians, and about seven times as much as some Europeans, according to Philanthropy Roundtable. The other fact is that the American government has become less generous, at least when it comes to funding social safety net programs like food assistance. These two facts do fit in with the American concept of less government, more private good. And given all that, it seems reasonable to imagine American philanthropy stepping in where the U.S.

0:50government is stepping out. The big problem with that is that the math doesn't work. On today's show, why charity can't fill the hole left by government cuts. And why some philanthropists say doing that can be the wrong way to spend those dollars. To check in on the state of U.S. charities, we called up Kyle Caldwell. Kyle heads up a group that represents philanthropic giants in Michigan, like the Kresge Foundation, along with smaller foundations. Well, change and chaos is really the theme that we're having to sort of manage in philanthropy. He's talking about all the change and chaos caused by the federal funding cuts last year under the Trump administration.

1:27And I think that creates for us a real challenge because philanthropy cannot not step into the breach. To explain what he means by this, he pointed to a moment in Michigan when foundations did try to step in. This was during the government shutdown that started in October. The Trump administration said because of that, it would not be sending out funding for SNAP in November. SNAP helps families pay for groceries, including around 1.4 million residents in Michigan. This caused a big concern that some families would go hungry. So Michigan turned to philanthropy. And the person who sent out the emergency signal was Dana Lenane.

2:03She's with the governor's office as the foundation liaison. So in a way, it sounds like you're the glue that makes the private and the public sides work well together. I like that. I'm going to borrow that. Yes. Dana said 160 foundations answered that call and all got on a Zoom to figure out what to do. What does a Zoom room with 160 philanthropic groups look like? You know, Zoom through, you know, pages and pages. Well, certainly not everyone is introducing themselves. Yeah, you're not doing the icebreakers at that point. No, we're not doing the icebreakers. This ended up being multiple calls and conversations, like how to even get the money out.

2:42They realized one group was already using an app to track about half of the Michiganders receive SNAP, and they already had a system set up to send out aid. We kind of said, whoa, this is huge. This is a quick turnkey solution where we know we can serve at least almost half of Michigan's SNAP beneficiaries. Then it came down to convincing the foundations to send over the cash to cover those lost benefits. It was around just shy of$2 million, which is a lot. But when you have 160 funders on the call, you can quickly mobilize and say, OK, who's going to do this? So they got the money and started sending it out.

3:19More than 2 ,000 families got the aid before the federal SNAP funding was eventually unfrozen. And this sounds like proof philanthropy can step up. A feel-good story about private foundations joining together to fill in for missing government aid. But the truth is they had to make sure those foundation boards were comfortable. They don't want to set a precedent to be a gap filler for federal government, for state government. And while the different boards did approve the aid, Kyle said they wanted to be clear. That this was a very limited, short-term innovation on the part of philanthropy to fill a public sector gap that cannot be sustained.

4:01And the reason they didn't want to set this precedent? Everyone knows the math, and the math doesn't work. The math being that for all the money that philanthropy has in the U.S., it is just a fraction of the federal budget. To show his math work, Kyle points to the same federal program, SNAP, and asked what if Michigan foundations took over all those payments in the state? They need$3 billion in one year. And realize we have the Kellogg Foundation, Kresge Foundation, Mott Foundation, plus community foundations, corporate foundations. We only spend$2 billion in everything that we do. So we can't even carry one federal program for a full year.

4:43Kyle said the math doesn't work on the national level either. If you took all of philanthropy's resources nationally, everybody, the Kresge Foundation, the Gates Foundation, not just their grant making, but their endowments, gave it over to the federal government and said, here you go. How long do you think that you could run the federal government? I feel like you'd get maybe two, three months. Am I being generous there? 79 days. You actually weren't that far off, Stephen. Either way, not a great number. And, you know, it's not like all this money is just sitting there. It would have to be pulled from elsewhere, like food banks and after-school programs.

5:21This is why those groups were so reluctant to set that precedent. As generous as Americans are, there just aren't enough dollars being given to fill those gaps. This is also more than a math problem. There's another reason that Kyle said philanthropy should not just step in for the government. They're both good at spending money in different ways. Philanthropy can experiment. Public sector can scale. What he means by this is that philanthropy can be used to invest in risky early ideas that might not pay off. And sometimes those ideas are controversial for their time, the kind you wouldn't expect the government to be on board with funding.

5:57Alexander Berger is the CEO of Coefficient Giving, a philanthropy group that aims for high-impact giving. And he says one example of philanthropy-driven research that might not be controversial today, but definitely was in the 1950s, contraception. One that I think doesn't get enough attention is philanthropy was really important in the development of the birth control pill. An activist named Catherine McCormick played a big part in funding that research. She wrote out a check for$40 ,000. That's big money in 1953. And she kept the funds coming until the pill came to market in 1960. You've seen philanthropy being able to make these risky early-stage investments in things that then become much more broader, popular things where people start businesses.

6:38Or he says the government can then scale a program or intervention later. Philanthropy also played a big role in the spread of kindergarten. After those early, privately funded projects were proven to work, government stepped in and scaled it up. That tends to be how this goes, philanthropy handing it over to the government. So expecting the opposite, that philanthropy taking over government programs is a pretty big change. Yeah, and again, there's just not the funds to do that, despite how much Americans give, which averages out to about 2 % of gross domestic product. And that's been really steady for many decades, actually.

7:13But also there's sort of some parts of the country or, you know, increasing growing demand for people to give more. And so you've seen things like the Giving Pledge, where sort of billionaires are sort of committing to give away the majority of their wealth over the course of their lifetimes. There's this idea of tithing, people trying to give sort of 10 percent of their income to really cost effective charities. And if you're going from sort of 2 percent on average to 10 percent, then that can be a big increase. And that actually could grow the pie a lot. So some optimism to end on. And hey, we've actually seen that here.

7:42Listeners have stepped up to fill some of the funding gap left by the loss of federal funding for public radio. So thank you for growing that pie and hoping us continue to deliver economic stories. Yeah, thanks for buying our tote bags, everyone. Keep doing that. Appreciate it, really. This episode was produced by Julia Ritchie with engineering by Sina Lafredo. It was fact-checked by Sierra Juarez. Kicking Cannon edits the show, and The Indicator is a production of NPR.