Philanthropy is My Co-Pilot

Yesterday in Washington, D.C., the Peter G. Peterson Foundation convened the 2010 Fiscal Summit: America's Crisis and A Way Forward to, in its words, "launch a national bipartisan dialogue on America's fiscal challenges." Top billing as participants in the six-and-a-half-hour session on reducing long-term budget deficits went to former President Bill Clinton and then to the two men whom President Barack Obama appointed to chair the National Commission on Fiscal Responsibility and Reform, former Sen. Alan Simpson and former White House Chief of Staff Erskine Bowles.

Three other members of that same federal commission are also participating in the summit, at which the foundation also released the results of a survey of former government officials, who unsurprisingly agreed that the deficit is a big problem. And on Tuesday, the commission itself held its first meeting. The double hit of meetings, on consecutive days, is likely to echo and reinforce media and public focus on the issue of the deficit, just as intended.

My point here isn't to bash the Peterson Foundation, or the commission, or the cause of long-term deficit reduction. (Relative to many progressives or Prospect contributors, I'm something of a "wet" on the issue -- I think long-term budget deficits matter a lot, I think it's better to deal with them now than to wait, and I think the commission is a good idea.)

But I'm interested in the complicated relationship here between a private foundation, built on the wealth of a single individual, and a public, government effort. The two are co-piloting what looks from the outside like a joint project, with the privately funded project convening meetings that involve the same people and producing vast amounts of research and advocacy that reinforce the fiscal-crisis message and inform the commission. The Peterson Foundation was the primary advocate for the establishment of the public commission, was aggressive about its structure and composition, and now is running parallel to it and nudging it in what it sees as the right direction.

Or take a comparable story, also in the news this week: The Washington Post reported yesterday that a group of private foundations that had pledged $64.5 million to the District of Columbia Public Schools to provide the funds necessary for Chancellor Michelle Rhee's controversial teacher merit-pay proposal were conditioning their grants on a right to reconsider if there were a change in leadership in the D.C. Schools -- that is, if Rhee goes, so does the money.

As a D.C. public-school parent, I'm sympathetic to Rhee's objectives and want her to succeed. (Although I'm frustrated by her lack of political skills in a job that's about politics as much as it's about education policy.) But the role of the foundations here, which includes the Walton Family Foundation (Wal-Mart) and the Robertson Foundation (hedge-funder Julian Robertson) among others, raises a complicated question, especially for the District, where Home Rule -- that is, the right to make local decisions for ourselves -- is still incomplete. Shouldn't Rhee's tenure be our decision to make or that of the mayor? (We have a mayoral election this fall, which is likely to be in large part a referendum on Rhee and the mayor who appointed her, Adrian Fenty.) Sixty-four million dollars from foundations based outside of D.C. puts a high price on that decision, especially for a poor city.

On the other hand, if you put yourself in the position of one of these foundations, and your primary interest is school reform, it makes perfect sense. If Rhee goes, so does her initiative. These foundations aren't interested in funding the D.C. schools' status quo. Nor should they be. What they are saying to D.C. is no different from what grant-making foundations say to nonprofits every day: Here's the kind of project we're interested in funding. If that's what you do, we'll fund you; if not, no thanks. Nobody's forcing anyone to do anything. And much the same can be said of the Peterson Foundation -- it is acting in accord with its view of what is inarguably the long-term public interest. In both cases -- Peterson's quite explicitly -- the funders see their role as counter-political, given that the democratic process on its own can't solve the problems of persistent deficits or failing schools.

The "philanthropic sector" in the U.S. can be seen as a brilliant government-subsidized (by tax exemption) pluralistic research-and-development system for social policy (as well as for science, medicine, and arts). Leaving aside the vast number of philanthropies and nonprofits that simply provide services, most large foundations now understand that to make a real impact, they have to influence public policy in some way. (Conservative foundations understood this long before centrist and liberal ones did.) Influencing policy can take many forms: Some foundations see themselves as constructing model programs, evaluating them, and hoping government notices and expands those that prove themselves. Others fund policy research, or seek to strengthen the voice of disadvantaged groups. Others seek to directly influence public opinion. The model of aligning a foundation very closely with a public project, as in the two cases above, is not new but seems to be an increasingly popular model.

Having worked for seven years for a particularly imaginative and outspoken foundation (the Open Society Institute, founded by George Soros), I've long argued that foundations and the nonprofits they fund should be unabashed about advocating for the ideas they think will work. If there is such a thing as a real "marketplace of ideas," it is found in the debate fueled by the thousands of public-spirited foundations, supporting a multitude of projects and voices, drawing lessons from them, and then feeding those lessons back into the public-policy process.

We tend to think that influencing government means lobbying, but for historically idiosyncratic reasons, the tax code prohibits foundations from lobbying government. (The key distinction is between a private foundation, whose money comes from one source, and a typical nonprofit, such as The American Prospect, which has a multitude of contributors and can do a small amount of lobbying.) According to Joel Fleischman's recent book, The Foundation, both the Peterson and Robertson foundations get around this ban in an ingenious way -- neither foundation pays its president a salary; they are paid personally by Julian Robertson and Peter G. Peterson, leaving them free to lobby. But even without that gambit, the legal definition of "lobbying" is so narrow that foundations can engage in massive parallel efforts to shape public policy, such as the Peterson-sponsored summit, without ever triggering it.

Although the Peterson and D.C. cases raise issues worth thinking about, there's nothing wrong with any of this. Foundations should fearlessly keep trying to influence public policy, and do more of it -- at their best, they possess knowledge as well as money, they can open up the public debate about ideas that aren't heard otherwise, and unlike for-profit entities that face no prohibition on lobbying, they aren't self-interested in the traditional sense. But as in any market, monopoly becomes a danger -- the Peterson Foundation has a near monopoly on the conversation about budget deficits, and the education-reform foundations now have considerable leverage over D.C.'s decisions. The solution to any monopoly problem is competition -- more foundations with different perspectives should join these and other debates, and governments should have enough resources of their own to make their own choices, informed and supported by foundations but not overly dependent on private wealth and its priorities.

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