Barack Obama Understands the Changing Philanthropic Sector


Barack Obama is the first president to truly understand the evolving nonprofit sector. His administration has embraced the social entrepreneurship movement, tripled the size of the national service corps, and spent nearly every cent of his political capital passing the Affordable Care Act (ACA), the most sweeping social program since the creation of Medicaid.

The ACA provides significant direct and indirect support to non-profits. The ACA provides non-profits with 25 or fewer employees with a sizeable tax credit (note: these tax credits expire when the law comes into effect in 2014). 

The ACA also creates the health insurance exchanges for individual purchasers of insurance. Right now, the individual insurance market is prohibitively expensive – especially if you have a pre-existing condition. It’s well-established that a lack of insurance access discourages entrepreneurship, but people often forget that it discourages social entrepreneurship as well. Let’s say you want to start a pilot program through the legal structure of a nonprofit or social enterprise (could be 501c3, LLC, or L3C). You’re much more likely to take that risk and put your ideas to play in the free market if you can acquire insurance at an affordable rate. The fear of medical bankruptcy is a powerful driver of behavior. The non-profit sector is transient, and sometimes an individual might work as a consultant or on multiple projects across multiple legal structures. The creation of the individual exchanges allows for flexibility and risk-taking.

Beyond these direct impacts, the ACA will ease the heavy burden of the uninsured on non-profit hospitals and health care providers. It expands Medicaid dramatically, reducing the need for direct healthcare assistance to the working class and poor. It funds community health centers in areas where health care access is a persistent social problem. A lack of health insurance access creates a multitude of social problems in the United States, as do discriminatory practices by insurance companies. Universal healthcare will solve many of these problems and may put some nonprofits out of business. That sounds harsh, but when you get to fold up your tent and declare “Mission Accomplished”, that’s a good thing!

Obama has come under fire for his proposal to cap the charitable giving deduction and end several silly loopholes like the ridiculous charitable easement for golf courses (?!?). A University of Indiana study suggested that this would lead to a 0.4% decrease in charitable giving in the first year and a 1.3% decrease during the second year. Individuals give about 73% of all charitable donations, so the actual impact of this change would be a drop of about 0.3% and 1%, respectively.

The important thing to remember about this policy recommendation is that it has no chance of passing outside of the context of broad tax reform. In a world where taxpayers enjoyed lower marginal rates but could no longer take advantage of the charitable deduction, I believe that we would see a net increase in charitable donations. And in a world where secretaries often pay less in taxes than their billionaire bosses, some might argue that this tax change increases economic fairness, which is a social goal for many.

Obama has also worked to promote national service and capacity building programs. His service initiatives recognize the potential for the service-oriented Millennials and the retiring Baby Boomers. His crowning achievement was the bipartisan Edward Kennedy Serve America Act, which expanded the Americorps from 75,000 members to 250,000 members. It also authorized the Silver Scholars program, under which individuals 55 and older who perform 350 hours of service receive a $1,000 education award that can be applied to college tuition or transferred to a child or grandchild.

The Serve America Act also authorized the creation of Nonprofit Capacity Building grants, which provide organizational development assistance to nonprofits. In a nod to the growing Social Entrepreneurship movement, it authorized the Social Innovation Fund (SiF). The purpose of the SiF is to see that successful initiatives are brought to scale in other communities. Obama also created the White House Office of Social Innovation which has been tasked with instilling a social entrepreneurship ethic (metrics, accountability, etc) into federal agencies, among other things. Finally, he established the Semester of Service program that provides $500 education awards to high school students who engage in service-learning.

Before you whine about paying volunteers, remember that these are modest education credits and that Americorps members’ compensation barely crosses the poverty line. Many Americorps members qualify for food stamps. Also know that complaining about modest compensation for community service disqualifies you from any complaints about limiting the charitable deduction.

Obama also expanded Bush’s faith-based initiative and gave it a slightly more secular outlook (in response to civil liberties criticisms). I have always been a fan of this program. It made it easier for faith-based organizations engaged in direct human services to seek federal funding and is a recognition by the federal government that faith-based service providers often do a fantastic job in addressing social problems. After all – the first charities were largely faith-based.

Finally, I am certain that someone could list hundreds of cuts to discretionary spending that impact non-profits, but it seems odd to blame Obama for these cuts. When it mattered, Obama passed billions in temporary expansions to discretionary spending programs through the Recovery Act.

On the whole, Obama has been good for the philanthropic sector, and it’s no surprise. This is a man who understands both the potential and flaws of the nonprofit sector, having worked as a Community Organizer in Southside Chicago.

Photo Credit: Wikimedia Commons