Giving Big: Philanthropy's Influence on the Social Sector - June 30, 2023
The latest data from Indiana University shows that philanthropy's dollars rival government expenditures in the social sectors
Last week, we reported that the recently released 2022 figures by Indiana University has shows that giving is on the decline. This news has sparked concern within the philanthropic community, as charitable giving in the United States experienced a significant decline of 10.5% after adjusting for inflation. This downturn has led some to label 2022 as one of the worst years in philanthropy history. However, while the decrease in giving is undoubtedly troubling, it is essential to consider the long-term trajectory of philanthropy in the United States. In a recent piece in Inside Philanthropy, Philip Rojc explores the comparison between philanthropic and government expenditures.
The Impact of Economic Factors on Charitable Giving
The decline in charitable giving in 2022 can be attributed to several factors. In 2021, a booming stock market and the ongoing COVID-19 pandemic prompted significant philanthropic contributions. However, in 2022, as the pandemic receded and the stock market lost momentum, donors pulled back their support. The fluctuating economic landscape and rising inflationary pressures affected donors' capacity and willingness to give, especially impacting smaller, individual donations.
While the decline in giving raises concerns, it is crucial not to overstate its significance. In the long run, philanthropic power and prominence continue to grow in the United States, as indicated by broader trends. The perception of philanthropy often reflects the perspectives of nonprofits that rely on steady giving for their survival. However, it is essential to explore alternative methods of assessing the state of American philanthropy, such as comparing it to public sector spending.
Comparing Philanthropy and Government Funding
Traditionally, the narrative suggests that philanthropic capital is minuscule compared to public spending. Grantmakers often emphasize that private wealth cannot and should not replace government spending. However, a closer examination reveals that philanthropy and government funding are more comparable than commonly assumed, particularly in specific issue areas.
In 2022, Americans donated nearly $500 billion to charity, a monumental figure despite the decline from the previous year. Comparing this amount to federal spending, the U.S. government's total outlays for the same year stood at $6.3 trillion. However, the majority of this spending constitutes mandatory expenses, such as Social Security, Medicare, and Medicaid, set by federal law. When discretionary spending is considered, which provides flexibility for government allocations, the figure drops to $910 billion, aligning more closely with philanthropic causes.
The Significance of Philanthropic Contributions
Philanthropy's role in public provision should not be dismissed as marginal. While the overall totals of philanthropic giving pale in comparison to government spending, the distribution of funds and alignment with specific causes highlight the significance of philanthropic contributions. In some areas, such as science funding, philanthropy's support matches or even surpasses government allocations. Philanthropy's influence extends beyond filling gaps and plays a substantial role in shaping public goods distribution.
The Growing Influence of a Select Few
Despite the decline in small-donor giving, philanthropy's overall impact remains substantial. However, it is important to acknowledge that philanthropic resources are increasingly concentrated among a select group of individuals, such as foundation executives and major donors. The concentration of wealth within this elite cadre has the potential to reshape the field and impact the distribution of public goods.
While concerns surrounding the decline in charitable giving are valid, characterizing philanthropy as fragile or insignificant in the face of government funding is misleading. Philanthropy's size and influence, when considered alongside government spending, reveal a more complex relationship. The power dynamics and the transformative potential of philanthropy are undeniable, particularly with the vast resources still available among the super-rich. As philanthropy continues to evolve, it is essential to critically examine its impact alongside narratives of American generosity, fostering a deeper understanding of its role in society.
The Weekly Notebook
A few notes and ideas of things I am seeing and hearing on the nonprofit world.
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Online Learning Options from Texas A&M Announced
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