In 2009, the Obama administration established a new initiative, the Social Innovation Fund (SIF), saying that it would “scale up” existing programs for the poor in three areas—“economic opportunity, healthy futures, and youth development.” The fund’s novelty was the way that it would “scale up” these programs. The White House would choose an assortment of “intermediary grant making organizations,” such as foundations, which would in turn identify worthy grant recipients. Those recipients would get money from both the government and the intermediaries, and they would also pledge to raise enough money from private donors to match the total that they had received.
So far, the private donors aren’t cooperating. They’ve provided just 40 percent of the $350 million that the SIF projected. Only 31 percent of the grant recipients listed on the fund’s website report having raised their matching funds—even as the nation’s private donors increased their overall charitable giving in 2011 to $298 billion.
The donors’ reluctance to participate in the SIF isn’t so surprising. For one thing, the fund’s mission statement implies that it funds a small number of promising new nonprofits that are based on inventive concepts. In reality, though, dozens of organizations—in 33 states and 100 cities—have received grants, and they include many long-established social-services organizations and even government agencies, such as public-housing authorities and public television. Indeed, the fund’s bureaucratic hurdles, including an evaluation procedure with an 80-page instruction form, likely favor these entrenched groups. It’s hard for potential donors who had read the exciting mission statement to avoid concluding that the SIF is essentially a grab bag of standard social-services grants that public officials and organizations would like to take credit for. In fact, that’s just what the Corporation for National and Community Service (CNCS), the parent agency of the SIF, did in December 2010, when it boasted that it was “moving more than $12 million in federal and private investments into some of the cities hardest hit by the economic downturn.” These “investments” might be better thought of as executive-branch earmarks allocated without congressional approval. (Only the overall SIF budget requires congressional authorization.)
Donors may also recognize the hollowness of the SIF’s claim that it will use social science to test promising approaches to helping the poor. Such an effort would rightly command the attention of philanthropic foundations, which could watch with interest as the SIF tested, for example, whether a particular way of preparing disadvantaged children for school was producing good results. Unfortunately, the SIF shows no sign of being this kind of program, its advertising notwithstanding.
Or perhaps donors are reluctant to participate because they realize that the SIF represents the politicization of private charity. Consider the donors that have provided matching funds. They include banks, health-care firms, and Freddie Mac, the government-backed housing enterprise—all deeply entwined with government regulators and with plenty of motivation to stay in the White House’s good graces. The fund also appears to be strengthening the liberal arm of American philanthropy with public money. Among the outfits providing matching funds are the Ford Foundation, the Annie E. Casey Foundation, and George Soros’s Open Society Institute. It’s possible that the government is influencing them to fund causes that they otherwise might not fund; it’s more likely that the spending is in keeping with their traditional grant-making priorities.
The SIF is a step, however modest, toward a system in which government decides which programs deserve charitable support. One can imagine how such a system might operate: the government could bestow the charitable tax deduction only on donors to government-approved causes, or award tax-exempt status only to government-approved nonprofits. That approach might be amenable to organizations like the National Committee for Responsive Philanthropy, which would like to see charity— now largely directed toward higher education, medical research, and the arts—focused instead, like the SIF, on poverty and “injustice.” At risk would be not only the discretion of charitable donors but also the happy accidents that have often resulted when an individual philanthropist takes a gamble on a visionary new organization.
The SIF represents the potential Solyndraization of philanthropy, a system in which private giving becomes so deeply embedded with and dependent on government discretion that the line between the two blurs. Congressman Paul Ryan has proposed to eliminate the CNCS entirely, which would spell an end to the SIF. Speaking out against a government agency dedicated to helping the poor can be bad politics. But Ryan is right.