Problems With Philanthrophy – Part II

Consider giving to smaller, local and goal-directed charities.

Problems With Philanthrophy – Part II

By: Mitch Levin – July 19, 2020

        This is the second of two posts by guest blogger, Mitch Levin; if you missed the first part, it is on our website:  We resume where we left off last week.

Unintended Consequences: Well-intended charities of the 1960s directly led to poor black women depending on government for income and sustenance, replacing and emasculating the men in their lives. The men sought meaning in the streets. The family unit was decimated and poverty is now enculturated in certain communities.

Adverse Outcomes: An opera company would not renegotiate artist contracts during the Great Recession for fear of tarnishing its reputation for future contracts. Despite a multimillion dollar budget and endowment, the company folded, artists were unpaid, performances cancelled, donors burned, audiences deprived and staff unemployed.

Complication and Bureaucracy: Hospitals are often very poorly run, organized and maintained. Doctors, patients and administrators all are frustrated at the same things at the same times. There is so much regulation, often competing, and so little transparency and data to identify and to measure good goals.

Executive Compensation: There is no compelling reason leaders of taxpayer supported, tax-exempt organizations should be compensated at levels commensurate with commercial enterprise sisters. Donating work is part of the donation – especially for those passionate about the charitable mission. Don’t worry you won’t be able to attract high level performers with lower compensation. Mayo Clinic and Harvard do it all the time for the privilege of wrapping their halos around you. It is a false comparison.

Diversion: You contribute to one “charity” which then contributes to a completely different type charity. Examples are a charitable hospital contributing to a performing arts building and cancer research contributing to abortion clinics.

Frustration: Performing arts giving subsidizes those who don’t, yet without your subsidy the organization may not be able to deliver the art form to the community – and we all would be so much worse off, even if you do not patronize the arts.

Perpetuation: This is especially true in the social services realm where the goals are poorly defined. Many simply continue to grow. Rockefeller and others create additional “charitable” entities (that hire their own employees and consultants). The LDS endowment exceeds $100 billion; Harvard approaches $40 billion – enough to fund every one of their 10,000 students current annual tuition of $75,000, or $750 million, less than 1.9% of the principal, every year and never run out.

Perversion: Foundations based on the premise of capitalism now contribute to opposing entities. Pew Charitable Trusts contributes to NPR and the Ford and Rockefeller Foundations to anti-capitalist, openly socialist Center for American Progress and Alliance for Green Revolution.

Proliferation: March of Dimes, polio effectively eradicated, now advocates for “the health of moms and babies” with only 1,500 employees.

Vagueness: Bezos’ new foundation states that “to address the climate crisis, we must address inequality” and Bloomberg’s spends on “sustainable cities”. In the educational and research worlds, the goals are often not measurable.

      These issues may lead to donor fatigue and be self-fulfilling, without market pressure and “governors” such as pricing and competition. What to do? How to find the right organization to give? Consider smaller and local and goal directed.

Fulfillment of Mission

         This is often counter-intuitive. For many philanthropists, the reason to donate and keep donating is to make a difference. To be certain the intended results actually happen. To that end, meaningful and measurable goals are vital.

        Dallas’ OurCalling exists to reduce homeless populations. The 1970s saw a mass elimination of mental institutionalization, without any reasonable replacement. Since 80% of homelessness is a result of substance abuse or psychiatric diseases, giving a blanket and a sandwich only temporarily and partially salves the symptom, doing little to solve the problem. OurCalling, discovering the reasons for their homelessness, delivers the emotional and material resources to live beyond their challenges and provides information resources to the beneficiaries to help themselves.

      Capitalism funds philanthropy. The more successful charities mimic capitalism, and often they “sunset” after 75 years. They help those who will help themselves. There is a substantial responsibility in charitable giving, including good stewardship. Putting itself out of business is the greatest success.

Next up on July 26th is MLLG’s inimitable take on the 2020 election.
More Liberty Less Government  –  –

The Troubles With Philanthrophy -Part I

Troubles include: abuse, unintended consequences, complication and bureaucracy, conflicts of interest, diversion, frustration, perpetuation, perversion, proliferation and vagueness.

The Troubles With Philanthrophy -Part I

By: Mitch Levin – July 12, 2020

       As you may have noted from the masthead, this post is authored by a guest blogger. Mitch Levin is a friend of more liberty – less government and provides some keen insights into the world of philanthropy, which he knows firsthand. Following a career as an ophthalmologist, Dr. Levin turned his focus to the world of finance, becoming CEO of Summit Wealth Partners. He is very active in the community, particularly in the performing arts. The following (presented in two parts) is unedited. Note: We will consider publishing guest blogs; contact us if you are interested. Postings  should be no more than 600 words and have a nexus to more liberty and less government.


     The charitable, tax-exempt (sometimes non-profit) sector comprises 10% of American employees or 12 million jobs – and is the third largest, behind retail and manufacturing. Under IRS code 501(c)3 these receive donations tax-free, while donors deduct the amounts given from income taxation. They also pay no sales, property or income tax on “profits”.

         Charities may have positive cash flow and they simply reinvest these profits, in an accounting sleight of hand into either increasing salaries or purchasing other assets such as advertising, marketing, buildings, supplies and equipment. Incomes of tax exempts have grown by 20% over the past 10 years along with an increase in their staffing by more than 50%. In contrast, the private sector has grown by 2-3%.

        About 90,000 endowments and foundations in the USA hold some $2.5 trillion (also income and capital gains tax-free), 10% of total stock market value. They only need distribute 4% of that to be compliant; 1% is allowed for “costs”. There is an incentive to maintain the investment corpus to sustain the organization and sinecures, while delivering only the minimum required by law to the intended beneficiaries.

    Colleges and hospitals also own substantial portions of property in their communities. The local taxpayers therefore must pay more than their “fair share” to make up for the lost tax revenue. And because they get to receive tax-deductible donations, in addition to federal redistributions from the tax receipts, all US taxpayers at least indirectly subsidize them.

        Americans are generous. Total charitable giving  in the US in 2016 was about 10% of federal spending at about $390 billion. Americans are the most charitable of any nation. There have been several studies that indicate a causal relationship between free markets and charitable donations. Also, there is an inverse relationship; the more a government provides for charitable entities and beneficiaries, the less compelled and the more reluctant are citizens to donate beyond their taxes. In the aggregate, American donations as a percent of earned income may appear to be falling. But the amount of giving is increasing – even to organizations with a high cost of acquiring donations.

      There is the mistaken impression that high administrative costs detract from beneficiaries. These high costs sometimes imply a poorly run organization. Yet many organizations will not be able to raise sufficient funds without a larger infrastructure of costs. The accounting can be misunderstood or misleading.

The Troubles with Philanthropy 

       Trouble and controversy come in many forms and includes abuse, unintended consequences, complication and bureaucracy, conflicts of interests, diversion, frustration, perpetuation, perversion, proliferation, and vagueness.

Abuse: Kaleo Pharmaceutical Company, maker of the Ezvio naloxone injector, also created and donated to a patient assistance program (“PAP”). Kaleo then quintupled the price to cover the cost of the PAP that lowers the out-of-pocket costs for people who now cannot afford Ezvio.

Unintended Consequences: The road to hell is paved with good intentions. A church  group on a mission to Africa installed pumps in a village without running water. Two years later the pumps were broken and the women walked to the river to haul water on their heads. The reason: no one was trained in repairs and there were no spare parts.

          To be continued – Next week Part II picks up where we left off.

The next post concludes by describing the other troubles with philanthropy.
More Liberty Less Government  –  –