Monday, January 23, 2017

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Centralizing Compassion: A Disaster’s Tale

webcandyJennifer D.  Zambone
In his inaugural speech, President Barack Obama reminded the nation of the role not just of government, but of individuals in responding to crisis. “For as much as government can do and must do, it is ultimately the faith and determination of the American people upon which this nation relies. It is the kindness to take in a stranger when the levees break . . . which sees us through our darkest hours. . . . What is demanded then is a return to these truths. What is required of us now is a new era of responsibility.”

The president’s words refer to the devastation wrought by Hurricane Katrina, but they are also an evocative tribute to the unique resiliency and strength of American society—the tendency of its people to self-organize on the local level to meet social problems. However, for nearly a century, beginning in the Progressive Era and continuing through the present day, the federal government has eroded this vital aspect of American life.

Rather than limiting its involvement in the sphere of private charity, government is encroaching ever more into this area. This centralization of compassion hurts its intended beneficiaries and weakens the charitable impulses of individual Americans. By pushing individual and local charity to the margins and asserting control over what remains, government will alter the character of society and make the people less responsive, less responsible, and less interested in the lives of our communities.

Katrina Successes and Failures

Hurricane Katrina’s August 2005 landfall devastated the Gulf Coast, displaced thousands of people, and revealed profound inadequacies in the federal and state governments’ disaster response. Among the many inadequacies at the federal level was a fundamental tension between the Federal Emergency Management Agency (FEMA), the bureau charged with disaster response, and the American Red Cross, a “federal instrumentality” responsible for providing disaster aid.[1]

At the time, the Department of Homeland Security’s (DHS) National Response Plan (NRP) was the nation’s single, comprehensive framework for what the federal government would do during an “incident of national significance” (a natural disaster or a terrorist attack). In December 2004, the NRP designated the Red Cross as “the primary agency responsible for coordinating federal mass care assistance in support of states and local governments and other voluntary organizations, as they meet needs, such as shelter, food, and emergency first aid.”[2] In doing so, DHS chose a private group with a long history of working with the federal government.

In spite of this long-running relationship, Red Cross and FEMA cooperated poorly in the wake of Hurricane Katrina. The organizations quickly became overwhelmed by bureaucratic requirements, poor communication, and mission confusion. The problem was so severe that in a 2006 evaluation, the Government Accountability Office (GAO) noted, “Given the lack of progress FEMA and the Red Cross have made thus far in reaching agreement on operating procedures and that the new hurricane season is beginning, they may wish to use mediation to speed the agreement.”[3]

While these two organizations squabbled over a bureaucratic impasse, smaller, more flexible, and more responsive organizations were supplying food, water, and housing to the people who desperately needed it. That is not to say the Red Cross was not providing help. According to Louisiana’s Department of Social Services, on October 5, 2005, six weeks after Hurricane Katrina, the Red Cross was housing 13,617 people in 55 shelters in Louisiana. However, faith-based organizations and churches were housing 5,780 people in 123 shelters, and other nonprofits, private groups, and parish governments were housing 6,733 people in 62 shelters.

In short, institutions other than the Red Cross—which was supposed to be the chief source of aid—were housing nearly as many people and operating four times as many shelters.[4] Despite more than a century of experience and a long-running partnership with FEMA, the Red Cross could only equal the efforts of local, decentralized charities that had almost no experience dealing with disasters of Hurricane Katrina’s magnitude and far fewer resources. [5]

As the Homeland Security Institute acknowledged in its report to DHS, Heralding Unheard Voices: The Role of Faith-Based Organizations and Nongovernmental Organizations during Disasters:

FBOs [faith-based organizations] and NGOs [non-governmental organizations] had a significant beneficial impact during and after Hurricane Katrina and Rita. Thousands of FBOs and NGOs provided services across entire geographic regions affected by the hurricanes. The scale of their response was unprecedented. In some communities, they—not the government—were the focal point for services. In other communities, they were the sole or lead provider of services for days or weeks. They made life-and death differences in people’s lives. They gave food to the hungry and vulnerable. They reduced suffering, facilitated restoration of infrastructure (primarily by housing relief workers and volunteers), and lessened the economic impact of the hurricanes by donating services and material resources.[6]

The More Things Change, The More They Don’t

The federal government’s forays into charitable enterprises are nothing new. At the turn of the last century, the Progressive Movement fought to improve living conditions in city slums. This movement was extended by the New Deal’s creation of a national welfare program, and then followed by the Johnson administration’s War on Poverty and the Great Society’s efforts to end urban blight and poverty. Despite the limitations and failures of many of these policies, the federal government has continued to expand its role as a “first provider” in response to crises, immediate and otherwise.

And despite information gathered on the performance of government and NGOs during Katrina and the recommendations of scholars and even of parts of government for ways to improve disaster response, little has changed in the area of federal disaster response. FEMA and Red Cross did resolve their problems in February of 2007—one and a half years after Katrina—by agreeing to make FEMA the principal agent in charge of providing mass care.[7]

Agreeing to put FEMA in charge, however, does nothing to address the intrinsic problems of communication and responsiveness within bureaucracy. In its report, FEMA Should Take Action to Improve Capacity and Coordination between Government and Voluntary Sectors, the GAO raised several concerns about FEMA’s ability to accomplish its stated goals—in particular, how well its staff was trained to handle major catastrophes.[8]

Steven Ganyard, a former deputy assistant secretary of state, argues that the federal government’s disaster approach must change dramatically. The answer, he says, is not a “whole of government” response, but a “whole of society” response. “In responding to disasters, Americans must look beyond government for help. Most of the critical infrastructure of the country is in private hands, and much of humanitarian relief is provided by local churches and relief charities.”

He continues, “The federal government can be most helpful by providing what state and local officials are often short of in an emergency: transportation, communication bandwidth, and portable electric power. Generally, other kinds of federal ‘help’ can be disruptive.”[9]

We’re from the Government, and We’re Here . . .

Ganyard may think federal help is disruptive, but other groups do not—especially the federal government. In the past 40 years, it has become increasingly intertwined in the work of nonprofits in the United States—and not just in the areas of military aid and disaster response. The Great Society programs of the 1960s and 1970s led to a rapid, massive increase in the federal government’s spending on health and welfare programs. As a part of this effort, the government did not provide the services detailed in these programs directly. Instead, it contracted with nonprofit organizations to provide the services. The nonprofit agencies did the work. The federal government footed the bill. As a result, the nonprofit world has grown rapidly, as has the federal government’s interest in and involvement with nonprofits.[10]

The nonprofit world is divided as to whether this ever-increasing federal encroachment is good or bad. Some nonprofits embrace the federal government’s involvement. Many of them would not exist if it were not for government funding.[11] Other organizations fear that further involvement with the federal government is a Faustian bargain: If they take federal money, they surrender the drive, passion, and flexibility that could produce innovative solutions to long-standing problems in their areas.

$1,000,000 Here + $1,000,000,000 There = $1,000,000,000,000

While charitable institutions have existed since the colonization of America, the number of nonprofit organizations has skyrocketed in the past 20 years.[12] While the amount Americans give to charity (in constant dollars) has continued to increase over the years,[13] the most important factor fueling this astonishing rise is federal funding.

In its domestic budget alone, the federal government spends more than $1 trillion each year on social problems. State and local governments spend more money on top of that. They use some of this money to pay government staff, but they spend much of the money on providing direct benefits to people or on service grants and contracts that will award such benefits.[14]

For decades, American administrations have sought to further centralize charitable institutions, and President Obama has indicated he will continue to expand the federal government’s role in the workings of nonprofits, as President Bush did before him. A new White House Office of Social Innovation and Civic Participation has joined two existing organizations,[15] and the president’s budget for fiscal year 2010 also indicates an interest in having the federal government support nonprofit work.

One example of this expansion of support is the Social Innovation Fund at the Corporation for National and Community Service, which will provide $50 million to fund “social entrepreneurship,” defined as “the practice of responding to market failures with transformative, financially sustainable innovations,”[16] and “ventures aimed at social change rather than monetary profits.”[17]

The corporation intends to use the money “to help find and scale up promising programs” around the country by making grants ranging from $1 million to $10 million to such programs.[18] Some in the nonprofit world, however, worry that the fund will miss the truly entrepreneurial programs of small- and medium-sized nonprofits and will instead go—as government money usually does—to the large, already well-funded organizations that have experience in handling grants of those sizes.[19]

A second example is the Strengthening Communities Fund (SCF). Congress gave it $50 million with the instructions that these funds should go to build the capacity of nonprofit organizations. However, the Department of Health and Human Services (HHS), the agency charged with distributing these funds, has pronounced that it will award only $34 million of the funds to nonprofits. It will give $12 million of the SCF to state and local governments and keep the remaining $4 million for administration and evaluation of the programs.[20] In short, one-third of the money meant for funding nonprofits will stay within government.

Those two programs are only a small sampling of the president’s charitable aims. The budget continues to fund many programs with established nonprofit clients. These include, but are not limited to, the $4.5 billion Community Development Block Grant within the Department of Housing and Urban Development; the Department of Education’s Promise Neighborhoods program and charter school funding;[21] a plethora of HHS programs, including $7.2 billion for Head Start and Early Head Start, $2.127 billion for the Child Care and Development Block Grant, and $1.7 billion for the Social Services Block Grant; and the $243.6 million Community Development Financial Institutions programs within the Department of the Treasury.

Public Money?

As the budget and the administration’s statements and actions indicate, the Obama administration seeks to further thrust the government into control over the nonprofit world. Even more disturbingly, some members of Congress and state legislatures want control even over nonprofits that do not take government money as well as philanthropic foundations that pay out about $32 billion annually to fund charitable organizations.[22] They claim a right to this control by espousing the dangerous view that the money that goes to charities is “public money.”

Three contentions, taken separately or together, form the basis of this “public money” claim:

  1. Charities have public purposes and are subject to the parens patriae power of the attorneys general of the states in which these charities are incorporated;
  2. States charter charities, therefore charities are state actors; and
  3. By granting tax exemptions to the charities and tax deductions to donors, the federal government is foregoing funds that would have gone to it for its purposes.[23]

While all three of these contentions threaten the independence of charities by subsuming them to the state, the federal tax issue would likely have the broadest effects on the nature and character of charitable institutions.

Taxing Work

Since 1913, Congress has exempted most charitable organizations from paying the federal income tax.[24] The legislative history of the 1913 tax act is silent as to why Congress granted these organizations tax-exempt status. As government granting charitable organizations tax exempt status was a practice that started back in the Colonial era, many scholars think that Congress was simply continuing this tradition and assumed that the reasons as for this practice were so self-evident that explanation in the legislative history was unnecessary.[25]

However, Congress’ failure to explain this decision is a gift to those who want private money to become part of the public fund. Some argue that because the federal government has forgone tax revenues from funds that go to charity, charities must at least provide to the public quantifiable benefits that at least equal the amount of forgone taxes. In some cases this argument is taken further, espousing that charities that receive federal funds should be required to pursue activities supported by the government, even if these come at the expense of other charitable activities.[26]

Senator Charles Grassley (Iowa) is a prominent proponent of this point of view: “The cost of [charitable] deductions is borne by other taxpayers, the majority of whom are not able to take deductions for their contributions. It’s fair to look at what benefits charities provide in return for the preferential tax treatment they and their donors receive.”[27]

In support of his point, Grassley has held numerous hearings on the governance and accountability of charities and the duty he believes they owe the government and the public.

Grassley wants to revise the tax code and plans to hold hearings on that topic and on the topic of charitable deductions in the current Congress. As this view has supporters in the House of Representatives as well, including Representative Xavier Becerra (California), Congress will likely continue to push for control of the workings of charities in the United States.[28]

Congress is at least open in its desire for such control. The Internal Revenue Service (IRS) has been much less open in its methods, using its powers under the tax code—particularly its power to deny or revoke tax-exempt status—to assert positions on a host of charitable practices and governance issues. While these positions do not officially have the force of law, charities might feel pressure to comply with the IRS’s “requests.” After all, charities frequently view compliance with IRS requests as necessities, even when such compliance is not in the best interest of either the charity as an organization or its mission. The advisory committee detailing these issues made the following point:

We acknowledge the IRS’s longstanding stake and legitimate interest in governance issues as they relate directly to compliance with the laws under its jurisdiction. But, the IRS is a powerful force that can drive behavior merely by asking about specific governance practices. Charities can feel pressured to adopt the specified practices, even where it is inadvisable in their situation, because they believe the IRS or others will consider them poorly governed if they fail to do so. This then can effectively usurp the judgment of governing boards in determining what governance practices make sense in their specific context, place undue burdens on organizations, divert their attention to proxies for governance instead of actual governance, and adversely impact the unique, diverse, vibrant, and flexible charitable sector in this country. Accordingly, we believe the IRS should approach this area with caution.[29]

Courts have rejected the IRS’s positions in these matters,[30] yet the IRS has not changed its approach, and is unlikely to do so, given the position of many in Congress on the use of the tax code to give preference to certain charities and unduly burden others.

An Act of Man

Why should we object to the government taking over the provision of compassion or at least a large part of it? Perhaps it would be easier for us all if we allowed the federal government to centralize compassion. After all, if government delivered services currently delivered by charitable organizations, we would not have to dedicate time to charity, or worry about the problems of others. We could just think about us.

And that is precisely the problem with the centralization of compassion: It centralizes the compassion right out of us.

To have compassion, we have to practice compassion—freely. If chances for practice are denied or forcibly required, individual compassion, and with it, organized charity, withers. As Alexis de Tocqueville observed, “Feelings and opinions are recruited, the heart is enlarged, and the human mind is developed only by the reciprocal influence of men upon one another.”[31]

Charles H. Hamilton, the 2009 Senior Fellow at Philanthropy and former Executive Director of The Clark Foundation, points out that we can see examples of centralized compassion diminishing the charitable spirit of communities in recent history:

Much of the rhetoric promotes a “politicization” of the nonprofit sector and philanthropy—the notion that all problems must be and can only be solved by political action and legislation. The history of philanthropy in the United States and Britain gives us many lessons of how this diminishes the charitable spirit in our communities.[32]

Economist Russell Roberts documents this change in his analysis of the “crowding-out” effect the infusion of government money has had on charitable donations in the 1930s. Roberts points to a study that shows that out of the billions of dollars that went to charity in the late 1970s and early 1980s, only about 10 percent went to social services and “only a fraction of that amount went to the poor.”[33] This was not the case prior to 1932. During the 1930s, however, a seismic shift happened in the nature of charitable donations. As the government instituted social programs and the number of public transfers to the poor grew, the number of private transfers dropped. For example, between 1932 and 1935, as public transfers increased three and a half times, private transfers fell by a factor of five.[34]

Roberts is not the only scholar to note the crowding-out effect. Jonathan Gruber and Daniel Hungerman focus on a more specific data set in the 1930s: whether New Deal spending crowded out charitable spending in Christian churches. They find that “benevolent church spending” dropped by 30 percent between 1933 and 1939 and that this drop was almost entirely due to the new government spending.[35] In addition, several studies examine whether crowding out exists today. Most find the phenomenon does exist, particularly in “social and human service charities.”[36] Researchers even note crowding-out effects in the amount of time people volunteer to organizations.[37]

These effects are not a surprise. As far back as the early 19th century, Tocqueville foresaw the problem of government encroaching upon private activity and the effects that it would have. He strenuously cautioned against it, writing, “[The French] contend that the more enfeebled and incompetent the citizens become, the more able and active the government ought to be rendered in order that society at large may execute what individuals can no longer accomplish. They believe this answers the whole difficulty, but I think they are mistaken.”

Tocqueville continued:

[W]hat political power could ever carry on the vast multitude of lesser undertakings which the American citizens perform every day, with the assistance of the principle of association? . . . A government can no more be competent to keep alive and to renew the circulation of opinions and feelings among a great people than to manage all the speculations of productive industry. No sooner does a government attempt to go beyond its political sphere and to enter upon this new track than it exercises, even unintentionally, an insupportable tyranny; for a government can only dictate strict rules, the opinions which it favors are rigidly enforced, and it is never easy to discriminate between its advice and its commands. Worse still will be the case if the government really believes itself interested in preventing all circulation of ideas; it will then stand motionless and oppressed by the heaviness of voluntary torpor. Governments, therefore, should not be the only active powers; associations ought, in democratic nations, to stand in lieu of those powerful private individuals whom the equality of conditions has swept away.[38]

Tocqueville is not the only person to notice that the benefits of charity extend beyond its direct effects. Many supporters of charity and the U.S. charitable system have long argued that charity gives civil society certain intangible benefits as well as tangible ones, and scientific and sociological studies support these assertions. For example, people who participate in social networks like volunteer organizations are happier and healthier,[39] and these social networks, in turn, foster the structure of democracy and political stability.[40]

Writing in the 1960s, Richard Cornuelle, troubled by what he saw as the increasing dismissal of the power of the “independent sector,” urged all members of society to reclaim this power, a power separate from those of business and government. In an afterword written in 1993, Cornuelle argued that to be effective, the independent sector must be—independent.

The independent sector must come to see itself as elementally different from the state, with a prior, more-powerful moral franchise than the state. Its means seem more fragile than the state’s irresistible powers to tax and command, but they are in the long run more legitimate and powerful. The sector cannot fulfill its essential mission until it detaches itself from the state.[41]

The independent sector cannot fulfill its essential mission unless detached from the state because the sectors have very different motivations. In contrast to the profit motive that drives the private sector and the power motive of government, the independent sector’s driving force is the “service motive,” the simple desire to serve other people.[42] Some might term this quality “empathy.” Only individuals, not institutions, are capable of empathy. Humans may even be hardwired for empathy, an evolutionary adaptation complete with sophisticated neural mechanisms that are most effectively activated by face-to-face interactions.[43] That face-to face interaction leads to the formation and sustenance of an individual’s empathy and from thence to the development of altruism.[44] It is there, at that face-to-face level where people put their reputations on the line, that the nonprofits are the most effective at solving problems as diverse as providing student loans, housing,[45] and disaster relief.[46] Neither the government nor the market can have the same powerful effects at this level.

The government will continue to advocate for the centralization of compassion. It is simply the nature of the beast. As Tocqueville presciently observed about relations between private industry and government, an observation that applies equally well to the relations between nonprofits and government, “Among democratic nations it is only by association that the resistance of the people to the government can ever display itself; hence the latter always looks with ill favor on those associations which are not in its won power.”[47]

The charitable sector’s strongest defense against the centralization of compassion lies not in itself, but in the people. But as the centralization of compassion becomes more common, that defense seems to become progressively weaker. Whether this weakening derives from torpor, ignorance, “a secret fear and jealousy, which prevents the citizens from defending the institutions of which they stand in need,”[48] or other factor does not matter. What matters is the ultimate effect this weak defense will have. We need the nonprofit sector, because we all benefit from its existence. If we lose it, if we cede the expression of compassion to a central authority, we will have fundamentally altered the nature of our society and of ourselves, creating a far greater disaster than any Katrina ever could.

While this disaster would be a far greater one than that created by Katrina, it is an act of man, not an “act of God,” and so is much easier to avoid.  We have the power in this situation: we have our compassion. We just have to express it. We just have to heed the advice of  Connie Uddo, a volunteer at Beacon of Hope, a New Orleans nonprofit: “I tell groups, “‘Get off your sofas; don’t wait for Obama to come fix your economic problems. Start thinking out of the box like we had to. Try to figure out how to feed your family, if that’s what it’s going to get down to, like we had to do…Shoulder with each other like we have, and I think we will be a stronger country and a better country.'”


The author thanks Albert Zambone, Eileen Norcross, Lura Forcum, and Amy Fontinelle for their invaluable advice. All errors that remain are hers alone.

[1]Although the American Red Cross is not a federal agency, and does not receive federal funding “on a regular basis,” it has had a special relationship with the federal government since it was granted a congressional charter in 1900. Congress initially chartered the American Red Cross because of concerns about the organization’s management by its founder, Clara Barton. The charter was supposed to instill more fiscal responsibility and systematic organization. The effort failed, but a prolonged internal struggle, capped by a threatened congressional investigation, finally forced Barton to resign leadership of the organization in 1904. After working with an interim leadership committee, Congress issued a new charter in 1905, and the Red Cross still operates under the much-amended terms of that charter. American Red Cross, “The Federal Charter of the American Red Cross,” http://www.redcross.org/museum/history/charter.asp.

[2] Department of Homeland Security, National Response Plan (Washington, DC: DHS, 2005), http://www.scd.hawaii.gov/documents/nrp.pdf.

[3] GAO, Coordination between FEMA and the Red Cross Should Be Improved for the 2006 Hurricane Season, GAO-06-712 (Washington, DC: GAO, 2006), 18. Specifically, the dispute between the Red Cross and FEMA rested on three issues: how the two agencies should communicate during a disaster, the frequency of Red Cross staff rotations, and FEMA’s failure to respond to requests for help.

[4] Tony Pipa, Weathering the Storm: The Role of Local Nonprofits in the Hurricane Katrina Relief Effort (Washington, DC: The Aspen Institute, 2006).

[5] This was at least in part due to the Red Cross’s official policy of not operating shelters in floodplains, a policy which meant it did not establish shelters in all of New Orleans and most of the New Orleans metro area. Testimony of Kay Wilkins, Director, Southeastern Louisiana Chapter American Red Cross, Answering the Call: The Response of Community-Based Organizations to the 2005 Gulf Coast Hurricane: Hearing before the Senate Committee on Health, Education, Labor, and Pensions, March 7, 2006, 3, http://help.senate.gov/Hearings/2006_03_07/wilkins.pdf.

[6] Homeland Security Institute, Heralding Unheard Voices: The Role of Faith-Based Organizations and Nongovernmental Organizations during Disasters (Arlington, VA: Homeland Security Institute, 2006), 2. For more on the role and acts of such organizations, see Lenore Ealy, “Coordinates of Resilience”, Local Knowledge 2 (Arlington, VA: Mercatus Center at George Mason University, 2009), http://localknowledge.mercatus.org/articles/coordinates-of-resilience/.

[7] The American Red Cross remains a critical part of the new National Response Framework (which replaced the National Response Plan in February of 2008) particularly in regard to Emergency Support Function (ESF) 6, the framework for disaster relief. In ESF 6, the American Red Cross is listed as a support agency to the Department of Homeland Security, along with a number of federal departments and the Corporation for National and Community Service. For more, see http://www.fema.gov/pdf/emergency/nrf/nrf-esf-06.pdf.

[8] GAO, FEMA Should Take Action to Improve Capacity and Coordination between Government and Voluntary Sectors, GAO-08-369 (Washington, DC: GAO, 2008), http://www.gao.gov/new.items/d08369.pdf. The GAO is not alone in these concerns. Weathering the Storm raises them as well.

[9] Stephen T. Ganyard, “All Disasters Are Local,” New York Times, May 18, 2009.

[10] Thomas J. Billitteri, “Mixing Mission and Business: Does Social Enterprise Need a New Legal Approach?” Highlights from an Aspen Institute Roundtable (Washington, DC: Aspen Institute, January 15, 2007), http://www.aspeninstitute.org/sites/default/files/content/docs/pubs/New_Legal_Forms_Report_FINAL.pdf.

[11] According to a report written for the Small Business Administration, “Of the nation’s 144 largest and fastest-growing nonprofits—all of which have $50 million or more in annual revenue—more than 40 percent rely on the federal government as their primary funding source. The next most common funding comes from service fees, which are paid at least in part by government agencies in 90 percent of cases.” Andrew M. Wolk, “Social Entrepreneurship and Government: A New Breed of Entrepreneurs Developing Solutions to Social Problems” (emphasis in original) in The Small Business Economy: A Report to the President (Washington, DC: Small Business Administration, 2007).

[12] Ibid.

[13] See Roxanne Alvarez and Veronique de Rugy, “Visible Hearts, Invisible Hands: the Economics of Charity,” Local Knowledge 2 (Arlington, VA: Mercatus Center at George Mason University, 2009), http://localknowledge.mercatus.org/articles/the-economics-of-charity-a-nonprofit%E2%80%99s-bottom-line/.

[14] Wolk, “Social Entrepreneurship and Government.

[15] The White House Office of Faith-Based and Neighborhood Partnerships was instituted by George W. Bush, and the Corporation for National and Community Service is a congressional/George H. W. Bush/Bill Clinton creation in charge of running national service programs.

[16] Andrew Wolk, Advancing Social Entrepreneurship: Recommendations for Policy Makers and Government Agencies (Washington, DC: Aspen Institute and Root Cause, 2008), 1.

[17] Emily Chamlee-Wright and Virgil Storr, Post-Disaster Recovery and Social Entrepreneurship, Local Knowledge 2 (Arlington, VA: Mercatus Center at George Mason University, 2009), http://localknowledge.mercatus.org/articles/the-social-entrepreneur%E2%80%99s-role-in-post-disaster-community-recovery/.

[18] Corporation for National and Community Service, FY 2010 Congressional Budget Justification (Washington, DC: CNCS, 2009), 5, http://www.nationalservice.gov/pdf/2010_budget_justification.pdf.

[19] “Despite the longstanding knowledge that innovation is found in organizations of many sizes, small and large, the Social Innovation Fund is structured to invest in sizable organizations able to absorb seven-figure federal grants and scale up. Many entrepreneurial leaders of the nonprofit sector toil for small organizations in out-of-the-mainstream locales. They may not be in line to get much from the Social Innovation Fund unless they are willing to sign up as local affiliates of the designated national innovators.” Andrew Cohen, “Finding Nonprofits in President Obama’s FY2010 Budget,” May 15, 2009, http://www.nonprofitquarterly.org/cohenreport/2009/05/15/finding-nonprofits-in-president-obamas-fy2010-budget/.

[20] Cohen, “Finding Nonprofits in President Obama’s FY2010 Budget.”

[21] To the president’s credit, he finally axed the Even Start program, which was a long and widely acknowledged failure.

[22] Wolk, “Social Entrepreneurship and Government,” 154.

[23] In this context, parens patriae refers to the power of the attorney general of a state to sue on behalf of the citizens on issues that affect the health, comfort, and welfare of the people and the general economy of the state. Evelyn Brody and John Tyler, How Public Is Private Philanthropy? Separating Reality from Myth (Washington, DC: The Philanthropy Roundtable, 2009).

[24] The law surrounding what comprises a charity is—as are most things legal—complex. Whether an organization is a “nonprofit” is a matter of state law. Whether it is “tax exempt” falls mostly under federal tax law.

[25] As James McGovern dryly remarks, “[The] history of mankind reflects that our early legislators were not setting precedent by exempting religious or charitable organizations.” James McGovern, “The Exemption Provision of Subchapter F,” Tax Lawyer 29 (1976): 523–524.

[26] Brody and Tyler, How Public Is Private Philanthropy?

[27] Suzanne Perry, “Paying It Forward—and Back,” Chronicle of Philanthropy, Sept. 4, 2008, http://philanthropy.com/free/articles/v20/i22/22000601.htm.

[28] Ibid.

[29] Advisory Committee on Tax Exempt and Government Entities, The Appropriate Role of the Internal Revenue Service with Respect to Tax-Exempt Organization Good Governance Issues (Washington, DC: Department of the Treasury, June 11, 2008), 1, http://www.irs.gov/pub/irs-tege/tege_act_rpt7.pdf.

[30] Ibid., 3.

[31] Alexis de Tocqueville, Democracy in America, electronic edition deposited and marked up by ASGRP, the American Studies Programs at the University of Virginia, June 1, 1997, http://xroads.virginia.edu/~HYPER/DETOC/ch2_05.htm.

[32] Charles H. Hamilton, “Philanthropy and the Law: A Symposium,” Philanthropy 18 (July–August 2004), http://www.philanthropyroundtable.org/article.asp?article=715&paper=1&cat=147.

[33] Ibid., 141.

[34] Ibid., 143.

[35] Jonathan Gruber and Daniel M. Hungerman, “Faith-based charity and crowd-out during the great depression,” Journal of Public Economics 91 (2007): 1064.

[36] Arthur C. Brooks, “The Effects of Public Policy on Private Charity,” Administration and Society 36 (2004): 173. Crowding out occurs at a rate usually less than $.35 to the dollar, and it is less common when it comes to donations to the arts. In fact, in some areas, particularly with public radio, crowding in occurs. In the case of public radio, however, crowding in may be the result of the structure of the public radio system. Ibid.

[37] Ibid.

[38] Tocqueville, Democracy in America, section 2, chap. 5, http://xroads.virginia.edu/~HYPER/DETOC/ch2_05.htm.

[39] See J. A. Pilliavin, “Feeling Good by Doing Good: the Health Consequences of Social Service,” in Processes of Community Change and Social Action, Allen Martin Omoto, ed. (Mahwah, NJ: Lawrence Erlbaum Associates, 2005), 29–50.

[40] See Robert D. Putnam, Bowling Alone: The Collapse and Revival of American Community (New York: Simon & Schuster, 2000).

[41] Richard C. Cornuelle, Reclaiming the American Dream: The Role of Private Individuals and Voluntary Associations (New Brunswick, NJ: Transaction Publishers, 1993), 193.

[42] Ibid., 55–64.

[43] See Frans B.M. de Waal, “Putting the Altruism Back into Altruism: The Evolution of Empathy,” Annual Review of Psychology 59 (2008): 279-300, http://www.emory.edu/LIVING_LINKS/pdf_attachments/de%20Waal%20(2008).pdf; Stephanie D. Preston and Frans B. M. de Waal, “Empathy: Its ultimate and proximate bases,” Behavioral and Brain Sciences 25 (2002):1-20; Paul J. Zak and Jorge A. Barraza, “Empathy and Collective Action” http://ssrn.com/abstract=1375059.

[44] Ibid.

[45] Peter J. Boettke and Anne Rathbone, “Civil Society, Social Entrepreneurship, and Economic Calculation: Toward a political economy of the philanthropic enterprise” (working paper, WPE 02-02, Department of Economics, George Mason University, 2002), 8-11, http://economics.gmu.edu/working/WPE_02/02_02.pdf.

[46] See Ealy, “Coordinates of Resilience,” and Chamlee-Wright and Storr, “Post-Disaster Recovery and Social Entrepreneurship.”

[47] Tocqueville, Democracy in America, section 4, chap. 5, http://xroads.virginia.edu/~HYPER/DETOC/ch4_05.htm

[48] Ibid.