A couple of weeks ago, the Mercatus Center noticed that Brad Pitt’s non-profit was seeking stimulus money for its mission to help rebuild New Orleans:
The Make It Right Foundation (profiled here on ABC’s 20/20) — as well as dozens if not hundreds of other local initiatives and non-profits — have done incredible work in rebuilding the Gulf Coast after Hurricane Katrina. But much of this success is due to their independence from large government bureaucracies. Stimulus funding has the potential to act as what Jane Jacobs called “cataclysmic money.” There is a real danger that if social entrepreneurs and non-profits like Pitt’s become dependent upon federal funds, they will in effect become arms of the federal government. This would have a dangerous effect on civil society, and reduce our resilience to disasters and shocks, whether natural or economic. (emphasis added -ed.)
Well, the news is that this has pretty much already happened with lots of non-profits. Many derive the overwhelming portion of their income from Medicare/Medicaid, or from state government grants and purchases of their services. Here in Colorado, for instance, Jewish Family Services reported in 2007 that roughly $2.5 million of $7 million in contributions, or 36%, came from government grants. Compare this with something like the Gathering Place, a drop-in shelter for homeless women, which received no direct government aid, and whose government purchases amounted to less than 10% of total income. No wonder organizations like JFS were lined up around the block to support Referendum C.
The degree to which these non-profits have become courtiers, to which they’ve essentially outsourced their fundraising operations to governments and a couple of lobbyists, is probably largely unknown to the public. It’s a whole new dependency class. If these guys get their way, there will soon be another effort to raise taxes, this time in the middle of a recession. And once again, the government-dependent non-profits will be complaining about how their critical services are about to be cut.
As Arnold Kling has pointed out, the ability to exit is ultimately more important than the ability to vote. The reason these non-profits are more responsive in the first place is that failure has consequences in their ability to fundraise.
