Center Director Professor Alan Abramson was cited in a recent article in The Chronicle of Philanthropy on the impact of President Trump’s federal spending cuts on the nonprofit sector. Dr. Abramson and several other philanthropy experts referred back to President Reagan’s economic policies in the 1980s to explore possible parallels with the current cuts.
Ultimately, the Reagan era experience may have mixed relevance for the current situation. While both the Reagan and Trump administrations pushed for substantial cuts in social service and other programs, the former also made a point of supporting private philanthropy as an alternative to government funding. As a result, in the early 1980s President Reagan and Congress legislated new tax incentives for charitable giving, and the fundraising profession grew exponentially. Some smaller nonprofits shut their doors, but many large and medium-sized nonprofits were able to weather the storm, in part because after an initial round of budget cuts Congress refused to go along with the president’s proposals for additional, significant reductions.
“For those of us who were trying to analyze what the cuts would amount to and their potential impact on nonprofits, we had something to go by during the Reagan years. Now people ask me, What does this all mean? and I don’t know. It’s very hard to go beyond just anecdotes because there isn’t any clear playbook.”
Dr. Alan Abramson, Director, Center on Nonprofits, Philanthropy, and Social Enterprise
In contrast to the Reagan experience, the Trump administration has not so far supported increased philanthropy and, in fact, has been openly critical of foundations and nonprofits, threatening to remove the tax-exempt status of some nonprofits, including Harvard University, and apparently considering increased taxation of nonprofit endowments.
For both administrations, it is important to understand the importance of government funding in the balance sheet of many nonprofits. While many believe that philanthropic support makes up the largest portion of nonprofit revenue, in reality, government funding is two to three times greater than charitable contributions from all individuals, foundations, and corporations for the nonprofit sector as a whole. As research in the early 1980s about the Reagan era cuts by Alan Abramson and his then-colleague Lester Salamon showed, even with increased incentives for giving it was next to impossible for private philanthropy to fully offset significant government cuts in the short-run, and there is no assurance that private donors would even want to do so or would direct their support to nonprofits experiencing cuts.
To read the full article on The Chronicle of Philanthropy’s website, click here.