Has private philanthropy become underrated?

My latest Bloomberg column focuses on Jeff Bezos in particular, and his recently announced $2 billion gift to preschool education and to help the homeless.  Here is one excerpt:

…the gift is unlikely to take the form of Jeff Bezos dictating terms, even if he is the world’s richest man. Bezos and his team will have to work through many institutions — not just preschools and homeless shelters but other organizations that help them do their work. Even brand new preschools and homeless shelters, funded entirely by Bezos, will have their own charters, missions, staffs and fiduciary responsibilities.

Any wealthy person who wants to give away money will find that incentives and the nature of decentralization and bureaucracy impose their own set of checks and balances. Real philanthropic influence goes to those who can persuade others to work with them and share their vision.

Rob Reich, a professor of political science at Stanford, argues in his forthcoming book that the philanthropy of the wealthy is not very democratic. But philanthropy operates a lot more like democracy than it might — and in fact, it may be too democratic. Voters, like philanthropists, can wish for a particular set of outcomes, but what they get will be filtered through broadly similar constraints of bureaucracy and decentralized incentives.

And this:

How about replacing philanthropy with higher taxes and more spending from the government, which is at least democratically controlled? Well, obviously there is room for both democracy and philanthropy in American society. But the elderly vote the most, and democratic expenditures — Social Security, Medicare, pensions and the like — are skewed toward the elderly. Philanthropy, including the Bezos initiative with its stated focus on homeless families, is usually more oriented toward the young or future generations.

The points I make about taxation of capital income should already be familiar to attentive MR readers.

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Bezos has not been getting enough credit for this bold and generous gift.

But I think at the same time tax and transfers as a means to aid the poor and homeless are also underrated.

Indeed:

https://www.cnbc.com/2018/09/18/larry-kudlows-entitlement-reform-talk-sparks-democratic-attacks.html

Sure. Underrated enough that the Senate Democrats couldn't whip votes to support a higher refundable CTC expansion in exchange for 0.9% higher corporate rate in the recent tax bill (even though with Rubio and Lee they had the votes to do so if they whipped), but are greatly concerned with SALT deductions for the top 5% and top 1%.

It all makes it too easy to go towards Bryan Caplan's cynical view that these days Democrats are mostly concerned with making government do more (rather than helping the poor) and Republicans are mostly concerned with just upsetting Democrats.

Any changes Democrats accepted at the margin would have made them co-owners of a very bad tax bill.

That is why Republicans wanted them in, that is why they stayed out.

Basically the reverse of PPACA, Dems wanted Rep buy-in, Reps wanted no part of it. This polarized crap has to end.

Kind of, but I think Democrats have a point that they tried to pre-compromise by picking something like the Heritage Foundation plan, something like the Romney in Mass plan.

And recent news is that Republicans might be coming around to post, post, compromise.

https://www.thedailybeast.com/suddenly-vulnerable-house-republicans-no-longer-bash-obamacare-on-their-websites

The Dems “pre-compromised” with the less liberal part of their own caucus.

The “we chose a Romney plan and the Rethugs still balked” is a talking point and not an effective one.

The compromises were for Joe Lieberman, not the other side.

I don't think that quite worked for you, buddy.

Remember that a mandate to purchase private insurance was treated as "teh socialism."

In truth the real socialism would have been a straight up National Health Service. That was and continues to be far off the table in a very conservative United States.

But for a little post libertarian thinking see:

https://niskanencenter.org/blog/could-we-afford-universal-catastrophic-health-coverage/

Great. “Buddy”. You missed the point.

The democrats had 60 senators. So let’s do this again.

They were negotiating with the more conservative Dems in their own caucus. It never had anything to do with republicans, or trying to get more than literally the 60 they had in the senate.

Obamacare couldn’t include a public option and pass with ONLY the Dems. Let alone needing a vote from across the aisle.

A meta point about how it wasn’t nationalizing the healthcare industry, or how the progressive caucus wanted something else, is irrelevant.

The debate was entirely within the party, and Obamacare was a result of A compromise, it just so happens that the compromise was Within the party alone.

Rail all you want, but this question of who was pragmatic and who was compromising ultimately ties back to the voters.

Fox News poll: Voters like Obamacare more than GOP tax cuts

This is a nonsensical argument.

The question was whether Dems compromised with republicans to pass the bill. Which is untrue.

Voters are loathe to take an entitlement away once it’s in place.

So don’t worry, we are still well on the path to Latin America levels of corruption and stupidity.

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I'd take the "private philanthropy is bad because those wealthy people subsidize the wrong things, like things for the wealthy" takes more seriously if the people on the broad Left who make them also supported the occasional conservative calls to eliminate federal government on arts programs whose audiences are upper income. (Or if, say, any Senate Democrats had voted against the military spending bill that passed yesterday 93-7, with the opposition coming from libertarian-leaning Republicans plus Bernie Sanders.)

After all, Bezos's charity seems like an odd place to fight, especially when combined with that support. Are people saying that it would be a better thing for money to go to wars and to arts aimed at the upper income than to homeless shelters and education for the poor? They'd do better to use as a hook private charity towards glitzy arts programs, faux charities, dubious foundations, etc.

In any case, at least I think most can agree that the recent tax bill shutting down the ability to deduct "contributions" to universities that are really just buying athletic tickets was a good thing.

In 2005 the US spent about $5 per capita on Arts. That was 0.13% of public spending. I assume current levels are similar, inflation-adjusted.

https://intranet.americansforthearts.org/sites/default/files/Comparisonsofartsfunding27Oct2005_0.pdf

I would be fine with reducing it, but we're not going to find mountains of savings here.

(As I get older, I think we should just eliminate the deduction, and let everyone give after tax money as they wish. Then set the tax levels for the services the government must still provide.)

"Then set the tax levels for the services the government must still provide."

You buried the lede there

Kinda. In a democracy, even a representative one, government must provide the services the majority demand. And then tax to cover that should be collected.

It is dysfunctional to break that tax and spending relationship, and it is ridiculous for some random guy to say "wait a minute, my taxes should only pay for what *I* want."

Agreed, and we should a) spend no more than we collect, and b) spend on things that are public goods. Everything else the private sector can do better.

We really do collect a lot of money. We have a spending problem.

Yep, i'd guess that 80% of SS recipients would not need the program if it did not exist.

That's WAY too high. I would guess 25% or so.

I think if SS did not exists at about 60 years old people would start to save earnestly and would work as long as their health allowed. To really need SS you also must not have children and or siblings willing to take you in. Also in a lower spending world homes would be smaller in most of the country and in the over controlled markets like San Fransisco and New York would just be cheaper.

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When I first read your comment, I thought "Yeah, but is anyone actually criticizing Bezos' donation?"

Then I did some research. Wow, there have been some dumb responses out there.

Hey, you don't have to agree with Bezos' business practices, opinions, or whatever. But anyone who supports the causes of homelessness or providing preschool education ought to be able admit this is a gigantic good deed. If you are unable to say "I disagree with various stuff Bezos does, but kudos to him for giving away $2,000,000,000 to a good cause", that is revealing. And really, how can a gift of this magnitude not inform your opinion of his character at least a little bit? If it does not, do you really hold views driven by evidence?

Just to be clear, the "you" in the last paragraph was general and aimed at Bezos' critics, not John Thacker. Reading it back, that might not be clear.

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" do you really hold views driven by evidence?"

No, they don't, but they'll always rationalize their behavior.

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I think preschool makes very little difference on life outcomes and the problem wuth the homeless is not housing, it's addiction and mental illness.

Housing first has worked well under the Mormon theocracy of evil and white supremacy.

Apparently it’s some combination of areas with cheap real estate, a lower than normal base homeless population, relatively strict alcohol laws, and a willingness to gradually apply social pressure on the newly housed to stop drinking/drugs and start working part time.

And lots of volunteer women who don’t have jobs to provide free labor.

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If you don't think those are good used of resources, that's a defensible position, but Bezos isn't being criticized on those grounds.

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I agree on preschool, big waste, but I think the money could really help with homelessness.

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Philanthropist: a misanthrope with disposable wealth or discretionary income.

Contemporary "philanthropy" merits at least all the skepticism that it has earned, and perhaps more than it has earned, given the sad plight of humanity today.

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"How about replacing philanthropy with higher taxes and more spending from the government, which is at least democratically controlled?"

No

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Rob Reich, a professor of political science at Stanford, argues in his forthcoming book that the philanthropy of the wealthy is not very democratic.

Agree. It's a big problem in the US that certain people have money and the rest of us don't get to vote on what they do with it.

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A good chunk (1/3) of "private philanthropy " money goes to religious institutions. To be clear, this is purely religious organization not religious related charities https://www.nytimes.com/2016/11/06/giving/donations-to-religious-institutions-fall-as-values-change.html

So, is private philanthropy really " more oriented toward the young or future generations"? Bezos did it, universities also go in this direction. It would be much better if the relation private philanthropy-youth could be quantified properly instead of relying on anecdotes.

That is absolutely true regarding religious giving. One of the best kept secrets in philanthropic giving and service support is the Mormon Church. You could argue whether or not the Mormon tithe is actually philanthropical, but you can't argue that the Church worldwide isn't A) sitting on millions of sq/ft of warehouse space filled to the brim with emergency supplies of almost every category and B) shows up at almost every disaster requiring help and support from other agencies that can offer similar support. I am not Mormon (or religious) but I have seen their capabilities in action first hand and quite frankly, they are better organized than FEMA.

It's a classic example of non-government entities doing a better job using their own resources.

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Most "purely religious organizations" give money to philanthropic causes, fund clergy or other staff that spend some of their time on philanthropic causes, and organize voluntary work for philanthropic purposes.

Most also spend plenty of money on their own organizations and members, but you can't simply say that all of that money is going to non-philanthropic purposes.

Also, religious organizations tend to encourage charitable giving by their members, in ways both general (teaching values that lead to giving) and specific (most churches periodically highlight the work of other charitable organizations and encourage members to donate to them).

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The world has been getting significantly better by most measures. This fabulous Ted talk by Steven Pinker has the facts to back that up. https://www.ted.com/talks/steven_pinker_is_the_world_getting_better_or_worse_a_look_at_the_numbers.

My hope with private versus government backed programs is that they will find new and innovative ways to deliver the resources more efficiently to those in need than the government can, that they will be less influenced by politics, and that they will have the ability to adapt more easily when the data demands it. May be too much to ask but has to be worth a try. The current social programs from the government referenced here are great examples of well intentioned programs that haven't adapted to new demographics, and have become increasingly expensive over time. The Social security program for example is expected to run out of money in 20 years, as the number of payers vs recipients has flipped since it's inception, while they continue to increase the cost of the program, take money from it to pay for other programs, and employee 60,000 people to administer the program. Has to be a better way.

60k employees .. 160m paying in .. 61m receiving benefits.

Is this actually a bad ratio? One employee per 2000 served?

Apple has 80k employees for 700m iphones, but they are outsourcing a lot of their problems. Verizon alone has 160k employees for 140m customers. FWIW.

Not sure why those would be appropriate comparisons. Apple makes stuff. Verizon maintains a large network of cell towers and landlines. SSA just takes in money from one group and gives it to another.

Out of 2000 people how many change jobs in a year? How many change addresses? How many change names? How many just want to call on the phone to ask a question or complain?

And that's without the work-a-day stuff, running the computers, updating the software, bringing new-fangled web services online.

Luckily, there are these things called Social Security numbers which make it very easy to track individuals through name, address, and employment changes.

"Running the computers," I agree, though, is a very tough task. You have to, like, turn it on, wait for it to boot up, put in a username and password, make sure not to spill coffee on it, etc. Very demanding!

I'm afraid I'm going to have to downgrade my expectations of you, Jeff.

58 million phone calls, often from the old, and frightened.

You have a point. Handling phone calls is no picnic either. Picking up the receiver, holding it to your ear, listening to what the caller is saying, responding to questions with words like "yes," "no," and "we recommend you visit our website for more information." These are not tasks that can be entrusted to just anyone.

You gonna tell granny that if she wants to change her address she needs to navigate the website?

And regardless of whether you do it by phone or online, you have to feed it through safe identity checks and fraud filters. You don't just slam a check to a new address.

I hope you don't have a job where you spec systems for complexity.

True, those ultra-complex fraud detection procedures where you ask people for the last four digits of their social security number, their zip code, birth dates, etc, are no joke. Having to transcribe those four, five, and sometimes seven digit numbers in real time is a PhD level skill. Learning to use a ten key pad to high proficiency is like a masters curriculum unto itself. Real American Heroes we've got over there on Security Boulevard.

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(I suppose the correct framing was "out of 120,000,000 people ..")

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Ah, I found one older data point:

"Reflecting the popularity of this service, call volumes have increased steadily over the years to the point where, during Fiscal Year 1999, we handled over 58 million phone calls. "

https://www.ssa.gov/history/reports/SSAReports/800number/index.html

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I can only assume that Reich believes that tax deductions for donations to universities is incredibly undemocratic, especially because tenured professors at wealthy universities like Reich are among the least accountable groups in America.

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'find that incentives and the nature of decentralization and bureaucracy impose their own set of checks and balances'

Donors Trust is working to change that, in its pursuit of a much better world. 'Donors Trust is an American nonprofit donor-advised fund. It was founded in 1999 with the goal of "safeguarding the intent of libertarian and conservative donors". While not its primary purpose, DonorsTrust, like all donor-advised funds, can offer privacy to clients who do not wish to make their donations public. It makes grants to charities that are not dependent on government support and that promote limited government, personal responsibility and free enterprise. It is affiliated with Donors Capital Fund, another donor-advised fund. In September 2015, Lawson Bader was announced as the new president of both DonorsTrust and Donors Capital Fund. Bader was formerly president of the Competitive Enterprise Institute and vice president at the Mercatus Center.' https://en.wikipedia.org/wiki/Donors_Trust

Do note this from the article - 'rants from Donors Trust are based on the preferences of the original contributor, and the organization assures clients that their contributions will never be used to support politically liberal causes. As a donor advised fund, Donors Trust can offer anonymity to individual donors, with respect to their donations to Donors Trust, as well as with respect to an individual donor's ultimate grantee.'

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Man, talk about an unfortunate dropped letter - 'grants' is the first word of the second quote. I'm sure the guarantee to never support politically liberal causes is explained with the sort of measured tone that one assumes a man like Falwell or Buchanan would have sed.

And not using having u'sed' javascript.

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I feel like this article is missing the point, it isn't about efficiency or maximum cost/benefit, its a first amendment issue.

Trying to dictate what Bezos donates to with his money is stifling his freedom of speech, especially if you are trying to replace with higher taxes and "government aid"

Due to his very generous donation, I now know how Bezos feels about pre-schools and the homeless and how serious he is about it.

That is speech.

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Here is better advice to Jeff Bezos for his philanthropic plans: https://www.nytimes.com/2018/09/19/technology/bezos-amazon-rich-concentration.html

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According to Heather MacDonald, two thirds of all foundations are run by leftists with political agendas... See "The Burden of Bad Ideas"... Also, a lot of foundations and endowments pay more to money managers than for helping people. The Communuity Trust of Chicago reportedly has over $2 billion but rarely do you see any news of them helping anyone. Pre-schools are baby sitting services and yuppie fetish. But public unions love them to increase membership and kick back more money to the democratic party.

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Seriously, are there poor people in the USA? I think not.

Bonus trivia: YOU MUST, and I mean MUST, read this new book "Billion Dollar Whale" by Wright et al (2018), a WSJ expose of Low Taek Jho, “Jho Low”, born 1980, who on behalf of former prime minister Najib Razak of Malaysia and some others from Abu Dhabi, including a DC diplomat, stole $4B in the 1MDB scandal. The authors received several gigabytes of emails and so when they quote somebody, it's verbatim, not a reconstruction from somebody's memory. And the name dropping and how J. Low spent money at trendy clubs is incredible. Literally J. Low probably spent $500 million on clubbing over five years, and $100 M in making the movie "Wolf Of Wall Street" (which ironically grossed about three times that money). The opening scene in this movie, where they crash a Lamborghini, is not "CGI" but on J. Low's advice was an actual supercar they trashed. That's how much money this kid had to burn. A well written story too, authors did well to entertain us and without being killed. Think of all the people they must have pissed off! Goldman Sachs does not come off well BTW, nor do high-powered US law firms, nor of course the Malaysians. Best book of the year for me.

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If you accept that Bezos' money is his to spend as he pleases, and if he pleases to give it away, well, what is there to complain about? That he didn't give it away as you would have given it away, had it been your money? But, it's not, is it? It's Bezos' money.

On the other hand, if you postulate that Bezos' money is not really Bezos' money but belongs to all of us, then the first question would seem to be, why should we allow him to keep any of it (above subsistence) at all? Does this argument not come down to "Well, if you're going to give it away anyway, why shouldn't we just take it (by democratic means) and give it away as WE see fit?"

Do you really want to go down this path, where anything anyone has can be taken (er, I mean taxed at confiscatory rates) at any time, just so long as it's taken by democratic means?

Yes, I know: you don't mean to take it all, just an itty-bitty portion. And for a good cause! And (of course) government must fund itself. But once you declare that others' wealth should be distributed "democratically," what makes you think the democratic mob will stop at just a portion?

Unless it realizes that that Golden Goose might just waddle away from your jurisdiction before you can get around to (democratically) cutting it up to get at them Golden Eggs.

" what is there to complain about? ... But, it's not, is it? It's Bezos' money."

I think that's the core motivation behind the complaints.

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"Do you really want to go down this path, where anything anyone has can be taken (er, I mean taxed at confiscatory rates) at any time, just so long as it's taken by democratic means?"

That's exactly what the author intends. All wealth is ultimately the government's (which acts at the behest of the majority) except what crumbs it allows individuals to retain. Madison called that majority faction and it's the most dangerous faction in a democracy.

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Congratulate Bloomberg team on hilariously psychotic picture of Bezos.

It's sad they didn't go to the trouble of photo shopping a long haired white cat into the picture. But I guess that would be a step to far.

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" To the extent that Western European systems make more public spending possible, it is through a value-added tax on middle-class consumption."

The US needs to go to this model. The Federal government should have broad based consumption taxes.

Preach.

Outside of a declaration of war, consumption taxes on the middle class should automatically throttle with spending.

And to all the internet economists, No.

I don’t care that you read Krugman. To all the raywards and bears, you can’t do stochastic calculus. You have no conception of what you’re trying to argue, so no. I don’t care that you think we should use deficit spending to “cure” a recession.

But regardless of the truth we’re due for federal and state wealth taxes within 20 years.

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"Rob Reich, a professor of political science at Stanford, argues in his forthcoming book that the philanthropy of the wealthy is not very democratic."

That is the typical leftist attempt to conflate socialism with democracy, as in "democratic socialism," "social democracy," and all the variations thereof, which are opposed to varying degrees to liberal democracy. If it's Bezo's money, then the public has no right to demand that he be held publicly "accountable" (that nice sounding democratic word) for his spending on private philanthropy or private yachts.

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Philanthropy is a good thing, when it's real. Gates is doing his best, for instance. But then you have Larry Ellison, whose idea of Philanthropy is to get tax savings while he spends on increasing his own lifespan, or the hilarious endeavors of Peter "young developer's blood" Thiel. Sometimes the donations are really about changing the way the world thinks to agree with them, like the famous Olin donations, or what Sinquefield is doing. And of course, there's the "charity" work of 45.

I for one think that they should have money to pay for philanthropy, but that America's tax advantages for such donations just give the very rich yet another way to find ways to benefit themselves without paying taxes. Given how often charities and churches are political nowadays, I'd get rid of their tax advantaged status altogether.

I've got no problems with Sinquefield's donations, which are to promote chess. And this is not a 'new' phenomena. I read that way back when, when a rich industrialist's relative drowned, he set up a foundation to abolish gravity. It's still in existence. As mentioned in Mary Roach's book, "Packing for Mars".

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2 bn $ that partly goes to the homeless? Wow, now is the time to buy some booze stock! Thank you Mr. Bezos.

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