As President Obama and members of Congress get to work on what promises to be the mother of all economic recovery programs, much of the talk has focused on an expected vast infusion of cash into state and local governments for a variety of long-delayed public works projects. Largely overlooked in those discussions, however, is a far more direct way to provide assistance and stimulate recovery, one that can also foster a sense of citizen involvement and national purpose. That mechanism is the more than 1-million nonprofit organizations with their 11-million paid employees and countless more volunteers firmly rooted in urban, suburban and rural communities across this country. Those organizations have a critical role to play in sustaining families and communities during the hard climb to recovery the nation now faces. In fact, as the Katrina recovery process has shown, the road to recovery will probably have to pass directly through them. Yet there is little evidence that any attention is being paid in the design of the stimulus package to helping equip them for this task. How might this be remedied? How can the country's charities contribute to the recovery process, and what could a stimulus program do to help them prepare for that? Here are three ideas that can be put into action quickly:
Here are details of three ways the government could help nonprofits step in right now and help the economy, according to Lester Salamon, director of the Center for Civil Society Studies at Johns Hopkins.
1 Create a $3-5-billion matching-grant program to support nonprofit soup kitchens, homeless shelters and other organizations that provide services to the needy.
Mounting foreclosures and job losses are producing enormous pressures on families and on the basic service organizations like soup kitchens, homeless shelters and the food banks that they turn to.
No matter how speedily Congress enacts a stimulus program, it will take months for its effects to kick in. To reduce the suffering and social disintegration that could result in the interim, millions of families will need a helping hand.
America's nonprofit organizations are in a perfect position to deliver needed assistance. To speed up the process, aid could be channeled to direct-assistance organizations — not through the cumbersome processes of state and local governments but through local United Ways and community foundations, both of which are knowledgeable about them and have existing processes for handling grants.
To encourage citizen involvement in this crisis, the federal funds could carry a requirement with a twist. Instead of matching grants with money, nonprofit groups could meet the requirement by mobilizing volunteers, taking advantage of a resource that too many workers now have in too much abundance: their time.
This would give the unemployed a sense of purpose and self-esteem, important qualities they will need to forestall the despair of joblessness.
2 Commit $5-billion out of the $700-billion Congress already authorized in the Troubled Assets Relief Program, set up to rescue the financial system from the overhang of troubled mortgages, to underwrite a three-year effort by nonprofit housing and community development organizations to help low-income homeowners rework their mortgages to avoid possible foreclosures.
While the U.S. Treasury and the Federal Deposit Insurance Corp. trip over each other trying to find a way out of the subprime mortgage mess bequeathed to us by careless lenders and mortgage packagers, a powerful and effective alternative mechanism is available to help low-income homeowners negotiate affordable workout arrangements on their loans.
This is the network of nonprofit community-development credit unions, finance institutions and housing organizations that dot the landscape of urban America.
These organizations provide a ready-made network for salvaging value in the billions of dollars of troubled mortgages that lie at the heart of the mortgage meltdown.
They already manage billions of dollars of mortgage loans in low-income areas with delinquency rates that their high-flying for-profit competitors would now die for. (Delinquency rates on mortgage loans for the 230 members of the National Federation of Community Development Credit Unions, for example, stand at only 3.1 percent of assets compared with the 18.7 percent national average on subprime loans).
A significant infusion of capital into those organizations could do more to clean up the mortgage mess quickly than any other comparable use of money from the Troubled Assets Relief Program.
3 Adopt emergency incentives for private giving and volunteering.
Government support is not the only resource that needs to be mustered to deal with the economic emergency. At times of national crisis of the sort the country is facing today, history has shown that Americans will respond generously with both their time and their resources.
Yet tax and other changes over the past eight years have steadily undermined the incentives to give and volunteer. As part of the economic recovery program, Congress and the president should adopt measures that re-establish or expand those incentives, at least temporarily. Among the ideas worth considering:
• Extend for at least two more years beyond 2009 the so-called IRA rollover that allows people ages 70½ and older to avoid taxes on withdrawals from their retirement accounts that are used to make charitable contributions.
• Allow the 65 percent of all taxpayers who do not itemize their tax deductions to claim a deduction for charitable contributions above a minimum amount; or, better yet, to receive direct tax credits, which are financially more attractive.
• Set the mileage deduction for volunteer travel equal to that for business travel, and exempt reimbursements for volunteer travel from taxation up to the business rate.
• Expand support for AmeriCorps and other service programs that can mobilize the army of unemployed recent college graduates, automobile workers, and others into productive roles as teachers, Habitat for Humanity construction workers, and other nonprofit assignments.
• Create a broad-based nonprofit investment tax credit to help charities hold their own in a brutal credit environment and encourage more private investment in community-development finance institutions working to solve the mortgage crisis.
• Temporarily suspend the 2 percent excise tax on foundation earnings for grant makers that give more than the 5 percent of assets required by federal law. To be eligible, the increased spending would have to go to charities that serve citizens affected by the economic crisis.
Policymakers have much to think about as they contemplate how to get our country out of its economic crisis. But they would do themselves and the nation a disservice if they overlooked the enormous potential of private nonprofit groups. Those organizations have the capability not only to deliver timely and effective aid but to do so in a way that builds community and transmits hope, all of which we now critically need.
Lester M. Salamon is director of the Center for Civil Society Studies at the Johns Hopkins University and former deputy associate director of the U.S. Office of Management and Budget. Copyright © 2009 The Chronicle of Philanthropy.