Chronicle of Philanthropy Op-Ed: New Deficit Deal Should Make Nonprofit World Quake

By Gary D. Bass and Katherine McFate
Published August 21, 2011 by The Chronicle of Philanthropy
Reprinted with permission

After the debt-ceiling deal was struck, Treasury Secretary Timothy Geithner remarked, “It was a terrible process but a good result.”

Many people will question the result, but no one will disagree with his assessment of the process.

It has left Americans disgusted with Washington and more cynical about government. That may be the worst legacy of the debt-ceiling negotiations.

While the deal will leave a profound fiscal challenge for the nonprofit world, threatening financing for vital projects in education, health, arts, the environment, and other causes, it may also be creating a “new normal” for the way decisions are made in Washington.

And this narrowing of democratic practice will reduce the ability of citizen organizations and other nonprofit groups to represent the priorities of their constituencies and protect the interests of vulnerable people.

Nonprofits play a critical role in representing people who are often ignored in public-policy debates—the poor, minorities, disabled people, rural Americans, and so many others.

So when the structures of representative government are jettisoned—especially for decisions designed to set national priorities for years to come—everyone working for nonprofits and foundations has reason for concern.

The debt-ceiling deal should be a clarion call for a national conversation on the importance of government and on ways to reform our governance processes to broaden participation to better reflect the needs and priorities of the American people.

The deal, formally known as the Budget Control Act, establishes a precedent for “delegated government”—a mechanism that allows decision making power to be transferred away from elected leaders and established laws.

The new law outlines three models of delegated government.

First, it shifts budget decisions to a “super committee” of 12 people selected by party leaders. Second, it establishes a mechanism for automatic spending cuts that would reduce congressional discretion over budget decisions.

Finally, it allows a vote on a constitutional balanced-budget amendment that would permanently restrict congressional spending tools.

The “super committee,” working outside the official budget process, has until November 23 to deliver a plan to reduce the deficit by at least $1.2-trillion (beyond the $917-billion reduction already agreed to in the law).

The creation of the super committee diminishes the authority of other elected representatives by concentrating spending control in the hands of a small group chosen by party leaders.

Between now and Thanksgiving, lobbyists will be hovering over the 12 committee members like bees on steroids, but it will be hard for nonprofits, with their limited resources, to compete for attention given the limited time period for super-committee deliberations.

As currently written, the law contains no demands for transparency or disclosure.

With little input or scrutiny from the American people, the 12 members of the committee could dramatically shift our national priorities.

And make no mistake about the power they have: Unlike the process that traditional legislation usually goes through, no member of Congress can offer amendments to the plan by the committee. Lawmakers can either vote yes or no—no compromises or changes can be made, and there will be limited time for debate.

The next step of the process is even more worrisome. If the majority of the super committee fails to agree to a $1.2-trillion deficit-reduction plan or if the plan fails to become law, the second delegated governance mechanism kicks in: automatic spending cuts.

Uniform spending cuts would affect virtually all programs financed by the federal government and would once again reduce the vast majority of elected officials to the role of bystanders, unable to register and advocate for the priorities of their constituents or the country.

The Budget Control Act also allows a vote on a third, severe form of delegated government: a constitutional balanced-budget amendment.

That would permanently handcuff federal officials from engaging in spending to counter bad economic times. As a result, economic downturns will likely be longer and more severe.

The Budget Control Act is an abdication of representative democracy.

That is not surprising given its origins; it was negotiated by just a handful of people behind closed doors, responding to the demands of an intransigent minority. You might call it “governance” by hostage-taking.

A vocal, ideologically extreme minority simply refuses to compromise. Its members manufactured a crisis by demanding immediate and severe spending cuts in the middle of a shaky economy and may have succeeded in further weakening a fragile recovery.

We are seeing the results in global markets. But the lawmakers who manufactured the crisis don’t seem to care about the repercussions of their actions.

After the vote on whether to allow America to default on its debts, Rep. Jason Chaffetz, a Utah Republican, said, “We weren’t kidding around, either. We would have taken it down.”

These ideologues came to Washington to shrink government and cut spending. Their success in keeping revenues off the table has emboldened them to threaten default, government shutdowns, and other extreme measures to get what they want.

For charities and foundations, the repercussions of the debt-ceiling debate are severe.

World markets are reacting negatively to the new, take-no-prisoners minority-rule politics of the U.S., and over the coming weeks, increased volatility in the markets will probably result in less private giving to nonprofits, but this decline will be small potatoes compared with the reduction in government spending the Budget Control Act requires.

The debt-ceiling deal will change the ecology of nonprofit service providers and cultural institutions across America.

The American welfare system works through a network of nonprofit providers. Without government support, many providers of child care, job training, counseling, and other human services will not survive; others will find their capacities harshly constrained. Neither foundations nor religious institutions can fill a trillion-dollar budget hole.

As they are forced to increase fees, arts, human needs, and educational institutions will find it increasingly difficult to serve those without means. America will become a meaner place, and the public institutions that have reinforced democratic values and created opportunities for generations of Americans will simply not be available to large swaths of our residents.

Here is the challenge for American civil society: In the current context of hyperpolarized politics and the assault on government as an institution, how do we reinvigorate American democracy?

For many years, foundations have supported the development of pilot projects to test whether new ideas work and then paid for advocacy groups to encourage government to expand and defend the successful ones.

Nonprofits typically conduct such advocacy in two ways.

Some groups focus on gathering evidence and using it to persuade elected officials to “do the right thing.”

Others seek to build up abilities of particular groups of people to make their voices heard in the halls of government.

Both are needed, but it is not clear what impact either approach can have under the new structures of delegated governance or hostage politics played by people who truly don’t care if government breaks down or shuts down.

In both approaches to advocacy, the actual processes of governance have been viewed as fixed and unchanging.

Antigovernment activists have shown us how naïve this assumption is.

It is time for foundations and big donors again to invest in efforts to promote democracy, to encourage a broad new national conversation about how democratic structures and practices can be reinvented for the modern era. Foundations need to support projects that explain how government operates, what it does, and how we can make it better.

Our nation needs to broaden its rules and structures of participation and create continuing opportunities for citizens to express their views and get involved.

We need a rule making process that efficiently produces and enforces standards and safeguards that protect the public. We need systems that encourage elected officials to be responsive to their constituents and the public interest instead of special interests.

Until we get the public structures right, the important social programs foundations have invested in over the years will be held hostage, and they won’t be released until the mechanics of democratic governance are repaired.

Gary D. Bass is executive director of the Bauman Foundation. Katherine McFate is chief executive of OMB Watch.

© 2011 Chronicle of Philanthropy

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