Quickly, the issues of behind dismantling failed and redundant social welfare programs took shape under a well-crafted political campaign of "generational poverty" and "entitlement reform".
The solution was privatization.
Michigan, being a stalwart steward for privitization policies began experimenting with its move to encourage charter schools and its child welfare programs by promoting corporate responsibility.
Under Medicaid expansion, corporations entering the privatized market of social programming stand to generate substantial profits, but at what cost to children?
As corporations began to be animated by SCOTUS rulings as "persons" who now hold religious beliefs, social investing, rather charity, became a multi-billion dollar unregulated industry under the guise of God, crafting social policy.
And as everyone knows, God cannot be audited, all policy experimentation begins with child welfare, because no one has questioned it.
The Wall Street Takeover of Charity
Donor-advised funds run by huge money management firms are exploding.Fidelity Charitable runs the second-ranked charity in the United States, according to the Chronicle of Philanthropy, behind United Way Worldwide. Charles Schwab's is fourth and Vanguard's is 10th.
People aren't literally giving to these companies. They are setting up accounts at these firms and then disbursing the money, advising on which charities get how much.
The idea of the funds was to make it easier for individuals to give to charity. People could drop money into the account during flush times, and donate as they see fit, not in a panicked rush to meet the Dec. 31 deadline for contributions.
So far, this has turned out to be a bad deal for society.
For about 40 years, charitable giving held steady at about 2 percent of gross domestic product, while donations from individuals have stayed at around 2 percent of disposable personal income, according to Ray D. Madoff, a Boston College law professor and frequent critic of donor-advised funds.
Over the last few years, the donor-advised funds have grabbed significant market share. The total amount of assets under management at donor-advised funds rose to $54 billion in 2013, up 20 percent from $45 billion a year earlier. Fidelity's alone have skyrocketed to $13.2 billion.
Contributions to donor-advised funds rose 24 percent in 2013, compared with the previous year, to $17 billion. They only gave out less than $10 billion, so money is building up in them. And the amount paid out each year declined in each of the last three years through 2013, according to Alan Cantor, who runs a philanthropy consultancy and is a frequent critic of donor-advised funds.
This has given rise to several concerns. The money in donor-advised accounts doesn't have to go out right away. Private foundations have to disburse an average of 5 percent each year. But donor-advised funds have no legal obligation to spend down their money — ever. True, donors cannot get their money back. But they could designate their children as the advisers to the money. And their children could pass that responsibility on to their children.
So people can get their taxable deduction all in one year, but society doesn't get the benefit of the money right away.
And there's a tax game. Investors who had a particularly good year can make a big donation to a donor-advised fund and lower their taxes. But charities might have to wait while the money sits in the account for years.
Another significant issue is that the interests of the donor-advised funds and donors may diverge. Fidelity, Schwab and Vanguard all charge fees on the money put into their charitable funds. The charities are notionally independent, but they actually plow money into mutual funds run by the same companies.
There are layers of fees charged on that money. Of the $13.2 billion in Fidelity Charitable, $8.5 billion of it goes into Fidelity mutual funds. Those Fidelity funds also charge fees. And investment advisers can charge fees on some portion of the rest of the money.
Cantor estimates Fidelity makes 0.75 percent in total on its funds, but that's really just a shot in the dark because Fidelity doesn't clearly disclose the fees.
There is a more subtle effect at play as well. The firms have an interest in accumulating assets. They have no interest in having money go out the door to charities. Investment advisers, too, have an interest in directing their clients to put money into donor-advised funds rather than to charity, as well, so they can continue to charge them.
Representative Dave Camp, Republican of Michigan, proposed in his sweeping tax reform that money deposited into donor-advised accounts would have to go out the door in five years. The outcry was swift, with donor-advised funds tellingly joining the lobbying effort against it.
The president of Fidelity's charity, Amy N. Danforth, told me that donor-advised funds help people make "more planful and impactful" gifts, rather than haphazard ones.
She said in surveys, two-thirds of their clients said they gave more to charity because of their accounts than they would have otherwise. The firm said that on average, more than 20 percent is given out annually. And Fidelity says 90 percent of the donations are sent to charities within 10 years. She said the donor-advised funds were working and did not need tax reform or more regulation.
But the figures can be misleading. Some people might put a million in and donate that in the same year. Others might hold off for years. How much does the median account holder send out each year? There is a lot that Fidelity could do to improve its level of disclosure. A firm spokeswoman wrote to me that, "at this time, we do not calculate median contributions, investment return or payout at account level."
One argument in favor of these funds is that the money accumulates through investment gains. But that gets the notion of charity wrong.
"In most cases, it is more beneficial for society to invest the money now. But we are so used to piling it up and piling it up," said Cantor, because people think of it as they do retirement funds.
If a donor insists on thinking about charity in terms of investment returns, a donation today for early childhood development and education will produce substantial societal returns over time.
Thinking that way, however, signals another problem with the charitable world today, one that the rise of donor-advised funds merely exemplifies.
Even charity, like so many other corners of our economy, has come to be financialized. In some cases, it's literal. Charities are being run by for-profit financial firms. And take our most prestigious universities. It's become an oft-repeated argument that they have become hedge funds with tax-exempt colleges attached.
But it is cultural, too. The values of the financial world have infiltrated the world of philanthropy.
The charitable world has become obsessed with "metrics," as the jargon has it. Everything must be measured. One reason is that the super-wealthy increasingly come from the investment world, and not the industrial realm as in past eras, and elevate measurements over accomplishments. One leader of this movement is a hedge fund favorite, the Robin Hood Foundation, whose annual gala is regularly one of the biggest nights of giving in the charity world.
The fixation with metrics deserves a jargon term all of its own. How about Return on Societal Investment? Making things smell ROSI is pernicious and misplaced. What gets measured, gets managed, as the old expression has it. Charities will try to shape their activities to whatever the big donors choose to look at, which won't necessarily be what's most important. The more significant problem is that not everything of value can, or should, be measured. What is the good that comes from, say, a mural project for underprivileged children?
Today, we are counting the dollars that go into donor-advised funds but forgetting that some things cannot have a dollar figure put on them.
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