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//Powerful Crumbs: A Few Thoughts on Another “Record” Year of Charitable Giving

Powerful Crumbs: A Few Thoughts on Another “Record” Year of Charitable Giving

 Photographee/shutterstock

Photographee/shutterstock

The latest data from Giving USA reports that charitable giving rose to $410 billion last year. That’s the largest amount ever, in total dollars; measured by GDP, it’s around the average (2.1 percent) of the last 40 years.

On the one hand, $410 billion is a lot of money. On the other, consider another number: $100 trillion, which is the total net worth of U.S. households.

Now that is a lot of money, a reminder of just how wealthy U.S. society really is. And every year, a few crumbs of that vast private wealth gets diverted into the charitable sector—around 0.4 percent last year.

Of course, as we all know, household wealth includes stuff like home equity and 401ks. And most Americans don’t have nearly as much wealth as they need. In fact, a recent survey by Federal Reserve found that about 40 percent of U.S. adults would not be able to cover an unexpected $400 expense without selling a personal item or borrowing money.

Given how strapped many Americans are, it’s no wonder that charitable giving by average households has been on a downward trajectory for years.

Related: Are We Living in a Golden Age of Charitable Giving? Hardly

So who does have spare cash sitting around? The top 1 percent of households, that’s who.

This group of Americans now holds over 40 percent of all household wealth, according to data from the inequality expert Edward N. Wolff. Even more shockingly, the top 0.01 percent of households have as much wealth as the bottom 90 percent of U.S. households. The Forbes 400 alone have a combined net worth of around $3 trillion.

In other words, there’s an enormous—unprecedented—amount of wealth piling up at the tippy top of U.S. society. And while we hear all the time about giving by the rich, the fact is that the most affluent Americans are giving crumbs relative to their net worth.

While reliable numbers aren’t so easy to come by, my understanding is that roughly a third of charitable giving by individuals comes from households in the top 1 percent. Some portion of foundation gifts and many bequests also come from the wealthiest Americans, either living or recently deceased. The rest of charitable giving flows from legacy foundations and corporations.

Let’s say as a ballpark estimate that donations by the top 1 percent represent around $125 billion of the total $410 billion in charitable giving last year. Meanwhile, as noted above, these households are sitting on roughly $40 trillion in wealth.

A little quick math finds that the slice of Americans who have the most spare cash sitting around, who are flusher now than ever before in history, gave away around 0.3 of their total wealth last year. To be sure, this group looks more generous if you analyze by income. The top 1 percent of pulled in about $3.7 trillion in income in 2017, about 22 percent of all household income. Their charitable giving thus accounts for just over 3 percent of their income, well above the national average (as you’d expect, given that this group has the money to spare.)

Regardless of how you view the generosity of Americans, including the wealthiest among us, one thing that’s clear is that charitable giving is becoming more important.

This flow of wealth may be crumbs in the grand scheme of things, given how rich America is, but we’re talking about powerful crumbs.

Most strikingly, total charitable giving is becoming more sizable relative to certain streams of government spending.

While the overall federal budget is over $4 trillion, the portion that includes non-defense discretionary domestic programs—like education, biomedical research, and environmental protection—is only around $600 billion a year. Thanks to budget cuts and caps, this slice of federal spending is at its lowest level since the Eisenhower years, measured by GDP—under 3 percent. And it’s likely to keep falling. Many state and local governments also have fewer discretionary dollars thanks to rising pension and debt costs.

All this means that philanthropy is coming to loom ever larger as a means of addressing society’s problems and providing public goods. As elected officials are paralyzed by a tightening fiscal straightjacket, private donors are filling the void.

And, with small donors accounting for a diminishing flow of gifts, it’s the wealthiest donors who are increasingly in the driver’s seat of civil society.

That’s an unsettling picture. But keep in mind that many of the ultra-high net worth Americans now engaged in larger, more influential giving have only scratched the surface of their fortunes and are likely to eventually give more, much more.

Bill Gates is a good example. Besides the $40 billion endowment sitting in his foundation, which will one day be spent down, Gates has another $90 billion in private investments. His buddy Warren Buffett, who also plans to give away all wealth—mainly through the Gates Foundation—has another $80 billion. Jeff Bezos, who hasn’t even started to give, is now worth $140 billion. The Koch brothers currently have a combined net worth over $100 billion.

There’s enormous latent giving power at the very, very top of the U.S. income ladder. And one day it’s likely to be tapped at a larger scale. After all, where else can the money go?

Yes, we may now live in the age of big philanthropy. But get ready for a coming age of bigger philanthropy.

RelatedTilting Upward: Skewed Giving Trends and Inequality in the Nonprofit Sector

2018-06-12T13:51:27+00:00 June 12th, 2018|Categories: Nonprofit News|