American Philanthropies Challenge Capitalism. Huh!

Talk about biting the hand that feeds, or fed, you!

There’s an ambitious, sprawling, and loosely coordinated effort by some of America’s biggest foundations to remake capitalism, according to the Chronicle of Philanthropy. 

How bizarre. 

“Some of the country’s largest foundations…want to upend the very system that allowed them to build massive endowments and personal fortunes,” writes Alex Daniels with the Chronicle of Philanthropy

“Capitalism must be remade, these foundations argue, because unregulated markets are at the root of the most important social and environmental problems we face,” Marc Gunther wrote in the same journal. “What’s needed, according to an expanding chorus of philanthropy leaders, is a change in the economic system itself.”

The Ford Foundation, the William & Flora Hewlett Foundation, the Omidyar Network and others have already committed nearly $500 million over the next five years to transform the economic system that, not incidentally, made possible the great fortunes that underpin their work, according to Gunther.

The controversy isn’t exactly new. The Ford Foundation has been attacked for years for funding initiatives that Henry Ford would surely have disagreed with. That kind of behavior often happens because Foundations end up controlled by professional do-gooders, usually with a liberal education and leftist leanings.

These types are calling for a new code of business ethics, expanded employee ownership of corporations, and rule changes that would put the environment and equitable distribution of wealth on the same footing as making a profit.

Their agenda bears a strong resemblance to the platform of the progressive wing of the Democratic Party, wrote Gunther. “There is a lot of overlap,” says Felicia Wong, CEO of the Roosevelt Institute, an influential Washington think tank and a grantee of Ford, Hewlett, and Omidyar.

Scott Walter, president of Capital Research Center, a conservative think tank that focuses on philanthropy, noted that huge foundations like Ford wouldn’t exist without the wealth generated by free-market capitalism.

“If the Ford Foundation’s money is so badly tainted, perhaps they should start on a swift course of no longer possessing it,” Walter says. “Let’s redistribute it.”

The entire controversy has been exacerbated by the growing visibility of younger woke anti-capitalist activists. Often they are in philanthropies run by only slightly older, and experienced, people who think they’re already pretty damn woke, thank you, and don’t need to be lectured by their juniors.  

The environment has pushed expectations far beyond what workplaces previously offered to employees., columnist James Freeman wrote in the Wall Street Journal. “A lot of staff that work for me, they expect the organization to be all the things: a movement, OK, get out the vote, OK, healing, OK, take care of you when you’re sick, OK. It’s all the things,” said one executive director. “Can you get your love and healing at home, please? But I can’t say that, they would crucify me.”

Ryan Grim, writing in the progressive website The Intercept, said some left-leaning philanthropic leaders seem to have felt so much under attack by their own staff that they have adopted a mantra originating with Andy Grove, one of Intel’s founders, “Only the paranoid survive.”

It’s become so toxic that it’s getting more difficult to hire leaders. “Executive directors across the space said they… have tried to organize their hiring process to filter out the most disruptive potential staff. “I’m now at a point where the first thing I wonder about a job applicant is, ‘How likely is this person to blow up my organization from the inside?’” one, leader said to Grim. 

And the turmoil has affected the philanthropies’ ability to do their job. “So much energy has been devoted to the internal strife and internal bullshit that it’s had a real impact on the ability for groups to deliver,” an organization leader told Grim.

Maybe people like Bill Gates, a fierce believer in the fundamentals of capitalism, should worry about the direction future leaders of their foundations will take them. “Flirting with radical change, dramatic change, how we run these systems, I personally — my vote will be not to make a radical change,” he has said.

The temerity of some foundation critics of capitalism is particularly irritating because not only were their foundations created through the success of their founders, but their continuing work is only possible because of capitalism’s success. 

Large foundations like Hewlett are not only the product of free-market capitalism, but also remain tremendous beneficiaries of it., says Robert Stilson, a research specialist with the Capital Research Center, which examines how foundations, charities, and other nonprofits spend their money. 

Stilson points out that according to the foundation’s website, Hewlett’s $14.4 billion endowment is invested mostly in private and public equities, and its performance has consistently exceeded the benchmark. Its most recent tax filings disclosed almost $3.8 billion in corporate stockholdings. “Capitalism drives the creation of wealth at left-of-center philanthropies no less than it does everywhere else,” Stilson said.

Cancelling student debt: Another bad idea from the “free stuff” crowd

“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness,” Charles Dickens wrote in A Tale of Two Cities. Thousands of Oregon college graduates in the class of 2019 probably felt the same way.

After years of hard work, they had finally earned their degrees. But 54% graduated with student loan debt. The average debt – $27,542. If it was any consolation, they were not alone. About 45 million Americans (13.7% of the U.S. population) are dealing with federal and/or student loan debt that totals about $1.7 billion.

But fear not, debtors, liberal politicians have been falling all over themselves with plans to help bail you out.

In May 2020, Reps. Peter DeFazio (D-OR) and Earl Blumenauer (D-OR) called upon House Speaker Pelosi and Minority Leader Kevin McCarthy to prioritize long- term relief in any future COVID-19 response in the form of at least $30,000 in one-time student loan debt cancellation for all federal student loan borrowers 

In September 2020, U.S. Senators Ron Wyden (D-OR) and Jeff Merkley (D-OR) introduced a resolution  outlining a plan for the next president to use existing authority under the Higher Education Act to cancel up to $50,000 in individual federal student loan debt for Federal student loan borrowers.

Before the Nov. 3, 2020 election, Joe Biden and Kamala Harris called for student loan forgiveness of up to $10,000, and if a student found a job that paid less than $125,000 after graduation, all their student loan debt would be forgiven.

And then there are all the progressive think tanks, unions and special interest groups lined up behind the debt cancellation idea.

In November, a coalition of 236 mostly progressive groups, including the American Federation of Teachers and the National Education Association, sent a letter to President-elect Biden calling on him to cancel student debt using his executive powers on the first day he takes office. Casting their lobbying as a racial justice issue, the letter said, “The ​disproportionate impact​ of student debt on borrowers of color exacerbates existing systemic inequities and widens the racial wealth gap.” 

The progressive Roosevelt Institute, adopting the “No crisis should go to waste” philosophy,  is calling for the cancellation of student, housing, and medical debt as part of a massive covid-recovery plan. Framing student debt as “a product of and a contributor to our country’s shameful racial wealth gap,” the Institute wants student loan forgiveness to go hand in hand with a commitment to funding tuition-free public colleges and universities.

That’s what the most ardent advocates of student loan cancellation are really pushing for – free college, with somebody else, usually simply called “rich people,” covering the cost.

Sen. Elizabeth Warren (D-MA) argued on Nov. 17, 2020 that forgiving student loans would be the “single biggest stimulus we could add to the economy” in these difficult times. And the New York Times said, “Both sides of the debate acknowledge that tackling the $1.7 trillion in student debt nationwide, which is spread among more than 43 million borrowers, would go far toward jump-starting the economy.” But a lot of economists don’t agree. 

The Committee for a Responsible Federal Budget says the stimulus benefits would be minimal and aimed at those who least need the help. Total student loan debt may be atrociously high, but borrowers often pay back their loans over 10, 15, or even 30 years, so debt cancellation would increase their available cash for injection back into the economy by only a fraction of the total loan forgiveness. “Stimulus dollars that are spent rather than saved provide a stronger boost to near-term economic output,” the Committee has said. 

Continuing current student debt relief policies, including deferring payments and interest, are preferable, as well as income-driven repayment programs under which monthly payments are determined based on a borrower’s income, not the amount of debt. After 20 to 25 years, the remaining debt is forgiven.  

Recently released data from the U.S. Department of Education shows that the national default rate (A federal student loan is considered to be in default if payment is late by 270 days) for FY2017 was 9.70%.  Massachusetts had the lowest loan default rate – 5.83%; Mississippi had the highest –  15.19%.

Oregon had 6,477 borrowers, 10.71% of the total, in default. The Oregon schools with the highest default rate, 7.80%, were Eastern Oregon University and the Pacific Northwest College of Art. The Brookings Institute is predicting a “looming student loan default crisis” that could see 40% of student loan borrowers nationally in default by 2023.

Yes, some of this debt has accrued because of lax government lending standards. As the Wall Street Journal reported on Nov. 23, 2020. “The government lends more than $100 billion each year to students to cover tuition at more than 6,000 colleges and universities. It ignores factors such as credit scores and field of study, and it doesn’t analyze whether students will earn enough after graduating to cover their debt.”

But subsidizing people who run up large college loan debts penalizes those who took their responsibility seriously and acted responsibly, James B. Meigs wrote in City Journal, a publication of the Manhattan Institute for Policy Research, a free-market think tank. That leaves a lot of people feeling like chumps, he says. “…the chumps of modern America feel that the life choices they’re most proud of—working hard, taking care of their families, being good citizens—aren’t just undervalued, but scorned,” Meigs wrote. As Jeff Jacoby, a Boston Globe columnist put it, “…a massive bailout of borrowers would be unfair to countless families that saved and worked to pay for college, to say nothing of those who responsibly repaid their loans.”

Then there’s the “moral hazard” of cancelling student debt. It might encourage students to continue running up risky big loan balances on the assumption that their debts will be forgiven at some point. That would cause a distortion of borrowing decisions, making them insensitive to the ability to repay. 

Of course, what if higher education institutions see that it makes sense to continually raise prices because the government will absorb any losses down the road. But that’s another problem.