THE BLOG

Crowdfunding Government Is a Bad Idea

02/26/2015 10:59 am ET | Updated Apr 28, 2015

Governments -- at the local, state and the federal levels ­-- are increasingly competing with charities for voluntary donations. Beyond their on-going appeals to philanthropic foundations, the rivalry has grown to include crowdfunding and other individual-donor focused campaigns. That's a problem not just for nonprofits, but for all of us who depend on government to address common problems and shared needs.

Most Americans would readily agree that the more of us who engage with one another, the more who help one another with money and volunteer effort, the better off all of us are. That kind of engagement makes for better neighbors and better citizens, both of which are key ingredients of a good society.

But we have to ask ourselves if we want to substitute voluntary individual philanthropy for collective public responsibility. Do we trust the vagaries of people's personal motivations and their sometimes impulsive altruism to begin to substitute for government in prioritizing problems and in gathering the resources to address them over the long haul?

Consider the ALS Association's wildly successful Ice Bucket Challenge, which has raised more than $115 million since its debut in July for the organization's efforts to find a cure for Lou Gehrig's disease (amyotrophic lateral sclerosis) -- about six times the Association's total revenue from all other sources in 2014. The challenge also drove worldwide donations for ALS of an additional $100+ million. No wonder nonprofits and governments at all levels have become interested in crowdfunding and other social-media-driven techniques. Yet, for all its success, the Ice Bucket Challenge also highlights some real issues.

Few would begrudge the ALS Association a penny of those contributions. But one could be forgiven for wondering why the 2.4 million new donors to the organization (triple the number it could boast prior to the challenge) made the decision to contribute to that particular cause.

There are about 12 thousand people in the US suffering from ALS at any one time. Contrast that with the 5.2 million people who suffer from Alzheimer's disease. In the last comparable year for which IRS data is available, the Alzheimer's Association raised seven times as much the ALS Association (though with the success of the Ice Bucket Challenge, that advantage assuredly has narrowed) for over 400 times as many ill people. While one can debate whether ALS or Alzheimer's is the more pressing need, it is safe to say that the vast majority of "ice-bucketers" probably didn't even consider that question or others of importance before deciding to dump and/or give.

That is a concern because it's not as if there's a limitless pool of charitable dollars. Giving has long remained relatively static in the US at about 2 percent of GDP. No matter what a fundraising campaign generates for a particular cause, it's quite likely that those dollars are not added to -- but instead come out of -- the philanthropic pool.

There has been much speculation and some academic analysis about what led to the astounding success of this highly creative ALS crowdfunding campaign; peer-pressure and the narcissism of social networking have been cited beyond other factors common to philanthropy. Still, its viral scope is decidedly uncharacteristic and not easily replicated. Indeed, there's every reason to believe the ALS Association will not do comparatively better than to retain the 25 percent of donors who typically return to gift a charity for a second year.

That fact begins to get to one of the major problems in crowdfunding charities and government. Do donors truly care about the issue or cause and, even assuming that they do at the time of the gift, can that be sustained over time? Beyond whimsy, what brings them to select a particular problem and program that they are funding in the moment?

Contribution-seekers understand that successful crowdfunding efforts depend in great part on good public relations, on media savvy. One study of support for scientific research - government's share of funding for which has dropped by half since the 1960s - suggests that researchers with a large "fan base" (Facebook, Twitter, and YouTube) get the lion's share of crowdfunded dollars. Government officials recognize this and now are promoting crowdfunding efforts through "old-fashioned fundraising strategies" using social networks and other online channels. That might be fine for charities, but it raises real and important questions when it comes to public-sector initiatives.

Rather than truly serving the broader common good, such campaigns tend to appeal to the narrower self-interests and concerns of prospective donors. Instead of working to generate the resources to meet public needs and making policy decisions about how best to allocate public funds in the context of pressing priorities, governments increasingly are looking to promote those projects with the potential to catch people's attention so they can get them funded voluntarily. Sometimes such initiatives are as parochial as a park in their neighborhood or a bike-lane serving its residents.

Unlike charities, public program funding ought not depend on ephemeral individual and foundation interests. That approach moves government away from coherent efforts on public problems and toward addressing social concerns as fragmented matters subject to people's passing fancy. It makes it profoundly more difficult for government - and charities - to adequately support and advance the broad-based and continuing efforts necessary to improve our social, political and economic institutions.

As an example, joyfully over $350,000 and a new car were donated recently by 13,000+ crowdfunders to Detroit's James Robertson to help in his heroic daily 21 mile roundtrip walking commute (plus additional miles by bus) while maintaining his perfect attendance record at a factory job. But as The Washington Post's Michelle Singletary points out, this does nothing to address the lack of public transportation in low-income communities or the inability of working people to earn enough to own and maintain a car. To do so would require government policy changes and a commitment of significant public resources.

Crowdfunding and other individually-focused campaigns also tends to favor the economically secure. Over the past three decades, politicians have passed tax cut after tax cut benefiting the wealthy, effectively transferring money due to public coffers back to those least in need. And now government asks them not to pay those taxes, but instead to voluntarily consider whether or not they might wish to divert some of their charitable giving to meet a promoted cause, one that really should have been funded by the missing tax dollars - just as President Bush did with national parks.

That might be a fine way to fund "nice-to-haves" - if governments were meeting the basic needs of every American, maintaining our highways and bridges, providing quality public education in every community, safeguarding our food supply, and so on. But, of course, strapped for revenue, they aren't. There is a long history of governments cutting funds and then turning to foundations and corporations for public support to try to meet obligations. Now, however, localities are turning as well to individuals, with ice buckets in mind and metaphorical tin cups in hand.

In spite of the fact that Mitt Romney and the libertarian Cato Institute both argue that "taxes are a form of charity," most Americans know they decidedly are not. Voluntary and discretionary decisions by individuals, even if aggregated through crowdfunding, are not a substitute for deliberated and accountable policymaking or for appropriate revenue and allocation decisions by democratically-elected officials.

We all have a responsibility to promote the common good, and government is the principal mechanism through which we serve it. Let's not substitute the arbitrary and sometimes passing nature of individual altruism for what is in fact a continuing shared obligation. We need to go beyond joyful tinkering at the margins, beyond joining friends for the light-heartedness of doing good in funding programs we like. Let's not shirk the hard work of improving the responsiveness, performance and accountability of our government and the substantial sacrifice of providing it with the resources that all of us truly need.

Versions of this piece also appear in The Chronicle of Philanthropy and PhilanTopic.