Every four years America gets another chance to make its voice heard. And every four years the American arts community, in a way, gets a bit of a fiscal makeover.
How is that? Well, it has to do with how the nonprofit arts in America are funded and how policy affects those funding sources. And every four years, no matter who wins elections across our country, there are new policymakers in town. Roughly 10 percent of the $61 billion aggregate budgets of the nonprofit arts in America comes from government -- mostly local and then state government and finally federal sources. Yes, this is a tiny portion of the whole, and it is actually a lot smaller than many people, including many politicians, think. This 10 percent is indeed a small amount compared to the 30 percent the private sector -- (mostly) individuals -- chips in and the 60 percent that comes from earned and investment income.
But that 10 percent is critical in what is a very conservative funding model for arts in our country. I call this model conservative because a very modest government investment leverages more than 60 times as much private and earned revenue to create a whole industry and support millions of jobs. How? A $146 million investment from the federal government directly leverages close to $5 billion more in local and state government investment, which in turn helps leverage another $50 billion to create the $61 billion nonprofit arts industry in America.
This model has helped grow an industry from a handful of organizations in 1965 -- when the federal cultural funding agencies like National Endowment for the Arts (NEA) and National Endowment for the Humanities (NEH) came into being -- to more than 110,000 arts businesses today. And that core of nonprofit organizations has served as the catalyst and R and D engine if you will, that has helped spawn 800,000 additional for-profit arts-centric business like the local music store or dance studio or Hollywood or Broadway, collectively 4.2 percent of all American businesses.
Does a new president, or a new term for a president, make any difference for the nonprofit art industry?
When Kennedy took office, he envisioned a bigger role for the arts in America and set a series of initiatives into motion. Johnson actualized the initiatives and created the federal funding agencies and incentives to create 50 state arts funding agencies. Nixon saw the potential of the arts and the agencies and built up the funding capacity of the NEA and NEH. Under Reagan, federal money was used to leverage significant new amounts of local government investment and even larger private matching dollars. And now that the election is over, we have a new start.
Under Presidents Clinton, Bush and Obama, we began to see the arts engaged more and more as part of the solution to America's social problems: youth-at-risk, crime reduction, healing of wounded warriors and rebuilding of challenged communities. And agencies beyond the arts and humanities like HUD, Justice, Transportation, Commerce, DOE and Defense slowly began to become partners in using the power of the arts to make America not only a more beautiful but also a better place.
Nice... but too costly? During this presidential campaign, it has been argued that the arts are valuable but unaffordable in our challenged economy. Understandable perhaps but uninformed. There is good news here. The $61 billion nonprofit arts industry and the $74 billion in related audience spending create an economic impact of $135 billion and produce 4.1 million full-time equivalent jobs that return about $10 billion to the federal treasury each year. The federal investment in the arts -- the tiny $146 million to the NEA -- plus the Smithsonian, the Kennedy Center and every other related arts expenditure equals close to $2 billion. And even then we still have a huge return on investment. Two billion spent on the arts returns $10 billion in federal taxes. Add state and local tax revenues, and that figure jumps to $22 billion.
The arts are so much more than all these numbers I have cited. The arts are making communities everywhere more creative and competitive places. The arts are helping to make classrooms throughout the country more exciting places to learn subjects like science, technology, engineering and math. The arts are helping to make 21st century workers and businesses more innovative and competitive in the global marketplace. But isn't it nice for our administration, our president and our Congress to know that the arts are also helping to solve America's core problems while not only paying their own way, but also contributing a tidy profit to our nation's balance sheet.