04/25/2013 12:59 pm ET Updated Apr 25, 2013

Fix The Debt Campaign Drove New America Foundation To Split Off Affiliate


WASHINGTON -- Late in 2012, the Committee for a Responsible Federal Budget (CRFB), the leading organization promoting a grand budget bargain that includes large cuts to social safety net programs, separated from its parent nonprofit, the New America Foundation. The sticking point came as CRFB launched its Campaign to Fix the Debt.

CRFB planned to raise significantly large amounts of money, including from corporations and their executives, for a ramped-up effort to pressure Washington and the public to balance the budget by cutting Social Security and Medicare. As the Campaign to Fix the Debt got underway, the New America Foundation temporarily separated itself from CRFB, its leader Maya MacGuineas and the funding the group received from private equity billionaire Pete Peterson.

New America's interim president says the little-noted shift was due to issues of management, not policy, for the larger organization.

But the eclectically liberal New America Foundation cut off one of its largest divisions amid public arguments among progressives over whether it was acceptable for ostensibly liberal groups to advocate cuts to social safety net programs. While policy and ideological concerns were dismissed as a reason for the separation, it is hard to miss the ire directed toward the Campaign to Fix the Debt from liberal circles ever since the campaign, fronted by budget hawks Erskine Bowles and Alan Simpson, launched in 2012.

A senior New America Foundation insider said that part of the reason for the separation between CRFB and New America was internal dissent: Other New America staffers disagreed with the aggressive policy positions that CRFB was advocating, especially cuts to Social Security and Medicare.

In an interview with The Huffington Post, New America's interim president, Rachel White, denied that internal staff dissent, especially policy-driven dissent, was behind the decision to legally separate CRFB.

"That wasn't part of the decision-making around the separation. This has always been a place with a lot of divergence of opinions. We've always prided ourselves on heterodoxy," White said.

White explained that the separation was driven by concerns about the growing size of CRFB, the potential lobbying it might do and the corporate contributions it began to accept last year. According to White, the separation went through two phases, pushed along by issues raised by the New America board and in conversations involving White, MacGuineas and former New America Foundation President Steve Coll.

Chief among those issues was the prospect of CRFB becoming too large and too well-funded to operate within the confines of the New America Foundation. "It would present a lot of complexity for [New America] to house a program that had more funding, for instance, than the entirety of the rest of the institution, which is one of the things that [MacGuineas] contemplated," White said.

In the summer of 2012, CRFB and MacGuineas launched the Campaign to Fix the Debt and began to seek out large corporate contributions to help fund the effort.

"It was in August last summer when [MacGuineas] officially launched the Fix the Debt campaign and the money, the corporate money in particular, but the money started flowing in really fast that we realized together that we needed to begin a process of possibly temporary separation, but definitely a separation between the two entities," White said.

In the first phase of the separation, CRFB was reorganized as an independent 501(c)(3) nonprofit. This was made easier by the fact that CRFB already had its own board of directors because it had been independent in the 1990s before coming under the New America umbrella.

MacGuineas would split her time between CRFB and New America, where she was director of the fiscal policy program. Her staff would remain at New America working within that program, but any new staff for the Campaign to Fix the Debt or any part of the expansion of CRFB would be hired as part of CRFB.

This agreement held for a couple of months during which New America board members discussed the possibility of further separation. The main issue voiced was CRFB's lobbying and grassroots activity, including the potential establishment of a 501(c)(4) social welfare nonprofit, which can spend money on direct political activities and advertising.

"In talking with our board over the course of the fall, our board felt strongly that if the CRFB and the Fix the Debt campaign contemplated or took steps to set up a 501(c)(4), that we would need to take additional separation measures," White said.

In October 2012, CRFB and the Campaign to Fix the Debt moved to set up a 501(c)(4), pushing New America to fully separate CRFB's functions from the foundation. This involved a secondment, or a temporary shifting of employees: MacGuineas and all her staff came off the New America payroll, essentially shuttering the fiscal policy program.

The secondment and separation has also meant that the New America Foundation no longer receives money from the wealthy Peterson, according to White and others inside New America. They noted that Peterson had funded the New America Foundation to support CRFB. Now contributions from him and the Peter G. Peterson Foundation flow directly to CRFB.

Peterson has put nearly half a billion dollars of his own money into the Peterson Foundation to fund organizations that call for bipartisan support for cutting back the social safety net.

New America and CRFB have not cut all ties. New America rents office space to CRFB, and CRFB funds the paychecks of a handful of policy staffers still housed at New America.

The secondment of MacGuineas and other staffers, however, is a temporary arrangement. White said that in the coming months a final decision may be made whether CRFB will remain separate or return under the New America umbrella.

"We fully recognize that we are approaching the moment with CRFB, and they know this too, and we have begun to talk about this with them, to sort out what the future of their endeavor is," White said. "And it's unclear now whether they will stay separated and keep their operation upright. I don't know what the future of their advocacy work is, or whether part or some will be reabsorbed back into the New America Foundation sometime in the fall."

CRFB head MacGuineas did not respond to requests for comment, but a CRFB spokesman said that the two organizations still share a "great relationship" and that they are unsure whether the separation "is a permanent thing."



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