Tuesday, December 18, 2012

Fiscal Cliffhanger for Nonprofits

Who would have thought the scholarly Federal Reserve Chair Ben Bernanke would have been cast in the role of a catchy phrase-maker, the envy of any marketing brand guru? That he did in February of 2012 when he described as falling off a "fiscal cliff" the economic effects of severe tax increases and spending cuts mandated to take place on January 1, 2013 by the Budget Control Act of 2011, passed by Congress after the legislative and executive branches failed to reach agreement on deficit reduction that summer. It was a classic case of "solving" problems using a manana approach. Now, unless the Obama administration and the Congress, chiefly the House, can agree on alternatives, it is over the cliff we go.

Vats of ink have spilled on this issue, so I will be brief. As of this writing, it would appear that, although the scene changes daily, President Obama and Speaker of the House Boehner are not yet in accord. Some pundits ( from the Sanskrit meaning "learned" although that should not apply to all) suggest even if they reach agreement, the Speaker may have a hard time selling it to his colleagues - or even that he may want to wait until January in order to save his Speakership. Others even posit a strategy that a voluntary dive over the cliff may be desirable in order to compel action to mitigate the effects of the austerity mandates (c.f. Samuel Johnson's "Nothing focuses the mind like a hanging.").  All of this conjecture is swirling around in the whirlpool of politics.

Whatever the actual details on the outcome, there is no doubt that the result will affect nonprofits. At the top of the list is the allowable tax deduction for charitable gifts, adjustment to which some believe has traction at both the White House and Congress. Capping the deduction in some fashion seems to be favored. There is some disagreement as to how much impact such an action would have on giving. Nonprofits should  know that there has been a very active lobbying--yes lobbying--campaign undertaken on their behalf by the umbrella group Independent Sector and such powerhouses as the American Red Cross -with the deduction matter at its core. Still, some charities are even suggesting to their larger donors that they uptick their giving in 2012 to take advantage of the deductability regulations in place.

Then there is the matter of large tax increases, especially on the wealthy, cutting into disposable income, some of which presumably would be directed to charitable giving. Changes in entitlement programs, such as Medicare, would bring further pressures on those nonprofits that provide social services.  Specialized federal programs, such as the Arts/ Humanities Endowments and PBS, long on the far right's chopping block, are facing curtailment at least. There is no shortage of grim scenarios.

Nonprofits, by their nature and necessity, have had to be resourceful. Adversity is not novel to them. This case however, may present challenges of historic proportion because its impact is potentially both deep and widespread. Organizations and their donors alike will feel pain, the degree of which is not yet known, regardless of whether or not we are forced off the cliff's edge. We will know soon enough.

Finally, I am reminded of Shakespeare, from "As You Like It" (Act 2) : Sweet are the uses of adversity/Which , like the toad, ugly and venomous/Wears yet a precious jewel in his head..."  May we, in the end, find the jewel.

Stay tuned. Courage! Best wishes for the holidays and the New Year. See you then.