A conversation with the Mercatus Center’s Jack Salmon (Part 2 of 2)

Editorial note: This essay originally appeared at The Giving Review. To watch the video for this second half of the interview, please see the post at The Giving Review. Please see this post for access to the first part of the interview at The Giving Review.

Jack Salmon is a research fellow whose work focuses on economic and fiscal policy at George Mason University’s Mercatus Center, to which he returned after a two-year stint as the Philanthropy Roundtable‘s director of policy research. He remains a visiting fellow of the Roundtable, and he’s also done research for the Competitive Enterprise Institute and the Cato Institute.

Last month, the Roundtable published a report by Salmon, Strings Attached: How Government Funding Compromises Nonprofit Independence. Nearly one-third of nonprofit entities’ revenue came from government sources in 2021-2023, according to the report. Large nonprofits with expenditures exceeding $1 million report almost half their revenue comes from government funding.

Since 2008, federal grants awarded to nonprofit groups have more than doubled, with most of that growth occurring since 2019, Strings Attached reports, and every dollar in government support may “crowd out” 50 cents or more in private charitable contributions to social-service nonprofits.

“Ultimately, overdependence on government funding threatens to transform nonprofits into mere extensions of government bureaucracy, eroding their independence, reducing sectoral diversity, and diminishing the interpersonal connections fostered through private giving,” Salmon concludes.

Nonprofit leaders must remain vigilant to ensure the nonprofit sector retains its vital role as a dynamic, community-driven force for social good, free from the constraints of excessive government intervention and dependence. Balancing the benefits of public funding with the need for independence will be essential for preserving the integrity and effectiveness of the nonprofit sector.

Salmon was kind enough to join me for a recorded conversation late last month. In the first part of our discussion, which is here, we talk about the report’s findings and the ways in which various forms of government benefits can compromise nonprofits’ independence—as well as the range of conditions government can and cannot, and should and shouldn’t, attach to its nonprofit funding.

The just less than 17-and-a-half-minute video is the second part—during which we cover Alexis de Tocqueville, whether “civil society” and the “nonprofit sector” are the same thing, and what his research has to say both to nonprofit leaders and to policymakers, if anything.

Tocquevillian civil society and what later came to be known as the nonprofit sector are “not the same thing, but they’re certainly intertwined,” Salmon tells me.

The nonprofit sector is part and parcel of civil society. When we think about civil society, it’s really the broad sphere of all voluntary associations—essentially, all the ways people can cooperate outside of both the state and the market. … The nonprofit sector is a far-narrower sort of legal category shaped by tax law, but pretty much all nonprofits are part of civil society.

In answer to a question about how his research should inform nonprofit leaders and policymakers, he begins “by making clear that I’m a classical liberal, and so I’m highly skeptical of policymakers and their intentions most of the time,” he says. “So I would say declining government support is the obvious solution, right?

“But that’s more, as you said, from the nonprofit’s perspective itself,” Salmon continues. “On the policy side, I mean, governments, in an ideal world, they could deliberately limit the conditions they attach to funding, right?—keeping requirements focused on things like accountability for funds rather than sort of ideological conformity, which is which we often unfortunately see.”

He says he’s “studied a lot of public-choice economics, and the question comes to my mind: why would we trust government to act in a way that limits its political influence, right? … Ultimately, I think that most of the burden falls to nonprofits to weigh the risks themselves” of accepting government funding. “The reason I say the weight is on the hands of the nonprofit is because I don’t think we’re going to get to a point—I could be wrong—I don’t think we’re going to get to a point where the government stops funding nonprofits.”

At the end, Salmon returns to Tocqueville. “One of my primary reasons for being interested in in this topic and in private charitable space at as it relates to government funding and government size is because of where I come from,” the U.K., he says. In America,

people have to recognize this. The U.S. is really unique in the entire world when it comes to private philanthropy. In terms of charitable giving, the U.S. gives … like seven to 10 times more as a share of GDP—that’s private donations—compared to many European nations, as well as neighboring nations like Canada, you know, countries of the Anglosphere.

In Europe, we used to have a thriving charitable sector. … We don’t really have a charitable sector in in the U.K. or in Europe broadly speaking anymore because of the interventions and the growth of the state. And so I’m really concerned that the U.S. doesn’t go down that same path. That’s another reason why I’m really invested in this topic, preserving the Tocquevillian ideal.

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Note: Part 1 of this essay was posted yesterday: A conversation with the Mercatus Center’s Jack Salmon (Part 1 of 2)