Obama and Romney Offer Few Words on Nonprofits but Contrasting Views

Barack Obama and Mitt Romney, who moved their presidential drives into high gear this month, have so far said little on the campaign trail about the nonprofit world.

They have devoted many words to jobs, the middle class, and business but virtually none to any specific plans to alleviate poverty.

Yet their economic plans offer two sharply different philosophies about how much the government should do to solve social problems—and that could affect charities working in virtually every field.

More Moderate Plans

President Obama, battle-weary after a string of Congressional budget fights, has had to temper some of his goals for funneling money to nonprofits that assist needy people. He is not proposing any ambitious new spending plans along the lines of his 2008 pledges to expand national service, start a grants program to help innovative nonprofits, and create the poverty-fighting “Promise Neighborhoods” program.

Facing political pressure over the federal budget deficit and spiraling debt, the Democratic president has proposed several lean budgets in a row and crafted a plan to trim spending over the next decade. But he has fought off efforts by House Republicans, who took control of the chamber in 2010, to make much deeper cuts in some areas—for example, to kill AmeriCorps, the national-service program, and end federal money for the arts and public broadcasting.

He pushed through a health-care overhaul that many nonprofits and foundations supported and are now working to put in place, along with an economic-stimulus plan that funneled billions of dollars to nonprofits in areas including community health centers, Head Start, housing, Medicaid, national service, and social services.

The president consistently argues that the wealthy must pay more taxes to help close the budget deficit and preserve needed federal programs.

But the economy, while improving, remains stagnant, with high unemployment and a record number of people living in poverty at record levels.

“Given the state of world affairs, given the true state of the economy that he inherited, I suspect there is no group that would say he entirely satisfied them,” says Cathy Tisdale, chief executive of Camp Fire, a youth group. “On balance, there was a general belief that he understood the issues [important to nonprofits] and wanted to make headway. In some areas, he has.”

Spending Cuts

Mr. Romney, the GOP challenger, promotes a philosophy that relies much less on federal intervention—tapping into a small-government fervor shared by many voters.

He argues that spending must be sharply curtailed to bring down the debt, spur investment, and spare future generations from inheriting a fiscal mess. “For every government-spending proposal, I will ask the following question: ‘Is this program so important that it is worth borrowing more money from China to pay for it?’ With our nation facing $16-trillion in debt, most times the answer will be an easy and unqualified ‘no,’” Mr. Romney told an audience in St. Louis in June.

The former Massachusetts governor wants to reduce federal spending to 20 percent of gross domestic product, down from more than 24 percent today, while boosting the defense budget.

He would repeal the health-care law; end or seek “deep reductions” in federal spending on the arts and public broadcasting; eliminate family-planning money that benefits “abortion providers” like Planned Parenthood; and cap spending on Medicaid, the government insurance program for the poor and disabled that provides large sums directly to many nonprofits.

Mr. Romney rejects higher taxes for the wealthy, saying that would deter them from investing in job-creating ventures. His plan would lower income-tax rates by 20 percent, cut or eliminate a variety of other taxes, and trim some deductions and exemptions. But he designed it to be “revenue neutral,” meaning it would not add or subtract money from federal coffers.

Relying solely on spending cuts to close the deficit scares some nonprofits that have been battered in recent years by federal and state budget cutbacks, rising demand for services, and a slowdown in giving from private sources because of the bad economy.

Mr. Romney’s selection of Rep. Paul Ryan, Republican of Wisconsin, as his running mate added to the fears. As chairman of the House Budget Committee, Mr. Ryan has crafted budget proposals calling for deep cuts in safety-net programs like Medicaid.

“We are potentially going to see this huge contraction in the social-services sector,” says Katherine McFate, chief executive of OMB Watch, a group that advocates for nonprofit issues. “I think that’s not yet a clear understanding of the general public. They think, ‘Oh, there’s so much waste in Washington, you could cut half the budget and we wouldn’t feel it.’”

But Donald Haider, director of the Center for Nonprofit Management at Northwestern University and a delegate to last month’s Republican convention, said nonprofits should ask, Who is more likely to produce a growth-oriented economy?—since that would spur more giving.

“Romney has laid out a 59-point plan to produce 12 million jobs,” he said. “Whether you like it or not, there is a plan that seems very favorable.”

Limited Tax Breaks

Charities are also nervously watching the candidates to see how the charitable deduction fits into their tax plans. Despite strong opposition from nonprofit leaders, President Obama has not wavered from a plan to limit the value of itemized deductions, including those for charitable contributions, for households earning more than $250,000.

While charities argue that the plan would depress giving, Mr. Obama contends it is not fair that wealthy people now get a bigger tax break for their donations than lower-income people.

Mr. Romney has not yet detailed his plan for the charitable deduction, although he appears to share Mr. Obama’s willingness to limit the tax break for big earners.

He told Fortune magazine in August he would cut some tax deductions, benefits, and exemptions as a way to pay for the lower income-tax rates that he has proposed, but only for people “at the high end.”

He added: “I have noted before my commitment to preserve tax preferences for middle-income taxpayers such as homeownership, charitable giving, and health care.”

An analysis by the Tax Policy Center, a joint project of the Urban Institute and Brookings Institution, found that Mr. Romney would be forced to make “deep reductions in many popular tax benefits,” including the charitable deduction, to keep the plan revenue neutral.

Mr. Romney has contested some aspects of the center’s analysis, but Mr. Haider agrees that the Republican challenger may have to consider trimming the charitable tax break. “The chances are whoever is in the White House, there will be a serious look at a cap on the charitable deduction, not an elimination,” he says.

2 Views on Estate Tax

The two candidates have offered contrasting plans for the estate tax, which some nonprofit leaders like since it offers an incentive for people to donate assets to charity to shield them from taxation. Mr. Romney has proposed ending the tax, while Mr. Obama wants to keep it and increase both the tax rate and the amount of assets that are taxed from current levels.

While the outcome of the presidential election is important to the fate of government social programs, it is only one part of a bigger political mosaic.

“There is a question of how much leeway either candidate’s going to have unless they have a real mandate and the electorate goes along with changes at the Congressional level,” says Dennis R. Young, director of the nonprofit studies program at Georgia State University.

Many nonprofit advocates have their eyes turned more toward the current Congress, which has to act before the end of the year to avert a “fiscal cliff”—including automatic across-the-board budget cuts that are set to take effect in January because a Congressional super committee was unable to agree on how to trim $1.2-trillion from the deficit.

Some charities are circulating a letter urging lawmakers to head off the cuts, which they say would “inflict devastating harm” on needy people. Deborah Weinstein, executive director of the Coalition on Human Needs, says she expects the letter to attract signatures from more than 1,000 groups.

Tim Delaney, chief executive of the National Council of Nonprofits, urges nonprofits to look beyond the top contest and pay attention to Congressional and local elections. “The presidential elections are really a proxy, almost a shorthand, for all the other elections,” he says. “We have gubernatorial and attorney general and other statewide races and state legislative elections that will determine what is going on in people’s lives even more directly than at the presidential level.”

Doug Donovan contributed to this article.