Contra MR On Charity Regrants

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I often disagree with Marginal Revolution, but their post today made me a new level of angry:

Commenters correctly point out that there’s a difference between regranting to other charities and “pocketing the money”.

USAID is not, itself, a charity. It is an organization that funds other charities. Cowen/Rubio’s claim that “only 12% goes [directly] to recipients” is false, because 0% goes directly to recipients, because USAID is not set up in a way where this even makes sense. All USAID money goes through other charities. The 12% number seems to be the amount that goes through foreign organizations (including charities, charitable government programs, and charitably-minded forprofits), with the other 88% going through charities based in the US.

There are various reasons why USAID works with more US nonprofits than local nonprofits. These include fears that local nonprofits would be corrupt or inefficient, compliance issues, and Congressional mandates (for example, some programs involving food are required to source it from US farmers and US companies). Before the Trump cuts, USAID was working on ways to find and use more local partners, but this was a slow and difficult process. The same people who cry corruption when USAID works through US charities would definitely cry corruption if they worked through a foreign charity that turned out to be less than scrupulously honest. How many staff do you think it takes to prove that a hospital in Burkina Faso where nobody speaks English is definitely on the level? Is it really efficient for USAID to have all of these staff in house, for every hospital, for every cause area?

The organizations that accept USAID money take an overhead averaging ~30%¹, then pass the rest onto recipients, or to even smaller, even more local organizations that take smaller overheads and pass it on to recipients. Overheads pay for salaries, facilities, compliance costs, and audits to make sure the money is reaching its intended targets. You will never have (and would not want) an overhead of zero.

Maybe Cowen thinks that 30% is too high an overhead? I asked o3 to estimate the overhead for the Mercatus Center, the libertarian charity that Cowen runs. It said that it was hard to give an apples-to-apples number because much of the administrative work that would be counted under “overhead” in other charities is covered by George Mason University. But it estimated that if the federal government gives a dollar of research funding to Mercatus, about 40% would go to combined university and Mercatus overhead - higher than the average USAID charity.

Or maybe he’s spooked by the admittedly-weird-and-incestuous world of charities that regrant money to other charities? I normally wouldn’t begrudge someone for being unnerved by this. But Cowen is the director of a charity that regrants money to other charities! Here is a typical cohort of Mercatus regrant recipients, including the Council of Christian Colleges, the NC Leadership Forum, and “Vibecamp LLC”.

(disclosure: I also take funders’ money and regrant it to other charities, although I would gouge my own eyes out with a spoon before giving it to Vibecamp)

Cowen and I both do regranting because it works, and because it’s really hard to have high-level charitable priorities without it. If I have $1 million or $1 billion and want to cure cancer, I may not personally have the right skill set to be a cancer researcher, or to found a cancer research lab, or to figure out which cancer research labs are good and need the most money. I might only know and trust someone in an organization that specializes in figuring out which cancer labs are good and connecting them to funders. Maybe I don’t even know that, and I only know and trust somebody who knows and trusts that person. These are things that sound silly to the uninitiated, but can quickly become your whole career once you start dabbling in charity.

USAID programs like PEPFAR have saved millions of lives, which suggests USAID does a pretty good job of deciding who to trust with their money. The Trump administration is trying to turn Americans against these programs by pretending that the money gets “pocketed” by intermediaries. This is a lie. PEPFAR is well-audited and the audits find between 0-2% unexplained expenses, which is lower than the average domestic US government program.

Not every program is this good. Some are cringe scholarships-for-underrepresented-women-in-permaculture garbage². Others go over budget or accomplish less than hoped, because charity is hard. But the overall track record is outstanding, outright fraud is rare, and the cringe is less common than you think (because Rubio and Trump falsely attributed many cringe programs to USAID that it never funded at all).

Politics is nasty and sometimes involves lies. But the thousands of doctors, nurses, and charity workers who give up more lucrative careers elsewhere to save lives in the developing world are some of my heroes. I’ve talked to many of these people (see my father’s story of his time in this world here) and I couldn’t do what they do for a month, let alone a whole career. When Trump and Rubio try to tar them as grifters in order to make it slightly easier to redistribute their Congress-earmarked money to kleptocrats and billionaire cronies, this goes beyond normal political lying into the sort of thing that makes you the scum of the earth, the sort of person for whom even an all-merciful God could not restrain Himself from creating Hell.

Part of the joy of owning your own blog is getting to make absolutely sure that you never unintentionally give one iota of aid or comfort to these lies or anything remotely associated with them. If Cowen means something else, I think he should clarify it better. Otherwise, I think he should edit his post to make it less misleading.

1. I’m getting this from o3, since I wanted to match Cowen’s sources. It said that of the ~88% that it counted as going to third-parties, 20-35c went to overhead. Some of these charities then further regranted it to other charities, which total consumed another 5-10c. o3 gave some good sources, but I don’t know if these are the last word or if experts would fully endorse these numbers.

2. This is what I meant by the second-to-last paragraph of The Other COVID Reckoning. If a group both saves millions of lives, and funds some cringe women-in-permaculture scholarships, this doesn’t in any sense “cancel out”. It comes out millions of lives ahead. By all means try to get rid of the cringe stuff if you can, but not in a way where you throw the baby out with the bathwater.