Philanthropy's Fork in the Road

The Trump Administration is hellbent on "deconstructing the administrative state" and consolidating power. This is blowing up the strategies of many big grant makers. How should they respond?

In late January, a foundation leadership team asked me how the second Trump Administration might try to bring opponents in civil society to heel. I suggested the biggest danger would come from the Administration trying to use executive orders like this one to target, investigate, and bully its nonprofit and philanthropic critics into submission. Those attacks will no doubt come. But just one month into the new Administration, I was wrong about the main threat. The most immediate and telling blows are coming from another direction.

Civil society actors on the wrong side of Trump and his acolytes are struggling to defend themselves against a hammering 1-2 punch. From the one hand comes the spending impoundments and reviews led by Russell Vought at the Office of Management and Budget that seek “to stop funding NGOs that undermine the national interest” as Trump happens to define it. From the other hand comes the havoc wrought by Elon Musk’s Department of Government Efficiency with each agency it wantonly feeds into its “wood chipper.” In combination, Vought, Musk and their teams are dismantling long-established federal policies and crimping if not closing down entirely the funding and agency workforces meant to carry them out.

I actually share the Administration’s stated goals of reducing federal spending and streamlining a byzantine and hidebound bureaucracy. But I cannot see their spasm of retrenchment ending well. What Trump, Vought, and Musk are doing is a bald-faced bid to consolidate power in one branch of government. They are bypassing not only the power of the purse that the Constitution grants to Congress, but also the need to negotiate and compromise when making laws in that body, and the tempering of policy that results.

Moreover, Trump’s team is not seeking to govern prudently but to traumatize politically, punishing their enemies while rewarding – and grandstanding for – their friends. As Andy Smarick wisely notes in his Governing Right substack, Musk and DOGE are running roughshod over the “Chesterton’s Fence” principle of conservatism, tearing down fences without understanding or even caring why they were put up in the first place. This will lead, sooner or later, to catastrophe(s).

In the meantime, nonprofits with federal contracts and grants to implement policies disfavored by the Administration have had their worlds turned completely upside down. I will say more about the hard choices these beleaguered NGOs face in a future newsletter. In this update, I want to explore what the upheaval means for philanthropy.

In particular, I want to focus on the large scale funders with elaborate program strategies that are inextricably — if not always explicitly — intertwined with the policies and agencies of the federal government. These include many of the largest private foundations, e.g., Gates, Ford, Robert Wood Johnson, Hewlett, Kellogg, Packard, and Moore. And they include new types of enterprises established by wealthy living donors to execute similarly ambitious philanthropic projects, e.g., Arnold Ventures, the Ballmer Group, and the Chan Zuckerberg Initiative.

Strategic philanthropy has to go back to the whiteboard

Across a range of policy areas, these philanthropic institutions seek, however imperfectly, to change the world for the better. But the second Trump Administration is upending the government and policy landscape in which they are pursuing their strategies. Just as the New Deal came to be known for the “alphabet soup” of agencies and policies it established to advance liberalism, Trump’s second term will be marked by an alphabet soup of deconstruction at USAID, OPM, NED, CFPB, DOJ, EPA, HHS, CDC, NIH, ED, etc.

Given what the Administration has managed to dismantle in just four weeks, it’s daunting to imagine the disruptions to come over the next four years – even if the Supreme Court and Congress manage to catch up with and begin to check and balance the executive branch. In domain after domain of philanthropy – e.g., global development, public health, climate change, K-12 and higher education, scientific research, and civil rights – funders have no choice but to go back to the whiteboard.

To bring this point home, let me turn to and demystify some philanthropic jargon. The various programs of the large scale and strategic grant makers listed above reflect two related but distinct theories, namely, a theory of action and a theory of change. (Not all the funders use these specific terms, but most will rely on variants or their functional equivalents).

• A theory of action describes what the philanthropic program in question is going to do, how it is going to do it, and the immediate effects their actions will generate in the broader world.

• A theory of change describes how the effects produced by the theory of action will be incorporated, supported, utilized, amplified, and / or perpetuated by a host of other actors in ways that will ultimately lead to the desired change.

These other actors include grantees, co-funders, civil society groups, community members, businesses, professions, and – not least – policymakers and administrators at different levels of government.

In strategic philanthropy, particular institutions’ theories of action must be embedded in, and come to fruition through, broader theories of change. And theories of action fail if key assumptions in their corresponding theories of change turn out to be invalid.

For roughly a 25 year period, from 1990 to 2015, during the time when strategic philanthropy became the default operating mode for most large scale grant makers, U.S. government policy and the agencies administering it were more or less stable. There were different emphases, to be sure, between Democrats and Republicans. But from the standpoint of the assumptions and continuities that mattered for most philanthropic theories of change, the differences were not fundamental.

Then came the disruptive fluke (as it was widely seen at the time) of Donald Trump winning the presidency in 2016. His victory required strategic adjustments and responses but did not necessarily change the deep and often implicit assumptions of most philanthropic theories of change. Indeed, with the election of the older school Democrat Joe Biden in 2020, and the negation of Trump’s efforts to overturn that result, it was natural to hope for the return to normalcy that Biden promised – and that Trump’s chaotic presidency would turn out to be the exception that proved the rule.

This view is no longer tenable. The Reagan/Bush/McCain/Romney GOP – your correspondent’s lifelong political home – is gone and never coming back (RIP). Trump’s decisive victory in 2024, and the multi-ethnic, working class coalition he assembled and grew across virtually all parts of the country and all demographic groups demonstrated that the MAGA-ified Republican Party is neither an accident nor a flash in the pan. It is here to stay – and, if left unchecked politically and constitutionally, to dominate.

Now the divergence and discontinuities between what the federal government will do and how it will do it under Democratic and Republican administrations are massive and undeniable. The slash and burn operation that Vought and Musk have undertaken on Trump’s behalf, especially in agencies where the prior inter-party policy consensus had been most striking – USAID, the National Endowment for Democracy, the Centers for Disease Control, the National Institutes of Health, and the Department of Education – underscores the yawning divide.

Whatever the outcome of the many pending court cases or future actions Congress might take to push back on all the deconstruction, the second Trump Administration has already left an indelible mark on the federal government’s work and workforce.

Philanthropic theories of action and change that do not fully account for and adapt in the face of this new reality will fail. For all of the autonomy and self-sustaining resources that strategic philanthropists enjoy as they pursue their goals, the Trump Administration is imposing an inescapable “fork in the road” choice on their institutions also.

“When you come to the fork in the road, take it!” – Yogi Berra

What funders should do in response to this pivotal moment will vary based on their goals, values, commitments, and resources, as well as the financial and political risks they are prepared to take. And they will need to figure all this out as they go. Given the pace at which the Trump Administration is moving, funders do not have the luxury of time to triage their initial moves.

Many social sector advocates are quite vocal about how funders should proceed. I am not as confident that I know the one best way forward. Indeed, there is not one given all the different institutions and programs that will need to find new paths. But in the spirit of being helpful, let me at least share a few caveats about pitfalls lying alongside the frequently recommended routes.

Perhaps the most common prescription is for well-endowed foundations and wealthy individuals to “step up” and keep their grantees solvent, as many of them did during the COVID pandemic. For private foundations, for example, this would mean opening up their coffers and granting far above the annual five percent of their endowments that the law requires.

But the present circumstances stand in stark contrast to those of the pandemic. The federal government is not surging financial support to help faltering nonprofits but yanking it away. And for the next four years at least – perhaps longer – the funding flows will not be turned back on with sufficient velocity to fill the spiking nonprofit budget deficits. Philanthropy cannot close this massive funding gap.

If funders decide to spend at a faster clip, they should avoid the temptation to spread their supplemental funding over all the grantees affected by the federal funding cuts. This amounts to philanthropic palliative care – and an expensive and not especially effective form of it at that. Instead, funders might ask themselves this question: “Which grantees are so essential to our long run goals that we will increase our support for them to make up for any reductions in their federal government funding for the duration of the Trump administration?”

This question will concentrate funders’ attention (and their extra spending) on the most critical grantee organizations – and heighten funders’ awareness of the heavy lift required to offset federal cuts in nonprofit budgets. Funders should rank the shortlisted grantees in their order of centrality, specifying what each grantee is doing that will make them so essential in the turbulent years that lie ahead – i.e., not in funders’ now invalidated and obsolete theories of action and change, but rather in those they are developing in real time for the future.

Others are calling for philanthropy to commit to and fund social justice movements and the resistance, siding in open and uncompromising solidarity with undocumented immigrants, asylum seekers, the transgender community, etc. J.D. Vance’s 2028 campaign will no doubt appreciate the fresh material that the activism supported by such an approach will generate. Some go further and propose that philanthropy should play a leadership role not only in funding but also in helping to organize and coordinate opposition to the Administration in civil society.

There is certainly a role for philanthropy in underwriting any surge in litigation costs as well as physical and online security requirements that their grantees may now be facing. Organizations that are refusing to bend the knee to Administration efforts to squelch their missions need steadfast funders in their corner.

Foundations can also speak plainly and forthrightly about the human costs and adverse consequences of federal cuts in areas of work they support. Felix Schein has some excellent advice on this score in his recent post on “How to Show Up When Your Work is Under Attack.”

But is now the time for wealthy philanthropists to stand out and seek to lead the vanguard of opposition to the Trump Administration? Will their doing so add democratic heft to this nascent coalition? Or will it serve as further proof of the President’s claims about the privileged and elitist forces opposing him and the movement he represents?

Perhaps this is a moment for large scale philanthropists to step back and let civil society leaders representing bona fide and broad constituencies come to the fore. These leaders and their followers can do so with even more resolve if they are confident funders will have their backs.

Imparting this confidence is one of most useful things philanthropists can do at present. Another is updating their theories of change and action to reflect the world in which we now find ourselves. It is not going to change itself.