The Pentera Blog
Political Donations May Cut Into Charitable Giving in 2024
In the shadow of disappointing 2022 and 2023 fundraising figures, charities are probably wondering what 2024 has in store.
One potential source of headwinds for charitable fundraising this year could be the U.S. elections in November. Individual donations to U.S. House, Senate, and presidential races have risen dramatically in the past decade, potentially drawing from funds that would otherwise take the shape of charitable gifts.
While there has been some disagreement in academic circles about whether political contributions “crowd out” charitable donations, a 2020 paper published by the National Bureau of Economic Research argues convincingly that an increase in political donations, all other things remaining equal, results in a decrease in charitable gifts.
Using data from the American Red Cross and the Federal Election Commission, the authors of the study isolated the effects of overseas natural disasters on charitable donations—finding that such disasters are followed by an increase in charitable donations and a reduction in political contributions. They also found this relationship works in the other direction: when political advertising increases, political contributions rise and charitable donations fall.
Political and charitable donations affect each other this way because, for many individuals, they scratch the same psychological itch, according to the study. “In other words, individuals believe that their charitable and political contributions are alternative ways to help society: when one way becomes more attractive, it crowds out the other way.”
If correct, this finding could have at least marginal impacts on charitable fundraising in 2024—a presidential election year that appears certain to further expose the country’s strong political divisions. According to data from OpenSecrets, individual donations to the U.S. House, Senate, and presidential campaigns in 2004, 2008, 2012, and 2016 (all presidential election years) were in the $2- to $3-billion range in current dollars. That figure more than doubled in 2020 to approximately $6.5 billion in current dollars. And that does not count donations to political action committees, which OpenSecrets.org estimated at another $2.5 billion in the 2019-20 election cycle.
The election could also impact planned giving marketing, says Claudine A. Donikian, JD, president and CEO of Pentera, Inc. “Planned giving marketing materials may get lost in a bombardment of political mailings in the fall. There can be a sense of uncertainty that accompanies impending political change (or lack thereof), both of which might lead to seeing lower response rates. It highlights the importance of our industry looking at email engagement metrics as the better measure of marketing success rather than just at response alone.”
Compared to total U.S. charitable giving of around $500 billion annually, political contribution figures may seem small. But, in today’s philanthropic environment, it is yet another reason for nonprofits to take steps to reach out to their potential donors and give them a reason to believe their donations will do at least as much good as a political contribution.
