Endowments and the Next New Deal: Thinking Bigger and More Creatively 

Since its inception, the Bill and Melinda Gates Foundation has made grant payments totaling more than $90 billion. These grants have gone to things like polio eradication, the Malaria Vaccine Initiative and targeted education efforts in low-income communities. The Gates Foundation’s endowment is currently around $89 billion. Harvard’s endowment is of a similar magnitude: around $57 billion, compared to the median university endowment size in the United States of about $250 million. Harvard has used its massive endowment to fund professorships, financial aid and research.

These endowments have clearly been positive forces for good in society. Furthermore, they have provided perpetual funding for their chosen causes.  

So, why don’t we have more endowments like these in society? Why doesn’t every community foundation have a massive endowment? Why doesn’t every university have a massive endowment? The answer is somewhat obvious. It is because we haven’t designed our economy that way. But maybe the Next New Deal could create and scale endowments that will endure for generations. The Next New Deal will could be designed and implemented in the United States circa 2029–2032 with a new progressive government.  

When people think of endowments today, they think of the endowments that are the result of wealthy individuals setting aside money for a particular cause or set of causes. Or, in the case of universities, it is the result of an accumulation of donations and grants. It makes sense that we don’t have thousands of massive endowments of magnitudes similar to that of Gates and Harvard, because — believe it or not — there is a limit to how many endowments millionaires and billionaires can fund. At the same time, we have witnessed numerous injections of capital into the economy by the federal government in the form of stimulus packages and quantitative easing. 

The American Recovery and Reinvestment Act of 2009, which was introduced to the House on Jan. 26, 2009, and signed into law by then President Obama three weeks later, injected roughly $800 billion into the American economy over 10 years. The legislation funded things like infrastructure, energy efficiency, education, healthcare and scientific research.

The Federal Reserve has also been active in recent decades. The third round of quantitative easing in September 2012 started at a rate of $40 billion per month and peaked in 2014 at a rate of $85 billion per month. This money is injected into the economy when the Federal Reserve buys securities from banks, thus giving banks more capital to lend. Quantitative easing and federal stimulus packages are shortsighted solutions to our economic problems. For proof that federal stimulus packages are shortsighted and ineffective, simply take note of the rhythm at which they occur. One stimulus package gets us out of a recession in 2008, only to have a pandemic bring us to our knees a little over a decade later. The Inflation Reduction Act, Bipartisan Infrastructure Law, and CHIPS Act pull us out of the COVID pandemic, only to have artificial intelligence causing mass layoffs, economic disruption, and environmental devastation.

What would it look like to design an economy that is recession-proof such that we never need federal stimulus packages ever again? 

We need an effective long-term solution that is better by design. We need more endowments that are designed to address societal problem sets forever.  

Instead of thinking in terms of short-term stimulus projects, our elected officials should be considering how they might design, iterate, and scale endowments for the long-term. We should consider what it would mean to invest in endowments strategically, and specifically what it would mean to inject large amounts of newly created money into endowments at the local and state level.

Endowments aren’t just private philanthropic foundations and university endowments. We should expand the definition of endowments to include things like the Federal Highway Trust Fund, the National Endowment for the Arts, Social Security, state rainy day funds, community healthcare foundations, land trusts, and environmental endowments. We should be open to a multitude of different permutations of endowments that we iterate on and scale in society so that we might develop some society wisdom and long-term efficacy. We could create and iterate on massive endowments for education, healthcare, the environment, infrastructure, and the arts in every corner of the United States. Endowments provide perpetual sustainable funding streams. These wouldn’t simply fund a road project and create jobs for a year. Endowments are designed to fund programs consistently over decades.  

Critics of expanding the endowment economy might suggest that this would be inflationary and increase the size of the federal government. However, endowments would likely have the opposite impact. Something as simple as a revolving loan fund for energy efficiency could effectively reduce the cost of energy across the economy and thus reduce the cost of anything in the economy that has energy as an input.

Likewise, advocates for smaller government should like this idea. While this wouldn’t necessarily shrink government, it would inherently shrink the market share of the government sector (perhaps a more accurate term for this would be ‘sector share’). Therefore, if newly injected money were funneled into endowments outside the government sector, then the economy would continue to thrive and mature while the government remained close to the same size.

It is also reasonable to assume that as the economy matures, the government sector would not only shrink in sector share, but also in actual size. The work done by federal government agencies can be, and sometimes is, done by the private and nonprofit sectors and also local and state governments (think: education, healthcare and other social services). Endowments can, in difficult times, effectively be utilized as rainy day funds for the people and places they serve. Endowments would help facilitate cross-sector collaboration between government, philanthropy, the nonprofit sector, and corporations. 

Endowments, if designed well, have the ability to empower local communities. While the initial injection of capital into local endowments would of course come from the federal government, the annual outlays that follow in perpetuity can be determined through deep community engagement processes. After the initial investment from the federal government, we could have thousands of endowment iterations in the United States that would effectively and continuously run experiments and naturally build a body of knowledge and best practices around community engagement, investment strategies, and operational efficiency. 

It is clear that our societal challenges aren’t getting easier. Issues relating to food, energy, water, poverty, infrastructure, education and justice are becoming more and more complex. Increasing the size, number, and variety of endowments in society can effectively address the social and environmental challenges of today and tomorrow. As we consider future rounds of economic stimulus and quantitative easing, we should also consider the effectiveness and longevity of endowments. Increasing the number and variety of endowments across the United States and globally has the potential to effectively address many of our current and future societal problem sets.