The burgeoning federal deficit, coupled with new spending for defense and homeland security, will soon put health care, education, and other social programs in a serious squeeze. Yet this crunch can be eased if the richest US nonprofit groups distributed more of their money now instead of saving for the future. They could provide the United States with some $20 billion more a year to spend on urgent social needs.

As a nation, we have made a huge investment in nonprofit organizations. People who give to charity get a write-off, and charities pay little or no tax on their income. The tab for these subsidies comes to roughly $50 billion a year—more than all federal aid to education combined. We grant these incentives to boost giving for good causes, and in one sense the strategy has worked. Personal charitable contributions, driven by a strong economy, rose 87 percent in the last decade, to top $150 billion in 2000. Foundations and other endowed nonprofit organizations (primarily universities) now control almost $1 trillion in investment assets.

Yet these organizations generally distribute only 5 percent of their financial assets each year, a sum well below the income generated by their investment returns—which...