Last week the Center of the American Experiment (CAE), a Minneapolis-based think tank, announced an upcoming event to examine an intriguing idea: financing social services for the poor with performance bonds. Nonprofit organizations and government agencies would get public money only on the condition that they produced results of quantifiable economic value.
If a preschool program led to higher test scores and greater likelihood that kids would become productive citizens, the program would continue to get money. If a housing agency provided homes for people who refused to work or pay their rent, the agency would be cut. It makes no sense, after all, to throw good money after bad.
CAE called this “a brilliant market-based idea,” and perhaps it is. But maybe the same accountability standards should govern the benefits doled out to people at the top.
What have the rich done for you lately?
Last Monday I wrote about the spectacular 30-year ascent of the very wealthy, who, even through the difficult last few years, have continued to widen the gap between themselves and those stuck on the middle and bottom rungs of the income ladder. I quoted extensively from a new book, “Winner Take All Politics: How Washington Made the Rich Richer — and Turned its Back on the Middle Class.” The authors, economists Jacob Hacker and Paul Pierson, acknowledge that the advancement of ordinary Americans has been stymied, at least partly, by the usual suspects: globalization, technology and a failed education system.
But those factors can’t explain the supercharged ascent of the wealthy. What does explain their continuing ascent is the takeover of the American political system by corporations and their allies. Beginning about 1980, those forces rigged the game so that tax benefits and lax regulation disproportionally benefit those at the very top while risks were shifted downward to ordinary citizens, burdening them with greater debt, rampant job insecurity and bigger holes in the social safety net.
Even in the current budget dilemma, the focus is on shared sacrifice except at the top — slashing spending on ordinary people (undoubtedly necessary) while lavishing tax and regulatory benefits on the wealthy in the blind hope that jobs will be created and that greater income equality will trickle down.
Laffer Curve or learning curve?
But, considering the stubborn inequality trend since 1980, why throw good money after bad? Since the dawn of Reaganomics, the political system has provided the already wealthy with enormous advantages. But that strategy has been a dismal failure for everyone else. Where is the quantifiable economic value? And — now especially — where are the jobs? Everyone loves a good investment as long as there’s a good return. But have the rich been a good investment?
If performance bonds are a “brilliant market-based idea” for the poor, then why not consider a similar accountability standard for the very wealthy? Their corporations would get tax breaks and lax regulation on the condition that they produce results of quantifiable economic value for the wider society. If they create private-sector jobs that allow ordinary Americans to move up the income ladder, then they get a reward. If they don’t, they’ll have to pay higher taxes.
Steve Rothschild, the former General Mills executive who founded Twin Cities Rise!, a celebrated job-training nonprofit aimed at breaking the poverty cycle, has worked out the details on how pay-for-performance bonds [PDF] would work to finance and sustain successful social programs while reducing government expenses. I’m sure it would be far more complex to devise incentives for the very wealthy to leverage their advantages in ways that create income gains for the broader society. But, hey, it’s worth a try. We have corporations that are said to be sitting on $3 trillion in unproductive cash. And we 30 years of bad policy to make up for.
How about doubling the charitable deduction?
Elizabeth Sawhill of the Brookings Institution has a more palatable idea for shaking money loose from the wealthy: a temporary doubling of the deduction for charitable giving.
With the poor facing terrible times in the months ahead, some way must be found for getting money into the pipeline, she says.
“We need to get them [the wealthy] to spend that money instead of socking it away, and we need to get them to spend it on socially beneficial things,” she told the Huffington Post. “This is simply a device to pry that money out of them.”
Overheard at a breakfast restaurant
First senior citizen: You gonna get the senior special?
Second senior citizen: Yeah, I guess. But don’t you wonder why they give us a cheaper breakfast? We’re doing better than everybody else. We’re on fixed incomes.