By Brian Howey
ANN ARBOR, Mich. – We live in an era of eroding faith in government while we face an array of intractable problems.
U.S. Rep. Todd Young entered Congress as part of the 2010 Tea Party wave that was fueled by distrust of an expanding federal government. Yet the Bloomington Republican finds realities on the ground he believes should be addressed by public and private enterprises. He regularly interacts with what he calls “at-risk populations” facing access to health care issues that stoke up things like Indiana’s Russian-like infant mortality rate.
“I care about these people,” he said. “I see them every day. It is sad to see so many failed efforts. I went to Washington to innovate, not just move deck chairs around.”
In June, Young and Maryland Democrat U.S. Rep. John Delaney introduced H.R. 4885, the Social Impact Bond Act. The two representatives described the legislation that would establish desired outcomes to pressing social challenges that, if achieved, would improve lives and save government money. State and municipal governments could then submit proposals to work towards those outcomes — such as increasing adoption rates of teenagers in foster care, or improving the health and mortality rates of infants born into low-income families — by scaling up existing, scientifically-proven interventions.
“Private-sector investors would provide the capital needed to expand the existing programs, and, if an independent evaluator were able to validate that the desired outcomes were met and money was saved, the investors would be paid back their initial investment plus a small return from the realized government savings,” the two representatives said.
Both Young and Delaney are members of the No Labels organization that was formed by former Republican Utah Gov. Jon Huntsman and Democratic U.S. Sen. Joe Manchin of West Virginia to address the polarized gridlock in Washington. They have forged the “Problem Solvers Coalition” that includes 93 Members (including Republican U.S. Rep. Larry Bucshon of Indiana) designed to work to develop policy solutions that could attract widespread support in Congress and begin rebuilding the American people’s trust in government.
Young used the infant mortality rate crisis in Indiana and cited a South Carolina program that dispatched registered nurses and nursing assistants into low-income areas. The upfront investment for the program comes from the private sector, but its success would ultimately save the state and federal government money in Medicaid funds. “In exchange, our investors would be paid back a portion of future government savings,” Young explained. “You would add up the federal, state and local savings. In the United Kingdom, it’s structured as a performance contract.”
New York Times columnist David Leonhardt recently observed, “When the federal government is good, it’s very, very good,” citing the space program or winning World War II. “When it’s bad (or at least deeply inefficient), it’s the norm,” Leonhardt continued. “The evidence is abundant. Of the 11 large programs for low- and moderate-income people that have been subject to rigorous, randomized evaluation, only one or two show strong evidence of improving most beneficiaries’ lives.
Leonhardt cited Yale law Prof. Peter Schuck’s book “Why Government Fails So Often.”
“Less than 1 percent of government spending is backed by even the most basic evidence of cost-effectiveness,” Schuck writes. The explosion of available data has made evaluating success – in the government and the private sector – easier and less expensive than it used to be.
Young said that many not-for-profit agencies don’t have what he called “performance pressure.” Many exist to address a problem, but once methods and protocols are established, there is little incentive to shift to achieve better outcomes.
Young listed three goals: to improve outcomes, reduce taxpayer burden, and produce investment capital with returns set on “evidence-based” statements.
“Private sector investors would provide the capital needed to expand the existing programs, and, if an independent evaluator were able to validate that the desired outcomes were met and money was saved, the investors would be paid back their initial investment plus a small return from the realized government savings,” Young and Delaney said as they unveiled the legislation.
“Social Impact Bonds have the potential to transform our nation’s social safety net by shifting the focus of such programs from inputs to outcomes,” said Young. “In other words, instead of arguing about how much or how little we are spending, policymakers should reward what works based on actual evidence. Whether you think government ought to do more to help our fellow Americans in need, or you think government needs to save money wherever possible, social impact bonds provide a solution on both counts.”
Young said the legislation would “create a market.” He said that in the current mode, government press releases only talk about “successes” with various programs. “This shifts the risk from government on to the private investors” who would subsequently establish models that would achieve better outcomes. The legislation would “bring in a whole new class of people” to address issues, said Young’s communications director, Trevor Foughty.
Young said that he is “engaged with Paul Ryan’s budget committee staff” on the legislation and expects a hearing in Ways & Means this fall. Colorado Democrat U.S. Sen. Michael Bennett and Utah Republican Sen. Orrin Hatch are preparing a companion bill.
The concept has a successful and growing track record in the United Kingdom. Its time may be coming to gridlocked Capitol Hill.