Since I’ve studied a bit of economics at the University of Chicago, I want to start today with a quote from Milton Friedman: “One of the great mistakes is to judge policies and programs by their intentions rather than their results.” I’ve spent the last two years on this subcommittee learning about many of our nation’s social services programs, and I’ve found that to ring exceedingly true. For all our best intentions, we all know that too often we see government programs fail both the constituencies they are intended to help, and the taxpayers who fund them. Unfortunately, instead of trying to determine how to get better results, discussions in this sphere tend to devolve quickly into arguments over funding levels. Instead of outcomes, we spend too much time talking about inputs. To some, it’s tempting to measure compassion with dollar signs. But this was not – and is not – what our social safety net is all about. Social Impact Bonds can help change this focus from inputs to outcomes, where it belongs.
They do this by requiring every approved project to answer three basic questions at the outset: What does a successful outcome look like? Whom are we trying to serve? What is the value of a successful outcome in terms of current government spending? When those questions are answered, we can develop programs with measurable policy goals and measurable savings. When we have measurable policy goals and savings, we can use social impact bonds as a funding mechanism to raise private investment capital, administer the program, and then if – and only if – those policy goals are met the federal government can pay back those initial investors. If the goals aren’t met, the federal government doesn’t owe a dime.
In essence, SIBs bring pay-for-performance to the social and public health spheres, allowing the federal government to improve both the impact and cost-effectiveness of vital governmental services.
The Social Impact Bond Act, which I sponsored with Congressman Delaney, as well as Mr. Griffin and Mr. Reed on this Subcommittee, empowers states, local governments, nonprofits, and the private sector to scale up evidence-based social and public health interventions to address some of our nation’s most pressing social challenges.
The results of these projects will help empower well-intentioned policymakers across all levels of government to improve lives through evidence-based policymaking, as well as aid nonprofits in expanding their models with fidelity across different geographies and populations.
In turn, this expands their menu of policy options and offers meaningful alternatives to simply increasing funding for existing government programs that we know are less than successful at meeting their stated policy objectives.