Our government is stalled — it’s time to invest in innovation

For decades now, Washington has been either unable or unwilling to address the needs of a changing country and a changing world. With lawmakers all too often frozen by hyperpartisanship, a need to refight old battles and a rigid adherence to ideology, the American people have been left to try to navigate a smartphone world with 1950s infrastructure, 1960s benefit programs and 1980s tax policy.

It’s no wonder that, for a lot of people in a lot of places, the American dream is falling out of reach. 

Around the country, nonprofits, philanthropists and state and local governments are trying to fill the gap. The cost of doing nothing is not nothing —that’s why we’ve got to embrace a new approach.

{mosads}In terms of domestic and social policy, there is a role for government to play to set the rules of the road, look out for the common good and make sure that no one is left behind. But that doesn’t mean that government can’t partner with agencies and individuals outside government’s walls, to embrace innovation. In fact, these things are more essential than ever to government being able to function well.

The stakes are really high. Globalization and technology have been positive for the country as a whole, but not all regions of the country have reaped the benefits. Today we have entire career fields that would have been hard to even explain to someone in 1980, and many of the jobs in these fields are good-paying and fulfilling. Unfortunately, these new jobs are concentrated in only a few places, and are particularly rare in the old manufacturing hubs that have been hollowed out. In many ways, this disparity was the defining policy question of the last election and a topic that the country has been wrestling with for some time.

So how do we solve this problem? It’s all about investment.

One thing that I learned as an entrepreneur is that nothing happens unless someone makes an investment. This is true for both the private sector and the public sector. If we want better infrastructure and better government research, it’s going to take an investment, and if we want stronger economies in places that are struggling, it’s going to take an investment too. 

That’s why I was proud to be an original co-sponsor of the Investing in Opportunity Act, bipartisan legislation to get private capital flowing to the communities that need it most. The bill allows taxpayers to defer capital gains taxes on investments that are reinvested into designated opportunity zones. This gives investors an incentive to move capital into worthwhile businesses — including startups that have the potential to rapidly expand — in places that have thrived in the past and can thrive again. This provision was one of the few bipartisan ideas that was included in the Republican tax bill, and I look forward to seeing its implementation.

Now imagine pairing this investment credit with a national infrastructure program that improves our rural broadband capability, creates good-paying jobs nationwide and helps businesses move their products around the country quicker. Overall, we’re talking about a major infusion of capital — exactly what’s needed.

Similarly, we should continue to look for creative ways to combine the insights and capital available from the nonprofit, philanthropic and impact investing sector and use them to make government programs more effective. Research has found that early interventions in education and health care can lower long-term costs and produce better outcomes, but often government agencies lack the resources or the ability to take this action. Instead of taking the early steps that can help young people avoid asthma hospitalizations, we end up paying for costly emergency room bills. Likewise, because federal, state or local governments lack the initial capital needed to invest in early education or fund programs that reduce recidivism, they end up paying higher long-term costs.

Social Impact Bonds (SIB) are a tool that can be used to leverage private capital to pay for these front-loaded costs. Under a SIB, if the government ends up saving money in the long run and the program is a measured success, the investors are repaid a percentage of the money saved. Importantly, if the program turns out to have not worked, the taxpayers aren’t on the hook for anything.

Salt Lake County Mayor Ben McAdams has been a pioneer in using this model in local government. In Congress, I’ve worked with Sen. Todd Young (R-Ind.) on legislation to help states and local governments implement more programs like this. This is why I’m especially looking forward to attending and speaking at the Winter Innovation Summit in Salt Lake City this month, where leaders in this space from around the country will share ideas.

While government has stood still — or suffered as good ideas have been blocked by ideology — nonprofits and philanthropists have kept innovating and kept looking for new ways to make a difference. As we continue to face rising deficits and increased social needs, we should use every lever we have to make services better, and that should start with more Social Impact Bonds and impact investing.

Congressman John K. Delaney represents Maryland’s Sixth District and will speak at the Winter Innovation Summit hosted by the Sorenson Impact Center in Salt Lake City this month.