Social impact bonds: ‘do they promote public good, or sell it?’
Gina
Raimondo “kicked off” her campaign for Governor on January 13, and wouldn’t you
know it, but the centerpiece of her policy proposals will be a new invention of
Goldman Sachs, the “social impact” bond.
What,
you might ask, is a social impact bond? The idea is that some great
source of capital like, oh, I don’t know, Goldman Sachs, lends some community
millions of dollars to improve early-childhood education. Perhaps they build a
new pre-K facility, or even use the money to pay some teacher salaries.
A
wealth of evidence shows that this kind of investment pays a return of sorts
because the kids who enjoy this better education are less likely to become teen
parents or teen lawbreakers. It stands to reason, therefore, that the community
so enriched by this investment can repay the bond by sending to Goldman Sachs
the money that would have been spent on the welfare or jail that those teens
didn’t need. How’s that for a win-win?
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| Raimondo doing her famous fist pump at a bankster-funded, Tea Party & RISC organized rally to support her plan to cut teacher pensions. POWER TO THE BANKSTERS! |
Of
course if your pre-K students grow up to be peaceable, responsible, taxpaying,
and generally lovely adults — who happen to live somewhere else — well, you
can’t make an omelette without cracking a piggy bank, right?
Snark
aside, what do we really have here? Is it a good idea or not? Is this a
way for communities to access funds for desperately needed investments, or is
it a new way for the financiers who burned down our economy just a few years
ago to rape the public funds — again? Bear in mind, please, that there is
a substantial risk here.
Research about the future costs of jail and welfare
are estimates, made to illustrate various cost/benefit analyses. They are not
carefully calibrated prices. The weight of evidence says there will be savings,
and the side benefit is happy people and less crime. To me, that’s enough to
argue for investment, but the happy people and less crime parts of the benefit
aren’t going to help pay off a loan.
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| Here's that fist pump again at her Jan. 14 campaign rally |
It
might be worth asking at this point, why those communities can’t afford to
invest in these improvements the evidence says will pay off. Oh, right, it’s
all the tax breaks of the past decades. Did you know that business taxes used
to be the third most important source of revenue to the state of Rhode
Island? Now they are fifth, behind the lottery and all the fees collected
by various departments.
Did you know that the richest Rhode Islanders paid over
three times the income tax of the average taxpayer in 1996, and in 2011, a bit
more than twice? Over the past decades, our state and nation have cut
taxes repeatedly in a vain and misguided attempt to stimulate the economy and
things have only gotten worse for everyone except those whose taxes were cut.
So
now that we can’t afford to make these investments in education and
infrastructure (not to mention the human capital our business community claims
they want access to but won’t pay for) here’s a new plan: take money from the
rich, not as taxes, but as loans, and in return pay them the benefits that used
to be thought of as belonging to everyone. And if the benefits don’t actually
pan out, do you imagine that the financiers will be at risk?
It’s
easy to imagine a community in dire straits, seeking to salvage the futures of
some of its residents, with such a desperate and risky scheme. Business owners
on Federal Hill used to find themselves wondering in the same way if they
should ask the mob for help. But to imagine — no, to actually see and hear — a
gubernatorial candidate suggest that this is a good idea on its own merits is
appalling. The idea is a disgrace, a wholesale sellout of the very concept of
the public good.
So
what do we learn here? First, that the creativity of people paid millions
of dollars to think of new ideas to make more money is nearly boundless. Over
the past decades, we offered a bargain: tax cuts for rich people in exchange
for a better economy. But they used the money to buy political power and used
it to extract still more money from the rest of us. They are already on the way
to owning the world. Here is yet one more way for the fabulously wealthy to
solidify their control of our politics and our world.
The
other thing we learn? That clearly Gina Raimondo is not at all worried by
the idea that she might be perceived as too closely tied to the wolves of Wall
Street. The question she should answer: does she want to promote the public
good, or sell it?
EDITOR'S NOTE: In the 2010 election, Tom was also a declared candidate for General Treasurer. When Gina Raimondo declared her candidacy, Tom withdrew from the race saying that he (like many others including myself) thought Raimondo was a solid, progressive choice so he felt it was in the public interest to defer to her. Big mistake, but hindsight is always 20-20.
EDITOR'S NOTE: In the 2010 election, Tom was also a declared candidate for General Treasurer. When Gina Raimondo declared her candidacy, Tom withdrew from the race saying that he (like many others including myself) thought Raimondo was a solid, progressive choice so he felt it was in the public interest to defer to her. Big mistake, but hindsight is always 20-20.
