cutting entitlements to make room for innovation

The administration’s decision to cut entitlements in its proposed budget has mostly been interpreted as a tactical political move (whether smart or foolish). It’s treated as a pure compromise, the president giving up his real preference in order to achieve a deal with the Republicans or to make them look bad for not negotiating. In other words, it is interpreted as a shift rightward, either for tactical reasons or because the president is just wobbly as a liberal.

But there are hints that the administration sees longer-term entitlement cuts as good for their version of liberal priorities. The Times’ Jackie Calmes reports:

But to Mr. Obama, cost-saving changes in the nation’s fastest-growing domestic programs are more progressive than simply allowing the entitlement programs for older Americans to overwhelm the rest of the budget in future years.

Even so, he emphasized that his support is contingent on Republicans agreeing to higher taxes from the wealthy and new spending, in areas like infrastructure, to create jobs.

The president’s views put him at the head of a small but growing faction of liberals and moderate Democrats who began arguing several years ago that unless the party agrees to changes in the entitlement benefit programs — which are growing unsustainably as baby boomers age and medical prices rise — the programs’ costs will overwhelm all other domestic spending to help the poor, the working class and children.

Many contemporary liberals are struck by the effectiveness of particular programs that can be rigorously evaluated. They know about these programs because they are wonks who read research, and also because nonprofit leaders advocate effectively. This advocacy is not merely special-pleading, but involves real evidence of need and positive impact. Just for instance, see the dozens of educational interventions that have been found effective in randomized controlled studies, as collected by the US Department of Education. But the really big policies are usually not evaluated at all. For instance, there is no official evaluation of federal farm subsidies, although independent economists would almost all oppose them.

This combination leads to a sense that the government could be much more effective at achieving liberal ends if it could invest in innovation. That is the theory behind the White House Social Innovation Fund, which operates much like a private foundation. Its style of governance as investment/innovation fits the Zeitgeist. The same philosophy is taught in policy schools and learned on the job in the nonprofits, businesses, and foundations from which today’s government leaders usually come.

This worldview makes liberal policymakers want to hold money for discretionary federal  programs that are smart, accountable, innovative, and otherwise “21st century.” Given the aging of the US population, those programs will be squeezed by the older entitlement payments that were launched in the 1930s-1960s, unless the latter are trimmed. So the administration proposes $200 million in a competitive pool for state governments that cut energy use, while it reduces farm subsidies by $38 billion over ten years. The administration proposes to expand HOPE (Hawaii’s Opportunity Probation and Enforcement scheme), which is officially an “evidence based program,” but it cuts Social Security by $130 billion and Medicare by $380 billion.

What should the government be: a check-writing operation or an incubator of social innovations? It could be both, but given limited funds, choices must be made.

On one hand: it is possible that taking money from Social Security to spend on HOPE would maximize the net human benefits. Deep cuts in Social Security would reduce human welfare and also violate a promise, but modest cuts could pay for more effective programs.

On the other hand: I am worried about biases that result from (1) too much attention to data and advocacy in favor of small, evaluatable programs that are almost inconsequential compared to the entitlements; and (2) class backgrounds that make our liberal political leaders very interested in entrepreneurial innovations and not adequately concerned about the boring old check-writing operations.

See also: “the proper role of experimentation in social reform.”

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About Peter

Associate Dean for Research and the Lincoln Filene Professor of Citizenship and Public Affairs at Tufts University's Tisch College of Civic Life. Concerned about civic education, civic engagement, and democratic reform in the United States and elsewhere.