A Prevention Model for Reducing the Federal Debt While Doing Social Good

Neil Wollman

The growing federal debt has become such a looming problem that President Obama appointed a National Commission on Fiscal Responsibility and Reform to tackle it. So far, the public discourse has focused on two painful but seemingly necessary solutions — raising taxes and cutting current government programs. If instead, far more funds were put toward preventing problems before they arise, future spending would be reduced, along with the need for as many tax hikes and program cuts. This prevention model is primarily associated with health care (it is cheaper to prevent than treat an illness), but it could be applied across diverse budget sectors. What if all budget administrators were instructed to consider funding preventive measures that might save money in the future? Here are some examples.

In education, preventing drop-outs could save in various ways. The General Accounting Office has identified a number of specific costs of dropping out of school: fewer employment opportunities, with resulting loss of tax revenue for government; a greater tendency to engage in high-risk behaviors resulting in pregnancy, crime, and drug use; and drawing on social programs throughout one’s lifetime. Analyses by the Center for Cost-Benefit Studies of Education at Columbia University demonstrate that cutting dropout rates in half increases new federal tax revenues annually by 45 billion dollars. In an extensive review of the research, sponsored by Northwest Regional Educational Laboratory, E. Gregory Woods identified effective (and ineffective) practices for reducing dropout rates. Job training can produce similar savings: a Department of Labor study found a return of one dollar and forty cents for every dollar spent on programs such as Job Corps and the Job Training Partnership Act. Finally, research indicates that rehabilitation of prisoners can prevent recidivism, and that even minimal reduction of recidivism results in significant savings.

Funds can also be saved by providing safety net services for needy populations — such as food, housing, and counseling — before costlier behaviors occur. For example, recent testimony by the United Tenants of Albany cited extensive research showing that providing housing for the homeless, coupled with onsite services, results in cost savings by “lowering the use of expensive emergency services like shelters, hospitals, prisons and psychiatric centers” that typically serve this population.

The defense budget presents significant possibilities for savings. Armed conflicts are extremely costly in terms of weaponry, personnel, injury, and collateral damage to civilians and infrastructure. Some money is already spent to prevent harm and injury from wars — for example, anti-IED armored vehicles, missile defenses, anti-terrorism efforts, and diplomacy. The Carnegie Commission on Preventing Deadly Conflict has gathered empirical evidence that many armed conflicts can be avoided using “preventive defense,” “preventive diplomacy,” and conflict prevention and management. In contrast to traditional diplomacy, for example, preventive diplomacy is more systematic, proactive, and responsive to early warnings. Recent testimony by Lund and Schirch to the House Armed Services Committee revealed that “cost ratios of prevention to war ranged from 1-1.3 to 1-479, an average of 1-59.” Think of the hundreds of billions of dollars that could be saved by the U.S. if even one major war were to be averted, or if smaller U.S.-resourced civil conflicts were prevented.

Numerous studies demonstrate the cost savings of environmental management techniques such as pollution control, waste control, and energy conservation. Though specific figures are hard to come by, increased funding for regulatory monitoring and for technological improvements in industries should mean fewer oil spills and other environmental accidents, hence less spending on clean-up, repairs, and health care and economic aid for those affected (only some of which is covered by the private sector). Legislation like Cap and Trade — prevention on a grand scale — can reduce greenhouse gases and global warming, reducing later costs related to health care, water shortages, disruption of economic activity, and so on.

Finally, there is health care, where we started. In contrast to commonsense notions about general effectiveness, research reviews conclude that there are only limited areas where prevention has reliably cut costs, and in those areas prevention is often already widely used. However, some areas for potential significant savings still exist. Citing a National Institutes of Health study, Chris Norwood, who directs a preventive health institute in the South Bronx, outlines ways that prevention could save “untold billons” of dollars in ameliorating the growing diabetes epidemic, which would reduce the deficit and even create prevention jobs.

Targeting funds for new prevention-oriented research could reveal new cost-saving and effective measures in any number of sectors. Cohen, Neumann, and Weinstein present a method for detecting such measures in health care. It involves identifying and utilizing with larger populations what works now and might in the future, and identifying programs that should be eliminated due to ineffectiveness and cost. This can serve as a model for experts in other sectors to find potential savings through prevention. Where prevention works, the need for cutting current government programs purely for financial reasons would be reduced. Some program cuts would be made as a natural consequence of reduced need, thus eliminating the hard choice between fiscal responsibility and social welfare.

Besides its impact on spending and the debt, and on the need to raise taxes and cut programs, prevention generates positive social outcomes. It is better not to get diabetes in the first place than to successfully treat it; to avoid an oil spill rather than clean it up; to stay out of prison rather than be rehabilitated; to not have a war. These outcomes could lead to higher levels of welfare and happiness.

Any proposal to reduce the debt has a downside. For one, if we have fewer problems, we will need less people to fix them, so jobs will be lost. (Of course, maintaining jobs to fix problems that need not be is not productive for the economy.) But new prevention jobs will be created, and efforts would be implemented over time, allowing for job relocation. Additionally, some sectors (like health care) may require extensive public education campaigns and “nudges” (see Thaler and Sunstein) to induce preventive behavior. Finally, political opposition will arise from those with vested interests in fixing problems rather than preventing them. As with health care reform, accommodations with these interests may be required to pass legislation. We need a strong Commission, President, and Congress to implement a prevention model, and it is a model that should have appeal across the political spectrum. Perhaps the best hope lies in a diverse and vocal public willing to put elected officials’ feet to the fire, insisting that they identify and implement effective and cost saving preventive measures across the board, with a significant overall savings to the federal budget.

I end with a pitch for informed citizens to weigh in on ways to reduce the national debt — since experts and politicians have been unable to do so. No one has “the” solution to the debt problem, but prevention can be a piece of the puzzle, perhaps a significant one, that has social benefits as well. I have submitted the prevention model to the National Commission on Fiscal Responsibility and Reform, and I encourage others to submit their ideas to the Commission as well (commission@fc.eop.gov).

PsySR member Neil Wollman is Senior Fellow, Bentley Alliance for Ethics and Social Responsibility at Bentley University in Waltham, MA. He can be contacted at NWollman@Bentley.edu.

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