The solution to the nation’s long-term deficit problem is generally portrayed as a choice among sharp budget cuts, major tax increases or a combination of the two. Given the magnitude of the problem, some level of sacrifice is probably unavoidable. But there is a third, overlooked approach to major budget savings — innovation — that the new congressional supercommittee should also include as a key component of its deficit-reduction strategy.
Innovation in this case is the process of trying a range of promising approaches and using rigorous evaluation methods to determine which of them really work. In many areas of the economy — such as information technology, agriculture and manufacturing — innovation has often identified ways to both reduce cost and improve performance. This has led to amazing progress over time, including exponential gains in computing power over the past half-century at a steadily decreasing price. So a logical question is: Can innovation in policy produce more effective government at lower cost?
The answer is yes. There are proven examples, from U.S. welfare policy and other areas, where innovative reforms produced major budget savings while simultaneously improving people’s lives. This suggests that part of the answer to our deficit problem lies in American ingenuity and not just sacrifice.