An Opportunity Development Bank

A child jumping a puddle

As inequality reaches unprecedented heights in America, there is growing—and increasingly realistic—concern for social and political stability.


Although inequality could be redressed by explicit redistribution, political gridlock in Washington and in many states makes this solution unlikely, and potentially economically disruptive. Yet many Americans, hostile to redistribution, are sympathetic to the need to create broader economic opportunity for Americans. Many Americans across party are also, quite legitimately, concerned about good governance.


These policy preferences create an opening for a non-partisan effort to enhance opportunity that could appeal to members of both political parties: an Opportunity Development Bank.


This Bank would be a public-private partnership, similar to infrastructure development banks elsewhere, that would use tax revenue to pay for investments with very high rates of economic and social return. These investments could include early-childhood interventions, preschool enhancements, juvenile-justice diversion programs, high-school counseling programs, adult job-training programs, adult criminal rehabilitation, substance-abuse prevention programs, housing support and library expansions.


Returns on these investments have been shown to be extremely high. Some programs return to government as much as one dollar or more in net-present-value for every dollar spent: a 100% rate of return in an era when returns on bonds are one-fiftieth as large. The social returns are even higher, sometimes reaching as much as 15 or 20 dollars for every dollar spent.


As these returns flow back to governments, the Opportunity Development Bank could either recoup some of its own expenses by drawing back the returns from local, federal, and state government over time, or it could simply gift the returns in toto to those governments.


As a public-private entity, the Opportunity Development Bank would be governed by a non-partisan board appointed by the legislative and executive arms of government, perhaps with additional citizen involvement.


I am a particular fan of the structure of the California Citizens’ Redistricting Commission, which chose an equal mix of Republicans, Democrats, and Independents randomly from among a large pool of volunteers.  When the Commission reached some decisions that the Republican Party objected to, it was the Republican Commission members who defended those decisions—an excellent example of how Republicans and Democrats truly can work together when the political klieg lights are off.


Initial funding for such a Bank could come from carve-outs from existing general funds, or as a special new tax, for example on income inequality (the additional amount by which top incomes have grown over general economic growth in the past 30 years) or a renewed inheritance tax.


Although taxes are not popular, research has shown that when the public understands and embraces the uses to which new tax revenue will be put, they are much more likely to support it.  For example, a poll of Californians by Hart Research Associates found that 64% are willing to see their own taxes increase to fight child poverty.


Our polarized political climate calls out for radical, yet sensible, solutions. An Opportunity Development Bank holds out the possibility of uniting Democrats and Republicans around shared priorities, and could help to make government more responsive and constructive.


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