Monday night I attended the Robin Hood Foundation’s annual charity dinner. Robin Hood is an incredible charitable organization. Its board members pay all of the administrative costs of the Foundation; consequently, every single dollar donated is used to help end poverty in New York City.
But Robin Hood is not just about raising and spending money. Robin Hood implements a rigorous metrics system to “spend money smartly, cutting poverty as deeply as possible.” It is easy to spend money, but money needs to be spent wisely, not easily, and Robin Hood does this by abiding by a spending system designed around cost-benefit ratios, which provide the “best estimate of the benefit to poor people that each dollar creates.”
Sitting at the dinner and learning more about Robin Hood, I started thinking about federal spending. Since the financial collapse and during the current — yet fragile — economic recovery, our political leaders and economists have focused a lot on spending, as well as taxes, debt and deficits.
While the spending debate revolves around whether to continue spending in an attempt to grow the economy or reduce spending to close the deficit, it fails to focus on why we are spending, where the money is going and how we decide what we spend.
And this brings me back to Monday night. Robin Hood started with a well stated goal — to cut poverty as deeply as possible. To do this it needs to spend money on carefully designed programs. The money must be spent smartly and it is spent smartly because Robin Hood applies a rigorous cost-benefit system. And, Robin Hood is able to raise the money it needs because the donors know their “investments” are being put to good use and creating real results.
As we head toward the proverbial fiscal cliff at the end of this year when automatic spending cuts and tax increases will occur without political action, a comprehensive long-term plan to reduce federal public debt, close deficits and reform our entitlement system is needed.
In that regard, our political leaders should consider following Robin Hood’s lead. Specifically, our political leaders should agree on our country’s stated goals; a budget should be developed to achieve these goals; a rigorous cost-benefit process should be designed and implemented to help make spending decisions; and a fair tax system should be put in place to pay for necessary spending and so citizens will know that their money is being put to good use.
Following the lessons of good governance, good process and strong leadership, we can avoid the cliff and set off on a path of economic strength and growth. Continuing with ideological entrenchment and political inaction, our economy may just fall off the cliff and crash.
Jon Henes is a partner in the restructuring group at Kirkland & Ellis LLP where he has led some of the most complex restructurings in a variety of industries, including media, chemicals, energy, manufacturing, real estate, retail and telecommunications. Jon has also frequently appeared on CNBC's "Worldwide Exchange" as a guest expert on various financial and economic topics and is a member of the Economic Club of New York.