Scott Adams of Dilbert fame makes an interesting suggestion at his blog. What if the rich were given an option to, say, buy homes with bad mortgages and required to rent them out? It would sort of be a tax but it would offer the rich the hope of a return, taking some of the sting out of "paying" extra taxes.
But what if investors had more options than a simple government bond? We have 37 kinds of ketchup but only one kind of federal bond? Why not a bond that finances alternative energy and another that finances war and another that finances transportation infrastructure? It would be even better if the bonds not only paid the traditional interest rate but offered a premium based on the performance of what they financed.
For example, let's say that there was a bond for community college programs to train trades people for plumbing, electrical, and carpentry work. If graduates from the program were employed in the trades at a rate of 85% or higher (to pick a number out of the air), you would get a premium of 1% on your annual return. If the rate of successful placement were 96%, you would get a 4% premium. The more promising you thought the program, the more likely you'd be to invest.
This would put markets to work as a means to finance government programs, letting investors "vote" on programs they felt would yield better returns, would create more value for the community.
And once that is in place, I see no reason why we couldn't go further with this, allowing taxpayers to indicate, when filing taxes, where they would like their money to go. I suspect that the Pentagon would get less and the National Science Foundation or National Institute of Health would get more. And I suspect that future generations, who would benefit from this research and investment, would thank us.