Given the Rasmussen Reports polls released this week that show that 86% think the issue of the economy is very important, and just 38% of Americans say the economy will be stronger in a year, it is clear that creating jobs and stimulating the economy is a top priority for our country.
Despite the significance of this issue, there has been no rational discussion among political, business and academic leaders on how to create jobs and encourage entrepreneurship.
As Kauffman Foundation CEO Carl Schramm points out in the Economist, government policy debates lack a real discussion on how we spend and tax, and politicians often simply champion small businesses as the key to job creation, when in fact, firms less than five years old are responsible for nearly all net job creation. Robert Samuelson in the Washington Post adds that this distinction between new and old firms is much more significant than the distinction between small and big firms: over long periods, almost all job growth comes from new businesses, due to high failure rates among existing firms.
The White House lacks a coherent job creation strategy. The administration has passed a stimulus package that has not produced the results that were anticipated and promised, it has given bailouts to banks and automobiles to simply stop these companies from going under, and it wants to increase taxes for those making over $250,000 annually by letting the Bush tax cuts expire at the end of the year. Most recently, Obama proposed a plan to invest $50 billion in infrastructure – a plan that was met with skepticism, as infrastructure investments do not usually stimulate the economy quickly.
The Republicans meanwhile, have simply opposed all of the Democrats’ ideas. They are against stimulus plans, against the health care bill, against cap-and-trade, and against tax increases. In the Pledge to America that the Republicans released last month, Republican simply reiterated their positions of “no.” They called for taxes to not be raised, the health care law to be repealed, federal spending to be limited, and Congressional approval for any federal regulation that would add to the deficit.
The White House and Congress need to put forth a bold, centrist agenda that focuses on fiscal discipline and fiscal stimulus initiatives that target the private sector and encourage entrepreneurship.
Entrepreneurial activity is key to a sustained economy recovery. Not only are entrepreneurs responsible for net new job growth in the U.S. economy, but a majority of the employment they generate remains as new firms grow, which creates a lasting impact on the economy. Although only a fifth of start-ups make it to their 25th birthday, employment figures stayed at 68 percent of the initial number. Thus, the number of start-ups that flourish and continue to create jobs balance the jobs lost by companies that close.
The Kauffman Foundation has the most comprehensive plan on how to create jobs and promote entrepreneurship. Here are some ideas that should be included in such an agenda to promote job creation and economic growth.
• Promote a culture of freedom and innovation in America by reducing overly burdensome regulation and limiting the impact of punitive lawsuits of those who create new businesses.
• Develop policies that promote innovation to develop incentives for successfully commercializing innovative new ideas and new businesses.
• Invest in innovation, especially in sectors like energy and health, to create jobs.
• Ensure a skilled workforce through entrepreneurially-driven improvements in our school system, entailing better training in the sciences and engineering, and government policies to support programs that train future entrepreneurs and encourage entrepreneurial activity.
• Promote more open-minded immigration policies to encourage the world's best and brightest to study work and start businesses here.
• Remove red tape and regulation from small businesses to encourage job growth and job creation in smaller firms.
• Offer tax credits for high net worth individuals who invest in small or new businesses.
• Reduce or eliminate taxes for entrepreneurs during their first six months or a year of business activity.
• Set up federal government and state sponsored investment funds for new businesses generally or in areas where it is particularly productive to encourage new entrepreneurial activity.
• Develop coaching or mentoring policies for entrepreneurs to encourage business development and job growth.
• Support efforts by state and local government to encourage entrepreneurial activities through the development of strong local educational systems and institutions and supportive infrastructures designed to attract and stimulate new business development and creation.
The bottom line, creating jobs and promoting entrepreneurship is paramount to our nation’s recovery. The voters already know this, and it is time for the politicians to act.
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