Stimulating Economics

A highly sensible read from Doug Schoen: Promoting Job Creation and Economic Growth

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.

I’ve long argued the mechanisms of collecting and spending taxes are in need of reform. The systems are wasteful and so cumbersome we should not be surprised at their abuse. Mr. Schramm is exactly right when he says this issue is sorely neglected.

With a very evenhanded analysis, Schoen continues:

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 They called for taxes to not be raised, the health care law to be repealed, federal spending to be limited, and Congressional approval for any federal regulation that would add to the deficit.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.

Is “centrist” the new word for “capitalist?” Hmm. Anyways, Schoen goes on to list a number of ideas championed by The Kauffman Foundation, including:

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.

I agree since a well-educated populace is necessary for an adaptable, innovative economy. The problem lies in the voters ability to elect officials who will realize when government policy harms education or economic innovation instead of helping them. Leaders in Washington are not going to fix what they don’t acknowledge as broken. Until the electorate is offered candidates serious about real reform, the “rational discussion among political, business and academic leaders” will continue to be missing.

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