Start-Ups

It is common at college graduation time to ask the newly minted degree holder what he/she plans to do after graduation; meaning do you have a job? Too many recent grads just cannot find a job even remotely related to their field of study. We owe our young people better and the solution is not that complicated although it appears to generate little discussion in Washington.

In his excellent op-ed piece, Thomas Friedman says we need three things: start-ups, start-ups and more start-ups. However, good jobs do not come from government. They come from risk takers starting businesses. A business that makes people’s lives healthier, more productive, more comfortable or more entertained, with services and products that can be sold around the world has just got to be successful.

The bottom line is you cannot be for jobs and against business. And herein lies the rub. This administration has just not been focused on job creation. As pointed out by Leon Hardt in the New York Times, Mr. Obama, Harry Reid and Nancy Pelosi have done less than they could have. And what is their excuse? They have been busy with other things like creating legislation for health care and financial services reform.

Now, I am not against health care and financial services reform, but everything in due time. The first priority of the President as he took office was to resurrect the economy and that means job creation. The stock market will not grow and home sales will not return to robust levels until more people are employed.

Mr. Obama has not wrapped his arms around teachers, fire-fighters and other workers facing layoffs and dared Republicans to oppose him, just as he did with financial regulation. He has not pushed for tax cuts which could also put Republicans on the defensive. So now the Democrats find themselves in the unenviable position of heading into mid-term elections with the unemployment rate near 10%!

Instead of pushing for short term stimulus and tax cuts we are getting long term spending and tax increases.

As a result, relations today between Mr. Obama and the people, especially businesses, the people who make and sell “stuff” are particularly strained. I wonder how many business owners who voted for the president would vote for him again.

To be fair, Mr. Obama has never received credit for stabilizing the economy with virtually no help from Republicans but we do not like having our taxes increased to pay for some one else’s health care.

The main problem, again, is this administration’s lack of leadership. Their efforts at job growth do not appear to be well coordinated, a top priority or championed by knowledgeable leaders. As Mr. Friedman points out, “this administration is heavily staffed by academics, lawyers and political types. There is no senior person who has run a large company or built and sold globally a new innovative product. And that partly explains why this administration has been mostly interested in pushing taxes, social spending and regulation – not pushing trade expansion, competitiveness and new company formation. Innovation and competitiveness do not seem to float Obama’s boat.”

America is going to pay a heavy price for this if things do not change.

But what could that change look like?

Two prominent individuals have suggested the following:

Curtis Carlson, chief executive of SRI International, the Silicon Valley-based innovation specialists, says he would begin by creating a cabinet position exclusively for promoting innovation and competitiveness to ensure that America remains “the world’s new company formation leader.” He advocates lower taxes for start-ups, reducing costly regulation and expanding tax breaks for research. He says ‘we need to unleash millions of entrepreneurs.”

Another expert, Robert Litan, vice president of research and policy at the Kauffman Foundation, says he would staple a green card to the diploma of every foreign student who graduates from an American university and push for a new entrepreneur’s visa because the current one requires $1 million of capital that few foreign entrepreneurs have. It would grant temporary residence to any foreigner who comes here to establish a company and permanent residency if that company generates a certain level of new full-time jobs. He also suggests cutting the capital gains tax for any profit-making venture start-up from 15% to 1%. Now that is an incentive! He opines we should “encourage our best minds to be successful starting new companies rather than going to Wall Street and betting against existing companies.”

Finally, he would impose a carbon tax and balance that with a reduction in the payroll tax and corporate taxes. As he says, “let’s tax what we do not want and encourage what we do.” Makes sense to me.

Too bad we are not hearing any of this from Washington