Tuesday, June 30, 2009

Our Entrepreneurial President?

Based on recent statements and actions, Jonathan Ortmans, Senior Fellow at the Kauffman Foundation, asks if President Obama might just be a champion of entrepreneurs (entrepreneurship.org). He lists a number of good statements and actions and seems hopeful and optimistic that this Administration will fulfill its promise to foster an entrepreneurial economy. The President's own words serve as a rallying cry:
I believe that jobs are best created not by government, but by businesses and entrepreneurs who are willing to take a risk on a good idea. I believe that our role is not to disparage wealth, but to expand its reach; not to stifle the market, but to strengthen its ability to unleash the creativity and innovation that still make this nation the envy of the world.
Source. I too will remain optimistic and hopeful, but a Kauffman survey from last March found, among other things, that entrepreneurs and the general public felt the stimulus bill reflected the wrong approach to recovery:
Several key themes emerged from the findings, providing insight into the American psyche following the economic crash and resulting stimulus package. First, entrepreneurship is gaining recognition as more important than the stimulus package in creating long-term economic stability. Close to half of Americans say that an entrepreneurship initiative is as important as the stimulus package in creating jobs, while only a quarter disagree (Slide: 25). Americans rank innovation and entrepreneurship above free trade, big business, and labor unions in terms of importance to the nation’s economic health (Slides: 3, 4-7). They also see entrepreneurs as more important in creating jobs than big business, scientists, and the government (Slides: 8-11).

But Americans have their doubts that the stimulus package will spur the entrepreneurship that they hold as so important. In fact, a full third of Americans feel that the stimulus package will hurt entrepreneurial activity, while only 21 percent feel it will support entrepreneurs (Slide: 20). And 72 percent think that the government could do more to encourage entrepreneurs (Slide: 22).

There is a clear sense among Americans that the stimulus package in-and-of itself is not going to resolve the serious economic problems facing the country. When asked what would lead us out of the economic crisis, two-thirds favored an alternative, less-costly course of the action: reducing legal barriers and red tape for new business development (Slide: 12). Two-thirds say encouraging new business development and other entrepreneurial activity (Slide: 13). And 63 percent say that giving incentives to individuals is the way to improve the economy, as opposed to only 23 percent who think that allowing the government to create jobs is better (Slide: 16).
While the President's statements reflect these views, he still must work with Congress to get his policies through. The reason I used the David Brooks quote in my previous post is because there is an interesting debate going on about how aggressive the Administration should be in drafting its own legislation. Tim Kane ably sums up:
Rather than specify a solid framework for legislation (on immigration, on Social Security, take your pick), the new way to kill your own agenda is to talk up general principles and leave Congress to craft actual legislation. Without clear leadership (and not just behind the scenes), the modern result is acrimony. Inside the beltway, the Clinton health care experience remains a searing lesson in the "wrong way" -- overly strong presidential specificity. But the lesson has been overlearned. What the Clintons did wrong was to hijack the legislative process with a massive semi-secret commission. That wasn't leadership. Somewhere between being a control freak and a mere rhetorician is the golden mean of presidential leadership.
We are looking at creating a number of sweeping policy changes while already engulfed in record budget deficits (I am not suggesting these are the President's fault). The Administration's economic forecasts call for a significant recovery and commensurate surge in revenue. By contrast, most private forecasters are expecting a much slower rate of recovery. When revenues do not materialize, we will have to find revenue from alternative sources. Congress has found that its rhetoric in the "rates vs. base" debate resonates with many voters and will likely go after big business and high income individuals to meet its revenue shortfall. Whether you think this is good or bad, there are limits to what can be accomplished simply by raising rates or creating new taxes like a VAT. More importantly, these debates do not bring us any closer to reducing barriers to entry, encouraging new business formation, and creating a more dynamic and prosperous economy. Here's hoping the President's message about the importance of innovation, creativity and our entrepreneurial spirit will not be lost along the way.

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