American Dream

As I sit here juggling 7 different projects in 5 different fields of expertise, I start to scratch my head and laugh. Living in paradise has its complications.

I live pretty simply, but there are things in my life that need to be funded. When I moved to the mountains, I traded a "normal" life for one that required a great deal of creativity to survive financially. There are not that many jobs locally that need a great PR gal (or can afford one), so I started finding other opportunities that could capitalize on my unique skillsets. My current resume reads like a person with ADD. It is all over the board.

The common denominator is an entrepreneurial spirit. I totally understand the hardships associated with being out on your own. Insurance, taxes, liability, employees, liability, taxes, insurance, economy, overhead, taxes, liability, insurance. Each start-up business has its demons, but the benefits to making your own way by your own expertise is truly a thrilling and fulfilling endeavor...in fact, second only to being a parent. Owning your own business is truly the great American Dream.

So as we try to figure this economy thing out, I am thinking some of the greatest businesses were started during the worst of times. We are Americans and that is what we do best. That stimulus money should be stimulating us.

Entrepreneurs are best stimulus for the economy
Posted by Carl J. Schramm/ NJ Voices Guest Blogger March 04, 2009

The day after the House of Representatives voted on the stimulus package, I met with a Democratic member of Congress.

He told me, "I know the package won't begin to create enough jobs and certainly not now when we need them." Worse, he worried, "The voters will be on to this by the 4th of July and they won't support more spending then because they don't support it now.

"How," he asked, "do we get out?"

Those in charge in Washington think they know the answer: take a pledge from the Keynesian playbook. Spend (and borrow) massively and hope that government will spur demand and revive the economy.


The congressman knows better. This bill had everything to do with necessary political theater, and nothing to do with basic economics. Anecdotal experience and observation have taught him what drives growth: individual activity in thriving communities.

But what drives that activity is the "animal spirits" of entrepreneurs. And no one understood that better than another long-dead economist - one whose work is vastly more sound than John Maynard Keynes' and directly applicable to current times.

Joseph Schumpeter is best known for the concept of "creative destruction," which asserts that economies flourish only to the extent that entrepreneurs disturb the status quo. Entrepreneurs are job creators. More entrepreneurs mean more growth and more prosperity for all. Or, to put the equation in terms fit for our times, E=R: entrepreneurship equals recovery.

Only private enterprise -- in particular high-growth start-ups -- will create the jobs and the wealth to right America's listing economy. That is, if we let them.

What our economy most needs is another outbreak of entrepreneurial energy. It is waiting to happen all around us. As people face layoffs, many take with them wonderful ideas for entirely new products and services. Layoffs are tough, but they need not spell doom. The average age of those who found high-tech companies in this country is 39. In fact, twice as many founders are older than 50 as are younger than 25. The end of one career can be the beginning of another.

Some people getting pink slips might have ideas that could become entire new industries. Indeed, some of America's largest and most successful firms were started in recessions or bear markets or both -- including General Electric (founded in the wake of the Panic of 1873), IBM (started in the last year of the recession that followed the Panic of 1893), United Technologies (same year as the 1929 crash), Microsoft (1975 depth of "stagflation") and Guess (1981, worst post-World War II recession to date).

If Schumpeter were available to take a 3 a.m. call from a nervous president unsure if his stimulus policy will stimulate, he would say that the most important thing government can do is step out of the way and let the talented next generation of entrepreneurs do their work unhindered. But he might also recommend certain modest steps -- most of them not incorporated into the stimulus bill -- to help entrepreneurs work their magic.

First, encourage risk-taking through tax policy: exempt entrepreneurs from payroll taxes. In fact, a year-long moratorium on payroll taxes could have the economy back up inside of a year.

Second, exempt entrepreneurial businesses from capital gains taxes. The president promised as much during the campaign. Somehow, the Congressional scribes forget to get it into the stimulus package. Sen. Chuck Grassley (R-Iowa) tried to reinsert it as an amendment, but was blocked by members of the president's own party. Perhaps the president could prevail on the Congressional leadership to reintroduce this provision as a separate bill.

Third, focus on the needs of new businesses for affordable health coverage by telling insurance companies they can compete across state lines with a bare bones "entrepreneurs' policy."

Fourth, encourage the world's brightest students to come here, study, and become entrepreneurs. Over 40 percent of the growth of the Silicon Valley in the 1990s came at the hands of foreign-born entrepreneurs.

Finally, put some government spending into research and development for defense. We need more sophisticated protections against biologics and tactical terrorist weaponry, including cyber-assaults. Spending in these areas would bring forth thousands of new companies whose innovations and new jobs would be of great benefit to our economy, while helping America focus on the one place in modern society where seeking order is well-advised, namely, world affairs.

This is the way out. Over half of Americans aspire to start a business. In other words, the people who will save our economy are not mysterious: they are you and me. President Obama promised, "Yes we can!" American entrepreneurs are ready. They just need a little help. Schumpeter, not Keynes, shows the way.
Carl J. Schramm is president and CEO of the Kauffman Foundation and coauthor of Good Capitalism, Bad Capitalism.