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A Gift for Grads: Start-Ups

Thomas L. Friedman 

If you have a son or daughter graduating from college this year, you’ve probably gotten the word. When meeting this year’s college grads it’s best not to ask: “Hey, what are you doing next year?” Too many recent graduates don’t have an answer. They can’t find jobs even remotely related to their fields. This year’s graduation theme is: “Don’t ask. Can’t say.”

We owe our young people something better — and the solution is not that complicated, although it is amazing how little it is discussed in the Washington policy debates. We need three things: start-ups, start-ups and more start-ups.

Good jobs — in bulk — don’t come from government. They come from risk-takers starting businesses — businesses that make people’s lives healthier, more productive, more comfortable or more entertained, with services and products that can be sold around the world. You can’t be for jobs and against business.

Alas, though, relations today between the Obama administration and “business” are pretty strained. I’m not talking about Wall Street, which deserves Obama’s lash. I’m talking about people who actually make stuff and sell it. I am talking about entrepreneurs and innovators. A surprising number of them told me they had voted for Obama, and an equally surprising number of them now tell me they’re unhappy. A lot of their criticism is unfair. Obama has never gotten the credit he deserves for stabilizing the terrifying economy he inherited — with virtually no help from Republicans. And business is never going to like anyone who raises income taxes, especially to pay for other people’s health care — even if it is in the national interest.

That said, I think part of the business community’s complaint about Obama has merit. Although there are many “innovation” initiatives ongoing in this administration, they are not well coordinated or a top priority or championed by knowledgeable leadership. 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 don’t seem to float Obama’s boat. He could use a buoyant growth strategy.

What might that include? I asked two of the best people on this subject, Robert Litan, vice president of research and policy at the Kauffman Foundation, which specializes in innovation, and Curtis Carlson, the chief executive of SRI International, the Silicon Valley-based innovation specialists.

Carlson said 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.” “Secretary Newco” would be focused on pushing through initiatives — including lower corporate taxes for start-ups, reducing costly regulations (like Sarbanes-Oxley reporting for new companies), and expanding tax breaks for research and development to make it cheaper and faster to start new firms. We need to unleash millions of entrepreneurs.

Litan said he’d staple a green card to the diploma of every foreign student who graduates from a U.S. university and push for a new meaningful entrepreneurs visa (the current one, the EB-5, 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 and revenues. One of the best moves we could make, adds Litan, would be a long-term budget deal that would address the looming Social Security/Medicare payouts for baby boomers. Proving to the bond market that we have our long-term fiscal house in order would keep long-term interest rates low and thereby “encourage private investment more than any tax cut.”

Nevertheless, I’d also cut the capital gains tax for any profit-making venture start-up from 15 percent to 1 percent. I want our best minds to be able to make a killing from starting new companies rather than going to Wall Street and making a killing by betting against existing companies. I’d also impose a carbon tax and balance that with a cut in payroll taxes and corporate taxes. Let’s tax what we don’t want and encourage what we do.

“Fortunately, this is the best time ever for innovation,” said Carlson, for three reasons: “First, although competition is increasingly intense, our global economy opens up huge new market opportunities. Second, most technologies — since they are increasingly based on ideas and bits and not on atoms and muscle — are improving at rapid, exponential rates. And third, these two forces — huge, competitive markets and rapid technological change — are opening up one major new opportunity after another. It is a time of abundance, not scarcity — assuming we do the right things with a real national growth strategy. If we do not, it rapidly becomes a world of scarcity.”

Source:  NYT – Opinions

Thomas L. Friedman  –  Mr. Friedman joined The Times in 1981 and was appointed Beirut bureau chief in 1982. In 1984 Mr. Friedman was transferred from Beirut to Jerusalem, where he served as Israel bureau chief until 1988. Mr. Friedman was awarded the 1983 Pulitzer Prize for international reporting (from Lebanon) and the 1988 Pulitzer Prize for international reporting (from Israel). Mr. Friedman’s latest book, “The World is Flat: A Brief History of the 21st Century,” was released in April 2005 and won the inaugural Goldman Sachs/Financial Times Business Book of the Year award. In 2004, he was awarded the Overseas Press Club Award for lifetime achievement and the honorary title, Order of the British Empire (OBE), by Queen Elizabeth II. His book, “From Beirut to Jerusalem” (1989), won the National Book Award for non-fiction in 1989 and “The Lexus and the Olive Tree” (2000) won the 2000 Overseas Press Club award for best nonfiction book on foreign policy and has been published in 27 languages. Mr. Friedman also wrote “Longitudes and Attitudes: The World in the Age of Terrorism” (2002) and the text accompanying Micha Bar-Am’s book, “Israel: A Photobiography.” Born in Minneapolis on July 20, 1953, Mr. Friedman received a B.A. degree in Mediterranean studies from Brandeis University in 1975. In 1978 he received a Master of Philosophy degree in Modern Middle East studies from Oxford. Mr. Friedman is married and has two daughters. More…

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Written by Theophyle

July 24, 2010 at 5:25 pm

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