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Strangling Entrpreneurship

from The Slow Decline of American Entrepreneurship by Tim Kane

Start-up companies are the reason America’s economy is more innovative, prosperous and dynamic than the economies of other industrialized countries around the world.

New companies create roughly 3 million jobs every year, while existing companies tend to shed 1 million jobs. It is no secret why a healthy entrepreneurial culture is important.

Think of it this way: Roughly 1 in 10 U.S. companies are founded each year, and these young firms create 100 percent of all net new jobs. Even in gross terms, start-ups punch above their weight, with 16 percent of all new jobs created by start-ups. Older firms create fewer jobs per firm, but, on average, cut even more, for a net negative impact.

While start-ups have always played an important role in the U.S. economy, the extent to which they drive job creation was, until recently, underappreciated.

However, thanks to new data from the federal government, we are able to identify job creation across all firms according to their date of “birth.” Yet, as important as this insight is, the data, which only goes back as far as 1977, also shows an alarming downward trend: America’s entrepreneurship rate is declining.

During the Carter administration, 14 percent of U.S. companies were start-ups.

That rate declined by one percentage point during the Reagan years, two points during the recession of the George H.W. Bush presidency, held steady under Bill Clinton, dropped a percentage point under George W. Bush, and then dropped two full points during the first term of President Obama.

We can only speculate why entrepreneurship is declining, but it seems that America’s economic culture is trending toward the European model.

In Europe, as well as Japan, large corporations are the norm, as are ample welfare programs and an erosion of familial bonds.

America’s history of entrepreneurship is strongly rooted in a culture of hard work and self-reliance. Unfortunately, bureaucratic regulations are growing at the same time start-ups are declining. Coincidence?

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The True Cost of Government

“The federal budget suggests that just over 20 percent of what the national government does involves the provision of public goods, and the rest involves taking from A and giving to B because politicians want it that way. This isn’t necessarily wicked or nefarious—politicians like Social Security in part because they genuinely care about the welfare of old people, and people voted for the Patient Protection and Affordable Care Act (PPACA) because they sincerely believed that it would provide relief to the uninsured and others struggling with medical expenses. Being wrong isn’t the same as being evil; it’s just being wrong.

“…..the cost of government is not the annual toll in taxes and debt, but the forgone benefits that we would have derived from using all of that capital in innovative and productive ways. The $1 trillion that goes into financing the federal deficit every year is $1 trillion not available to invest in Apple (or the next Apple) or to endow the Central Park Conservancy (or the next Central Park Conservancy). The real cost of government is always opportunity cost, but that is difficult to calculate, because free societies and free people are unpredictable. The fact that we are several centuries into a very good run of making people better, richer, freer, healthier, and longer-lived suggests that we free people have some pretty good ideas about how to deploy our resources, and that wagering on our continuing to do so is the smart bet. Assets deployed in antipoverty programs that leave people poorer, in health-care programs that make people less healthy, or for national security projects that make the nation less secure cannot be used for productive purposes. We can only imagine what the world might look like if we had not spent $1 trillion on a War on Poverty that has resulted in more poverty, or roughly the same sum to drop bombs on Iraqis under the theory that eventually the ones who were left would become Swiss.

The political model is constrained in what it can actually accomplish by the knowledge problem discussed above, and our theories of legitimacy and consent mainly serve to mask the substitution of violence for knowledge.”

Excerpt From: Kevin D. Williamson. “The End Is Near and It’s Going to Be Awesome.” HarperCollins, 2013-05-01. iBooks.

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Rebel Yid’s First Law

The more that the consensus is intolerant of dissent, the more likely it is to be wrong.

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Weasel in Chief

The Abandoned War