In a speech yesterday, President Obama gave a nice nod to reality:
And we were guided by a simple idea: Government doesn't have all the answers. Ultimately, government doesn't create all the jobs. Government can't guarantee growth by itself.
Needless to say, even this merest acknowledgement of the limits of the state, couched in a longer defense of indefensible government programs, has left certain liberals feeling a little betrayed. But the president is right.
So where do jobs come from, if not the government? Tim Kane has published a study (pdf) showing that the answer is, more or less, start-ups.
A relatively new dataset from the U.S. government called Business Dynamics Statistics (BDS) confirms that startups aren't everything when it comes to job growth. They're the only thing.
Kane offers this graphical evidence:
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