Who creates jobs? In the U.S., over the past 30 years, the answer is new firms.
Logically, then, one way to spur job creation would be to encourage the formation of new businesses. In the Huffington Post, Carl Schramm and Bob Litan propose a number of short-term measures the government could enact now that would do just that.
Let’s import a lot more skilled workers, beginning with those who want to come here and found companies. Let’s change our tax code to facilitate the financing of small business, with a permanent capital gains exemption on investments in startups held for at least five years and a significant cut in corporate tax rates for new companies in the first three years they have taxable income. To make it easier for growing private companies to go public, let’s give their shareholders (who can best judge the benefits and costs of financial auditing mandates) and those of other public companies with a market cap of $1 billion or less the choice whether to comply with the onerous requirements of the Sarbanes-Oxley Act.
To get more new ideas into the marketplace faster, let’s give the Patent and Trademark Office the tools it needs — primarily differential fees for faster service, but with special breaks for small business and individual inventors — to cut down the enormous and growing backlog of patent applications. Furthermore, let’s create a competitive market in technology licensing by enabling faculty inventors more freedom to license their federally funded innovations, without having to be hostage to their own universities’ licensing offices. And let’s finally truly reform federal regulation by sun-setting all major rules after 10 years, requiring all new major rules to pass a benefit-cost test, and by collecting sufficient data on regulation at the state and local level to permit private sector organizations to rate these jurisdictions on their business-friendly climates.
Other than changing laws relating to the immigration of high-skilled workers, none of these measures should be particularly controversial. And each one of these ideas is a thousand times better than trying to paint everybody’s roofs white.
Unfortunately, we have a president who believes that the lack of jobs is entirely a function of a lack of demand. The administration has totally overwhelmed the few small-scale tax cuts and reforms that have made it through Congress by the addition of countless burdensome regulations and mandates.
Even if the lack of jobs and weak recovery is purely a demand-side problem, though, supply-side reforms along the lines of what Schramm and Litan suggest wouldn’t hurt — and couldn’t be less effective than the stimulus spending that Obama has pushed for.