Freedom Line Blog

The Kauffman Foundation for Entrepreneurship’s newest report on business creation rates across the United States offers some intriguing insights for policymakers.

According to Robert Litan, the foundation’s vice president of research and policy, “The Great Recession has pushed many individuals into business ownership due to high unemployment rates.”  “However, economic uncertainty likely has made them more cautious, and they prefer to start sole proprietorships rather than more costly employer firms.  This ‘jobless entrepreneurship’ trend negatively effects job creation and the larger economic recovery.”

No doubt, regulatory barriers and confiscatory rates of taxation are causing start-ups to make the same kind of cost-saving hiring decisions as larger, more established firms.  Across nearly every industry these days companies are hiring people to independent contracts rather than salaries, converting many ‘company men’ into standalone consultants.

While becoming an accidental entrepreneur may not be the first career choice of many people – and according to the Kauffman study the college educated cohort saw the steepest decline in their willingness to start their own business – the movement of millions of people into the ranks of the self-employed could have huge consequences for policymakers.

For starters, this army of new business owners is much more likely to demand rollbacks of costly regulations and profit-killing tax rates on corporations.  Your perspective changes when you go from receiving a paycheck to making a payroll.

Remember, the people that lose a job and start a business are the people whom the government should want to help the most.  They aren’t looking for a hand-out or even a hand-up, just space to make a contribution that others in the free market will reward.

This constituency is a natural growth area for the conservative movement.

The best part about the Kauffman report is that entrepreneurial activity can be found in important electoral pockets.  Consider:

• Entrepreneurial growth was highest among 45- to 54-year-olds, rising from 0.35 percent in 2010 to 0.37 in 2011
• The top five highest entrepreneurial rates among the fifty states were:

(1) Arizona with 520 per 100,000 adults creating businesses each month during 2011;

(2) Texas with 440 per 100,000 adults;

(3) California with 440 per 100,000 adults;

(4) Colorado with 420 per 100,000 adults; and

(5) Alaska with 410 businesses started per 100,000 adults

The key to our economic recovery rests on policymakers understanding that Americans want to work.  I submit that any politician willing to make the necessary changes to tax and regulatory rules so that start-up owners can become employers as well as entrepreneurs will find a loyal constituency, and one well worth fighting for.

Dana Milbank of the Washington Post pens a searing description of Christina Romer’s farewell luncheon at the National Press Club.  According to Milbank, Romer, until recently chairman of President Barack Obama’s Council of Economic Advisors, established four points during her speech to reporters:

(1)   She had no idea how bad the economic collapse would be.

(2)   She still doesn’t understand exactly why it was so bad.

(3)   The response to the collapse was inadequate.

(4)   And she doesn’t have much of an idea how to fix things.

So, where does Christina Romer go from here?  Back to her teaching post at UC Berkeley where she’ll presumably try to make reality fit into her mathematical models; only this time she won’t have to worry about being held publicly accountable for her conclusions.  (Such as the one where she argued that passing the first stimulus bill would keep unemployment below 8%…)

Victor Davis Hanson has some terrific commentary at National Review Online drawing out the distinctions between the well-paid, over-worked White House aides recently profiled by the New York Times, and the everyday Americans grinding it out during the Great Recession.

The Times wants to draw a sympathetic portrait of the heroic Obama cadre that suffers so much on our behalf. These are six-figure jobs that wear out one’s hands on the Blackberry, true, but serve as valuable stepping-stones to even higher-paying corporate jobs. And this is still a recession. This raise-the-bar griping will not go down well with the coal worker in Montana, the welder on a 30-story scaffold, or the oil worker offshore (e.g., it is not as if a Blackberry is going to blow up in one’s hands, or an acoustical tile is going to fall and crush one in the West Wing). It is all too reminiscent of the various explanations we’ve heard for why Michelle’s Costa del Sol sojourn was an understandable and much-needed refresher before the more arduous odyssey ahead on Martha’s Vineyard.