Once after lecturing at a famous business school a student approached to describe what sounded like a promising idea. His question still haunts me. "Do you think the government will allow me to try this?" What better example of how the ubiquitous regulatory state stifles creativity. Its presumptive power to stop an idea in gestation is antithetical to risk-taking capitalism.
Looking back to the Harris campaign, her solution of encouraging more entrepreneurs was to be expected when finding herself without a coherent economic plan. Bidenomics was not one. Turning to entrepreneurs is the Deus Ex Machina solution of politicians and economists who otherwise refuse to see that cutting taxes and reducing the regulatory burden on large and especially small businesses is the only way to reduce debt and induce real growth.
In fact, our economy desperately needs an entrepreneurial renaissance. The rate of new businesses has been falling for over twenty years. It was falsely masked in the midst of the COVID pandemic by an explosion of new business registrations driven by the millions of unemployed workers desperately hoping to make work for themselves. By 2022 the nation watched startups flat line and the discouraged worker effect was in full motion.
In fact the federal government is the singular force holding back an outbreak of new business creation. Despite politicians endlessly repeating Schumpeter's insight that entrepreneurs instigate the "gales of creative destruction" necessary to our economy constantly reinventing itself, President Biden's efforts to install a centrally planned economy that favors giant incumbent firms slowed innovation. Consider his plan to solve America's lag in new chip creation. He bet the ranch on Intel, a firm notorious for missing the turn on chip design.
The last thing startups need is government attention. For more than twenty years, government at all levels has run an expensive array of programs to promote and support entrepreneurs. Evidence, however, shows the more we spend on government grant and loan programs like SBIRs, university programs teaching entrepreneurship, and supporting local business incubators, the fewer businesses actually start.
Notwithstanding this reality, federal programs promoting entrepreneurship are everywhere -- the SBA, the departments of Agriculture, Treasury, Defense, Health and Human Services, Homeland Security, Energy, State, and the National Science Foundation. It's another full-on "whole of government" mess -- lots of sailors without a captain or a map.
Consider one of government's best bad ideas. iCorps, a government outreach program, presumes potential entrepreneurs can be trained, much like military recruits. "Ready, Aim, Start a company!" The process of starting a company, however, is more like dancing an intricate tango than doing target practice. Elon Musk knows the entrepreneur's tango better than anyone.
iCorps encourages mid-career university and government research scientists, in whom taxpayers have invested enormous amounts in paying for advanced degrees and years of preparatory research, to abandon their laboratories to start companies. Conversion therapy for scientists? This program might be better thought of as the federal government subsidizing venture investors in their hunt for and de-risking of potential new companies.
As noted, America absolutely needs more entrepreneurs. The best way to get them is for President Trump to ask DoGE, OMB and ORIA to shut down ineffective government efforts at promoting more companies. In their place four policy steps would certainly spur more business creation.
The first would be to let local banks take more balance sheet risk by getting back into the business of making loans to startups. Until the dawn of venture capital, banks were the principal source of capital for new companies. The overreaction to the Enron scandal removed banks from debt financing for startups.
Second, since most entrepreneurs are about forty when starting their first business, the federal government should quit subsidizing universities teaching entrepreneurship to college aged students. Mid-career engineers, who never studied entrepreneurship, start more companies than do MBAs.
Third, to encourage friends and families serving as a startup's first source of funds, any capital gains up to $10 million derived from such an investment should taxed like a return on invested venture capital.
Finally, President Trump should direct Kevin Hassett, his head of the National Economics Council, to fashion economic reforms necessary to making America Great Again in terms of a "permission free" entrepreneurial economy. No aspiring entrepreneur should ever think of government being a presumptive obstacle.