27 February 2009

The Entrepreneur's GI Bill

Obama's new plan will create a deficit of $1.5 trillion. This is the difference between taxes collected and money spent in just a single year. Outside of the US there are only 6 (six!) countries with GDPs that are bigger than this. This would be a mind boggling sum were it not so mind numbing.

I am going to repeat myself here. We're spending all this money in the hopes of a multiplier effect - in the hopes that the money spent by the government will trigger money spent by businesses and households - that will jump start the economy. But if that is the goal, why not go after it more directly?

I am having trouble letting go of the idea of a movement to fund new businesses that would be to our time what the GI bill was to the explosion of knowledge workers after World War 2.

If we are going to spend such a massive sum, why not be more direct in going after what we want? If we give households money, they are as likely to buy cars from Japan as wheat from the US. Even businesses are likely to subcontract work overseas. One of the problems rarely mentioned in this age of globalization is how much of a stimulus package might leak abroad.

We want jobs. Why not use the stimulus money to create companies that would provide these jobs?

The GI Bill really was instrumental in helping to create a new economy where professionals with advanced degrees did more to stimulate GDP growth than did captitalists and factory workers. People who would not have otherwise gone to college - who could not have afforded it - got degrees and careers that their parents could not have imagined. By creating so many knoweldge workers, the GI BIll helped to create the innformation age.

Why not look back in 30 years at the amazing companies that were started by the infusion of start up capital that triggered the creation of companies that found new industries and created new wealth? People who would not have otherwise started companies could become the new generation of entrepreneurs. This would not just stimulate consumption but two other things vital to a sustained economic solution to our current plight: new jobs and wealth. By creating so many entrepreneurs, this new stimulus package cold help to create an entrepreneurial age.

Ultimately, our twin deficits (trade deficits and government deficits) will not go down until we begin to produce more and begin to create wealth faster than we deplete it. Why not replace deficit spending with investment in our one remaining economic strength: innovation and entrepreneurship?

I love Biden and Barack. But until they can tell me why their plan of tax cuts and government spending is a better use of money we don't have, I'm going to wince every time I hear about their stimulus plan. As it now stands, it just makes me nervous.

5 comments:

Lifehiker said...

Mr. RWorld, I'm nervous too, and for the same reason. The U.S. has to "produce" useful stuff and create the new jobs that will sustain an economy over the long haul. The stimulus does not do much of that.

My concern is that waves of successful entrepreneurship usually follow some major technical innovation like the transistor, circuit board, CD,internet, etc. What is the big technological wave that American entrepreurship can ride this time?

Another concern is that automated manufacturing of everything from cars to medicines to laptops means that few new businesses can create huge numbers of jobs.

We need a fusion reactor. We need a great new solar panel, maybe a roofing material that generates electricity. We need a new technology that requires lots of people to work on it while also saving money for those who purchase it. What will it be?

Come on, scientists! Save America!

Big Al said...

Ron,

I can tell you don't do business in the Beltway, do you? To even THINK of suggesting our government so-called Leaders invest in regular people like you and I . . . sheesh! And I suppose next you're going to suggest health care for all US citizens to insure citizens are healthy enough to be productive with all the money invested in them.

You need to move to Sweden and be with brethren of your ilk. Oh wait . . . *I* want to move to Sweden, too!

Ron Davison said...

LH,
yes, it does get to fundamentals, doesn't it? And maybe, just maybe, our buddy Barack is addressing those with his education initiatives.

Allen,
I know that you are being tongue in cheek - at least partly. But I am ultimately hopeful. We'll get this figured out eventually.

Tim Coulter said...

Ron,

You have to stop thinking and continue to drink the koolaid;-)

Most of what I am seeing come out of Washington is payback to those that have sponsored this administration. Governments can't make the poor rich, but they can make the rich poor. At some point you will realize that what you and I get from an Obama Administration is higher taxes. So far, we have seen a mixture of amateur hour, Tax Cheats and Lobbyists move into control, and a burden of debt piled on us and our kids, in only the first short month of Obama ruling over our country. Wonder if it will get better?;-) I look at the stock market now, versus when the Dems took over in 2006 and wonder if I am in a parallel reality, where only I can consider cause and effect.

Oh, how I wanted Obama to do a good job running the country, but have to give him an F so far, and am looking for something lower to apply in the future, unless things change.

We are living in interesting times.

Anonymous said...

The key to any positive benefit from gov't spending is having a multiplier greater than one.

The US money multiplier is less than one.

That comes from the St Louis Fed.

Read about it here:
http://market-ticker.denninger.net/archives/703-Uh-Oh.....-Monetary-Flat-Spin.html

Karl Denninger is a very interesting economic news source, check him out.