PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

Points on Entrepreneurship Brought Before Congress

By at 5 November, 2021, 2:56 pm

by Raymond J. Keating –

It’s always an interesting experience being able to testify before Congress. I had the privilege to offer testimony about entrepreneurship and the economy before the House Small Business Committee on November 3.

Along with my fellow witnesses, I was able to discuss both opportunities and challenges facing entrepreneurs. Interestingly, among the developments expanding opportunities for entrepreneurs (and being generated by entrepreneurs) are advancements in technologies, such as computer, digital and broadband innovations, and we were able to utilize such advancements for the hearing itself.

Three of the four panelists and some members of the committee attended the hearing remotely via Zoom. Trust me, when I first testified before Congress in the early 1990s, this was unimaginable.

In terms of the written testimony, a few points that hopefully are worth highlighting for further consideration include the following:

On economic growth. “The most recent GDP data is troubling. By the second quarter of this year, entrepreneurs, investors, businesses and workers worked to get the economy (that is, our economic output) back to where it was pre-pandemic. However, we still face the task of getting back to where we should be, given lost growth, and then maintaining strong growth thereafter. Unfortunately, two percent growth is anemic under normal circumstances, given that the U.S. economy on average should be growing at better than 3 percent and during non-recession periods at better than 4 percent (based on post-World War II data). At 2 percent growth, U.S. economic under-performance will be extended far into the future.”

On starting up businesses. Both Census Bureau employer and nonemployer data and Bureau of Labor Statistics numbers point to, at best, slow, minor growth in the number of businesses over the past decade-and-a-half, or at worst, no real growth occurring. Hope is found in business applications data:

“The U.S. Census Bureau reports on business applications for tax ID numbers. These applications serve as an indicator for future actual business formations. While this data set only goes back to the early 2000s, there has been a strong relationship between these applications and business formations happening sometime over the coming four to eight quarters. After suffering big declines when the pandemic first struck, the number of business applications (seasonally adjusted) skyrocketed beyond where they had been prior to the pandemic.”

On international opportunities. “Technology advancements coupled with economic growth abroad have opened doors in the international arena for entrepreneurs. Keep in mind that 95 percent of the world’s consumers are outside the U.S.”

On imports. “The myth that imports are economic negatives must be laid to rest. Not only do imports offer more choices, improved quality and better prices for consumers thanks to added competition, for example, but keep in mind that nearly all imports are inputs to American businesses, from manufacturers to retailers. For good measure, most of those manufacturers and retailers are smaller companies.”

On taxes. “The policy focus needs to move away from counter-productive efforts to raise taxes, and instead look to providing substantive, permanent tax relief, in particular, reducing taxes that directly impact entrepreneurship and investment, namely, income, capital gains and death taxes. Again, it must be kept in mind that increased taxes on investors wind up being negatives for the entrepreneurs who need investment.”

On regulation. “Rather than emphasizing all kinds of ways to increase regulatory intrusions, entrepreneurship and investment would be aided by serious efforts at regulatory reform, such as sunsetting rules and regulations so that Congress is required to re-evaluate regulations after a certain period of time; and requiring congressional approval of rules and regulations to establish full responsibility for regulating to Congress.”

On trade policy. “On the policy front, the U.S. needs to move away from protectionist measures and aggressively move to advance free trade on all fronts. Indeed, the U.S. needs to reclaim the global leadership role it had in advancing free trade since the end of World War II, but recently abandoned.”

On immigration. “A constructive pro-immigration policy agenda – that is, improving and expanding avenues of immigration for those who wish to contribute by working and starting businesses while also enhancing security to keep out terrorists, et al – would make a difference in the long run in terms of meeting labor needs and advancing entrepreneurship.” And regarding immigration and entrepreneurship, I highlighted that “given that immigrants are obvious risk takers (leaving for another country is serious risk taking), it’s not surprising that immigrants have a higher rate of entrepreneurship than do the native born. If we want more entrepreneurship – and we do – then immigration is a great source.”

I appreciated being able to testify before Congress on opportunities, challenges and policy measures focused on growing entrepreneurship and our economy. Let’s hope that constructive discussion moves beyond the committee to the full Congress, in the media, among state and local officials, and among the public. Entrepreneurship drives economic growth and innovation, and the policy ecosystem must continually be evaluated and reformed to encourage more people to start businesses.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.

 

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