What Congress Should Do To Help Entrepreneurs
Posted by: Robert W. Price
Reduced Investment and Job Creation to Blame for High Unemployment
By James Sherk
Abstract: The unemployment rate in America jumped from 4.9 percent in late 2007 to 10 percent in November this year. The conventional wisdom that unemployment is rising because more people are losing their jobs is only partly true. Job-loss rates have increased, but the largest force driving unemployment is the sharp drop in private-sector job creation. The massive stimulus bill championed by President Obama did nothing to “create or save” millions of jobs. Heritage Foundation labor-policy expert James Sherk explains why any “jobs bill” that relies on government spending without improving the investment and entrepreneurship climate will fail.
What Congress Should Do To Help Entrepreneurs
According to Heritage Foundation: In order to reduce unemployment, Congress must encourage firms to innovate, invest, and take risks, and remove policies that discourage them from doing so. One policy proposed by President Obama would encourage innovation and job creation. During the election campaign, Senator Obama proposed eliminating the capital gains tax on start-up companies. Doing so would encourage more venture capital investment in new businesses. Most new businesses fail. Venture capital funds invest in many new companies and make up the losses in the many failures with large profits on the handful of start-ups that succeed. If Congress repealed the capital gains tax on start-up businesses, investors would earn greater after-tax profits on the few successful start-ups. The higher returns would encourage venture capital funds to invest in more new companies, including some riskier ventures in which they will not invest now. The greater profits from successful companies would compensate for the risk of failure from others. The net result would be more investment, more start-up businesses, and more jobs. This would increase job creation and lower unemployment.
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About The Heritage Foundation
Founded in 1973, The Heritage Foundation is a research and educational institute — a think tank — whose mission is to formulate and promote conservative public policies based on the principles of free enterprise, limited government, individual freedom, traditional American values, and a strong national defense.
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Source: Heritage Foundation