Paul Pryde is frustrated. He's not opposed to the president's 5-cents- a-gallon gasoline tax, although he has a problem with many of the counterproductive amendments being debated in Congress. He's not opposed to the more expansive public works bill the Democrats have offered. He's not even opposed to the administration's enterprise zone proposal, though he doubts it will do much good.
But to the extent that the issue is job creation, Pryde thinks the whole debate is ridiculously wide of the mark.
"We know how most new jobs are created," says Pryde, head of a Washington-based firm of economic development specialists. "Most new jobs come from new, small businesses. If you want to solve the fiscal distress of the cities, particularly the inner cities, you must do something about small firms."
And isn't that what the enterprise zone bill proposes to do? It is, Pryde says, but it cannot possibly work. "Reducing taxes won't help a struggling new business, since it won't be making enough money to worry about taxes."
"We know what the problems facing small businesses are. They need money. The main reason for the high failure rate of new businesses is undercapitalization. They need a decent environment, so they can attract business and employees. They need facilities and amenities they can afford. They need an adequate source of trained or trainable labor, and they need services."
But mainly they need money, and Pryde says he knows how they could get it. "Instead of some of the schemes being debated in Congress, we should make it possible for anyone investing in a new, small business to deduct the amount of the investment from his federal income taxes. That would make more capital available at the time it is most needed, thereby significantly reducing the risk of business failure. It would greatly reduce the risk to investors, and from a public policy point of view, it would create a 'good' tax shelter, unlike so many of the present tax shelters, which don't produce jobs or wealth."
But wouldn't such a scheme also constitute an additional drain on the Treasury?
"That's what some of the Treasury people think, but they haven't thought it through," says Pryde. "Let's say you created 10 new businesses with investments from people in the 50 percent tax bracket. Let's be really conservative and say eight of the businesses failed (unlikely if they had access to the capital they need) and that the remaining two paid no taxes for five years. If by the sixth year, these two firms were paying taxes on income of $100,000, and growing at the modest rate of 20 percent a year, the stream of revenue from just these two businesses would, over a 20-year period, give the Treasury a 15 percent return on its money. Who knows, one of them might turn out to be the next Control Data."
Pryde isn't talking mom-and-pop stores. He's thinking of business based on what all the experts say is the wave of the future: high-technology firms.
"Most of them would be small -- nothing to hire a band or cut a ribbon on. Many would probably start in somebody's basement. But what people don't understand is that a lot of high-tech business is highly labor intensive, involving such non-technical jobs as assembly and packaging -- assembling converters for cable TV, for instance.
"The kind of thing I have in mind would be perfect for Washington, which has more scientists and engineers than Silicon Valley, a great deal of vacant land, and also has in its downtown the accountants, lawyers, banks and technical expertise that the new firms would need.
"If it were done right, you would have bright young entrepreneurs falling all over each other in the rush to set up job-producing businesses. And unlike public works jobs, which are all right as a temporary measure, the potential is absolutely unlimited.