Washington wonks pitch ideas to boost entrepreneurship and the economy

New business formation rates are stagnant, entrepreneurship in the once vibrant technology sector is down, and across the country, the economic recovery remains sluggish.

Could that all be changed with a single stroke of the pen in Washington?

During a start-up-style pitch competition last week, several policy experts outlined the single most powerful step they think federal lawmakers could take to foster higher entrepreneurship rates and bolster the country’s ailing economy. One by one, they laid out and defended ideas ranging from new work visas for foreign-born entrepreneurs to new tax credits for firms that hire job candidates that have been long out of work.

It’s an increasingly important debate right now in Washington, where elected officials are grasping for ways to accelerate what remains a slow economic recovery. Kauffman research released a day before the event shows that the number of young high-tech firms, which have historically created a large share of the nation’s new jobs, has dropped off sharply in the past decade. In fact, the decline has been even more steep than a dip in the overall number of new firms created during the same period.

“Despite high-profile successes, the rate of business formation has lagged for two decades, and there is concern over the effect of falling entrepreneurship on job creation, wage growth, mobility and overall economic dynamism,” Kauffman President Tom McDonnell said during the group’s annual State of Entrepreneurship event.

“We need more people prepared to create new companies, new jobs, and otherwise successfully participate in an entrepreneurial economy,” he said.

During the policy pitch competition that followed, each pundit was asked to stump for a single step policymakers could take to reverse that trend and then defend it before a panel of judges. Here’s a look at their proposed solutions.

Wonk: Donald Marron, the director of economic policy initiatives at the Urban Institute, a think tank in Washington

His pitch: A start-up visa

Marron opened his pitch by citing data showing that foreign-born individuals are statistically more likely to start companies in the United States than native-born Americans. However, he said, many foreigners who might start new ventures are currently here on either student or work visas, and once they either graduate or leave their current employers, they are required to leave the country.

“We have foreign-born entrepreneurs who want to and could create things here in the United States, but because it’s difficult for them to do it, some give up, some go to more welcoming nations like Canada, Australia or New Zealand, and some do it in their home countries,” Marron said.

His solution? A visa program targeting foreign-born entrepreneurs, commonly known as a start-up visa. It would provide a temporary visa and path to permanent residence to entrepreneurs with a promising business plan, which would be vetted by a select panel or entrepreneurs, investors and government officials. In order to stay in the country, those admitted would have the show that their firms were succeeding by meeting certain benchmarks in terms of revenue earned, capital raised or jobs created.

“In a perfect world, we would do comprehensive immigration reform,” Marron said, noting that a start-up visa was part of the broad immigration package approved last year by the Senate. However, the legislation stalled in the House and faces stiff opposition from many Republicans.

“If that isn’t possible,” he added, “we ought to pursue a plan B, think about what we could do as an economic growth package that could get through Congress that would include a start-up visa.”

Wonk: Will Marshall, the founder and president of Progressive Policy Institute, another think tank in Washington

His pitch: A regulatory improvement commission

Business owners and entrepreneurs consistently place regulatory relief atop their policy priority lists. Marshall said the fundamental problem is not that federal agencies continue to issue new rules—it’s that they never go back and strip away the old ones.

“The principle problem regulatory accumulation; the layering on, year after year, of new rules atop old rules,” he said during his pitch, adding that “there’s no way to get us on a high-growth path that doesn’t include improving a busted, broken regulatory system.”

In order to start pulling down some of that red tape, he urged lawmakers to create a regulatory commission like the one created at the end of the Cold War to decide which military bases should be closed. An independent advisory board would field comments from individuals and businesses and then discuss ways to “prune the regulatory garden,” he said.

The board would consider comments from individuals and businesses and try to determine which rules were duplicative, obsolete or harmful and should be eliminated or modified. It would then present a list to Congress for a vote on whether to approve the proposed changes.

“It presents a politically viable way to trim this burden of regulatory accumulation and reduce the regulatory drag on entrepreneurs starting new business and on current businesses,” Marshall said.

Wonk: Megan McArdle, a columnist at Bloomberg View

Her pitch: A back-to-work program

One the greatest drags on the economy, McArdle said, are individuals who have been unemployed for long periods, who typically find it harder to reenter the labor market the longer they are without a job. Meanwhile, as a second economic consequence, that may deter some would-be entrepreneurs from leaving their current jobs to roll the dice on a new venture.

“If you want to increase risk-taking and failure, you have to lower the price of that, and the big risk right now is that you will end up without a job and be unable to get back into the labor market,” McArdle said.

She pitched a federal back-to-work program that would provide a payroll tax break to employers who hire job candidates who have been unemployed for long periods. The credit would increase in size for every additional month the candidate had been out of a job, giving employers an incentive to seek prospects that have been out of work the longest and bring them back into the labor force.

“It makes labor cheaper, which is good for entrepreneurs, and it’s also good for the people who need to get re-employed,” McArdle said. In addition, she argued, the proposal has the potential to appeal to both sides of the aisle in Congress.

“It’s a wage subsidy, which Democrats love, and it’s a tax cut, which Republicans love,” McArdle said. “This should be one of the easier things to get through even our current completely dysfunctional, polarized bad-marriage Congress and hopefully get some people back to work.”

The winner: At the end of the event, the panel of judges and the audience was asked to vote for the best pitch. Ultimately, the room was split, with one judge voting for Marron’s visa program, two voting for McArdle’s back-to-work program, and the audience voting overwhelmingly in favor of Marshall’s regulatory commission.

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