One way to get more people to start companies, according to a growing body of research, is to expand the welfare state ...
Entrepreneurs are actually more likely than other Americans to receive public benefits, after accounting for income, as Harvard Business School’s Gareth Olds has documented. And in many cases, expanding benefit programs helps spur new business creation.
Take food stamps. Conservatives have long argued that they breed dependence on government. In a 2014 paper, Olds examined the link between entrepreneurship and food stamps, and found that the expansion of the program in some states in the early 2000s increased the chance that newly eligible households would own an incorporated business by 16 percent. (Incorporated firms are a better proxy for job-creating startups than unincorporated ones.)
Interestingly, most of these new entrepreneurs didn’t actually enroll in the food stamp program. It seems that expanding the availability of food stamps increased business formation by making it less risky for entrepreneurs to strike out on their own. Simply knowing that they could fall back on food stamps if their venture failed was enough to make them more likely to take risks.
Food stamps are not an isolated case...
Many argue that welfare discourages work because working means giving up public benefits, making wages comparatively less attractive. Yet working for a wage is not an inherently risky proposition, the way starting a business is. If welfare reduces the relative rewards of running a successful business, it also reduces the risks of failure.
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What's in Wonkbook: 1) GOP budget passes House 2) Opinions, including Yglesias on O'Malley 3) How a trade deal in the Pacific could allow multinational firms to block all kinds of ordinary laws, and more
1. Top story: House Republicans pass budget
Defense hawks won out over spending hawks, as House Republicans agree on a budget that would increase military spending. "That triumph for more military spending was an anomaly in the budget blueprint, which would cut spending $5.5 trillion over the next decade. ... To be sure, the congressional budget does not have the force of law. It sets overall spending levels for the coming fiscal year, and if the House and Senate can reconcile competing blueprints, a final budget can ease passage of future legislation — such as a repeal of the health care law that Republicans have promised, even though President Obama would veto it. But its specific policy prescriptions are aspirational, not binding." Jonathan Weisman in The New York Times.
Getting the budget through has got to be a relief for Boehner. "House Speaker John A. Boehner (R-Ohio) racked up a much-needed political victory Wednesday when the House passed a budget proposal after a very rocky first three months of the new Congress in which unruly conservative members seriously complicated the Ohioan's efforts to govern. For Boehner, the passage of the measure with majority Republican support was a welcome departure from weeks of discord in the GOP ranks that started with a long-shot attempt to displace him as speaker and escalated in a protracted fight over immigration and homeland security funding that left conservatives disgruntled and gave Democrats exactly what they demanded." Sean Sullivan in The Washington Post.
The Senate's budget is up next, and members are being asked to vote on a slate of proposed amendments. "Their decisions on scores of amendments to the nonbinding budget blueprint will help political operatives in both parties craft a stream of commercials, press releases, and fundraising appeals. And that means the budget process could matter for politically vulnerable members facing reelection in 2016 as well as the GOP's presidential contenders. Already, both parties are hunting for ammunition among votes that have started on topics such as wages, environmental regulations, and Medicare." Ben Geman and Sarah Mimms in National Journal.
KLEIN: The GOP budget hides big spending cuts with block grants. "If Republicans simply proposed cutting Medicaid by hundreds of billions of dollars, then the cuts would be described as, well, cuts, possibly with the word "draconian" in front of them. But tucking them behind block grants leads to gentler "saved." The reality is block grants don't save money. But they're routinely used to hide the thing that does save money, which is fixed funding formulas that require huge spending cuts. That's how the Republican budget actually saves money in Medicaid and food stamps." Vox.
MEYERSON: A bill in Congress is a sensible plan for getting some of the money out of politics. "If candidates chose to limit contributions to their campaigns to no more than $1,000, every contribution they received of $150 or less from residents of their state would trigger a contribution of public funds at a 6-to-1 ratio: A $100 donation would yield $600 in public funds; a $150 donation, $900. To qualify for matching funds, candidates would also have to reject contributions from political action committees... It wouldn’t remove the ability of big money to sway close elections. The really big spending in today’s elections comes not from the candidates’ own campaigns but rather the campaigns that supportive groups and individuals run on their behalf. That said, thanks to the geographic sorting of voters by ideology and to the miracle of gerrymandering, most House candidates run in safe districts that the big-dollar independent campaigns routinely ignore. Financing their campaigns through small donations would be not just an ethically preferable option for them but an electorally viable one as well." The Washington Post.
YGLESIAS: O'Malley is running the campaign people want from Sen. Elizabeth Warren (D-Mass.). "If it's the ideas you're interested in, it's worth paying attention to former Maryland Governor Martin O'Malley who is actually waging the campaign people want to see from Warren. ... These ideas would, if implemented, radically alter the role of finance in American society. Large financial institutions would have to act in an extremely risk-averse (and not-so-lucrative) manner and likely become substantially smaller besides. The Obama administration — and mostly likely Clinton — would argue that this is unnecessary for financial stability and risky for the economy as a whole. But to populists, that's precisely the point. These ideas would move beyond a narrow focus on the stability of the financial system to a broader attack on finance's role as one of the commanding heights of the American economy." Vox.
SORKIN: Mergers have allowed airlines to avoid competition and charge higher ticket prices. "The airline industry is increasingly looking like an uncompetitive oligopoly. For proof, look no further than airline ticket prices. ... Mergers over the last several years have left the nation with only four main airlines — Delta, United, Southwest and American-US Airways — which deliberately don’t compete on some routes." The New York Times.
The United States and Israel must attack Iran now, before it's too late, writes former U.N. ambassador John R. Bolton. "Iran will not negotiate away its nuclear program. Nor will sanctions block its building a broad and deep weapons infrastructure. The inconvenient truth is that only military action like Israel’s 1981 attack on Saddam Hussein’s Osirak reactor in Iraq or its 2007 destruction of a Syrian reactor, designed and built by North Korea, can accomplish what is required. Time is terribly short, but a strike can still succeed." The New York Times.
Today, the global warming alarmists are the equivalent of the flat-Earthers. It used to be, "It is accepted scientific wisdom the Earth is flat," and this heretic named Galileo was branded a denier.
The trade deal in the Pacific could allow foreign corporations to bypass U.S. courts. "An ambitious 12-nation trade accord pushed by President Obama would allow foreign corporations to sue the United States government for actions that undermine their investment 'expectations' and hurts their business, according to a classified document. ... Under the accord, still under negotiation but nearing completion, companies and investors would be empowered to challenge regulations, rules, government actions and court rulings — federal, state or local — before tribunals organized under the World Bank or the United Nations. ... Conservatives are likely to be incensed that even local policy changes could send the government to a United Nations-sanctioned tribunal. On the left, Senator Elizabeth Warren, Democrat of Massachusetts, law professors and a host of liberal activists have expressed fears the provisions would infringe on United States sovereignty and impinge on government regulation involving businesses in banking, tobacco, pharmaceuticals and other sectors." Jonathan Weisman in The New York Times.
These trade negotiations have put Sen. Ron Wyden (D-Ore.) in a tough spot. "He is the only Democrat negotiating with Republicans to speed up international trade deals. That's heresy for progressives... Wyden is the sole person who will make a fast-tracked Trade Promotion Authority happen, if he chooses, by striking a deal with Republicans that will attract only a handful of Senate Democrats. He believes in trade, so the pivotal role feels comfortable to him. But it's also natural that he would encounter anger from skeptics." Fawn Johnson in National Journal.
Federal regulators set new rules for payday lenders. "The Consumer Financial Protection Bureau on Thursday unveiled a new plan that it said would help rein in the $50 billion payday lending industry and prevent low-income borrowers from facing spiraling levels of debt. The proposal, which still must face months of review, marks the first attempt by the federal government to regulate payday lenders, whose loans — designed to help borrowers in a pinch — often come with triple-digit annualized interest rates." Chico Harlan in The Washington Post.
The crucial vote on the administration's rules for mercury emissions from coal and other plants is Justice Anthony M. Kennedy. "The issue comes down to what Congress meant when it ordered the EPA to study whether it was 'appropriate and necessary' to regulate the pollutants from power plants but was silent on whether that study should include the costs of regulation. ... The costs and benefits are a matter of vigorous dispute. The states and industries opposing the regulations say that the annual costs of compliance under the rule would be $9.6 billion but that the benefits of reduced emissions of hazardous air pollutants are only $4 billion to $6 billion. The EPA and environmental groups estimate the savings to be much more, from $37 billion up. Mercury can be especially dangerous to pregnant or breast-feeding mothers and young children, and some of the savings are calculated as coming from preventing as many as 11,000 deaths and more than a half-million lost days of work." Robert Barnes in The Washington Post.
EVENT TODAY: Washington Post Live presents “Changing the Menu,” March 26 at Arena Stage. Steve Case, chairman and chief executive, Revolution & co-founder, America Online; Debra Eschmeyer, executive director, Let’s Move! Dan Kish, head chef, Panera; Agriculture Secretary Tom Vilsack and many other innovators and experts will look at food and wellness -- what we eat, how we move and how to ensure a healthy, well-fed America. Learn more about the event and register to attend.