Entrepreneurs, not big firms, are the trick to economic expansion, the author writes. | Reuters
Why has the JOBS Act, which President Barack Obama signed today, been able to cut through Washington’s gridlock? Perhaps because, every politician sees that it might work when trillions in government spending have failed.
Whereas previous policies to foster entrepreneurship have sought to target opportunity zones, the Jumpstart Our Business Startups Act places the focus on those who can seize opportunities—entrepreneurs.
Entrepreneurs, not big firms, are the trick to economic expansion, to growth and, ultimately, to recovery. Indeed, virtually every fiscal problem the country faces could be solved or slowed with faster economic growth.
Firms less than five years old accounted for all net job growth from 1980 to 2005, according to Kauffman Foundation research. On average, nearly 92 percent of that job growth occurs at firms after they go through an initial public offering, according to the National Venture Capital Association.
New firms create 3 million new jobs each year. We need more than that just to keep up with population. But entrepreneurs help make the recession a lot more mild than it would otherwise be.
Throughout U.S. history, new firms have been disproportionately, and overwhelmingly, responsible for many of the innovations that characterize modern life — including the automobile, the airplane, computers, air conditioning, Internet search and gene therapies—that have helped improve living standards.
It would seem a no-brainer, then, to want to increase the number of new firms going to I.P.O., but regulations, particularly Section 404(b) of Sarbanes-Oxley, have made getting there tougher. However well-intentioned in the wake of the Enron and WorldComm accounting scandals, Sarbanes-Oxley has made it far more costly to file for an IPO. Thanks to this bill, the average cost to go public is $2.5 million, and the annual cost to stay listed is $1.5 million.
Since Sarbanes-Oxley, the IPO market has experienced a steady, swift decline. The pre-1999 average of IPOs per year was 547 annually. Since 1999, only 192 IPOs per year occurred. Only 45 IPOs occurred in 2008. Indeed, from 2001 to 2011, the annual figure for small firms going public was 80 percent lower than in the previous two decades.
None of the companies he mentioned would be able to start or grow under an Obama Administration.
It remains is to be seen what comes out of this.
In the face of Obamanomics, rising energy costs, and regulations it sounds more like a bundle of gimmicks and platitudes than anything else.
This is a very poor climate in which to take any risk, especially with a President that is eager to vilify and penalize any success one might achieve.
STOP....
THIS IS A SECRET MUSLIM SOCIALIST PLOT FOR PRESIDENT OBAMA WORLD DOMINATION IN HIS SECOND TERM....AND ERIC CANTOR IS IN CAHOOTS WITH HIM....!!!!!
Ain't that right, TBAGS.....!?!?!?!?.....;-).........
But, Mitt Romney has a secret Mormon plot to do the same thing....!!!!!!
Updated: 04/05/2012 4:47 PM ET
Updated: 04/05/2012 4:47 PM ET
Updated: 04/05/2012 4:47 PM ET
Updated: 04/05/2012 4:47 PM ET
Updated: 04/05/2012 4:47 PM ET
Updated: 04/05/2012 4:47 PM ET
Updated: 04/05/2012 4:47 PM ET
Updated: 04/05/2012 4:47 PM ET
Updated: 04/05/2012 4:47 PM ET
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