How Would the Democratic Candidates Re-Invigorate Entrepreneurship?
Tonight, half a dozen Democratic candidates will participate in the seventh campaign debate. With three weeks to go until the Iowa caucuses, the field has narrowed, with both Sen. Cory Booker and former HUD Secretary Julian Castro recently dropping out.
Unfortunately, the thinning of the field has also meant a thinning of debate topics. When it comes to the economy, Democrats seem to be stuck on how much to tax wealth rather than how to help create wealth. That’s a common charge against Democrats during any election campaign, but it has particular urgency right now.
Despite the continued macroeconomic expansion, there are worrying sub-surface trends. Not potential signs of recession in the near future—but signs of potential economic erosion, threatening prosperity over the next several years.
The United States is enduring what researchers have labeled a “startup deficit.” Business creation has stalled over the last several years. We have fewer high-growth firms, especially in high-tech sectors, and those firms that do achieve high growth have been creating fewer jobs. Entrepreneurship is still largely white and male, and there are significant geographic disparities. Only a relative handful of regions enjoy vibrant entrepreneurial scenes.
It’s easy not to worry too much about this during a record-breaking expansion, but the startup deficit means lower productivity and less wealth creation over the long term. The U.S. economy, already “older and slower” according to economists, could become more so. Addressing this issue, and other indicators of lower economic dynamism overall, should be a top priority for the next president.
Most of the Democratic candidates, however, seem either unaware or unconcerned about this. As a new paper released today from the Progressive Policy Institute shows, entrepreneurship has been largely absent from the Democratic campaign. Booker’s withdrawal means the loss of more than the last African-American candidate. It also means the loss of one of the few candidates who has talked about declining entrepreneurship and the importance of business creation for local communities.
The new PPI paper reviews how each remaining candidate has spoken (if at all) about entrepreneurship as well as what they say they might do as president to catalyze business creation. The paper also looks at how President Trump has approached entrepreneurship, reviews the academic research on declining business dynamism and its causes, and considers what actions might be taken to reverse the trends.
Our main conclusion is that most Democratic candidates are fairly far from what might be considered an “ideal” set of entrepreneurship policy ideas. That applies especially to those who are being permitted to join the debate this evening.
There are exceptions. Congressman John Delaney (who is not participating in tonight’s debate) has been the most vocal about entrepreneurship. That’s not surprising, since Delaney has built two successful companies. Andrew Yang, who also has entrepreneurial experience and started an organization, Venture for America, to help young companies, has talked about the hard reality of starting a business. Yang did not qualify for the debate tonight.
Of those who will be on stage in Des Moines, only Sen. Amy Klobuchar can be said to be certifiably pro-entrepreneur. Klobuchar co-founded the Senate Entrepreneurship Caucus and co-sponsored reintroduction of the Startup Act.
Sen. Elizabeth Warren and Mayor Pete Buttigieg both have proposals on their campaign websites aimed at closing demographic gaps in entrepreneurship. Yet Warren, like Sen. Bernie Sanders, speaks so vehemently against business that it’s hard to imagine her being perceived as concerned about addressing the startup deficit.
Former Vice-President Joe Biden has been mostly quiet about entrepreneurship, but he does have some worthy ideas on his website about helping new businesses. One might also expect that Biden would revive some of the Obama administration’s entrepreneurship initiatives (such as the International Entrepreneur Rule).
President Trump has not been anti-entrepreneur but he hasn’t exactly been pro-entrepreneurship either. Surveys have found confidence in the president among entrepreneurs to be waning, and small business optimism has fallen in 2019 compared to the administration’s first two years. Overall, Trump’s economic policy chaos has led to volatility and spikes in economic uncertainty.
So tonight, what should the Democrats talk about? For starters, debate moderators should ask them about the startup deficit and corresponding decline in business dynamism. That should give us a sense of how concerned the candidates are about these trends. They should be asked about how they’ll approach regulation and taxes from the perspective of both existing business owners and potential new businesses. What specific ideas from the policy agenda published by the Center for American Entrepreneurship would they adopt? It would be nice, of course, if such a substantive debate included all the candidates, especially those who do seem concerned about the state of U.S. business creation.
Most of all, Democratic candidates should be asked to speak about the economic—and social—importance of entrepreneurship in American history. How, at the very moment that the American entrepreneurial spirit appears to be in trouble, would they reinvigorate that legacy?