Skip to comments.A Modest Proposal to Save the American Economy: Entrepreneurial Blitzkrieg as Job Creation Vehicle
Posted on 03/23/2011 11:12:31 PM PDT by 2ndDivisionVet
Preamble: The United States is the richest nation on the planet and yet we find ourselves mired in a long-term recovery from the Great Recession of 2008. The biggest problem affecting the greatest number of Americans is the high unemployment rate, which is not expected to return to pre-recession levels for many years. High unemployment means that many people struggle daily to find adequate food and shelter, with many losing homes to foreclosure. Business activity is adversely affected and growth is diminished. The cost to government is enormous as public safety nets are strained to the breaking point, and reduced tax revenues push government budgets to crisis at local, state, and federal levels. Nearly 45 percent of the unemployed have been out of work for six months or longer, underscoring the urgency of the matter. Waiting passively for the economy to self-heal is impractical as the high unemployment cancer continues to metastasize.
In this grim economic environment I propose an entrepreneurial solution to reinvigorate the sluggish American economy. While new businesses are created daily often with the assistance of angel investors and venture capital firms, the rate of such new business creation is insufficient to put any sort of serious dent in the unemployment rate. What we need is a bold plan to throw gasoline on the entrepreneurial fire to create a tsunami of new business and, hence, job creation. My proposal presents the concept of the Entrepreneurial Blitzkrieg fueled in part by the creation of a venture-backed security (VBS). The VBS engages the power of Wall Street to create jobs on Main Street in the numbers necessary to reduce the unemployment rate and jump-start the economy back to full employment.
Entrepreneurial Solution to High Unemployment
The overriding goal during these troubled economic times is the creation of massive numbers of new jobs, with the ultimate objective to return the nations workforce to full employment. At full employment, a manageable level of government assistance is required to aid those persons in need, while government coffers are (relatively) fat with tax revenues and business-related revenue streams associated with economic growth. In essence, employed persons are reasonably self-sufficient, providing an economic benefit to the overall economy.
Job creation is key because working folks have money to spend on food, shelter, clothing, education, recreation, entertainment, travel, etc. Infusing the economy with consumer spending creates increased business activity, providing many new customers to new and existing businesses, and boosting the overall economy. Working people benefit the economy in several ways: they spend money to buy various goods and services; they pay taxes to provide the government with essential operating revenue; and they do not rely on government assistance for subsistence.
With the unemployment rate dancing between 9 and 10 percent, and projected to remain high for many years, 300,000 jobs must be created each month over a five-year period to return unemployment to pre-recession levels. Currently, the tepid U.S. economy is generating just a fraction of this number, indicating that long-term high unemployment (and associated nationwide hardship) is going to be with us for a long long time. The quickest way to create jobs en masse is to create new businesses en masse, to instigate an entrepreneurial blitzkrieg.
One important component of job creation is consumer spending. However, because of the economic devastation resulting from the financial crash in 2008, consumers have reduced spending far below pre-recession levels. Many people have lost their jobs and those still employed have watched the value of their homes and investments decline sharply during this period and they continue to worry about their own job security. Instead of engaging in typical levels of consumer spending (which accounts for nearly 70 percent of GDP), many folks are choosing to pay down existing debt and/or build up personal cash reserves by padding their savings accounts. The many trillions of dollars effectively withdrawn from the economy through this restrained spending puts a serious hurt on job creation prospects.
Another important element of job creation is corporate hiring. However, without normal levels of consumer spending, corporations will not hire additional workers. Lack of corporate hiring contributes directly to the ongoing stagnant job growth. While sitting on nearly two trillion dollars in cash, these big companies await nonexistent signals from consumers to begin expanding their collective workforce.
Without adequate consumer spending or corporate hiring, there simply isnt enough money circulating through the U.S. economy to create enough jobs for all the people who need to work. Consumers and corporations are sitting on many trillions of dollars, effectively keeping this much-needed source of spending (and job creation fuel) out of the economy. Additional trillions of dollars are stashed in non-entrepreneurial investment vehicles managed by Wall Street investment banks, the release of which could offset the lack of consumer spending and corporate hiring.
Clearly, we need to find a way to bring MORE money INTO the economy! More money moving through the economy equates to more consumer spending, more corporate hiring, and ultimately more jobs.
There are various methods available to instigate consumer spending and job creation. Keep in mind, though, that many folks are exasperated by government efforts to resolve our economic woes. They are legitimately concerned by high annual budget deficits and the escalating national debt. In this environment, it would seem that most of us would prefer a private sector solution to the employment crisis.
The jobs creation antidote to timid consumer spending and tepid corporate hiring, which does not rely on government handouts or bailouts, and serves the overriding goal to jump-start the American economy back to full employment, is the launch of a D-Day invasion of investor-supported entrepreneurial activity, something I have designated as an Entrepreneurial Blitzkrieg!
Why? Entrepreneurship is the quickest way to create jobs, with every dollar that an entrepreneur receives going directly into new jobs. New businesses need employees. New businesses need professional services (accountants, attorneys, et al). New businesses often require offices and other facilities (employing builders, contractors, and heating/cooling, plumbing, and electrical professionals, et. al.). Entrepreneurship creates jobs lots of them!
Increased entrepreneurial activity translates to more jobs. More jobs mean that more people have more money to spend. With increased individual spending power, both new and existing businesses benefit from an influx of new customers. More customers mean that businesses generate more revenue and experience more demand for their goods and services. Businesses of all sizes (including corporations) begin to hire new employees, putting even more money into circulation, creating a self-propelled upward cycle of job creation and consumer spending.
As the unemployment rate dips, consumer confidence increases (due to decreasing fear of losing jobs and the strengthening perception that the economy is on the rebound), unlocking the trillions of dollars of pent-up savings (mattress money), infusing the economy with a vital booster shot of economic activity. This infusion of saved mattress money ensures that the new businesses created as part of the entrepreneurial blitzkrieg have sufficient customers to achieve success. Propelled by this new momentum of economic activity, the U.S. economy springs back to life and returns to full employment, enabling all Americans to realize a higher standard of living and a better quality of life.
Entrepreneurial Blitzkrieg: From Wall Street to Main Street
To achieve the goal of an entrepreneurial blitzkrieg (and the greater goal of achieving full employment for the macro-economy), we must find a way to transfer money from where it is located to where it is needed, in amounts great enough to fund large quantities of new business ventures. We must find a source of funding sufficient for the task and develop a mechanism to deliver it to entrepreneurs en masse. We already know that massive amounts of money are located in or are passed through the machinations of Wall Street by one means or another. We know that if some percentage of this money could be diverted directly to jobs creation, the entrepreneurial blitzkrieg could be achieved.
Money is needed to create businesses and thus jobs on Main Street, where regular hard-working Americans reside. We need to develop a mechanism to move money from Wall Street (where it is located) to Main Street (where it is needed), thereby inducing an entrepreneurial blitzkrieg. If we can create a method to redirect a percentage of the Wall Street money to new entrepreneurial ventures on Main Street, we can achieve the end result of sufficient new business creation, and associated jobs creation, necessary to jump-start the flagging economy.
Wall Street money is in the hands of the many bond and securities traders (and related) who derive, collectively, hundreds of billions of dollars in commissions and bonuses each year from brokering the movement of investment funds from one location to another. These folks may not be traditional investors but their personal fortunes represent an important source of investment capital needed to create the entrepreneurial blitzkrieg. Another source of Wall Street funding includes traditional institutional investors who control pension funds, insurance company money, and other large endowments. These folks routinely hand huge sums to investment banks to stash in all sorts of financial instruments. Surely some of this money could be diverted directly into entrepreneurial investments.
The large investment banks themselves are yet another source of venture funding, as they routinely record massive profits from their various financial services and investment branches. Sovereign wealth funds (i.e., all the money we send overseas when we purchase foreign oil and other commodities) could be enticed to pour money directly into new ventures. These funds already pour lots of money into this country. We simply need to direct it specifically into new enterprises. Hedge funds are another possible funding source because they always seem to be looking for new, unique, or unusual investment opportunities.
In order to create an entrepreneurial blitzkrieg and the consequent high level of jobs creation, we must redirect as much Wall Street money as possible into new business ventures. The only way to unlock sufficiently high levels of Wall Street funding is via the creation of a gimmick defined here as the venture-backed security (VBS). The VBS is based upon the development of a mathematical model derived from known probabilities of success rates for new business ventures. In the case of the VBS, the model is expanded to include an entire group of new business enterprises, and the risk normally attached to an individual new business investment is diversified and distributed throughout the business group.
The bundle of businesses defined here as an entrepreneurial venture investment bundle (EVIB) is then assigned a quantifiable rate of return, enabling the finance industry to create securities to be bought and sold on the bond markets (where traders would still earn their commissions and bonuses). In effect, we are proposing the creation of an active secondary market for venture capital. By introducing the VBS to the finance industry we acknowledge and feed existing Wall Street practices for the purpose of achieving the objective of creating massive quantities of new businesses and jobs an entrepreneurial blitzkrieg to help jump-start the American economy and return the nation to full employment.
While the economy continues to stagger from the blow delivered in 2008 during the financial meltdown and unemployment levels remain stubbornly high, I propose that we launch an entrepreneurial blitzkrieg to re-energize the economy and help propel the nations workforce back to full employment. Fueled by the introduction of the venture-backed security and the massive financial power of Wall Street, the entrepreneurial blitzkrieg, essentially an avalanche of new business and jobs creation, is the necessary mechanism at this point in our great nations history to rebuild our economy to one of strength and vibrancy where jobs exist for all those hard-working Americans seeking employment. I propose that we put in motion today the elements of this modest proposal and create the environment for a successful entrepreneurial blitzkrieg!
Drop county zoning ordinances on lots over 20 acres in remote rural areas. That would do it.
...county zoning ordinances against manufacturing, that is.
The devil is always in the details. The above begs the question: How? All that money on Wall Street belongs to someone, or rather a lot of someones and it's there because investors wanted it there. How does this guy propose that these someones be persuaded to move it his venture investment model?
By gum, I think that would. The first states to do it would reap the windfall and others would race to do it also. Exurban areas at least 25 miles from a large MSA or 15 miles from a mid-sized one, perhaps.
Agreed. Most among the hordes of NIMBY (not in my back yard) retirees will be moving out of these remote areas during the next few years anyway (inflation in propane, vehicle fuels, food, services shutting down, etc.).
New businesses require a lot of startup capital. A restaurant can cost over 100k to just get the ball rolling. Are the banks really going to foot the risk of new business loans to newborn entrepreneurs in this economy?
Not to sound like a negative nelly here but, methinks not.
As the economy limps along, more and more people will turn entrepreneurial in order to survive. The government should be hands off, rather than hands on, to insure the best outcome.
Tax profits at a lower rate. Allow any losses in one year to be registered in prior or later years to further lower taxes. If such securities are currently illegal, then make them legal, etc.
The author hasn’t made clear what is standing in the way of creating VBS’s right now. That is, if they were a smart idea, they would already have been created unless government rules somehow got in the way. All that’s required to move capital from one investment to another is the prospect of higher returns. If VBS’s truly can generate superior returns to financial instruments or whatever else wealthy investors are now dumping their money in, then the market essentially would be leaving money on the table by not creating them. Some smart entrepreneur would have recognized this opportunity and exploited it etc.
Lower taxes and less regulation are the most certain path to unleashing entrepreneurial talent. I don’t see how VBS’s accomplish either. But maybe I’m missing something.
My proposal to Break this depression, and it is a depression which is only just beginning. Is to give a Federal Tax Credit to any business which hires a person for more than 6 months till December 31st of the year. The Credit would be defined as 75% of that which would be collected (minimum wage) for 6 months. The government then would collect REVENUES on the 25% or more in tax DIFFERENCES.
This would be a big WIN for Government Revenues and for Businesses to Hire.
Of Course Obamacare needs to be repealed Immediately. Because Obamacare stops hiring because of NEW BUSINESS Health Care FINES which Business are Saving up Moneys (in the Billions) in preparation to PAY!
There are other things that can be done to PROMOTE business in America. But a Business Tax Credit for hiring a person for that year up to or more than six month that brings in Revenue for the Government would do it BIG TIME.
Fooey for the Socialism proposed in this article.
How about Gov’t get out of the way and hands OFF business entirely? Your suggestion of Gov’t ‘subsidies’ for business is just aas socialistic.
Although it’s not related to this article, local zoning can be a huge impediment to business. Our local city of about 20,000 people has over 200 pages of zoning ordinances. So, when people say less government, it means less “zoning” ordinances at the local level. If local cities want new businesses, they have to make it easier for businesses, not harder.
Can you read? My posts said the "Article" suggests Socialism.
Read before you post.
My point sir, is yes the article espouses socialism, as does your solution.
Socialism is bad only if others are doing it?
No it doesn't. My proposal is a tax credit, or if you like a tax reduction. I'm not telling business what to do like a Socialist does.
You don't like my proposal because you know the vitamin shot in the arm it would be for American Business. I don't know why, but it's not my role to correct it unless you tell me what's wrong with it specifically.
Go for it.
So the Gov’t gets to decide, via the tax code, what gets incentivized. Yes sir, that is a hallmark of socialism. The ‘tax credit’ gets paid for by others. Socialism is taking money from me, giving it to these businesses in the form of ‘credits’. Socialism is fine as long as you have other peoples money (MINE!) to use for your programs.
I don’t like your proposal because it is not the Gov’ts place to do this.
Yes, my proposal is a gamble. I'm gambling that the government will take in more money from the Citizen hired than the cost of the program. By basing the amount on a percentage the minimum wage taxes that would be made verses what the newly hired citizen will pay in taxes will be greater.
Yours Takes from the Rich in "Wall Street", business owners to give to the program. Guess what, the Rich have feet like you and me and there are corporate tax rates less than here in the United States. And if you think they aren't considering moving if possible, your wrong.
Your Proposal takes from the Rich yet again, and the Rich are moving; Out of state, Out of the U.S. or just getting out of this High Taxed nut house and retiring.
Time to stop thinking that Business is a never ending source of revenues for fantasies.
Where oh where did I say “take it from wall street”?
Not once did I advocate TAXING business, especially income. I would in fact advocate eliminating business income tax entirely, because businesses do NOT pay it. Their customers pay it. Anyone advocating a business income tax is only saying that they don’t feel like they are paying enough for the goods.
Your solution of giving ‘credits’ presupposes that Gov’t needs to manipulate the business environment. NOTHING Gov’t touches gets better, especially in regards to taxes. I would opine that Gov’t needs to get their hands off incomes entirely, business AND individuals.
We already know that massive amounts of money are located in or are passed through the machinations of Wall Street by one means or another. We know that if some percentage of this money could be diverted directly to jobs creation, the entrepreneurial blitzkrieg could be achieved.
Yep, sucking it out of Business. I'm not fooled.
So, you DO buy into Gov’t being an instrument of Monetary redistribution; that it may take from one company or a group (Wall Street) and then give to another group.
From each according to his ability (Wall Streey has it) to each according to his need (we think small businesses should have it)
And Karl smailes.
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