Brookings Institute: US economy less entrepreneurial now than any point in last three decades

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    May 08, 2014 4:09 AM GMT
    Left-leaning Brookings Institute: US economy is less entrepreneurial now than at any point in the last three decades

    http://www.washingtonpost.com/blogs/wonkblog/wp/2014/05/05/u-s-businesses-are-being-destroyed-faster-than-theyre-being-created/?hpid=z5

    The American economy is less entrepreneurial now than at any point in the last three decades. That's the conclusion of a new study out from the Brookings Institution, which looks at the rates of new business creation and destruction since 1978.
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    May 08, 2014 4:12 AM GMT
    It might also have something to do with this:
    America the Shrunken
    http://www.nytimes.com/2014/05/04/opinion/sunday/bruni-america-the-shrunken.html?_r=1

    American schoolchildren aren’t anywhere near the head of the international pack, and American adults, according to one recent study, lack the technical skills that peers in many other developed countries have.

    American bridges crumble. American trains crawl. American flights leave from terminals that pale next to many Asian and European counterparts. Joe Biden acknowledged as much three months ago when he compared La Guardia Airport to a third-world country. I’ve been to La Guardia and I’ve been to Guatemala, and if I were Guatemala, I’d sue for defamation.
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    May 08, 2014 12:29 PM GMT
    More here:
    http://finance.yahoo.com/blogs/daily-ticker/the-u-s--economy-may-be-the-world-s-biggest-but-its-dynamism-is-slowing-down--robert-litan-211423899.html

    A new business is born almost every minute in the United States, while an existing business fails every 80 seconds.

    But that pattern is changing. For the first time in 30 years, business "deaths" in the U.S. exceeded business "births" and only 600,000 net new jobs were created in each quarter of 2012, according to a new report from the Brookings Institution titled "Declining Business Dynamism int he United States."

    Robert Litan and his co-author Ian Hathaway studied two key measures of business dynamics: the creation of new businesses and job turnover in existing companies. What they found surprised them: "a long-term 30-year decline in both measures" nationally and in all but one of 366 metro major areas.

    "This is really a problem that is geographically dispersed throughout the United States," says Litan in the video above.
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    May 08, 2014 1:45 PM GMT
    riddler78 said ... been to La Guardia and I’ve been to Guatemala, and if I were Guatemala, I’d sue for defamation.


    i bet even Guatemala was better off before the great recession.
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    May 08, 2014 1:56 PM GMT
    pellaz said
    riddler78 said ... been to La Guardia and I’ve been to Guatemala, and if I were Guatemala, I’d sue for defamation.


    i bet even Guatemala was better off before the great recession.


    I might take that bet. The latest unemployment data from Guatemala (that I was able to find) shows that it's lower than the US.

    Not sure what the great recession has to do with it though given that historically every bad recession, even those brought on by financial crises, have brought better recoveries except this one and the Great Depression. And we also know from the Great Depression that at least some of the things they did to try to cope actually prolonged it.

    My guess is that we will find in retrospect that this has also been the case for the supposed great recession. I think Americans - and indeed, much of the world which relies on the strength of the US economy should be as concerned about this emerging data as the Brookings Institute is however...
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    May 08, 2014 2:27 PM GMT
    so the OP suggests that a government do nothing to promote start-up business growth? some truth into this: 4example billion dollar government influences into a trillion dollar economy are likely to have no effect and are for political benefit.

    There is just less business everwhere. The start-ups are the most fragile, first to go.

    its not an educational issue.
    I agree americans are conservative and if you havnt noticed the wheels of change are slow. any tiny change is endlessly debated for generations. Education us under funded but a lot of things here are icon_rolleyes.gifincluding the military budget.
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    May 08, 2014 2:54 PM GMT
    pellaz saidso the OP suggests that a government do nothing to promote start-up business growth? some truth into this: 4example billion dollar government influences into a trillion dollar economy are likely to have no effect and are for political benefit.

    There is just less business everwhere. The start-ups are the most fragile, first to go.

    its not an educational issue.
    I agree americans are conservative and if you havnt noticed the wheels of change are slow. any tiny change is endlessly debated for generations. Education us under funded but a lot of things here are icon_rolleyes.gifincluding the military budget.


    Not sure about that. The US government has massive influence on how and where entrepreneurship happens - in spending and regulation. When they choose to spend, not only do they do tend to do so for political benefit but it also sucks out the life of competing firms (e.g. green energy is a good example of how less competitive technologies have been able to survive longer because of government subsidies whereas better technologies but at less connected companies have had to struggle more).

    When it comes to regulation, the last few decades have seen a massive increase with a substantial increase in the last 6 years alone. Even the tax code is so complicated in the US that the former US Treasury secretary, responsible for the IRS wasn't able to figure out how to do his own taxes.

    As for the OP - this is what was in the article:
    Teasing out the causes of the overall decline or the variation between states is difficult; the authors stressed to me that their data don't answer the questions of why or how just yet. But they will be looking into that in the months ahead.


    And no, education in the US is not underfunded. If anything by global standards, in real dollars it is overfunded with results substantially below other countries for the money you spend. I'd agree that there is much that could be done with the US military (as would the US military itself) but I'm not sure that this has had an impact on entrepreneurship (nor do I think education has an impact there - if anything, it's a massive new opportunity opening up).
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    May 08, 2014 8:17 PM GMT
    Is regulation the culprit?

    http://www.thefiscaltimes.com/Columns/2014/05/08/Overregulation-Killing-America-s-Can-Do-Spirit

    Overregulation Is Killing America’s Can-Do Spirit

    As a share of private sector GDP, the federal regulatory burden has increased over the same period as this study. The Phoenix Center recommended at the time that even a small decrease in federal regulatory burden – just 5 percent, roughly decreasing the regulatory budget by less than $3 billion – would generate an additional $75 billion in the economy and add 1.19 million new jobs to the private sector.

    Instead, we passed Obamacare.

    We have another indirect method to test this conclusion, too. Expanded regulation tends to favor larger and more established firms in a market, which have more resources and better economies of scale to deal with compliance issues. Sure enough, the Brookings Institution study found that kind of dynamism alive and well. “Whatever the reason,” the authors conclude, “older and larger businesses are doing better relative to younger and smaller ones.”

    Whatever the reason … the core value of American economics is slowly dying off. As the Brookings chart shows, we have finally crossed over to an environment where there are fewer businesses being created than fail – and the latter is spiking upward despite the Obama-era “recovery.” Capital no longer meets up with entrepreneurs to innovate and expand. We have exchanged business dynamism for regulatory stagnation, and “creative destruction” for the slow death of the American dream.
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    May 08, 2014 11:19 PM GMT
    Graph:
    http://www.washingtonpost.com/blogs/wonkblog/wp/2014/05/05/u-s-businesses-are-being-destroyed-faster-than-theyre-being-created/?hpid=z5
    entrepreneurs.png
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    May 10, 2014 2:28 PM GMT
    Sen. Ron Wyden (Democrat): "We Must Stop Driving Businesses Out of the Country"

    http://online.wsj.com/news/articles/SB10001424052702303701304579548433123065724

    The U.S. is stuck with a 35% corporate tax rate—one of the highest in the world—and a painfully complicated and outdated tax code. Few companies pay the full 35%, but some come close and others pay next to nothing. Effective tax rates vary wildly by industry; the entire system flunks the fairness test.

    The last overhaul of the U.S. tax code was in 1986. Meanwhile, other countries have modernized their tax policies to encourage investment, and today the average corporate tax rate among the 34 member countries of the Organization for Economic Cooperation and Development has fallen to 25%.