Recently in Politics & Legislation Category
March 3, 2009
Here is a great column by Reid Hoffman in the Washington Post making the point that entrepreneurship is a major engine of growth for this country and it deserves some stimulus.
Entrepreneurs are the fertile soil for job growth and recovery. Small companies represent 99.7 percent of all employer firms, Commerce Department data show. They pay nearly 45 percent of U.S. private payroll and have generated 60 to 80 percent of net new jobs annually over the past decade.There are few people who are more credible or smarter when it comes to technology entrepreneurship than Reid, who has PayPal and LinkedIn on his resume and, as he mentions in this piece, has invested in over 60 companies. I should also mention that he is an investor and board member of Six Apart -- and a friend.
I think he is right on when he makes the point that although there is some focus in the stimulus package on scientific research, that "new ventures -- not merely new technologies -- need to be championed as the course to stability."
As for Reid's proposals, I would support some and I am more skeptical of others (this would not surprise Reid :) ).
First, he proposes that we "encourage small business with loans. Apply to the United States the micro-lending model that has proved successful in developing countries, extending credit lines of up to $50,000." I would like to hear more about this. There are parts of this I like. The costs of starting a tech business -- an Internet business especially -- are now relatively low and it would be great to have more start-ups get financed by small loans. VC is in a sense the most expensive form of financing, but it has come easy in the past and so entrepreneurs haven't relied on raising money from banks or, heaven forbid, customers (i.e. selling something!) as a means of funding operations as much as they should. So I like the general idea.
However, I'm a bit wary because we saw what artificial incentives for banks to lend to those that couldn't afford mortgages did to the overall credit market, and I wouldn't want this $50k incentive to similarly distort markets. If there is a way to free up lending to start-ups by lowering barriers but without artificial distortions in the credit market, I'm all for it.
Second, he would "welcome foreign innovators" by urging lawmakers to remove "the cap on H-1B visas while imposing a 10 percent payroll tax above and beyond the benchmark salary for any position being filled by holders of such visas." This is the subject for much more discussion but I am strongly in favor of eliminating the cap on H-1Bs. I think it's crazy that this country is severely gating our ability to attract the best and brightest from around the world and Reid is right to focus on this as a severe hindrance to entrepreneurship in this country. I don't like his 10% payroll tax increase, but I'd accept it if it were the only way politically to remove the cap.
Third, "match funds for venture capital and angel investments. Venture firms and investors need financial incentives to invest in companies that create U.S. jobs. What if firms with credible histories could receive as much as $100 million in federal matching funds if their investments create jobs in the United States?" This is my least favorite of his proposals. In the first place, my sense of the angel and VC markets is that there is in fact plenty of money out there still, though this may be changing, and investors don't really need artificial incentives to invest. What they need are returns.
And it's on the liquidity side that investors are having the biggest challenges with unstable and plummeting public financial markets and regulations such as SarBox making it ever harder and expensive for companies to go public. Companies from around the world are now looking elsewhere to list when they used to look only to the NYSE and Nasdaq. There is a whole lot that could be done to improve liquidity options for companies and I'd like to see more focus on this.
Also, I am very skeptical of injecting the federal government into private investing. It will undoubtedly come with strings attached, as so much of the recent government intervention has, and frankly it's not needed. And once a system gets hooked on federal funds, it rarely weans itself off. Finally, "credible" venture funds as a class have not had a challenge raising capital, so this seems to be a solution in search of a problem. The scarce commodity is not private capital but the time and talent of capable investors who should want a full return on their effort rather than giving half of it away. Such a system would actually lower the returns on investors time, which is a zero sum, and probably not be in the best interests of the industry.
(Fred Wilson has a more detailed and eloquent take on this which I endorse.)
If the goal were to infuse more capital into private investing, I'd prefer a different approach. Right now there are a huge number of impediments for individuals to invest in private companies. Reid can invest in 60 companies because he is experienced and is an accredited investor, but most people simply can't invest in these companies by reasons of law, regulation, legal cost, and sheer logistics. Many of these limitations are imposed on people to "protect" them from themselves. Thank goodness we've been preventing people from private investing so that they can keep their money in the public markets! Another classic example of a system that punishes the responsible in an attempt to protect the irresponsible.
I am sensitive to the need to protect less sophisticated investors from shams, but it strikes me that there should be some middle ground between the public market which is easy and open for investors but difficult and expensive for companies and the private market, which imposes fewer restrictions and costs on companies but is much more challenging and restrictive for investors. This, more than anything, restricts the flow of capital to start-ups.
The very purpose of a financial market is to provide capital and liquidity to businesses -- they are not an entitlement for individual investors -- and when they stop serving that purpose effectively we should ask what we can do to fix things. Whether this means lessening the burden on public companies, or loosening the restrictions on private investors, or coming up with a middle way, perhaps by freeing up personal investment in venture funds or creating mutual fund like vehicles -- or all three -- we should be exploring these avenues.
And finally, I have to say that I'm a bit disappointed that there is no comment here on the Obama tax increases. Whether you are for or against the income and capital gains tax increases and the massive implied taxation on the energy sector put forward by President Obama, we should not kid ourselves that these don't come at a cost to entrepreneurship. These taxes will hit many wealthy individuals who fund a lot of start ups and many SMBs that file as individuals -- and capital gains is the return on their investment so higher taxes here will further impede growth. Rather than take this money out of the financial system, and then use the political system to dole funds back to favored constituencies, how about leaving it there in the first place?
Finally, as Internet companies grow we depend on energy (how much does LinkedIn spend on power in its data centers?) and so I believe this heavy regulation on energy will come at a real cost to growth in the Internet sector.
I think this is a good conversation that Reid has started. I support much of it, but I would love to have more discussion not on what the government can do to play favorites but instead what it can do to remove impediments for people like Reid to do what he does best -- grow companies and create jobs.
March 6, 2008
Lessig will concentrate on building a new Web site: www.change-congress.org. The site will include a tool that will allow Congressional candidates to select their level of commitment to the Change Congress reforms, an application that will enable people to make donations to candidates who have committed to reform and a Web page that will encourage people to run against candidates who do not support reforms.I don't know what the reforms will be, but this piece suggests that anti-ear marks will be one of them. My vote for what a Change Congress commitment should include: redistricting reform. It would be nice for the people to choose their representatives, rather than the other way around. With competitive congressional elections, something we simply don't have in the US Congress, many problems of corruption will be addressed. Elections are meant to hold politicians accountable, but with a 98% reelection rate, it's no wonder politicians don't feel accountable to anyone. I'm not saying that will fix all problems, but competitiveness in politics is where I'd start.
September 28, 2004
The Lead21 blog is now LIVE! Here is an excerpt from the about page:
Lead21 provides business and community leaders a platform to get involved in politics and public policy, meet key elected officials and thought leaders, and build on America that furthers entrepreneurial thought.
September 2, 2004
I also thought Lt. Gov. Michael Steele's (R-MD) speech was very powerful. Excerpt:
I am proof that the blessings of liberty are within reach of every American.
We have come an incredibly long way since the first Republican President, Abraham Lincoln, signed the Emancipation Proclamation.
We have come a long way since another Republican President, Dwight Eisenhower, sent the National Guard into Little Rock to open the school doors to black and white children alike.
And we have come even further since a majority of Republicans in the United States Senate fought off the segregationist Democrats to pass the Civil Rights Act of 1964. ...
You see, she raised me to understand and appreciate the words of Abraham Lincoln, who said: "You cannot bring about prosperity by discouraging thrift. You cannot strengthen the weak by weakening the strong. You cannot help the wage earner by pulling down the wage payer. You cannot further the brotherhood of man by encouraging class hatred. You cannot help the poor by destroying the rich. You cannot build character and courage by taking away man's initiative and incentive. You cannot help men permanently by doing for them what they should do for themselves."
August 30, 2004
Good news about the "Induce Act." Despite the fact that "Sens. Orrin Hatch and Patrick Leahy, the sponsors of the bill, are determined to move forward with the legislation," I have heard from a couple of congressmen, on both sides of the aisle, that is has no chance of passing the house. In fact, it shouldn't reach the floor. Phew.
August 29, 2004
People have compared John F. Kerry to President JFK but it may be more fitting to compare him to Kennedy’s successor, Lyndon Banes Johnson. Johnson, like Clinton, aspired to be President from a very early age, and much of his career was calculated toward garnering political power. World War II was his springboard and while he played cushy, bureaucratic roles for much of the conflict (he was in many senses a coward) he became intensely concerned that the war would end before he had a chance to have some battlefield experience, something he knew would be required to be successful in post-War politics. So he essentially injected himself into the theater during a 13 minute observer mission and obtained what many feel was one of the least deserved Silver Stars in American history, almost certainly earned more by political manipulation, rather than battlefield merit—and questions about that merit came from others who served along with him. LBJ actually brought a movie camera along with him to the war. LBJ then, as is totally counter to the military ethic of humility about ones accomplishments, shamelessly used his “war hero” status for his campaigning, wearing his Silver Star on his lapel.
In congress and later the senate he was perhaps most notable for his lack of legislative initiative or accomplishments. He knew very well that a man who didn’t take strong stands on legislation thereby avoided the risk of having those positions held against him while campaigning. Few of his peers accomplished less than he in terms of legislation, and yet LBJ, an indefatigable politician, continued to rise to power, becoming majority leader in the Senate. He was also a tireless and innovative campaigner, and his path to the Senate was an amazing tale of corrupt and brilliant voter manipulation across the state of Texas, amazingly defeating one of the most revered men in Texas political history, former governor Coke Stevenson.
LBJ, a man who’s political career was launched with an abbreviated combat service and exaggerated honors, who then went on to be a totally ineffective legislator but brilliant politician, and then went on to establish the Great Society—a huge leap forward for socialism in America—only to then be utterly destroyed in the ashes of Vietnam.
But from those ashes rose another politician with an abbreviated military tour of duty and some questions about his honors, who went on to a long and politically successful but legislatively vapid career, and who has tried to use his “heroism” for political advantage.
Let me not exaggerate: Kerry’s months of service in Vietnam were much more honorable than LBJ’s 13 minutes in WWII. Whether or not there was manipulation involved with some of his medals is still being debated, but what does seem clear is that Kerry had longer term plans as he went into battle. His typewriter, his movie camera, his reports… all speak to a man who had political ambitions from an early age. But where service was the coin of the realm after WWII, Kerry seems to have calculated that opposition was the best path to political glory when he returned to a nation in deep conflict over the Vietnam cause. This calculation served him well for the following decades, but who knew that when it came time for him to run for president the nation would be in a new, different war setting.
LBJ was also the last president to come from the senate, where Kerry helped hone his "you bet we might have" style of political leadership. It is conventional wisdom that the reason so few presidents come from the senate is that this deliberative body is not the best training for executive leadership.
The salient point here is that Kerry strikes one as coming from the LBJ, Clinton and perhaps George H.W. Bush class of candidates for whom political power, not principle, is the prime motivator. Unlike the likes of Reagan and perhaps Carter, their actions seem to be determined more from calculation than conviction. While we tend to focus on the left/right axis, I believe that the calculation/conviction axis is an important one to pay attention to because it will define how that individual will govern. In my view, conviction is a necessary, though not sufficient, condition for success. Carter’s humanitarianism, for example, may have been praiseworthy because it was deeply felt, but it resulted in an unsuccessful presidency. Reagan’s convictions, on the other hand, helped produce one of the most successful presidencies in American history. Clinton served over the sanguinity of the 1990s, but left with few, if any, signature accomplishments and a legacy of inattention to foreign policy that we are still paying for. For me, George W. Bush is a hybrid—far too often driven by political calculation but with some threads of real Reagan-esque conviction.
The parallels to Johnson should not call into question Kerry’s service, but they do speak to his character and what type of president would be.
August 24, 2004
Praise for bloggers by Michael Novak on the Swift Boat Vets on National Review Online:
The Swift Boat debate is one of those cases that has persuaded me that if one seeks the truth of things, much more help is on the way from the best of the bloggers, liberal as well as conservative, than from the main organs of the national press.Whatever your take on this issue it is clear that the blogosphere has had much more interesting debate and analysis on this issue, as compared to the mainstream players such as the New York Times and Washington Post who have been unwilling or unable to actually tackle to Swift Boat charges themselves and instead have riveted us with the shocking scoop that... wait for it... some Republicans have been financing the Swift Vets (though it is rarely mentioned that the largest source of funding is from small individuals.) Now it would have been news if DEMOCRATS had been paying the bills, just as it would be news if Republicans were giving to MoveOn.org.
Most of the bloggers seem to me to be lawyers, to think clearly, and to have a very sharp eye for conflicting evidence. Most of the mainstream press, perhaps because of their editors, seem hemmed in by blinkers. It frequently startles me to discover how far behind the story they really are. The mystique of the mainstream press has self-destructed.
The most I've seen mainstream press tackle this issue directly it's been to condemn by insinuation the motives of the Swift Vets by suggesting they have changed their tune. Michael Novak puts the lie to that analysis:
After John Kerry's two campaign books came out — the more scholarly one by historian Douglas Brinkley and the more or less official one by writers from the Boston Globe — the Swift Boat Vets grasped for the first time John Kerry's view of his four-months service with them (from November 17, 1968 to March 17, 1969). In Brinkley, they read for the first time Kerry's contemporaneous (and also his recent) reports on that period — and they were shocked.I personally don't care much about what either Kerry or Bush did or did not do in the Vietnam era, but I am much more concerned about the ongoing movement to silence political speech in this country. McCain-Feingold was an abomination, in my view, as it regulated speech without doing anything to remove money from politics. In fact, as David Broder has pointed out, "The best one can hope is that new rules do not produce more unintended negative consequences than benefits. McCain-Feingold is flunking that test." Now we have the unseemliness of a major political candidate, John Kerry, asking his opponent to silence free, independent individuals, rather than responding to the merits of their charges. Shame on him. And shame on the Bush team for not defending the Swift Vets right to free speech and instead calling for an end to ALL 527’s! Whatever our politics, we should all be alarmed that beneath the surface what’s going on here is politicians pressing each other to silence independent and critical voice. MoveOn should have a right to spend whatever they want to get their message out and so should the Swift Vets, and so should anyone else who wants to be heard in this process. But we seem to be seeing, with calls from both sides for the other to silence critics, a collusion of politicians to cap the level of political discourse over our airwaves. The mainstream media won’t sound these alarms because their vested interest is to keep political discourse in their bailiwick—probably a big reason why the editorial pages of mainstream media have been the biggest supporters of campaign speech restrictions. So bloggers play an important role here.
In previous political races, more than once, some of these vets had traveled long distances to defend Kerry against unfair accusations that he was a "war criminal." They hated that charge, and putting aside what he had done to them, they defended him against it. They considered their service on his behalf to be a defense of all of them against the same charge.
Anyone who doesn’t believe that politicians will collude (and have colluded) on a bi-partisan basis to protect their power and create restrictions to grass roots opposition hasn’t been paying attention. The shame of American politics is that hardly any race is truly competitive. Well over 90% of US Congressional seats are locks for the incumbents and this has been accomplished by political rules and gerrymandering that heavily favor those that already hold the seats. In fact, the presidential race is one of the few in this nation that is truly competitive, and shame on BOTH candidates for calling for an end to free speech in such an important campaign.
July 28, 2004
Perhaps the reason for Clinton's reversion is that the old formula didn't actually work that well. As Auren Hoffman points out Clinton actually wasn't such a successful politician afterall. Can it be that while triangulation was a successful strategy for him personally it wasn't so great for the party? Excerpt:
When Clinton assumed the presidency in 1993 the Democrats controlled the executive branch, the senate, the house, the majority of the governorships, the majority of the state legislatures, and a majority of all elected officials nationwide.
When Clinton left office in 2001 the democrats had lost control of everything. They lost the presidency, the senate, the house, a majority of the governorships, a majority of the state legislatures, and a majority of all elected officials nationwide. In fact, Clinton presided over a dominant resurgence of the Republican Party (which is now in its tenth year).
I thought this graph from Clinton's DNC speech was a doozy:
"These policies have turned the projected 5.8 trillion dollar surplus we left-enough to pay for the baby boomers retirement-into a projected debt of nearly 5 trillion dollars, with a 400 plus billion dollar deficit this year and for years to come. How do they pay for it? First by taking the monthly surplus in Social Security payments and endorsing the checks of working people over to me to cover my tax cut. But it's not enough. They are borrowing the rest from foreign governments, mostly Japan and China. Sure, they're competing with us for good jobs but how can we enforce our trade laws against our bankers? If you think it's good policy to pay for my tax cut with the Social Security checks of working men and women, and borrowed money from China, vote for them. If not, John Kerry's your man."
The architect of the new Democrats apparently has decided to be an old Democrat again—his rhetoric reminds me of the standard faire of Democrats circa the Mondale campaign in '84: criticizing spending cuts and tax cuts, while fear mongering about deficits and social security--with some protectionism thrown in for good measure.
There’s a reason the Democrats moved on, how can Clinton so easily revert? Does he even believe what he’s saying? One has to pretend a fair amount to buy what he's selling:
Let’s pretend that despite his track record Kerry won’t actually INCREASE the deficit as will be the inevitable result of his election year pledges. (Or NOT: See this R21 post or this piece from the WSJ: “If we put the spending and tax sides together, the first budget that Mr. Kerry will submit would increase the deficit over 10 years by a minimum of about $1.2 trillion and, more likely, by well over $2 trillion. While a few smaller proposals from Mr. Kerry raise a little more revenue, they do not go anywhere near the level necessary to close the enormous gap between spending and taxes.”)
Let’s pretend that Bush’s tax cuts, and not huge structural problems and the baby boom, are the reason Social Security is so dysfunctional and in need of reform. (Or NOT.)
Let’s indulge in the fantasy that we can concentrate our tax policy on the prosperous and not retard prosperity and the even infinite progressivity in the tax code has no consequence (Or NOT or NOT again.)
Let’s pretend that China and Japan investing in the US is a bad thing. (Or NOT.)
Let’s pretend that we need protective trade laws to compete with Asia, not competitive regulatory and tax policy in this country. (Or NOT.)
And if you can pretend all of that, you can pretend that Clinton’s book actually belongs in the non-fiction section.
July 21, 2004
If you aren't alarmed by the INDUCE Act by now, you should be. Here's a great overview by CEI on why this is a bad idea. Excerpt:
The INDUCE Act is the latest in a string of fast-tracked Senate proposals designed to give major media players more "power tools" to attack downloading, duplicating, and exchanging music and video files over the Web. However, this legislation is not confined to person-to-person (P2P) file exchanges: It would affect cable, PC, PDA, satellite TV and radio, photocopying, and other technologies that allow transmission of data—and threaten the emergence of future technologies. Had such a law been in place during the 1970s, we may not have PCs, CDs, and other technologies we now take for granted.