As we near the one-year anniversary of our economic recession, we also appear to be approaching a crucial juncture and, of the two likely paths ahead, neither is cause for optimism.
History, economic indicators and the natural business cycle all suggest that we are transitioning out of the Crash of Late-2008 into either a "double-dip" downturn or a slow "jobless" recovery. In other words, our near-term prospects appear to be either catastrophic or merely dreary -- deflation-driven depression or inflation-driven recession, 1932 or 1976.
It's no wonder that the U.S. public, weary, fearful and looking at 10 percent unemployment and massive deficits into the indefinite future, is hunkered down, deferring purchases and growing increasingly cynical about Washington's ability to manage the economy (or anything else).
It's a depressing scenario. And yet, Americans are, by their nature, eternally optimistic. Given a way to improve their lot -- while retaining their freedom -- they will take it, and accept the risks and sacrifices to get there.
So, can we envision another path that will enable us to escape this pair of dire futures and restore us to prosperity? Well, certainly it would have to feature, first and foremost, massive job creation, of the magnitude we saw during the Reagan and Clinton years; and, second, the conversion of those jobs, through increased productivity and investment, into equally massive wealth creation. We're talking enough new, non-make-work jobs to push unemployment back down to less than 5 percent; and enough wealth to both pay off most of the debt we already have and preclude the jaw-dropping debt ($9 trillion at last count) we are about to assume.
But how do you create that much employment and wealth in a short time? Large corporations are unequalled at sustaining jobs but, as the past two decades have shown, not at creating them. They also accumulate revenues and profits, but rarely create truly new wealth. Governments can create jobs, largely by fiat, and money simply by printing it – but the jobs are comparatively unproductive and the inflated money creates only the illusion of wealth and further distortions in the economy.
Less Funding for the Googles and Facebooks
In the end, we only know of one way to create and sustain new jobs and new wealth, as well as the increased productivity and prosperity that accompany them: through entrepreneurial start-ups and small businesses.
But, incredibly, that knowledge has not turned to action. On the contrary, if you were to design a program to systematically undermine, impede and, ultimately, crush new business creation in America, you couldn't do much better than the one begun by the Bush administration and taken into overdrive by the Obama administration. Sarbanes-Oxley has destroyed initial public offerings of new start-ups to the benefit of Big Business, accomplished little and has cost a quarter-trillion dollars (couldn't we use that money now!). It -- combined with rules on options expensing, director liability, the recent re-classification of investment firms as banks, and Candidate Obama's still pending promise to raise capital-gains tax rates -- has paralyzed the high-tech, venture capital industry.
And that, in turn, has meant fewer and fewer future Googles and Facebooks being funded. As a result, Silicon Valley, the world's heartland of high-tech entrepreneurship, is rapidly becoming a place of big, maturing electronics companies -- as are the rest of the nation's tech enclaves. Its unemployment rate is the worst since the Valley was filled with orchards.
And that's just the beginning. The last year has seen one body-blow after another thrown at new and small companies -- ironically, at a time when hundreds of thousands of laid-off Americans, many of them older and with dwindling prospects of finding new employment, are pondering starting their own businesses.
First came the credit crunch, followed by the widespread capital shortage that continues to this day (just try getting a new business loan). Then came the administration's plan to tax the "rich," a majority of whom are small business owners; then the automotive bail-out, which wiped out dealerships across the nation; then Cap and Trade, which will wound Big Business but kill many small companies. Then health care, which, in most current plans, will sock small business owners with added taxes and fees – and keep a generation of biomedical start-ups from being born.
Wanted: Millions of Jobs
Even Cash for Clunkers managed to reward giant automobile makers while stealing business away from used car dealers, auto parts stores and junkyards.
Thus, in what is arguably the most entrepreneurial society in human history, the federal government seems hell-bent on suffocating the widespread impulse to create new enterprises. If it succeeds, we will find ourselves without the new innovations, the new products and markets, and the companies we will need to compete in the global market. Recovery won't be just around the corner, but far over the horizon.
Does anyone inside the Beltway understand the cumulative, long-term implications of all this? Apparently not. Congress seems to be under the impression that the laws of economics have been temporarily suspended. Meanwhile, the Obama administration appears trapped in some 1895 Corporatist-Progressive fantasy in which Big Government, Big Business and Big Labor sit around a table and decide how to fairly divide up the economic pie – never noticing that the kitchen is crowded with chefs ready and willing to bake any number of new, better, and even bigger pies.
This would be a good moment for President Barack Obama, as long as he is naming one for everything else, to appoint an Entrepreneurship Czar -- someone who shares his politics like venture capitalist John Doerr, or an expert on the subject like Carl Schramm of the Kauffman Foundation -- whose primary job would be, at the very least, to ask at every White House briefing the simple question: "Where are we going to find the millions of new jobs we'll need to get out of this mess?"
This is the opinion of the columnist and in no way reflects the opinion of ABC News.
Michael S. Malone is one of the nation's best-known technology writers. He has covered Silicon Valley and high-tech for more than 25 years, beginning with the San Jose Mercury News as the nation's first daily high-tech reporter. His articles and editorials have appeared in such publications as The Wall Street Journal, The Economist and Fortune, and for two years he was a columnist for The New York Times. He was editor of Forbes ASAP, the world's largest-circulation business-tech magazine, at the height of the dot-com boom. Malone is the author or co-author of a dozen books, notably the best-selling "Virtual Corporation." Malone has also hosted three public television interview series, and most recently co-produced the celebrated PBS miniseries on social entrepreneurs, "The New Heroes." He has been the ABCNews.com "Silicon Insider" columnist since 2000.