Eight Years after the Great Recession, Congress Realizes Entrepreneurs also need a Jolt
Americans across the country have been digging out of economic despair ever since the housing market crisis during the last open presidential election in 2008 led to the financial collapse, and lawmakers have bloodied themselves fighting over the correct path forward. With four months to go before voters choose the next president, policymakers are just now waking up to some of its devastating ripple effects.
Beyond the job loss and foreclosures that devastated the U.S. economy, the Great Recession gravely impacted American entrepreneurship.
“Historically births of new businesses outpace the deaths of old businesses even during recessions. The 2008 recession, however, had a markedly different impact,” said Sen. David Vitter, R-Louisiana, the chairman of the Committee on Small Business and Entrepreneurship, in a hearing Wednesday. “This is the first time on record that we have seen closures of business outpace the rate of startups.”
That may sound alarming, especially considering the zeitgeist of the Millennial generation suggests that startup culture is hot right now.
But the data reveal a different reality: A 2015 Kauffman Foundation study shows that new startup activity has just begun to rise in the last several years after hitting a low in 2013.
That Vitter’s committee convened a hearing this week on the consequences of dwindling startup activity is a promising sign. 1776 Co-founder and Co-CEO Donna Harris testified, telling the panel that the United States must step up its startup game to sound agreement.
Real solutions are still a long way away.
While the senators on the committee participating in Wednesday’s hearing are highly engaged in the issue and did not breaking down into partisan camps in their lines of questioning about why the pace of entrepreneurship activity has slowed, it’s clear the Senate is still in the discovery phase of this issue.
New Hampshire Sen. Jeanne Shaheen, a Democrat and the committee’s ranking member also blamed the recession for plummeting new business formation in recent years and substantial damage to the state of American entrepreneurship.
“We’ve seen robust efforts to encourage startup growth,” she said. “But it’s clear that startups still face a significant number of challenges; those challenges include attracting a highly skilled workforce, navigating complex regulations and markets, and getting access to the capital they need to grow.”
There are several pieces of legislation under consideration in the Senate now that address some of the factors holding back entrepreneurs. But there is not one sweeping plan that will jolt the economy enough to galvanize the scores of innovative Americans with auspicious concepts who simply need a financial kick to move their ideas toward active businesses.
During Wednesday’s hearing, Sen. Tim Scott, R-S.C., asked about encouraging entrepreneurship in distressed communities. Sen. Heidi Heitkamp, D-N.D., was concerned about access to broadband in rural areas, and encouraged Congress to promote a better culture of risk. Shaheen, citing both of her daughters’ experiences as business owners, noted the concerning statistics showing women startup founders receive far less venture funding than do their male counterparts. Sen. Edward Markey, D-Mass., argued for net neutrality. Vitter worried excessive regulation favors incumbent businesses over startups. Nearly every senator present dove into the hot debate over changing immigration laws to allow more highly skilled foreigners to develop their businesses in the United States.
On the panel, Economic Innovation Group co-founder John Lettieri pointed out that the underlying cause of the financial crisis — the housing crisis — has caused fewer younger Americans to buy homes and borrow against them to launch startups. Dane Stangler of the Kauffman Foundation said there are at least 45 federal programs designed to encourage entrepreneurship that need some streamlining, and SBA loan programs need carveouts for new startups to bypass antiquated requirements that no longer apply.
And 1776’s Donna Harris called on the panel to recognize that the United States does not have a leadership lock on the digital era and must encourage a wholesale shift to maintain its footing on the world stage.
There are signs that lawmakers are getting this message: Hillary Clinton unveiled a detailed tech agenda on Tuesday. House members on both sides of the aisle have engaged 1776 for fact-finding events on the state of entrepreneurship. It’s a good start.
