Who else will be interested in this concept? I’d love to see a coalition–Rochester Regional Design Center among others.

One comment about small business, however: They make a significant contribution to job creation, but it isn’t quite as overwhelming as is popularly thought. McKinsey Global Institute reports that from 87 to 05, firms w/ more than 500 employees added nearly a third of net new jobs and employed about half of the workforce (see http://goo.gl/d3jNO).

The stats for job creation attributable to new firms are often exaggerated. As Americans, we love entrepreneurs, and for good reason. I often see Kauffman Foundation data on startups (see Tim Kane, The Importance of Startups in Job Creation and Destruction. Ewing Marian Kauffman Foundation, July 2010) subtly misquoted as claiming that new firms add 3 million jobs each year. That’s technically correct—but a more accurate statement is that about 3 million jobs each year exist at “startups”—firms less than a year old. Many new firms don’t survive into a second year of existence, however. Among firms that have passed their first birthday, employment is stable—they add as many jobs as they lose.

Among all established firms, net job growth is negative in aggregate. That happens for two reasons: 1: Firms go bust and 2: Surviving firms add and eliminate jobs. If you look only at the group of survivors—firms that don’t go out of business—they add net new jobs. The U.S. economy relies on new firms to replace jobs lost as the free market’s “creative destruction” eliminates uncompetitive establishments. Net job growth, then, depends on new establishments.

Alan, as I wrote in the article, I’m very supportive of regulation. I’m just wary of relying on regulation alone. The 2008 financial crisis is a great example: While the absence of key regulations was part of the problem, the weakness of the regulators was also a contributing factor.

A graduated corporate VAT, or even simpler, a graduated gross receipts tax, starting at 0% for businesses under $5 or even $10 million, going up to 20-30% for something the size of Citibank or Exxon. Unlike net income, which is subject to all sorts of gaming, gross income is very simple, and hard to fudge. So just making the corporate tax rate go up as the company gets bigger eventually makes a business justification to break huge outfits into smaller, still big corporations. Don’t like your 30% tax? Divide up into 15 smaller ($27 billion is still a pretty big business!) companies, and drop to 20%. Divide into 150 businesses, and go down to 12% at $2.7b …. You get the idea.

We all know that small companies provide most of the jobs, particularly new jobs, in the US, and smaller companies innovate better, compete more, and are less likely to lay off 12,000 workers at a time. It’s time we gave smaller businesses a boost.

You say “I’ll take ‘all of the above.’ Which is why I’m unimpressed with the response of the nation’s leadership, having left the structure of the financial sector untouched, and choosing instead to put our faith in more regulation and better regulators.”

What can you expect, when our legislators are basically up for auction? Until we get real campaign finance reform, none of these problems will get better.

Your reply “… the political obstacles are significant” is a considerable understatement, and if there are any “… remaining moderates in the Republican Party” they sure aren’t getting much coverage.