The business community, particularly entrepreneurs and venture investors, has been relatively quiet in the debt ceiling debate. Not the Tech Guys. As funders of job growth, we see how important House Majority Leader Eric Cantor, his ideologically consistent freshman class and other pro-growth congressmen have been in preventing tax hikes and providing the economic foundations for innovation, entrepreneurship and sustained job creation.
The mainstream media has been harsh and occasionally volcanic in its review of Eric Cantor and the GOP House, which Cantor increasingly seems to lead. Recently, mock-conservative New York Times columnist David Brooks channeled his inner Joseph Welch, writing of the GOP congressmen who are maintaining their anti-tax pledge to voters: “The members of this movement have no sense of moral decency.”
A few business people have spoken out in favor of debt reform. Sun Microsystems co-founder Scott McNealy has been an active pro-growth tweeter recently. McNealy is putting his money where his mouth is, building his new company WayIn in Colorado, which he considers more business-friendly than California.
McNealy shared a quote for this op-ed: “Congress should be limited in any year to spending 18% of GDP (moving average from last three years). This excludes defense spending, which should be budgeted separately. Congress can only decide where to spend the 18% on non-defense, not how much. They can decide how to raise the money through taxes but only as much needed after everyone pays at least 5% of earnings. And there should be a national consumption tax of at least 2% across the board. This makes sure everyone has skin in the game and an interest in how Congress spends the 18% of GDP. Eighteen percent of GDP is a massive number. And GDP will grow faster the lower the percentage is.”
Despite a sluggish economy, McNealy and a modest number of other high-profile entrepreneurs, such as Facebook’s Mark Zuckerberg, continue to demonstrate the power of technological innovation to create high-value jobs, private-sector wealth and public-sector revenue.
Facebook is a seven-year-old company with a private market value of $80 billion and an estimated 2,000 employees. We celebrate this growth and encourage President Obama and both parties in Congress to promote policies that will nurture the founding and growth of more Facebooks.
Job creation in the tech sector will accelerate if we:
- Make sure corporate and personal tax rates are simple, stable and world-competitive.
- Reduce federal government spending as a percentage of GDP down to or below 18%, which is the percentage of GDP that the federal government has historically collected in tax revenue during good times and bad.
- Reduce state and local spending as a percentage of GDP.
- Keep regulation light, stable and appropriate.
- Pass free trade agreements, including the ones with South Korea, Panama and Colombia.
- Reform our visa system in a way that enables more skilled technology workers and job creators to move to the USA and stay in the USA.
- Ensure government R&D agencies (DOE, NSF, NIH, etc.) disburse funds according to merit, not politics.
- Create a healthcare system that allows America’s biotechnology and medical device industries to flourish — both of which are under siege by Obamacare.
Tax rates on businesses and individuals should be modest and predictable. Put yourself in the mindset of a would-be entrepreneur who is considering resigning from a stable job at Microsoft in order to build a new wireless startup in Seattle. You would be more likely to start that new company and create those new jobs if capital gains tax rates were low.
Imagine yourself as a venture capitalist deciding whether to invest $10 million into that new startup. You also have a long-term horizon. And you will be more likely to fund that company’s job creation if you have visibility into the future taxation environment.
Let’s use the same example of the would-be entrepreneur in Seattle to evaluate the impact of excessive government deficits on job creation. Let’s assume that you are that entrepreneur and you have a choice between locating your research and development facility in China, Greece or the USA. Which nation has the strongest balance sheet and is the safest bet? The answer to that question should always be the USA. It can be again.
These are critical times for our economy. The importance of the specific August 2 deadline has been exaggerated. Wise debt holders would prefer a delay in payments if the result was a structural reform that reduced America’s deficit addiction, contained inflation and preserved the value of the dollar and their existing holdings.
Yet, the debt crisis has provided a clear opportunity to begin to finish the work that Republicans and ultimately some Democrats pursued in the 1980s and 1990s. We have the power to end the era of big government. We must think long term about how to resolve the structural problems with entitlement spending. This requires leadership, courage and occasionally constructive obstruction.
Charles Curran and Patrick Ennis have spent over 35 combined years as technology investors and innovators. They live in Washington, D.C. and Washington State, respectively.