Not noted in the article, but I feel like a lot of the reasons that the rate of people starting their own business is declining is that the costs of essential services like housing, education, healthcare and childcare have been increasing at a rate much greater than inflation [0]. It was comparably easier to pay for essential services 30 years ago than it is today, and it is difficult to take the risk of starting your own business when you need to pay higher costs for basic life necessities.
Interestingly enough, the industries that show the highest growth according to that chart have significant government involvement (here there is subsidized daycare, not sure about the US).
Correct me if I'm wrong, but I recall reading the US government gives some sort of tax benefit to the employer for providing parking spaces for employees. Some people say this subsidizes suburban sprawl. https://books.google.com/books?id=ZIqIN2j2LOUC&pg=PA82#v=one...
Costs are a problem for sure. But the biggest factor is the FED. They have slowly increased rates the past 1.5 years and have stated that they are going to increase interest rates further and pop the economic bubble. Not only that, Yellen has said the FED is going to shrink their balance sheet.
Credit is drying up and becoming more expensive and will be for some time. All business activity will slow ( new or established ). And we'll get a recession soon. It's only after the recession, when the FED decreases rates and loosens credit controls that business activity will start to increase again.
Should the rates be kept at 0 or near it forever? What happens when there's a recession despite the low rates, is the government supposed to pay banks to take their money? Some of your points can be argued for and I'd agree with them, but to put it out like the big bad government is just looking to turn off the economy is pretty disingenuous
> Should the rates be kept at 0 or near it forever?
Of course not.
> but to put it out like the big bad government is just looking to turn off the economy is pretty disingenuous
Where did I say this? Also, the FED isn't "the big bad government". They are a private corporation.
Why do so many people on hackernews read into things and get defensive?
Recessions are a necessary part of an economy. All I said was that the FED exists to pop bubbles via their interest rates. I didn't say it was good or bad. I was just pointing out why recessions happen.
Forgive me if I read into your comment incorrectly. To me it read as if you are stating that the fed increasing the interest rate at all is what is going to lead to a recession and that businesses won't be started until they lower the rate again, even though that rate is historically low.
Also the Fed is not a corporation like all the others in the US. They are indepentish because they aren't answering on day to day basis to the political side of the government but they still ultimately work for the government
The FED was far far too tight with money from 2008-2010 or so but it's not at all clear that they are right now. If you subscribe to NGP targeting they are in the right ballpark when it comes to interest rates.
Over 80% of small business loan applications are rejected. SBA loans in the US take 6 months - 1 year to get and still require cash down. Leasing companies hate start-up businesses. Landlords want financials and personal guarantees. In short, there's very little liquidity available for most start-up businesses in the general economy.
Got cash? Great. Most high growth areas are short STEM graduates, short trades-people, but long on large companies who can outbid you for talent.
Got cash and talent? Awesome. Large companies have more than you and pay less vig for it. If you're lucky your business is likely to be acquired as it hits critical mass. If you're unlucky as the eye of Sauron notices you - all that easy big company money will crush you.
Oversimplified? Sure. There are exceptions, success stories and counter-examples. But understand that small business and small business job creation is not a priority in the US.
In agriculture the USGOV is literally paying farmers NOT to farm in some areas. The priority is wealth preservation and predictable returns for baby boomers and special interests who vote, and who control votes.
You know who wants to change this? Who wants to repatriate 2-4 trillion in liquidity back in the US where its very likely to benefit small business growth? The only high profile person I've heard championing this issue is Trump. He appears to be fighting hard for it in upcoming tax reform legislation. Opinions about this guy aside, if he gets his way on dollar repatriation there's going to be a lot of money available for investment.
> The 15 companies that benefited the most from a 2004 tax break for the return of their overseas profits cut more than 20,000 net jobs and decreased the pace of their research spending
And do you think investors just flushed that dividend/share buyback money down the toilet?
No, they invest it somewhere else, and for most wealthy investors the best returns can often be found in tech start-ups. So it still makes it easier for start-ups to obtain capital.
Is it actually difficult for tech startups to obtain capital? My impression is that it's not. Non-tech small businesses are the ones that seem to have more difficulty getting off the ground with loans, and it's not clear to me that shareholders/corporate executives getting fat bonuses from dollar repatriation would put that cash into small businesses.
In theory dividends and share buybacks will be reinvested by the stockholders. In practice I wonder how much just further inflates various asset bubbles.
That's the crux of the "trickle down" theory, that eventually money will make its way to normal Americans. Arguably, the rising inequality in the post-Reagan years is proof that the theory is flawed and that very few individuals and small businesses actually see any benefit.
Taxation theories aside, parent proposed repatriation as a solution but past experience showed it to be less effective than the proponents claim.
It really doesn't matter where the money goes though. Even if an investor spends the money on golden bathtubs and private jets, the money is being spent in the economy. If they keep it in the bank it's getting leant out to small businesses.
That's a theory, but it does not hold up in practice. The issue seems to be money just pools in specific areas like money markets where only a percentage can be lent out.
The other issue is velocity. If loans last 10 years but it takes 1 year to find someone to lend the money to. Then effectively only 90% of the money is loaned out on average.
Hi, I turn up in these discussions to represent the hard money advocates.
In practice you might well be right about velocity, but there is no "the money" of which 90% is lent out.
America & most other countries use fractional reserve banking. A pretty reasonable interpretation of this is that making a loan is nearly equivalent to creating the money needed to make the loan.
All the existing money that can be lent that exists is, in fact, currently lent out.
The average americans checking accounts has high fluctuations over a month so it can be used for overnight interbank loans but not directly turned into home loans. This means two banks need to cover their reserve requirements so ~(90% of 90%) of the money in checking accounts can be loaned out. Savings accounts are more stable so ~(90%) of the money of the money can be loaned.
Also, banks may make loans, but they can also sell them to other groups without reserve requirements. Allowing for a near endless streams of new loans.
Thus the total amount of loans is not fixed and depends on where in the economy the actual currency is.
The sharp influx should even help with the velocity of money.
I am not an economist but I've been trying to learn a bit about it and a bit about financial management/investing. I'm currently at the velocity of money stage of my learning.
It's not really the same thing as the trickle down that the parent poster mentioned. From what I can tell, you hit the nail on the head.
An influx of money will mean the money moves. Also, when money moves is when the government taxes it. So, the influx will increase the velocity of money and will have an effect on the economy.
That's not the same as the parent post implied, where there's a reduction in taxes and that is supposed to result in the money trickling down. That's not the same as an influx of money. One is people keeping their money, the second is people getting more money.
If I understand correctly, they are different things. Then again, I may not understand correctly. As I said, I am still learning.
But it does matter where it goes. What if it all goes into real estate (again), for example? Then you get another housing bubble and even more unaffordable housing for middle Americans. You're also assuming that cash being spent on things like luxury goods is flowing into the US economy as opposed to the global economy. Globalization has changed that dynamic significantly.
Sorry, I don't see how that rebuts my statement. Also, that's a gross oversimplification of what actually happened. My point is that if the windfall from dollar repatriation goes into real estate and we get another bubble, how does that help middle Americans? We can't assume that everyone will go out and put their repatriated dollars into economically productive places.
Also, I've said this before and no one has given me a good answer yet. Corporations already have record amounts of cash on hand [1], but they're largely not doing anything with it. What reason do we have to believe that getting cash back on shore would change this behavior at all? After all, taxes are on profits - companies could effectively repatriate their money tax free today by spending it on hiring more people, building factories, etc.
“Mounting evidence suggests that the notion that the 2007 crash happened because people with shoddy credit borrowed to buy houses they couldn’t afford is just plain wrong. The latest comes in a new NBER working paper arguing that it was wealthy or middle-class house-flipping speculators who blew up the bubble”
Rising inequality means that higher incomes are rising faster, not that lower incomes aren't rising. No one claims that trickle down effects will fall to the lower half of the income distribution as quickly as the upper half (i.e. flat inequality). It's right there in the name!
They might argue that the bottom half of the distribution grows as quickly as it possibly can via "trickle down," because in a more regulated and redistributive world, the productivity gains that the left wants to to redistribute wouldn't be made.
I don't think this is right either, but inequality isn't a signal you can use to assess that.
But it's nonsense to pretend that the only factor that's been driving inflation-adjusted wage stagnation is Reagan's economic policies.
Globalization, automation, Baby Boomers retiring, healthcare costs, education costs, and a million other factors are influencing that too. Trying to parse the effect of Reaganomics economic policy by looking at one country in one 20-30 year period among all the other effects is an impossible task.
In lack of any significant empirical evidence, I'd rather rely on reasonable economic theories than politicians trying to win the votes of an angry mob.
That’s a cutting your nose to spite your face argument. Even if every penny of the repatriated cash goes to dividends for investors, that’s strictly better than the money sitting abroad.
That seems untrue. If the margin of benefit to non-shareholders is so small as to be negligable, one can very reasonably not want to "reward" these companies for tax-dodging business practices, and seek reconciliation that actually ensures some sort of effective outcome instead of just hoping; especially given past repatriations as the parent poster notes.
To suggest otherwise seems to lead that Trickle Down can be effective, which I believe history has well and truly laid to rest.
As a holder of invested capital, I will still speak out against efforts that I think would exclusively benefit that class and not the core participants of the working economy. The latter historically seems to motivate much better long term trends.
> That seems untrue. If the margin of benefit to non-shareholders is so small as to be negligable, one can very reasonably not want to "reward" these companies for tax-dodging business practices, and seek reconciliation that actually ensures some sort of effective outcome instead of just hoping; especially given past repatriations as the parent poster notes.
There is no effective outcome. Countries are engaged in a race to the bottom where it comes to favorable tax treatment for international corporations. We either bring the money back here, or it'll just stay over there.
By that logic we set corporate tax rate to 0 and throw our hands in the air. Having missed out on some percent of corporate tax revenue does not mean to me that our entire regimen is worth discarding, but could be adapted.
That's exactly what we should do. All taxes are taxes on people. Corporate taxes are an inefficient and not especially progressive tax on people. We'd be better off without them.
Convince me, why should I buy that argument? I've not seen any compelling justification that reducing the corporate tax would do anything but create a further deficit which would need to be filled with a much more direct tax on people less able to pay. What precedent is there for this sort of strategy actually showing long term benefit across the broad economic spectrum, and not just to the upper percentile?
(This is fantastic, I can't even get 2 seconds into asking for discussion without being in the negative. This is not the HN I normally applaud. I'd hope readers recognize that I'm actually looking to have my opinion changed here and not just spark an unproductive argument, and am saddened that I have to clarify this.)
I have some thoughts about this. If we think about the strengths of the U.S. economy, it's the transparency, rule of law, and easy access to capital that U.S. companies have. We should encourage all companies to be formed here.
I would drop corporate taxes as much as possible. Now, let's say we've done this. What next? In this age of the global economy, I think the problem with trickle down economics is that while companies are localized, the trickle down is globalized. Investors from overseas take their gains and re-invest it into their own economies at a much higher rate than the U.S. economy.
So, I would tax them on the way out. Make corporate tax rate low, but capital gains higher. This encourages companies to stay here, re-invest their profits here, and investors "pay their fair share" when they take their profits out.
Yes, if we eliminated corporate taxes we would need to raise individual taxes in order to maintain government revenue.
But we could do so in a way that was:
A) Far more efficient - The deadweight loss of corporate taxes is higher than individual taxes. Corporate taxes are crazy complicated by necessity and lead to all sorts of crazy behaviors.
B) More fair - A millionaire should pay higher taxes on his profits from stock ownership than a middle class person. When a corporation pays its taxes those two people are taxed at the same rate.
A sister poster suggests offsetting with higher cap gains, which could be a component of what you're suggesting and I could see how that would work as a concept, but I have issue with pragmatism within the US. As far as I understand it, didn't both the prior tax holiday come essentially in isolation of balancing factors, alongside a broader tax plan that de-emphesized the higher tax brackets and cap gains? (and from a brief reading, seems to have added a significant amount to the national debt via lost tax revenue, during a period of drastically increasing inequality) This was my original concern when posting earlier, that I haven't seen a history of positive outcomes, or strategies that offset like you're suggesting.
Oh I agree with you - the current tax holiday plan is just a dramatic wealth transfer from the rich to the poor. In an increasingly globalized environment, trickle down economic gains are diffused over investors all over the world. The current Republican tax plan has a 1950's era view of the world. With the current proposal, the only way to sustain the middle class is to close our border and become more nativistic - which is what happening.
I agree that a "tax holiday" is a bad plan. I also agree that from a political standpoint my plan might be unworkable. I think it's a good plan from an economic standpoint though.
By law, corporations are people. Why should they be taxed differently than human people? Why not just form a corporation that is in the sole business of making your life better, earn all income through and charge everything through the corporation, and never pay a penny in tax yourself?
This is a commonly held belief, but it is not true.
> Why not just form a corporation...
Your idea won't work because a company buying something for an employee (or owner) is considered a taxable benefit to that person just like paying them a salary.
>> By law, corporations are people.
>This is a commonly held belief, but it is not true.
"Are corporations people? The U.S. Supreme Court says they are, at least for some purposes. And in the past four years, the high court has dramatically expanded corporate rights.
It ruled that corporations have the right to spend money in candidate elections, and that some for-profit corporations may, on religious grounds, refuse to comply with a federal mandate to cover birth control in their employee health plans.
These are personal rights accorded to corporations. To many, the concept of corporations as people seems odd, to say the least. But it is not new."
Citing an NPR article for a legal point is like citing NPR for a programming point. Just, no.
Corporations and humans both implement the ILegalPerson interface. So for some purposes where you need a legal person, they are interchangeable. But they are not in general people.
Would you suggest I cite Supreme Court decisions directly then in the future? I'm happy to cite whatever documentation you treat as canonical when we have these sorts of discussions.
While it's true corporations are not "people", legal interpretation in the United States has shown that they have been given many rights of personhood.
You seem to be conflating "person" with "human". The two are entirely separate. And this is where being pedantic is important. For legal purposes on important points like entering contracts, free speech, freedom of religion, being sued, etc. corporations are people. The case law is very clear on this. Can your dog be sued? No.
So when we talk about legally bound responsibilities like paying taxes, suddenly making a distinction between corporations and humans with respect to personhood seems really strange.
We already make distinctions between "legally bound responsibilities like paying taxes." There is an entire separate tax code for corporate taxes vs taxes on individuals.
This is because they are not the same legally. They might have similarities in some respects, but they are not the same.
Please provide examples here of how they are different. There are entire separate tax codes for you filing individually vs. jointly. That does not mean that if you get married you're not a person anymore. Same with corporations - just because the specifics of the tax code differ for filing does not mean they are not legally people.
Also note that you yourself are already changing language here. You said "separate tax code for corporate taxes vs taxes on individuals". Both are legally people. If we want to make a distinction, we have to use other terms, like "individual".
> There are entire separate tax codes for you filing individually vs. jointly.
This is not true. The tax brackets are different but essentially everything else is the same. The same things are counted as income. You have the same deductions. You use the same forms.
Some other ways that corporations are different from people (just off the top of my head):
- A corporation can't get a driver's license.
- A corporation can't get federal loans to go to college
- A corporation isn't expected to register for the draft at a certain age (does that make a corporation a woman? Hah!).
- A corporation cannot "take the 5th" and refuse to testify against itself.
- A corporation cannot be sentenced to a prison term as punishment
- Corporate free speech rights are more limited than individuals
I think you might be confused by the idea of "corporate personhood." This idea doesn't mean that a corporation is a person, it means that corporations have some (but not all!) aspects of being a person.
I feel like you're getting into No True Scotsman territory here, especially since you're providing examples that have zero relevance to the matter at hand. However, I'll tackle your rebuttals in order:
- I don't think you actually understand the nuances of filing separately vs. jointly. It's a lot more complicated than just different tax brackets and "essentially everything else is the same". For example, filing jointly you cannot take the credit for child and dependent care expenses, you cannot take the earned income credit, you cannot take education credits or deduct student loan interest, etc. There are many more differences as well. It is, in fact, a separate code, not just a separate bracket.
- Individuals under the age of 15 also cannot get a drivers license. Does that mean they are not people?
- Obtaining loans has no bearing at all on legal status. But even so, a corporation can get all kinds of loans. What difference does it make if the loans are for capital or education?
- As you point out, women also are not expected to register for the draft, are they not people?
- The 5th amendment is a very interesting case with respect to corporations. You're kind of getting at the Collective Entity Rule, which basically says that an agent acting on behalf of a corporation cannot always exercise his or her personal rights, such as the 5th amendment. Here's what the courts had to say about the justification for the current state of affairs, "The privilege is limited to its historic function of protecting only the natural individual from compulsory incrimination through his own testimony or personal records" (emphasis mine). Note that it says nothing about "person". Also note that there is quite a bit of activity on this particular point, and in the near future the 5th amendment might be allowed to apply to corporations as well [1].
- Minors cannot be sentenced to prison terms, either. Are they not people?
- More limited does not mean non-existent.
No, I am not confused. In legal status, a corporation is a person. Period. The difference you're missing is that a corporation is an artificial person vs. a natural person (or if you prefer, a statutory person vs. a constitutional person). But still a person.
I'll also point you to the definition of Person from Black's law dictionary. Person. In general usage, a human being (i.e. natural person), though by statute term may include labor organizations, partnerships, associations, corporations, legal representatives, trustees, trustees in bankruptcy, or receivers.
> filing jointly you cannot take the credit for child and dependent care expenses
Yes you can. I file jointly and do this.
> you cannot take the earned income credit
Yes you can. Just google it.
> You cannot take education credits or deduct student loan interest, etc.
Yes you can. Again, google it. You are wrong.
I am tired of arguing with you when you keep saying things that are factually incorrect. Anyone reading this thread will clearly see that you are wrong. Goodbye.
I was incorrect on the above - the differences I noted were for married filing separately, not jointly. However, that goes further to prove my point. There are multiple tax codes that apply based on marital and filing status (single, married filing separately, married filing jointly, head of household, etc.) it is far more complicated than just being in a different bracket.
That being said, you ignored 90% of my comment, including the legal dictionary definition of Person and are now walking away to prove that I am wrong? Just, wow. This is not the level of debate I expect from HN.
Yes, it is true. The only question is extent, not of being - take a look through some of the case law summaries on wikipedia [1]. And you only addressed the expenditure portion of the hypothetical, not the income portion.
The 2004 tax holiday was a bad idea for trying to grow the economy. However, there is a clear difference between a short-term tax holiday and a long-term lowering of repatriated fund taxes. The problem is that investment isn't spurred by short-term windfalls, it's a slow, long-term strategy to insure a particular business is competitive.
If I was coincidentally looking to invest in something in the US during the tax holiday, I'd be in luck. But if I was looking the previous year or the following year, I'd still be facing a massive 35% burden over leaving the funds overseas. This creates a pervasive attitude that businesses don't even begin thinking about investing foreign funds domestically.
You and rrggrr are not arguing opposite things. "Theoretically", these investors who have received the profits from dividends and share buybacks will then turn around and invest money back into the economy.
Trump appointed Ajit Pai to the FCC whose doing his best to gut net neutrality for big communications. You have Pruitt whose dropping regulations for his big oil pals. You have Steven Mnuchin whose goal is destroy Dodd-Frank so financial firms can get too big to fail.
This administration is the most nakedly oligarchic and monopolistic since Harding was president. To peddle this idea that Trump will be a savior to the small business owner and the working man is nothing short of a lie.
I don't like Trump and his administration, and I think they are doing bad things like you have outlined.
However, I don't think they are doing anything new other than being blatantly obvious about it. We had Eric Holder under the Obama administration who was supposed to be in charge of the arm of the government that focused on the rule of law. Instead he "... considered the economic fallout that could result from prosecuting major banks for their role in the financial crisis..."[1]. Before that we had Dick Cheney and Haliburton under Bush. There are countless other examples of naked oligarchism under both administrations and that covers the past 16 years, and I would not be surprised if you found other examples of this magnitude under Clinton, Bush 1, and Reagan. Someone born the day busy was elected would be months away from voting right now.
We are undisputedly an oligarchy and are on no path to change that
80% of businesses don't survive their first year, though the number goes up if you have employees.
However, the percentages have been pretty consistent, year over year, for quite a while. This isn't a new trend, it wasn't better in the past. It was like this even before the current situation where there is 2-4 trillion needing to be repatriated.
Here are some numbers and a bit about how these numbers have been largely unchanged for a long time:
Blaming it on boomers and wealth preservation seems all too simplified, considering it has been like this for quite some time.
It's not that a lack of capital isn't a problem, it is - and that's the primary reason for failure. It's that trying to pin this on boomers is a simplistic way of looking at this problem and doesn't solve anything. The problem existed long before the off-shoring of capital. The numbers have been pretty similar, for quite a long time.
The failure rate of new businesses is mostly due to the entrepreneurs having no idea what they're doing. It's a learning process; many start many companies one after the other until they figure it out.
They cite lack of capital. I take that to mean they ran out of money. They'd do that if they didn't know what they are doing, so I suspect you're right.
Many, many people are very good at what they do. Being good at what you do doesn't actually equate to having good business sense or management skills. Being an expert craftsman doesn't mean they know how to find customers, read contracts, deal with logistics, hire employees, manage money, or any number of things.
When people ask how I managed to start my business and keep it successful, I usually tell them that it was mostly dumb luck. I was just getting good at it, some fifteen years later, when I sold it. There was lots of work involved, but a whole lot of luck.
I can't be the only one that would love to start a business, or join a riskier small business, but due to a combination of health insurance and student loans it is not feasible.
Both health insurance payments and student loan payments go to zero as income goes to zero. So what's the problem? If you find yourself with no income you will also find yourself with no monthly payment on your loan and free health insurance.
Student loan payments do not go to zero as your income goes to zero. You still accrue interest if you aren't making oayments. Additionally if you have any sort of cosigner, which is not uncommon, then the banks go after your family for those loans if you cannot pay. I know I have turned down risky startuo jobs because my parents credit would have been hit had I been unable to make payments
Good points -- interest still accrues, and some loans are private and you don't get access to all the pay-as-you-earn and income-based/income-driven repayment options. But for Federal loans with IDR, you absolutely can get a $0 monthly payment without any impact to your credit score, and this is not at all uncommon.
Correct, but as long as a significant portion of loans don't have that option it stands to reason that it would put a downward pressure on the number of people who felt they could start a new business
I think you're assuming that people have enough money saved to start a small business with zero income for an extended period of time, which I highly doubt is a common case. And what about the employees you have to pay enough to cover those things for?
Not at all -- I would not expect someone without savings to work for nothing at a startup, or try to start their own startup without outside funding and a salary. But it's important to recognize that both health insurance and Federal student loans have programs in place to support people who have no income.
America? Student loan debt has surpassed both auto debt and credit card debt in terms of percentage of the countries toal debt as per the Federal Bank of New York[1].
How many people do you know who could just shoulder double the car payments or credit card payments while taking in little to no income? It is not an insignificant burden
A agree that a large student loan is a heavy burden. But, like a car payment, it's a reasonably easy burden to avoid having. So it surprises me that so many people list it among their biggest problems.
A college degree is not something Americans think they can go without anymore. You get taught your whole life in the educational system that if you don't go to college you are going to be a failure. Degrees are so prevalent now that they are becoming the new high school diploma instead of a differentiator. In 2012 I was a year out of college, 4 years after the recession, and working at a call center that would only accept employees with a bachelor's and they had too many applicants.
Given how many jobs have moved to cities nowadays I wouldn't be surprised if it was easier to get by without a car than it would be to not have a degree, and this is in car centric America
But I got my B.S. in Computer Science in 2007 from my state's flagship state university, and graduated with no loans.
I got about a year's worth of classes out of the way at a community college before going to the real school. I guess my parents probably covered about 1/3 of my total tuition. The rest I covered by delivering a lot of pizzas.
Having to work at night while you're in school is inconvenient. But getting a degree from a public university without accruing a vast debt is far from impossible. Or at least is was in 2004 - 2007. Maybe things are different now?
I went to a state school and worked, epecially in the summer when I would pull OT every week it kinda covered rent for the most part and that was it. If I had worked enough to pay for tuition as well it would have gone past inconvenience and become close to impossible to accomplish while also maintaining grades. Going to community college first was a smart idea and I recommend it to anyone thinking about college, but at least when I was in the school system we were actively told not to endager our future and go to "real" school instead. We can't expect children, in significant numbers, to be able to see past the advice being given to them by their elders.
Ah you graduated in 2007, it did indeed change drastically after that. The next year the recession hit and schools everywhere had massive price hikes. My school saw a 12% hike in one year and the price went up almost as much every year after that. IIRC some state schools in California saw hikes near 30%. None of these hikes have been reversed and the price has just gotten worse and worse every year.
But what makes you think that any of that money would be any more easily available to small businesses than now? We’re talking about money owned by Apple and similar multinationals here (and banks no doubt), and of course by the Trump organisation.
If you think that Trump opposes wealth preservation and predictable returns for baby boomers, you're delusional. If anything is certain about Republicans, keeping generational wealth inequality is one of their most important issues.
> In agriculture the USGOV is literally paying farmers NOT to farm in some areas.
If unfarmed land provides a benefit to the public and it costs the landowner money to provide that benefit, how is that different than the government contracting to provide any other service to the public?
First the problem is startups getting crushed by the cash available to large companies, then the solution is repatriating those same large companies' offshore cash hoards? I'm not exactly convinced.
If you're a business with tons of cash in foreign accounts, you will have good credit rating. If you have good credit rating, raising debt will cost you next to nothing in today's low-interest environment. Both Google http://www.telegraph.co.uk/finance/markets/8517781/Google-ta... and Apple https://www.cnbc.com/video/2016/02/16/apple-taps-bond-market... have sold bonds. The creditors know that if the worse comes to worst, there's always the stash of cash that can be brought in during downturn years when there're losses that can be offset.
Repatriation is a red herring sold to the masses as a silver bullet solution to every economic problem. The money that could be put to use has already been repatriated, the rest can be repatriated on a relatively short notice, given the liquidity of the high-grade corporate bond market.
That, plus a bit of over-reliance on the US Census Bureau's way of measuring new startup activity. It's now easier than ever for individuals (read: not registered businesses that reporting agencies typically count in their studies) to start up and run experimental ventures, especially online. (edit: typo)
It would be useful, at least on HN, to distinguish small businesses like a new pizzeria from what most of us call a startup; i.e. a tech company that's probably building software to solve a problem and scale.
That aside, I would point out that startups and small businesses are no match for the incumbents when it comes to lobbying and regulation. The principle of "concentrated benefit, diffuse harm" applies, especially when the power is already concentrated in a corporation looking to weaken future rivals.
Few politicians and policy people on either side of the aisle understand tech, startups, their financing or incentives, and vast swaths of the tech sector are remarkably disengaged from educating those decision-makers even as Washington and the state capitols pass laws that affect their interests.
Immigration restrictions, for example, will have an enormous and damaging effect on US tech. How many people do you know have actually spoken with their senator about it?
Every one of those companies is someone's dream. Don't dismiss them for not being tech. Domino's Pizza ($2.5B revenue) was once one of those new pizzerias that you wouldn't call a startup (read the History section of https://en.wikipedia.org/wiki/Domino%27s_Pizza).
The same mentality is why universities graduate more students in the visual and performing arts than computer science, math, and chemical engineering combined(1).
It's not enough to let people follow their dreams, if their dreams lead most of them off a cliff. You have to either catch them when they fall, or help them find better dreams.
Not everyone has the desire or ability to do STEM. I'm not sure why you'd not encourage them. You do appreciate having someone cook your food and create the art and media you consume, right?
The best part is paying minimum wage for it, because there are so many of them. :)
Except not. These aren't people going on to be visual artists. These are people frittering away their college opportunity, and then going on to careers were the degree doesn't help.
>"There is nothing wrong with the arts, psychology, and journalism, but graduates in these fields have lower wages and are less likely to find work in their fields than graduates in science and math. Moreover, more than half of all humanities graduates end up in jobs that don't require college degrees, and those graduates don't get a big income boost from having gone to college."
These aren't people successfully chasing their dreams - these are people avoiding adulting for four more years. It's not appropriate to encourage kids to go to college "for the love of something," unless they already have the means, or at least a plan, to pay for the rest of their life.
I agree with you that not everyone has the desire or ability to do stem, but the poster you are responding to accounted for that. We have to catch them when they fall if the open market does not value those people, but we as a society do value them. We shouldn't continue on our current path of telling people to follow their dreams or that all careers have some value and then throw them to the wolves when it comes to paying to live in our society. This applies mostly to the US
I'm sure there are plenty of people who have successful careers based on visual arts degrees: my SO is one. Their sibling, however, is the counterexample: her degree was just a vague attempt to put off adult work, and she now lives back at home with her parents, doing nothing.
FTA I posted:
> "There is nothing wrong with the arts, psychology, and journalism, but graduates in these fields have lower wages and are less likely to find work in their fields than graduates in science and math. Moreover, more than half of all humanities graduates end up in jobs that don't require college degrees, and those graduates don't get a big income boost from having gone to college."
They aren't, as far as I can tell (my wife is a successful visual designer). They tend to be started by individual designers who find a successful niche, or (less often) design collectives that band together to hire business staff.
That's not the point though. The bulk of these people are getting majors they never use. I would argue they should never have been pointed in the direction of an industry they don't have the aptitude for, no matter what their 'dreams' are.
I'm not saying that small businesses are somehow worth less than startups. I'm saying that they are different in many ways: intent, team, sector. And because they are different, increases in the rate of their creation mean different things.
My family includes people who run small businesses. I respect them and their place in the economy. Collectively, they employ more people than the mega-corporations. Those that are privately owned have the leeway to maximize values other than shareholder value; i.e. act morally. I'm into it.
But most pizzerias don't want to grow to be Domino's Pizza. They're founded by people who like to build something at a certain level, be directly involved, and would rather not manage a billion-dollar company.
When we say "startup" in SV, SF, or YC, the word means something, and that something is not a pizzeria -- right? But the New York Times is using the word in a different way than the community here. That's largely because startups are sexy and small businesses are not. Startup is a short word that fits in a headline, and small business is not. So the headline is misleading to readers here, even if the misdirection wasn't deliberate.
It may be difficult to distinguish startups from SMBs in the statistics the NYT reported. But we all know that startup creation is pegged to things like VC funding. It might even be inversely proportional to megacorp engineering salaries, for all I know.
But those factors have almost zero to do with the pizzerias, which are probably tied to banks' willingness to make loans, the growth of cities, the price of supplies and employees, etc.
I'm not saying that startups are better than SMBs, just that conflating the two is not very enlightening.
What makes something a startup though is if it's arbitraging some temporary economic disequilibrium. How big the business ultimately becomes is unrelated to whether or not it would qualify as a startup.
> It would be useful, at least on HN, to distinguish small businesses like a new pizzeria from what most of us call a startup
A new, small business _is_ a startup though[1]. Just that our current trade policy dictates most small businesses are service-oriented doesn't mean other small businesses are somehow different in purpose.
> That aside, I would point out that startups and small businesses are no match for the incumbents when it comes to lobbying and regulation.
> Immigration restrictions, for example, will have an enormous and damaging effect on US tech.
Legislation finds a balance between business development and quality of life for its people. For decades, legislation has been skewed in big business's favor, leading to an incredible spike in income and wealth inequality. While immigration reform isn't what's best for business, it is in reaction to a growing need to help our middle class again.
Lobbying can only work so much when widespread dissatisfaction in our government and economy leads to populist uprisings.
We have a semantic disagreement. I'm saying startup means something different to people in SV and on HN than pizzeria or local accounting firm. A better term for those is SMB: small and middle size business. And for startup, we reserve the idea that it is an organization in search of a business model that intends to grow very quickly. Neither is true of most SMBs. They are copying well-known business models and content with not scaling.
> Legislation finds a balance between business development and quality of life for its people.
This is a naive view of legislation, if only because there are many more interest groups than "population" and "big business". Legislation does not find a balance. It is the product of a complex process whose results are unpredictable, and it is heavily influenced by both the permanent bureaucracy of the state, re-election-seeking lawmakers, and all of their donors. Sure, big business is one of the donors, but money does not map directly to votes.
> For decades, legislation has been skewed in big business's favor, leading to an incredible spike in income and wealth inequality. While immigration reform isn't what's best for business, it is in reaction to a growing need to help our middle class again.
Immigration benefits many SMBs and society as a whole, including the communities that wouldn't have doctors if it weren't for immigrants. Big business is not the driving force behind encouraging immigration -- it's a cross class, cross-sector issue. That said, when economies go wrong for other reasons, marginalized voters tend to blame immigrants for lack of a better scapegoat. Even if you accept that immigrants are the cause of citizen's being out of work in America, which I don't, no one thinks that they're taking middle class jobs. The immigrants vilified in the news fill working class and service class roles in construction, cleaning, ag and food service. These are actually jobs that US citizens tend to avoid. But they like blaming fictional brown people when Fox news stokes the flames.
It would be useful, at least on HN, to distinguish small businesses like a new pizzeria from what most of us call a startup; i.e. a tech company that's probably building software to solve a problem and scale.
That would assume the conclusion. As a thought experiment, imagine a world in which the number of startups is growing. In that world, you can imagine that every new pizzeria is going to grow into the next PizzaHut or Dominos. That is every tiny little new retail store might be a giant 10 years from now.
It is from the frothy, primordial soup of little mom and pop shops that new giants emerge. I don't have time to make an attempt at making a list, but 2 examples off the top of my head: both McDonalds and Barnes & Noble were small family businesses, for decades, before new management took over and found a way to turn them into giants.
'Many economists say the answer could lie in the rising power of the biggest corporations, which they argue is stifling entrepreneurship by making it easier for incumbent businesses to swat away challengers — or else to swallow them before they become a serious threat.'
How many start ups are founded with an explicit target at being acquired by a megacorp? Increasingly a few massive monopolies in tech are siphoning up more and more markets, often without even extracting profit (its for data and customer acquisition). While it is good for the consumer, it certainly is not helping maintain a dynamic economy.
It’s easier. I like the convenience of just going to Amazon and ordering what I need without having to think about it. When I’m in a new city for a night I could research and pick out a boutique / bed and breakfast, or I can just open the Hilton app and get a consistent room without any work.
Right now it's great. Come back to this question after competitors are driven out of business and you don't have much of an option should Amazon decide to capriciously raise prices. I tend to think decentralization is a good thing even if it's not more convenient at every level.
and, as you suggest, probably not so good for entrepreneurs. their upside is limited. fewer small companies can hope to grow large, remain independent. fewer founders can grow into full fledged, mid or large company CEOs.
Cost of healthcare is in IMHO, the reason. It's hard to start a business and get talented people if you can't afford to provide healthcare.
It's really hard to change jobs when you have a family with ANY health issue, this is also causing people to stay in jobs longer than we've seen since the 50's.
The F'd up healthcare system we have is now dragging down the economy.
I've seen a lot of debates about basic income, I think that is stupid. If we give out basic income people will need to use that money to pay for healthcare.
How about healthcare for everyone, then we can figure out basic income.
The price was lower, but the overall regulatory environment was much worse.
Insurance companies could deny coverage based on a variety of pre-existing conditions, even minor ones.
Insurance companies could deny coverage based on the lack of previous coverage, i.e. not having a valid insurance policy for a few months while you were switching employers, etc.
The policies had no hard limits on out-of-pocket maximum, which meant that for some prolonged treatments (cancers, complicated surgeries) you could easily get into the debt that would lead to an eventual bankruptcy.
The forms that you had to fill in during the application process asked for a quite detailed family history, so for a couple with kids that would include parents, grandmas and grandpas on both sides, and then you add siblings. If you omitted any symptoms or complications, perhaps by mistake, or perhaps grandma's arthritis wasn't really a dinner conversation topic, the insurance companies could claim that you've intentionally falsified your medical history, and deny coverage retroactively.
In the US, I can say anecdotally healthcare was never quite affordable but it has been getting increasing un-affordable each year for at least the past 17 years at least. I know because I see the larger and larger premiums deducted from my salary every year of my professional life, even when not accounting for family-hood. It is the constant talk in October/November when most professionals have to sign up for health plans and get sticker shock.
Both. It was more affordable, but it was also a lot simpler. Because it was less likely a doctor could actually help you, many people didn't bother at least for minor ailments.
When I was a kid, if I had a sore throat or fever I just endured it, maybe with the help of some aspirin. Parents didn't rush panic-stricken to the doctor for every bump and sneeze.
500,000 businesses a year means we’re not talking about high-tech startups alone. This entire article seems to be using a single statistic (100,000 fewer businesses are started per year now as compared to before the recession) to push an agenda. It talks about how useful these businesses are in employing the less-educated and as an entry point to the middle class, and then talks about YouTube and Instagram without acknowledging those are two very different types of business.
I would be interested in seeing a breakdown by sector. My guess is that the number of new restaurants, laundromats, and nail salons has decreased the most, and that’s what’s driving the overall decline. And, rather than being the result of pressure from the Googles and Facebooks, it’s a natural result of the recession. Fewer people have the nest eggs to start a capital-intensive business, and fewer people have homes to use as collateral. Credit is harder to come by. And potential customers have less disposable income to shop with. All of these trends are well-established and seem to have a broader impact than the main points of the article.
Remember the trend is almost 40 years old, starting in 1980:
Yields on 10-year U.S. Treasuries hit an all-time low yesterday. Before you spin a story using recent events: remember long rates have been trending down for thirty odd years. And that’s true in most advanced economies. So think bigger than jobs day or Brexit or liftoff. And while I’ve got you thinking in decades not data releases … also consider that the share high-growth young firms, aggregate productivity growth, and general satisfaction have all been trending down since early 2000s. And again not unique to the United States.
No single factor has a chance at explaining all these trends … Still I think a common thread of population aging and reduced risk taking is worth exploring. The idea that aging can change individual behavior is nothing new but sometimes the gradual and the familiar are easy to discount. Also, and a bit more provocatively, I want to argue that effects of population aging go well beyond the behavior and views of older individuals.
..As we age, we are less willing to take risks.
In numerous studies, including my job market paper, older individuals are less willing to take risks than younger ones. In fact, I was able to see how much risk tolerance changed with age (and other factors) in decade-long panel study of older adults. Aging by a decade led to a 17 percent decline in risk tolerance. For comparison, women were 14 percent less risk tolerant than men, on average, even after taking into account several other observables including age. My main takeaway from this work was that persistent differences across individuals create more variation in the willingness to take risks than the changes within person over time. However, of the factors that seem to cause risk preferences to change, aging was by far the most robust in my data and shows up in other studies, including those with younger adults.
It'd be interesting to get a split beyond just pure volume of startup businesses to dive a little deeper -- small businesses divided by industry, and also revenue/profit per small business might be interesting to look at.
Anecdotally, it doesn't feel like small businesses have slowed, though I live in the eye of the Silicon Valley storm. I'd love to dive deeper into the stats to try to reconcile what I'm anecdotally experiencing and the systematic truths that might be out there.
Before the Internet, small businesses had a few key competitive advantages going for them: being local. Process Knowledge. knowing your customers. Customers had hard time to compare. Etc. Now they're gone.
After the the Internet and the recession, scalable businesses, had few advantages going for them: everything became scalable. A lot of VC funding. Technology is better(and the advantages come first to those with capital). Many things can be turned into a network. Everything became global.
So those forces should decrease the number of small businesses. By a lot.
On the other hand, small businesses still got some advantages, and the main among them: many new niche markets became accessible, mostly via targeted marketing, scalability and opening of larger markets. That was the new hope.
Did could it be that this hope has failed us ? and if so, Why ? What can be done to enable more niche businesses ? or is it the wrong answer ?
> Did could it be that this hope has failed us ? and if so, Why ? What can be done to enable more niche businesses ? or is it the wrong answer ?
Small businesses can't compete with global mega-corps who exploit cheap labor and lobby(bribe) the government in their favor. Young people can't afford to start their own businesses when the smartest among them have massive amounts of student loans, rising housing costs, and are under the threat of bankruptcy if they get sick. If we want to stimulate small business growth while also increasing economic development in rural areas, we need to do something about globalization. People need to feel economically secure to have the leverage to start a business, which necessitates a rising quality of life for all the classes, not just the upper class.
> Young people can't afford to start their own businesses when the smartest among them have massive amounts of student loans, rising housing costs, and are under the threat of bankruptcy if they get sick.
You think that 35-year-old with a wife, 2 kids, and a mortgage has those problems any less?
Not having universal health care is an economic drag. We have study after study on this.
Rising housing costs are a drag by preventing labor liquidity. People can't just move from one area to another when so much of their wealth is tied up in an illiquid asset.
Neither of these is inherently tied to globalization.
DC has funny issues likely shared with some other locales. The traffic is so bad people do not want to show up. People move 30 miles away for square foot dreams appropriate to where they grew up and then hate getting to work. Then many dimmer lights here enjoy well paid, easy and even secure event planning or influence peddling jobs. DC political giveaway and pecking order jobs are attractive temptations for entrepreneurs comparing notes and dating. Then add limelight fears vs. friends working well behind walls.
I tried to explain during onboarding that we were not providing public school teacher security and summers off with "tech industry" upside. It did not matter. Expectations were driven by friends and family narratives. Everyone borrowed like consumers, even dabbled in tech day trading and panicked at every industry downturn.
Entrepreneurs must have the operative networks to "front run and flip businesses" or be money savers with real wills to endure as an operational team. Sony failed first making ironing board covers. The team kept going together. I learned enough working for Bill Wynn and Mark Pincus. People not so lucky must read some business case history and biographies. Those are not long or hard reads. Otherwise people are infected with the wrong expectations.
Student debt is a giant depressing obstacle. I am considering registering a religion so "friars" can defer their student loans operating small scale operations together, rotating roles, cost accounting, scheduling, writing contracts for fulfillment and finding sound counsel advisors. Business formation must put process refinement, team building and network growing front and center. It has to be functional, information rich and mostly fun all by itself.
No waves of pens solve these problems deep within motivational structures and widely disparate comparisons between possible futures.
My gut says it's because a larger portion of the younger workforce don't feel the urge to start a business - or even work.
I know too many undergrads who live in their parents basements playing video games all day. Parents pay for their housing, food, and gadgets. Their "happy" and don't sense a need to work or be productive or even hold up their end of the table.
Bring a little financial adversity into their lives and my guess is you'll see some hustle.
> Bring a little financial adversity into their lives and my guess is you'll see some hustle.
That would be awesome, except that research shows over and over that the laziest rich kid does as well or better in life than the most motivated poor kid.
Bring some consequences and financial adversity to the rich and maybe we'd see some hustle, eh?
Depends on your definition of "as well or better in life". If you mean they make as much money... maybe. If you mean they produce more than they consume, I doubt it.
I would like to see that research though. Can you provide links?
Maybe related:Internet Porn.some psychologists say this has a big effects on drive and motivation. Maybe it shows in people choosing a job over a business ?
Yeah! Those pot smoking hippies. Whoops, I'm from the wrong wrong era, I mean game playing wasters.
We pay those lazy bastards too much, let's keep all the money in our generation because we obviously earnt it, not being given anything at all by the previous one because we're so god damn hard working. Never took a day sick before I was 165.
I wonder how much the amassment of frivolous patents by large companies coupled with fear of litigation contributes to this trend.
Even if you are right and it's a frivolous patent, you can't afford to defend yourself. Once you get big enough to survive on your own and establish a small foothold, the big boys will be looking to steal all your IP through the court system.
Most US small businesses are small retailers and service businesses, not innovative startups. Starting a small retail shop today is not a good idea - you probably get clobbered by Amazon and WalMart before you even start. Malls are dying. The US is "over-stored."
Starting a service business still has potential, but it may mean being a slave to a franchise system like Servicemaster or Roto-Rooter. It's more like a contract employee. There's consolidation in services. Think Uber.
Starting a restaurant is a classic way to lose money. Don't go there.
There just aren't that many places where there's potential profit for new entrants in classic small retail and service businesses.
I think the rising cost of health care, child care, etc just mean that your business better provide a real service or fill a niche that is badly needed. If the barrier to entry is super low then everyone with a half baked idea would start a business, watch it fail and default on their debt. It's probably not a bad thing to be at least somewhat hard to start a business. That said, most serial entrepreneurs bring their own money and manage to build something as they have the capital. Then after a few years, sell their mediocre company for 20x what they put in. Rinse and repeat. Life is pretty good when you are already rich.
Whether starting a business is good or bad is irrelevant, the question is why it is happening less now than in 1980. Also, where does this trend end? The rate of business formation has been declining for almost 40 years, and the rate of decline has accelerated since 2000. So we should ask, how far does this trend go? How large do the monopolies grow? Will there ever be an era when the USA returns to creating new businesses at a rate that would have been normal for most of the 20th century?
One issue with studying the effects on economic policies (licensing, wage floors, etc) is that it's difficult to meaningfully measure companies that never get created, beyond maybe hypotheticals via polling.
[0] http://www.zerohedge.com/sites/default/files/images/user2305...