Distribution of federal money to a lightly regulated investment industry isn't likely (and for plenty of good reasons), but the general idea of stimulating entrepreneurship is a good one, and deserves serious consideration. Such efforts address immediate needs by providing jobs, but also put the United States in better position to meet the health care and energy challenges that threaten our future economy and overall well-being. Technological innovation, brought to life by entrepreneurs, is critical for health care cost reduction, expansion of quality care to more Americans, and development of sustainable energy alternatives. The recently announced Recovery and Reinvestment Act commits an impressive amount of money to scientific research and technology infrastructure, which is a great start, but we still need additional support, from government or elsewhere, of nascent ventures stuck in the "funding gap" between academic research and high-quality investment. Along these lines, J&J, Lilly, and other pharmas are partnering with universities and venture investors to build early-stage development programs and "accelerators" to capture technologies typically lost in the "valley of death" between initial scientific publications and progress through the early regulatory stages. Partners HealthCare, an integrated health system non-profit founded by Massachusetts General Hospital and Brigham and Women's Hospital, recently spun out the Partners Innovation Fund to address the same need. Even traditional venture firms recognize the need to readjust investment priorities in light of President Obama's commitment to health care reform (see Psilos Group's Albert Waxman recent post on The Health Care Blog, in which he identifies innovation as a key element of health care reform, and calls for increased action among venture investors in the health care space).
Still others have a different perspective of stimulus efforts, health care reform, and their impact on innovation. James Manzi of the City Journal wrote earlier this week that increased national spending is "bad news for American entrepreneurs." He argues that the increased income taxes needed to recover the expenditures will discourage potential entrepreneurs from kicking their start-ups into action. Manzi reasons that the "rational" entrepreneur will have to foresee higher odds of success in order to make up for the lost pay-off going to increased taxes. Unfortunately for those eager to jump on big government spending amidst economic crisis as anti-capitalist, Manzi's argument simply doesn't apply to any self-respecting entrepreneur. The reality is that entrepreneurs face such steep challenges and low probability of success at the outset of venture creation, especially if their ideas are worth anything, that whether they pay 39% instead of 36% in federal income tax, or 20% instead of 15% in capital gains, is hardly a consideration, and never a deal-breaker. Entrepreneurs start companies to build something new and make a meaningful contribution - this is the only way they succeed at any significant level, and the only way they are eventually financially rewarded for years of hard work with little pay and no guarantees. Arguing that concern over these kinds of tax increases will "squelch" entrepreneurship shows a fundamental misunderstanding of the entrepreneur.
Our health care system relies on public servants and entrepreneurs to work together and realign cost-coverage-quality trade-offs. Our country needs entrepreneurs more than ever to create jobs and stimulate local economies. I believe our entrepreneurs will rise to these challenges. The calls of unmet need have driven American entrepreneurship for over two centuries, and I don't see why our current situation should be an exception. Those "entrepreneurs" who opt to sit on the sidelines and wait for better odds of "success" should consider a career change.
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