Dylan Ratigan Show   |  May 18, 2011

Business – the key to job creation

Author Henry Nothhaft and panel discuss why the government continues to block thousands of potential start-up jobs.

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This content comes from Closed Captioning that was broadcast along with this program.

>>> new business , not small business , new business is the key to job creation , the stats back it up some why is washington blocking thousands of new businesses and so hung up on the rhetoric of small businesses , some of which may not have added a job in 30 years? ask today's pressist, entrepreneur henry nothat developed several startups which created, by his estimate, 6,000 new jobs with, yes, new businesses. he is also author of "great again, revitalizing america 's entrepreneurial leadership." he also chairs the technology miniaturization firm tesera. the panel still with us. jonathan , mark and matt. hen tricks is obviously a pleasure to have you here. the numbers are right there something like 70% of all the jobs in america come from new businesses and yet the entire imperative from washington is a small business rhetoric and tax cut rhetoric, nothing around new business formation?

>> very frustrating. you never hear anyone speaking about the root causes out of washington that's why i'm here today and yes wrote the book t is always cut taxes, increase government spending . they never give a thought to where the jobs might be being created, that their policies that they are implementing. so whenever they talk about cutting taxes, offering some incentive to create more consumer electronic dees manned, i wonder, don't he they understand that job is being created in a manufacturing plant in china and there's only so many jobs that we really need in the united states that sell these goods so they really are disconnected from the job creation .

>> at the same time they love to talk about jobs they love to talk about small businesses even though it is new businesses that create the jobs them love to talk about tax cuts for the rich as a job creator and yet, we continue to see tax cuts where we basically take on more debt in order to cut taxes, as barack obama told us to do last december. do you think it is because they don't understand what we're talking about they don't care can or they basically -- i can't -- i honestly can't explain it?

>> i don't know if they care or not, i don't think they understand the issue. they have heavied on us a one-size-fits-all government. whenever they pass a piece of legislation whether it is sarbanes to oxley , toddodd frank or others, they don't take into account that the bills disproportionately cost and cause damage to small companies.

>> jonathan go ahead.

>> dylan, keep going.

>> if you were to look at -- change could be made. if you were here advocating policy change that would help new business today in america what would it be?

>> the first thing i would do is freeze new regulations on small businesses . second the second thing, a carve out of the minimum size that sarbanes-oxley applies to as well as dodd frank and i would pick around $500 million in market capitalization as what would make sense in today's economy.

>> how would you reconcile an advocacy like that with the obvious prevalence of theft, fraud, corruption and abuse in american business today ?

>> well, i think theft, fraud and abuse does not really occur in small businesses , by and large.

>> or at least if it does it is not as damaging?

>> the companies threatening the entire financial tomorrow system and where sar/box was passed, mci, enron and the likes. come 2008 , we have a huge financial melt down, layman brothers, bear stance, every one of those companies was sarbanes-oxley compliant. they passed legislation, they didn't even stop it the meantime, the small businesses are the real casualties of these type of policies.

>> why are the new businesses the job creators?

>> the fact is multinationals have choices, we they sit back to decide where to hire the next employee, they look at tax benefits, new employees, tax benefits they might receive. if you look at the last ten years, multinationals have added 2.9 million jobs internationally while cutting 2.4 million jobs in the u.s. they could have chosen to create the jobs in the united states , perhaps if the business climate was better they made a chase choice to move offshore. small businesses generally don't have that choice.

>> if you look at the jobs in chain narc the reason they are -- one of the reasons they are so good at getting them, they use places like fox com, pay them a few dimance hour, work 20, 25, 30 hours at a time, sleep ten to a room, not allowed to go to the bathroom, put up net fuss try to kill yourself, the net catches you and put you back to work and you just keep making iphones and all the rest of it. is the best way for america to compete to move to the slave structure, more basic competitive to china or a better direction for us?

>> absolutely not. the lower labor costs in china are way overrated. if you look at highly capital intensive high-tech manufacturing, labor costs only represent 3% of the entire costs. labor costs are not the issue in competing with china. it is more of the tax structure and capital structure in the u.s. what is good about small businesses , we don't need --

>> don't come up.

>> don't need the government offer subsidies and anything else, all we need is an government to get the heck out of the way so a entrepreneur can go out and have a fair chance to start a company and succeed.

>> mark, go ahead.

>> i just heard music to my ears when our guests said government get out of the way. i'm curious what you think is the comparative ability of new businesses, regardless of their size, and established corporations in terms of the problem of regulatory capture where you have corporations that find it easy to become buddies with people in government and keep other competitors out of the market?

>> if i understand your question correctly, once you have representation in washington , you are no longer a small business .

>> new businesses are they any less likely to be in bed with washington ?

>> definitely not in bed with washington it is the established companies, the established organizations. it is not just business it could be the teachers' union it could be any special interest . they are in washington . they have representation. they are there full time trying to get their policies implemented there's no one there that i know of representing small new startups on a regular basis in washington , d.c. therefore, they don't have access to that sort of influence.

>> matt?

>> can you say more about what exactly the problem is? i think some people might say you have google, facebook, netflix driving, silicon valley , venture capital ecosystem, a lot of innovation in the american economy , what are the obstacles specifically you are concerned about?

>> the problem with the media-centric companies that you just talked about, it's a boomlet that's going on in a very concentrated area. like we have microclimates in the weather in silicon valley , we are having a microclimate in the economic boom that's taking place out there and the encenter is palo alto , menlo park , and there's a handful of media-centric companies that are very hot, very high valuations but they don't manufacture, they don't create jobs and they don't disburse wealth into the community broadly as things used to be in the previous versions of the silicon valley model, full. so a company like facebook, when it hit $50 billion on a private valuation the other day, 1400 employees. and all the wealth is being concentrated amongst a handful of investors, goldman sachs ' high rollers that exist overseas and a handful of employees. so, those companies are great companies, i have nothing against them but they are not creating jobs, they are not creating what -- the middle class . if you look at the silicon valley as a whole, there's people like a russian vc buying $100 million house he is not going to live in while 10% of the population is eating at the second harvest food bank on a regular basis once a month. so, there's a real dichotomy in silicon valley , there is not a broad boom in silicon valley tucker is really turning into a banana republic and really haul hollowing out the middle class .

>> fundamental basis of an environment creatively that encourages anybody to start a new business that is the greatest job creator, problem solver , innovate they're exists in this world, even if the business fails, right, henry , you ultimately still have people who have worked that year or for a couple of years, they probably learn sold things they didn't know before they did that probably melt some people they didn't know before that and now they can go on to do what of the next thing is if you don't have those easy new business and the cull charge their is needed to support it.

>> america is the land of the second, third and fourth chance. that's what's really great about this country.

>> exactly. listen, jonathan , mark, matt, a pleasure had, thank you, gentlemen. henry , absolute flesh sure. you have been watching me since bloomberg, before i had gray hair, the financial crisis turned me gray. a pleasure to see you.

>> thank you so much. thank