- The Washington Times - Friday, July 7, 2000

At the dawn of the 21st century, we are in the midst of the most exciting economic times history has ever recorded. Indeed, given mankind's God-given abilities to create and innovate, and America's remarkable artistry for taking risks and investing in new ideas, only two dangers truly threaten our long-run prosperity bad public policy and cultural decay.

As my co-author Thomas Edmonds and I point out in our new book, "U.S. by the Numbers: Figuring What's Left, Right, and Wrong with America State by State," the United States is experiencing an "entrepreneurial revolution" that simply dwarfs the "Industrial Revolution" of the 17th and 18th centuries. Leaps in technology, especially in the areas of telecommunications and computers, have empowered the individual as never before.

Consider that between 1980 and 1997, for example, the U.S. population increased by 18 percent, but the number of businesses, according to IRS tax returns filed, jumped by 72 percent. And over this same period, the United States was a job-creating juggernaut. Employment increased by 32.2 million between 1980 and 1998, while employment for Canada, Japan, France, Germany, Italy and Great Britain increased by only 16.8 million combined. And the United States was tops among those nations in terms of the percentage gain in employment as well.

But even in terms of manufacturing, where the United States lost jobs between 1980 and 1998, manufacturing production continued its ascent as a result of increased productivity through advancements in technology and other efficiencies. In terms of communications, transmitting goods, services and information, and moving capital, time and distance are becoming less and less meaningful. Just consider how integrated the United States is in the world economy today compared with just a few decades ago. In 1959, for example, total trade (exports plus imports) amounted to just less than 10 percent of the U.S. economy, while by the late 1990s, total trade had reached almost 25 percent.

And since capital, information, goods and services are more mobile and accessible, so then is labor. Empowered entrepreneurs are increasingly able to start up and build businesses pretty much wherever they like. It is worth noting that in late June, the Organization of Economic Cooperation and Development (OECD) publicly criticized 35 nations around the world for serving as tax havens to businesses and individuals. The OECD might not like it, but in the point-and-click Internet world, they better get used to it. When it comes to life and work, having to be in a particular location is less and less of an imperative.

This increased mobility of both capital and labor must be recognized by elected officials and policy-makers. If not, their respective towns, cities, states or nations will pay dearly. Much of "U.S. by the Numbers" is dedicated to following key trends and rankings for the United States as a whole the 50 states and Washington, D.C. in order to determine who is well-positioned and who is not when it comes to critical matters like taxes, the size and scope of government, education, crime, health care, the environment, and so on. Indeed, the "entrepreneurial revolution" is not only boosting competition in the private sector, but will intensify competition in the public sector as well. While nations, states and cities have always been punished for imposing high taxes, burdensome regulations and bloated government, the penalties imposed by the private sector promise to become swifter and more severe.

That means that if a city like Washington continues on with onerous taxes, a failed public education system and a lavish welfare state, the District's dismal record in terms of population, jobs, businesses and the economy will only grow worse.

As for the United States in general, while relatively well-positioned globally, critical improvements are needed on the policy front. For example, tax rates on personal and corporate income must be cut deeply, with an eye toward moving to a pro-growth flat tax or retail sales tax system.

Counterproductive multiple layers of taxation need to be eliminated, starting with capital gains and death taxes which serve as direct assaults on entrepreneurship and investment. Free trade and sound money need to be secured. In contrast, increased entitlements and bigger government must be avoided. On key issues like health care and Social Security, government regulation and spending must give way to measures like tax-free medical savings accounts and personal retirement accounts, where the individual is in control. Such policies fit neatly into a more mobile and dynamic economy and society.

Beyond policy, our culture must be sound enough to support this "entrepreneurial revolution." Culture and economics cannot be separated; they are intimately intertwined. Required are trust and a common understanding of right and wrong; a positive work ethic overcoming any kind of entitlement mentality; and protection of life, limb and property. In the end, the "entrepreneurial revolution" will place the highest value on individual freedom and personal responsibility.

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