EDITORIAL: The vanishing entrepreneur, crushed by red tape and regulations

It’s not the wealth gap to worry about, but the growth gap

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President Obama focuses on the “wealth gap” as if that were the nation’s pressing economic issue. So long as there’s a disparity of ability, determination and luck, some people will be better off than others. The alarm to raise is not about the good fortune of some, but the bad fortune of the vanishing entrepreneur.

He’s rarely seen these days as hope for economic rebound fades. The bitter facts lie in the findings of a survey by the Brookings Institution that the nation’s entrepreneurial spirit is dying. The vision of Sam Walton, Bill Gates, Steve Jobs and their kind has been punished to the point of extinction.

Strangled by endless spools of red tape and beaten down by taxes and government fees, businessmen are losing their zeal to convert an idea into a startup business or expansion of one already operating. It’s too much work and risk, to get approvals and comply with laws written by bureaucrats with no spirit or vision. Such rewards as there may be are consumed by taxes. That’s why there are fewer jobs to feed growth.

The Commerce Department had to borrow a microscope to see the minuscule 0.1 percent “expansion” in the economy in the first quarter. The Labor Department reported a productivity decline of 1.7 percent in the same period, meaning factories are less efficient, while unit labor costs rose 4 percent. Taken together, this means many businesses will continue to struggle to stay alive.

Brookings economists Ian Hathaway and Robert Litan measured the pace of new business creation across a wide swath of industries. It has been in the decline for some time, but the decline became a plunge in 2006, when the rate of entry of firms fell by half. At the same time, the rate of shuttered storefronts rose until reaching the critical point where “business deaths exceed business births” for the first time in three decades. The decline is nearly universal, with only a handful of metropolitan areas lucky enough to escape the dreaded malaise.

The blame for the situation falls squarely on Washington, where federal policies stifle innovation. Some 18,000 new federal regulations were imposed between 2008 and 2012, and many more are under consideration. Each one adds to the cost of doing business. Many firms have had no choice but to hire compliance experts to avoid running afoul of the increasingly complex maze of rules and requirements.

The tax system is oppressive and complicated. No other developed nation has a corporate-tax rate as high as America’s, and the global tax policy encourages companies to leave the United States for a friendlier tax climate, taking their profits with them.

Worst of all, the businessmen and entrepreneurs who provide the jobs and keep America’s economic engine running are vilified. “You didn’t build that,” says Mr. Obama, with a sneer, and he raises the rhetoric of redistribution against the “1 percent.” From Obamacare to the failed trillion-dollar stimulus schemes, where the government picks the winners and the losers, everything he does is antithetical to a dynamic marketplace.

Until the White House begins showing a little appreciation, the entrepreneurs will continue to disappear. Without them, there won’t be wealth to complain about.

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