Kicked the austerity can again. The parties played to their bases and made a short term deal for some taxes and deferred austerity pain for another day when ther Republicans can trumpet slogans for their base on the debt limit. We can thus expect the same theatrics in two months. Critics abound; lobbyists and fund-raisers rejoice. .... We expect more absurd policies, motivated by political pain aversion, to be floated, tested, and implemented over the next few years that will increase systemic risk and geopolitical tensions. [Global Macro Monitor, Dec 31]
SBIR Insider Rick Shindell reports on SBA's "final" SBIR rule making. More complexity in proposing and agency management although the enterprise still does not have to exist until funding agreement signed. Explaining the new eligibility by VC-owned companies will take more effort. If you are wholly US owned and a majority by individuals, you are clear to propose.
Tax and cut somebody else. The “war on success” waged by the guilty rich and labor unions will have a slow and detrimental impact.[Robert Nelson, VC, Dec 31] The economists pretty puch say that income tax rates have little or no effect on GDP. But, of course, everyone with a personal vested interest in tax rates cries havoc at any rise, no matter what the larger story for government finance. The ugly present fact is that VCs are doing better than they might have done if we had had responsible fiance for the last forty years instead of pumping the cononmy with deficits. They also don't give themselves enough credit for their ability to adapt to whatever system they find themselves in.
A handy subject. Income taxes stir up strong feelings among voters because of concerns about fairness — and politicians exploit those emotions, whichever party they belong to. As a result, the broader budget discussion keeps getting diverted to focus on tax rates, which actually play only a small role among the causes of current U.S. financial troubles. [Michael Sivy, TIME, Dec 26]
Beware the axe. an e-mailed memo on Thursday from agency heads to employees. The cuts would be “significant and harmful to our collective mission.” Furloughs “or other personnel actions” — layoffs — remain a real possibility. [Lisa Rein, Washington Post, Dec 25] Remember that SBIR is a low priority for federal agencies which would easily surrender SBIR managers and workers in a funding crumch. The theater of the fiscal-cliff is still wide open.
If they get a fiscal deal done in the next few weeks, do you really think it will result in a sensible tax system, or bring long-term health-care spending under control? Are we going to invest more in education? Will we really have a frank discussion about what kind of social-insurance programs we want, and how to pay for them? [Simon Johnson, Bloomberg, Dec 23] Political theater is easier than serious allocation of public capital.
Can't be good for the economy. Shrinking the credit card shrinks the standard of living. No fiscal-cliff plan that would actually accomplish anything has a good result except in the minds of the advocates. The Tea Party deficit hawks want debt shrinkage for the long term stability of the national finances. The tax cutters make up their own economcs to justify their passion at the debt cutters' expense. The recipients of federal money (defense contractors, pensioners, etc) wnat the money to keep flowing. The middlers want something done about rhe shrieking. But any solution that reduces the deficit, and eventually the debt, will reduce economic activity and thus employment. Live with the discomfort of the national medicine in your long term interest. Unfortunately for that idea, politics doesn't do long term. Look for doing nothing costumed as doing something, and eyewash like Obama is appointing the chief executive of bond giant PIMCO as chairman of a presidential council created to help spur private-public partnerships and global economic development. [Wall Street Journal, Dec 26].
[SBA] is taking applications from experienced early-stage fund managers who could receive up to $50 million each to invest in high growth potential start-ups. The SBA has committed as much as $1 billion to an Early Stage Innovation Fund program, which it is operating with Startup America. Applicants must have experience in early-stage investing, and must invest at least half of their dollars in early-stage, small businesses. They would have to match the SBA funding with privately raised money. [Kathleen Gallagher, Milwaukee Journal Sentinel, Dec 19] Hey, the federal agencies have had thrity years to do the same thing, but only SDIO/BMDO/MDA did it and only then when Dwight Duston ran the Innovative Science group. All the rest ignored the company and just funded the technology they liked.
A new anti-evolution bill has been prefiled in the Texas House. would alter the state's education code. ... In Indiana, state senator Dennis Kruse, an advocate of teaching creationism, says that he plans to introduce a bill allowing students to challenge teachers on their lessons. [AAAS, Dec 19] Next, the defense of magic, crystal balls, wizards, and whatever to put the supernatural into teaching nature, and then try to recruit good scientists into the state.
Yet another government innovation program.Two organizations have in recent weeks called on the United States to create a national federal office of innovation to help focus and concentrate innovation across the country. Following the election, the Information Technology and Innovation Foundation (ITIF) announced its policy recommendations for the administration in their weekly news publication as part of their "Winning the Race 2012" series. Among other recommendations to improve the country's competitiveness, innovation, and productivity, ITIF calls for the creation of a National Innovation Foundation. Similar in scope and organization to the National Science Foundation, the National Innovation Foundation would support companies and other organizations in innovation activities. [SSTI, Dec 13]
Cascading austerity.<.Amid the economic uncertainty surrounding fiscal cliff negotiations, and what it means for states, some governors are erring on the side of caution when it comes to funding recommendations for the upcoming year. At the same time, several state budget officers are projecting significant revenue shortfalls in the current fiscal year or biennium as a result of lower than expected tax collections. States could lose an estimated $7.5 billion in federal funding if the automatic spending cuts take effect for 161 grant programs, according to a recent analysis by the Associated Press. States with heavy defense spending, such as California, Texas and Virginia could also take a hit with $33.6 billion in cuts slated for military and defense contractors. In the coming months, governors from across the nation will present their State of the State addresses — a key time to unveil new and expanded TBED programs. But for some states, shoring up budgets and preparing for worst case scenarios is the top priority. [SSTI, Dec 12] All the fine talk of getting the nation's finances in order usually overlooks the reality of what federal austerity would mean. Favored programs sliced at both federal and state level. The advocates make implicit assumptions that they can engineer some escape mechanism for the things they like while sticking other programs for the bill. The other main escape is the idea the growth will solve the problems, if only they had any realistic program to get the growth beyond platitudes about liberty and free markets.
Austerity. Everybody wants it and nobody wants to pay for it. Taking a trllion or so out of the economy will certainly reduce economic acitvity in any combination of more tax, less spending, and more private debt pay-down. We're a long way from national debt paydown, and the next tinme we get there, another GW Bush figure will arise to tell us we should be getting our money back. Not to worry, some day we will get the hang of responsible self-government. Meanwhile, the theater continues as each party plays to its base and House members have no pressure to compromise since most are gerrymandered into secure seats where the only challenge would come in the next primary election where most of the voters are the avidly committed.
Big prize, big temptation. Journal Sentinel report on Sunday that financier Stephen Einhorn and his wife donated $25,000 to Gov. Scott Walker a month before Einhorn's Milwaukee firm won a contract to manage $1 million of taxpayer money, potentially triggering federal "pay-to-play" conflict of interest rules. [Jason Stein and Kathleen Gallagher, Milwaukee Journal Sentinel, Dec 11] Civil service was invented to handle merit-based decisions that could be poisoned by politicians.
Hamilton, who served as secretary of the Treasury in Washington’s administration from 1789 to 1795, was certainly well-prepared to handle the new government’s financial problems. He had run a merchant house in the Caribbean as a teenager, and he was incredibly smart—smarter than any of the Founders. He could read a paragraph and extract its meaning faster than anyone, and he could write a meaningful paragraph faster than anyone as well. ... Even someone as learned and widely read as Jefferson had no understanding of banks, and he consequently hated them. .... We may not know what we are doing with our own public finances, but perhaps we may take some comfort in the fact that the Founders, two centuries ago, did not know what they were doing, either. [Gordon Wood, reviewing McCraw's span style="font-style: italic;">The Founders and Finance, The New Republic, Dec 7]
The sceptics argue that technology has exhausted its growth-enhancing potential, that innovation is now mostly about social media, entertainment and silly games, with no ability to boost living standards. In a recent provocative piece, Robert Gordon (2012) has argued that the recent waves of technological innovations are simply not as transformative as those of the industrial revolution, and Martin Wolf of the Financial Times commented: “Today’s information age is full of sound and fury signifying little.” [Marco Annunziata, voxeu.org, Dec 7]
Serve the highest bidder, drain America first. Alaska's governor will introduce legislation allowing the state to provide $355 million in seed money for a liquefied natural gas project that promoters hope will eventually ship North Slope natural gas to Asian markets. [Yereth Rosen, Reuters, Dec 8] customers are lining up. Japan’s Sumitomo and another Asian buyer have signed long-term agreements to buy LNG from Cove Point; those contracts include guarantees that enable Dominion to line up financing.Short term profits trump strategic independence. [Washington Post, Dec 9] Private firms are neither nationalists nor philanthropists.
Silly season continues after election. The negotiating of a fiscal-cliff deal brings out the silly rationales for shifting the burden of re-balancing USG finances to someone else. From having the poor pay some income tax just to remind them of their duty to arguing that higher taxes on the richest will destroy small biz and capital investment. Most of the politically appealing ideas are economic nonsense. Unfortunately, we are still in the denial phase of thinking we can have our economic cake while someone else pays for it.
Fingers pointing and waggingA bankrupt battery manufacturer that was a cornerstone of President Obama’s effort to make the United States a global leader in clean-energy technology could end up in the hands of a Chinese company when it goes on the auction block Thursday. Congressional Republicans call the company, A123 Systems, which received $133 million in federal stimulus grants, a textbook case of how the Obama administration wasted taxpayer money trying to nurture new industries. Administration officials say the stimulus money was used to build a new manufacturing facility in Michigan that could remain open under new owners, even if they turn out to be foreign. [Washington Post, Dec 6, 12] Sensible people should ask what the Michigan Republicans thought when the administration sent the big money to Michigan.
Five Milwaukee area universities have received a five-year, $1 million matching grant from the U.S. Economic Development Administration to form a coalition that will support entrepreneurs and start-ups. The Wisconsin Center for Commercialization Resources must match the funding with another $1 million [Kathleen Gallagher, Milwaukee Journal Sentinel, Dec 5] The politicians will like the news story and then will ignore evaluating it.
Vote Republican for free enterpeise and energy security. Shipping some of the newly abundant U.S. natural gas overseas would benefit the nation's economy more than keeping it all at home, according to a long-awaited government study that has the potential to reshape the global energy market. [Keith Johnson and Tennille Tracy, Wall Street Journal, Dec 6] For all the political blathering about energy independence, when profitable exports call, private frims in a free-market economy ignore national security.
Recently, a few writers, including internet entrepreneur Peter Thiel and political activist and former world chess champion Garry Kasparov, have espoused a fairly radical interpretation of the slowdown. In a forthcoming book, they argue that the collapse of advanced-country growth is not merely a result of the financial crisis; at its root, they argue, these countries’ weakness reflects secular stagnation in technology and innovation. As such, they are unlikely to see any sustained pickup in productivity growth without radical changes in innovation policy. [Kenneth Rogoff, project-syndicate.org, Dec 5] What's a free-market government to do? Tax the private economy to supply funds to private and public entities to do productive R&D? If so, how is the government to decide where to allocate such capital better than would be done if the profits were left in the hands of private firms to invest for wealth creation? Which investor si more likely to create more economic activity that, in turn, creates more investment capital?
Watervliet Arsenal, through the Arsenal Business and Technology Partnership, will receive $300,000 [from New York State] to continue its role as a research and manufacturing facility. [Business Review (Albany) Nov 30]... New York announced that $2.9 million in grants have been awarded to help local municipalities and community organizations support and strengthen New York’s military installations in the face of looming defense cuts in Congress.[state press release] Rome Lab got $1.2M.
DOD SBIR put out a pre-solicitation. Proposals due Jan 16, 2013. You can talk technical to topic authors, the most influential voices in the reviews, until Dec 17. No, they won't tell you whether your proposal will win, but they may tell you not to waste your time and money writing it at all. If you haven't got the very best new thing in your field, or you are not long time friends with the agency, your chances are poor. And don't believe all the political blather about how great small biz is at creating jobs for America. The Congress is forcing the agencies to do SBIR unwillingly, but Congress will not intervene on behalf of your proposal(s).
UNITED STATES OF SUBSIDIES States, cities and counties are giving up more than $80 billion a year to attract or keep companies and the jobs they provide. But officials and governments rarely track how many jobs follow, and many do not know the value of all their awards. ....Even where officials do track incentives, they acknowledge that it is impossible to know whether the jobs would have been created without the aid. .... The Times analyzed more than 150,000 awards and created a searchable database of incentive spending [Louise Story, New York Times, Dec 2] [Connecticut] Gov. Dannel Malloy has overseen a 70% increase in state assistance to retain or bring new companies to the state during his less than two years in office compared with the previous eight years combined, a Wall Street Journal analysis shows. [Joseph De Avila, Wall Street Journal, Dec 3] Politics giveth, politics looketh away. Biggest subsidizer,$19B, by the free-market champion - Texas.
Two small grant programs and a minor reorganization of related functions within the [SBA] are the aims of a [new federal entrepreneurship] bill. ... "Today's Entrepreneurs are Advancing Mentorship Act of 2012," or the TEAM Act [SSTI, Nov 28] Politicians want to be seen doing something for small biz [as well as for motherhood, the flag, and apple pie] What's missing is any evidence of market failure that calls for government intervention. But there is plenty of evidence of capital ready to invest in potential economic winners although that capital is not dstributed proportionally to number of voters.
The scorpions circle each other. Mating of animals that would naturally eat each other is tricky business. The Democrats and the Republicans are doing a scorpion mating dance to find a happy medium that will reduce the deficit and foster growth while sticking the blame for inevitable failure on the other party. Each thinks the public is dumb enough to believe the story line of either party. Do you think there is a middle ground that can fool the basic laws of economics?
Don't cut us, we're special. “It would absolutely devastate the American scientific community exactly at a time when other countries are investing tremendously,” says Alan Lesher, CEO of AAAS. A ride over the fiscal cliff would cut science by 8% Join the lone queue of "we're special" pleaders against austerity. But since science investment is an act of faith, rather than an ROI investment, they can only talk about the hoped-for science that won't be done until next year with no specific harm. Congress, in a budget brawl for survival by multiple pleaders will ignore grand pronouncements by potenital future successes in favor of protecting present voters and contributors.
We will most likely undergo a recession when we wean ourselves off the unsustainable deficit spending of the last four years. The choice is not recession or no recession. The choice is recession now or recession later.[Jeffrey Dorgfman, Real Clear Markets, Nov 26] Make that ten years since we plunged into undertaxing and overspending. Tax cuts to wipe out the nasty surplus and then Medicare Part D, Iraq, Afghanistan, TARP, and stimulus. Of course we can afford it; we're the world's richest nation and we own the money supply! Happy Day, we could say yes to everybody with a bright government idea. Small biz need a handout? Divert it from the big government contractors who will never miss it. Spend, spend, elect, elect.
government has shown no interest in rigorous evaluation of corporate subsidies in the past, and no evidence suggests it will in the near future, either. [Scott Wallsten, Technology Policy Institute, Sep 2011] In politics, it is sufficient to pass out the goodies. You can tell you've done good by the happy, grateful looks [from Lloyd Weber's Evita]
Fear the fear. Supposedly, any day now investors will lose faith in America’s ability to come to grips with its budget failures. When they do, there will be a run on Treasury bonds, interest rates will spike, and the U.S. economy will plunge back into recession. This sounds plausible to many people, because it’s roughly speaking what happened to Greece. But we’re not Greece, and it’s almost impossible to see how this could actually happen to a country in our situation. ... For we have our own currency — and almost all of our debt, both private and public, is denominated in dollars. So our government, unlike the Greek government, literally can’t run out of money. [Paul Krugman, New York Times, Nov 26]
Science, religion, politics. Charles Darwin received nearly 4,000 write-in votes in Athens-Clarke County in balloting for the 10th Congressional District seat retained Tuesday by five-year incumbent Republican Rep. Paul Broun, reports the Athens Banner-Herald. A campaign asking voters to write in Darwin’s name in the 10th Congressional District, which includes half of Athens-Clarke County, began after Broun, speaking at a sportsmen’s banquet at a Hartwell, Ga., church, said evolution and other areas of science are “lies straight from the pit of hell,” the Banner-Herald said. [Carla Caldwell, Atlanta Business Chronicle, Nov 9] Meanwhile, Georgia politicans make inviting noises to sci-tech to invest and locate in Georgia.
Competition Wanted. A coalition of entrepreneurs, investors and advocacy groups is pressing its campaign for a special visa that would allow foreigners who launch companies to stay in the U.S. ... People who would launch any type of business—from an Internet startup to a restaurant to a trash-hauling operation—would qualify for one of a total of 75,000 visas. [Vauhini Vara, Wall Street Journal, Nov 23] The idea pits economic conservatives against nativist Republicans. And it could be interpreted as a recognition that government programs for home-grown "innovation", like SBIR, are not doing well in fostering innovation that creates jobs and downstream economic activity.
ARPA-E has funded around 200 projects, all of them meant to be "transformative" ways to either help replace foreign oil or reduce emissions. The notion is that such projects are too speculative and risky to gain large investments from companies. .... However, last year some House members said the agency should be defunded because its projects are too commercial and sometimes replicate work already paid for by the private sector. [Martin LaMonica, MIT Tech Review, Sep/Oct 12] Politically targeable as either wasteful or foolish? Of course. The only good tech investments are those that win a war or put money into thye Comgressional members electorate.
the camp that thinks Romney was not conservative enough and did not fully articulate a conservative contrast to President Obama, except during the first presidential debate. [Paul Kane and Rosalind Helderman, Washington Post, Nov 20] It's an old line among policy advvocates: if a policy fails, we need more of it.
Connecticut Innovations announced an offer of up to $150,000 to small businesses that are willing to match that contribution and team up with academics to work on technology challenges larger corporations have posed. Up to five small businesses will be chosen to tackle: * the best way to integrate micro grids into the larger electric grid, taking into account metering and cyber security. * the most efficient biomass conversion for fuels, power or chemicals * rechargeable power for lightweight portable electronics. * manufacturing process improvements, including reducing heat treatment distortions, and moving from press to autoclave curing. .... Businesses and universities that are interested in participating should visit http://www.ctihub.com/show/challenge-grant. [Mara Lee, Hartford Courant, Nov 14]
Cities today have a productivity advantage for different reasons, to do with ideas rather than costs. When one firm in a city comes up with a new technique, product or design, nearby firms may quickly build on it or hire its creator. One firm’s innovation boosts its own productivity but also spills over to other businesses. Companies that prefer seclusion cut themselves off from these “knowledge spillovers”. [The Economist, Oct 13] If the government wants to subsidize winners in any economic subsidy program, it should focus on firms in cities. unfortunatley, the politics of two Senators per state guarantee that won't happen.
Today starts the next fantasy economics carnival as everyone tries to wangle a bettter deal in the dismal science of re-balancing national finances. Almost all the arguments being made are self-serving, economically wrong, and supported by captive analysts/pundits. Don't raise our taxes, don't cut our government contracts, don't cut our government jobs, let growth balance the budgets, .... . Eventually politics will rule the outcome with the most likely first step being to kick the can farther down the road because the constituencies are not yet ready for pain.
According to the Robotic Industries Association (RIA), there are some 225,000 robots at work in U.S. factories today, putting the nation second only to Japan in terms of robot usage. However, this number represents only a fraction of the total possible market. "Many observers believe that only about 10% of the U.S. companies that could benefit from robots have installed any so far," RIA's President, Jeff Burnstein notes. "Among those that have the most to gain from robots are small and medium-sized companies." That market, says Visti, is exactly where Universal Robots (Denmark) is aiming.[Travis Hessman, Industry Week, Nov 9]
perhaps the most interestingJournal survey result is that only 6.9 percent of readers believed that government should "provide more financing" to small business, while in the NFIB survey, only 3 percent of respondents reported that financing was their top business problem. [Thomas Hemphill, Real Clear Markets.com, Nov 15]
Most of the [SBA]'s loans go to aspiring restaurant owners and hotel franchisees, not companies that come up with ideas that can reshape the global economy. .... New research from the University of Chicago finds that 75% of small-business owners aren't aiming for growth at all. They're basically just looking for a steady job as their own boss. [Aaron Chatterji, Wall Stereet Journal, Nov 14] Government investment in private business should follow the market failure criteria: the societal return is much greater than the return that can be captured by private investment. Restaurants do not qualify.
take an initiative like [SBIR], which awards over $2 billion in grants to help businesses commercialize innovative research. For years, the program was closed to startups that receive the majority of their funding from venture capitalists. The idea was that these firms would have an unfair advantage over other small businesses. But the venture-backed companies are exactly the ones the government should be supporting—they've already been validated by outside investors and have the potential to grow and help the economy. [Aaron Chatterji, Wall Stereet Journal, Nov 14] If you want growth, you have to back the companies most lkely to produce it.
Congressional Budget Office (CBO) reprised its warning that the mix of spending cuts and tax hikes that make up the fiscal cliff would likely cause a mild recession in 2013. [AAAS, Nov 14] Subtract spending = recession. To get back to balance, we would have to cancel years 2001-2011 by reversing the Bush tax cuts, Medicare Part D, Iraq, Afghanistan, TARP, and the stimulus to recover from the financial crash.
Obama bids $1.6T. Obama will begin budget negotiations with congressional leaders by calling for $1.6 trillion in additional tax revenue over the next decade, far more than Republicans are likely to accept and double the $800 billion discussed in talks with GOP leaders during the summer of 2011. [Janet Hook and Carol Lee, Wall Street Journal, Nov 14] Get ready, everybody must share the pain of reducing the big balance on the national credit card as our politicians scramble to put the burden on somebody else. How many will tell their Members of Congress they they accept a fair share of the pain?
trickle-down economics is over. There was a time when a promise of a 20-percent tax cut would have ended the whole conversation in Romney’s favor. But all it accomplished this time was to raise questions—legitimate and never answered—about how he was going to pay for it. Romney had nothing to say to the middle class beyond cutting taxes and watching the magic happen. But voters have stopped believing in that magic. [Michael Tomasky, The Daiky Beast, Nov 13]
[Half the deficit] could be closed by ending all tax cuts, tax breaks and stimulus payments for everyone, according to the Tax Policy Center. But two-thirds of the burden would fall on the middle class — something both political parties want to avoid. All the proposed tax increases on the wealthy, however, even combined with the end of the payroll-tax cut, would raise only $295 billion. So unless there were spending cuts twice as big as the ones currently scheduled, the deficit would still be too large. [Michael Sivy, Time, Nov 13] Face the facts: cutting the deficit will reduce economic activity because private activity will not expand by the full amount of the federal spending and tax taking. No free lunch. The money government takes and spends goes directly into GDP; private assets will go partly into savings, which is good for investment capital but bad for immediate activity. Everyone who complains that cutting or taxing him will reduce growth is correct, but insufficient. Everyone enjoying the fruits should put up some water for the tree.
Simply delaying the pain is not an option, economists say. .... said Rep. Peter Welch (D-Vt.), a liberal who advocates compromise. “And the obvious is: There’s no grand bargain that will not cause political pain for all of us.” [Lori Montgomery, Washington Post, Nov 12] Nonsense. Our ever-responsive politicians will find a way to do almost nothing that sounds like something. They will invoke the happy solution - growth, which is like the proverbial story about two economists in a well: "assume a ladder." Hands will wring, fingers will point, oceans of ink will flow, and our house will not collapse, at least not right away.
“Oh no, we can’t do that,” Not long ago, a former senior official involved in the federal budget process told me that various senators used to meet with him periodically and argue for reducing tax expenditures. He would say that was a good idea, and then go down the list of large tax expenditures. At each one, the senator would say, “Oh no, we can’t do that,” and at some point the senator would repeat his proposition and the conversation would end. [Robert Rubin, New York Times, Nov 13] Where you stand depends on where you sit. Will small biz accept a share of the pain in re-balancing the federal finances? Not likely. Small biz has been finding all kinds of excuses for tax breaks and other econmic favoritism from politicians. And no matter how many economists debunk small biz myths, politicans cling to myths like a life preserver.
A massive U.S. Air Force contract has been awarded to a group of five small businesses that will share in the $851 million worth of work, according to Washington Technology ... sharing the contract: Abacus Technology (Chevy Chase, MD); EIS (Vienna, VA); Odyssey Systems Consulting Group(Wakefield, MA); P3I (Hopkinton, MA); and SpectrumS4 (Burlington, MA). [Dayton Business Journal, Nov 1, 12] No SBIR to any.
Markets are convulsing as lawmakers scramble to avert the higher taxes and slashed spending scheduled to kick in Jan. 1 [Wall Street Journal, Nov10] The politicians have to face the reality that they must pass out some pain as unlimited credit for public programs can't last much longer. The budget hawks are still in the mode that they can pass the pain to the bottom of the economy, even though Obama ran on a platform of higher taxes for the wealthy.
it’s time for the GOP to put it to bed [Romney defended tax cuts on the “rich” because so many small businesses pay the top tax rate.]. Implicit in it is that our growth emanates from small businesses. It doesn’t, plus it’s not a good message to an electorate that likes to think big. Small businesses are to a high degree vibrant because they cluster around big businesses. If this is doubted, readers should travel to Cupertino (Appleand Seattle Microsoft) and ask small business owners how much of their customer base is a function of those two very large businesses. [John Tamny, Forbes, Nov 11]
The big election is over and it is safe to return to regular life, away from the self-serving puffing by office seekers of their importance to your well-being. Our two party system swings regularly between the two parties with proposed revolutions regularly blocked or impeded. That two-party system can get on with adjusting the government financial system back into some sort of balance, of course with much screaming and shouting.
The U.S. tax code has a crazy-quilt of deductions, credits, exemptions and lower rates enacted by Congress over the years. .... Overhauling the tax code could produce a simpler and more efficient system, say economists in both political parties. [Wall Street Journal, Nov 2] If only! Tax efficiency always takes a back seat to vested interests, which is why we have the tangled structure and continuous noise about perfecting it. That noise usually has the message: let me pay less. The economists have pretty much punctured the idea that any particular tax structure has any demonstrable effect on economic activity. The wailing is all political talk seeking advantage.
The devil we know. On the economy, the most powerful argument in [Obama's] favour is simply that he stopped it all being a lot worse. ... That is a hard message to sell on the doorstep when growth is sluggish and jobs scarce; but it will win Mr Obama some plaudits from history, and it does from us too. ... No administration in many decades has had such a poor appreciation of commerce. .. The obstructive Republicans in Congress have certainly been a convenient excuse for many of the president’s failures, ... Obama has shown no readiness to tackle the main domestic issue confronting the next president: America cannot continue to tax like a small government but spend like a big one. ... Backing business is important, but getting the macroeconomics right matters far more. Mr Romney’s more sensible supporters explain his fiscal policies away as necessary rubbish, concocted to persuade the fanatics who vote in the Republican primaries: the great flipflopper, they maintain, does not mean a word of it. .... For all his businesslike intentions, Mr Romney has an economic plan that works only if you don’t believe most of what he says. That is not a convincing pitch for a chief executive. .... Obama has dragged America’s economy back from the brink of disaster, and has made a decent fist of foreign policy. .... stick with the devil it knows, and re-elect him. [The Economist, Nov 2]
Obama is the wiser bet for crisis-hit US [Financial Times, Nov 5] Although Europeans cannot vote in US elections, they do have well informed opinions, although a somewhat different attitude toward societal organization. Americans have a very much more everyone-for-himself approach despite the continuous news that a greater portion of the US population are losing their ability to compete in such a world. Meanwhile, the haves are fighting hard to do nothing about the have-nots.
Sell now? Many business owners—mostly founders who could gain a lot from a sale—are looking to close deals before next year, when the maximum tax on investment income is scheduled to rise from 15% currently to at least 23.8% on most capital gains, at least for higher-income households. Many sellers intend to convert their equity into retirement funds or just start anew. [John McKinnon, Wall Street Journal, Nov 1] Regardless of all the lies, distortions, and imaginary math of the political campaigns, we cannot get the national finances back into balance without more revenue. Although we do not know any details of the eventual deficit/ debt deal as all the vested interests angle for advantage, we do know that a lot of people are going to get less from government, and a lot are going to pay more for the privilege of living with a strong central government. Taxes, after all, are the price of civilization.
Dontcha love small biz subsidy? Championing small business is a bad idea. It’s not good to champion any particular group. You especially don’t want to champion small business relative to big business. Some small businesses are trying to grow into big businesses. It’s like favoring children over adults. Most of them are the same species. Putting small business at the center of the plan is a way to pander to people who think that the idea that small businesses create a lot of jobs means that subsidizing small businesses means more jobs. We shouldn’t subsidize anything. That’s the road to cronyism. [Russ Roberts, cafehayek.com, Oct 31]
Special interest? In all my years in Washington, I have never met anyone, even a professional lobbyist, who thought she was a special interest. That’s always somebody else, someone selfish whose interests are contrary to the national interest. Everyone always says, and may even believe, that whatever special deal they want or wish to preserve in the budget or the tax code is for the benefit of a broad segment of society or the economy. [Bruce Bartlett, New York Times, Oct 30]
As a business model, private equity has had a mixed record. As a political template, it is stunted in the extreme. Private equity is concerned with rewarding winners and punishing losers. But a democracy cannot lay off its failing citizens. It cannot be content to leave any of its citizens behind—and certainly not the forty-seven per cent whom Romney wishes to fire from the polity. .... The Romney-Ryan ticket represents a constricted and backward-looking vision of America: the privatization of the public good. [The New Yorker, Oct 29]
President Obama and his aides quietly chafe at the idea that Mitt Romney would be able to take credit for a recovery. Publicly, Mr. Obama has begun to emphasize the economic good news in recent weeks. Mr. Romney, for his part, has said he expects the economy to improve early in his presidency, not because of his policies but because of optimism about what he will do.[New York Times, Oct 28] Victory has a thousand fathers.
Scientists want science, and control. Thirty-three scientists resigned from a [Texas] state-funded cancer research institute this month, with some publicly complaining that political appointees were trying to improperly influence how its money was doled out. .... The dispute reflects a larger debate in the cancer-research world between groups who want to focus on scientific research to answer basic questions about the disease, and those who favor investment in commercial projects such as drug companies that can bring products quickly to market. [Wall Street Journal, Oct 25] The politically appointed oversight board approved a grant to a commercializing firm without vetting by the scientists. In Texas, who has the gold makes the rules.
Chief executives from some of the nation’s biggest companies are urging Congress to forge a bipartisan deal to address the national debt by raising taxes and cutting spending. [Beth Healy, Boston Globe, Oct 25] Everybody wants a solution as long as someone else pays. And these CEOs are among the best placed to arrange sweet deals in any solution.
If wishes were horses. Mississippi unveiled a comprehensive plan to capitalize on Mississippi's energy strengths and bring more energy jobs and research to the state. Endowed with diverse energy resources and a strong energy sector, the plan highlights energy-related activities possess tremendous opportunity for job growth and economic development in Mississippi [SSTI, Oct 24]
A fourth Texas high-tech startup that received taxpayer dollars through Gov. Rick Perry’s signature economic development fund has filed for bankruptcy in the $194 million portfolio’s biggest bust yet. The collapse of bioenergy producer Terrabon (no SBIR), which was awarded $2.75 million in 2010 and was backed by Perry political donors, is the second bankruptcy in the past four months for the Emerging Technology Fund, [Paul Weber, Lori Hawkins, Austin American Statesman,Oct 24, 12]
Mandate affirmed. "It's pretty clear that the president was re-elected," Boehner added. "Obamacare is the law of the land." -- John Boehner, Nov 12 The President and the House recognize the power of reciprocal veto in our competitive power Constitution.
If you want to kiss a government frog, you'll have to travel to the pond because the government cannot afford to travel on its new fiscal-cliff budgets. .... acting director of the budget office, issued a memo calling for all agencies to decrease travel spending by 30 percent starting in the new federal fiscal year. It capped spending at a single conference at $100,000 for each agency [Laura Dattaro, New York Times, Oct 24] And every dollar spent for travel is a dollar less for handouts. You have to pay for affordable government.
Democracy is a pathetic belief in the collective wisdom of individual ignorance. -- HL Mencken, courtesy of the unbalanced pro-market mob at AEI.
Politics overrides science. Faced with blame for not preparing for earthquakes, the political system found a scapegoat - scientists. Seven prominent Italian earthquake experts were convicted of manslaughter on Monday and sentenced to six years in prison for failing to give adequate warning to the residents of a seismically active area in the months preceding an earthquake that killed more than 300 people..... The court did not rule on whether earthquakes can be predicted. [Elizabeta Povoledo, New York Times, Oct 23]
If there’s one thing we know, it’s that even experts with fancy computer models are terrible at predicting human behavior. Financial firms with zillions of dollars have spent decades trying to create models that will help them pick stocks, and they have gloriously failed.[David Brooks, New York Times, Oct 23]
I wasn't planning on watching the debates, but my wife made me watch the first 20 minutes. Is this really what passes for political discourse in this country? I was particularly struck by the appeals to unnamed authorities -- both candidates said something like "I saw a study the other day [unnamed] that said my plan was great" or "your plan was bad." Seriously pathetic. [Coyote blog, Oct 3] Don't expect enlightenment from pure entertainment of he masses
When the medium is again the message. the Twitterverse, where America’s obsessive-compulsive, attention-deficit population holds the zeitgeist hostage with tweets and memes that infantilize political discourse and reduce the few remaining adults to impolitic fantasy. [Kathleen Parker, Washington Post, Oct 20] Good policy matters don't fit into sound bites. It's perfect for surface-feeding politicians and mobs.
When government "invests" Federal subsidies also created a network of green tech corporations hoping to benefit from taxpayer dollars. ... green technology grants were costing $2 million per job created ... [VP Al] Gore left public office in 2001 worth less than $2 million. Today his wealth is estimated to be around $100 million. Leonnig reports that 14 green tech firms that Gore invested in received or directly benefited from more than $2.5 billion in federal loans, grants and tax breaks. [David Brooks, New York Times, Oct 19] And how many permanent privately financed jobs have been created by SBIR? No one knows! But several companies learned to feed at the trough and build the nest eggs of their owners on government contracts at low but certain profit margins.
30% loss margin. The U.S. government wasn’t the only one investing in renewables. Governments around the world were also doing it, and the result has been gigantic oversupply, a green tech bubble. Keith Bradsher of The Times reported earlier this month that China’s biggest solar panel makers are suffering losses of up to $1 for every $3 in sales. Panel prices have fallen by three-fourths since 2008. Manufacturers will need huge subsidies far into the future — as Bradsher writes, “a looming financial disaster.” The U.S. share of the global market, meanwhile, has fallen from 7 percent to 3 percent since 2008. [David Brooks, New York Times, Oct 19]
Spend our way to security and prosperity. Romney is proposing to fully fund the four-year plan laid out by the Defense Department, and Mr. Obama’s former defense secretary, Robert M. Gates, in 2010. Mr. Obama scrapped that scheme this year to cut $500 billion from the Pentagon over a decade. Mr. Romney would restore that funding as well as an earlier round of cuts by Mr. Obama; he would also establish “a goal” of spending 4 percent of GDP annually on defense, compared to about 3.5 percent in Mr. Obama’s latest budget.[Washington Post, Oct 19] And where is the money to come from? Ask him and his allegedly deficit-allergic party after the election. Meanwhile, rely on the comforting assumptions that someone else will pay for our favorite policies. Vote for prosperity!
We need the money. The [mortgage-foreclosure settlement] agreement said the state money should be used "to the extent practicable…for purposes intended to avoid foreclosures," among other purposes. .... so far, less than half of the money has been designated for that cause—with much of the rest going to help close state budget gaps, says a report [Nick Timeraos, Wall Street Journal, Oct 18] Unless an agreement is legally binding, the state can do whatever it wants with the money, subject only to political control. The home-owners who won the settlement by paying for a lot of lawyers, get a lot less than they bargained for.
Take the money and hide. Publicly posted information on [Wisconsin]'s subsidies to businesses is severely lacking and getting slightly worse, a new report has found.... of 251 companies receiving subsidies in 2009 and 2010 and completing their contracts, full data was available for only two ... "Wisconsin taxpayers shouldn't have to be auditors to find out if the economic development subsidies we fund are delivering bang for the buck," said Bruce Speight, director of Wisconsin Public Interest Research Group. [Jason Stein, Milwaukee Journal Sentinel, Oct 15]
Wrestling Entertainment, Policy Vacuum.span style="font-style: italic;"> In every debate, whatever the format, whatever the questions, there is one and only one way to identify the winner: Who commands the room? Who drives the narrative? Who is in charge? [Jeff Greenfield, Yahoo News, Oct 17] No wonder we have distracted government! We score politicians on their entertainment value in combat.
R&D dashboard, a new beta website to scan federal R&D investments by NIH and NSF. Search and download data on grants (investments) and output (e.g., patents and publications) by state, congressional district and research institution.(for political purposes) and investments and outputs by select topic areas. the government plans the full version of the website to include all federal R&D spending. It also would expand information on outputs of federally funded research. Public comment sought http://rd-dashboard.nitrd.gov/.[SSTI, Oct 12]
A state of strong belief. In 2010 the Texas board of education managed to remove Thomas Jefferson, author of the Declaration of Independence, from the state’s list of important revolutionary figures, apparently because of Jefferson’s insistence on the separation of church and state. He was, however, swiftly reinstated. [The Economist, Oct 13]
Texas loves politics. At least seven scientists resigned in protest last week from Texas' embattled $3 billion cancer-fighting program, claiming the agency ... is charting a politically driven path that puts commercial interests before science. .... its chief scientific officer resigned in protest after it approved - without scientific review - a $20 million commercialization project. [AP, Oct 13]
Good luck figuring out whether Republican presidential candidate Mitt Romney would cut or raise your taxes if he's elected president. President Barack Obama promises tax reform, too, but precious little detail. [AP, Oct 13] Tax talk in campaigns is promise and myth avoiding as many unpleasantries as possible. Math and logic are abandoned to feed the voters' desire to hear what they want to hear. The result, of course, is we get the government we deserve and we will pay, one way or another, for every good thing we get from the government.
Big promises, short honeymoon. Just five months after electing President Francois Hollande, many French are now despairing that he cannot deliver on the vision they voted for. What's worse, some wonder if Hollande has a plan at all. [Eleanor Beardsley, npr.org, Oct 13] US pols may find the same screeching when they pretend to painlessly solve the fiscal cliff problem. Until then, we will hear more mythical math in campaigns before we vote for our favorite pretender.
Two things seem certain in modern presidential campaigns: Candidates will spend more time attacking each other than offering constructive alternatives, and one or both will attack China. .... If innovation is nurtured and a sense of optimism about the limitless possibilities of the future is maintained, then China represents only more of an opportunity for U.S. prosperity. [Zachary Karabell, Washington Post, Oct 14] Never mind the facts: politics needs competitive sound bites since people prefer stand-up entertainment to serious debate.
Two suburban Philadelphia legislators introduced a bill last week designed to generate at least $140 million for cash-strapped biotech firms and other high-tech companies in Pennsylvania.... [money source would be] the auctioning of $175 million of deferred insurance [John George, Philadelphia Business Journal, Oct 5]
Economists say the automatic cuts, known as “sequestration,” could slam NIH, eliminating up to 3,100 life science jobs in San Diego. An additional 1,400 industry support workers could lose jobs. [Gary Robbins, utsandiego.com, Sep 24] For all the political blather about jobs, cutting government means cutting jobs funded by government, and jobs that feed and house those workers. If you believe that the private sector will replace those jobs with even more jobs, you are a rock-ribbed conservative drinking the Kool-Ade.
What a deal, borrow more, pay less. The U.S. government’s interest expense fell to the lowest in seven years as yields on Treasury debt dropped to records even as debt soared beyond $16 trillion for the first time, [Daniel Kruger, Bloomberg, Oct 5] Thanks to having the world's safest currency, interest rates are low enough to indulge the electorate's dream of painless prosperity where somebody else, including our future children, pays to keep government services flowing on the national credit card. So politicians concoct fairy tale stories of magical economics.
Declaring that the nation is in a "jobs crisis," Republican presidential candidate Mitt Romney is charging ahead with his economic arguments [AP, Oct 6] which are political drivel without redeeming substance. His basic argument is that since the US has not fully recovered since the 2008 crash, we ought to elect him president. His reasoning sounds like the Pentagon's classic proof-by-assertion."
In science news around the world this week, prison terms are being sought for seven Italian earthquake experts who allegedly downplayed the risk of the deadly earthquake that struck L'Aquila in 2009, [AAAS, Oct 4] If inaccurate forecasting were criminal, we would all be in jail. Italy must be as flush with lawyers as we are.
Problem deferral 101. Let’s get this straight: Economists think our government should raise taxes and cut spending. They think the Federal Reserve should crank back its free-money policies. They think all of this should happen, oh, um, ah, eventually.And then they think: Gosh darn it. Do you know what’s holding back our economic recovery? Uncertainty in Washington. We sure wish we knew when they were going to do something. [Al Lewis, Market Watch, Sep 28] Too bad; until a crisis descends on us, we voters can find endless reasons to avoid any pain.
The Wisconsin Economic Development Corp. is negotiating with Chinese investment firm PiYi Investment Management Co. Ltd. to create a fund that would invest in state companies. [Milwaukee Journal Sentinel, Sep 28]
The number of federal contractors suspended or debarred in 2011 was up 73% from 2009. [Andrew Zajac, Washington Post, Oct 1] In SBIR, the government watches for common charades like billing for work never done, and/or submitting a research report that merely recycles data from previous work. Remember, too, that your competitors for SBIR contracts have an incentive to alarm the government when they suspect that your work is old stuff.
Federal money, state scheme. Two Wisconsin state agencies have failed to follow federal law and their own policies in issuing economic development grants, the U.S. government said in a strongly worded letter sent to Gov. Scott Walker's administration..... Among the most serious findings are that the state failed to perform required underwriting - the process of determining the financial soundness of a company - before giving $390,000 to Gilman USA LLC, a machining company in Grafton, and $1 million to Morgan Aircraft in Sheboygan. [AP, Sep 26] Look to Texas for what can happen when state politicians have their hands on money.
analysis of [NIH] grants awarded from 1975 through 2006 showed that a sustained 10% funding increase targeting a specific disease led to a 4.5% increase in the number of drugs targeting that disease entering Phase I clinical trials, with a lag of up to 12 years. In contrast, she found no evidence that changes in the allocation of funds across the NIH disease portfolio affect industry's decisions to invest in Phase III clinical trials for treatments for those diseases. Thus, NIH funding influences the early stages of drug discovery and testing but may not affect the later, more costly stages of drug development. [Brad Wible, Science, Jun 29]
New Public Opinion Poll on Sequestration, Medical Research. Research!America and United for Medical Research released the results last week of a poll of likely voters on the sequestration cuts and medical research. Slightly more than half of respondents said that across-the-board budget cuts are not the right way to reduce the federal budget deficit. Although 54% of respondents feel it is important for the U.S. to maintain its leadership in research, 59% are pessimistic about U.S. prospects to be a world leader in science and technology in 2020. Full results of the poll [AAAS, Sep 26] Magic political math for cutting the deficit: Don't cut anything, don't tax anybody, call in the growth miracles. Some day soon the politicos will have to hurt some actual constituents and dream machines.
The rich can afford legalists. Texas Attorney General has sued the federal government 24 times since President Barack Obama took office, the Associated Press reports. According to records, ... those suits have cost the state $2.58 million and more than 14,113 hours of staff and state lawyers’ time. [Olivia Pulsenilli,Houston Business Journal, Sep 10, 12] Texas politics prepping a story for Texas governor as POTUS candidate
NSF, in partnership with NASA, NIH and the USDA awarded nearly $50 million to grantees from universities around the country for the development and use of robots that cooperatively work with people to enhance individual human capabilities, performance and safety [SSTI, Sep 20]
The National Ignition Facility (NIF), a $3.5 billion laser fusion lab in California, looks certain to miss its deadline at the end of this month for achieving ignition, a self-sustaining fusion reaction that yields more energy than was put in to make it happen. [AAAS, Sep 20]
Action by Congress. the House of Representatives passed by voice vote the Government Spending Accountability Act of 2012 (H.R. 4631), which would set restrictions and cuts to travel budgets for federal employees attending conferences. The bill, introduced by Rep. Joe Walsh (R-IL), would prevent federal agencies from spending more than $500,000 on a single conference, and defines a conference as an event that an employee travels 25 miles or more to attend, whether for consulting, education, discussion, or training. [AAAS, Sep 12] Parkinson's Law of Triviality: the time spent on any item of the agenda will be inversely proportional to the sum involved. Like the company picnic.
The NSF's National Center for Science and Engineering Statistics has released a report, "Businesses Concentrate Their R&D in a Small Number of Geographic Areas in the United States," based on data in its Business R&D and Innovation Survey. [AAAS, Sep 20] Fortunately for the businesses not in those areas of R&D concentration, each of has two Senators to insist on "equitable" distribution of government subsidy. Many of those areas are represented by Senators from the party that pronounces that 47% of Americans are unhealthily dependent on the government.
Every new administration, not excluding ourselves, arrives with bright and benevolent ideas of using public money to do good. The more frequent the changes of government, the more numerous are the bright ideas; and the the more frequent the elections, the more benevolent they become. --- Winston Churchill, 1927 Can you think of any bright ideas for government that would benefit you, and by extension, the entire American economy?
The list of groundbreaking technologies that have been developed by US-funded research laboratories is long and illustrious: the Internet, global positioning systems, lithium ion batteries, and many wireless communications breakthroughs.Now Allied Minds Federal Innovations (Boston, MA; no SBIR) is tapping into this legacy innovation with a new business to commercialize military technology developed at department of defense laboratories and research centers. [DC Denison, Boston Globe, Sep 11, 12] There are graveyards of investors with the same idea over the past few decades. It always sounded better than it paid.
Rule One: spend the money. Immunetics (Boston, MA; $9M SBIR) received a $3.7 million, two year [NIH] SBIR contract to support clinical trials of a new blood screening test for Babesia infection. “Babesia is among the top infectious threats to blood safety and, at present, there is no licensed test available. [company press release, Sep 10, 12] Multi-million awards in principle violate the law's provisions for award sizes. But Congress doesn't seem concerned because, after all, every award of any size has two Senators and Representative with great praise for a brilliant government investment in a constituent company. What Congress won't tolerate is the agency's not spending the legally mandated minimum SBIR total for the year.
Federal regulators[SEC] filed fraud charges against [Bio Defense (Boston, MA; no SBIR) that purportedly developed a machine to use radiation to kill dangerous biological agents, such as anthrax, sent through the mail. ..... with misleading investors while raising at least $26 million. .... Specifically, the SEC said the company falsely told investors that the company paid its employees and officers little cash, but instead employees were toiling solely or mainly for “sweat equity” shares that might later become valuable if the company went public or became profitable. In reality, the SEC said, the company’s largest expense was payments to employees, including $1 million in 2004 alone. [Todd Wallack, Boston Globe, Sep 10, 12]
Far too many businesses have been all too eager to lobby for maintaining and increasing subsidies and mandates paid by taxpayers and consumers. This growing partnership between business and government is a destructive force, undermining not just our economy and our political system, but the very foundations of our culture. [Charles Koch, Wall Street Journal, Sep 10]
Competing myths."Democrats say: 'We're all in this together,' " former President Bill Clinton told the convention this week. "With the Republicans, you're on your own." All formulations of this contest during an election season tend to be overdrawn and misleading. Candidates tend to speak with reverence for their own myth (the individual or the community) and its contributions to our lives. Unfortunately, such reverence is too often accompanied by contempt for the mirror-image myth of the other side. We embrace our own preferred myth on faith (and call that a virtue) while assessing another's myth with skepticism and derision. [Ron Elvin, npr.org, Sep 6] Sadly, all the politicians are competing to tell us myths rather than cold economic truth. We have become accustomed to a life style beyond our means, with government closing the gap by borrowing. When it comes to jobs, government programs create some jobs for government workers but few permanent jobs in the wealth-creating private sector, while the tax cuts for marginal upper rates create only more savings for upper class incomes and the hope of trickle down boost to jobs. The economists do not buy the cause and effect of such job creation. Jobs are made by creating something to sell to willing buyers for economic reasons. But cheap goods require cheap workers. Someday, soon, we will recognize the myths for their fantasies that pander to our dreams.
"The fiscal pain coming your way isn't even imaginable. The U.S. political system is in denial." from Willem Buiter's Crystal Ball [Suzanne Kapner, Wall Street Journal, Jul 6]
States rights Wyoming lawmakers are livid that the new federal highway-funding and student-loan bill slashes funds the state would get for coal-mine cleanup, money that the state has been using for unrelated projects. [Damian Paletta, Wall Street Journal, Jul 6]
"We're not going to let our campaign be dictated by fact-checkers," Neil Newhouse, the lead Romney pollster, told critics. Say what? [Tom Friedman, New York Times, Sep 1]
Caught between deficit and austerity. Beijing has until now backed austerity across Euroland, but the severity of China's own downturn has begun to rattle policymakers.Exports of electronic goods to Italy crashed 43pc in July from a year earlier, and sales to Germany fell 11pc. Caixin reported that processing trade to Europe fell 21pc.The country's two largest shipping groups COSCO and China Shipping both reported a drastic losses today. The Shanghai composite index of stocks threatened to break below 2000 today, the lowest since the Lehman crisis.[Ambrose Evans-Pritchard, The Telegraph, Aug 30]
Mother, May I? [NSF] posted their FY-2013
STTR solicitation on their SBIR/STTR website (http://www.nsf.gov/eng/iip/
Home cooking.A Tokyo court has found Samsung not guilty of infringing Apple's intellectual property, in contrast to a jury decision and a $1.05 billion damage award in Apple's favor in a California court last week.[EETimes, Aug 31]
In my younger, more naive days, I would have drawn the following lesson from this story: "Never create a business plan predicated on subsidy checks from the government. They may stop at any time." I still think this is mostly true, as FirstSolar is finding out. But my sense is that a range of folks from GE to Kleiner Perkins still get their checks. So one may cynically rewrite the rule: "Never create a business plan predicated on subsidy checks from the government unless you are confident you have the political connections to guarantee and expedite the payments." [Warren Meyer, coyoteblog.com, Aug 17]
Should the government use higher taxation to forcibly extract additional money from the already-prosperous, then somehow allocate it back into the private sector as the bureaus and agencies see fit? Or would it be more effective to trust private-sector intermediaries—such as private equity firms—to select which specific entrepreneurs should be matched up with capital that the already-prosperous voluntarily make available through those intermediaries? [Steve Conover, The American, Sep 2] AEI's habitually preaches that the private sector can do all America needs for investment. Which is true for ROI on private capital for private gain. But does little investment for public gain, which is where "market failure" programs step in. Private investment won't build sewers and won't bet on fusion energy. Unfortunately for the neat picture, politics intervenes to capture public investment for special interest gain. Where money is on the table, the strongest hands will grab it. Conover also touts the AEI view at http://www.optimist123.com/
In politics, half-truths prevail. The problem with making small business owners the face of an anti-regulation argument is, most of the Obama administration’s new regulations … don’t apply to small businesses. And when they do, the nonpartisan Congressional Budget Office has found the costs to be negligible. .... [SB owner] Archuleta, in fact, said his business was already being dismantled, but only vaguely described how. And he left out the fact that he has benefited from government aid. According to Mother Jones, Archuleta’s company secured an $850,000 Small Business Administration loan guarantee to build an 11,700-square-foot building. [Elizabeth Dwoskin, Bloomberg Business Week, Aug 31]
the Kentucky Innovation Network has a new name and logo, a tighter focus (whatever that means), and expanded services. ... The  centers offer services such as business mentoring, assistance to growth strategy and access to funding and capital networks. [SSTI, Aug 29]
Spread the net. [New York State] has started accepting applications for the $25 million "Connect NY" program to promote and expand broadband Internet access. The grants will be awarded to public-private partnerships comprised of internet service providers, local governments and economic-development organizations. [SSTI, Aug 29]
[The White House] announced the first class of “Presidential Innovation Fellows” . Selected from an applicant pool of nearly 700 innovators from across the country, the 18 “Fellows” have agreed to spend six months in Washington to work on five high-impact projects aimed at supporting entrepreneurs, small businesses and the economy, while significantly improving how the Federal Government serves the American people. [White House press release, Aug 23] Maybe Romney can offer some more red meat by declaring that he will kill this interventionist foolishness with an Day One Executive Order. Unlike expecting something to happen by declaring China a currency manipulator on Day One, he could actually kill this program.
Long-term U.S competitiveness is threatened due to a lack of progress in U.S. child development areas that are the best indicators of human capital development, according to a new report from the Center for American Progress. The report found that while U.S. human capital development and economic growth remain practically stagnate, the rest of the world — primarily China and India — have grown significantly in both aspects since 1980. To address this issue, the authors provide several recommendations including adopting best practices from across the globe. [SSTI, Aug 29] The loudest and most committed Republicans have an answer - defang the teachers' unions and get creationism into the science curriculum. Then we can go back to underpaid teachers teaching the little darlings to pray and read the Bible.
The Arsenal Business & Technology Partnership has signed a new five-year agreement to continue its role as the on-site manager and developer of the Watervliet [NY] Arsenal. ... will pay more than $15 million in rent and fees over the life of the contract. Tenants at the Arsenal include M+W Group, one of the largest builders of computer chip plants; Vistec Lithography, which manufactures electron beam lithography systems to etch computer chips; Extreme Molding LLC, a woman-owned silicones and plastics firm, and Solid Sealing Technology, which produces high-tech parts with air-tight seals for the semiconductor, nanotechnology, solar-energy and health care sectors. [The Business Review (Albany), Aug 22,] No SBIR
67 more days to hear spin, half-truths, and a general disdain for cause-and-effect. Close your ears and open your mind to assess the nation's state in the global competition. And then vote for one party's ideas with the knowledge that most voters do not understand the economics anyway. The winner will find it's easier to talk about big plans on the stump than to actually implement them when the dirty details are exposed as Congress has to vote for pain.
Posturing before action.Each of Europe's key political actors will exhaust all options in trying to secure the best possible deal for itself before at the last minute coming to an agreement. The result is a messy process, exacerbated by the cacophony of voices within each country, which understandably unsettles markets. The possibility of miscalculation will continue to loom over Europe. But pressure from the financial markets will ultimately prod the eurozone to find the way forward. And Europe's overriding political imperative to preserve the project of integration will drive its leaders to secure the euro and restore the economic health of the continent. [Fred Bergsten, Foreign Affairs, S/O21]
A U.S. federal court has found that a stem cell therapy offered by a Colorado clinic is a regulated drug. The ruling could spur a U.S. Food and Drug Administration (FDA) crackdown on other clinics offering untested adult stem cell treatments. Regenerative Sciences (Broomfield, CO; no SBIR) uses stem cells extracted from a patient’s own bone marrow to treat bone and joint injuries. The company calls its treatment a medical procedure. But in a 2010 suit, FDA argued that because the stem cells are more than “minimally manipulated” and the procedure uses reagents that cross state lines, the cells are an FDA-regulated biological drug. [Science, Aug 3]
Automatic budget cuts due to take effect in January will drive up the cost of weapons systems and cut revenues for arms makers in the longer term, but the full brunt of the cuts will not be felt for several years, a top budget analyst said [Reuters, Aug 24].... Every entity dependent on government funding will be making the same appeal, and the politicians will have a painful time allocating the necessary cuts in government outlays. Look for another kick-the-can solution.
The campaign isn't divulging fresh details of its economic platform, saying there isn't public demand for specifics that could be used as a weapon by the Obama campaign. [Wall Street Journal, Aug 27] Keep it abstract; the public can't stand to hear the details. Campaigns don't suffer in insulting the intelligence of the voters.
Another election year, another VC dream. Gov. Scott Walker has asked the state commerce agency to pull together a broad coalition in a new effort to develop venture capital legislation aimed at creating more jobs in Wisconsin. .... A Journal Sentinel analysis found that the 1999 program yielded huge returns for three out-of-state financial firms and their partners while netting just 202 new jobs for Wisconsin, at a cost of more than $247,000 per job [Kathleen Gallagher, Milwaukee Journal Sentinel, Aug 23] The perennial political dream that government can create a venture world that can succeed and confine results to a political domain. Governments are faced with the ugly choice of turning the investment decisions over to real VCs or picking the winners themselves. Texas and SBIR illustrate the problems with government decisions. Neither way is likely to work very well as the history of government investment sadly shows. The politicians don't seem to care much whether the enterprise wins or loses, only that they get the publicity in time for the campaign.
What happened to all the talk about jobs and the economy? [Joe Deaux, thestreet.com, Aug 17] Why all Medicare now? Because political campaigns have a logic all their own to keep ears and eyeballs on the candidates, and not on complex questions. Neither candidate has a good answer on jobs or the budget, just promises and platitudes, because there are no pleasant facts to tell. World competition requires us to bite bullets and suffer surgery to re-align our economy. And all the blather about SBIR as a job creator must also give way to the reality that SBIR has never created more permanent jobs than the same money spent by the government in open competition. We're all for competition, but only in name.
SBA released two Requests for Information (RFIs) on amendments to SBIR/STTR ... Although the SBA has already published the final changes, it is requesting comments on the various amendments made. Public comments are due October 5, 2013, for both the SBIR RFI and STTR RFI. SBA will hold two webinars on August 23 and 29, 2013 [SSTI, Aug 15] Another chance to whine about VC participation in innovations with a future profit potential.
To accomodate the new VC participation rules, NIH says it is developing a SBIR/STTR reauthorization website that will have information about NIH implementation of the Policy Directives, timelines, FAQs, links to SBA information on reauthorization.
Field it fast. The Navy recently posted a BAA (www.fedbizopps.gov) that may be of interest to the SBIR community. ... primarily for the validation and transition of technologies developed by small biz that directly support DoN needs and programs. ... up to $3M in Rapid Innovation Fund funding; developmental efforts can be completed within 24 months; preference will be shown for technologies that can be available to the operational Naval Forces within 12 months of project completion. Funds available for awards are $50 million. [SBIR alerting service]
The Connecticut State Technology Extension Program (CONNSTEP) received $1 million in July to help boost the growth, employment, and operating efficiencies of the states manufacturing industry. .... through its Hollings Manufacturing Extension Partnership (MEP) [Jim Schakenbach, Hartford Courant. Aug 17]- a Democratic dream machine that government can efficiently allocate capital to private for-profit enterprise. And how will the program be evaluated except for whether it dispensed all the money to grateful constituents? The politicians should remember that gratitude in politics extends only to what you're going to do for me next.
Pork only happens elsewhere. Farmers queuing for lunch at the state fair’s aptly-named Iowa Pork Tent declared that they wanted the government out of their lives, yet stoutly defended subsidised crop insurance. Others defended taxpayers’ money spent turning corn into ethanol. .... if the thrifty swing state of Iowa is anything to go by, those same voters like the idea of other people footing the bill, long before they tighten their own belts. In that, perhaps, this election is not so unusual at all. [The Economist, Aug 17] What's ours is ours, what's yours is negotiable.
Larry Szrom, a registered Republican who supported McCain, is now leaning toward Obama. He dismisses Romney's claims that his business skills will get the economy moving. "He says, 'I know how to create jobs.' Guess what? He doesn't," Szrom says. "I don't think anyone truly knows what we need to create jobs." [Sharon Cohen, AP, Aug 18] Politicians regularly make economic claims because people want to hear them. After all, we elect politicians who tell us what we want to hear.
Andrews Consulting Group, a 38-year-old IT services firm, will receive $1 million from Connecticut Innovations, the state's quasi-public authority that gives state money to tech businesses to help them grow. The debt financing of a mature firm is a new tactic for CI, which generally has acted as an early funder of start-up firms that are too young and small to attract traditional venture capital. Andrews has more than 70 employees at its Cheshire offices. No details were released about the terms of the loan, but the interest rates vary between 5 and 10 percent for a three to six-year pay back. The deal also includes warrants, a mechanism that gives the agency a right to buy shares of stock at a set price in future years. The size of the equity stake will be smaller than the stake CI usually takes in its other fund programs. [Mara Lee, Hartford Courant, Aug 8] Where's the market failure the justifies the dodgy practice of government financing private firms for an equity share? Who will keep the politicians from exploiting the ownership for uneconomic purposes? And why is government competing with private finance? Are the prospects for economic return not as good as the company claims? Funding infant technologies with high risk novelties makes some sense, but a veteran IT services firm sounds neither infant nor high tech risk, only perhaps high business risk. Not everything good needs to be done by the government.
Politicians babble on money policy. Romney and Ryan don't approve of fiscal policy stimulus (unless it's tax cuts for the wealthy), and Ryan would take away the ability of the Fed to respond to unemployment as well. Basically, they are telling us that if a recession hits and they have their way, nothing will be done. Not a thing. No fiscal policy response (except perhaps austerity to make it worse), and no monetary response (except, if Ryan has his way, interest rate increases based upon a misunderstanding of how the economy works -- that would also make things worse). So it wouldn't just be the "you're on your ownership society" of Randian dreams, Ryan would have monetary and fiscal authorities making things even worse than they already are. Ryan is not a well-informed policy wonk with new, exciting ideas. He's a policy idiot. Don't let this guy anywhere near the policy levers. [Economist's view blog, Aug 13] Unfortunately, politicians have little choice but to dumb down economics to vague platitudes for an electorate that knows more about football and Facebook than economics.
On picking winners: "A desirable industry was, almost by definition, one which could establish itself and thrive without special assistance in ordinary market conditions." ---- Sir John James Cowperthwaite, the Hong Kong financial secretary [Wall Street Journal, Aug 14]
We want to get Washington out of the business of picking winners and losers. We want entrepreneurs to have the barriers removed from in front of them, so that people can work hard and succeed. [Paul Ryan, Aug 12] That sounds like ditching corporate welfare programs that hand public funds to otherwise uncompetitive companies. Could he mean SBIR? His Republican predecessors tried to ditch such programs but got swept out of office by a draft-dodging liberal womanizer from Arkansas.
Sen. Kirsten Gillibrand is introducing a bill to create a $200 million fund to help biotech companies move discoveries out of the lab and into the marketplace. .... called the America Innovates Act, [Richard D'Errico, The Business Review (Albany), Aug 9] Another election year gambit would insert government into the marketplace with no particular competence and no particular source of the money in a deficit-avoiding climate. The speech said the money would come from R&D but nothing about how it would be managed intelligently and by what criteria. No matter, the Republican House is not about to bless a Democratic suggestion to spend money for market intrusion.
political myopia. It can afflict anyone who confuses what politicians do with what’s happening in the country, or what they say with what is going on in the world. Governments may be having a hard time of it, struggling with debt they ought not to have taken on. Noisy pressure groups who seek government funding may also believe that the sky is falling in. But a clear-headed analysis of the facts reveals something rather extraordinary. The crash has not even retarded, let alone halted, human progress. The world has never been richer, healthier, freer or more equal than it is today. The idea that the world is going to hell has been hard-wired into the psyche of most political leaders throughout recorded history. [Fraser Nelson, The Telegraph (London), Aug 10] News people can tell you: if it bleeds, it leads.
Republicans object - to everything. A Chinese company’s preliminary agreement to invest in A123 Systems has ignited concerns that China could take control of the struggling Waltham battery maker’s advanced technology and spurred new criticisms by Republicans that the Obama administration squandered billions in stimulus money with investments in risky firms. ... Republicans quickly raised concerns about the potential loss to China of sensitive technology developed with the support of US taxpayers. .... "Obama borrowed from the Chinese to give taxpayer money to prop up green energy companies that the Chinese are now buying already.” [Todd Wallack, Boston Globe, Aug 9, 10] Don't fund it, don't let foreigners fund it. If Obama did it, it must be wrong. Let private US capital fund it, except US capital seems disinclined to do so with risky technology. Don't need electric vehicles anyway to compete with our darling petro campaign contributors.
An index of policy uncertainty created by economists at Stanford and the University of Chicago backs their view, showing that policy uncertainty has been much higher in recent months than during the previous 25 years. ... After the Supreme Court upheld Obamacare in June, Mitt Romney and Republican congressional leaders promised to repeal it if they win the election in November. ... It's similar with the fiscal cliff at year-end: the killer combination of mandatory cuts in federal spending and the expiration of the Bush tax cuts. Even assuming that Congress averts a plunge over the edge, no one knows how it will happen. .... The message to businesspeople: Don't count on anything that passes without substantial bipartisan support. And little of significance seems to be enacted that way anymore. [Geoff Colvin, Fortune, Aug 8]
Is it truly "different this time"? In the weakest recovery since the Great Depression, nearly the entire reduction in unemployment since October 2009 has been accomplished through a significant drop in the percentage of adults participating in the labor force -- whether working or looking for work. [Peter Morici, thestreet.com, Aug 3] The economic and political debate on recovery seems to use a yardstick of recovery rates from previous post-wwII recessions. Which is convenient for the political challengers who have little interest in whether the comparison is relevant (because they cannot put any accurate number on the new phenomena and the voters don't understand such nuances in economics). But the employment world has taken on a new dimension: intense competition from worldwide low cost sources of labor, and a de-leveraging by consumers of their debt, and de-leveraging by state government, and potential de-leveraging by the federal government in response to Tea-Party shrieking.
It is a moral imperative to get the U.S. back to 4% growth. How? Of course, the platitudes: Cut government spending; Simplify the tax code; Drill and dig; Import the skilled; Let technology transform education and health care; [Rich Karlgaard, Forbes (where else?) , Apr 18] If only wishing could make the magic. The cut government spending platitude assumes that the private sector would step in and fill the public needs, despite the evidence that the private sector would distribute its profits and simply squirrel away a huge chunk of it while the public infrastructure deteriorates. And where is there any hard evidence that a "simplified" tax code would raise growth? Drill and dig means drain America first and get the immediate profits from extraction and sale just above immediate cost; good for short term profits but a questionable long term strategy. Health care is already being transformed by technology; it costs a lot more for all the new techniques that may prolong life but has not shown up in overall health metrics as a function of money spent. Unfortunately, the pundits of the establishment don't have a good answer to the basic problem of intense international competition that is limiting American growth expectations. Oh, never mind, talk is cheaper than action that Americans don't want to face anyway.
Romney is calling for "something dramatic" to help the economy recover, but he's not saying exactly what. Good idea- what does he have in mind? Romney said repeatedly this past week that his economic policies would create 12 million jobs in his first term. Pushed to explain how, Romney said in the interview, "That's what happens in a normal process." [Steve Peoples, AP, Aug 5] Fantasy economics, again. If wishes were horses, .... What are those magical Romnian economic policies? More of the usual Republican "Let business be business." private economics to resurrect the 19th century. Or even the 18th. Everyone ready for sawdust in the sausage? Just remember the solution for economists stranded in a hole - assume a ladder.
Meanwhile, any chance for a compromise on anything is further endangered on the right. [Kansas] Conservatives are feverishly working to win the [Kansas] Senate and drive out the last remnants of what they see as moderate Republicanism in a state with a deep-rooted history of centrist Republicans in the mold of Bob Dole, Dwight D. Eisenhower and Nancy Kassebaum. [John Eligon, New York Times, Aug 5] That widening divide has an effect on national business as Executives at a wide range of companies fear paralysis in Washington will force hundreds of billions in tax increases and budget cuts in January, leading them to cancel new investments and put off new hires. [Nelson Schwartz, New York Times, Aug 5] The politicans don't seem to grasp that it is not taxes and budgets themselves that paralyze investing; it is uncertainty of what those taxes and budgets will be. As a nation, our regular elections drive us to not making up our minds that better is often the enemy of good.
epic, historic collapses in market valuation, made all the more stunning by the assumption, so prevalent just four years ago, that "clean" energy's time had come. How ironic it is that Barack Obama's insistence that the United States invest government money into the creation of so called "green jobs" -- which led to the debacle of Solyndra and other wasted investments -- was predicated on the fact that if the U.S. didn't do so, the industry of the future would be Made in China. .... four years later, and China's solar energy industry has become nothing less than a capital destruction machine, with some of its most prominent companies now desperately flailing for lifelines. .... the rout in solar is not limited to just Chinese companies -- First Solar stock has plunged 87% in the last year. [Bill Powell, Fortune, Aug 2, 12] Half the counties in the US want federal emergency relief and half the Republicans want to shut down the government. Nonetheless, Congress is taking five weeks vacation from agreeing on almost nothing except their re-election.
This isn't about legislating and this isn't even about budgeting: It's about politics. This is all election-year garment rending. [Gordon Adams, former Clinton budget official] Republicans, who passed a big defense budget cut in the abstract to relieve the deficit, now want to dodge the actuality by screaming. The bad news for all is that deficit cutting means the pain of slimming down life style.
Politics trumps efficiency A General Dynamics military plant in Taunton dodged a huge bullet when the Pentagon this week backed off a plan to cut hundreds of millions of dollars from a communications projects being developed there. The Defense Department’s proposal to cut $334.6 million from the project--a mobile communications system for military units in the field--met with stiff opposition in Congress, particularly from Sen. Scott Brown (R-Mass.). General Dynamics had said the cut would have led to layoffs at the Taunton plant. [Boston Globe, Jul 27, 12]
With enough assumptions. A new study by Ernst & Young concludes increasing taxes on higher-income Americans will hurt economic growth and lead to 710,000 fewer jobs being created. [Columbus Business Journal, Jul 23] Welcome to the ugly idea that aligning government income with federal program spending requires someone to give up something. If tax income doesn't rise, and budget balance is required, some equivalent number of jobs supported by government spending will also disappear. As in: Automatic cuts in federal defense spending set to take effect next year, if not adjusted, will create a lot of pain nationwide, including in San Antonio. [San Antonio Business Journal] Unsurprisingly, privately funded studies and think tanks conveniently ignore that part of the economic picture. Not to worry, though, your Congress delegation will be in the front ranks of don't tax us, don't cut us.
We don't need no federal government rules and programs, EXCEPT [Exemplary Republican] Gov. John Kasich is asking for federal assistance to help Ohio farmers recover from a drought that has plagued the state, the Toledo Blade reports. [Columbus Business Journal, Jul 23] And who will be providing the taxes to pay for Ohio's bailout? Why, no one, since federal money comes from a limitless heaven. Oh, and yes, send us more SBIR money.
Too late smart. Having created a financial monster with huge incentives to cheat the system, and having extracted huge compensation during his reign and in retirement, Sanford Weill now endorses breaking up the banks with resurrection of the Glass-Steagel Act that would have prevented his enrichment and the banking monstrosities that caused the collapse. Thank you, Mr. Weill, for your courageous declaration. Why couldn’t you have made it a decade ago? [Roben Farzad, Bloomberg Business Week, Jul 25]
People often have unrealistic expectations of their governments. The role that local governments can play in revitalizing struggling communities is less extensive than most voters realize and most mayors would like to admit. .... Local governments can certainly lay a foundation for economic development and create all the necessary conditions for a city’s rebirth, including a business climate friendly to job creation, but there is no magic formula for redevelopment. ... The use of public funds to create jobs must be reserved for cases where there are important market failures and a community has a credible chance of building a self-sustaining cluster. [Enrico Moretti, author of The New Geography of Jobs, The American, Jul 25] Our current political debate over jobs is mired in outdated assumptions from the past to which we can never return. But since voters don't study economics or history, and politicians have little incentive to lead debates, the mire will continue. They have to realize that The past is a foreign country: they do things differently there. [LP Hartley, English novelist, 1953].
Univ of Washington health science institute won a five-year, $65 million grant from [NIH] to help researchers speed up the process of getting research from the bench to practical applications that can help people. The money is going to the UW Institute of Translational Health Sciences (ITHS), where researchers from any area will be able to apply for small grants. The funds can be used broadly, whether scientists need to collect early data for a study, get help finding clinical research resources or find expert partners for specific work. [Valerie Bauman, Puget Sound Business Journal, Jul 23]
The PCAST (a White House
published a grand report on Advanced Manufacturing with the usual warm
and fuzzy recommendations for saving America's manufacturing
competitiveness. One specific: Foster a continuum of enhanced capital
access from start up to scale up −− Create a special “Phase 0” section
of SBIR [to] support for the critical pre-early stage funding
activities associated with testing the commercial potential of new
technologies—including early prototype development and market
development. Which sounds good until you realize that SBIR
agencies could have been doing that since the mid-1980s. Most did no
such thing as they re-capturied the money into their regular R&D
programs pointed to the agency's missions. Even DARPA and BMDO
that actually funded innovative stuff left any commercial spin-off to
private funding at the stage where Return On Investment could be
calculated and act as a basis for for-profit investment. It is also
beyond the competence and interest of mission agencies to dabble in
No news and no money. The House and Senate appear unlikely to pass many more appropriations bills for FY 2013. ... On July 12 approximately 3,000 organizations from across the public-interest spectrum – including AAAS – sent a letter to Congress asking for a responsible deficit reduction approach that does not include further cuts tonondefense discretionary spending (which includes the career pleaders for government money). [AAAS, Jul 19] Sometimes it's hard to remember that gridlock is your friend. Little matter, since the Congress cannot let its friends or the government starve, they will do CRAs as needed to buy time to make their speeches before the election.
The Wisconsin Economic Development Corp. said it will give a $300,000 grant to VictorySpark Inc., a group that will make investments in young, veteran-owned businesses. VictorySpark is the first "seed accelerator" to use mentors and focus on veterans' start-ups, the commerce agency said. [Kathleen Gallagher, Milwaukee Journal Sentinel, Jul 17]
[The] company that makes a Bluetooth-enabled meat thermometer has received a $100,000 grant a $250,000 loan from the state in the latest round of Small Business Express aid packages Grow Home Organics (Guilford, CT; no SBIR) which makes products for outdoor kitchens and gardens, is receiving a matching grant of $83,800, ... Connecticut Valley Bindery (New Britain, CT; no SBIR) is receiving a matching grant of $50,000. ....Wethersfield Offset (Rocky Hill, CT; noSBIR), a commercial printer, is receiving a matching grant of $55,721 ... Fire Alarm Specialty Design (Windham, CT; SBIR) which designs fire and security alarm systems for healthcare, educational, municipal, commercial, and industrial uses, is receiving a $100,000 matching grant and a loan of $100,000. [Hartford Courant, Jul 11, 12] Even though states complain of financial distress, they continue to put public money into private enterprise with little hope of economic return to preserve jobs. It's all politics. So what happens next year when the grants expire and such investment is still uneconomic for private investment?
if the government was handing out subsidies to manufacturers, the [Obama] aides worried that those with the best lobbyists would get them — rather than firms with the best business prospects. [Zachary Goldfarb, Washington Post, Jul 14] Subsidies are all politics, SBIR included. American manufacturing befuddles politicians who dream of more and better jobs for voters but have no credible way to make it happen. So, they cling to convenient fantasies from vested interests. In SBIR, federal managers cannot even spell manufacturing because it is not in the rice bowl. A NASA or Navy R&D manager gets no bonus for creating an industry that will create 4000 new well-paying jobs in Ohio.
Never before have
organizations and policy experts harmonized so clearly on the need for
a long-term manufacturing strategy. Time will tell if anyone in
Washington is listening. [Stephen Gold, Industry Week, Jul
11] What they cannot agree on is how any strategy would be
devised and installed in the real world where the interplay of
government and industry is so controversial.
the new satellite U.S. Patent and Trademark Office planned for the region is expected to streamline the process of protecting innovative ideas that once again have turned this region into a job-creating powerhouse. [Patrick May, San Jose Mercury News, Jul 12]
Hands off our handout.
SBIR Insider advises The SBTC
has created two letters, one to Congress (see http://www.nsba.biz/docs/sbtc_
Obama's new campaign fodder measures to help small biz: directing government agencies to pay their bills on an accelerated timeline to all prime contractors for the next year - within 15 days as opposed to 30 days; calling on Congress to let small businesses write off up to $250,000 in capital investments in 2013; SBA revamping its Small Loan Advantage program to raise the maximum loan amount from $250,000 to $350,000 and streamline the loan process. [Reuters, Jul 11]
At the core of the almost universal admiration of small business is an assumption: that ultimately it will be such enterprises that revive the economy and create needed jobs. ... BUT however much everybody admires the small, independent businesses in our neighborhoods and communities, big business remains the primary driver of economic growth and job creation. ... as the New Yorker's financial analyst, James Surowiecki, recently pointed out, the countries with the lowest percentage of workers employed by small business — Germany, Sweden, Denmark and the United States — are some of the strongest economies in the world. ... there is ample proof of their fidelity to limited government, free markets and traditional morality, which they regard as the virtues and inducements of an earlier way of life. [John Bunzel, LA Times, Jul 10] Of course, since we are a representative democracy where politicians pander to public mythology, they will continue to push goodies to small biz regardless of the reality of low economic impact. And a minority of those businesses will plead for special handouts, which is how SBIR got born and continues. No politicians has the nerve to call a halt.
Miles Kimball, an imaginative economics professor at the University of Michigan, has stepped forward to propose an ingenious solution for the Fed’s dilemma. The government should create a “federal credit card” and send one to every adult in the nation, enabling each person to borrow $2,000 at a very low interest rate and not pay back any of the money until after the economy has fully recovered. ... Kimball’s account of his proposal, “Getting the Biggest Bang for the Buck in Fiscal Policy,” can be found at his blog, supplysideliberal.com. [William Greider, the Nation, Jul 10] A form of the helicopter form of stimulus. Let's see: the day that the USG declares the economy fully recovered, the public will suddenly withdraw $2000 per credit card and re-crash the economy. The solution to that is of course political pressure to never so declare.
If markets remained relatively buoyant early this week, that was doubtless because they were waiting for central banks to step into the breach yet again. [The Economist, Jul 6] The world wants to cancel and continue debt at the same time in some way that does not depress economic activity. Can't happen! Every dollar of debt removed is a dollar less buying power for whatever you are selling. Unfortunately, our political system refuses to believe such economics and candidates promise pain-free re-balancing. After the next election we will continue to get only what we are willing to pay for, no matter which party or candidates win.
A biofuels initiative that aims to reduce the military's reliance on imported petroleum is moving ahead, with companies including Virent (Madison, WI; $200K SBIR in the mid 1990s) invited to submit proposals in a $30 million initiative .... another step in a program launched last year by the U.S. Navy along with the Energy and Agriculture departments that aims to help build up the supply of advanced biofuels - those that don't rely on sugars from plants that are eaten, like corn-based ethanol. ... The Air Force said it will select five companies in the first phase, with plans to award $70 million each to the three companies that advance to the second phase and provide matching private-sector funding. .... Critics include Arizona Sen. John McCain, who has termed it a case of "misplaced priorities" and said the Pentagon shouldn't be in the business of funding and sponsoring new energy technologies. [Thomas Content, Milwaukee Journal Sentinel, Jul 2] McCain was a jet jockey who typically expects unlimited logistics for strapping a ready-to-go jet on his back. Wars, though, are fought with logistics as a combat limiter. Never mind, since there is money to be passed out, the political system will spend its energy steering the money to their constituents.
Aerodyne Research (Billerica, MA; 199 SBIR Phase Is and something like $80M total SBIR) will receive five $1-million DOEnergy [SBIR Phase II] grants, and Radiation Monitoring Devices (Watertown, MA; 404 SBIR Phase Is and something like $150M SBIR) will receive three $1 million grants, the department said. ... Other local companies in line to receive Energy Department grants: Conispire (Boston, MA: no SBIR) , Aspen Products Group (Marlborough.MA; $5.6M SBIR), Capesym (Natick, MA; $5.3M SBIR); Nova Scientific (Sturbridge, MA; $9M SBIR); Beacon Power (Tyngsborough, MA; $1M SBIR), the department said. [Chris Reidy, Boston Globe, Jun 29, 12]
The rest of DOE,'s Phase II list also shows a preference for SBIR experience: Euclid Labs (Solon, OH; $18M SBIR since 2004, all DOE including one $10M award), four new Phase IIs; Radiabeam Technologies (Santa Monica, CA, $10M SBIR since 2005 SBIR) three awards; Tech-x (Boulder, CO; something over $50M SBIR since 1994) three new awards Muons (Batavia, IL; $13M since 2002 SBIR, all DOE) three awards; Far-Tech (San Diego, CA;$9+M SBIR since 2003) two awards; Ridgetop Group (Tucson, AZ; $10M SBIR since 2002) two awards; Calabazas Creek Research (San Mateo, CA; $26M since 1994) two awards; Niowave (Lansing, MI; $5M since 2007 SBIR) two awards; Mesa Photonics (Santa Fe, NM; $0.8M since 2008 SBIR) two awards; Green Mountain Radio Research (Colchester, VT; $5.7M SBIR) two awards. Of 104 awards, 33 went to multiple winners who already had collected $378M SBIR from the federal government. Is DOE over-emphasizing contractor competence at the expense of companies and technologies with brighter futures? No one knows becasue Congress shows little interest in the question, and the agency has a bias toward making itself smarter.
Import more smart and cheaper labor.Technology industry lobbying group TechNet has released a letter signed by nearly 350 tech companies — including several from Washington state — to key U.S. senators urging that legislation be approved to remove a cap on how many green cards may be issued to residents of any given country per year. [Jennifer Sokolowsky, Puget Sound Business Journal, Jun 28]
SBIR Insider Rick Shindell wants the sb world to get excited over turning the new law's VC participation rules into a fair share disaster. is, somebody other than market-dead crowd getting most now may have give way more entrepreneurial companies. For the largest part of SBIR, worry seems not bother since mission agencies aren't interested in kinds of technologies in companies that would actually make something economic out of awards. Anyway, to do their part, the SBIR advocates should scream at SBA and their Congress: The deadline for comments on the size standard issues we've discussed is July 16, 2012. The SBTC will be publishing their letter in a few days, along with instructions on how you can sign on to the document. If you read their document and agree, I urge you to sign on to it. All it will take is a simple short email from you giving SBTC your permission to include your name on the letter.
Ohio board of regents proposes a statewide commercialization ecosystem= to create jobs, promote economic growth and increase wealth in thestate. Among the recommendations: ensure that professors' commercialization activities are recognized in the tenure and promotion processes and Aligning curriculum to support the needs of industry. Read the report... [SSTI, Jun 27]
If you can't stand the answer, don't ask the question. the House voted to prohibit the NSF from funding political science research and to curtail the government's ability to monitor economic and demographic trends by eliminating the American Community Survey (ACS). [Science, Jun 15] Somebody has to pay for less government spending, and it will be the politically weakest programs. Business may rescue the ACS because business benefits from the data.
Give those elite [research] institutions more money, with fewer strings attached, and they'll find ways to be more efficient in training students and operating their campuses. [Science, Jun 22] The blue ribbon National Academies panel tells how to spend more money for good stuff without the burden of saying where such money is to come from and why the taxpayers should believe a claim of efficiency. The SBIR advocates cry the same nonsense: more money and no hard questions.
Activist judge? One that makes a ruling you don't like. In the ObamaCare case, the Chief Justice said that the judiciary should yield to the political decisions of lawmaking whenever possible - the opposite of "activist unelected judges." Chief Justice Roberts, in deferring to our elected law-making branches, noted that It is not our job to protect the people from the consequences of their political choices.Never mind, the right has to find someone to blame for their losing elections to the party that enacted such healthcare reform.
Cry "Havoc!" and let slip the dogs of war [Shakespeare's Julius Caesar] The nation's military contractors say they are preparing to shut facilities, tear up supplier contracts, issue pink slipsto thousandsof employees to deal with proposed budget cuts threateningto hit Pentagon spending. ... part automatic round set to take effect in january if congress fails to reach an agreement on reducing mounting federal deficit. .... the aerospace industries association, a trade and lobbying organization in arlington, va., has estimated that 1 million jobs of all kinds nationwide would be lost if sequestration occurs. [WJ Hennigan, LA Times, Jun 26] Easy arithmentic, hard politics. To reduce federal spending, real jobs have to disappear in real Congressional districts. Naturally, since the pie will be shrinking, the SBIR lobby will want more of it.
Spend, spend, elect, elect. People like living above their means, and governments prefer to see the masses sated. The masses have come to think government is a magical entity that can do almost anything, including kiss the economy and make it better when the going gets tough. -- Doug Casey Therefore, handouts like SBIR will continue. The newly borrowed money will flow to the groups with votes or campaign contributions. The merely deserving will see some shrinkage as the price of borrowing rises as political party control of government swings between the two sides.
Ignore those intruders. The present SBIR beneficiaries, particularly the SBIR junkies, through their lobbyists, want to block competition by having SBA declare that under the latest SBIR authorization law only existing companies can apply for SBIR. For thirty years of SBIR the company did not have to exist until the company signed the funding agreement. Greed has no shame as the beneficiaries argue that they deserve SBIR as a their fair share of government prime contracts.
The first round of grants awarded under the Massachusetts-Israel Innovation Partnership, MIIP, were announced ... A total of at least $1.3 million ... SBH Sciences (Natick, MA; no SBIR) and Improdia (Israel) will work together toward the development and manufacture of a chronic inflammation-dependent immunosuppression prognostic kit. $400K .... Automated Medical Instruments (Needham, MA; no SBIR) will work with STI Lasers (Israel). They will develop new technology involving radio frequency energy to perform circumferential ablation of the pulmonary veins. $230K ... Lantheus (North Billerica); no SBIR and Check-Cap (Israel) will work on a novel 3-D imaging capsule that can be used to screen for polyps and lesions associated with colorectal cancer.$600K ... FloDesign Sonics (Wilbraham, MA; no SBIR) and Transbiodiesel (Israel) have been selected as the clean energy award winners. Their joint project will use FloDesign’s acoustic molecule separation technology to separate oil that can be used to create fuel from Transbiodiesel’s oil-generating algae. $75K. [DC Denison, Mass High Tech, Jun 19, 12]
On June 6, Rep. Russ Carnahan (D-MO) introduced the International Science and Technology Cooperation (ISTC) Act (H.R. 5916), which would establish an interagency committee, under the direction of the National Science and Technology Council, to coordinate and improve the efficiency of U.S. research efforts. [AAAS, Jun 14] How sweet, improved efficiency in science, as if anyone can define such a thing. In politics it usually means funding what I like and not what you like.
A campaign in South Korea has reportedly succeeded in removing references to evolution from high school biology textbooks. The Committee to Revise Evolution in Textbooks is an offshoot of the Korea Association for Creation Research. The South Korean Ministry of Education, Science and Technology has announced that publishers are slated to produce revised editions of books that exclude examples of the evolution of the horse or of an avian ancestor; the committee has also targeted human evolution and the adaptations of the beak of the finch. [AAAS, Jun 14] Religionists everywhere try to force-fit history and nature into their ideas of existence.
A third company [Nano Tailor,Austin,TX; no SBIR] awarded taxpayer dollars through Gov. Rick Perry's business-hatching Emerging Technology Fund has filed for bankruptcy, folding after the state cut off money that was tied to hitting milestones not in the original contract, the president of the startup said Thursday. ... [company president] Perales said NanoTailor used licensed technology from NASA to make carbon nanotubes for industries ranging from aerospace to pharmaceuticals. He said the company had six employees and about 20 investors, but [Perry spokeswoman Lucy] Nashed said filings with the state indicate the startup lagged in attracting outside dollars. ... The awards are not grants, because the state takes equity positions in each company, but the stakes are not made public [Paul Weber, AP, Jun 14, 12]
US companies looking to hire skilled foreign workers have signed up for special work visas at the fastest rate in years. The US Citizenship and Immigration Services said earlier this week that it has filled its quota for the H-1B visa program, [Boston Globe, Jun 15]
Gov. Rick Perry has made job creation a cornerstone of his administration. It doesn't matter whether those jobs originate here or come in from out of state, Perry wants 'em all.[Dan Zehr, Austin American Statesman, Jun 16] If you're not Texas bred, you would have to put up with a lot of "stuff" for a Texas job.
The inevitable political boo-birds sang: Longview Republican state Rep. David Simpson, who rode the tea party wave into the Legislature in 2010, said that $250,000 has now been wasted because the government went into the business of "picking winners and losers." Such a judgment has to weighed against the objective of the investments. If it was a high technical risk technology with a large payoff, a high failure rate is expected and a low failure rate signals too timid an approach. If it was merely a business risk venture, than questions about politics are legitimate. In Texas, no one can be sure what was going on, especially when the details are kept hidden. [Paul Weber, AP, Jun 14, 2012]
Those tiresome government auditors. Eight Wisconsin agencies that spent tens of millions of dollars on economic development programs don't have a complete picture of the payoff, according to a state audit .... WEDC Secretary Paul Jadin wrote in a letter to auditors that the 15 Commerce Department [now defunct] programs that lacked results information provided technical assistance and weren't designed to produce performance benchmarks. What's more, agency heads need clarification about what programs are subject to the results reporting requirement mandated by law. .... Republican Gov. Scott Walker abolished the department last year and created WEDC in its place, saying the new agency would approach economic development more like a private company. [Todd Richmomd, AP, Jun 12] Economic development program evaluation has the dilemma that the US economy is so large and complex that good or bad results may not have been caused by the political program that sounded so good in its announcement.
DeMuth pointed out ... that debt has become the tool politicians use to placate voters here and now, leaving the not-so-trivial problem of future repayment to their successors. Unless some institutional changes are made that hold these politicians to account for their spending decisions, they will continue to overload the national credit card. And no such effective institution has yet been devised by any democratic government, unless you believe that a balanced budget amendment to the constitution, such as those in Spain and Italy, will do the trick. If you do, I have a bridge in Brooklyn that I would like to sell you. [Irwin Stelzer, Weekly Standard, Jun 9]
We do our stuff. develop stand-alone computational modules for seamlessly extending the validity of continuum CFD codes into transitional and rarefied flow regimes. The modules will be designed for implementation in to existing legacy codes for use in the characterization of high altitude plume flows. Another similar Phase II: Enhancements to Continuum Plume Flowfield Models for Transitional Flow Simulations A 2010 Phase II SBIR by MDA that will make the government a little smarter. Downstream economic return, jobs after SBIR, ...? It's our money and we do our stuff. Another similar Phase II: Enhancements to Continuum Plume Flowfield Models for Transitional Flow Simulations. If you're thinking about proposing to MDA, search their lists of funded projects after Y2K and ask if you fit into the defensive and incremental approaches they favor.You're not likely to find any projects that would stir the pulse of an ROI-minded investor.
NIH has posted a notice on its plan to pilot a new procedure that would trigger an additional layer of review for principal investigators or program directors who apply for funding and already receive more than $1.5 million per year in research project grants. Read Blog » [AAAS, Jun 8]
Another o-pork-ortunity. The Obama Administration announces a $26 million Advanced Manufacturing Jobs and Innovation Accelerator Challenge, a partnership between the U.S. Department of Commerce’s Economic Development Administration and National Institute of Standards and Technology, the U.S. Department of Energy, the U.S. Department of Labor’s Employment and Training Administration, the Small Business Administration, and the National Science Foundation. This initiative will assist the development and implementation of regionally-driven economic development strategies that support advanced manufacturing and cluster development. In addition to the six partnering agencies, the initiative will leverage technical assistance from up to eight other Federal agencies. The investments will accelerate innovation-fueled job creation and economic prosperity through public private partnerships, and serve as a catalyst for leveraging private capital, assisting entrepreneurial development in disadvantaged communities and promoting cluster based development in advanced manufacturing. [http://www.manufacturing.gov/accelerator/index.html] Can't you just smell the glowing letters from Members of Congress in every proposal? What are the evaluation criteira for which government has good competence? Words like cluster, economic propserity, leveraging, disadvantaged communities mean politics will rule. Last year's crop View the 2011 winning projects was scattered all over the country and filled with vague feel-good words of pretending that government can actually influence private capital investment in uncompetitive places and enterprises.
King Canute brings sea commands to NC. A proposed piece of legislation in North Carolina's state legislature would change the way state scientists are allowed to estimate sea-level rise over the next century. Specifically, the legislation would require state agencies to only use historical sea level data from the year 1900, and to extrapolate future trends linearly. The legislation is supported by a local economic development organization called NC-20 that seeks to promote continued development in the coastal Carolina region.[AAAS, Jun 6]
Startup Act (S. 1965),
originally introduced by Senators Jerry Moran (R-KS) and Mark Warner
(D-VA), has been merged with the AGREE Act (S. 1866),
introduced by Senators Chris Coons (D-DE) and Marco Rubio (R-FL). The
Startup Act creates a new grant program to be managed through the
Department of Commerce for universities "to improve commercialization
capacity" and to allow faculty "to approach technology transfer
programs outside their institution of employment." The program would be
funded by creating a new set-aside of 1.5% from the federal R&D
budget. The AGREE Act would extend tax relief to small businesses, ease
regulations, and provide research credits for qualified domestic
manufacturers. The newly merged bill is called Startup 2.0 (S. 3217), and it
would also create a new visa for foreign students who graduate from a
U.S. institution with either a master's degree or Ph.D. in a STEM field
to extend their stay by one year in order to facilitate their ability
to receive a green card. [AAAS, May 31] A handout
and tax cuts, just what a deficit reduction Congress would do in an
election year. The handout shifts money from government R&D to
professors to pretend that their pet technologies have commercial
appeal. Watch for more deficit crocodile tears.
SBA will be holding roundtable meetings regarding its proposal to amend its regulations governing size and eligibility for the SBIR and STTR) Programs (proposed amendments found here). The roundtable meetings will be held June 8 in Washington, DC and June 19 in Austin, TX (registration details are here). Comments on the proposed changes must be received by July 16.[AAAS, May 31] The proposed ownership criteria are naturally as complex as private entity ownership and control can be.
Subsidies produce supply. Since 2009, the Obama administration has awarded more than $1 billion to American companies to make advanced batteries for electric vehicles. Halfway to a six-year goal of producing one million electric and plug-in hybrid vehicles, auto makers are barely at 50,000 cars. The money funded nine battery plants—scattered across the U.S. —that have few customers, operate well below capacity and, so far, have created less than a third of the jobs promised by 2015. ... President Obama heralded the "birth of an entire new industry" during the ceremonial opening of A123 Systems Inc.'s production plant in 2010. .... A123, which has been trying to raise cash through a private debt offering, said in a regulatory filing that its losses and cash burn "raise substantial doubt on the company's ability to continue as a going concern." [Mike Ramsey, Wall Street Journal, Jun 1]
A higher mythical goal. Small businesses would be entitled to at least 25 percent of federal contracting dollars under legislation passed by the House today. That’s an increase from the current small business contracting goal of 23 percent. Problem is, the federal government hardly ever reaches that goal. [Kent Hoover, Pittsburgh Business Times, May 21] Pure handout politics, which among other things gives politicians more chances to announce contracts for their constituencies. One problem is that the number is for prime contracts - written directly from the federal agency to the biz - for which I can see no basis for any particular floor, and no defensible economic justification. Direct contracting also requires more government handlers than indirect. In practice the small biz world gets a huge percentage of federal dollars in the combination of prime and sub-contracts. Every Lockheed military aircraft is stuffed with parts from small biz; big biz makes big things and small biz makes small things because small biz canot make a fleet of aircraft and big biz finds small markets uneconomic. Ah well, the concessions that efficient government makes to representative democracy.
Our subsidy good, yours bad. China’s allegation that renewable-energy subsidies in five US states violate free-trade rules ratchets up a potentially costly trade war between the world’s two largest economies. Programs supporting renewable power, including wind and solar, in Washington state, New Jersey, Massachusetts, Ohio, and California, violate World Trade Organization policies and trade treaties, according to a preliminary finding of an investigation posted yesterday on the website of China’s Ministry of Commerce. [Bloomberg News, May 25]
Indiana's secretary of state is urging investors to thoroughly vet new online investment operations coming under a new federal law. Connie Lawson warns that the new "crowdfunding" tool approved under that law could attract fraudulent investors. .... Congress ordered the [SEC] to develop rules for using the new tool within 270 days. Lawson cautions that until those new rules are in place any crowdfunding offers are unlawful. She says crowdfunding holds the potential to work as a fundraising tool for legitimate startup businesses, but "there is also great potential for fraud" and Indiana investors need to do their homework before investing. [AP, May 29]
Harder chairs. As the U.S. Air Force continues to face growing budget pressures, acquisition officials will be putting the pressure on defense contractors to keep their overhead costs to a minimum, says the ***general at.Wright Pat AB [Dayton Business News, May 24, 12]
Market failure remedy leads to ... market failure. Even from a conservative, free-market perspective, government subsidies for businesses distort markets, foster monopolies, undermine competition, and reduce efficiency. The same complaints that business advocates make about the welfare system apply to government programs to help businesses – the vicious cycle of dependence, the lack of incentive to work hard or face difficult choices, the inevitable favoritism (some businesses get taxpayer subsidies, others miss out, and those that do have an unfair advantage over competitors who might otherwise win in a free marketplace). It has a chilling effect on market-driven innovation, improvements in efficiency, or “creative destruction.” The subsidies can cause inflation as the local market prices correct for the infusion of unearned money. The inherent risks in entrepreneurship get externalized onto taxpayers rather than internalized by those who hope to reap the profits if they get lucky. The conflict-of-interest problem is not just that the businessmen will engage in whitewashed embezzlement, diverting funds to their own businesses or friend’s businesses (or to their suppliers, in hopes of getting discounted inputs). The problem is also that other firms – firms that might be more efficient, providing better goods and services at lower cost – face higher entry barriers when the existing holders of market share are bolstered by government handouts. In other words, I see little difference in the morality of handouts for poor individuals/families and handouts for businesses. There is a spiritual virtue in helping the poor, of course, but also a virtue in helping those who are hard-working and who have made sacrifices to become successful. The problem for me is the unintended consequences of government subsidies for entities that are supposed to compete and succeed in a free market. [Dru Stevenson at the Privatization blog] Stevenson's shot at the Arizona Commerce Authority applies just as well to most of SBIR because it is easier to claim market failure as an excuse for intervention than to control the handouts of money to actual market failure situations. Once money is on the table, defnintions give way to politics because few self-confessed capitalists can resist the temptation to take money that actually undercuts capitalism.
Subsidy failures. Schilling’s faltering video game company, which received a $75 million loan guarantee to move to Rhode Island in 2010, laid off its entire staff [AP, May 24] . Meanwhile, political campaign charges Obama administration with energy subsidies to renewables. The difference is that renewable energy has a market failure justification whereas subsidy to an ordinary company for hoped-for job creation does not. But in politics, market failure is ignored as a principle whne the politicians decide to do something.
A series of public webinar
roundtable meetings will provide a basic overview of and respond to
questions on the proposed rule, which addresses ownership, control and
affiliation for participants in the programs. Register by sending an
email to: SBIRcomments@sba.gov.
Kissing small biz. [Four US Senators] introduced legislation that would continue to spur the economy through the creation of new businesses ... use existing federal funding to support innovation initiatives to accelerate commercialization of university research and development. Grants would be awarded to universities to improve commercialization efforts and to support programs that allow faculty to commercialize research .... Visas for up to 50,000 foreign students who graduate from an American university with a masters or Ph.D. in one of the STEM fields;Creation of a new "Entrepreneurs' Visa" for up to 75,000 immigrants who currently hold a visa to enable these entrepreneurs to create new businesses; Elimination of country caps for employment-based immigration visas;Capital gains tax exemption for investments in qualified small businesses made permanent; and, Limited research and development tax credit for qualifying startups. [SSTI, May 23] Wishful ideas for universities and immigrants that don't require new money form the Tea Party. Now, if only the government knew how to create good actual permanent jobs from legislation of any kind. Alas not, in an economy where private investment for private purposes creates wealth and government redistributes some of that wealth for public goods and services. But the politicians have to pretend to be doing something.
The leaders of the 27 countries that make up the European Union are to meet in Brussels to try and find a way to keep the debt crisis in Europe from spiraling out of control and promote jobs and growth. [AP, May 23] Expect the usual banalities from politicians who have no solution to the modern dilemma of developed states that want "growth" at no cost but have no workable method beyond debt-powered public spending to increase economic activity. Our competing politicians mouth the same banalities as they pretend to offer cost-free solutions to unemployment and national debt.
Pump-priming fever. Massachusetts House leaders introduced a bill earlier this week calling for funding to support R&D at universities and research centers, manufacturing grants and workforce training, and a venture capital mentoring program for startups. The measure is touted as a jobs bill to stimulate the state's sluggish recovery by focusing on high-growth sectors of the economy.[Mass High Tech, May 18] Election coming again; be seen doing something that sounds good. Results not necessary, take longer than even the next election after this one.
Solutions [to USG finance dilemma] are easy to come by “when you’re sitting at the Council on Foreign Relations in New York,” said Rubin, the council’s co-chairman. “It’s a lot harder to do it when you’re sitting in Washington and it’s one minute of midnight.” [Lori Montgomery, Washington Post, May 15]
Religion wins in the Bible Belt. Last weekend, former President Bill Clinton took to North Carolina phone lines with a recorded message warning of the perils of a constitutional amendment banning same-sex marriage and civil unions. “What it will change is North Carolina’s ability to keep good businesses, attract new jobs, and attract and keep talented entrepreneurs,” Mr. Clinton asserted. “If it passes, your ability to keep those businesses, get those jobs and get those talented entrepreneurs will be weakened.” That argument landed with a thud, as North Carolina voters resoundingly supported the amendment by a margin of 20 percentage points. [James Stewart, New York Times, May 12] If you're looking for a state for high-tech biz, notice that the religious impulse extends basically from the Virginia coast in a broad belt through the Confederacy all the way to the California border. Does warmer weather suppress the intellect? Why does tech biz gravitate to Massachusetts and California?
A deal's a deal .. until. Ryan (R-WI) introduced a bill that would replace the budget sequester established by the Budget Control Act of 2011, in order to protect defense discretionary spending from automatic cuts. .... would replace cuts to defense spending, [AAAS, May 9] Horrors! Our friends would have to actually pay the price of the deal.
Politics misuses economics. [An economist] argues that every dollar taken from the private sector and channeled to the public-sector for government spending produces a GDP multiplier of less than one. Thus, the economy has gotten worse under Obama's big-government policies. He would have been better off leaving the money in private hands. The multiplier might be true, but was never tested because the money for the stimulus was never taken from private hands. It was borrowed - hear the Republicans wail - which put even more money into the economy and in no way restricted private spending or investment at risibly low interest rates. Oh, never mind, if you don't like a president, you'll invent convenient interpretations to justify your view. Post hoc, ergo propter hoc still lives in politics. Eventually millions of Americans will vote for president but not on the basis of real economics, only on some overall view of the candidates. The adults with some knowledge of economics know they have heard all the promises before. You can vote secretly but when you go to explain why, you need some sensible arguments to be credible. And take note that the stock market has doubled in Obama-time.
Never give up --Winston Churchill.
After two anti-evolution bills died in [Oklahoma legislature] committee, the same language appeared as an amendment to another bill which would have extended a deadline for local school districts to meet standards for media, equipment and textbooks. [AAAS, May 9] Not only can they not stop evolution, they will not stop trying. Old news from the Bible Belt.
Trolling for techno-votes President Obama said he wants to replicate Albany [NY] NanoTech's business model around the country, using the venue to urge Congress to approve his economic agenda. .... The NanoTech complex employs 2,700 people who focus on semiconductors .... the newest NanoTech building, being built by Watervliet-based M+W U.S. Inc., (Plano, TX; a full service engineering, architecture, and construction management firm) that will house joint research by the world's largest computer-chip companies. In total, it is a $4.8 billion investment, mostly private funding with government aid mixed in. [Adam Sichko, The Business Review (Albany), May 8]
Don't want no innovation. North Carolina voters approved a constitutional amendment defining marriage as strictly between a man and a woman. [Wall Street Journal, May 9] The political system sends mixed messages about inviting innovation and science into a den of religion,especially for biotech companies dabbling in stem cells and reproductive science, and parents with school age children. Perhaps the eventual solution is suggested in Tom Toles's cartoon where a marriage officiator says If anyone here objects to the marriage of these two men, speak up now because opponents are aging and dying off and soon won't matter anymore. [Washington Post, May 9]
The [right wing] Heritage [Foundation] plan reforms and funds those government programs that matter most to people who need the government’s help, and it frees the private sector to create the millions of jobs that will dramatically reduce the growth of dependence on government. http://www.heritage.org/research/reports/2012/02/2012-index-of-dependence-on-government Bah!. The private sector was always free to create millions of jobs; it didn't do because there was too little profit to be made from employees getting a decent wage. BTW, uutold numbers of SBIR awardees are also on the dole because their stuff can't cut it in the private sector. The exact number will remain untold because the politicians don't want it revealed that they are handing out corporate welfare.
Department of Energy's loan program is in shambles. Its reputation destroyed by the failure of Solyndra ... a near-perfect case study. It spent too much money too fast. In addition to the $535 million from the DOE, the company raised over $1.2 billion from private investors, including some of venture capital's most prominent firms. What Solyndra lacked, though, was market savvy and manufacturing flexibility. [David Rotman, Technology Review, M/J12] .... [renewable energy] all seemed intoxicating and revolutionary: a way to boost jobs, temper fossil-fuel prices, and curb global warming, while minting new fortunes in the process. Much of that enthusiasm has now fizzled. Natural gas prices have plummeted in the United States, the result of technology that has unlocked vast supplies of a fuel that is cleaner than coal. .... the government has schizophrenically ramped up and down support for renewable power, confusing investors and inhibiting the technologies' development; it has also structured its subsidies in inefficient ways. [Jeffrey Bell, Foreign Affairs, M/J12] Since government "investment" responds more to press release opportunities than profit opportiunities, no one should be surprised at some individual failures that supply even more press release opportunities. VCs in contrast quietly bury their failures and focus on exploiting the successes for total return onthe total investments.
Forget about Seattle's grand plans for a city-sponsored, superfast broadband network. Seattle has quietly given up, ending nearly a decade of blue-ribbon commissions, reams of studies and public outreach. ..... Over the past decade, cities across the country tried offering free Wi-Fi through public-private partnerships that largely failed. Now phone and cable companies are trying to seal the coffin. [Brier Dudley, Seattle Times, May 6] Where there's a competitive private market, public structures cannot and need not keep up. We don't need free bread for everyone. Nor do we need free bread for uncompetitive, life-style small tech biz.
the White House released a comprehensive national strategy to guide federal investments and collaborations with the private sector in the life sciences. The National Bioeconomy Blueprint identifies five strategic objectives that will inform administration efforts to boost the bioeconomy. Key among these objectives is the expansion of foundational, cross-disciplinary research, which will require improved funding mechanisms that are flexible enough to support many kinds of collaborations and that encourage high-risk/high-reward research [SSTI, May 3] The gap between bloviating and results is likely to be as cloudy as all earlier attempts to perfect government R&D investment. As the Army exhorts its leaders: Do something even if it's wrong.
Slithering underway. OMB says that the Department of Veterans Affairs (VA) would be exempt from the across-the-board cuts of between 8 and 10 percent scheduled to take effect in January 2013. [AAAS Policy Alert, May 3] Soon every other program will claim equal holiness and the budget will be re-opened for political re-jiggering. .... once again, we are more likely to witness dithering and bickering in Washington, accompanied by political posturing packaged in competing election-driven narratives [Mohammed El-Erian, WashPo, May 4] As an example of political dodging, European leaders are talking growth, even as Germany remains adamant that it doesn't want the fiscal framework it has established over the past two years going up in smoke as soon as the going gets tough. [Wall Street Journal, May 4] Talk growth on the campaign trails, even though the political system has no credible means of producing it without adding even more debt. Such dithering will go on in all democratic countries until the electorate stops accepting irredeemable promises.
austerity policies are failing to spark confidence in the region's economies ahead of a week of expected anti-austerity protests and a string of important national elections..... both French and Greek elections this weekend are expected to castigate incumbents. [David Roman and Stephen Fidler, Wall Street Journal, May 1] The very nerve of those politicians to give us the free lunch we clamored for despite economic reality that deficit finance must eventually end. US Republicans take note - voters don't like austerity.
DOD has released another SBIR solicitation with a June 24 deadline. It provides the names of the topic authors and their phone numbers and e-mail addresses for questions until May 23. You can ask them anything but they have some restrictions on what they can tell you. They are looking for the best technology in their area and they will (should) tell you if what you plan to propose interests them. Remember though that if you are not the best in the country at what you propose, you have little chance of winning an award. Fortunately for first-timers, DOD is not finicky about minor details if you have just what they want. And if you have a really hot idea, they have the option of picking up the phone and telling you to start work. DOD always has money for what they must have. http://www.acq.osd.mil/osbp/sbir/solicitations/sbir20122/index.shtml
Voters shy from hard choices. Lexington’s bet is that Americans will never give the Republicans a clean mandate to drown the sort of state they have now. Like voters everywhere, they want many impossible things before breakfast, including low taxes and all the things that high taxes pay for. They will expect their leaders to muddle through. And muddle through they probably will [The Economist, Apr 27]
in an aggressive, noisy campaign, the public may not fully understand the candidates' positions. After all, precision and clarity have never been the hallmarks of presidential campaign advertising. ..... The American people deserve a full debate and discussion on our fiscal problems. With four $1 trillion deficits in row and a debt ratio over 70%, the Washington response of both political parties has been to "kick the can down the road." [Bill Frenzel, realclearmarkets.com, Apr 24] But the people don't want to hear the truth; they want someone else to pay, and they will accept a vague political promise that they won't have to suffer. It's been going on for fifty years. LBJ wouldn't pay for Vietnam and Bush-Cheney wouldn't pay for Iraq, etc
Religion in science class. Tennessee Gov. Bill Haslam (R) allowed HB 368 [into] law ... encourages teachers to present the "scientific strengths and scientific weaknesses" of topics that include evolution and climate science. [SSTI, Apr 19] Maybe a teacher or two will introduce books like Dava Sobel's Gallileo's Daughter as extra-credit reading on how unrestrained religious authority denies science. Surely, other Dixie states will form a phalanx for the dumbing down of science as they retreat to the intellectual safety of the Middle Ages. The most widely held theory of politics is also the simplest: the powerful get what they want. Financial regulation is driven by the interests of banks, health policy by the interests of insurance companies, and tax policy by the interests of the rich. Those who can influence government the most ... eventually get their way. [Dani Rodrik]
Six investment funds received $25 million Tuesday, money aimed at backing up to 100 seed-stage companies around New York. The total investment in small businesses will wind up being at least $75 million, because each winning fund must supply at least $2 of private investment to pair with every dollar coming from the state. [Adam Sichko, The Business Review (Albany), Apr 17] Seed-stage is actually a true market-failure situation for government intervention, but government support is unstable because it is so driven by politicians with short time horizons. New York politicians, like every other state politicians, want the publicity of market intervention, provided it carries some other name. This New York fund with 2-for-1 private matching has the chance to pick future winning technology because the private investors won't go for kind of scientific blobs that science agencies typically fund. Good luck, NY.
Subsidies come and go. A report to be released Wednesday by scholars at the Brookings Institution and Oakland's Breakthrough Institute warns that federal spending on clean technologies is drying up, with little sign of additional help coming from Congress. As a result, more cleantech companies are likely to go bankrupt or be consolidated, ..... "We're falling off the cliff," Mark Muro, a senior fellow at the Brookings Institution, said [San Jose Mercury News, Apr 18]
SBIR] Phase I project will develop
multi-dimensional neurodynamic models of the cognitive organizations of
teams that span zero history to proven entrepreneurial teams (ET), with
the purpose of developing a neurophysiologic instrument to rate a
team's entrepreneurial aptitude. ..... Neurodynamic models
will be generated using EEG technologies and protocols previously
developed for high fidelity military training activities. These models
dynamically follow the engagement and workload of each member of the
team as well as the entire team and will be customized for studying
entrepreneurial teams. [NASA SBIR abstract] Using a
developed tool to study another specimen could be an endlessly
profitable job for the research team, BUT where's the downstream
economic impact? The proprietary
neurodynamic assessment system will be marketed to corporate training /
coaching programs, financial backers who wish to decrease uncertainty
in ventures, and entrepreneurial organizations who wish to optimize
their performance. The scientific and technical
merit people in government will believe almost any commercialization
story to justify SBIR for their favorite research.
Austerity hits science. the long-delayed 2012 [Spanish] national budget would slash the funding for science by more than 25% surpassed their worst predictions.[Science, Apr 13] On this side of the pond, we are still pretending that we can afford all our famous debt-financed public science.
The UC Board of Regents is expected to vote next month to approve the Center for Innovative Therapeutics, or CIT, a $110 million research complex that would house UCSD scientists and researchers from biotech companies. Regents are hoping to get companies to more quickly develop products and treatments invented by university scientists, a branch of research known as “bench-to-bedside.” [Gary Robbins, utsandiego.com, Apr 17]
Y biz luvs guv. In a libertarian world where politicians all just say no to subsidizing businesses, then businesses would end up reasonably evenly distributed across the country (due to labor markets, distribution requirements, etc.) and taxpayers would not be paying any subsidies. However, because politicians fear that their community will lose if they don’t play the subsidy game like everyone else (the equivalent of staying silent while your partner is ratting you out in prison) what we end up with is still having businesses reasonably evenly distributed across the country, but with massive subsidies in place. [coyoteblog.com, Apr 16] Interstate competition is natural where politicians have to convince voters to re-elect them. Unfortunately the result if the subsidies is a large diversion of tax revenue to private business.
Five Connecticut companies have qualified for more than $1 million in grants and loans through the Small Business Express Program. ... a bi-partisan effort created last year to help small businesses with 50 or fewer workers boost their payrolls and fund capital investments. Innovation companies: Nature's First (Orange, CT; no SBIR); Nalas Engineering (Essex, CT; one SBIR); [Janice Podsada, Hartford Courant, Apr 13, 12]
A new report from the Office of Science and Technology Policy (OSTP) examines the use of prizes to achieve ambitious national goals over the past few years, and presents a number of ways this approach could be improved. Read the report... [SSTI, Apr 12]
A new report by the Pew Center on the States found that half of the states with tax incentive programs do not take the basic steps needed to know whether or not they are effective. The study identified 13 states with good assessments, 12 with mixed results, and 26 not meeting any criteria for scope or quality of evaluation. A major problem seems to be that states conducting rigorous evaluations of some incentives tend to ignore others and many states evaluate infrequently or not thoroughly enough. The authors focused the study on four criteria for effective evaluation and assessed the states' practices as to how well they: inform policy choices, include all major tax incentives, measure economic impact, and draw clear conclusions. Leading examples are found in Connecticut, Oregon, Louisiana, and Washington. Evidence Counts: Evaluating State Tax Incentives for Jobs and Growth is available at: http://www.pewcenteronthestates.org/uploadedFiles/015_12_RI%20Tax%20Incentives%20Report_web.pdf. [SSTI, Apr 12] Evidence has an uphill fight for recognition where politics wants to hand out gifts.
Even when a state has the most favorable tax policies for a particular type of business, the policy does little to influence where people start companies. .... most would-be entrepreneurs can’t choose between states in which to start their companies without relocating. And few people switch states to start businesses. [Scott Shane, Bloomberg Business Week, Apr 10]
Thanks to a cold call placed by the Saratoga [NY] Economic Development Corporation in 2005, pitching the area as an ideal site for a factory, GlobalFoundries (no SBIR), a semiconductor manufacturer, is building a $4.6 billion, 2m-square-foot campus in a Saratoga forest ..... the area has returned to its roots. GE Global Research, founded 112 years ago, traces its origins to a carriage barn in nearby Schenectady. After shrinking its manufacturing arm in the 1990s, it is bringing it back to New York, making high-energy-density batteries and digital x-ray-detectors..... Sematech, a chip consortium, has moved to Albany from the high-tech magnet of Austin ... the area has the lowest per-capita county taxes in New York state. [The Economist, April 14] The Capital District has a long industrial history, frigid winters, a first class technical university, and no urge to suppress science in the name of religion.
Unlike with some rural economic development programs in his office, [Texas Agriculture Commissioner Todd] Staples decided last fall to outsource investment decisions to two private [VC] firms,. "I didn't want to be involved in the selection process," Staples said. "I wanted to have that removed from this office and that to be based on economic criteria and investment criteria, so it would be based on clear market circumstances." [Laylan Copelin, Austin American Statesman, Apr 15] What a novel idea: use private investors to decicde where to invest in private companies for economic return. A better idea is to get government out of investing in private entities where an ROI is easily calculated. Limit government investment in true market-failure situations.
Defense Conversion, 1992 Redux. with the war in Iraq over and the conflict in Afghanistan winding down, robot makers are facing a reboot. .... At the same time, the administration's new defense strategy pledges a "strong commitment" to emerging technologies and singles out robotics as an area of promise [Nathan Hodge, Wall Street Journal, Apr 12] Defense conversion was all the rage in the 1992 campaign, with almost every involved Congressional committee suggesting more SBIR as a big contributor. The new Clinton administration got busy trying to make civilian technology out of military R&D. As usual, it failed for price and the inability of the federal agencies to adapt to private market disciplines. Soon enough the fanfare subsided and defense business as usual regained its hold.
Making transportation spending about the construction jobs instead of the infrastructure is like making investment decisions based on how attractive the broker is rather than the expected return of the investment. [Adrian Moore, Real Clear Markets, Apr 12] Never mind, if it has jobs anywhere in the content, the politicians are for it in front of a public that tells pollsters that jobs will drive their voting preferences. How and why they actually vote is much more complex. We get the government we deserve.
Start the pump-and-dump machine. The signing of the new JOBS law opens crowdsourcing for startup companies which invites scamsters to pump trash concepts as the technology of the future for unsophisticated investors. Human gullibility being what it is, and the SEC chasing bigger scamsters with a declining federal budget, wanna buy warrants on a bridge?
A new Army laboratory [in Warren, MI] will develop technology such as fuel cells and hybrid systems for combat vehicles as the Pentagon steps up its push for cleaner and more reliable energy, federal officials said ... The military uses 90 percent of the energy consumed by the federal government, which accounts for about 2 percent of all U.S. energy consumption. [John Flesher, AP, Apr 11]
The [Chinese] government desperately wants its economy to move up the value chain, to become a source of innovation rather than just a producer of cheap goods. To make that happen, it has employed the traditional instruments of science and technology policy, but it has also relied on industrial espionage directed at foreign high-tech companies. Hackers have reportedly targeted the negotiation strategies, business plans, and financial information of foreign energy and banking companies, too. ..... With a growing population of 500 million Internet users, it is easy to see why the Chinese believe that the future of cyberspace belongs to them. [Adam Segal, Foreign Affairs, M/A 12]
To sell politicians on the benefits of allowing start-ups to grow into public companies, the task force pointed to research showing that when such firms go public, more than 90% of their job creation happens after the IPO. [James Freeman, Wall Street Journal, Apr 7] If the politicians believed such a fact, and weren't just passing any law they could with Jobs in the title, they would do something to push seed capital in programs like SBIR toward companies and ideas with a market future. Instead they stand by while the federal agencies serve themselves.
In “Globalization of S&T: Key Challenges Facing DOD,” Timothy Coffey and Steven Ramburg argue that the demographic and industrial strengths that shaped the highly successful U.S. S&T strategy over the past 50 years is not likely to be sustainable in the 21st century. ... as emerging countries enter a phase of rapid economic growth and accordingly ramp up investments in R&D. .... the DoD should shift from inventing and discovering new things at home to forecasting the invention and discovery of new things abroad. [William Pentland, Forbes, Apr 6]
A new program launched in Massachusetts will help companies commercialize technologies developed under [SBIR] by picking up where Phase II of the program leaves off, providing financial support, coaching and introductions to potential investors. The Massachusetts Technology Development Corporation will initiate the program with $6 million over the next three years. [SSTI, Mar 28] Nice theory but usually too late since the agency thought first of its own needs and then leaves the commercializing for afterwards. The problem is far too many market-dead companies getting SBIR to do nice government R&D on just criteria of scientific and technical merit. If you want good stew, start with good ingredients. Not to worry though, with an election coming up, the politicians will see the merits of amny such investments with glitzy announcements.
U.S. lawmakers, banks and the SBA recently have expanded the scope of what they commonly consider small. ... The SBA has made similar upward revisions over the last year in 130 industries, adding at least 27,400 new companies to its definition of a small business. Many of the definitions hadn't been adjusted since the 1980s despite inflation over that time [Angus Loten, Wall Street Journal, Apr 4]
"The challenges facing the American economy today are not primarily about the vibrancy or efficiency of the business community. They are about the barriers to economic opportunity and economic security for many Americans....These challenges can only be addressed by government action." [SECTREAS Timothy Geithner, Apr 4] The Republican view says cut taxes and spending to fix what ails the American economy, which by implication will liberate business to invigorate the economy [and help further concentrate the wealth at the top of the heap]. Not to worry much because there are not enough rich voters and gullible middle class voters to let it happen.
The Texas Emerging Technology Fund has attracted almost $1.3 billion of outside investment in technology companies and university research, the fund's director testified Friday, but he urged the Legislature to prod Texas colleges to do more in converting research into businesses. .... He said that the state has invested $192 million in 133 companies since the fund's inception in 2005 but that most of the money was disbursed in 2009 and 2010. [Laylin Copelin, Austin American Statesman, Mar 30] Theories abound on state investments in high tech companies, including those politically connected to the governor or other politicians, with little economic evaluation of the results except the easily counted jobs paid for with the investment. The same theories abound in federal investments like SBIR. The proponents are the politicians who can announce a handout and the beneficiaries who like free money. But then, government have only ever been good at measuring money spent.
The denial solution. The discovery in Delhi of a particularly nasty form of antibiotic-resistant bacteria, against which even last-resort drugs are ineffective, could bring about an era of unstoppable infections. But fearing a hit to the country's medical tourism industry, the government has denied the problem and has pressured researchers to disavow their findings.[Sonia Shah, Foreignaffairs.com, Mar 29] Why not denial? It works so well for politicians over many inconvenient issues.
Tariff wall helps some, hurts others. The threat of U.S. tariffs on imported Chinese solar panels could slow down North Carolina’s red-hot solar industry, according to those who benefit from the plummeting costs of solar power.U.S. trade officials on Tuesday imposed tariffs on Chinese panels in response to complaints by American solar panel manufacturers. The modest tariffs are between 2.9 percent and 4.73 percent, about three times lower than had been feared by some. [John Murawski, Raleigh News & Observer, Mar 21]
The Supreme Court jolted the biotechnology industry with a unanimous ruling that threw out two medical-testing patents and suggested companies need to do more to prove their discoveries are really new. [Kendall, Rockoff, Weaver, Wall Street Journal, Mar 21]
Learn nothing, remember nothing.
“Too often, investors are the target
of fraudulent schemes disguised as investment opportunities,” [said]
Mary L. Schapiro, the S.E.C. chairwoman about a Senator's
proposal to loosen investment guards in small biz.
Need capital? The Connecticut office of the U.S. Commerce Department is asking a variety of technology companies if they are interested in direct foreign investment from China, either by being acquired or selling a large equity stake to a Chinese firm. ...The Chinese investors want to invest in companies in alternative energy, pharmaceuticals, medical devices, high-end manufacturing equipment, advanced materials, technology that helps the environment and new generation information technology. [Hartford Courant, Mar 16] Sorry, real capitalism trades money for control. If you want free money with no equity surrender, beg the US government for a handout. Warning though: lots of other Capitalists in Name Only will be shoving and elbowing you for attention, especially firms thta have already had tens of million of dollars for ideas that have no market future.
Forbes magazine had some blunt advice for investors: "Utah and Colorado have maintained strong business climates. Forget about California." ... Silicon Valley no longer has a monopoly on high-tech talent and innovation. Hollywood has to compete for movie locations with Utah and Morocco. Real estate investors see better development prospects in states with fewer foreclosed and abandoned homes. [Bradley Schiller, LA Times, Mar 13] What do you think is the major complaint, especially in an election season? Regulations and taxes -- gospel for the Republican establishment.
Private wealth, public squalor. [JK Galbraith (The Affluent Society) would feel right at home in San Jose] Technology jobs are plentiful here, real per capita income is rising and the unemployment rate is declining. ... Meanwhile, In December, the city [San Jose] came close to declaring a fiscal emergency. Officials are scrimping on basic infrastructure such as road maintenance. [Bobby White and Pui-Wing Tam, Wall Street Journal, Mar 15] With encouragement from its politicians, Americans still dream of a nation where public investment takes care of itself without the need for taxes.
In Washington, nothing is ever final. Now, some House conservatives are pushing to spend less than [the agreed spending in last fall's deal], and GOP leaders appear ready to agree—in part because otherwise they risk not finding enough votes to pass the original budget. The situation has prompted Senate Majority Leader Harry Reid (D., Nev.) to accuse Republicans of violating a good-faith agreement.[Naftali Bendavid,Wall Street Journal, Mar 15]
the President officially unveiled a proposal to establish a network of up to 15 regional institutes focused on advanced manufacturing R&D. The Administration will also move to immediately establish an initial pilot institute for the network, with $45 million in funding from the Departments of Commerce, Energy, and Defense, and the National Science Foundation. The Administration proposes funding the network at $1 billion, nearly all of which would be classified as R&D. Both programs are mandatory rather than discretionary R&D funding, in that they are one-time funding requiring Congressional approval, and not subject to the regular appropriations process. [AAAS, Mar 13] Time again for wonder programs that spell RE-ELECTION. Next up: cut taxes and pretend there's no effect on the national debt. With tax cuts, the electorate will accept almost any story and pay no attention to shrieking economists.
The Pentagon unveiled a plan to change the way the military uses energy, saying it wants to bring more-efficient technology to the battlefield in order to save lives and money. In addition to the usual bureaucracy organizing, will also create an alternative-fuels investment portfolio to help develop new sources of fuel. Finally, the plan will include energy use and energy costs in military procurement—important because the operating cost of big items such as warships far outweighs the purchase price. ....[a retired logistics general ] said the U.S. military has been aware for years of the dangers of extended supply lines and energy-hungry troops and equipment, but top leaders have tended to focus on other priorities. [Wall Street Journal, Mar 10] Don't get all excited. The Pentagon often has spurts of urgent programs with much fanfare and then lackluster execution. The Army is the service with the greatest need to cut energy logistics because re-supplying the battlefield takes lots of people and fuel.
The Minnesota Science and Technology Authority said it will ask the state Legislature for $10 million to fund programs that help develop promising start-ups. ... Last year It had originally asked for $10 million and received only $350,000, excluding salaries and overhead costs. [Wendy Lee, Minneapolis Star Tribune, Feb 28]
The Department of Energy has launched a new contracting mechanism under which businesses may develop partnerships with participating DOE laboratories for R&D that commercializes technology (see here for more information). Called ACT (Agreement for Commercializing Technologies), the mechanism is an alternative to the existing CRADA and WFO mechanisms. ACT, being offered as a pilot program at selected labs, is intended to provide greater flexibility in negotiation of intellectual property arrangements, as well as multi-party options.[AAAS, Mar 7] Of course, the real way to get commercialization is to start with technologies with a future in companies with a market drive. Which would require Energy to shift from scientific and technical merit, which it understands and SBIR advocates love, to add future market potential which it only vaguely understands.
Only one percent of our businesses export. That’s why helping more companies export will continue to be a major priority for the Commerce Department. .... MEP has Centers within two hours from anywhere in the country with resources to help manufacturers export their products overseas. [Commerce Secretary John Bryson] MEP has long been a political football as Republicans try to kill every program doing anything with private business (except giving invisible tax subsidies to businesses with lobbyists). Note that foreign buyers start with a home-cooking bias, just like Buy American clauses in USG purchases, which means that any export must have a marked competitive advantage in cost-effectiveness in whatever function it performs. Does more, costs less, two criteria for which government export help will be of little use. What government overlooks in many of its R&D subsidy programs, like SBIR, is the costs-less criterion.
At least it won't be callled science. Alabama's HB 133, which would allow local school boards to award course credit for religious education, was approved by the House Education Policy Committee. The bill's sponsor, Blaine Galliher, has said in press interviews that his motivation for introducing the bill was to support the teaching of creationism. The bill can now go to the Alabama House floor. [AAAS, Mar 7] Now they can fight over separation of church and state for a return to the Middle Ages.
"No cuts, no fees. Education must be free," Politicians understand slogans and that beneficiaries hate program cutting. Dozens of protesters angry over fee hikes and budget cuts at California's public universities were arrested on Monday night during a boisterous but peaceful demonstration inside the state Capitol building. The arrests capped a day in which hundreds of students and others marched on the statehouse and rallied outside the Capitol before many of the activists moved the demonstration inside the building, clogging hallways in and around the rotunda. [Greg Lucas, Reuters, Mar 6]
"I don't even consider myself wealthy" said the wife of a campaigning politician who aspires to popular election and whose net worth is in the hundreds of millions. In America, wealth is a competitive game that sometimes spills over into politics.
Individual industries, of course, have thrived on building complexity into the tax code with self-interested loopholes and subsidies. Likewise, President Obama's plan to improve U.S. competitiveness rests on further mucking up the tax system by "rewarding companies that create jobs right here in America." Porter's response? "Let's not add another layer of complexity to the tax code," he says. "It's not [tax] incentives or spending that drives behavior, it's about creating a fertile environment here that justifies higher U.S. wages." [Nina Easton, Fortune, Feb 27] Subsidies, handouts, and tax breaks make great politics. Paying for them and their economic inefficiency is swept behind the curtain. SBIR is just one of many hidden cost subsidies beased on a myth that funding uncompetitive companies creates jobs, without ever getting into the question of whether it makes more jubs thna the money would if spent in open competition for the government R&D. But the benefciaries love it.
when leverage combined with globalization to produce a massive financial crash, we fell back on Keynesian deficits plus money printing in the mistaken belief that they had saved us before. They hadn’t. It was technological innovation, accelerated by government, that produced the economic miracles of the 1940s, ’50s, and ’60s. [Niall Ferguson, Newsweek, Feb 13]
David Stockman, former wunderkind of the Reagan revolution, is now an advocate for higher taxes, a critic of the work that made him rich and a scared investor who doesn't own a single stock for fear of another financial crisis. [Bernard Condon, AP, Mar 4, 11] Stockman introduced the budgetary magic asterisk for future budget cuts too politcally damaging to be named now. The Republican tax cutters love it as they promise jam today and vegetables to be named tomorrow. Unfortunately voters don't realy pay attention to the realities of budget arithmetic and turn loose their lobbyists to prevent cuts to their handout programs. The gane will continue until the electorate demands responsibility from its Congress. And SBIR is just another "fund me, cut somebody else" player in the game.
Government to the rescue. A new National Strategic Plan for Advanced Manufacturing" (here) establishes five objectives for federal policy: (1) accelerating investment, especially by small- and medium-sized manufacturers; (2) making the education and training system more responsive to the demand for skills; (3) fostering national and regional partnerships among all stakeholders in advanced manufacturing; (4) optimizing federal advanced manufacturing R&D investments by taking a portfolio perspective; and (5) increasing total public and private investments in advanced manufacturing R&D. [AAAS, Feb 29] And who will be getting this money? The companies who best understand how to work the federal maze. What's the likelihood that government money will make a difference? Not much if the money goes for the same things and companies as previous manufacturing programs. And how will the program be paid for while we reduce the national debt? Declare an urgent national need and issue the usual platitudes.
Subsidized companies don’t have to generate returns in the same way as unsubsidized firms, and that leads them to make bad investment decisions to build factories and buildings that are unnecessary and unprofitable. As a result, loans go bad and banking sectors buckle. That’s exactly what happened in both Japan and Korea [Michael Shuman, TIME, Feb 27] The inefficient investment in China today, and Japan yesterday, for government purposes eventually leads to economic disaster of uneconomic industry that cannot compete. If SBIR were really giant investment scheme, like China and Japan Inc, we too would have an economic disaster. But fortunately, SBIR is small potatoes the failure of which will be noticed by no one, especially the politicians who vote for it. Chinese bureaucrats today suffer from the same problem that led Japanese bureaucrats astray — they believe the economy can be managed by fiat. The tools of classical economics — getting prices right — are secondary. Why guide an economy with abstract measures like interest rates when you can just tell the banks what to do?
President Obama, in both his State of the Union address and his new budget, has defiantly doubled down on his brand of industrial policy, the usually ill-advised attempt by governments to promote particular industries, companies and technologies at the expense of broad, evenhanded competition. ... Despite his record of picking losers—witness the failed "clean energy" projects Solyndra, Ener1 and Beacon Power. [Michael Boskin, Wall Street Journal, Feb 15] In politics, emphasis goes to any negative result from the opponent while ingoring the wisdom of VCs that bet on many, many losers and win when only a few investments turn out well. Anyway, Boskin is right that the government is poor VC because the criteria for selection are not basically economic, they are political. Boskin reveals his political attitude by ignoring the many losers in the portfolios of the super-VCs from Sand Hill Road, amd making no comparative analysis as an honest economist knows is essential to credibe economic argument. Venture investing is measured by the total return, not by the statistics of numbers of losers.
what could be more uncertain than the prospects for economic policy in a country where the opposition party is campaigning on a platform predicated on repealing all the major accomplishments of the incumbent? It’s a wonder that there’s any economic activity in the United States at all. [Andrew Leonard, salon.com, Feb 22]
The present and the political to the fore: In the face of rising gasoline prices, US
Representative Edward J. Markey and two other lawmakers today called on
the Obama administration to help drive down the fuel’s costs by
releasing crude oil -- used to make gas -- from the nation’s strategic
petroleum reserve. [Erin Ailworth, Boston Globe, Feb 22]
Where the long term is the next election.
President Obama, in both his State of the Union address and his new budget, has defiantly doubled down on his brand of industrial policy, the usually ill-advised attempt by governments to promote particular industries, companies and technologies at the expense of broad, evenhanded competition. ... Despite his record of picking losers—witness the failed "clean energy" projects Solyndra, Ener1 and Beacon Power. [Michael Boskin, Wall Street Journal, Feb 15] In politics, emphasis goes to any negative result from the opponent while ingoring the wisdom of VCs that bet on many, many losers and win when only a few investments turn out well. Anyway, Boskin is right that the government is poor VC because the criteria for selection are not basically economic, they are political. Boskin reveals his political attitude by ignoring the many losers in the portfolios of the super-VCs from Sand Hill Road, amd making no comparative analysis as an honest economist knows is essential to credibe economic argument. Venture investing is measured by the total return, not by the statistics of numbers of losers.
the Minnesota Angel Tax Credit Program meant to spur more investment in Minnesota start-ups said it ushered $63.1 million in funding for 113 companies last year. ... rewards tax credits to qualified investors who give at least $10,000 to registered Minnesota-based companies. For their contributions to local start-ups last year, investors received nearly $15.8 million in tax credits, according to a state report [Wendy Lee, Minneapolis Star Tribune, Feb 17]
Santorum too is under the illusion that manufacturers need special help. He wants to zero out their tax liability, but all that distortion will do is touch off a lobbying grand guignol to qualify as a "manufacturer."... By 1970, America's global manufacturing market share stood at 22%—more than any other nation—where it has stood for four decades, despite the rise of Germany, Japan, Korea and now China. ... The manufacturing crisis, if that's the word, has been jobs. Industry employed one of three workers after the war. Today, it's one of eight. Yet this, too, is largely a measure of economic progress—because it is the result of productivity gains. [Wall Street Journal, Feb 18] Politicians exploit debate, not lead it.
Frustrations in government hoandouts. A $1.36 billion government-backed deal for a Southern California solar farm has hit a snag and could be days from unraveling, all due to a local construction permit.First Solar Inc., one of the world's largest solar-panel manufacturers, warned Thursday that it might have to buy back the 230-megawatt plant it sold to Exelon Corp. if the Department of Energy doesn't begin funding a loan made to finance the deal later this month. ... The offices of the Los Angeles County Regional Department of Planning, which issued the permit for the solar farm, were closed Friday and telephone calls were not returned. ..... Two solar manufacturers backed by venture capital investors, 1366 Technologies and Solopower., also haven't seen money yet for their new factories. [Yulia Chernova and Cassandra Sweet, Wall Street Journal, Feb 11]
Spear carriers in the war on .... whatever. Republicans propose to cut the federal workforce by 5% and freeze pay to save $127B. Nixon had the same idea that civil servants were one of many enemies as we fought inflation in the early 1970s. The cuts would mean fewer, cheaper, and dumber managers and deciders for SBIR. Career fields with private demand, like engineers, infotech'ers, and anyone highly numerate, would see a drain in government talent.
A crisis of governability has engulfed the world’s most advanced democracies. ... the United States, Europe, and Japan are simultaneously experiencing political breakdown; globalization is producing a widening gap between what electorates are asking of their governments and what those governments are able to deliver. [Charles Kupchan, Foreign Affairs, J/F 12] Give us, tax them, send the bill to non-voters. Watch the coming election follies for any signs of recognition of the downsides of world competition. Hear SBIR advocates fantasize how diverting government R&D to small biz will create more jobs.
Deathanol from tea. corn-ethanol subsidies are going to expire this year, and that no one is defending them. .... Three years ago, corn-ethanol subsidies appeared to be one of those common things in politics, an indefensible policy that was completely sacrosanct. It had, as many such policies do, a fiercely committed natural consistency, corn farmers, who enjoy a somewhat privileged political position due to their all-Americanness and the importance of the Iowa presidential caucuses. .... The rise of the tea-party movement forced conservative politicians to take principled opposition to subsidies far more seriously. [The Economist, Jan 7]
In November a report from Texans for Public Justice found that only 26% of the 65 projects that received incentives from the Texas Enterprise Fund—the governor’s “deal-closing fund,” as his office puts it—created as many jobs in 2010 as they had promised. [The Economist, Jan 28] The bad news is that no one except the beneficiaries sybscribe to political forecasts for proposed handout programs. And no one should be surprised that the power to hand out the money will be abused.
voters will never back the kind of tough measures that need to be taken to stabilize Western budgets. They want jam today, paid for in 30 years at the earliest. Hence our chronic deficits. [Niall Ferguson, Newswek, Jan 23] Democracy is about demanding what you want and that your neighbors or your grandchildren pay for it. SBIR included, in which private for-profit entities use somebody else's capital for free. No wonder they love it.Factor by which an American is more likely to cite unemployment that the deficit as the country's "most important problem": 3; Factor by which a wealthy American is more likely to cite the deficit than unemployment: 3. [Harper's, Feb 12] Where you stand depends on where you sit. As always, people's attitude toward any economic question favors their getting some benefit.
A multitude of organizations across Maryland, Virginia and the District have made it their mission to cultivate and advance [entrepreneurs and young companies], often with the idea that they will produce high-growth companies and create jobs that in turn generate tax revenue. This week marks the one-year anniversary of the Startup America Partnership, a national initiative created by President Obama and chaired by former AOL chief executive Steve Case that aims to promote private-sector investment in entrepreneurship. [Steve Overly, Washington Post, Jan 30]
Overall government research spending (relative to G.D.P.) has been heading down since its peak in the space-race years of the 1960s. And because it’s nearly impossible to imagine Congress significantly increasing research financing, any growth in long-term R. and D. will be, largely, up to the private sector. And that’s the real problem. From a C.E.O.’s perspective, long-term R. and D. is a lousy investment. The projects cost a lot of money and often fail. And even when they work, some other company can come along and copy all the best ideas free. [Adam Davidson, New York Times, Dec 28, 2011]
Despite the massive injections of public funds, banks are clearly not lending to small businesses, the vital source of economic recovery. Indeed, the vast government borrowings are 'crowding' private corporations out of funds available for lending. [John Browne, safehaven.com, Dec 28] So, since the government policy is not working, the solution is more of it. Any beneficiary of a government handout knows that more is better.if the crises of the past several months have taught us anything, it’s that despite the allure of a new Asian currency champion, despite the potential for the European project to be saved, despite the weakness of the dollar and the gains in gold over the last decade, when large institutional investors truly get scared, they buy U.S. dollars. [David Callaway, Market Watch, Dec 28] as Art Laffer recently estimated, reduced marginal tax rates may roughly be considered 10 times as important as reduced regulatory costs, and stable money may be considered 10 times as important as reduced tax rates. [Peter Ferrara, Forbes, Dec 29] Enjoy our advantage of the American economy and American governance. Ignore the many doomsayers raising alarms in search of public office.
Even economists who claim that these policies stimulate—such as those at forecasting firm Macroeconomic Advisers—admit that they cost jobs as they are turned off, leaving the recovery no better off. [John Taylor, Wall Street Journal, Dec 21] Could he be talking about SBIR created jobs lasting only as long as the SBIR money keeps coming in? Actually, no, he was talking about temporary tax breaks.
Long-term evidence indicates that the starve-the-beast strategy not only fails, but may make the problem of unrestrained spending growth worse, suggesting that a "serve the check" strategy might be a more effective means of curbing the growth of government spending. The simple explanation for this seeming paradox is that the starve-the-beast strategy currently allows Americans to receive a dollar in government services while only having to pay 60 cents for it. Rigorous analyses from centrist economists Christina and David Romer of UC Berkeley, and from libertarian economist (and Reagan White House alumnus) William Niskanen conclude that the starve-the-beast strategy fails. Strikingly, Niskanen's analysis found that lower taxes correlated with higher levels of federal spending. As a result, Niskanen argues that raising taxes may be the most effective way to reduce government spending. [Steven Hayward, Breakthrough Journal, Issue 2] The essay on conservatism got a Sydney Award from columnist David Brooks who annually praises the best essays he finds in the year.
A Christmas SBIR with gifts for all. Congress finally re-authorized SBIR, for six years, with more money, bigger award limits, openings for VCs to own some awardees, and money for the agency management. Total tax rate goes to 3.2%, award guidelines grow to $150K and $1 cool million but with a super-limits on highest awards to 50% more than the guideline. Agencies can request relief from that limit, one topic at a time, by promising to lower other awards enough to keep the average award within the guidelines. But an agency can award a second Phase II which would raise the effective limit to $3M for the project. Not to worry, an agency can get around that limit by issuing allegedly independent awards to the company for "related" technology since the agency is still the ultimate arbiter of who wins what. Health, Defense, and Education get a pass to go directly to Phase II as a pilot program. NIH can award up to 25% of its money to firms with substantial ownership by VCs, hedge funds, and private equity firms, and the other agencies can do 15%. In a bow to the idea that more needs to be done to get downstream benefits from SBIR, several small programs will be tried. The bottom line: it's mostly all politics. The SBIR junkies get bigger awards, future companies that don't vote today get fewer chances for entry, agencies can do what they want and skim a little of the money for administration, and none of the provisions can claim any economic justification. As the size of SBIR grows, it also moves SBIR toward a standard social procurement program for the federal agencies.
To bring more tech-related companies and jobs to Wyoming, Gov. Matt Mead's budget request for the new biennium adds $15 million to broaden an existing fund established last year for the recruitment of mega data centers. If approved by the legislature, the state would make available $30 million for both large-scale recruitment and to attract smaller technology companies. [SSTI, Dec 15] First question for data center candidates, what's the electricity cost? With all that coal heading east in endless trains, and a west wind to blow the smoke to Illinois? The tech companies ask, where do I get a smart worker when I need one? Ah well, the guv has to look engaged.
Less for more. Squeezed by rising living costs, a record number of Americans - nearly 1 in 2 - have fallen into poverty or are scraping by on earnings that classify them as low income. The latest census data depict a middle class that's shrinking as unemployment stays high and the government's safety net frays. The new numbers follow years of stagnating wages for the middle class that have hurt millions of workers and families. [Hope Yen, AP, Dec 16] And as any Republican will tell you, the answer to any economic dilemma is to cut taxes, especially on higher incomes and corporations.
On Dec. 8 the White House announced the launch of the Early Stage Innovation Fund, which will provide $1 billion in matching capital to Small Business Investment Companies (SBIC), targeting early-stage small businesses. The fund is part of the administration's Startup America initiative and is included in proposed rule changes from the Small Business Administration that allow private investment in SBIC participants. The proposals are open for comment until Feb. 7, 2012. The fund will be fully implemented in 2012. [AAAS, Dec 14] The good news is that the companies and ideas need third party validation with real money, not just an OK from a federal agency which would benefit from the spending.
New York State will invest some $50 million in the biosciences through the Regional Economic Development Council Initiative with projects in nearly every region, according to an analysis by the New York Biotechnology Association (NYBA). The awards were announced on Thursday in Albany. The funds will include support for projects as diverse as a bioscience incubator in Westchester County to a biomass electric plant in the Mohawk Valley. [Business Wire, Dec 12]
NSF unveiled an initiative (www.nsf.gov/pubs/2012/nsf12011/nsf12011.jsp) that aims to roll the dice on a relative handful of researchers with unorthodox ideas about how to tackle complex problems. At $24 million, the Creative Research Awards for Transformative Interdisciplinary Ventures (CREATIV) will take up only a tiny portion of NSF's $5.5 billion research portfolio. But NSF hopes it will send a big signal to the U.S. research community. “It's a new way of doing business for NSF,” says Richard Behnke, who co-chaired an internal NSF committee that designed the new program. [Science, Nov 18] A little money for a flood of proposals (almost every scientist/technologist can claim a new idea when there's money on the table) and soon Congress will hear of the great ideas refused. But since Congress isn't capable of judgng merit in such proposals, it will add more money while reducing NSF's total for deficit reduction. It'll be SBIR all over again- throwing money at early ideas and then abandoning them in the valley of death because development is not NSF's mission. and the other agencies will show a stern Not Invented Here attitude during the deficit reduction struggle. Frustration all round.
I genuinely admire innovators like Henry Ford, Gordon Moore, Herb Boyer (co-founder, Genentech), Judy Estrin and Larry Page. If they really needed tax cuts to get out of bed, give it to them. It’s the long line of sycophants that follow in their wake that I object to. You know the type: attorneys, investment bankers, McKinsey consultants, marketing experts. People like me. Silicon Valley can be divided into two groups: creative, driven entrepreneurs and guys they knew at Stanford. It’s an inescapable fact of life: most of us are along for the ride. [Michael Kanellos, Forbes, Dec 13]
SBIR Insider Rick Shindell reports that House and Senate have finally reached a deal to re-authourize SBIR for six years that will appear in the DOD authorization law. It opens the door to VC ownership of the company for 25% for NIH, DOE and NSF, and up to 15% for the others. The SBIR money goes up to 3.2 percent gradually and STYTR to 0.45 percent with 3% of the money going to the agency for administration. It includes some language about guidelines for company success. The weeping and pleading of the beneficiaries finally re-opened the door as 950 companies signed a letter, only a few of which I'll wager don't already have their ladle in the soup. As Oliver Twist said, holding up his gruel bowl, Please, sir, I want some more.
Great tech, questionable side effects. [EPA] has linked hydraulic fracturing with groundwater contamination - a first-of-its-kind conclusion by the agency that could trigger new scrutiny of the technology fueling a surge in oil and natural gas production. [Jennifer Doughy, Houston Chronicle, Dec 8] The industry and its political allies immediately jump to the attack of an out-of-control government in a classic burden-of-proof case. Should new technology be allowed to be used unless and until the government proves beyond a reasonable doubt that it causes great irreparable harm?
Right ideas, wrong temperament. Of all the major Republicans, the one who comes closest to my worldview is Newt Gingrich [who] talks about using government in energetic but limited ways to increase growth, dynamism and social mobility. But Most people just want somebody who can articulate their hatreds, and Gingrich is demagogically happy to play the role. [David Brooks, New York Times, Dec 9] The things politicians do to attract votes says a lot about the voters.
For the current orthodoxy among Republicans is that we mustn’t even criticize the wealthy, let alone demand that they pay higher taxes, because they’re “job creators.” Yet the fact is that quite a few of today’s wealthy got that way by destroying jobs rather than creating them. [Paul Krugman, New York Times, Dec 9] Entrepreneurs developing technology for productivity should realize that productivity is about reducing labor costs. And all the political bloviating about jobs pretty much ignores the economics of where the American jobs have gone. But then, economics has always been a convenient and elastic playground for politicians' self-serving efforts to get and stay elected by an electorate looking for cheap simple answers to complex problems. There's a long held view that no one ever lost many votes by insulting the intelligence of the electorate.
With Congress committed to
reducing the $1.5 trillion federal deficit,
research agency budgets will likely be flat or declining for the
foreseeable future, meaning the loss of thousands of jobs and grants
and the delay or cancellation of numerous high-profile projects.
[AAAS, Dec 6] We've hear this story before. Congress is only
committed to talking about defict reduction until the constituents and
contributors start to scream about speical circumstances.
More subsidies for the solar industry in Arizona are crucial to avoid being left behind by other states and China, a Phoenix business leader said today at a solar-power conference. Tax incentives and loan guarantees “make a lot of sense” right now in Arizona, which is already a leader in the industry, said Barry Broome, president and CEO of the Greater Phoenix Economic Council at the Solarpraxis convention. [Ray Stern, Phoenix New Times, Nov 30] Every beneficiary can the huge public benefit of a subsidy. Just listen to the SBIR advocates bleat.
Rep. Darrell Issa, R-Vista, wrote in 2009 to the Department of Energy supporting Aptera’s loan application. The letter later sparked cries of hypocrisy against Issa, who has taken a leading role among Republicans in Congress questioning the government’s clean-energy loan programs.... Aptera Motors (Carlsbad, CA; no SBIR) closed its doors on Friday, canceling plans to produce an electric car that briefly thrust the upstart into a national controversy over government loans designed to promote green jobs and technology. [Morgan Lee, signonsandiego, Dec 2, 11] Pork and earmarks are help to some other Congressional District. There's no interest quite like a vested interest.
A legislative subcommittee in Georgia recently proposed a $180 million public-private venture capital fund financed through a combination of tax credits and private funds to attract high-growth jobs and retain existing companies.[SSTI, Dec 2]
SBIR Insider Rick Shindell reports that the Senate unanimously OK'd a eight-year re-authorization of SBIR as an amendment to the DOD authorization with a lovely bunch of new ideas. ... increases the SBIR allocation by one percent, from 2.5 to 3.5 percent, over ten years, and doubles the STTR program over six years, makes firms majority owned and controlled by multiple VC firms eligible for five years for up to 25 percent of the SBIR funds at NIH, NSF and DoE and up to 15 percent of the funds at the other eight agencies, lets agencies take 3 percent of the SBIR allocation for administering (if there is an allocation increase), increases the award guidelines from $100,000 to $150,000 for Phase I and from $750,000 to $1 million for Phase II, allowing for one sequential Phase II. Still, that's only half the battle since the House doesn't like such terms. It's another political year for pandering to small biz as the magical American growth machine.
Close your eyes, open your wallet, and buy a bridge. Sen Scott Brown says it’s up to Senate leadership to listen to America’s communities of investors and entrepreneurs. With the willpower to push forward and a few votes, Congress can equip the best and brightest in America with a powerful tool and transform the age of apps and startups into something even more revolutionary. In other words, while many wonder who will be the next Steve Jobs, crowdfunding legislation wouldn’t leave us waiting for one person, but thousands. [Mass High Tech, Dec 1] Vote for the Scammers Relief Act of 2012. If the Masters of the Financial Universe couldn't figure out that CDS and MBS were scams, how will the middle class Massachusetts "investor" figure out whether an investment proposition is a Steve Jobs or a con job? The crowdfunding goal is noble but the evils are too tempting and obvious.
Can't compete? Get a subsidy. Congress wants to hand out subsidies to the politically astute but economically uncompetitive. analysts say the risk is rising that taxpayers in many cases will not see a return on their money soon, if ever. Instead, they warn that some federally subsidized companies could be forced to shut down in coming months. Solar, nuclear, electric cars, ethanol, biofuels, you name it. [Carol Leonnig, Washington Post, Dec 8] The trouble comes when government gets into reducing business risk beyond reducing terchnical uncertainty. of really new ideas. If the business potential is big enough, then political contributions are worth the investment. That's almost never true with technically uncertain ideas, like fusion energy. TJ Rodgers, storied CEO of Cypress Semiconductor and long-time scourge of government subsidy, updates the Law of Unintended Consequences with the corollary Law of Misguided Subsidies: Whenever Washington disrupts a market by dumping subsidies into it, Wall Street will find a way to pocket a majority of the money while the intended subsidy beneficiaries are harmed by the resulting market turmoil. ... Washington gives tax breaks to Wall Street to fund LLCs that buy solar panels from the Chinese to "help" the American solar industry, while the ITC threatens to levy a tariff on those solar panels, which would raise the price of solar energy to U.S. homeowners. In short, Wall Street pockets the money and consumers get higher solar-energy prices. He cites the final scene of the film Margin Call where the Chariman of the Lehman Bros like firm says "There's going to be a lot of money made coming out of this mess." [Wall Street Journal, Dec 8]
for all our political dysfunction, the U.S. has enduring advantages that the Chinese are some of the first to enumerate: many of the world’s top universities; a fertility rate that exceeds deaths (in contrast to Japan and Europe), which will help America outgrow its debt, and the capacity for innovation that remains unsurpassed. For now. [Evan Osnos, New Yorker, Dec 2]
Startup Texas an initiative aimed at helping jump-start the creation and growth of startups statewide will launch today in Austin, seeking to connect entrepreneurs with the resources needed to build their businesses. ... part of the Startup America Partnership, which the White House announced in January and brings together universities, incubators, services firms, investors and advisers to provide young, fast-growing companies with assistance and mentorship. [Lori Hawkins, Austin American Statesman, Niov 29] The helping hand of a government that Texas would like to shrink as Texas takes whatever it can get. How did America get to be the world's leading entrepreneurial nation before the helping hand of government was proffered? How will anyone evaluate the program's spending effectiveness?
In the typical scam, con-artists "just need a few investors to jump in, spread the word around how great it is, and the next thing you know, the website's down and the money's gone." In the House's bill to liberate scamsters, 407 to 18 in favor of the Entrepreneur Access to Capital Act. If the Senate and POTUS buy the same language, companies can raise up to $2 million from an unlimited number of individuals who can invest as much as $10,000 each. [Aarti Shahani, NPR.com, Nov 28]
Congress is considering exemptions to decades-old securities regulations as a way to throw open the doors to entrepreneurs who want to legally sell equity stakes in their start-ups over the Internet. ... Because the proposals call for an overhaul of federal securities laws, and pre-emption of state laws as well, some critics believe they may increase the chance that unsophisticated investors will get scammed by people who aren't really starting new businesses.[Angus Loten, Wall Street Journal, Nov 23]
Where profit calls, fraudsters will come. Deficit supercommittee comes to naught. Congress put its favorite programs in a guillotine with a timer on the trigger and bet that a committee of twelve could agree on how to stop the clock. No go; the committee split into two stubborn factions unwilling to compromise. Thecore trouble is an excess of democracy where the elected politician is afraid to disappoint any constituent group.
Seeking startups. Mayor Charles Meeker and N.C. State University leaders will hold a news conference today to announce an initiative to brand Raleigh as an "innovation city." A summit in January will give entrepreneurs a forum to share ideas on how to structure the effort - and what types of startup industries to pursue. The timing coincides with plans for an innovation and entrepreneurial center, a space where startups could hold recruiting and networking events, make pitches to potential investors and brainstorm ways to expand. [Matt Garfield, Raleigh News & Observer, Nov 20]
SBIR and pizza sauce as a school lunch vegetable will remain in force at least until Dec 16 as Congress passes another stopgap government funding law.
Texas Emerging Technology Fund has invested $197 million in 133 companies, but it is too soon to know the investment outcome for most of them, fund Director Jonathan Taylor [Laylan Copelin, Austin American Statesman, Nov 18] Like SBIR, such funds are mostly political shows that give an appearance of serious economic investment, with nobody accountable for actual ROI. Governments love input measures because output takes too long and defies easy measure. A few years later, the politician scna declare victory by stopping the effort as a giant step in cutting spending.
Snake-Oil revival. Congress is considering exemptions to decades-old securities regulations as a way to throw open the doors to entrepreneurs who want to legally sell equity stakes in their start-ups over the Internet. ... Because the proposals call for an overhaul of federal securities laws, and pre-emption of state laws as well, some critics believe they may increase the chance that unsophisticated investors will get scammed by people who aren't really starting new businesses. Some also point out that the impersonal nature of the Internet should call for more investor protections, rather than less. [Angus Loken, Wall Street Journal, Nov 17]
the worshippers of this economic religion, built entirely on the altar of innovation, delude themselves if they think that high-tech manufacturing is of little value today. After all, we still live in a world of things -- from cars and cutlery to computers and cell phones -- and somebody still has to make them. If the U.S. doesn’t, then obviously it buys them from countries that do.That explains why the $30 billion trade surplus in high- tech products that the U.S. enjoyed 10 years ago has become a $56 billion deficit.The consequences of America’s offshoring craze run far deeper than trade deficits. The wholesale transfer of production offshore has also weakened the nation’s engine of employment, crippled its ability to bounce back from the recession and seriously eroded not only middle-class prosperity, but also our capacity to invent the products, and make the medical advances, of tomorrow. [Henry Nothhaft, Bloomberg, Nov 15] Nothhaft goes on to recommend a antional manufacturing get-well program with a multitude of federal tax handouts to manufacturers, especially start-ups. Which would match similar handouts by our foreign competitors to their manufacturers. A bonus would be its boon to tax lawyers and accountants as another zilliuon pagers are addded to the tax codes for the politicians to rail against in campaigns.Deficit supercommittee comes to naught. Congress put its favorite programs in a guillotine with a timer on the trigger and bet that a committee of twelve could agree on how to stop the clock. No go; the committee split into two stubborn factions unwilling to compromise. Thecore trouble is an excess of democracy where the elected politician is afraid to disappoint any constituent group.
Who's winning? The government support — which includes loan guarantees, cash grants and contracts that require electric customers to pay higher rates — largely eliminated the risk to the private investors and almost guaranteed them large profits for years to come. The beneficiaries include financial firms like Goldman Sachs and Morgan Stanley, conglomerates like General Electric, utilities like Exelon and NRG — even Google....the government’s largess was a once-in-a-generation opportunity, and “we intend to do as much of this business as we can get our hands on.” ... “Subsidies and government support have been part of many key industries in U.S. history — railroads, oil, gas and coal, aviation,” said Damien LaVera, an Energy Department spokesman. [Eric Upton and Clfford Krauss, New York Times, Nov 11] The government passes out many subsidies at the pleasure of Congress's satyisficing constituents and contributors. “We’re making very large bets, and the decisions seem to be more grounded in politics and geography than in engineering and science,” said Michael Graetz, a professor at Columbia Law School and the author of “The End of Energy.” [Steven Mufson, Washington Post, Nov 11]as U.S. presidential candidates extol the virtues of small business during this campaign season, some U.S. analysts have begun wondering whether that dependence on family-owned businesses is good for Italy. "With the advent of modern communications and information technologies, arguably the return to 'small family firms' has fallen," the economist Tyler Cowen writes. Matthew Yglesias at ThinkProgress observes that Italy has "lots of barriers to competition so that poorly managed firms stay in business." If "small firms were so fantastic," he argues, "Italy and Greece would be the economic superstars of the western world." The Guardian adds that Italy's industrial centers have been battered by China's manufacturing of cheap consumer goods. Oh, and many of these small businesses also [Uri Friedman, Foreign Policy, Nov 8]
Argentine scientists are happy to take taxpayers’ money but according to Luis Dambra, a professor at the IAE business school in Buenos Aires, they look down their noses at the idea of actually getting their hands dirty by going into industry. Mr Dambra, though, says industry is equally to blame. In 2009 (the latest year for which data are available), only 21% of Argentine R&D was paid for by the private sector, compared with 44% of Brazil’s. Firms that might recruit academic scientists often do not see the point. Even those that do may struggle to accommodate people with a non-commercial background into the business world. [The Economist, Oct 28] Mutual comtempt of science and industry.
Navies have typically led technological developments for the wider economy ... naval technical progress raised the importance of engineers and constructors relative to their line-officer counterparts in the modernizing fleet. The transition was a major one. It required thinking of warships as amalgamations of machines which struck many in the United States as incompatible with the warrior-ethos and aristocracy dear to naval traditionalists. Indeed developments in steam propulsion, metallurgy, and naval ordnance were transforming the very nature of naval professional life. [DJ Glaser and AS Rahman, Journal of Econ History, Sep 11]
public resources currently aimed at small firms in general, such as those deployed by America’s Small Business Administration, should be concentrated on the gazelles.[The Economist, Oct 8] Gazelles do not consume $20M SBIR and beg for more. That's for boomerang children.
NSF uses two criteria to judge the 55,000 grant proposals it receives each year. One is straightforward enough: intellectual merit. But the other, known as “broader impacts,” is so confusing that a cottage industry has sprung up to help scientists figure it out. [Science, Oct 14] Scientists competing for government money know their science, but few, anywhere, can predict the spillover with any accuracy, including the evaluators at government agencies.
Connecticut will go after jobs in
states that don't believe in science and "make them pay for it," he
said. After the talk, Bergstrom, when asked which states Connecticut
will venture into to get science jobs, he said he preferred not to
preempt the marketing strategy. Bergstrom offered an example: the
University of Wisconsin has great stem cell research, but it is in a
state that has flirted with legislation banning such research.
[Matthew Sturdivant, Hartford Courant, Oct 27, 11] Are
Republicans really ready to sacrifice their state economies on an
altar of religious beliefs? We must be back in Kansas, Toto!
Grow and Graduate. A growing number of the businesses that provide professional services to the U.S. government say they struggle to compete against much bigger rivals once they successfully become mid-sized firms.The businesses are caught in a Catch-22: After winning government contracts designated for small firms, most will expand and many become so big that they no longer qualify for the small-business contracts that enabled them to grow in the first place.[Emily Maltby Wall Street Journal, Nov 3]
The new Portland Seed Fund graduated its first class Wednesday, gathering eight startups to present their business plans to industry experts and prospective investors. ... The seed fund is an experiment in using public money, doled out in small slices, to wake up Portland's historically sleepy startup scene. It's raised $2.5 million, two-thirds of that in public funds, ... From 125 applications, fund managers chose eight startups judged to be especially well positioned for quick results. [ Mike Rogoway, The Oregonian, Nov 2]
The House is expected to vote Friday on legislation that would allow privately held businesses to raise money from nonaccredited investors in exchange for equity stakes. [Wall Street Journal, Nov 3] Republican free-marketeers .love such opportunities for snake-oil fraud.
Republican lawmakers and others who have criticized the loan program say it was a mistake to give federal help to specific companies. While they haven't focused on Beacon Power and Nevada Geothermal, they say Washington shouldn't be putting any taxpayer money at risk for projects with unpredictable returns. [Yuliva Chernova, Wall Street Journal, Oct 27] What they want is a brand new idea that has been thoroughly tested. Or perhaps just some failure as grist for the political mill.
Florida's Institute for Commercialization of Public Research has launched a new loan program for early stage and life science companies developing technologies out of the state's universities and research institutions. The Seed Capital Accelerator Program will match private investment in university spinouts through loans of $50,000 to $300,000. [SSTI, Oct 26]
Weeping and gnashing. The lobbying arm of military contractors,
which represents local heavyweights United
Technologies Corp., Barnes
Group, Kaman, Goodrich, GE Aviation, Colt Defense and
General Dynamics, is promoting a new study that says cuts that could
come to the Pentagon if the "super committee" deadlocks would devastate
aerospace manufacturers, and the country as a whole.
[Mara Lee, Hartford Courant, Oct 25] Of course, deficit
reducation and austerity only sound good in the abstract or in their
third person, never in detail or the first person. The same story would
beheard from the supply-side abiout tax increases, The bad news for the
supply siders is that they also want strong defense in a continuation
of the fat times ever since the Korean War. Strong defense for
whch someone else pays!
Defenders of industrial policy also have a new answer to the long-standing critique that it hampers competition. By focusing subsidies and tax breaks on a set of industries or companies, argue opponents, governments open themselves up to being captured by these firms. Firms expend energy, time and talent not on innovating and creating better products, but on securing government help, often to ensure that potential rivals are kept at bay.... he thinks that what matters is not whether governments can pick winners—they cannot—but whether they have the good sense to let losers fall by the wayside. The problem, of course, is that this rarely happens. In effect, Mr Rodrik and others are arguing that industrial policy requires disinterested, benevolent policymakers who can do it well. Unfortunately, they do not yet have a recipe for how such policymakers can be created. Policy is made by real people with political and personal motivations. What they come up with is unlikely to be as well designed as the ones in the models. [The Economist, Oct 1]
Politicians want projects they can
brag about during an election
campaign, whether or not the projects make business sense.
Politicians demand that projects be located in their districts or
states, even when such locations create problems like higher costs. And
of course, politicians expect that those who receive government funding
will help their re-election campaigns. No surprise that many
businesses have chief executives best known for their ability to find a
place at the public trough, rather than boosting sales in free
markets. [Jim Powell, Forbes, Oct 24]
Hey, unfair; they're subsidizing. [Chinese solar] industry is backed by government subsidies that U.S. business groups say help Chinese firms undercut their American competition. [John Bussey, Wall Street Journal, Oct 21] The excuse offered for our subsidized companies' failing is similar subsidies for the foreign competition.
After 19 years in operation, TechMaine, the Pine Tree State’s
technology trade group, is being dissolved, a source close to the
organization has confirmed. [Mass High Tech, Oct 19]
Piled onto all this evident financial market pessimism is the ever-present vulnerability of our economy to more policy misdirection inflicted by our bloviating political class (e.g., the current proposed Senate bill imposing tariffs on Chinese imports). The self-serving maneuvering in Washington these past few months has done little to reassure the average voter (investor) that the country’s best interests, first and foremost, are driving the political process. [TFC investment Letter, Oct 7] Does SBIR advocacy qualify as self-serving maneuvering?
Once a subsidy starts, ... Lawmakers’ reluctance to simply eliminate
a subsidy without adding another in its place demonstrates how
difficult it is for Washington to trim the federal largess that flows
to any powerful interest group. Indeed, the $5 billion program that
lawmakers are willing to throw under the tractor, known as the direct
payment program, was created
in 1996 as a way to wean farmers
off all such supports — and instead was made permanent a few years
later. William Neuman, [New York Times, Oct 18]>
“We’re sitting on a treasure trove of energy in this country,” Perry said on CNBC. “There’s 300 years worth of reserves underneath the land of America and that’s how we’re gonna get America working again.” [Sarah Kunin, ABC News, Oct 14] Not surprising that a Texas governor would see a commodity economy as the road to riches.
The prospect of Washington lurching into the private sector is terrifying, as illustrated by the debacle of Solyndr .... While countries like China have put large resources behind industries they want to nurture, we should resist the temptation to plunge deeply into industrial policy. Particularly in its current dysfunctional condition, Washington is ill-equipped to pick winners and should concentrate its capital on infrastructure and other public investments that the private sector won’t make. [Steven Rattner, New York Times, Oct 16] But the potential beneficiaries of subsidies and handouts will still clamor for more.
Did [super free-market Republican] Darrell Issa seek U.S. clean-energy aid for a company in his district? ... Bloomberg suggested some hypocrisy now that Issa’s House Oversight and Government Reform Committee is reviewing $535 million of green energy aid from the Obama administration for Fremont-based Solyndra LLC. [Ricky Yung, signonsandiego.com, Oct 12, 11] It ain't pork if it brings money to my constituents.
Investing in ... a governor. The[Texas Emerging Tech] fund has made grants to companies operated by several prominent Perry donors, and at least one company receiving grant money went bankrupt — an uncanny similarity to the Solyndra scandal. In 2007 Perry’s office approved a $1.5 million award to ThromboVision (no SBIR), a biomedical diagnostics company. When it declared bankruptcy in September 2010, ThromboVision revealed that businessmen Charles W. Tate and Charles Millerowne had hundreds of thousands of preferred shares in the company.Tate was involved in the initial vetting process for the company’s Texas Emerging Technology Fund grant, a step before the request was evaluated by a statewide board and then approved by the governor, lieutenant governor and House speaker. The Dallas Morning News reported that Tate made two investments in the company between the April 2007 grant approval and the October 2007 public announcement of the grant. Tate donated roughly $424,000 to Perry’s campaigns between 2000 and 2010, while Miller donated $125,000 during that time. [Steven Nelson, AP, Oct 13]
The problem is that there are no apolitical subsidies. The economics of political venture capital are bad, but the politics are worse. For Republicans in particular, the green subsidy road leads only to scandals, job-number embarrassments, poor excuses, and a missed opportunity to draw distinctions with big-government liberals. [Kimbetrly Strassel, Wall Street Journal, Oct 14] But the temptation is too great for politicians to resist: [Wisconsin] would create a perpetual fund for investment in biotech companies and would invest with angel networks and venture capital funds in high-growth Wisconsin companies under the latest version of proposed venture capital legislation. [Kathleen Gallagher and Mark Johnson, Milwaukee Jurnal Sentinel, Oct 13]
the [Texas] A&M system had entered into an agreement to develop vaccines with a therapeutics manufacturing firm called Introgen; this put the firm in a position to benefit from the new center. Introgen’s founder, David Nance, is a close friend of [Gov] Perry’s. He contributed $100,000 to Perry over the decade, he had previously served on the advisory committee of the tech fund awarding the $50 million, and Perry’s son, Griffin, owned Introgen stock between 2001 and 2004. Introgen had its main drug rejected by the FDA and declared bankruptcy shortly before the $50 million award [Alec McGillis, The New Republic, Sep 28]
Buy American. The White House is considering a plan aimed at attracting at least $1 trillion of new investment from abroad over the next five years ... A target of $1 trillion over five years would represent a 15% increase over the $174 billion average of the past decade, ... The U.S. economy used to be the largest single magnet for foreign investment, attracting 40% of the world's total a decade ago. But that share has dropped to 17% today, according to estimates by Matthew Slaughter, an economist at Dartmouth College [Sudeep Reddy, Wall Street Journal, Oct 10]
The North Carolina Innovation Fund has announced plans to support a new accelerator that would promote life science technology transfer from the state's universities. ... The objective of this allocation is to target attractive investment returns through promoting technology transfer from entities such as North Carolina universities, research institutions and private enterprises in order to enhance and foster the development of biopharmaceutical therapeutics, diagnostics and medical devices. The Accelerator program would provide capital to specialist funds that will capitalize on the opportunity to invest in products that have commercial potential and are positioned for rapid development. [SSTI, Oct 6]
[Josh] Lerner ["Boulevard of
Broken Dreams"] details case after case where public investments produced little or
nothing. But he also makes an important distinction between
government efforts to set the table for entrepreneurial activity and
government efforts to create jobs directly. Setting the table means
building an underlying context for innovation: funding academic
research, establishing clear laws, improving immigration policies,
building infrastructure and keeping capital gains tax rates low. Lerner
notes that one of the most important government initiatives to
encourage innovation was the Bayh-Dole Act of 1980, which gave
universities automatic title to research paid by the federal
government. These table-setting efforts work. The problem is the
results are indirect, the jobs take a long time to emerge and the
market may end up favoring old-energy sources instead of shiny new
ones. So politicians invariably go for the instant rush. They try to
use taxpayer money to create private jobs now. But they end up wasting
Brooks, New York Times, Oct 7]
So it is with SBIR as the advocates claim great future econmic benefit
from jobs created by small biz. But the evidence says that the
money pays from jobs only as long as the money lasts. More welfare than
Still betting on cheap sunshine.
The Energy Department approved four
more solar energy loan guarantees worth nearly $5
billion, hours before a controversial loan program was set to
expire.Energy Secretary Steven Chu said the department completed deals
on four separate projects, including two that were sold late this week
by Arizona-based First Solar, a major solar manufacturer that had been
seeking three federal loan guarantees for projects in California. The
sales were announced along with the loan guarantees. [Matthew
Daly, AP, Sep 30]
Small Biz Job Myths. The idea of small businesses as indispensable to the national welfare dates to Thomas Jefferson’s veneration of the yeoman farmer. In the popular imagination, small firms are more nimble, more innovative, and more virtuous than blue-chip companies that employ thousands. Yet the notion that small business is the force behind prosperity is not true. ... among small companies in their second year of business, more jobs were lost to bankruptcy than were added by those still operating. The same was true in years three, four, and five. .... The trouble is that government programs aimed at helping small businesses usually help the wrong kind. Many of these outfits were never meant to generate employment for anyone but their founders. ... If you’re looking for a lot of good-paying, stable jobs, you’d better hope there are some big companies around that want to hire. [Charles Kenny, Bloomberg Business Week, Sep 28]
SBIR Insider Rick Shindell notes that the Continuing Resolution is keeping SBIR as alive as the rest of the government.government loan guarantees go only to those companies who the free market has chosen NOT to fund. If the free market was willing to toss another half billion into Solyndra, its owners would not have been burning a path back and forth to Washington. So by definition, every single government loan guarantee in this program is to a company or a technology that the free market, knowledgeable investors, and industry insiders have rejected as a bad investment. For the program to work, one has to believe that Obama, Chu, and some career energy department bureaucrats have a better understanding of commercializing technologies than do private investors (who are investing with their own money) and industry experts. [Warren Meyer, coyoteblog, Sep 25]
Invents Act, including two new
programs to assist biomedical entrepreneurs at the National Institutes
of Health (NIH). The administration also will develop a national plan
focused on reforms to speed commercialization and open new markets. A
blueprint outlining those efforts is due in January.
[SSTI, Sep 23] With a re-election contest looming, the
administration wants to look as small biz positive as possible.
SBIR maybe to continue. SBIR Insider Rick Shindell reports that the SBIR re-authorization has at least temporarily disappeared in the battle to fund the government for the coming fiscal year. It may or may not get a ride on a Continuing Resolution through Nov 18. All the politicians who think they have a political solution to the national economic problem want to apply their pet theories, but the pet theories cannot co-exist and no one really knows what will work. The lielihood seems that we are not going back by any of the theories to ourprevious comfortable where everybody gets wishes granted by a generous government.
[Federal] indictments point to the connections between Dong’s biotechnology company, GenPhar (Mount Pleasant, SC; $900K SBIR), and [US Senator Lindsey] Graham, who championed nearly $20 million in federal earmarks for the firm’s vaccine research. ... From 2004 to 2010, GenPhar received $19.6 million in federal grants from NIH and the military secured with help from Graham, according to the senator’s office. The money was focused on attempting to develop vaccines for use against the Ebola, Marburg and dengue viruses. In one example, Graham requested a $5 million earmark for GenPhar for a program to develop a vaccine against dengue fever.[Dan Eggen Washington Post, Sep 21, 11]
When lawmakers talk about small businesses as the engine of growth, they bring to mind entrepreneurs building start-ups from their garages. But when officials talk about protecting the “job creators” from tax hikes, they are mostly protecting a bunch of doctors, lawyers, freelancers, contractors and the like. .... Like the overwhelming majority of small businesses, I am a one-man operation. And, like most small businesses, I would not hire anybody even if the government dropped my tax rate to zero. [Dana Milbank, Washington Post, Sep 21]
The [Solyandra] problem is that even if a company with a cutting-edge technology manages to build a factory on time and at the anticipated cost, the market price of its product can collapse before its rollout, they said. ... Another analytical firm, Bloomberg New Energy Finance, reached a similar conclusion last week, saying that the manufacturing capacity for specialized lithium-ion batteries will greatly exceed the need “unless demand by automakers increases significantly in the short term.” ... Nissan North America has a loan guarantee of up to $1.448 billion for retooling a factory in Smyrna, Tenn., and building the Nissan Leaf, including the battery. [Matthew Wald, New York Times, Sep 16] The business risk of market competition.
The Small Business Administration (SBA) also released a report that summarizes ideas expressed by participants during the eight "Startup America: Reducing Barriers" roundtable events and from an online suggestion portal. After hearing from "over 1,000 entrepreneurs, investors, and other participants across the entrepreneurial ecosystem in eight communities," five key theme areas emerged: People—identifying, hiring, retaining and developing a strong entrepreneurial workforce in America; Money—fostering an environment in which promising U.S. startups and high-growth firms can access the kinds of capital they need; Ideas—transforming more of America's discoveries and breakthroughs into commercial success; Customers—ensuring that America's small firms can compete for customers, including U.S. Government contracts and export business; and, "Lean" Government — making the U.S. Government itself more customer-centric and nimble in serving our own entrepreneurs and high-growth firm. [SSTI, Sep 15] SBIR's mission is the capital with the hope that commercial success will follow. The federal agencies, however, are not interested in providing capital; they want their R&D work done with the money that was diverted to the social handout program. And since Congress gave tham unilateral authority to pick the winners, guess what happened.
Startup visas got a hearing on Capitol Hill today, but that’s as far as the idea may go this Congress. Proposed legislation would provide visas to foreign entrepreneurs who have secured venture capital backing to start businesses in the U.S. [Kent Hoover, portfolio.com, Sep 15]
The new fiscal year will almost certainly start with a stopgap CRA despite all the rantings by the Republicans for responsible federal finance. The House trial balloon CRA would cut 1.25% from everything.
SBA Should Work with Agencies to Improve the Data Available for Program Evaluation, says GAO's latest SBIR report. we recommend that the Administrator of the Small Business Administration work with participating SBIR agencies to take the following two actions: collect data on the number of applications submitted by small businesses owned by disadvantaged individuals and women, and identify best practices for verifying the accuracy of data related to progress in increasing commercialization. The basic problem is that most commercialization data are held by private companies thta have no incentive to report confidential business data to the leaky government. The only useful data would come from aggressive program managers who care about the economic objectives and who will force proposers to justify subsequent awards. Until now, though, no agency has done such action since SDIO/BMDO did it in the 1990s.
the U.S. military is trying to develop pilotless planes to operate in future wars where airspace may be contested. The drones will have to be able to fly with near autonomy and elude enemy radar by using stealth technology. ...currently developing the X-47B, designed to operate from an aircraft carrier and refuel in midair [a considerable technological feat]. [Nathan Hodge and Julian Barnes, Wall Street Journal, Sep 15]
The federal government says it gave Provident Bancorp Inc. of Amesbury $17 million as part of controversial national program to boost small business lending by injecting money in community banks. ... has awarded $2.4 billion so far to nearly 200 banks [nationwide] [Todd Wallack, Boston Globe, Sep 15] But no requirement that the banks actually lend money to small biz. Free market critics naturally object to such handouts. The banks still have the option of using the money to bulk up their capital and wait for a better day to invest. If consumers won't or can't buy stuff, the small biz isn't expected to do well anyway.
Do something? Almost nobody seems to hope the government will leave the economy alone to recover on its own. ... There was a stock market crash in October 1929 and unemployment shot up to 9% — for one month. Then unemployment started drifting back down until it was 6.3% in June 1930, when the first major federal intervention took place. That was the Smoot-Hawley tariff bill, which more than a thousand economists across the country pleaded with Congress and President Hoover not to enact. But then, as now, politicians decided they had to "do something." [Thomas Sowell, Sep 15] Of course, politiciams don't win any votes for doing nothing. The unending urge to do something got us into the national debt mess and getting out of it will require a lot more of doing nothing.
a chart detailing the collapse of federal support for research and development is especially disturbing. [David Frum reviewing Friedman and Mandelbaum That Used to be Us, New York Times, Sep 11]
As Madison girds for debate over a stalled venture capital proposal, two Republican legislators say they are planning a separate bill that would provide venture capital and other types of funding to the state's bioscience companies. [Kathleen Gallagher, Milwaukee Journal Sentinel, Sep 7] Hope springs eternal that government can wisely invest public money in technical innovation. Even Wisconsin Republicans go for it. They should pay close attention to Texas's experience with politically controlled "investment."
Since the sun rose every day in Utah, Massachusetts, and Texas, guess who's claiming credit? The self-proclaimed job-creating governors one-upping each other on how many jobs the private economic forces hired. Stand by for another fourteen months of cherry-picked statistics on the complex US economy. No sunrise ever gets past those roosters. Ah well, if the electorate doesn't understand basic economics and cause-and-effect statistics, politicians can invent any story they like.
FBI agents executed a surprise search Thursday of [Solyandra] that collapsed last week, in an investigation that appeared to center on half a billion dollars in federal loan guarantees granted to the company by the Obama administration. ... Solyndra officials had recently pronounced the company financially healthy. But at the end of 2010 they had privately confided to Energy Department officials that the company was rapidly going broke and on the verge of shutting down, according to newly released records and interviews. [Washington Post, Sep 9] Imagine that: a government program said it wanted to hear good things from a potential beneficiary so it justify handing out money. Just like SBIR commercialization fantasies.
the decisions are being made by, at most, a few hundred government workers. There is no possible way these workers can ever gather the knowledge and information posessed by millions of private actors making similar investment decisions. Like monkeys throwing darts, some of the investments will work out, but on average their success rate has to be far lower than the network of individuals in the broader economy. Second, and probably more important, government decisions-makers have terrible incentives when making these investments. Seldom, if ever, are government re-allocations of capital made with an expectation of earning a return. In fact, many of these programs promote themselves explicitly as shifting capital to investments no rational private investor would touch. [Warren Meyer, Coyote blog, Sep 2] Meyer has a good argument for projects that are business risks. But for technical risks, tooo uncertain to make an ROI calculation, somethjing else is needed, either crazy VCs or government if ended to the point where an ROI can be estimated with some confidence.
As Madison girds for debate over a stalled venture capital proposal, two Republican legislators say they are planning a separate bill that would provide venture capital and other types of funding to the state's bioscience companies. [Kathleen Gallagher, Milwaukee Journal Sentinel, Sep 7] Hope springs eternal that government can wisely invest public money in technical innovation. Even Wisconsin Republicans go for it. They should pay close attention to Texas's experience with politically controlled "investment."
As the U.S. deficit continues to climb, times are clearly tough for government funding. But should the nation’s debt crisis be “solved” by gutting R&D? To the contrary, science is essential to the future of our nation and the world. .... Last month, we sent a letter to Congress, signed by more than 150 scientific societies, urging members to refrain from defunding specific grants or entire scientific disciplines. [AAAS, Sep 6] Of course, our subsidy is worth every debt dollar we get. It's Story 101 that Congress hears from every beneficiary of subsidy or tax break. SBIR is no different, except that its story relies even more on conventional myths. Bad news: Congress's letter box is already full of similar pleas.
Lerner details case after case where public investments produced little
or nothing. But he also makes an important distinction between
government efforts to set the table for entrepreneurial activity and
government efforts to create jobs directly. Setting the table means
building an underlying context for innovation: funding academic
research, establishing clear laws, improving immigration policies,
building infrastructure and keeping capital gains tax rates low. ...
These table-setting efforts work. The problem is the results are
indirect, the jobs take a long time to emerge and the market may end up
favoring old-energy sources instead of shiny new ones. So politicians
invariably go for the instant rush. They try to use taxpayer money to
create private jobs now. But they end up wasting billions.
[David Brooks, New York Times, Sep 6] But the programs get
created because the program beneficiaries exploit the politicians' need
for action. And a divided Congress looks only for partisan advantage
and campaign contributions.
The Texas Emerging Technology Fund, also controlled by the governor, has invested $200 million in 133 start-up companies since 2008, according to Mr. Perry's office, and has the right to take equity stakes in the mostly privately owned companies. At least one backed by the fund, CardioSpectra, produced a profit for the fund when it was sold in 2007, a Perry spokeswoman said. The fund also has awarded about $175 million to university-linked research programs, and has about $140 million available to spend over the next two years. In an April report, the state comptroller's office found it "difficult to assess the success of the program." The legislature told the fund this spring to start tracking jobs created by its grants. [Leslie Eaton, Wall Street Journal, Sep 2] Imagine that: a government handout "investment" fund that cannot show its economic return.
Over the last few days, John Huntsman has called for an American industrial policy to rebuild manufacturing; Maxine Waters has slammed bailed-out banks for not writing enough new mortgages; and Solyndra, a company that recieved $535 million of taxpayer loan guarantees to manufacture solar panels, went bankrupt. What do all these stories have in common? At their core, they reflect the near-obsessive desire by politicians to redirect the flow of private capital to reflect their own personal preferences. In a free economy, private capital tends to migrate towards where it can be employed most productively. Individuals investing the capital have incentives that cause them to want to maximize their returns measured against the risks they perceive...... In what has been a progressive technocratic fantasy for over a century, politicians believe, or worse, try to convince the public, that it is possible for a few smart people at the top to better optimize the economy by redirecting private capital flows. This was a fundamental core assumption in Mussolini’s corporate state, in FDR’s National Industrial Recovery Act, in Japan’s MITI, and in Obama’s Green Jobs initiative. [Warren Meyer, Forbes, Sep 1] Government wants votes and spends money where it will bring the most votes. Call it democracy or call it corruption, it is a fact of life that dooms almost every government program that pretends some economic return will result from the spending.
SBIR Insider Rick Shindell gloomily notes that SBIR is in peril and is likely to lapse, be eliminated, or become a misshapen Wall street program at the expense of main street small business ... House Small Business Committee leaders, continue [since 2004] to be major supporters of their Wall Street benefactors to open SBIR funding to majority ownership of Wall Street giants. House and Senate, says Shindell, are nowhere near agreement on a revised SBIR, or even on another short extension after Sep 30. The main problem is representation of competing vested interests and the need for Congress to deliver a large budget pain to the country. For SBIR and many other special handout programs, a new day is dawning with heavy clouds. SBIR is just not convincing Members that it has a large economic payoff in jobs and economic activity (beyond the temporary jobs provided directly by the handout). SBIR advocates repeat the tired litany of small biz virtue and are suffering thee consequencs of their two decades of fighting economic evaluation of a program that is basically just serving federal agency short term interests. In Congress's mind, a dollar for jobs hires the same number of people in either large or small entities with no compelling evidence that SBIR has any better downstreeam payoff than any other program. Shindell again implores SBIR activists to shower Congress with the usual pleas.
Budget Bites. R&D investment thus far has received mixed support in the House, with themes similar to last year. Basic research has generally been supported, while applied research programs have seen deep cuts in their budgets -- in some cases more than 30 percent. [AAAS, Aug 11] It's still way too early to predict how all that austerity speechmaking will translate to real programs with real handout beneficiaries.
The US Treasury said yesterday that it is pumping $18 million into four small Massachusetts banks and taking shares in the financial companies as part of a controversial program to increase small business lending across the country. The Obama administration says the Small Business Lending Fund will help boost the sluggish economy by providing relatively cheap capital to community banks to lend to small businesses to expand and hire. ... The program is controversial because many of the banks are using the money to repay the federal aid they received under TARP, with better terms. ... More than 900 banks have applied for more than $11 billion under the program, none of which have been rejected yet, according to the US Treasury. [Todd Wallack, Boston Globe, Aug 18] eight California financial institutions so far receiving the same federal funds [signonsandiego. com] You can lead the horse to water, ...
Crony Capitalism. All told, the Dallas Morning News has found that some $16 million from the tech fund [Texas Emerging Technology Fund] has gone to firms in which major Perry contributors were either investors or officers, and $27 million from the fund has gone to companies founded or advised by six advisory board members. The tangle of interests surrounding the fund has raised eyebrows throughout the state, especially among conservatives who think the fund is a misplaced use of taxpayer dollars to start with. It is fundamentally immoral and arrogant," says state representative David Simpson, a tea party-backed freshman from Longview [Charles Sameron, Wall Street Journal, Aug 13]
The Michigan Economic Development Corporation (MEDC) recently announced the recipients of $25 million in awards from the Michigan Strategic Fund (MSF). Each of the eight organizations receiving the awards will use the funding to support Michigan entrepreneurs and technology commercialization. The largest single allotment, $10.8 million, will benefit Ann Arbor SPARK, which plans to replenish its Michigan Pre-Seed Capital Fund with the award. [SSTI, Aug 10]
Who will buy? The U.S. government used to be the ultimate customer for some American companies—consistent, deep-pocketed and faithful to its contracts. Now its deep pockets have holes.Among investors and executives alike, the recent debt-ceiling deal is regarded as the first step in a spending pullback that will reverberate across many industries, including health care, defense, technology and education.[Jonathan Rockoff, Wall Street Journal, Aug 9]
Unhealthily dependent. Today, both the stock market and the economy have become dependent on government support, and the current crisis grows from a fear that governments are losing control of the situation. [Wall Street Journal, Aug 5]
The N.C. Biotechnology Center has given a grant worth as much as $2.5 million for a new center designed to foster commercial development and jobs based on the state's ocean life. The four-year grant will help get the Marine Biotechnology Center of Innovation off the ground. [Raleigh News & Observer, Aug 3]
Almost all discretionary federal spending will face some cuts over the next 10 years, with defense spending taking a comparatively heavy hit. ... "If we have learned anything from this crisis, it's not to depend on the government for anything," said Bedda D'Angelo, president of Fiduciary Solutions, a Durham, North Carolina, financial -planning firm. [Reuters, Aug 2] And that's just from the preliminary round of federal belt-tightening. If and when the federal budget comes into reasonable balance, a lot more pain will be felt to both beneficiaries and to taxpayers. The national family will have to reduce its credit card financing to its income level, which is unlikely to bloom profusely in world competition. Re-building the national income stream will also involve a lot of pain.
NSF Launches Project to Link Research and Innovation . The National Science Foundation, in collaboration with the Deshpande Foundation and the Kauffman Foundation, launched a new public-private partnership entitled Innovation Corps (I-Corps). The program will make awards to teams composed of a principal investigator, a mentor and an entrepreneurial lead, to advance the development of commercial products based on NSF-funded research. The program intends to support up to 100 projects per year, at $50,000 a project. [AAAS, Aug 3]
The deal to raise the debt ceiling and reduce budget deficits would likely cause a mild drag on U.S. economic growth in the coming year, coming at a time when the recovery remains fragile. ... Some economists expect a more severe impact, which could be particularly damaging when growth is weak. [Sara Murray, Wall Street Journal, Aug 2] Taking away the credit card does not improve a family's life style. And Americans cut back on their spending in June for the first time in nearly two years and their incomes grew by the smallest amount in nine months, a troubling sign for an economy that is barely growing. [Martin Crutsinger, AP, Aug 2]
The Pentagon has encouraged foreign companies to pursue work with the U.S. military in hopes of creating more competition for sales of goods and services. “Globalization of our market is not an option. It is a reality,” Ashton Carter, the Defense Department’s top acquisition official, said in a February speech [Washington Post, Aug 1] Not to worry too much; the politicians will soon be trumpeting "jobs for Americans" as unemployment hangs on.
[Michigan’s angel investor tax credit] would-be three-year, $27 million program designed to stimulate early stage funding of startups, will end at the end of this year, the victim of Gov. Rick Snyder’s tax reforms and budget wrangling. The program began this past February. [Thomas Lee, xconomy.com, Jul 22]
A federal judge threw out a lawsuit by scientists challenging U.S.
government funding of embryonic stem-cell research, a victory for Obama
administration efforts to expand this area of study. ... Judge Lamberth
suggested it was up to the president to decide whether to put federal
money toward such research. "That policy question is not answered by
any congressional law, and it has fallen on three presidential
administrations to provide an answer," he said. [MJ Randall and
MH Anderson, Wall Street Journal, Jul 28]
Ultimately, the issue is the unsustainable fiscal trajectory of the U.S. government and the inability of the political system to change course.The credit rating isn't the problem.The problem is the problem. [David Wesel,Wall Street Journal, Jul 28] The problem, of course, is our unwillingness to tax ourselves enough to pay for what we want our government to buy for us. And SBIR is just on example of the free lunch syndrome.
"The bookshelves of policy analysts in Washington are loaded with statements of principle on tax reform that all sound good. And then they all die when you try to specify the details." -- William Gale, an adviser to President George H. W. Bush's Council of Economic Advisers and now co-director of the Tax Policy Center. [Stephen Ohlemacher, AP, Jul 20]
The federal government -- our nation's largest employer -- is about to
suffer a serious brain drain.
... About 35% of the employees at the Department of the Treasury will
be eligible to retire by 2012. So will 40% of workers at the Department
of Energy and 46% of people working for the Department of
Transportation. The good news is that many of these departments will
have to slim down anyway, and this retirement cliff could offer an
opportunity for agencies to become more efficient. [Shelley
DuBois, Fortune, Jul 22] The Tea Party will be glad to hear that
government could shrink by itself, although the retirees will still
have to be paid their pensions and health benefits. Roughly
two-thirds the pay and all the health benefits with no federal work
“The government is aggressively removing work from some small businesses,’’ said Robert Burton, a partner at the law firm Venable in Washington, who represented SAC and other small vendors in insourcing cases. ... Federal procurement officials said the impact on small business from insourcing has been minimal, though they had little data on the number of businesses affected. ... The Defense Department estimated that it has created nearly 17,000 civilian positions in fiscal 2010 as a result of insourcing [Leah Nylen, Washngton Post, Jul 24]
...fiscal nonsense is rampant in government today. They seem to think it is their job, at all levels, to intrude in areas they have no business intruding and pick winners according to an agenda with little understanding, apparently, as to what it actually takes to succeed in doing so. You know, like there has to be a market, the firm has to be adequately financed (for more than a couple of months) and it has to have a long-term and viable business plan that actually passes a sanity check. [Bruce McQuain, quando.net, July 20]
First, re-organize and change the name. an overhaul of Iowa's economic development efforts, giving private businesses a greater role in shaping programs, which was one of his top priorities in the last campaign. ... changes the name of the main state agency that does economic development, to the Iowa Partnership for Economic Progress. [AP, Jul 19]
Old standby deja-vu. The Republicans are pushing a balanced budget amendment as self-identified conservatives rush another attempt to change the Constitution to achieve their policy objectives. Even if they got such an amendment, their first moves would be to avoid its discipline by pretending the existence of whatever escape mechanism is necessarily included. Budgets, after all, are only plans and estimates, not binding documents.
Single Best Argument Against Technocratic Paternalism. The progressive argument for a larger state has, for over a hundred years, rested in part on the premise that smart people at the top in government can better optimize the allocation of resources and make better investment choices. This premise always has been ludicrous. Government officials have neither the information nor incentives to perform this function, and lacking such, decisions always get made based on political rather than economic or other objective functions.Ethanol is such a great example, it will almost be a shame when its mandates and subsidies are repealed. As a reminder, corn-based ethanol production get the trifecta of state sponsorship — mandates for its use, subsidies for its protections, and stiff tariffs to prevent lower-cost imports.The result is a classic government fail. The economic subsidies benefit only a small number of the politically connected, while hurting the great mass of humanity, even outside the US, through higher food and fuel prices. Because ethanol takes as much fuel to produce as it provides, it does nothing to change the amount of fossil fuels we use. And as a result, it does nothing to affect CO2 production and in fact has a number of environmentally negative effects, particularly in land and water use. [Warren Meyer, coyoteblog.com, Jul 13]opposition party, is withholding support for an internationally agreed austerity and privatisation plan on the ground that it can and should be renegotiated, with more emphasis on tax cuts. Few people outside Greece see much scope for that. But some of the government’s critics, especially on the left, gleefully observed that Greece’s international partners seemed to soften their stance slightly around June 15th, when street protests came to a head and the country looked ungovernable. [The Economist, Jun 25] Regardless of the scope of an impending disaster, one political religion holds that that the solution is tax cuts. Naturally, they are always the people who want their taxes cut. Economics alway runs a distant second to personal vested interests.
Start-ups that receive money through Minnesota’s angel tax credit program are eager to see the state government shutdown end soon. The program gives qualified individuals a 25 percent tax credit on their investments of $10,000 or more into Minnesota start-ups. During the state shutdown, investors are unable to sign up for the program. [Wendy Lee, Minneapolis Star Tribune, Jul 5]
The Methodist Hospital
Research Institute (TMHRI) in Houston, Texas. With help from a $3
billion state cancer research fund, the institute came up with a
5-year, $29 million package that includes the two scientists' salaries,
research costs, and ample space in a new research building for their
hundreds of mice. “Texas is the only place right now to get that kind
of money,” Copeland says. ... when a shift toward industrial research
in their adopted Singapore persuaded mouse geneticists Neal Copeland
and Nancy Jenkins to return to the United States .witn
money from the plan to sell $3
billion in bonds over 10 years for CPRIT 4 years ago, inspired by
California's $3 billion stem cell research fund. [Jocelyn
Kaiser, Science, May 27] Thanks to the religiously inspired
political decision by ex Texas governor George Bush to deny federal
funding for such science, two pretend rich states with all kinds of
budget shortfalls are competing to throw money at such science for
presumably purely economic reasons.
Lawmakers last week passed a measure establishing the Innovate NY Fund to invest $25 million of federal funds in technology development organizations, research universities, and seed-stage investment funds. The Empire State Development Corporation will administer the fund and establish a competitive process for evaluating applicants. Investment priority is given to companies involved in commercialization of R&D or high-tech manufacturing. [SSTI, Jun 30] How do you estimate the odds that this enterprise will achieve its goal? What do you think the overall return on investment to the state will come from such handouts? Do you think there will ever be an honest assessment of the project?
Last week, the House of Representatives passed the largest overhaul of U.S. patent law in 60 years. Under the new legislation, patent decisions would favor inventors who file for patents first, rather the the current "first-to-invent" system. The change would bring U.S. patent law more in line with the patent systems of Europe and Japan. A similar bill was passed by the Senate in March, which will be reconciled with the House bill in the near future. Read the full text of H.R. 1249 [SSTI, Jun 30]
Robo-copter down. NATO has confirmed media reports that a Navy unmanned aerial vehicle [Fire Scout] that was developed by Northrop Grumman in Rancho Bernardo crashed in Libya. Officials haven't disclosed why the remotely-controlled MQ-8B robotic helicopter, which can operate from a warship, went down. [Cary Robbins, signonsandiego.com, Jun 22]
Convergen LifeSciences (no SBIR) said it, the University of Texas System and the federal government had jointly won a patent for a drug to fight lung cancer. The company said it plans phase II clinical trials for the drug, called CNVN202, which is designed to suppress tumors in lung cancer patients. Convergen is at the center of a controversy over how it won a $4.5 million Texas Emerging Technology Fund grant and the secrecy that surrounded Gov. Rick Perry's award of the money. The American-Statesman recently reported that Convergen's founders had invested only $1,000 at the time that they had applied for the grant. Convergen LifeSciences Inc. said it, the University of Texas System and the federal government had jointly won a patent for a drug to fight lung cancer. [Austin American Statesman, Jun 28]
Big talk, little money. Minnesota Science and Technology Authority is asking the entrepreneurial community for input on issues it should tackle first.... The authority had originally asked the state legislature for $10 million each year to support its operations and initiatives. That amount was later reduced to a total of $607,000 across two bills. It is uncertain whether the authority will receive that funding. [Wendy Lee, Minneapolis Star Tribune, Jun 27]
end of the [Texas] legislative session in 2009, partisan bickering
killed a host of unrelated bills, including solar legislation. This
year, solar bills couldn't even clear a committee in a session marked
by a no-tolerance attitude to new taxes or fees, or higher electric
bills, for that matter. Texas is the nation's largest energy market,
but it ranked 10th last year in the amount of solar photovoltaic
generation installed. ... Price is the hurdle for solar. Despite
falling prices for solar panels, solar power is projected to be more
than three times as expensive as natural gas and double the price for
wind between now and 2035, according to the U.S. Energy Information
[Laylan Copelin, Austin Amertican Statesman, Jun 26]
President Barack Obama will launch an initiative to develop new manufacturing jobs by teaming government up with companies and universities to invest more than $500 million in advanced technologies.... Advanced Manufacturing Partnership, which aims to speed development of a new generation of American-made high-technology products. ... will leverage existing federal funds and future federal departmental budgets to invest with industry some $300 million to jump-start domestic manufacturing capabilities seen as critical to U.S. national security. Initial public-private investment areas include batteries, composites, metal fabrication, biotechnology and alternative energy. [Reuters, Jun 24] The administration is betting it can goose the trends by expanding partnerships between firms and community colleges for training, improving coordination between universities and advanced manufacturers, liberalizing export rules and pressing for more federal spending on sectors such as green manufacturing. [Wall Street Journal, Jun 24] Been there, done that, against basic Republican free-market theories, with MEP. This time in an environment of cutting government spending. It's mostly politics because any re-growth in manufacturing will be generated by a reversal of the economic forces that drove it off-shore in the first place: lower labor costs, relative value of the dollar, corporate tax rates on profits, etc. It's not R&D a shortage of R&D that dominates amnufacturing, and government supported R&D is almost certain to subsidize the wrong industries and companies. Ah well, the pres needs electoral votes in the classic manufacturing states of the Midwest. Nobel laureate economist Michael Spence has a essay in today's Wall Street Journal on the broader program needed to get us into a better world competitive position.
there also are tax breaks
companies. But most of those handouts are temporary -- including
low-interest loans from the 2009 stimulus -- with renewables receiving
only around 5% of some $20 billion worth of federal energy tax breaks
(excluding subsidy-rich ethanol, which is a separate but equal tax
tragedy). Some of these subsidies are very important to individual
companies, but the renewable-energy industry's best long-term play is
to support the elimination of all federal energy handouts. [Dan
Primack, Fortune, Jun 13] Subsidies are loved by the
beneficiaries but hard to justify as a net benefit to the nation. SBIR
advocates make the same fair-share pitch for corporate subsidies and
have the same negligible provable economic gain to show for it. But
politics being what it is, SBIR is likely to continue as a fair-share
soaring fuel bills and a dangerous reliance on vulnerable fuel convoys. The [Pentagon’s new energy] strategy, which will be fleshed out this summer with a more detailed implementation plan, constitutes the Pentagon's promise to develop more energy-efficient weapons, embrace non-oil energy sources and demand more energy-conscious behavior from the troops.
SBIR Insider Rick Shindell notes that SBIR will expire tonight unless the House today passes the Senate version if a new extension bill. Nobody knows how much damage a legal expiration would cause. If the Congress really wants SBIR it will make any needed adjustments when it gets around to it after it finishes toying with the nation's finances for political purposes. The agencies will still have the option of continuing the SBIR march in their mainline procurement. Whether they do would be a measure of their agreement with the small biz advocates of the value of the SBIR innovation to their missions. I have watched many of them for 25 years try to find ways to avoid SBIR.
Fear and loathing of dangerous technology. Germany's coalition government agreed early Monday to shut down all the country's nuclear power plants by 2022, the environment minister said, making it the first major industrialized power to go nuclear-free since the Japanese disaster. [Juergen Baetz, AP, May 30] Technology's dangers were also flashed by the AF447 first report that a modern airplane fell from the sky because the coordination between pilots and the flight control system broke down in a way yet to be understood.
SBIR Insider Rick Shindell says Congress re-connected the SBIR life support plug for another extension until Sep 30.
National tool, national threat. Iran is taking steps toward an aggressive new form of censorship: a so-called national Internet that could, in effect, disconnect Iranian cyberspace from the rest of the world. The leadership in Iran sees the project as a way to end the fight for control of the Internet, according to observers of Iranian policy inside and outside the country. Iran, already among the most sophisticated nations in online censoring, also promotes its national Internet as a cost-saving measure for consumers and as a way to uphold Islamic moral codes.... also intends its own computer operating system to replace Microsoft Windows [C Rhoads and F Fassihi, Wall Street Journal, May 28] Bad news for the mullahs: tech suppression doesn't work.
SBIR Insider Rick Shindell reports that the Senate passed (by unanimous consent) a continuing resolution [the 12th since 2008] that would keep the SBIR, STTR and CPP programs going "as is" for 12 months. The House is in recess until next week.
Re-organize ... again. Lawmakers concurred with the governor's recommendation to eliminate the Kansas Technology Enterprise Corporation (KTEC) and transfer some of its programs to the Department of Commerce ... [Nebraska] Lawmakers also approved an angel tax credit for investments in high-tech companies and a measure to create an internship program matching college students with businesses as part of the governor's Talent and Innovation Agenda (see the Jan. 19, 2011 issue of the Digest). The 2011-13 biennial budget signed by the governor also includes $25 million for a university-based innovation campus. [SSTI, May 19] Do state politicians really understand how to build an economy that will attract profitable business? Or is such change just another way to get news attention?
Despite the fact that up to 50 percent of U.S. economic growth since World War II has been driven by science and technology*, and despite continued positive returns on investment for academic scientific research, the outlook for federal R&D funding remains uncertain at best ... The 2011 budget compromise, which represents the largest collection of spending cuts in U.S. history, did spare R&D programs and agencies from the worst of the cuts, with basic research faring the best. [AAAS, May 19] For beneficiaries of government funding, there is never enough.
Despite all evidence to the contrary, we still maintain an immigration policy that views immigrants as security threats, rather than as the hard-working entrepreneurs many of them are. It’s no coincidence that many of our top companies today – Google, Intel, Yahoo! – were started by immigrants. Instead of ensuring that tomorrow’s top companies are American companies, we kick out these entrepreneurial immigrants after giving them the world’s best education. It’s the very definition of economic suicide. [Gary Shapiro, Forbes, May 11] But the urge is so great to pull up the lifeboat ladder. Lord Watson of Richmond (England) noted the other night that we focus all our intelligence gathering on the threats and none on the opportunities. So with seeing immigrants as a threat.
The Fortress America gaggle forbids even talk. A Congressional critic of the Chinese government, Rep. Frank Wolf (R-VA), wrote language into the FY 2011 spending bill that would prohibit the White House Office of Science and Technology Policy (OSTP) or NASA from engaging in joint scientific activities with China. ... Rep. John Culberson (R-TX) warned that OSTP or NASA funding might be jeopardized by efforts to collaborate or coordinate in any way with China. [AAAS, may 11] The presumed basis: the Chinese might learn something and we already know everything. That gaggle will have to learn, as did Newt and the 1995 Republicans, that they cannot run the government from the House. And there's a chance that Obama is as wily as Clinton.
A company of US Marines recently conducted a remarkable three-week patrol through southern Afghanistan, replacing hundreds of pounds of spare batteries in their packs with roll-up solar panels the size of placemats to power their battle gear. ... Batteries make up as much as 20% of the weight of the 100 pounds of gear a Marine infantryman typically carries. A Marine uses four times as much fuel as his counterpart did in the early 1990s—due to, among other things, laptops and other electronic gear that use electricity pumped out by portable generators. [Keith Johnson, Wall Street Journal, May 9]
Some 30% of all fuel trucked into Afghanistan—at great risk—goes to power those generators,Hoping to lure one of the world's leading agricultural biotechnology companies, the Durham County commissioners unanimously approved up to $225,000 in incentives Monday night to improve the county's chances of landing a $71 million expansion. Syngenta Global (Switzerland) , employs more than 26,000 people in 90 countries. Syngenta Biotechnology, the research biotech division of the company based in Research Triangle Park, uses technology as it seeks to raise crop yields in drought conditions while lowering herbicide and fertilizer use. The RTP division employs 400 people [Raleigh News & Observer, May 10, 11]
“I don’t need a roomful of analysts; I need a good enough, fast enough and big enough data system that can be used by someone in the field,” the official says. “We have had 10 years of learning how to do things better in wars at a time when technology is moving so fast, with an incredible advance in processing speed.” [says a] US defence official ... [for] an increasingly sophisticated form of warfare – one that fuses the intelligence services and highly sophisticated military specialists. It is being conducted in large part through spies, special forces and drone strikes in battlegrounds such as Pakistan and Yemen. [Financial Times, May 10] The good news and the bad news is that the tech advances let command centers in CONUS micromanage field engagements.
No new SBIR law. The Senate so-called SBIR bill S293 became just a carrier for every pet rock and politically controversial policy in the struggle for power and deficit control. With 120 unrelated amendments it was tabled again. SBIR is simply not a signature program for either party despite all the bloviating by its proponents.
capitalize on Tennessee's "entrepreneurial spirit," Gov. Bill Haslam
today announced a $50 million innovation strategy as part of his
regional jobs plan outlined last month. The initiative centers on four
components: providing co-investment funds, targeting funds and
resources toward technology commercialization, supporting
entrepreneurship by creating a statewide incubator network, and mapping
a strategic economic development plan for each of the state's nine
regions [SSTI, May 5] Will the scientists come to support such
structure and help nurture innovation? Does the state support
teaching of science or religion in its so-called science classes with
"critical thinking" trying to be imposed by law (on hold for now) for biological
evolution, the chemical origins of life, global warming, and human
cloning? Will Tennessee ever outlive the 1925 Scopes
A move to kick-start homegrown innovation by streamlining the patent process is being shelved "until further notice" over a lack of funding under the new cost-cutting federal budget, the U.S. Patent and Trademark Office said ... would have created a three-track system to help alleviate a bottle-neck of filers, including expedited, standard and delayed processing options. [Angus Loten, Wall Street Journal, Apr 28]
SBIR Insider Rick Shindell reports that House and Senate are crawling toward agreement on an SBIR re-authorization. Now, only money separates them, something that politics is well placed to compromise on. Looks like VCs will win a big nose under the tent, which is not too surprising when one considers that VCs make money and get technology into play while SBIR funding seems to play conservative and serve the funding agency almost exclusively.
Government policies and actions are hurting us more than anything or anyone else. The legislative risk in the US has never been higher than it is now. Unfortunately, that risk is one of complete and utter uncertainty. That uncertainty makes investing much more unpredictable. The government is in near lockdown while Congress battles over cutting pennies from the biggest budget deficit ever. [Leo Isaak, Minyanville.com, Apr 29] You bet , as Churchill observed, "Americans always do the right thing but not before they have tried everything else." A lengthy report criticized [Texas governor] Perry's management of the [Emerging Technology] fund because its decision-making is closed to the public, the values of companies are not reported, and the governor's staff does not adequately monitor the state's investments. [Laylin Copelin and Kirk Ladendorf, Austin American Statesman, Apr 28, 11] What good is a political office if you can't reward your friends and credit yourself for all the money put into the program? As the line goes from the musical Evita: You can tell you've done well by the happy grateful looks.
Kunal Bahl headed off to the University of Pennsylvania. He graduated with a dual degree in business and engineering, started an Internet company and now he's living the American dream -- in India. ... But Bahl is not a U.S. citizen, and the barriers to a foreigner starting a business here made the idea of launching in Silicon Valley all but impossible. ... McClure and others are pushing a Senate bill that would create a visa to make it easier for immigrants to start businesses in the United States. [Mike Cassidy, San Jose Mercury News, Apr 25] Let's see, the SBIR advocates and their political friends claim great success for startup companies, while a lot of business creation types with money to invest say we need to import foreigners to start companies. Who's got the story of American enterprise straight? Where are the astounding business success stories emerging from $2B a year going into high tech small business? Has the government even got just its money back in total profits taxes from the SBIR businesses? If not, why not?
Start Up America looks like a website designed by the government, with at least half an eye on convincing journalists and sceptical members of the public that the president and his administration are trying to do something about the problems facing the economy. [The Economist, Apr 2]
The incubator, called NYC ACRE (Accelerator for a Clean & Renewable Economy), is housed within New York University’s better-known technology incubator on Varick Street. ... cleantech is one part of New York’s infrastructure that the city has pegged as vital for its economic growth ... the New York City Economic Development Corporation (NYCEDC) has signed on as a partner, and Mayor Michael Bloomberg has publicly declared his support [Arlene Weintraub, Xconomy NewYork, Apr 20]
Subsidies promise no loyalty. Rhode Island is welcoming a Connecticut-based high-tech battery maker Yardney Technical Products (Stonington, CT; $20M SBIR) ... Gov. Lincoln Chafee will join executives in East Greenwich to mark the company's relocation. ... brings 165 jobs to Rhode Island. The Rhode Island Economic Development Corp. offered Yardney more than $500,000 in tax exemptions and guaranteed $5 million in bonds. ... manufactures batteries for the military and the aerospace industry and developed the batteries in the Mars rovers. [AP, Apr 18, 11] Two years ago Yardney was negotiating for millions in additional financial assistance from the state. [Eric Gershon, Hartford Courant, Jul 3, 09]
Meet your numbers or give back our money. State and local governments collectively give more than $70 billion a year of incentives to lure business and jobs, primarily through tax breaks, says [poli-sci professor] Kenneth Thomas, ... The issue has started to attract limited-government activists, who decry the perks as waste and government overreach. ... In some cases, public officials have grabbed ownership stakes in companies that lagged in producing jobs. [Jennifer Levitz, Wall Street Journal, Apr 22] Wouldn't it be something if the federal government took back SBIR funding from companies that didn't meet their commercialization fantasies?
Unfazed after being the nation's laughing stock with the 1925 Scopes trial, the anti-evolutionists persist, this time with another anti-evolution law in the Tennessee House 70-22 passing a bill that would require state and local education authorities to assist teachers in helping students "analyze" and "critique" the "scientific strengths and scientific weaknesses" of theories it labels as controversial, including evolution and global warming. [AAAS, Apr 13] Which makes one wonder why entrepreneurial innovators would move to Tennessee to operate in an anti-science and anti-curiosity world. With Georgia next door trying to eject immigrants from its cozy world, entrepreneurs will be staying on safer territory than Dixie until the voters there show a lot more respect for people who differ in any way from the Dixie model.
If wishes were horses, [Two Congresscritters announced]that they have each introduced bills to require the development of a national manufacturing strategy in order to boost traditional and high-tech manufacturing, spur American job growth and strengthen the middle class. America has lost 5.5 million manufacturing jobs, or one-third of the total, over the last decade. ... would require the Commerce Secretary to conduct a comprehensive analysis of the nation’s manufacturing sector and submit to Congress a National Manufacturing Strategy. [Industry Week, Apr 7] To compete on the world stage we have to compete on cost for commodity products or on capability for high-tech stuff. Left alone, the private sector will do whatever serves profit, as is its mission. Getting government into it is likely to produce little more than political theater and some subsidy scheme for the politically connected. And the politics would lean to import protectionism because it makes better stump speeches. SBIR advocates would get their micro-megaphones tuned up to claim some magic from even more subsidy for themselves.
Nativists v. Innovators. Joseph Donovan, lobbyist with Nelson Mullins Riley & Scarborough: It is promising to see a bill offered by U.S. Senator John Kerry that provides immigrant entrepreneurs with a two-year visa if they agree to invest in and create a business in the U.S. The bill is a simple and direct way to create jobs, especially in places like Massachusetts that historically have attracted immigrants. ... immigrants in Massachusetts have been founders for more than 25 percent of biotechnology firms in the state. [Mass High Tech, Apr 12] Since nativists are driven by cultural ideology, they would forego economic gain from immigration of any source.
Competitive bribing benefits companies. Though some say [offering companies big subsidies to move in] strengthen communities with new jobs and tax revenue, a growing chorus of leaders on both sides are wondering about the point of it all, warning that the efforts serve only to help private companies at taxpayer expense. ... Though they may say their development efforts are designed to help them compete with the two coasts for companies, they often end up fighting over companies already in the region. ... [The skirmish between the two Kansas Citys] has a long history of ugly border skirmishes dating back to the Civil War. [New York Times, Apr 8]
Federal securities regulators are moving toward easing decades-old constraints on share issues by private companies, in a sweeping review that could remake the way American start-ups raise capital. ... The steps under consideration would help such privately held companies raise more money without incurring the increased reporting and other requirements of becoming a public company. [Jean Eaglesham, Wall Street Journal, Apr 8] Bring on the suckers to the wild-eyed promises.
The Minnesota Partnership for Biotechnology and Medical Genomics said it launched five projects researching diabetes, cancer, heart disease and reversing neurological damage from diseases such as Alzheimer’s. The partnership said it will use more than $3.5 million in state-funded grants for the projects. The partnership is a collaboration between the state, University of Minnesota and Mayo Clinic. [Wendy Lee, Minneapolis Star Tribune, Apr 6]
two of San Francisco's hottest technology startups, Twitter and Zynga, are threatening to move unless they get a break from a city payroll tax that could, given the estimated multibillion-dollar valuations of the two companies, amount to tens of millions of dollars.Local officials, fearing the loss of thousands of jobs and prestige as a tech center, are scrambling to placate the businesses. But the city also is struggling with a budget deficit that may require firing hundreds of employees to bring it under control. [Verne Kopitoff, New York Times, Apr 5]
Not content with getting elected to shrink government Florida Gov. Rick Scott wants to create a new Department of Commerce and establish a position of commissioner to report to him directly. [with] restructuring is estimated to save more than $8 million Alert: Never believe political estimates of savings. ... In Nevada, a bill establishing a cabinet-level agency to direct and oversee three regional economic authorities [with] a regional organization for economic development for each of the northern, southern and rural regions, which would be eligible to receive grants from a proposed Catalyst Fund [SSTI, Mar 31]
the UK's Chancellor of the Exchequer, announced the country's 2011 budget including the "Plan of Growth" — a package of measures intended to support private sector investment, enterprise and innovation. Among the initiatives, a new "Technology and Innovation Centre" project focused on high-value manufacturing. According to Manufacturer.com, the center is likely to be the first of six manufacturing and engineering centers supported by a £200 million (approximately $321.2 million) four-year initiative. British Prime Minister David Cameron also announced the StartUp Britain — a program that delivers a benefits package of over £1,500 (approximately $2,400) for every startup company in Britain. [SSTI, Mar 31] Hope springs political. Do you suppose that the Chancellor has examined the track record of both UK and US efforts to improve innovation with government programs? Not the promises, the performance!
Corporate welfare illegal. The World Trade Organization has ruled that Boeing Co. has received at least $5.3 billion in illegal U.S. subsidies and must either withdraw them or make up for the harm caused. The EU had alleged that Boeing received almost $24 billion in illegal subsidies, such as research grants and free use of technology, from NASA, the Department of Defense, and the states of Illinois, Kansas and Washington. [Brent Hunsberger, The Oregonian, Mar 30] Note than SBIR may also be such a subsidy, but ignored because the business are insignificant.
activists in Oregon wanted to create a state-owned bank that would manage the money in state bank accounts and invest it in local businesses. ... The concept has morphed into a proposal to create a new agency that would try to coordinate all of the state's millions of dollars of investments in small businesses and farms. [AP, Mar 30] Another market-failure excuse for political intervention.
The Senator for Medtronic. Sen. Amy Klobuchar, D-Minn., joined with Sen. Scott Brown, R-Mass., to form the Senate medical technology caucus to help focus legislative attention on the industry, according to MedCity News. Rep.Erik Paulsen (R-Minn) earlier formed a similar caucus in the House. Its 50-some members include four other representatives from Minnesota. [Ed Stych, Minneapolis/St Paul Business Journal, Mar 31] Get real! Government support for technology is first and foremost political. Market failure is just a convenient cover story.
Here’s the [Republican staff at the Congressional Joint Economic Committee “Spend Less, Owe Less, Grow the Economy,”] report’s explanation of how layoffs would create jobs: “A smaller government work force increases the available supply of educated, skilled workers for private firms, thus lowering labor costs.” Dropping the euphemisms, what this says is that by increasing unemployment, particularly of “educated, skilled workers” — in case you’re wondering, that mainly means schoolteachers — we can drive down wages, which would encourage hiring. There is, if you think about it, an immediate logical problem here: Republicans are saying that job destruction leads to lower wages, which leads to job creation. But won’t this job creation lead to higher wages, which leads to job destruction, which leads to ...? [Paul Krugman, New York Times, Apr 1] Don't expect economic consistency from politics.
[Energy Secretary] Chu debuted a DOE program, “America’s Next Top Energy Innovator,” intended to spark clean energy startup activity. The program essentially opens the doors of U.S. national laboratories to entrepreneurs interested in moving federal research into the marketplace. From May 2 through December 15, startups may license a maximum of three patents, of the 15,000 patents held by national laboratories, for $1,000 each. Outside of this time frame, the patents would cost between $10,000 and $50,000 for entrepreneurs. Chu said the patents could range from energy efficiency software to solar power conversion techniques. [Mass High Tech, Mar 30]
[Companies] that rely on government contracts for large portions of their business are dialing back expectations or developing contingency plans should some funding fall through. "There's no question that we're going to see austerity. What's not at all clear is what that austerity will look like," said Stan Soloway, chief executive of the Professional Services Council, a trade association for the government-services sector. [Joe Light, Wall Street Journal, Mar 28, 11] And increasing SBIR's take will worsen the austerity hit for large entities.
The country is no doubt more innovative, more competitive in the global economy and has generated more and better jobs as a result of the SBIR.... . Slightly less than half of the SBIR funded projects actually resulted in an innovation in the form of a new product or service that was introduced in the market. ... Studies consistently find that firms receiving SBIR grants exhibit higher growth rates than do control groups control of matched-pair companies. SBIR Awards Remain Geographically Concentrated in Just a Handful of Regions. [David Audretsch, Testimony in House, Mar 16]
Since 1953 government “pump priming” by spending on R&D for innovations has declined by 50%!!! No longer is even 1% of Gross Domestic Product spent on R&D.... When the spending and incentives, as well as the selected leaders, have as their #1 interest preserving the past – largely in areas where American productivity lags – why would anyone expect new job creation? [Adam Hartung, Forbes.com, Mar 25]
The SBIR/STTR Programs are a “Perfect Solution” to the “Perfect Storm” of Financial Challenges Facing SBIR and STTR Companies – and The U.S. Economy [Michael Squillante, Testimony in House, Mar 16] Squillante heads a company that has hauled in something like $200M SBIR and chairs the SBTC as an advocate for even more of the same. If that happens, as long as the federal agencies keep their complete autonomy with no incentive for economic return, such companies will get even more SBIR. Anyway, government subsidy as a spur to economic growth is way oversold by politicians and potential beneficiaries.
Freshman members of Congress, like Representative Bobby Schilling of Illinois, are already under pressure from all sides, Democrat and Republican. [New York Times, Mar 28] Of course, all beneficiaries love their handouts, waste is handouts to somebody else. SBIR beneficiaries so love theirs that they shamelessly clamor for more.
Just another political platform. the SBIR/STTR bill became a vehicle for other Senators to attach a host of amendments that addressed a range of interests including de-funding the healthcare reform bill; barring EPA's authority to regulate greenhouse gases (see the preceding item); and eliminating funding for the Corporation for Public Broadcasting/National Public Radio. A total of 88 amendments were introduced and considered on the floor, which delayed a final vote on the SBIR/SSTR bill as the Senate turned to voting on a three-week extension of the continuing resolution and then adjourning for a recess. [AAAS, Mar 23]
Tennessee's version of the subsidy game: dedicate $10 million for a research consortium that would recruit senior scientists to advance scientific discoveries into commercial applications and spur high-growth companies. [SSTI, Mar 16] If it's research, most scientists don't know the profit potential, only happy words that it must be good. They may also have trouble getting senior scientists to switch to commercialization.
House Republicans called an “emergency meeting” last week, suspending the usual procedures to rush an urgent piece of legislation to the floor. ... the lower end of the FM-radio dial. Republicans, in an urgent budget-cutting maneuver, were voting to cut off funding for National Public Radio. All $5 million of it — or one ten-thousandth of 1 percent of the federal budget. ... Five minutes after acting on this budgetary emergency, House Republicans voted to continue the war in Afghanistan — which costs about $10 billion. Per month. They then flew home for a vacation. [Dana Millbank, WaPo, Mar 19]
Public money, private secrets. Convergen LifeSciences led by a major campaign donor to Gov. Rick Perry has filed another lawsuit against Attorney General Greg Abbott over rulings that ordered the release of public records. The lawsuit filed Tuesday is the third that Convergen has filed since late January in state District Court in Travis County. The lawsuits involve requests by the Austin American-Statesman and The Dallas Morning News to obtain documents related to a $4.5 million state grant awarded to Convergen, which was created by David Nance. [Austin American Statesman, Mar 8, 11]
The Senate voted 95-5 to overhaul the U.S. patent system, raising industry hopes that the biggest changes to patent laws in almost 60 years could soon be enacted. The House plans to take up its own bill in coming weeks. [Wall Street Journal, Mar 9]
SBIR Insider Rick Shindell reports a deal in the works for renewing and enlarging SBIR. VCs get a piece of the pie, more set-aside money, higher max on awards and stricter limits on large awards, a triumph of politics over economics. More money for a favored political class and deficit reduction lectures for unfavored political classes (like unions and public radio).
Startup America 2011 tour will kick off in Research Triangle Park NC [with] administration officials such as Ronnie Chatterji of the Council of Economic Advisers and Esther Vassar of the Small Business Administration. As part of the initiative announced in January, administration officials plan to visit eight cities to hear from small business owners and entrepreneurs about regulations, lending, hiring and more [Alan Wolf, Raleigh News & Observer, Mar 3]
More lemonade. The Senate Small Biz Committee got up a panel of SBIR cheerleaders for a Feb 17 hearing. Even the NRC's Charles Wessner chimed in with a general cheer from his 2008 report without getting into details of anything like ROI. SBIR Insider excerpted some of Wessner's oral cheers: I could put up a list of 10 countries that have copied this program. ... brings in over a third new companies every year ... Almost 50% of the firms that get awards reach the market and those numbers are going up ... if you put more money in this program it will be used effectively ... And I would urge you with all my heart and all our expertise to reauthorize this program. The House is balking of re-authorization for politics of venture capitalist who want their companies to get a piece of the pie. Neither chamber wants to talk about the elephant in the middle of the room - where's the economic return? - because no one in the room has a vested interest. Wessner and the NRC had to negotiate the terms of its study with the stakeholders (who were putting up some of the money) and thus closed the door on an economic evaluation. Cheer for small business, drink the lemonade, and elect, elect, elect. And since the Tea Party can't cut any deficit by cutting this corporate welfare, it too will ignore the elephant. Eventually the Senate will pay off the VCs enough to get a compromise.
Shutdown. The adrenalin-charged Tea Party thinks that no government is better than a continuing government and threatens to stop funding altogether until they get their way. If they succeed, SBIR will suffer because the agencies will fund their core business first and social programs like SBIR later. Pain will NOT be equally distributed across all programs. Even the threat of shutdown will cause the agencies to hesitate on committing money to SBIR. So, if you are a big advocate of reforming government, call your Congresscritter to say "except for the program that benefits me!". You'll have lots of company, and those Tea Party heroes haven't yet faced their constituents who got benefits and services cut. Services sounds so easy to cut until you get the additional bill for $5000 that Medicare isn't paying anymore for grandmother's care.
Congress should focus on getting USA Inc. growing again. The key to growth, in turn, is higher productivity through investment in technology, infrastructure, and education. Higher labor productivity means more useful output for the same 60 minutes of work. It's the ultimate source of prosperity. [Mary Meeker and Peter Coy, Bloomberg Business Week, Feb 24] What if SBIR awards had to pass some serious smell test on their impact on productivity? How could any federal agency be persuaded to engage in such smell tests and objectives?
Yet a history of on-again, off-again economic reform and the rise of forces, including the military, that have resisted liberalization suggests the path to a competitive economy will be difficult. [Bloomberg Business Week, Feb 24] Another gloom piece about US misinvestment and/or SBIR? Egypt's Economy Needs to Change. It Won't.
Never enough free lunch. Too hard to understand and too slow, say small businesses about the grand Obama stimulus. Some 83% of small, closely held companies say that publicly traded companies got the bulk of stimulus benefits .... But, says SBA "Tens of thousands of small businesses benefit directly from billions of dollars in Recovery Act loans and federal contracts, as well as from targeted tax breaks," says Karen Mills, head of the SBA. ... At least four stimulus tax provisions targeting small companies have been extended under new laws and one popular lending program was revived five times. Government contracts under the stimulus were issued through the end of September. But many of those projects will roll out in years to come and then spur the need for follow-up projects. [Emily Maltby, Wall Street Journal, Feb 24] You have only to listen to SBIR companies plead higher awards and watch them beg for more and more awards to realize how hooked they are on the free lunch.
It sounded great at the time The Massachusetts Life Sciences Center said today that more than half of the 26 companies that received tax incentives from the center in late 2009 failed to create all of the jobs they promised last year. The center, an independent state agency chartered to support the state's life sciences industry, said five companies have already agreed to return their awards and eight more could potentially be forced to do so because they haven't created at least 70 percent of the jobs they pledged. [Todd Wallack, Boston Globe, Feb 22] The politicians loved handing out the money and collecting the promises.
“When you start getting into the mode of picking winners and losers like this, it usually ends up being a no-win situation,’’ said David Terkla, an economics professor at the University of Massachusetts Boston. “It’s very unusual to find one firm that’s so key you’ve got to give them this kind of stuff.’’ [Casey Ross, Boston Globe, Feb 22]
Politicians have been carping about the more than $2 trillion in cash sitting idle in corporate coffers even as unemployment remains high. But much of that cash isn't in the U.S.; it is abroad. And it isn't likely to come back home unless U.S. tax laws change. [Jason Zweig, Wall Street Journal, Feb 19] And if the cash doesn't come hone, it must be invested abroad. Look for more Microsoft R&D centers in Europe.
Cut government, ... except. The Massachusetts biotech industry says an obscure provision in President Obama’s budget could deal it a “fatal blow’’ and cost the state untold numbers of jobs. A Bay State hospital says other proposed cuts would devastate its efforts to train pediatricians. And an array of research institutions fear what is coming next from a Republican budget proposal. [Boston Globe, Feb 19] More pain and screeching to come as the free lunch party closes down.
The Prez closed his eyes and tossed a FY12 budget over the fence to the velociraptors in the House. Dreams of funding for anti-free market stuff like doubling science budgets, TIP, and MEP with no proposed means of paying for them. Of course it's DOA and the opening gambit for the hawgrassle of painless deficit control.
As Wisconsin policy-makers ponder what it means to ensure the state is truly "open for business," their reading list should include a July 2010 report by the Ewing Marion Kauffman Foundation that highlights the importance of homegrown start-up companies to the American economy. Actually, I'll save them reading the full report with the world's briefest executive summary: Start-ups aren't everything when it comes to job growth. They're the only thing. [Tom Still, Milwaukee Journal Sentinel, Feb 12] Still firstname.lastname@example.org is president of the Wisconsin Technology Council and the Wisconsin Innovation Network. Still's words make fine talk for political speeches but the devil is in the details of how any government subsidy is run. Government is particularly weak at forecasting winners from seed (or any other) investment and too often imposes (often self-serving) criteria that don't serve the goal of maximizing economic rewards to society. Try estimating the ROI to the economy, for example, of the SBIR disbursed by the DOD which is half of all SBIR.
Texas competition. Citing the need to ensure a competitive edge in the weak economic climate, Texas Gov. Rick Perry is asking lawmakers to continue investing in the state's economic development tools by providing an additional $15 million for the Texas Emerging Technology Fund (ETF) and retaining funding for the Texas Enterprise Fund in the coming biennium. The governor also is proposing $50 million for science, technology, engineering and mathematics (STEM) scholarships and $32 million to increase STEM academies. [SSTI, Feb 11] But it has been targeted to be cut by as much as 85 percent in the Texas House’s first official draft of the state budget. [Dallas Business Journal, Jan 21] By mid-October , the fund had distributed $300 million to early-stage companies and university research projects. It has been an economic development tool that made Gov. Rick Perry proud. [Christopher Calnan, ABJ Entrepreneur, Dec 30, 10] Everybody loves an government emerging technology investment fund, until they start looking for a return. Calnan's piece did not mention any evaluation. And state legislators who have to appropriate money from tax receipts can soon lose patience with open-end promises of great things. Plus political intervention as recent reports that [the governor] disregarded the established grant approval process to funnel money to a campaign contributor’s startup [Austin Business Journal, Oct 22, 2010]. If the US Congress had to appropriate SBIR money annually, SBIR might be a memory by now or a blatant pay-to-play scheme.
Every program is critical, and locally profitable. The Airborne Laser is the pursuit of a military Holy Grail—a workable ray gun. But there may be only one thing harder than trying to perfect it: Trying to kill it. ... projects that have the backing of politicians, defense contractors and localities that depend on military jobs. ...Boeing's program director, says new possibilities for "directed energy weapons" are beginning to emerge. And he suggests that an Airborne Laser-like aircraft could handle new missions: attacking ground targets, for instance, or shooting down hostile drones. [also] believes this new area of research enjoys more bipartisan support than 10 or 15 years ago. [Nathan Hodge, Wall Street Journal, Feb 11] Democracy loves home cooking.
Two small businesses accused of operating as fronts for a large company have been dropped from a $3 billion Department of Homeland Security contracting program. ... EG Solutions and MultimaxArray Firstsource have received almost 900 orders worth more than $270 million through First Source, a program that was intended to boost small technology companies by setting aside federal contracting work .... enforcement efforts follow a Washington Post investigation of Alaska Native Corporations, [Robert O'Harrow Jr, Washington Post, Feb 11]
Subsidies distort economics. The story of ethanol in the United States proves that policies undertaken to nurture or protect an industry can just as easily undermine it. ... What we got instead is an industry reviled by economists, environmentalists and consumers for its reliance on the pampering embrace of government protectors, a fact only underscored by the ethanol industry's recent political triumphs in Washington. The spoils of those victories -- carefully erected mandates, tariffs and tax credits -- can actually distort the market for alternative fuels. [Eric Wieffering, Minneapolis Star Tribune, Feb 10] The good news about the SBIR subsidies is that they are too small to make much economic difference, especially when most of the money goes to supporting government agency stuff.
Russia's President has hopes for a new tech corridor near Moscow, but can the country overcome corruption, lack of innovation, and a slow-moving state sector? .... The bottom line: Medvedev is on a charm offensive, trying to persuade Western companies to invest in Russia despite its problems with corruption. [Lyubov Pronina, Bloomberg Business Week, Feb 3] And how much should be expected from SBIR funded by DOD and NASA? Oh sure, they all claim to be innovative. But where's the proof of making a noticeable difference in the economy beyond political platitudes?
Court Rules Scientist Had Duty. The U.S. Court of Appeals upheld a lower court dismissal of a million-dollar defamation law suit against a former Cornell plant scientist by a post-doc in his lab. ... a paper in Cell in 2003 and was subsequently retracted by all the authors except for the post-doc. The post-doc claimed in the law suit that the retraction and the allegations associated with it had ruined her career. [The court] ruled that since some of the research was funded by the federal government, the Cornell scientist "was required to inform the pertinent agencies of suspicions of scientific misconduct... In making his statements to ... NIH and NSF, [the scientist] was acting in accordance with legal duty." But the court went further, stating that "even had there been no federal reporting regulations, [the scientist] would have had a moral obligation to inform NIH of the possible fabrication of the data...." Although no misconduct has been found in the case, no researcher has been able to reproduce the results reported by the Cornell scientists in their published paper. [AAAS, Feb 9]
Programs that fail to make a difference like many of those that train workers for new jobs — endure indefinitely. Often, policy makers don’t even know which work and which don’t, because rigorous evaluation is rare in government. And competition, which punishes laggards in the private sector, is typically absent in the public sector. .... “If we just keep funding social programs the way we have been,” Mr. Baron says, “there’s not a lot of reason to think we’ll have much success.” [David Leonhardt, New York Times, Feb 9] Jon Baron is president of the Coalition for Evidence-Based Policy in Washington, and was the head of DOD's SBIR program in the Clinton administration where he consistently advocated for SBIR commercialization and evaluation. He and Assistant Secretary Paul Kaminski were moving DOD glacially in their direction until they both soon found more receptive green pastures. Unfortunately for Jon's efforts, beneficiaries of politically inspired federal programs like SBIR don't want honest evaluation.
Job-killing regulation Presumably, we could generate a lot of jobs by getting rid of all regulations and working for $2 an hour in dangerous and fetid working conditions in cities whose air could hardly be breathed and spewing out products that one in 10 consumers might die from. --- Robert Reich
When abstract meets detail. Divisions within the GOP over how much and how quickly to cut spending are roiling the party at a time when House Republican leaders are struggling to keep their agenda on track. [WSJ, Feb 10]
nearly all forms of energy development here in the U.S. are subsidized by the federal government, from oil and coal to nuclear, wind, solar and biofuels. These subsidies often go to research and companies that can survive without them..... one of Commerce's main functions is delivering corporate welfare to American firms that can compete without it. My proposal would scale back the Commerce Department's spending by 54% and eliminate corporate welfare..... [Rand Paul, Feb 7]
America’s confusing approvals process deters upstart medical-technology firms, since they typically lack the deep pockets and army of experts required to navigate it. And for a device to succeed in America it must be blessed not just by the FDA but also by the bureaucrats who oversee Medicare and Medicaid, the two huge government health-care schemes. Obtaining that blessing can take years. [The Economist, Jan 22]
Colorado's Bioscience Discovery Evaluation Grant Program has created 598 jobs in the state, with payroll exceeding $44 million, according to the Colorado BioScience Association and the Colorado Office of Economic Development and International Trade. Appropriated funding to date for the program has totaled $14 million .. [payroll plus follow-on investment totaled] 8.3 times the state's funding, Baumunk said. [Denver Post, Feb 2, 11]
The Obama administration launched a consolidated effort to spur new start-up businesses Monday, part of the White House's campaign to emphasize ... propose permanent elimination of capital gains taxes on investments by small business. Congress passed a temporary version of that provision last year. The SBA also will redirect $2 billion in small business assistance and specifically target startup firms in underserved communities. And the Commerce Department will expand a program that helps market clean technologies. .... The office of House Speaker John Boehner was dismissive of the new launch. [Jin Kuhnennen, AP, Jan 31] Political skepticism is probably warranted.
[Obama's] overarching case was also nuanced. "Our free-enterprise system is what drives innovation," he said. "But because it's not always profitable for companies to invest in basic research, throughout our history, our government has provided cutting-edge scientists and inventors with the support that they need." In other words, without smart and active government, China will leave us in the dust. This speaks to the paradox of Mr. Innovation operating in a very old tradition. When they want to look modern and moderate, progressive political parties always talk about technology. [EJ Dionne, Washington Post, Jan 27] One trouble is that, except for basic research, the government has at best a mixed story on success of S&T support programs as they sound better than they produce. Government knows how to develop technology it needs for government functions, but has all the wrong incentives for private development.
Japan's rapidly aging population and skyrocketing social-security costs have caused its legions of baby boomers, who like in the U.S. have already begun to retire, to become alarmed about the size of their potential pension payouts. The outlook is bleak: Japan's Government Pension Investment Fund, the largest in the world with assets totaling 123 trillion yen, is selling a record four trillion yen of assets by the end of March to free up funds for payouts. By the year 2055, 40% of all Japanese are expected to be over 65 years old. [Mariko Sanchanta and Atsoko Fukasi, Wall Street Journal, Jan 20]
Here's a sweet deal. A company can put up a $55 million solar factory in Oregon for just $13 million. Except that you, the taxpayer, get to provide the $42 million difference in tax breaks and loans, while private investors pocket the returns. Critics say SoloPower (San Jose, CA; no SBIR) startup, is getting that deal in Wilsonville as state, county and city governments support a solar plant to the tune of more than $129,000 a job. Oregon outbid other states for the plant, which will employ 170 during its first phase making thin-film solar panels in a leased warehouse. [Richard Reid, The Oregonian, Jan 20, 11] Public investment for private returns as long as the federal solar subsidy continues. But at some point in the deficit-reduction future, the solar subsidy has to disappear. Who will then keep the factory going after the private investors bail? Who cares now? The politicians get their moment in the light and move on to other sound bites.
More temporary SBIR extension, SBIR Insider reports that the new House SB Committee chair proposes a continuing resolution to keep SBIR/STTR running until May 31, 2011.
NIST SBIR alert from SBIR Insider: NIST released an
amendment to their SBIR solicitation that states: "Offers must
acknowledge receipt of this amendment prior to the hour and date
specified in the solicitation." NIST offers a few different ways
for you to acknowledge that you have read the amendment. NIST cautions
that without your acknowledgement, your proposal could be
rejected. The changes have to do with things like "protection of
human subjects." You should download the 5 page PDF from FedBizOpps at:
Securities regulators accused a manager at Seattle Genetics of leaking clinical trial results to a relative "who made more than $800,000 in illegal profits" using the insider information. [Kristi Heim, Seattle Times, Jan 22, 11]
Government to compete with private developers. The Obama administration has become so concerned about the slowing pace of new drugs coming out of the pharmaceutical industry that officials have decided to start a billion-dollar government drug development center to help create medicines. .... to be called the National Center for Advancing Translational Sciences, is akin to that of a home seller who spruces up properties to attract buyers in a down market. In this case the center will do as much research as it needs to do so that it can attract drug company investment. [Gardiner Harris, New York Times, Jan 23] A regularly recurring Democrat dream and Republican nightmare. Anyway, government's track record in commercial development is poor for a variety of reasons. For one, politics prevents long range thinking. It's also not the time for grandiose plans for new money, Republicans in the House have promised to cut the kind of discretionary domestic spending that supports the health institutes
Got enough USG debt. in the business of acquiring foreign companies. I expect that China's acquisitions will at least double in the next five years, and perhaps quadruple by 2020. ... acquiring foreign companies that possess one or more of the following characteristics: rich holdings of natural resources, high-technology or emergent technologies, and financial know-how and close connections with other financial institutions. [Charles Wolf, Wall Street Journal, Jan 24] All those US dollars have to be invested somewhere. But don't worry about getting bought out if your main business is tapping into government subsidies and handouts.
SBIR slowdown. The hotshot newly empowered Republican Study Group budget cutters want to slice off a ton of federal workers [over the next decade by firing 15 percent of the federal workforce] as part of government shrinkage. One certain result would be a big slice in people working SBIR - already a low priority program in the agencies. But the ugly truth is that government has to cut a ton of stuff to get down to sensible finance without raising any taxes. But it's still the delicious sound bite time before actual voting beneficiaries start to feel the pain. For now, they all sound like Reagan in 1981.
James Q. Wilson, America's preeminent social scientist, has noted that until relatively recently, "politics was about only a few things; today, it is about nearly everything." .... The idea that America's problem of governance is one of inadequate resources misses this lesson of the last half-century: No amount of resources can prevent government from performing poorly when it tries to perform too many tasks, or particular tasks for which it is inherently unsuited. [George Will, Washington Post, Jan 20] Is the government inherently well suited to foster innovation with subsidies to private companies? Just ask the beneficiaries if they would like more free money.
Financial turmoil. SBIR Insider notes that our entire country is running on a short term CR that expires March 4, 2011. We also have the debt ceiling vote coming up soon and failure to reach agreement on either of these issues could result in a shutdown of most of the government (including stop work orders to awardees). That means that SBIR will at best get a Continuing Resolution for even its existence and that awardees and selectees have a risk of stoppage. The House Republicans, charged with virtue, will take an axe to money until they discover that they cannot run the government from the House and will have to compromise.
several bills as part of the "Back to Work NJ" economic development and jobs plan proposed by Democratic legislative leaders. Among the measures approved is The New Jersey Angel Investor Tax Credit Act (S.2454) providing incentives to taxpayers who invest in emerging technology companies [SSTI, Jan 12] Tax credits spoil the conservative mantra of flatter simpler taxes but hand out money without that evil "deficit spending" and expect the voters to be too dumb to see the dodge.
Tax relief is for everybody. Republican lawmakers have nixed GOP Gov. Scott Walker's plan to give tax breaks to small businesses and replaced it with a measure that would cut taxes for businesses of any size that create jobs. [Milwaukee Journal Sentinel, Jan 12] An interesting view that questions small biz myth of job creation machine.
Golden Fleece Lives Again. In an online video employing contemporary technology to follow in the footsteps of the late Senator William Proxmire's (D-WI) famous "golden fleece" awards, Rep. Adrian Smith (R-NE) has launched a "You Cut Citizen Review" asking viewers "to identify wasteful spending that should be cut and begin to hold agencies accountable for how they are spending your money." Rep. Smith's first target is [NSF], and he provides a helpful link to NSF's award search page and suggests keywords such as "culture," "media," "games," and "stimulus" that viewers might use to identify and report "wasteful" grants. An article in USA Today compares Smith's exercise with past congressional attempts to ridicule NSF grants on the basis of incomplete information. [SSTI, Dec 8, 10] Out of 535 wannabe presidents, there's always at least one with the bright idea of cutting odd-sounding research authorized and appropriated by Congress. Rep Smith's main complaint might be that Nebraska isn't getting any of the fleece.
Spend it, they will come. A $25 million fund providing grants for tech commercialization, matching funds for research, and funding to attract "star" researchers to Virginia's universities is a key component of Gov. Bob McDonnell's $54 million Opportunity at Work agenda presented to lawmakers as part of his amendments to the 2010-12 budget. The governor's budget also includes $5 million for a refundable R&D tax credit [SSTI, Jan 5] That Gov has a lot of other spend (invest, of course) and borrow plans that fly in the face of the shrink-government conservative fad.
"Policies that pick winners and losers through mandates, subsidies or penalties can have a perverse effect of actually stifling innovation," said [Exxon CEO] Rex Tillerson. [Austin American Statesman, Jan 7] Forget it, Rex, the politicians cannot resist doing something visible about every problem. They will make whatever assumptions they have to in justifying pandering to constituent interests.
States grope for ROI. The State of Wisconsin Investment Board will commit $80 million to top-performing venture capital funds on the East and West coasts, a move that experts believe could bolster the chances for high-growth companies here to raise larger pools of money. It is the first time the $81.9 billion public pension fund has had the opportunity to invest with the top venture capital pools, which are willing to take public funds' money because the weak economy has made it more difficult for the funds to lure private investors. ... The board in 2000 committed $185 million to a "Wisconsin Private Equity" program that invested in venture capital funds either based in Wisconsin or willing to open offices here. SWIB still has $95 million invested in that program, Hearing said. [Kathleen Gallagher, Milwaukee Journal Sentinel, Jan 7]
Gov. Scott Walker is proceeding with a campaign promise of passing a tax cut for small businesses but in the process substantially reducing the size of businesses that would be able to claim it. Walker and aides Wednesday released details of the draft legislation for the first time, saying that businesses with gross sales of less than $500,000 a year and an income tax liability could qualify for the proposed tax credit. [Milwaukee Journal Sentinel, Jan 5] A hailstorm of comments note that most companies that small don't usually pay business tax anyway. But a new Republican has to do it to keep faith regardless of the actual economic impact on hiring or deficits. A larger version of the same scheme will be pushed by Wisconsin's delegation in Washington: cut taxes first and worry about the impact after the next election.
Another magic solution. [the America Competes Act] overhauls the way the federal government supports private-sector research and development, and one of the main ways the government hopes to support R&D is with prizes. Lots of prizes. ... Open-source innovation helps Washington break down its own research silos. Agencies such as NASA have their own scientists to solve problems; prizes let everyone from academics to hobbyists bring their expertise to bear. ... In 2009, the Congressional Research Service, the research arm of Congress, published a thorough survey of government prizes and their efficacy. [Annie Lowry, Washington Post, Jan 2] Actually, SBIR had the potential for opening agency innovation until at Day One the agencies re-captured the money for their R&D silos.