Monday, August 08, 2011

I'm from the government. I'm here to hurt

If there's one skill the government lacks, it's the skill to create jobs in the private sector. Yeah, sure, the government can create more government jobs. But that's the last thing we need. More burdens for taxpayers offering no visible benefit to the economy.

Five Ideas to Kick-Start Job Creation
Entrepreneurs don't want government money. They want the chance to invest their sweat equity

Now that the debt-ceiling gyrations are over, the Obama administration is "pivoting" to its biggest problem—jobs. Unemployment ticked down to 9.1% in July, but the real unemployment rate, including discouraged workers, is still 16.1%. The stock market is not pleased. Why? Because the president's calls for "patent reform" and an "infrastructure bank" won't move the needle. It's time to go big or be sent home.

Can we agree that throwing money at the problem doesn't work? The 2009-10 stimulus package wasted more than $800 billion. The Federal Reserve's frantic quantitative easing, QE1 and QE2, printed money and bought mortgage paper on the street, helping banks and financial institutions recapitalize, but it hardly created jobs—not lasting ones anyway. Sadly, the economy grew at a subpar 1.3% rate in the second quarter instead of the typical 5% rocket out of a recession. What's missing is not capital, it's opportunity.

As Otter famously said in "Animal House," this situation "absolutely requires a really futile and stupid gesture be done on somebody's part." Well, at least a gesture that might appear stupid and futile but in reality kick-starts whole new industries and massive job growth. And all it will take is the stroke of a pen. Here are some instant job creators:

• Free spectrum. AT&T is trying to buy T-Mobile to get hold of valuable spectrum for wireless. But there's loads of spectrum lying around that is not being used. Try this: Tune into channel 37 on your TV. Static? Bingo. Put this spectrum in the hands of entrepreneurs and you'll create a million new jobs, not to mention new devices and apps not thought possible in our bandwidth-starved world—phones that work in elevators and subways, remote auto and medical diagnostics, real-time ads on smart phones and other devices ("Hey, your friends ate here last week!"), and that's just in the first six months.

But how? Either allow spectrum to be sold by current owners, typically broadcasters inefficiently using this spectrum, or implement a "use it or lose" it rule. The Federal Communications Commission can declare that if a swath of spectrum is not being used for a real application, then they will open it up to the public, the same way that Wi-Fi is open to all—anyone can use it as long as they don't interfere with others. (AT&T and Verizon will fight this, but so what?)

This is also true of government-owned spectrum. If an entrepreneur can prove far greater potential usage, it should revert to the public. Chips are available today that can be tuned to virtually any new spectrum. Apps can be written in weeks. Venture capitalists and Wall Street would gladly provide access to capital. So what are we waiting for? Start making those "Free the Spectrum!" T-shirts.

• Disease diagnostics. Have the Department of Health and Human Services declare that Medicare will pay for any diagnostic test or device that can be proven to save money over five years—for example, detecting a cancer at Stage I when it's cheaper to treat versus at Stage IV, when it is expensive and often fatal. Some will prove worthy, others won't. But it's a self-correcting process—if a test or device doesn't save money, then reimbursements stop. That will help focus entrepreneurs' efforts, and the resulting innovation will both save money and create private-sector jobs.

• End the mail monopoly. The U.S. Postal Service, which posted a net loss of $3.1 billion in the third quarter alone (there is only so much junk mail and Hallmark cards to deliver anymore), is finally starting to rationalize small post offices, recently putting 4,000 of them on a list for possible closing. Accelerate this task by ending the USPS monopoly on first- and third-class mail. Entrepreneurs will jump into action. Online bill payment will become ubiquitous. UPS and FedEx and a host of new companies will create more productive forms of delivery. The Postal Service won't end, it will just slowly fade away.

• Frack this. The revolution in natural-gas extraction, driven by hydraulic fracturing, or "fracking" of America's huge shale deposits, has boosted shale gas to 25% of America's gas supplies from 1% in 2001. But environmentalists are pushing to close down this booming industry due to concerns over contamination of water supplies. Here's a solution: Declare all hydraulic fracturing legal with the caveat that drillers put up a bond equal to the potential cleanup cost of environmental damage. This will force large players to consolidate what is mostly a "wildcat" market. The big guys will be much more careful in their extraction techniques, knowing mistakes cause huge losses.

• Government platform. The hardest thing to do is interact with the government—the Department of Motor Vehicles being the most painful example. I have yet to see any government agency with an up-to-date user interface. But this is easy to change.

In the technology world, companies view themselves as platforms for others to build on, and they publish what they call application programming interfaces (APIs) so others can easily tap their ecosystem. All government agencies should be required to publish their own APIs by the end of the year. What will happen next is a sea of programmers will emerge to write iPhone apps and other code to integrate government functions into our everyday lives. And yes, this will eventually get rid of entire layers of inefficient government workers, but new companies nowhere near the Beltway will proliferate with virtual connections to the government.

• Rental society. Create a six-month foreclosure amnesty, i.e., initiate foreclosure proceedings on your underwater mortgage, and it doesn't show up on your permanent record. Foreclosure then becomes an individual's choice, not something mired in government red tape or stuck in a bank's back office. This would lead to millions of homes and condos hitting the market at fire-sale prices. This is exactly the price discovery that the finance sector both dreads and needs to move forward. Within weeks, we'd see the rise of Web-based rental agencies and real-estate auctions.

I understand the politics against all these opportunities and doubt any administration has the political will to enable so much change so quickly. But any one of these ideas, while a futile gesture on the surface, would sound like a starting gun for entrepreneurs and get them off to the races. They don't need money—they need somewhere to invest their sweat equity. And that's the only true job creator.

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