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‘Startup America’ Will Have a Bad Ending

Is Obama's latest economic initiative boon or boondoggle?

Jay Schalin


May 28, 2011 - 12:00 am
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But despite such hopeful details, Startup America’s total negatives outweigh the positive. Perhaps the biggest problem of all is the program’s potential for crony capitalism. Corporate charity often accompanies questionable quid pro quo agreements between private firms and government: in one particularly blatant example, in 2008, General Electric awarded $11 million in grants to schools in New York to Congressman Charles Rangel’s district, shortly after Rangel — the powerful head of the Ways and Means Committee — reversed his opposition to a tax shelter that greatly benefited GE. (Rangel has since been censured for other pay-to-play schemes.)

Major corporations are rushing to sign up as program “partners,” including IBM, Ernst & Young, and Intel. Firms have already pledged over $800 million in services, expertise, and capital to the campaign. Given the comments by the aforementioned unnamed White House staffer, it is doubtful that altruism alone accounts for their generosity.

With only $2.8 billion in mixed public-private funding to date, the program may look fairly insignificant now. But it has a great deal of potential for making economic mischief: the waste of taxpayers’ money, the interruption of natural market forces needed to actually restore prosperity, greater government control, and corruption. Let’s hope Startup America doesn’t do for entrepreneurship what HUD did for urban communities — or what Fannie Mae and Freddie Mac did for the housing industry.

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The author is Senior Writer at the J.W. Pope Center for Higher Education Policy.
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