The rate of new business creation is falling, thanks to overregulation, says Nobel laureate economist Edward Prescott of Arizona State University.
And that slide is pushing down productivity, he and UCLA economist Lee Ohanian write in
The Wall Street Journal. Productivity has dropped by more than 8 percent compared with its long-run trend since 2005.
The creation rate of new businesses and new plants by existing companies was approximately 30 percent lower in 2011 (the most recent year of data) than the annual average for the 1980s.
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"Virtually every state has suffered a drop in startups, which suggests that this is a national, and not a regional or state, problem," Prescott and Ohanian say.
Small business owners say economic policy is the problem.
"Surveys . . . show that entrepreneurs report being hamstrung by difficulties in finding skilled workers, by a complex tax code that penalizes small business, by regulations that raise the costs of doing business and by difficulties in obtaining financing," the duo writes.
The solution: immigration and tax reform for starters, they suggest. "Immigration reform that increases the pool of skilled workers and potential new entrepreneurs. Tax reform that reduces and equalizes marginal tax rates on capital income, including reducing the corporate income tax."
It's about "reducing the regulatory burden on all businesses."
Ken Langone, co-founder of Home Depot, agrees that the government has gone overboard on regulation, creating a "hostile" climate for businesses in general.
"We are in a period of intense and unreasonable regulation, and we're seeing the fruits of that environment," the investment banker tells
CNBC. "We have to accept the fact that what's going on today doesn't come without cost, and the cost is economic growth."
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