TrumpPence and Entrepreneurship (Blog Post)

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© edegan.com, 2016

Republican presidential candidate Donald Trump has remained quiet on entrepreneurship and innovation. Instead, he has assured voters that his success as a businessman would allow him to foster economic growth while president.

Trump and Pence's economic plan, released September 26, does not include the words “entrepreneurship” or “innovation.” The plan does claim that the proposed business tax cuts and reduction in regulations will help small businesses. Despite analysis that Trump's policy proposal would add over $5 trillion dollars to America's economic debt, his business record seems to give his supporters faith in his economic plan.

Is Trump Supportive of Entrepreneurship?

Without a stated policy for entrepreneurship of any kind, voters may turn to an examination of Trump's past with small businesses and his current "working man" rhetoric.

A USA Today report from June of this year pointed out that while Donald Trump often portrays himself as a “savior of the working class,” he has been involved in over 3,500 lawsuits. A vast majority of these were filed by small business owners, who say Trump or his companies have refused to pay them. His detractors suggest that Trump prefers forcing the small businesses into court where his legal team drags on the proceedings indefinitely.

Trump claims to sympathize with small business owners, citing the small business loan of $1 million he received from his father to start his $10 billion empire. In actuality, records show that the loan was closer to $14 million, and Trump's claims of a $10 billion empire remain dubious. Forbes puts his net worth at $3.7b.

Moreover, Trump's claims of business success and acumen are themselves questionable. An Associated Press analysis reveals that Trump's net worth has grown 300% since 1987. Had he invested in the S&P 500, his net worth would have grown 1,336%, to an estimated $13b. Not only did he under-perform the market, but fellow billionaires Warren Buffet and Bill Gates grew their fortunes 10 to 20 times faster.

Finally, Trump's advisors claimed him to be a "genius" when it comes to tax codes after it was revealed that he could have avoided paying taxes for 18 years, yet his current tax plan may increase taxes on the average small business.

In conclusion, it is hard to make an argument from past and proposed actions that Trump is supportive of entrepreneurship and small business.

Pence’s Record on Entrepreneurship

VP pick Indiana Governor Mike Pence brings something to the ticket on entrepreneurship and innovation policy. During his time in the U.S. Senate, he voted in favor of H.R.1249 - Leahy-Smith America Invents Act, which created a reserve fund for the U.S. Patent Office, lowered the patent application barriers for independent inventors and provided pro bono patent lawyers for small businesses. He also voted against H.R.5297 - Small Business Jobs Act of 2010, which established the Small Business Lending Fund within the Department of Treasury. Additionally, Pence increased the funding for the Small Business Administration to loan to small businesses and established the Small Business Credit Initiative.

Just a day before being announced as Trump’s running mate, Pence introduced several policy proposals in Indiana and an executive order focused on entrepreneurship. These proposals represent the bulk of potential known entrepreneurship policy from a Trump-Pence administration.

Pence promised that these policies are the start of a $10 billion investment in entrepreneurship in Indiana over the next 10 years. He proposed that the Indiana Public Retirement System invest $500 million in fast-growing, Indiana-based companies. Further, Pence called for a $300 million be invested towards the 21Fund, which provides capital and grants to growing companies. Beyond that he is seeking a $100 million investment toward partnerships with higher education and research institutions that would educate and support entrepreneurs. Finally, the Governor wants to expand the current tax-credit program on Indiana-based venture capital to out-of-state investors interested in investing in Indiana-based startups.

Is Pence’s Plan Good for Indiana and the United States?

Over the past 5 years, venture capital investment in Indiana has averaged $45 million a year. Pence’s proposed investment of an additional $100 million per year would therefore almost certainly damage the state’s entrepreneurship ecosystem. While promoting venture capital investment from pension and government-sponsored funds may seem like a good idea, the scale of the intervention must be appropriate. Even then, it is critical that this money is invested competitively, with rigorous inspection of potential investment targets by knowledgeable venture capitalists. Too often government-backed funds only benefit knowledgeable insiders leaving potentially high-growth businesses, and their states, worse off.

Right after Pence made this statement, Indiana state officials started walking it back, insisting that the $100 million a year investment was a target rather than Pence's mandate, and that the state pension fund would not be forced to invest in additional Indianan start-ups. Such a dramatic increase in yearly investment would likely flood the market, causing bad investments and negative returns. In 2015, Indiana was ranked the 32nd U.S. state in terms of venture capital. There may be a few more successful start-up deals to be made in Indiana, but in all likelihood Pence's plan would lead to an almost 2% loss to Indiana's pension funds, wiping out wealth for teachers, police officers, and other state employees.

Pence’s actions in the past have also arguably damaged the entrepreneurship ecosystem in Indiana. In 2003, Pence sponsored a controversial amendment to a bill which would make it harder for small businesses to access healthcare, and his passing of the 2015 Religious Freedom and Restoration Act caused AngiesList, Yelp, Apple, and Salesforce to move business out of the state in protest.

What would a Trump|Pence Presidency Mean for Entrepreneurship?

Between the business record of Trump and the policy record of Governor Pence, it is hard to tell the candidate's visions for their entrepreneurial policy. Hopefully as the campaign continues both candidates will flesh out their policy targets for and articulate substantive policy proposals.