Tax Cuts Are Not the Help Entrepreneurs Need to Grow the Economy
Lower marginal rates won't create opportunity in impoverished rural towns, but universal access to broadband would.
In the last month or so, we've seen a sweeping tax reduction proposal grab headlines, with some arguing that it's the best way to spur economic growth in the United States. But while pass-throughs and repatriation of offshore funds were filling talking heads' mouths, a few pieces of below-the-radar news signified a fundamentally different approach to spurring entrepreneurial growth in the U.S. that extends far beyond the coasts and metros. The first is about a state government stepping up to virtually connect all of its citizens, while the second points to the Trump administration's disinterest in physically connecting its most rural inhabitants. Both developments illustrate an opportunity to create a foundation for individual entrepreneurs to succeed while promoting a larger sense of connection within our country's economy.
Digital isolation withers small-town economies.
There has never been more content competing for our (increasingly) limited attention spans. As entrepreneurs in this environment, success comes with our ability to engage and connect with current and prospective customers across multiple channels and means of communication. It's not enough to be in the Yellow Pages. You need to be on social channels, your own web property and, perhaps most importantly, recognizable via search. Businesses need to be online to even begin playing the awareness, recognition and perception game across digital channels.
But according to the FCC, 34 million Americans lack broadband access today. As a country, the United States ranks 15th in broadband connectivity, behind countries such as South Korea and Canada, with at least 30 percent of people in states like Mississippi and Arkansas lacking broadband access.
While we can argue the merits of tax cuts to spur growth, broadband access is table stakes for today's businesses and, according to a federal court, no different than water or electricity as a utility. New York state has recognized the power of access for businesses large and small, rising to the challenge of bringing it to all of its residents through its "Broadband for All" program. The goal of this public/private partnership is to broadband access to everyone, everywhere in the state by 2018. That is an aggressive and lofty aspiration.
New York's efforts show how foundational improvements can foster a climate for entrepreneurial growth for underserved areas in the country, but the state's actions also point to a reality of today's business ecosystem. We live in a connected economy, and small town independent businesses cannot succeed long-term within only hyperlocal environments. Whether it's retaining Main Street customers or branching out to address a national or global market, digital connectivity is necessary for continued success.
Connect isolated entrepreneurs to world markets.
When the President rolled out his proposed budget in March, much was made of the increase spending on defense, border security and other hot-button items. One proposed program cut seemed relatively benign, but highlights how something like a government program can spur connectivity or completely shutter it for U.S. citizens. The Essential Air Service (EAS) program was begun in the late 1970's subsidize commercial flights to the smaller regional airports. Without a subsidy, commercial airlines simply wouldn't fly into places like the Shenandoah Valley in Virginia or Escanaba in Michigan.
The budget line item for this program? $175 million. To put that in perspective, the same budget called for an additional $52 billion in defense spending. Protecting the President and his family costs roughly $120 million, while this program serves 175 rural communities across the country (60 of them are in Alaska, which is completely dependent on the program).
Putting aside the disconnect between a populist president and a budget cut that disproportionately affects his supporters, axing the EAS would have been a symbolic gesture from the president. Aside from the jobs and businesses that are directly tied to the regional airports, providing a physical connection to the larger country and business community allows those in small towns to conduct business in a way they otherwise couldn't.
To compete in a global economy, entrepreneurs need the infrastructure -- broadband, airports, shippers, roads, ports and so on --to connect with everyone, everywhere. That's true in the virtual and physical sense as businesses evolve and scale. Building and preserving more ways to connect rural communities with the larger national economy will nurture more entrepreneurs contributing to their local economy while promoting economic growth throughout the country.Thanks to a bipartisan deal in Congress, federal spending legislation was passed that preserved the EAS at least until September. While many will (rightly) wage war against the FCC's net neutrality decisions, the impact of broader broadband access should not be forgotten, either. After all, Americans boast an entrepreneurial streak. More of them simply need the foundation and opportunity to use it.
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