Chairman Erik Paulsen Delivers Opening Statement on “Innovation, Entrepreneurship, and Barriers to Capital Access”
Chairman Erik Paulsen delivered the opening statement for the Joint Economic Committee's Wednesday hearing on “Innovation, Entrepreneurship, and Barriers to Capital Access” The remarks as prepared for delivery appear below:
I call this hearing to order.
The United States has fallen to 11th place in the 2018 Bloomberg Innovation Index and, one thing is clear: Our job as policymakers is to figure out how to find the right mix of policies to spur innovation along.
After all, economists agree that innovation is critical to growth and prosperity, and with the headway we have made since passage of the Tax Cuts and Jobs Act, this momentum must continue.
Innovators start their work from a difficult place; after all, great ideas don’t appear fully formed. They take research, development, and testing. Innovation is just as likely to happen in a suburban garage as it is in a corporate lab.
That’s because people of all walks of life can come up with the next big thing.
Are we advocating for the best policies to assist that? The Joint Economic Committee has held two previous hearings on this topic.
Witness testimony, combined with analysis by our staff of economists makes clear that too many barriers stand in the way of innovators and the life-improving ideas they have to offer.
Today’s hearing is about “Innovation, Entrepreneurship, and Barriers to Capital Access,” and how we can ensure innovators have access to the financial resources they need to succeed.
Nealry 70 percent of start-up businesses received less financing than they applied for. Nearly 28 percent of start-up businesses were not approved for any financing at all.
Innovators know that if an idea is entirely new but shows promise, the first challenge is to finance its development.
As such, each innovator has to not only create something entirely new, but also fund the work involved by means that require more effort and persuasion than simply applying for a commercial bank loan.
Access to capital is one of the most challenging parts of starting a new business, especially in the tech sector where companies are at the forefront of new technologies and are developing products and services for which there is no track record.
The risks are high, and subsequently, it’s difficult to raise money from investors.
For there to be progress, we need to remove obstacles to raising seed capital.
Take for example a company going public via an IPO has long offered real advantages.
Overregulation, however, has driven down the number of IPOs, which deprives the entrepreneurial ecosystem of capital access.
We should take a second look and modernize this system so we remain competitive.
We’ve already taken major steps to help. The Tax Cuts and Jobs Act included several provisions that may be helpful in expanding capital access.
As my friend and colleague on the Ways and Means Committee Chairman Brady embarks on Tax Reform 2.0, we must take an innovation friendly approach that increases incentives to invest in new companies and technologies.
Yet government itself is not and can never be the prime mover in the world of innovation.
Washington shouldn’t be subsidizing particular companies or activities in the hopes of winning big.
Picking winners and losers goes against America’s entrepreneurial spirit and undermines the process by which our strongest ideas are honed and improved.
Today, I look forward to hearing from our witnesses and my colleagues on how we can reduce the barriers and empowering those with big ideas to make even bigger strides.
We are facing fierce competition. In 2017, one third of the world’s IPOs happened in China. Domestic IPOs today total merely half of what they were 20 years ago.
I’m hopeful that our work today can help get us not only back into the top 10 innovative economies in the world, but to make us number overall.
I now yield to Ranking Member Senator Heinrich for his opening statement not to exceed five minutes.
