Tiberi, Paulsen examine issues surrounding uneven economic recovery during hearing

The economy has not surged back from the recession, and a drawn-out recovery and meager growth rate have exacerbated the country’s many challenges, U.S. Rep. Pat Tiberi (R-OH) said on Wednesday during a Joint Economic Committee (JEC) hearing.

Tiberi, the chairman of the JEC, convened the hearing to focus on the decline of economic opportunity in the United States, and to gain insight into reasons behind the slow economic recovery that has left some areas of the country effectively still in a recession.

“In my home state of Ohio, we’ve made strides in encouraging businesses to come to our state and our unemployment rate has dropped at a steady pace over the past few years,” Tiberi said in his opening remarks. “However, that hasn’t been true for every part of the state. We can do better, especially for the communities where folks feel they are being left behind. In Ohio that is in counties in Appalachia and in areas surrounding urban centers of Ohio where the dynamics of the rural and urban poor couldn’t be more different.”

One of the key areas of weakness in the economic recovery has been private business investment, which is sensitive to tax policy and regulations, Tiberi said. “The economy requires faster rates of private investment than the existing regimes have permitted. Regulatory and tax reform will create more jobs and opportunity.”

A central aspect of economic function, Tiberi added, is economic dynamism, which is known as the rate at which the population starts new businesses, moves to new regions, or changes jobs and occupations.

“Many of our communities are hurting, and I believe that increased private investment, restoring economic dynamism and the resulting accelerated economic growth can help them recover,” Tiberi said.

U.S. Rep. Erik Paulsen (R-MN), a member of the JEC, noted that economic dynamism has been fading and that small businesses and startups have been the engine of the economy.

“We always like to talk about most of our jobs and economic growth comes from that sector,” Paulsen said. But he noted two time periods when startups increased: during the mid-1980s and in the early 2000s.

Paulsen asked witness John Lettieri, the cofounder and senior director for policy and strategy at the Economic Innovation Group, what from those two time periods would need to be reproduced to bring about a similar jump in startup activity. Lettieri said that major tax policy changes preceded both of those periods, although demographics also play a large role in supporting entrepreneurship.

Lettieri also praised Paulsen’s legislation, the Empowering Employees through Stock Ownership Act.

This initiative promotes employee ownership at startup companies by helping employees keep ownership interest and utilize all options offered to them when accepting a job at a startup company.

“I think your legislation on employee stock ownership is a great example of things that are not intentional barriers to entrepreneurship or to the health of new companies but are just in the background providing an advantage to larger incumbents and a disadvantage to the competition for talent among smaller private firms, which is particularity true for new firms,” Lettieri said.