The Party of Growth and Opportunity

by Derek Satya Khanna
Important as messaging is, the GOP must concentrate on pro-innovation policy.

Last year, after conducting a study on voters’ perceptions of the Republican party, respected pollster Kristen Soltis Anderson concluded: “There is a brand. . . . And it’s that we’re not in the 21st century.”

Facing daunting demographic trends and having lost the last two presidential elections, Republicans face a major choice on the future of the party. Many Republicans inside the Beltway have persuaded themselves that better campaigning and messaging are all that’s needed. They are wrong.

What’s needed today is not poll-tested messages to appeal to Hispanics, African Americans, or Asian Americans. Rather, we need modern, conservative policy prescriptions that can appeal to a wide array of ages and demographics.

The College Republican National Committee (CRNC) report on what went wrong in 2012 concluded that “young voters simply felt the GOP had nothing to offer.” But it wasn’t always so: The GOP is a party founded on big ideas. It is a party that grew to prominence on one very controversial idea — opposing slavery — and there may have been no more powerful special-interest group in the 19th century than slave owners.

Republican National Committee Chairman Reince Priebus has tried to rebrand the GOP as the party of “Growth and Opportunity.” But growth and opportunity come from innovation. That’s why the Republican party must become the Party of Innovation, with the policies to match.

We know how to grow the economy; we know where job creation comes from: It’s from new small businesses — true start-ups. Real job growth comes from new small businesses, not just any small business. From 1980 to 2005, businesses less than five years old accounted for all net new job creation in the United States, and in 22 of 29 years between 1977 and 2005, all net new job creation was due to businesses less than one year old.

Yet Washington is far more comfortable listening to the voices of existing industries, which, far from being job creators, are actually shedding a million jobs annually. Some established companies do innovate, but market incumbents typically favor regulations to protect their bottom lines and stifle the creative destruction that is a key ingredient of economic growth.

A party that is dedicated to free markets, to job creation, and to reinvigorating the U.S. economy is a serious and robust party that will win national elections. As I explained in my cover story in the June issue of The American Conservative:

Given the stakes — the future of the economy — a political party that is not serious about technology and innovation is a party that is not serious about economic growth and job creation. Thus far, the Republican Party is not serious about technology and innovation. Republicans talk about regulatory reform but in practice do little about it.

The GOP must lower the barriers to entry for small businesses by removing regulatory burdens when they are unnecessary or counterproductive. But embracing this agenda requires more than vague talking points about “regulatory reform.” Rather, it means confronting cronyism in our own midst and standing up against senseless occupational-licensing requirements. It means allowing companies like Uber to operate across the country, and reforming our copyright and patent laws so that they serve the purpose the Founders intended, to “promote the progress of the sciences and useful arts.”

Disruptive innovation takes place when a new market participant doesn’t just make marginal changes to performance in an industry; rather, its technology creates an entirely new market on the basis of accessibility and lower cost and thereby disrupts an existing market — in the way that Uber threatens urban taxi cartels.

Our elected officials have to be well versed in emerging technology in order to ensure that the regulatory environment allows for innovation to flourish. There is nothing endearing about an elected official’s displaying a lack of knowledge of technology, yet in recent memory that’s exactly what voters have seen — e.g., Senator Ted Stevens (R., Alaska) referring to the Internet as a “series of tubes.”

America has a long tradition of technological innovation. Our Founding Fathers were not Luddites — indeed, several of them were inventors in their own right. George Washington invented the threshing barn, Thomas Jefferson came up with the cipher wheel, Thomas Paine received a patent for an iron-bridge design, and Benjamin Franklin invented both the lightning rod and the bifocal lens.

The first step in making America once again a land of innovation requires a regulatory and legal climate that fosters “permissionless innovation.” An 18- to 25-year-old should be able to pull together his friends, code through the night, and launch a company that could become the next Facebook, Twitter, Instagram, or WhatsApp. Entrepreneurs shouldn’t have to hire a lobbyist in order to change laws or influence regulators. They should not have to anticipate a decade of administrative and court proceedings. They should not be wasting their start-up capital on lawyers to sort through thousands of pages of regulations or muddled case law.

As one participant in CRNC’s focus group of young aspiring entrepreneurs put it: “We should really try to find out, what barriers do people have towards being successful . . . and trying to improve the economy . . . and work on. . . reducing the obstacles.” Such an obvious and on-point observation epitomizes the mission statement of a forward-leaning government.

Congress should hold annual hearings on the status of innovation in the United States, and the GOP should invite the innovators who are developing the next big thing and the venture capitalists who are investing in where the economy is going and ask them:

What is working and what isn’t working within the legal and regulatory structures?
What innovations are being held back?
What technologies would you have launched or invested in if the law were different?

A party that is not serious about technology and innovation is a party that is not serious about job growth. And these issues affect young people in particular. If all politics is local, what is more local than property rights over your own phone (it’s currently a felony to unlock your smartphone so that you can use it on another carrier), your ability to access websites uncensored (the 2012 bills SOPA and PIPA would have censored the Internet in the name of copyright), or your ability to start a business in your garage without worrying about obstructive litigation?

In an October 2012 CIRCLE study, despite poor marks on the economy, Democrats “still held a 16-point advantage over the Republican Party among young voters on handling of the economy and jobs (chosen as the top issue by 37 percent of respondents).” But the CRNC report found that when policy questions were framed in terms of small-business growth, young people supported conservative policies. Some 67 percent of respondents in that survey said that “keeping taxes low on small businesses” would make it easier for young people to get jobs. Some 49 percent thought that “reducing regulations on small businesses” would make it easier for young people to get jobs.

Ask a young person about Uber, Bitcoin, “permissionless innovation,” copyright and patent reform, or SOPA/PIPA, and it may mean more to them than Social Security, Medicare, and Medicaid issues. Deficit reduction and entitlement reform are critical parts of the GOP platform, but they must be combined with a robust and credible innovation agenda.

Economic growth through innovation, paired with fiscal conservatism, will solve our deficit problems and balance the budget. But it will also provide good-paying jobs to millions of unemployed and underemployed, raise the standard of living of all Americans, and increase economic mobility.

If we want to create millions of new jobs, jobs that are better than the jobs lost during the recession, then we need to unleash the full entrepreneurial potential of our society — and Republicans should be spearheading that effort.

— Derek Satya Khanna, a former staffer in both the House and Senate, is a Yale Law fellow and part of the coalition that launched www.stopwatching.us. He can be reached at @DerekKhanna and Facebook.com/derekkhanna. 

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