Jon Stewart Proposes an Entrepreneurial Policy. Don\'t Laugh.

The Daily Show

Jon Stewart said something provocative about entrepreneurship on The Daily Show a few weeks back - and it involved only a little cursing. The occasion was the Democratic National Convention, and while interviewing the former Obama economic adviser Austan Goolsbee, the host had this to say about the conservative talking point that taxes discourage “job creators” from taking big risks by pinching the rewards:

What we need to do in this country is make it a softer cushion for failure. Because what they say is the job creators need more ta x cuts and they need a bigger payoff on the risk that they take. … But what about the risk of, you're afraid to leave your job and be an entrepreneur because that's where your health insurance is? … Why aren't we able to sell this idea that you don't have to amplify the payoff of risk to gain success in this country, you need to soften the damage of risk?

Mr. Stewart says this at the beginning of the third part of the interview, which is only available online. (Warning: some profanity is involved.)

The Agenda has often wondered if decoupling health insurance from employment might encourage entrepreneurship. But Mr. Stewart is pushing a bigger idea here of a wide safety net for failure, and an associated trade-off between diminished risks and a diminished reward (presumably reduced by the higher taxes necessary to subsidize those risks). And perhaps one reason nobody has been able to sell that idea is because we 've never heard anyone advance it in the public square before.

Mr. Goolsbee, for his part, agreed on the narrower point about insurance. “The data do not support the view that cutting taxes a ton for high-income people leads to lots of jobs for everybody else,” he said. “The data back up your idea that not being able to have health insurance, not being able to have social insurance in general - that Social Security's going to be there to support your retirement; that when you retire, there's Medicare that's going to cover your medical expenses - lead people to say, ‘I don't want to take a risk, I don't want to go start my own company, because I've got to lock away some money [for] when I retire.'” But he shied away from Mr. Stewart's broader point. “That is a deep question,” he told Mr. Stewart, “and I don't totally know.”

As Mr. Stewart might say, the guy with the goofy name is right! It is a deep question. And for a country where civic leaders speak so enthusiastically and incessantly about nurturing entrepreneurship and innovation, it raises practical and philosophical issues about just how far we ought to go to do so, and at what cost. We'd like to know what you think.

First of all, what kind of risks could be mitigated or socialized with a failure cushion (I picture it brightly colored, and embroidered with comforting thoughts like, “Well, at least you tried” or “Better luck next time!”)? Mr. Stewart mentioned the risk of losing one's health insurance, which could be ameliorated by the new health care law, should it succeed in making affordable health insurance broadly available to people who cannot get insurance at work. It's possible, too, that crowdfunding may allow entrepreneurs to start businesses without putting their life's savings - or their homes - in jeopardy. What else do job creators put on the line when they open up shop, and how might the danger be lessened?

But even if we cou ld socialize the risks of innovation and entrepreneurship, as a practical matter, should we? Most businesses fail now, and that is with barriers in place that discourage starting new businesses. If those barriers were lowered, would the rate of failure grow higher, making the cost of success more expensive? Would the social benefits of success - jobs and spending in the economy - offset those higher costs?

Finally, suppose we do socialize these risks, in exchange for a somewhat smaller payoff: Would entrepreneurs still be interested in pursuing their ventures?