The Economic Innovation Group submitted the following comment on the proposed International Entrepreneur Rule with the Department of Homeland Security:
October 17, 2016
The Economic Innovation Group (EIG) is a bipartisan economic research and advocacy organization dedicated to fostering a more dynamic and entrepreneurial American economy. We appreciate DHS bringing attention to the crucial need for policies to foster entrepreneurship and welcome the opportunity to comment on the proposed International Entrepreneur Rule (DHS Docket No. USCIS-2015–0006).
Startups power the dynamism of the American economy. They introduce innovations, boost competition, advance productivity, and create jobs. As EIG’s work indicates, though, a number of trends point to a long-term decline in the dynamism of the American economy. This decline threatens the country’s capacity to generate prosperity and opportunity for its citizens, and it stems from a steady fall in the country’s new business formation rate. U.S. Census Bureau data show that over the past four decades, the share of startups in the economy has fallen by more than half. A flurry of recent research ties this decline to many of the major challenges facing the United States today: low productivity growth, torpid wage growth, and weakening competitive pressures to name just a few.
EIG therefore applauds the spirit behind DHS’s proposed International Entrepreneur Rule. A problem as deep-rooted and multifaceted as the decline in American entrepreneurship demands innovative policy solutions that tackle the challenge from all angles. Making it easier for entrepreneurs with proven business models and secured investor commitments to start and grow their companies here is the sort of meaningful low-hanging fruit that policymakers should embrace. However, executive action is no substitute for legislation and the policy certainty it can provide. Entrepreneurship is a risky business under any circumstance, and this rule only marginally reduces the status uncertainty would-be immigrant entrepreneurs face in the United States. The proposed rule nevertheless represents a step in the right direction, and we urge DHS to consider an additional criteria for parole in order to maximize the public benefit of the rule.
Recommendation pertaining to “Alternative Criteria for Parole Consideration”
We urge DHS to incorporate ways to encourage applicants to locate their companies in economically distressed communities. DHS could do this by relaxing certain criteria for parole if the business locates in a neighborhood or city particularly starved of startups and investment. Parole would then take a company’s broader economic development potential into consideration alongside its own growth potential. The rationale is compelling (new and innovative businesses have important spillover benefits for their communities) and would allow the Administration to achieve two related policy goals at once: increasing entrepreneurship at the national level while bolstering startup ecosystems in corners of the country that need it most. Incorporating such a place-based incentive into the rule would increase its likely future public benefit.
Startup activity in the United States is geographically unbalanced. For example, 78 percent of the country’s venture capital flows to California, Massachusetts, and New York alone. EIG’s own recent research found that, over the first five years of the 2010s recovery (2010 to 2014), 20 counties alone produced half of the net increase in business establishments nationwide, up from 64 counties over the first five years of the 2000s recovery and 125 counties in the 1990s. Fully three out of five U.S. counties saw more businesses close than open from 2010 to 2014, while the country’s most populous counties enjoyed their fastest job and business growth rates in a generation. In short, the crisis in U.S. entrepreneurship is severe and rooted mainly outside of the country’s most dynamic metropolitan hubs. This rulemaking presents an opportunity to seed underserved communities with the investment and entrepreneurial human capital they need to build an economy for the future.
In sum, the need for new entrepreneurs is most urgent in the nation’s second-tier cities, rural areas, and distressed urban communities. Adjusting parole criteria to encourage — but not mandate — entrepreneurs to launch their businesses in underserved communities will enhance the potential benefits of this rule without preventing would-be entrepreneurs from making the best location decision for their company.
For more information on the trends discussed here, please see:
John Lettieri, “America Without Entrepreneurs: The Consequences of Dwindling Startup Activity,” Testimony before the U.S. Senate Committee on Small Business and Entrepreneurship, June 2016.
Economic Innovation Group, “The New Map of Economic Growth and Recovery,” 2016.
Economic Innovation Group, “The 2016 Distressed Communities Index,” 2016.
