Last week, I was invited by the Obama administration to the White House. With me were Evan Williams of Twitter, Tony Hsieh of Zappos, the founders of Method, Blackboard CEO Michael Chasen, Jessica Jackley of Kiva.org, and many more young business leaders.
See the previous post, “Obama Administration Seeks Economic Advice From Young Entrepreneurs” for the recommendations I made to the Obama administration. Here’s some more on what was discussed on Friday.
Contrary to the opinion of those who believed I was invited only to then be coerced into letting the Obama administration win the Edison Award (we’re up against them in the “Lifestyle / Social Change” category), they had a much more constructive task in mind for us: to guide the administration on innovation, entrepreneurship and job creation.
In Washington, we met David Washington, Greg Nelson and Michael Strautmanis of Public Liason; Jason Furman Director of the National Economic Council; Macon Phillips and Katie Stanton of New Media; along with officials on the environment and domestic policy. The team stressed the main purpose of the summit: instead of just talking to big corporations, special interest lobbyists, and political pundits, they were actually interested to hear what 20 and 30-something entrepreneurs of 20 – 200 person companies had to say.
At the end of each introduction, we had the opportunity to ask questions. I took the liberty of breaking the ice with a question to the National Economic Council: “So if the US is a $14 trillion economy, and you run a $1 trillion deficit by printing money [more accurately selling T-bills and T-bonds], doesn’t that mean you’ve diluted the value of every dollar we save by 7% (1/14 = 7.1%)”.
His response was perhaps a little less than satisfying. In essence it was: “A trillion dollars isn’t that much. We have $40-50 trillion in unfunded liabilities for healthcare in social security over the coming decades, and that’s where the real problem is. So long as we can sell this debt off at 2.5% interest, it’s cheap money and maintainable. The real risk is not the inflation that you imply, but deflation. In a deflationary environment, the prices for everything drop, and consumer psychology changes. People think ‘Why buy now when I know the price will be less in 3 months, or 6 months, or a year from now?’ and that causes hoarding of capital and increased deflation.”
The last point is certainly plausible. As to the other point, deficit spending in general, and the stimulus package in particular, I must disagree. Borrowing “cheap money” for housing is part of what got us into the current recession. The Three Principles of Personal Finance apply to governments as much as individuals – and rule #1 says “spend less than you earn” (or take in via tax revenue).
I believe in a laissez faire supply-side economics – minimize or eliminate regulations, no corporate bailouts or subsidies for failing auto manufacturers – and leave people free to create, to innovate, to take risks, and reap the rewards when their work pays off, and lose their investment if it does not.
The good news is we have an administration who will listen. This trip to the White House was just the beginning of what I hope will be an open dialogue with the Obama administration. I’m not yet convinced that the government can operate on different principles than those that govern (or at least should govern) the financial behavior of individuals. My hope is that the philosophy behind Mint.com might just be able to make a difference. Want to help? Post your suggestions below.