LINDA WERTHEIMER, host: With the nation's unemployment rate edging up to 9.2 percent, finding the most effective and efficient ways to create more jobs is a matter of much debate. In a recently published essay, political theorist William Galston points out that start-ups or new businesses have been the biggest net source of job creation in the last generation.
Galston was a policy adviser to former President Bill Clinton. He's now a senior fellow in governance studies at the Brookings Institution. He says the Obama administration and progressives in general should reject an FDR-style approach to job creation and start over, aiming to help new firms grow and succeed. He says that begins by asking...
WILLIAM GALSTON: What our policy recommendations would look like if we devised them from the ground up rather than the top down. Ask ourselves what sorts of tax policies, regulatory policies, social policies, financial institutions policies and human capital policies including education and immigration would be most conducive to that. Now, it doesn't follow that once we have a sensible answer to those questions that we'll want to go all the way down that road.
Because in fact, there are considerations and goals that may pull us in somewhat different directions.
WERTHEIMER: You suggest removing some of the regulation that affects businesses, but adversely affects very small businesses which are trying to get started.
GALSTON: Not all businesses are created equal. If you're just getting started, even a small straw may break your back. And we need, as we think about regulations and mandates, to take the distinction between the big entities in the private sector and the small just starting up fragile new shoots in the private sector more seriously than we do as one of the basic structural building blocks of our thinking about regulations, tax policy and mandates.
WERTHEIMER: So this bottom-up thinking, how practical do you think it really is? I mean, considering that Democrats and Republicans can't agree on the time of day these days.
GALSTON: The core of my argument is that in the current era of globalization, rapid technological change where everything we do is subject to the inexorable logic of productivity and international competition, if we don't have a much more robust stream of innovation and of business startups based on that innovation, we're going to be stuck in below-average growth, below-average job generation and diminished prospects for the next generation of Americans.
WERTHEIMER: Do you have any concerns that the last couple of times that the federal government really did try very hard to encourage economic growth and did help to create major expansions, that we got a couple of bad bubbles in there? The tech bubble, the housing bubble?
GALSTON: Yeah. In retrospect I think we're all nostalgic for the tech bubble.
Look, I don't have any magic formula to abolish the business cycle. I don't know of a single serious economist who believes that there's a set of policies that can prevent bubbles from forming. This is not a formula for abolishing bubbles. But it is a formula for restarting the growth that we need at the end of which, inevitably, or at the end of a cycle of which will be another bubble. So be it.
WERTHEIMER: Bill Galston is a former policy adviser to President Clinton. He's a senior fellow in governance studies at the Brookings Institution. Bill, thank you very much.
GALSTON: My pleasure, Linda.
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