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Week of February 12 - 18, 2007

The President’s Fiscal Year 2008 Budget

President Bush unveiled his Fiscal Year 2008 Budget plan last week and the top line numbers are eye-opening. Next year’s Federal budget is expected to top $2.9 trilllion. Revenues are expected to only reach $2.7 trillion, so a budget deficit of roughly $239 billion is expected to remain. Within these big numbers, there is other interesting news to report. We will continue to cover debates over the FY 2008 budget, but here are some early highlights:

• American Competitiveness Initiative (ACI): The President’s plan includes $365 million to improve student learning in science, math and technology.

• Commerce Department Programs: The Commerce Department’s overall budget will rise slightly from 2006 total outlays, but key agencies, such as the Manufacturing Extension Partnership, the Technology Administration, and the Economic Development Administration, are slated for budget cuts.

• Energy Research: The budget includes more than $1.5 billion for the Advanced Energy Initiative, a series of R&D programs in alternative fuels such as biofuels, hydrogen, clean coal, and solar. As part of the ACI, $4.4 billion will be provided to the Energy Department’s Office of Science.

• Health Care: In addition to the well-publicized proposal for a $15,000 health insurance tax credit, the President’s budget document also calls on Congress to support creation of Association Health Plans (AHPs) and expansion of Health Savings Accounts (HSAs).

• Small Business Administration (SBA): The SBA budget is a mix of program outlays and funds to guarantee business loans. Overall spending is set at $814 million, but much of this money ($350 million) is carried over from previous years.

Learn more about President Bush’s Fiscal Year 2008 budget proposal

Small Business and State Economic Growth

If you want to understand the economic growth patterns of a US state, take a close look at its rate of establishing new small firms. There is no other measure that is more closely correlated with changes in gross state product, state personal income, and state job growth. This finding comes from a new SBA Office of Advocacy research report that examines the linkages between small business birth and death rates and various economic outcomes. The other key finding is that small business birth and death rates have equal and opposite effects on states’ economic performance. In other words, a state’s economic growth will be faster when its firm establishment rate exceeds its firm death rate. The opposite is also the case: higher firms death rates are associated with negative economic performance. Based on these findings, the authors conclude that state efforts to promote small business start-ups and growth should have more positive effects than nearly any other policy options.

Download a copy of the US Small Business Administration Office of Advocacy report, Small Business and State Growth: An Econometric Investigation, by Donald Bruce, John A. Deskins, Brian C. Hill, and Jonathan C. Rork,

The Future of Biotech

A new study from BIO, the nation’s biotechnology association, examines the regional effects of the biotechnology industry. The research examines the economic impact of biosciences in 361 major metro statistical areas (MSAs). Nearly 200 MSAs specialize in at least one of the four primary bioscience sectors (drugs and pharmaceuticals; research, testing and medical labs; agricultural feedstock and chemicals; medical devices and equipment). Twenty-five MSAs have a biosciences employment that exceeds 10,000. Nationally, the average bioscience worker earns a wage of $65,775, far exceeding the national median wage of $39,003. Not surprisingly, the biggest hotspots for biotech happen to be located in the biggest US metro areas. The top five locations in terms of total biosciences employment are (in rank order): New York, Los Angeles, Philadelphia, Chicago, and Boston.

Access the January 2007 BIO report, Growing the Nation’s Bioscience Sector: A Regional Perspective, prepared by Battelle.

Immigrant Entrepreneurs in New York City

The New York-based Center for an Urban Future has released a new report examining the impact of immigrant entrepreneurs on America’s cities. The report has a primary focus on New York City, but also offers brief glimpses at Boston, Houston, and Los Angeles. Not surprisingly, New York City is one of the nation’s centers of immigrant entrepreneurship. In the 1990s, the number of foreign-born self-employed in the city grew by 53%. Meanwhile, the number of native-born self-employed rate dropped by 7%. Neighborhoods with high populations of immigrant entrepreneurs also grew faster than comparable neighborhoods. The report’s authors conclude that city officials and economic developers need to do more to nurture and support this important economic sector.

Access the February 2007 Center for an Urban Future report, A World of Opportunity, by Jonathan Bowles with Tara Colton.

Stimulating Innovation in Russia

Russia’s political leaders are growing increasingly concerned about their ability to support innovation and entrepreneurship. The former Soviet Union was well-known for its science and engineering expertise, but it was not an incubator of creativity, innovation and entrepreneurship. How can this pattern be changed? A new Organization of Economic Cooperation and Development (OECD) research report examines this question. It finds that Russia spends a lot on innovation inputs (e.g. R&D spending) but produces few innovation outputs. Also, its private sector focuses more on imitation than true R&D based innovation. The report recommends two broad categories of reform. It calls for major changes in domestic institutions to help stimulate more domestic business competition and to improve intellectual property protections. It also recommends that Russia refocus public support for the state’s science infrastructure by shifting resources away from large science and technology institutions and toward expanding support for small innovative firms.

View the Organization of Economic Cooperation and Development report, Stimulating Innovation in Russia, by Christian Gianella and William Tompson.

The National Dialogue on Entrepreneurship, an initiative of the Public Forum Institute made possible by a grant from the Kauffman Foundation of Kansas City. Through NDE-news, we bring you short summaries and analyses of various trends driving the innovation economy. Subscribe now to receive your weekly copy. Archived issues are available online. Links to the day's entrepreneurship stories from across the nation and around the world are posted each weekday on the NDE main page - bookmark it and stay informed about the latest entrepreneurship news.

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