In Republican debate, candidates must promote entrepreneurship

Republican presidential candidates will gather tonight in Las Vegas for their fifth debate. In eight hours of previous debates, the candidates and moderators have only uttered the words "entrepreneur," "entrepreneurial," and "entrepreneurship" in three instances on the main stage. No one has mentioned "startups" at all.

The Las Vegas economy shows why this matters: New businesses, which represent only 12 percent of firms in the metro area and 3 percent of total employment, created 20 percent of the region's new jobs in 2013. Entrepreneurs are doing their part to bring Las Vegas' economy back to life.

While entrepreneurship may be missing from the debates, the GOP's platform from the previous presidential election explains why it's so important: "Republicans believe in the Great American Dream, with its economics of inclusion, enabling everyone to have a chance to own, invest, build, and prosper … [W]e have the lowest rate of business startups in thirty years … and we pledge to strengthen [their] role and foster small business entrepreneurship."

The platform also asserted that the American Dream is at risk, a sentiment expressed today by a striking number of Americans in recent surveys. One key reason: The American Dream is predicated on a dynamic economy, and entrepreneurship is the engine of that dynamism. Yet a historic decline in the rate of new business formation threatens to turn the dream into many sleepless nights counting bills.

Headline-grabbing technology startups prove that the United States still produces the world's greatest innovators and entrepreneurs, but they obscure the underlying crisis facing many communities across the country. Startups' share of all businesses in the economy fell from 16.5 percent in the late 1970s to only 8 percent in 2013 (the most recent year for which we have data). Likewise, the share of total U.S. jobs in startups has fallen from 6 percent in 1977 to just 2 percent in 2013. The numbers have dropped in absolute terms as well; 406,000 new firms started in 2013 compared to an average of 502,000 for the two decades prior to the Great Recession.

The decline of entrepreneurship has real human costs. New businesses kick-start a virtuous economic cycle by driving innovation and heightening competition. As successful new companies replace less dynamic, older ones, the economy reallocates resources from less productive uses to more productive ones. This process increases productivity economy-wide, which allows wages to grow and standards of living to rise.

Second, new businesses are vital to the health of the labor market. The long-term decline in new business starts has been matched by a decline in the dynamism of our labor market. Fewer companies entering or exiting the economy means less job turnover. That translates into fewer opportunities to find not only a job, but also a better one higher up the economic ladder. And since startups are responsible for almost all of America's net job creation, fewer startups mean fewer openings for people outside the workforce trying to break in.

Politicians often reference the importance of entrepreneurship, but most fail to address the severe implications of its decline. This is for two reasons. First, economists don't have easy answers for the causes or solutions to this complex challenge. Second, new businesses don't have much clout in the halls of Congress and state capitals. And no one is paid to lobby for future businesses that don't yet exist.

Meanwhile, the decline in competition that comes with slowing entrepreneurship suits many incumbent companies just fine.

While there's no single force responsible for the sputtering of America's entrepreneurial engine, without access to capital that engine is running on fumes. Factors like the decline in household wealth, plunge in housing values, consolidation in the banking sector, isolation of venture capital in a few U.S. cities, and growing regional inequality have all coalesced to make starting a business harder than it used to be. To reverse this trend, a mix of ambitious solutions needs to be tried, from removing pointless licensing barriers, to reducing student debt, and democratizing access to financing in ways that meet the needs of the new economy, such as further advances in crowdfunding.

The decline of American entrepreneurship is one of the defining economic issues of our time. Let's hope tonight's debate marks the beginning of a new chapter in the 2016 presidential race, when candidates start offering solutions to strengthen entrepreneurship in order to preserve the American Dream for future generations.

Steve Glickman and John Lettieri are co-founders of the Economic Innovation Group, a Washington, D.C., think tank dedicated to building a more entrepreneurial and innovative U.S. economy.