In the next COVID-19 bill, target innovation and entrepreneurship
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The surprise decline in the unemployment rate has shifted the discussion regarding additional COVID-19 relief legislation. Appearing on CNBC on Monday, White House senior adviser Kevin Hassett said that, while a fourth legislative package is highly likely, another positive jobs report in June would “absolutely affect the things that we pursue.”

A fourth legislative package is needed to complete America’s economic comeback. And, this time, the legislation should focus on accelerating the economy’s growth and job creation potential by strengthening the nation’s commitment to innovation and entrepreneurship. The content of such a package are two major bills introduced into Congress in the last 90 days.

The Endless Frontier Act was introduced on May 27 by Sens. Charles SchumerChuck SchumerPublic awareness campaigns will protect the public during COVID-19 Republicans fear backlash over Trump's threatened veto on Confederate names Overnight Defense: House panel votes to ban Confederate flag on all Pentagon property | DOD report says Russia working to speed US withdrawal from Afghanistan | 'Gang of Eight' to get briefing on bounties Thursday MORE (D-N.Y.) and Todd YoungTodd Christopher YoungSenate Republicans defend Trump's response on Russian bounties Stronger patent rights would help promote US technological leadership In the next COVID-19 bill, target innovation and entrepreneurship MORE (R-Ind.), along with Reps. Ro KhannaRohit (Ro) KhannaHouse panel votes to limit Trump's Germany withdrawal It's time to eliminate land-based nuclear missiles Stronger patent rights would help promote US technological leadership MORE (D-Calif.) and Mike GallagherMichael (Mike) John GallagherHillicon Valley: Democrats introduce bill banning federal government use of facial recognition tech | House lawmakers roll out legislation to establish national cyber director | Top federal IT official to step down Lawmakers introduce legislation to establish national cybersecurity director House Republican accuses Facebook, Twitter, YouTube of not doing enough to combat Chinese propaganda MORE (R-Wis.), and is intended to enhance U.S. leadership in science and technology.

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Scientific and technological innovations drive gains in productivity, which in turn drive economic growth, job creation, and expanding opportunity. Unfortunately, over recent decades U.S. government investment in research and development as a share of gross domestic product has fallen near historic lows. Meanwhile, other nations – China in particular – have dramatically increased their investments in scientific discovery and technology. To remain a global innovation leader in an increasingly competitive world economy – and to accelerate the economic recovery from the COVID-19 crisis – the United States must renew its commitment science- and technology-driven innovation.

The Endless Frontier Act will address this national priority in several important ways. The Act would expand the National Science Foundation (NSF), to be renamed the National Science and Technology Foundation (NTSF); establish a new Technology Directorate within the NTSF; authorize $100 billion for the new directorate to reinvigorate American leadership in the discovery and application of ten key technology areas that will define global competitiveness; authorize an additional $10 billion for the Commerce Department to designate at least 10 regional technology hubs; and fund programs to accelerate the transfer of new technologies from the lab to the marketplace.

The principal way new innovations and technologies are transmitted to the marketplace is through new businesses, or “startups.” Repeated research has demonstrated that startups are disproportionately responsible for the innovations that drive economic growth and job creation. Indeed, according to the Kauffman Foundation, startups – not large businesses – are responsible for almost all net new job creation.

Despite their importance, startups are extremely fragile because they are new and the COVID-19 crisis has taken a devastating toll. Thousands have been forced to lay-off employees or have failed. A paper released by the National Bureau of Economic Research (NBER) showed that business ownership among African-Americans plunged 41 percent – or by 440,000 businesses – between February and April. Another NBER paper released last month showed that early-stage venture capital investment dropped by 38 percent over the same period.

Simply stated, the COVID-19 emergency has imperiled an entire generation of the nation’s most innovative and promising young companies – and, in turn, the demise of thousands of these companies imperils the post-COVID economic recovery.

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The New Business Preservation Actintroduced in the Senate on March 18 by Sens. Amy KlobucharAmy KlobucharDemocrats: A moment in history, use it wisely The Hill's Coronavirus Report: Rep. Rodney Davis says most important thing White House can do on COVID-19 is give consistent messaging; US new cases surpass 50k for first time The Hill's Coronavirus Report: Stagwell President Mark Penn says Trump is losing on fighting the virus; Fauci says U.S. 'going in the wrong direction' in fight against virus MORE (D-Minn.), Chris CoonsChristopher (Chris) Andrew CoonsHillicon Valley: Facebook takes down 'boogaloo' network after pressure | Election security measure pulled from Senate bill | FCC officially designating Huawei, ZTE as threats Democrats, voting rights groups pressure Senate to approve mail-in voting resources To safeguard our elections, Democrats and Republicans must work together MORE (D-Del.), Tim KaineTimothy (Tim) Michael KaineOvernight Defense: Lawmakers demand answers on reported Russian bounties for US troops deaths in Afghanistan | Defense bill amendments target Germany withdrawal, Pentagon program giving weapons to police Senators aim to limit Trump's ability to remove troops from Germany Filibuster reform gains steam with Democrats MORE (D-Va.), and Angus KingAngus KingMcConnell on filibuster talk: Democrats want to 'vandalize' Senate rules Manchin draws line against repealing legislative filibuster Filibuster reform gains steam with Democrats MORE (I-Maine), and in the House on March 26 by Reps. Dean PhillipsDean PhillipsIn the next COVID-19 bill, target innovation and entrepreneurship Small businesses receive much-needed Paycheck Protection Program fixes House passes bill to grant flexibility for small business aid program MORE (D-Minn.), Terri SewellTerrycina (Terri) Andrea SewellDemocratic leaders press GOP to update Voting Rights Act New nonprofit aims to rename Edmund Pettus Bridge after John Lewis More than 100K sign petition to rename Edmund Pettus Bridge after John Lewis MORE (D-Ala.), Ro Khanna (D-Calif.), and Tim RyanTimothy (Tim) RyanThe Hill's Coronavirus Report: San Francisco Gay Men's Chorus Artistic Director Tim Seelig says choirs are dangerous; Pence says, 'We have saved lives' National Retail Federation hosts virtual 'store tours' for lawmakers amid coronavirus In the next COVID-19 bill, target innovation and entrepreneurship MORE (D-Ohio) – would address this threat to the nation’s startups and economic resilience.

The legislation would incentivize continued venture capital investment in America’s most innovative and promising young companies by establishing a program, administered by the Treasury Department, which would allocate $2 billion in federal dollars to the states on a straightforward population basis to attract private venture capital by offering a 1-to-1 match of federal dollars with venture capital investment in promising startups, particularly in states outside the major venture capital centers.

The legislation is modeled on Israel’s “Yozma” program of the late-1990s, which successfully incentivized U.S. venture capital firms to invest in promising Israeli startups, and builds on recent successful federal-state partnerships to support small businesses, such as the State Small Business Credit Initiative (SSBCI).

Importantly, the legislation is carefully structured so that the federal government will not “pick winners and losers,” but rather will rely on private entities to source and manage investments in promising early-stage companies in every state. All investment decisions will be based entirely on private investor determination of the economic prospects of the new companies receiving equity capital.

New innovations and technologies, coupled with the survival of America’s most innovative and fastest growing new businesses, are essential for a strong economic recovery following the COVID-19 emergency. To ensure America’s comeback and longer-term prosperity, Congress should swiftly pass the Endless Frontier Act and the New Business Preservation Act.

John Dearie is the President of the Center for American Entrepreneurship and Rustin Finkler is Communications and Research Manager at Village Capital, the largest supporter of seed-stage, impact-driven startups in the world. The views and opinions expressed in this article are those of the author and do not necessarily reflect the official position of Village Capital.