Budget – Page 24 – Donald Marron

Venture Capital Declining

An article in this morning’s Wall Street Journal documents a decline in venture capitalists. Both the number of VC firms and their capital under management have declined sharply:

A large number of individual VCs are also departing their firms. And, the Journal notes:

The actual number of exits might be even higher than the trade group’s figures indicate. Venture-capital funds are typically 10-year investment vehicles. That means even if a venture capitalist no longer actively invests, he or she can remain on a firm’s masthead because they have to wind up their investments in older funds.

The article is worth reading in full for its discussion of the factors — weak economy, reduced investment capital, natural turnover, etc. — that are contributing to the decline in venture activity and the departure of individual VCs.

I don’t know how much this generalizes (readers please chime in) but one VC friend of mine reports two other factors that may be driving him and some other successful VCs from the business:

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Growing Government Transfers

I’ve received several emails today about a story posted last night by USA Today. The story points out that government transfers now make up more than one-sixth of American incomes, the highest ever. Naturally, some observers welcome this development, while others denounce it.

I thought it would be useful to side-step that debate and instead provide some historical context. To begin, the following chart shows the ratio of government transfers to personal income from January 1959 through April 2009 (the most recent data):

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Why is the U.S. Borrowing Less?

Government deficits have skyrocketed in the past year, yet the U.S. as a whole is borrowing much less from the rest of the world. What’s going on?

As shown in the following chart, the answer is simple: Americans are saving more and investing less.

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Drawing the Line on Health Insurance

Some of CBO’s most important decisions involve principles, not numbers. For example, CBO has to decide when proposed policies should be treated as part of the government — and thus be recorded on the budget for Congressional purposes — and when not. Many calls are easy. But then there’s health insurance reform.

The fine folks at the Congressional Budget Office have a reputation as the number-crunching, uber-geeks of the Congressional budget process. And that’s a reputation they wear proudly (and I am proud to wear as an alum).

But some of CBO’s most important decisions involve principles, not numbers. For example, CBO has to decide when proposed policies should be treated as part of the government — and thus be recorded on the budget for Congressional purposes — and when not. Many calls are easy: taxes and spending are clearly governmental, hence in the budget. Many regulations (e.g., minimum wages and environmental rules) are clearly outside; they may create benefits and impose costs just as taxes and spending do, but they still leave most choice and control in private hands.

And then there are the hard cases such as health insurance reform.

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