Wednesday, October 14, 2009
Validated by researchers from Daniels College of Business and Leeds School of Business
DENVER – The University of Denver’s Daniels College of Business and the Leeds School of Business at the University of Colorado – Boulder today announced the findings of a three-month research project on a new program design for U.S. economic stimulus.
First proposed by former Starz founder and CEO John Sie in a March 2009 Denver Post guest commentary, the “Incentivize Success Plan” (IS!) would fund and motivate successful companies to expand their U.S. businesses as well as hire and re-train laid-off workers. The IS! plan would have three components: low-interest, government-guaranteed (at 80 percent) loans, a tax credit for retraining U.S. workers and a one percent rate discount on borrowing rates.
Researchers from both schools investigated whether there was a tangible need for the type of program like the IS! as well as the design, administration, costs and benefits associated with it. The first phase of their analysis supports the IS! premise. John Sie remarked, “I am so pleased that the CU/DU researchers have quantified the enormous impact on our economy and jobs from a very simple concept: reward for success and hard work.”
The Leeds and Daniels researchers reached the following conclusions:
- · Nearly every economic indicator has posted sharp declines over the past 18 months. In the current lending environment, there is clear evidence that capital constraints for businesses are inhibiting the growth of the economy. The IS! Plan offers a realistic way for banks to increase lending, and frees U.S. companies to grow with much-needed capital.
· The plan offers support to firms exhibiting growth. Currently, these companies have financial credit constraints that inhibit growth potential. The program, building primarily on the existing bank-client relationship (without new bureaucracy) is designed to be universal, without being political, geographic or industry-bound.
· In the financial models of the researchers, the IS! Plan would be fiscally revenue positive in its second year, given the income taxes and business taxes attributable to the economic growth. Using $15 billion as the sum allocated to the program, they predicted the economic impact of this program would be significant, with 978,196 jobs created, a $595.4 billion increase in GDP over five years and a positive return on investment for taxpayers.
“This is a tool to help thaw the frozen financial markets by getting money to qualified lenders. It is helping out businesses that normally would qualify for loans but are locked out during this economic crisis,” said Brian Lewandowski, research analyst for the Business Research Division of the Leeds School of Business (BRD). “It allows the private sector to build on its strengths. So, by focusing on already successful firms, this program increases the chances of job creation, new product development and innovation,” explained Gary Horvath, managing director of the BRD.
The second phase of research will focus on the overall economic impact (since the program is tailored for firms with less than 500 employees), the optimal size for the program, since $15 billion was used only for modeling purposes, as well as the specific design and administration of the program.
“The results for the first phase of the research are encouraging as to the need and potential impact of the IS! program,” said Ron Rizzuto, professor of finance in the Daniels College of Business. “We are optimistic that the second phase of this project will provide actionable research for policy makers at such a critical time for the economy.”
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Founded in 1915, the Business Research Division at the Leeds School of Business at the University of Colorado at Boulder is one of the oldest business research divisions in the United States. The BRD’s mission is to conduct quality, relevant, meaningful and socially responsible business and economic research within the local, state and regional economies for the purpose of expanding knowledge base of decision makers throughout the state and the region.
The Daniels College of Business at the University of Denver is ranked among the top business schools in the world by BusinessWeek, U.S. News & World Report and the Financial Times. In 2008, it celebrated its 100th anniversary and is among the first business colleges founded in the U.S. that includes Wharton, Chicago, Berkeley, Dartmouth, New York, Wisconsin, Illinois, Harvard, Northwestern, and Pittsburgh. As the eighth-oldest collegiate school of business in the country, Daniels has built a curriculum producing accountable citizens of the world who are business sharp, stakeholder savvy, and future ready.
Contact: Julie Lucas,
(303) 871-3379
julie.lucas@du.edu
Contact: Gary Horvath
(303) 492-8395
Gary.Horvath@colorado.edu