Growth and Regulation: Caught in the Middle

August 26, 2011

We are in many ways a nation of the middle class.  This is where America finds some of its greatest innovators and where we place our hope for the future.  Might the same be true for companies? 

Warren Stephens, the CEO of Stephens, Inc., sure thinks so.  His recent article in The Wall Street Journal shines a light on what Stephens calls "the forgotten middle."  That is, the more than 100,000 companies that bring in between $25 million and $1 billion in revenues each year.   If you want to have an idea as to what the Fortune 500 list will look like 50 years from now, it's in the middle market where you'll find your answer.

To Stephens, this growth potential is under threat by an "uncertain regulatory and tax environment." Reporting requirements end up costing firms a pretty penny, cash is hoarded to protect against both market swings and unexpected government intervention, and new laws pose hidden costs all of their own. Stephens isn't short of ideas for countering this challenge.  "By designing a set of policy solutions that eliminate obstacles, remove disincentives and reward smart risk-taking by middle market companies, we can reignite our economy and create the kinds of jobs that built this great country."

It's unclear though how simple these measures would be in practice or how layering new policy measures on top of old ones will address Stephens' regulatory concerns. Nevertheless, Stephens is right to draw our attention to firms that contribute so much to our economic growth and innovation.  Remaining mindful of the middle may be the best way to keep America's economy on top.