Automatic Stabilizers

I was reading an article about private enterprise helping government to produce the kinds of systems and technologies needed in the war on terrorism (ie sensors, identification devices, information sharing technology, etc...). The article makes frequent reference to the relationship of VC's to big business, government, and technological innovation. Somewhere down a ways in the article it mentioned that incubators have fallen out of favor lately, and even suggests a possible role for the government providing "incubation services" to startups. This gives me an idea.

When economic times are tough, what do companies do? One thing they do is lay people off. Another thing they do, because they now have less employees, is vacate office buildings. Sometimes they even sell office equipment, although they probably often put it in storage. This is a big waste, because lots of office equipment obsolesces very quickly.

I am a big fan of automatic stabilizers in the economy. In addition to government spending programs as automatic stabilizers, there are also even more fundamentally automatic stabilization tendencies in a market economy. For example, when the economy is in recession, and interest rates go down, average mortgage payments also go down, increasing disposable income for consumers. What if the government created an automatic stabilization program around incubation. When the economy turns sour, investors are wary of investing in risky new businesses. Whereas the bubble economy was being driven fiercely by internet investment, the number of startups and IPO's now is probably lower than what would be healthy.

So we have too few innovative businesses being funded in a down economy, and we also have vacant office space and displaced workers. What if the government offered a tax break or a subsidy to companies that offered up their extra office space, employees, business services, and equipment to a startup - basically offered to incubate a startup. When the economy was good, it wouldn't be worth it to a big company to spend their time on that, but when the economy turned sour, it might mean the difference between laying people off or keeping them. Obviously, only certain types of firms with certain kinds of expertise would be able to do this. But companies that could certainly do that are companies like Sun Microsystems or HP, which recently laid lots of people off. They have exactly the kind of expertise, employees, and existing systems that an innovative PC hardware engineering firm might need to get off the ground. I would suspect the same relationship might exist with drug companies and biotech startups.

This idea would clearly need a lot more development. What do y'all think?