Similar to how government-funded medical research leads to huge innovation and jobs in the pharmaceutical industry, open source software serves as the foundation for entire industries… yet it receives virtually no funding. Just imagine the infrastructure that could be built for such a small government investment.

We could use something like “github”:http://github.com/ to allocate the funds based on how many people use the project or via peer ratings.

How does it work?

The federal government sets aside funding to infuse start-up seed capital for the bank. Upon formation, the government will leverage private capital and invite proposals from American entrepreneurs in line with important national innovation priorities. The National Innovation Bank will enable entrepreneurs to access the capital, resources, and mentorship to unleash the full potential of their next generation innovations that will re-charge the American economy.

How much capital will it raise?

The government will contribute $15B from non-committed stimulus funding and then leverage up to $100B through the sale of federal “innovation” bonds or other devices.

What are the investment guidelines?

The National Innovation Bank will appoint an “Investment council” made up of experts from academia, the private sector, and government. The NIB will outline investment areas in line with national priorities, including clean-tech, bio-tech, national broadband expansion, and web tech.

How can everyone get involved in re-starting America?

The bank will solicit proposals from bright American innovators and entrepreneurs for early seed capital, mid-stage investing, or late-stage scaling to fund ground-breaking initiatives. These investment packages would include incubator subsidies, access to resources, and advisory support from the “Investment council”. Americans can invest in “innovation bonds” across the three asset classes of early-stage, mid-stage, or late-stage companies, with appropriately scaled risk-return rates. In addition, investors can track progress against transparent reporting metrics. Together, we can re-start the American economy.

What role can states play?

Each state will be invited to provide matching investments for innovators selected by the National Innovation Bank. In addition, states can set up special “incubator incentives” to provide start-up space, public-private resources, and mentorship to cultivate businesses. In doing so, the National Innovation Bank will not only fuel entrepreneurship and growth nationally, but will be an engine for states to develop regional innovation clusters, similar to Silicon Valley.

US is the only country in the world taxing its citizens across the globe. In a way, this is a tax on mobility, i.e. because I am taxed even if I work in Europe, there is no incentive for me to relocate there for a good opportunity. Unemployment can be lowered if people can find jobs in a global environment vs being incentivized to only look for opportunities at home. Finally, for every person working abroad, it reduces some level of burden on the state.