Earlier, John Carney pointed out a major flaw in Tom Friedman's plan to subsidize the VC industry and startups. Top investors aren't wanting for cash, so any government money would flow towards lower tier investors, and lower tier companies, likely leading to a big mis-allocation of wealth.

Here's another big problem. Innovative startups aren't the cure-all they're made out to be.

Sure, it'd be great to plant the seeds of another 100 Googles, but alas, most startups aren't Google. Actually, most startups crash and burn. Just look over the last few years. Even in the absence of extra government money -- just a normal market scenario -- investors seeded way too many trash companies. Companies got funding despite ideas that were so half-baked you knew they were DOA the moment you heard of them. They still are, even today. And the data bears this out.