Have you heard about the new “Square”? As in, “Are we square?” It’s a new square-shaped gizmo that gives people a way to accept credit card payments on their iPhone, iPad, or Android. It was invented by Jack Dorsey, the founder of Twitter, a guy who knows something about new ideas that catch on with people carrying cell phones.

According to its Web site, the small Square device is free and plugs into the earphone jack, the downloadable app for it is free, there are no set-up or monthly fees, and the per-transaction costs are much lower. It’s secure, it E-mails the receipts, and it keeps track of all your cash and credit card transactions for you. 

What it does is make it easier for customers to pay small business owners such as women with home trunk shows, day care workers, even dog walkers. Many charities who couldn’t afford a credit card machine for fundraising events could now use this for charitable donations. You can even add tips to the total for people in the service industry. For better or for worse, it could also speed up the transition to a cashless society.

It has the potential to make life much easier for small- and medium-size businesses, especially home-based ones. If Square catches on, think of all the young people with a good idea who will have an easier time launching their businesses and making money. You could call it a license to print money--or really, E-mail money--that crosses all industries and demographics.

Its economic effect is going to be huge, and the Obama administration should realize that rewarding--not punishing--private sector innovation like this is the best way to economic growth and prosperity for all Americans.