[House Hearing, 106 Congress]
[From the U.S. Government Printing Office]





 IMPACT OF FEDERAL AND COMMUNITY-BASED PROGRAMS ON MAIN STREET AMERICA 
          AND VARIOUS SEGMENTS OF THE SMALL BUSINESS COMMUNITY

=======================================================================

                             FIELD HEARING

                               before the

                            SUBCOMMITTEE ON
                   GOVERNMENT PROGRAMS AND OVERSIGHT

                                 of the

                      COMMITTEE ON SMALL BUSINESS
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED SIXTH CONGRESS

                             SECOND SESSION

                               __________

                   ELLICOTT CITY, MD, APRIL 25, 2000

                               __________

                           Serial No. 106-55

                               __________

         Printed for the use of the Committee on Small Business


                               __________

                    U.S. GOVERNMENT PRINTING OFFICE
67-559                     WASHINGTON : 2000



                      COMMITTEE ON SMALL BUSINESS

                  JAMES M. TALENT, Missouri, Chairman
LARRY COMBEST, Texas                 NYDIA M. VELAZQUEZ, New York
JOEL HEFLEY, Colorado                JUANITA MILLENDER-McDONALD, 
DONALD A. MANZULLO, Illinois             California
ROSCOE G. BARTLETT, Maryland         DANNY K. DAVIS, Illinois
FRANK A. LoBIONDO, New Jersey        CAROLYN McCARTHY, New York
SUE W. KELLY, New York               BILL PASCRELL, New Jersey
STEVEN J. CHABOT, Ohio               RUBEN HINOJOSA, Texas
PHIL ENGLISH, Pennsylvania           DONNA M. CHRISTIAN-CHRISTENSEN, 
DAVID M. McINTOSH, Indiana               Virgin Islands
RICK HILL, Montana                   ROBERT A. BRADY, Pennsylvania
JOSEPH R. PITTS, Pennsylvania        TOM UDALL, New Mexico
JOHN E. SWEENEY, New York            DENNIS MOORE, Kansas
PATRICK J. TOOMEY, Pennsylvania      STEPHANIE TUBBS JONES, Ohio
JIM DeMINT, South Carolina           CHARLES A. GONZALEZ, Texas
EDWARD PEASE, Indiana                DAVID D. PHELPS, Illinois
JOHN THUNE, South Dakota             GRACE F. NAPOLITANO, California
MARY BONO, California                BRIAN BAIRD, Washington
                                     MARK UDALL, Colorado
                                     SHELLEY BERKLEY, Nevada
                     Harry Katrichis, Chief Counsel
                  Michael Day, Minority Staff Director
                                 ------                                

           Subcommittee on Government Programs and Oversight

                 ROSCOE G. BARTLETT, Maryland, Chairman
MARY BONO, California                DANNY K. DAVIS, Illinois
PATRICK J. TOOMEY, Pennsylvania      RUBEN HINOJOSA, Texas
RICK HILL, Montana                   CHARLES A. GONZALEZ, Texas
                        Nelson Crowther, Counsel


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on April 25, 2000...................................     1

                               WITNESSES

Glover, Jere, Chief Counsel, Office of Advocacy..................     3
Howard, John, Executive Director, Economic Development 
  Commission, Washington County..................................     6
Story, Richard, Chief Exectutive Officer, Economic Development 
  Authority, Howard County.......................................     9
Lyburn, John, Director, Department of Economic Development, 
  Carroll County.................................................    12
Nixon, Randall, Nixon's Farm.....................................    23
Schulze, John, Vice President, Pizza Hut of Maryland.............    28
Williams, Ken, CEO Director, Howard County Chamber of Commerce...    31

                                APPENDIX

Glover, Jere.....................................................    38
Howard, John.....................................................    55
Story, Richard...................................................    60
Lyburn, John.....................................................    65
Nixon, Randall...................................................    70
Schulze, John....................................................    78

 
 IMPACT OF FEDERAL AND COMMUNITY-BASED PROGRAMS ON MAIN STREET AMERICA 
          AND VARIOUS SEGMENTS OF THE SMALL BUSINESS COMMUNITY

                              ----------                              


                        TUESDAY, APRIL 25, 2000

              House of Representatives,    
                 Subcommittee on Government
                            Programs and Oversight,
                               Committee on Small Business,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 10 a.m., in the 
Banneker Room, Howard Building, 3430 Courthouse Drive, Ellicott 
City, Maryland, Hon. Roscoe G. Bartlett (chairman of the 
subcommittee) presiding.
    Chairman Bartlett. We will call our Subcommittee meeting to 
order. Good morning and welcome to this hearing of the 
Subcommittee on Government Programs and Oversight of the 
Committee on Small Business. A special welcome to those who 
have come some distance to participate.
    This is one in a series of hearings begun in April of 1997 
to determine the impact of Federal and community-based programs 
on Main Street America and various segments of the small 
business community. The last hearing in this series was held in 
Chicago, Illinois and focused on the importance of Federal 
procurement opportunities for small businesses.
    One of the goals of these hearings is to learn how small 
business owners have succeeded and continue to grow, whether by 
reliance solely upon the private sector or with assistance by 
Federal, State and local programs, in order to help others 
become or continue to be successful small business owners. It 
is important to know what works and what does not work.
    Another focus of the hearing is to obtain your views as to 
the causes of the present economic prosperity. How can the 
present economic conditions be sustained? Has the prosperity 
touched every segment of the small business community or are 
there segments of the small business community that need 
assistance? If so, what kind of assistance? Small businesses 
have been leading the economy both in innovation and job 
creation. What is needed to maintain this record well into the 
21st century?
    This hearing will provide you with a forum for expressing 
your views with respect to Federal Government programs for the 
purpose of addressing any problems, where feasible, with 
remedial legislation. The Federal Government should be user 
friendly since it is the taxpayers who pay for every Federal 
program and the salaries of those that administer them. Also, 
your views with respect to any burden created by Federal 
regulations and paperwork, together with suggestions for 
improvements, would be most helpful.
    Why the emphasis on small businesses? For the simple reason 
that small businesses are presently the main engine driving the 
economy of this country. It is a statistical fact that small 
businesses are the creators of new jobs and the stimulus behind 
our present economic prosperity.
    Independently owned businesses, the free market economy in 
this country, with fewer than 500 employees, and many with far 
fewer than that, created 76 percent of the net new jobs from 
1991 to 1995; employ 53 percent of the private non-farm 
workforce; contributed 47 percent of all sales in the country; 
are responsible for 51 percent of the private gross domestic 
product, and produced 55 percent of innovations--small 
businesses produce twice as many both product innovations and 
significant innovations per employee as large firms.
    However, I have previously found almost universal agreement 
among small business owners that Federal Government 
overregulation and meddlesome approaches to the regulatory 
process is a pervasive problem that is detrimental to small 
business viability. I want to know if this has been your 
experience.
    Those who work in Washington, D.C. need your views as to 
the success or failure of Federal programs in Maryland and 
locally here in Howard and Ellicott City.
    Do Federal programs designed to help small businesses 
actually work? Are they helpful? Are they outdated? Should the 
present Federal Government programs be restructured to meet 
present conditions? Is the Federal Government too intrusive and 
meddlesome?
    It is your answers to these and many other questions that 
are important. The Committee on Small Business welcomes your 
testimony. I look forward to a lively and informative 
discussion. Thank you again for being here today.
    Our hearing today is focused on Main Street USA. Are 
Government programs for small business effective? What are the 
causes of the present economic prosperity? How can the present 
economic conditions be sustained?
    We have two panels, and the first panel is made up of the 
Honorable Jere Glover, Chief Counsel, Office of Advocacy; John 
Howard, Executive Director, Economic Development Commission, 
Washington County; Richard Story, Executive Director, Economic 
Development Authority, Howard County; and John Lyburn, 
Director, Department of Economic Development, Carroll County. 
Thank you all very much for joining us.
    There is a joke that never fails to get a response from an 
audience. I guess the best jokes are those that have some 
relevance to real life. It is about a well dressed person who 
shows up at the farm or the small business, and tells the 
hardworking farmer or small business owner, ``I am from the 
Government and I am here to help you'', at which point the 
farmer or the small business person bursts out laughing. This 
never fails to get a response from an audience because that is 
a generally true representation of the response of people when 
somebody tells them ``I am from the Government and I am here to 
help you''.
    But the four people sitting at this table don't have that 
experience. I know from personal experience that when the 
Economic Development Director comes and says ``I am from the 
County Government and I am here to help you'', that the small 
business person says ``Thank you very much for coming''. I will 
tell you that for Jere Glover, I know from a number of hearings 
and personal communications with him, that is certainly not 
true of him, which is quite rare for Federal employees, by the 
way, Mr. Glover.
    You will hear in his presentation today when he uses the 
pronoun ``them'' he is talking about Federal bureaucrats, and 
when he uses the pronoun ``us'' he is talking about small 
business people. He truly identifies with small business people 
and their problems.
    The Office of Advocacy is, what, 25 years old?
    Mr. Glover. Yes, sir.
    Chairman Bartlett. And it has been reinvigorated recently 
with legislation that gives them some real teeth. It was 
created by the Small Business Committee, by the Congress, 25 
years ago, in recognition of the fact that regulations that can 
be borne by large businesses frequently are killers for small 
business, that the Government agencies in the promulgation of 
their rules needed to consider what the effects would be on 
small business, and that small business people needed an 
advocate, and so the Office of Advocacy was created.
    If you have small business people who need an ombudsman 
with the Federal Government, this is the office to go to. They 
are very effective, and I am really pleased that Jere Glover 
can be with us here today and will turn to him first for his 
testimony.

   STATEMENT OF THE HONORABLE JERE W. GLOVER, CHIEF COUNSEL, 
                       OFFICE OF ADVOCACY

    Mr. Glover. Thank you, Mr. Chairman, it's delightful to be 
here with you.
    Chairman Bartlett. Let me say first of all that all of your 
prepared statements will be made a part of the record, so you 
can feel free to summarize.
    Mr. Glover. Thank you, Mr. Chairman. It is good to be here 
with you, and what I thought I would do is to talk about a few 
areas where your unique experience as a scientist, as an 
inventor, as an entrepreneur and a farmer, have helped the 
Congress better understand the issues and issues that we worked 
together. And what I find is that a lot of people don't 
understand the real significance of that unique set of skills.
    The first one is the patent bill, and in this past Congress 
there were proposals that were going to significantly weaken 
the inventor's protection under the patent bill. And it is hard 
to find in Government, and it is hard to find in Congress, 
someone who has been an inventor. We have small business people 
in Congress, probably not enough, but we certainly have some, 
and we certainly have some farmers, probably not enough again, 
but as an inventor has a unique set of skills. Understanding 
that and speaking from personal experience, really helped to 
keep some bad things from happening in that patent legislation, 
and I wanted to thank you for your efforts in that regard. It 
was a situation where, if we change our patent structure, we 
may change the fiber of how small business succeeds better in 
this country than anywhere else in the world, and the patent is 
one of those areas of unique protections that we have that is 
better than anywhere else in the world. Whenever that is 
threatened it is important that people rally to that cause, and 
I appreciate your efforts.
    The next area again deals with innovation and invention, it 
is the Small Business Innovation Research Program. This is a 
billion dollar program that is designed to make the Federal 
procurement officials recognize the importance of small 
business. Without this, they had been ignoring small business, 
despite the fact that today more scientists and engineers work 
for small business than for big business, the Government or 
universities.
    The marketplace has made a huge shift to small business. 
Large firms are now buying the technology, they are buying the 
innovations, in some cases buying the businesses rather doing 
it themselves inhouse. So, we have seen degreed scientists and 
degreed engineers move into small business. Despite that, 
Federal procurement from small business for R&D is still very 
low. But the innovation program which you worked to get 
reauthorized has not only a billion dollars nationwide, but 
Maryland is the fourth largest state in number of dollars 
received under that program, after California and 
Massachusetts. It received over 200 awards and over $53 million 
of money. That, of course, is money that is used as seed 
venture fund to help those companies take the technology to the 
next level and provides the Government with what it needs.
    This economic development initiative in Maryland is putting 
venture capital into the right businesses at the right time, 
and I think that you are to be commended for your work in that 
regard as well.
    The other area that I wanted to mention is regulatory 
burdens. We in Washington have, for years, heard people 
complain about the regulatory burdens. It is one of those 
things that I guess everybody says everybody talks about but 
nobody does anything about it. Well, in 1996, the Congress 
passed and the President signed legislation called the Small 
Business Regulatory Enforcement Fairness Act. It did several 
things, but it provided for judicial review of agency 
regulatory proceedings, and it strengthened the Office of 
Advocacy's power to go and work with the agencies. We have been 
working hard to implement that and trying to educate Government 
officials as to the importance of the law and importance of 
small business, and the ease with which they can often exempt 
or modify their regulations to lessen the burden on small 
business.
    I have attached to my testimony the Executive Summary where 
we quantify from some independent source the amount of 
regulatory burdens that have been reduced for small business--
$5.3 billion of regulatory burden has been eliminated, from 
regulations that were going to be proposed or were proposed, 
and how they ultimately came out, and it goes across the gamut 
from different--all kinds of different regulations.
    Now, I am not here to tell you that we have solved the 
problems with this legislation, but we are beginning to change 
the culture so that small business is taken into consideration 
by the people making regulations, and we are very proud of the 
fact that we have been able to do this. This is the second year 
that we have eliminated savings.
    You will remember the Universal Service phone fight that we 
worked together on, where the FCC was proposing to eliminate 
the charges that supported universal lines. They basically said 
that businesses only needed one telephone line in rural 
America. The Federal Communications Commission had proposed to 
let small businesses pay full prices on all their phone lines 
outside of the urban areas, but they could only have one line 
that would fit under that. The savings from the sales charge 
was not counted in these, and it also doesn't include 
regulations that weren't proposed or the regulations that have 
not gone to fruition. These are the ones that simply have had 
final action during one fiscal year.
    We often, in small business, look for the perfect world, 
and we look for how things should be, but we don't always take 
time to think about how things have improved. You cited some 
statistics in your opening remarks. More businesses have been 
started in each of the last six years than at anytime in the 
history of the country. So the climate for small business 
development has never been better.
    Most people don't think about or go back to look at--as I 
did just recently--the number of tax bills that have been 
passed that changed the taxing on small business. We started 
off with capital gains reductions. Since the White House 
Conference in 1995--I use as a base point, other people use 
different years--we have had targeted capital gains for small 
business reduced by 50 percent. We have had all capital gains 
reduced from 28 to 20 percent. We have had estate tax 
improvement and reduction on estate tax for family farms and 
for small businesses. We have had the home office deduction 
restored. We have had the health insurance deduction increased 
for small businesses, encouraging self-employed individuals to 
have that. We have had direct expensing increased, the amount 
of money that you can write off for your capital expenditures 
instead of having to depreciate it over a number of years. And 
we have had dramatic and significant pension changes.
    In this tight labor market where it is hard to find good 
employees, it is important for small business to have good 
pension plans. And here is one of the most significant 
regulatory changes we accomplished. What we try to do is put 
small business people together with the people who are making 
the regulations, and then facilitate coming out with good 
regulations. It just came out the first of the year, something 
we have wanted to happen for a long time. Now small businesses 
don't have to declare in advance that they are going to make 
pension contributions, they can wait until November of the 
year, so they know they have got the money.
    The reason small businesses don't have pension plans is 
because we don't know until near the end of the year whether we 
are going to have a good year or bad year. If one of our major 
customers gets in financial trouble, if one of our major 
customers leaves--there are a variety of things that can affect 
whether we have money, but by changing and letting small 
business decide in November--so we have seen a bunch of 
regulatory changes and climate improvements. We have a lot more 
to do, and I am not here to say we have accomplished it, but I 
think the goal is to continue improving the environment.
    If we expect to sustain the economic growth that we have 
had, we are going to have to continue to have new businesses 
being created, new businesses growing, new ideas, and moving 
from one idea to the next idea, and that is a function that we 
have had. We have improved the climate significantly, but there 
is a lot more we have to do to continue that. Thank you.
    [Mr. Glover's statement maybe found in Appendix.]
    Chairman Bartlett. Thank you very much.
    Mr. Howard.

 STATEMENT OF MR. JOHN C. HOWARD, EXECUTIVE DIRECTOR, ECONOMIC 
           DEVELOPMENT COMMISSION, WASHINGTON COUNTY

    Mr. Howard. Thank you, Mr. Chairman. I feel compelled to 
speak to the characterization of ``them'' and ``us'' that you 
evidenced with Mr. Glover here because I think it is an 
important backdrop.
    I, in a former life, worked 18 years for American Telephone 
and Telegraph Company back when it was ``the'' Bell system, 
arguably, second only to the Federal Government in terms of 
span and control at that point in time, but I also owned a 
small business as a men's store in a very rural area of North 
Carolina for three years thereafter, and I believe that my 
understanding of both of those poles brackets me appropriately 
for being able to bring you comments today on the plight and 
needs of small business.
    So, Mr. Chairman, and for those other distinguished members 
of your Committee as well, my name is John C. Howard, I am the 
Executive Director of the Hagerstown, Washington County, 
Maryland Economic Development Commission, and our offices are 
right in Hagerstown. Ours is a not-for-profit agency funded 
through out County Commissioners' annual budget process, using 
county tax proceeds exclusively. I serve at the pleasure of a 
12-member Commission, all of whom are volunteers.
    With members appointed by the County Commissioners 
representing the Chamber of Commerce, our Greater Hagerstown 
Committee, our principal city of Hagerstown, and the eight 
other incorporated municipalities in our county, we are able to 
offer a broad perspective to our two basic challenges: First, 
the retention and expansion of existing business and industry 
and, second, the recruitment of new business and industry.
    Washington County is a mid-sized cosmopolitan area in 
Western Maryland. Our population is slightly in excess of 
125,000 people. Hagerstown, our county seat, lies in the 
geographic center of the county, with a population within the 
city limits and contiguous areas exceeding 60,000, 
approximately one-half of the county's total.
    Although we enjoy many quality of life features, at best we 
remain classified as a semi-urban area, rich in America's 
historic past and founded from a strong agricultural work 
ethic. In the 20th century, our development and commerce was 
spurred by our locational advantages for the nation's rail 
companies.
    As the Director of Economic Development, I currently serve 
a county that is blessed by most development standards. We are 
served by both north-south and east-west U.S. interstate 
highways, and are within approximately one hour of major 
economic generators in the Baltimore and Washington, D.C. 
areas.
    We have a very diverse economy, bolstered by our service 
sector, and with manufacturing employment over twice the 
average for the State of Maryland. But we are part of a region 
of the state that does not enjoy all the traditional urban 
benefits from which continued and sustained growth just 
naturally evolve. We have to work at it. And a very 
recognizable component of our growth these days rests squarely 
with our success in retaining and expanding the growth of our 
small business sector.
    Procurement opportunities abound here. It is important that 
small business procurement activities continue to receive your 
nurture and visible support. Areas such as ours require the 
opportunity to acquire supply-line contracts to spur our local 
economy, rather than see the diminution of entrepreneurial 
aggressiveness due to mandated national account contracting. We 
would ask, as well, that programs be simplified further, to the 
extent possible, to ease the opportunities for such competition 
on a local basis, rather than intimidate the small business 
provider.
    I would also ask that the Congress continue to adequately 
fund the Economic Development Administration of the U.S. 
Department of Commerce. Related programs for small business 
development in the U.S. Small Business Administration and U.S. 
Department of Agriculture will continue to also require your 
support and attention for communities my size to continue to 
thrive, even on our currently sparkling national growth 
economy, for it is the small business sector that ultimately 
benefits the most from your attention to these programs.
    Whether by definition ``small business'' is 100 jobs or 
less, or 500 jobs or less, small business remains the force 
that turns our County's economic engine. We must never lose 
sight of the fact that somewhere around 70 percent of the new 
jobs created in areas like mine have sprung from a small 
businessperson's dreams, diligence, and drive. With the 
exception of education, no other force in America compares with 
the ability of small business to foster upward mobility, but 
not without risktaking.
    As champions of American ``can-do-ism'', these folks are 
near-miracle workers. Usually undercapitalized and frequently 
operating on the slimmest of margins, small business men and 
women are constantly beset by the never-ending woes of 
regulatory and employee-related impediments. Taxes, health care 
costs, restrictive Government standards and practices, worker's 
compensation--all are major issues affecting many small 
businesses just like the big businesses are affected.
    In my region of Western Maryland, we are part of the 
nation's sector known as Appalachia. The Appalachian Regional 
Commission, in 1971, designated our Tri-County Council a Local 
Development District serving Washington, Allegheny and Garrett 
Counties in Maryland. Subsequently, the U.S. Department of 
Commerce designated us as an Economic Development District. 
Since that time, the Council has been successfully utilizing 
state and Federal resources to carry out an annual investment 
strategy across the region.
    More recently, the Council has been able to expand into new 
economic development initiatives consistent with a regional 
approach to economic growth and job creation. The Tri-County 
Council now offers a range of business services to the region, 
including a Manufacturing Network that utilizes computerized 
data to match buyers with potential local suppliers; a 
Procurement Technical Assistance Center that can help small 
businesses successfully enter the Federal procurement system; 
an Export Assistance Center that can assist local businesses in 
developing international markets for the goods and services 
they produce; and, finally, a Revolving Loan Fund which can 
provide gap financing to encourage business development and 
expansion. We need your support and your Committee's support 
and the Congress' support for the continuation of all such 
programs that sustain this means of growth for us.
    I also feel it essential to reinforce to you the benefits 
we derive from our Maryland Small Business Development Center 
partnership. This engagement between the U.S. Small Business 
Administration and the University of Maryland, College Park, 
links private entrepreneurs, Government, higher education, and 
our local economic development organizations so as to provide 
management training and technical assistance to Maryland's 
fledgling entrepreneurs and small business owners. The no-cost 
consulting services provided by this resource make a great 
impact on our economies by developing and refining business 
plans, solving problems, locating sources of capital, and 
imparting innovative strategies to support growth and 
profitability. Your congressional support of these programs 
must continue.
    Now turning to some facts I have secured from the Office of 
Advocacy, U.S. Small Business Administration, Baltimore 
District Office, I think it is important for us to reflect on 
why hearings such as these are important, and I will be 
reciting some of the statistics, Mr. Chairman, that you opened 
with your comments.
    For the record, small businesses in Maryland employ 54.6 
percent of the workforce; small businesses in Maryland account 
for 97.8 percent of all business firms; small businesses 
produce 55 percent of innovations, producing twice as many 
product innovations per employee as large firms. Clearly, these 
statistics indicate that small business is the avenue by which 
more and more are reaching out for the American Dream.
    As the Congress goes forth, please consider the importance 
of the global economy to the small businessperson. Trade 
barriers must not be restrictive as companies depend more and 
more on the international marketplace for their success. In my 
county, for example, a medical products company currently 
exports to over 30 foreign countries and, by any definition, is 
a ``small'' business. Companies like these need your attention. 
And telecommunications regulations, including Internet 
standards, must invite, rather than constrain, their global 
commerce. Your continued help in these areas will be 
appreciated.
    Finally, in our quest at the local level for stimulating 
new and existing businesses, it would be my request that this 
Subcommittee maintain its sensitivity to the passthroughs 
affecting our county levels of government which stem from 
federally-mandated programs or cutbacks. Main Street America 
provides the core strength of our great nation, but the domino 
effect of passthrough actions stops with those of us who are 
employed not to ``massage'' the economy in place, but to 
stimulate it to new heights.
    All too often, we who can provide a return on the 
investment from our work by way of new jobs, increased tax 
base, and a richer quality of life, become constrained by the 
losses from local funding which necessarily gets deferred to 
``maintenance'' or caretaker programs. Since the pot is only so 
deep, these mandated passthroughs detract from our progressive 
activities, and must be curbed where at all possible.
    In conclusion, I would ask for the Federal Government to be 
the positive force in its programs to focus on health care in 
America. Our aging population and its impact on older worker 
programs in the small business realm, alone, command new and 
creative resolutions to maintain a fit and ready workforce of 
all ages, today and in the future.
    Thank you, Mr. Chairman, for providing me this opportunity 
to appear today.
    [Mr. Howard's statement may be found in Appendix.]
    Chairman Bartlett. Thank you for your testimony.
    We now turn to Mr. Story.

   STATEMENT OF MR. RICHARD STORY, CHIEF EXECUTIVE OFFICER, 
         ECONOMIC DEVELOPMENT AUTHORITY, HOWARD COUNTY

    Mr. Story. Mr. Chairman, I agree with Mr. Howard, but let 
me add a little bit. Mr. Chairman, I am Richard Story. I am 
Chief Executive Officer of the Howard County Economic 
Development Authority, which is a public-private partnership 
for economic development involving Howard County Government, as 
our single largest shareholder, and approximately 80 other 
private companies who invest in the economy of Howard County 
through participation in our Economic Development Authority.
    I report to a 13-member Board of Directors. It is a 
volunteer group that gives incredible amounts of time in the 
name of economic development here.
    Howard County, has a growing population approaching 
250,000. Mr. Chairman, your question leading off dealt with 
continuing this period of prosperity in which Howard County 
certainly is fully participating.
    Over the last three months for which reports are 
available--February, January and December, respectively--our 
unemployment rate was 1.5, 1.4 and 1.3. So, certainly we are 
fully employed in Howard County. That is not to say there 
aren't opportunities to do better in the job creation and other 
economic development activities.
    Our average household income now is over $70,000. Because 
of these dynamics Howard County is not eligible for designation 
as an enterprise zone, we are too affluent. Yet there are 
opportunities which I have outlined in testimony that I 
supplied to you and to Committee staff.
    Let me just summarize my five points. The single most 
important constraint we have on continuing our success in 
Howard County is workforce. There are three points I would like 
to bring to the attention of the Committee.
    We held our Business Appreciation Week in Howard County 
several weeks ago, back in March, where we visited nearly 100 
companies, the overwhelming majority were small businesses, and 
the single theme that reoccurred in all of those meetings was 
``We need workers''. We need people to fill jobs and we are 
currently turning contracts away because we can't staff up to 
meet the new business. We just need to find ways to solve that 
problem. It is a people problem and not so much training 
anymore.
    Training, however, is still an issue. Federal resources 
should be available to complement a very aggressive state 
program both in MITP, Maryland Industrial Training Program, and 
the Partnership for Workforce Quality. Federal resources should 
be available to enhance those programs for both new employee 
training programs and retraining for existing workforces 
keeping up with evolving technology. We think training an 
important solution to our workforce challanges.
    Workforce mobility issues are important, too. Howard County 
is in the middle of the Baltimore-Washington common market. We 
are situated between two major metropolitan areas, or the 
``bullseye of the target'' which contains 7 million people. 
There are higher levels of unemployment in both core cities, 
certainly a lot higher than the 1.5 that we enjoy today.
    We have made some fragmented attempts to reach primarily 
into the Baltimore Metropolitan Area where today more than 500 
people are taking advantage of Federal HUD monies, through a 
pilot program called ``Bridges to Work''. It transports people 
out of urban areas in Baltimore who need the jobs, to places 
like Howard and Anne Arundel County where the jobs are being 
created. We can do much more to have a true suburban mass 
transit system. One that does not exist today. It would bring 
people who are willing to work to the companies who are turning 
work away because they can't staff up.
    We are also toying with a notion, and would like for you to 
explore, a National Job Service Database. In Mr. Howard's 
community, for example, a worker can be in any one of four 
states within an hour's drive on Interstate 81. That is a truly 
regional workforce work pool. We need to have a database that 
defies county, and sometimes even state, lines to be able to 
identify who is available to new employers or growing companies 
in those geographic areas. We should look beyond territorial/
jurisdictional boundaries when we evaluate economic areas and 
job pools.
    Issue 2 relates to how the community college system can 
participate in this process. Today, employers are requiring 
fewer degreed people in favor of employees who are certified in 
certain disciplines. Howard Community College has done very 
well in providing customized training or retraining programs 
specifically designed for the businesses they serve.
    In Maryland, the community college systems are coming 
together for a regional program that's called 
MarylandTraining.com. It should be up and running in September. 
To date all financial resources have been provided by the State 
of Maryland. We think there is probably a role for the Federal 
Government. The Federal Government could participate in 
Maryland and in similar programs nationwide.
    Issue number three, like Mr. Howard suggested, the Small 
Business Development Centers have been a wonderful way to 
counsel fledgling businesses or businesses who have issues, to 
help them past specific crises free of charge.
    In the past the Small Business Administration's 
relationship was with the State of Maryland's Department of 
Business and Economic Development.
    This system has been less effective over the recent past, 
here in Central Maryland, where it has been partnered with a 
variety of colleges or universities. There has been 
incontinuity in this program, where the contract has changed 
three times over that period. I would respectfully suggest that 
the SBDC program, at least in Central Maryland, be realigned 
with the State Government through DBED. This would restore a 
Government-to-Government partnership in serving us small 
businesses. I personally think that would be more effective.
    Issue number four has to do with agricultural marketing. As 
you know Mr. Chairman, all of the counties in your district 
have farmland preservation programs, including Howard County, 
where we are approaching the 20,000 acre mark in preserving 
farmland and/or open space.
    We have developed an agricultural marketing program within 
my agency to help farmers and owners of farm property in these 
districts to be more successful in farming. We think, 
therefore, that agriculture and agribusiness should be 
perceived by the Federal Government just like any other 
business, and all SBA and other Federal programs should be 
available to the farmers. Priority should be given to those who 
have participated in farmland preservation programs, who have 
sold their development rights and who are looking for ways to 
continue farming.
    Startup farming practices are also a unique challenge for a 
young person wanting to get into farming today. Farming is the 
quintessential small business, and we think special attention 
should be given to new, first-time farmers.
    My fifth point is streamlining the procedures. Mr. Howard 
and Mr. Glover both mentioned that, but the time that it takes 
dealing in SBA 504 and 7(a) programs to complete the 
documentation can be shortened, and therefore made much more 
user friendly to the business that we are trying to assist.
    I do have two other points I would like to mention that are 
not in my written testimony. One is small business incubation. 
We are starting a small business incubator. We are moving in 
over the weekend, so next Monday we will have our first two 
tenants in a building that was formerly occupied by Allied 
Signal Technical Services, and now owned by the County. Ten 
percent of that building is available to the Economic 
Development Authority and an incubator will start there.
    We think business incubators, especially technology 
incubators are perfect places to cluster companies. This allows 
us to serve more of them better, mentor them and provide them 
with venture capital. By having startup companies in one place, 
we are able to serve more small businesses who have tremendous 
growth potential more frequently and in a more efficient way.
    A final note, Mr. Chairman, has to do with minority 
businesses. We define minority businesses as businesses owned 
by minorities, women and persons with disabilities.
    We have an equal business opportunity function in the 
Economic Development Authority. All economic development 
programs should give special emphasis to minority businesses, 
not at the competitive disadvantage of non-minority businesses, 
but in answer to one of your opening questions. Some of these 
companies have historically not fully participated in all the 
programs that are available to them. We should make an extra 
effort to help minority businesses. That is certainly the case 
in Howard County and probably an agenda of yours as well. That 
is my testimony.
    [Mr. Story's statement may be found in Appendix.]
    Chairman Bartlett. Thank you.
    Now Mr. Lyburn.

 STATEMENT OF MR. JOHN T. LYBURN, JR., DIRECTOR, DEPARTMENT OF 
              ECONOMIC DEVELOPMENT, CARROLL COUNTY

    Mr. Lyburn. Congressman, I would like to thank you for all 
you have done for small business, especially in Carroll County. 
I would like to disagree with one thing you did say, though, 
when you said if you need to know anything you can call Mr. 
Glover. I can tell you, we call your office and you have given 
us all the answers. So, I thank you.
    I am Jack Lyburn, the Executive Director of Economic 
Development for Carroll County. Carroll County is north of 
Baltimore County. We are 456 square miles, 297,000 acres. We 
have 33,000 acres that are Ag. Ag is our number one industry, 
over $100 million.
    However, I believe that--and we talk about partnership is 
extremely important--I believe that small business economic 
development is a very local issue. And we have a lot of drivers 
of it--the Federal Government drives it, the State drives it. 
We are where the rubber hits the road, and I think the three of 
us on the right side of the table--we have to make the deals 
happen and we do.
    I took the liberty of coming up with three problems, three 
examples, and I have given you the, I guess, solutions to them, 
as I guess economic developers usually do. The first one is the 
banking, I would like to talk to you about the Federal 
regulation in banking.
    The problem that I see is that the Federal Government is 
really encouraging banks to get into the insurance and the 
brokerage business, and there is an et cetera, et cetera, after 
that.
    This puts smaller banks at a competitive disadvantage as 
well as negatively impacts small local insurance agencies and 
stock brokers who may be put in position of selling out to a 
larger company or going out of business altogether, and we are 
seeing that, especially in Carroll County. In the last two 
years, we have had three of our local banks bought out by 
larger banks.
    The local economy loses its ability to influence these 
newer, larger lenders. It takes the ability and decisionmaking 
away from local and it goes to national, and what we are trying 
to do is in a corrective action would be an assessment or study 
of the impact of Federal rules and regulations and their effect 
on small businesses might be considered before these rules are 
put into effect. Please look at that before you do that, 
especially with--I want to say ``gobbling up'', but the larger 
banks are doing that--and we think that--I think that the rules 
and regulations are encouraging them to do that.
    Banking with the SBA. It is a problem. The SBA must comply 
with standard operating procedures in order to issue a loan 
guarantee. However, the operating manual is extremely long, 
making it difficult for smaller community banks, the ones that 
are still left, to comply with. Sometimes, these banks must 
hire an outside attorney to review the documentation. I have 
spoken with several community banks--and a lot of banks refuse 
to do an SBA loan just because of the documentation. This makes 
it more difficult for them to compete with larger banks and can 
also add a significant expense to the borrower.
    Corrective action: I think to create a simple one- or two-
page ``check list'' and let people know what you need for a 
loan guarantee. This list can be reviewed quickly by the SBA 
and a lender would feel secure that the guarantee would be 
there for the term.
    These are just a few of the examples that could be given on 
insurance and banking.
    We talk about Main Street Revitalization. When I say it is 
a local issue, it is a local issue but it is a Federal funding 
and local and State issue. The State funds the local 
Neighborhood Business Development Program. We have eight towns, 
the same as Washington County has. These types of projects are 
extremely important to Carroll County. While this program has 
been very successful, our local Main Street in Westminster 
wouldn't be the success it is without these types of programs.
    I feel Federal dollars could be used to increase the 
current funding level. In general, I feel more funds need to be 
put aside for startups and expansions especially in small 
business, and these are retails and small manufacturers that we 
have on Main Street. I would like to see more money fed into 
the State programs.
    Programs that also have had a positive impact on small 
business, the main thrust of the Economic Development Office is 
to retain and attract major employers, and we have all said 
that--retention, retention. About 90 percent of our economic 
development has all been retention, especially in Carroll, and 
I know in Washington County and Howard County. Given this 
mission with the limited staff and budget, it is impossible to 
provide the level of assistance required to assist small 
businesses in our county.
    For this reason, I strongly support the SBDC. They have 
been invaluable. I can tell you that we have seen over 200 
people just in Carroll County in the last year to start up 
operations. We need support. In the past two years, we worked 
with at least eight Main Street businesses in financing 
programs. We need to do a lot more with that.
    The public needs to be better informed on the type of 
assistance programs, I feel that is a problem. We don't educate 
the public. We have many times businesses are not fully aware 
of the array of services offered by the SBDC--and this is from 
the Federal, State and also local level. While we make every 
effort at the local level to make the community more aware of 
our services, I would like to see more Federal environment in 
the promotion of these services. Education is the key to let 
the people know we have the programs. People walk in and say, 
``Gee, we are surprised, we didn't even know about these 
programs''. I think education is important.
    I agree with Dick when he talked about the SBDC works 
better when it is working out of a local community economic 
development office. I think it should be in a local community 
economic development office. When looking to start a business 
or expand, people typically contact a local economic 
development office, they don't call a college and they don't 
call universities. This applies at the state level as well. 
SBDCs often ask the state for matching funding. It may be 
easier for the state to provide SBDC funding to assure some 
level of control and input.
    I feel also that this program would better be fit under the 
Maryland Department of Business and Economic Development. I 
have been in this position five years now, and I have seen 
three changes with very little continuity between the 
universities. This would provide a ``one-stop-shop''. When we 
talked about labor with the WEA program, it is a one-stop-shop. 
I think we need a one-stop-shop for business development.
    We have been criticized, all of us sitting at this table, 
that we deal more with larger companies and not smaller 
companies. I feel if it comes under DBED where the consolidated 
programs are there, I think that is where it needs to be.
    In conclusion, there are many Federal programs that have 
good intentions, but end up causing undue burdens on small 
businesses. Especially in Carroll County, where 95 percent of 
our businesses are small--and that is under 100--a lot of it 
can be devastating on the local community.
    I hope my testimony today helps, and look forward to 
working with you. Thank you.
    [Mr. Lyburn's statement may be found in Appendix.]
    Chairman Bartlett. Thank you very much. I want to thank all 
the witnesses. Several of you have defined ``small business'' 
by various numbers. Technically, I think Jere said it is 5,000 
and under----
    Mr. Glover. No, 500 and under.
    Chairman Barlett [continuing]. 500 and under----
    Mr. Glover. For statistical purposes, yes.
    Chairman Bartlett. Okay. Many of you have defined it as 200 
and under, 100 and under--okay--but 500 is pretty big business 
for a lot of people.
    Who establishes the definition of a small business?
    Mr. Glover. There are two different general parts. In the 
1980 White House Conference, the delegates were asked what 
number made most sense for general purposes and economic 
analysis and all that. The answer was 500.
    The SBA, for procurement purposes, has a number that 
depends on the size of the industry, the makeup, the 
characteristics, and they adjust that from time to time, and so 
SBA's numbers are fairly low in things like architecture and 
fairly high in things like manufacturing. They can go as high 
as 1500 employees for SBA purposes, but for statistical 
purposes we look at a variety of different breaks, but 
generally anything under 500.
    The important thing is to make sure the regulation or the 
program meets the size of businesses that need it. Some 
programs are great for startup businesses, some are great for 
companies who have been around for a while, and you need 
different definitions. And so we don't want to put a fixed 
number for exemptions for all businesses under ten, for 
example, because that is a huge incentive never to grow above 
ten. So those numbers jump all over the place, and that is not 
by accident.
    Chairman Bartlett. There are, in fact, some regulations 
that are limiting the growth of businesses. Restaurants, I 
think, when they get over 50, respond to different regulations. 
And I have talked to some restaurant people--I don't know what 
threshold they get over at 50, but some of them want to stay 
under 50 because when they cross that threshold they have 
additional regulatory burdens.
    What is the size of a contracting company now that above 
which OSHA will come, below which they will not come?
    Mr. Glover. OSHA does not have a fixed number. OSHA says 
they will go into anyplace that has a significant hazard. For 
example, if you have one employee and that employee is testing 
dynamite blasting caps, then that company would be covered. But 
they have changed their policy. In the old days, they used to 
focus primarily on small firms, now it is more evenly balanced 
they say.
    Chairman Bartlett. Was it just a general consensus that 
under ten employees they generally did not come?
    Mr. Glover. That is the case. If they have a complaint, 
they will now send the company a letter asking that them to 
respond, but then they will send an inspector.
    Chairman Bartlett. So the only time they will visit really 
small companies is when there is a specific complaint?
    Mr. Glover. They will tell you that occasionally they will 
do something different, but generally speaking that is correct.
    Chairman Bartlett. Okay. Mr. Glover, you mentioned the 
patent bill. I think I am probably the only member of Congress 
who has patents, and so I was much involved in that debate with 
some very good friends of mine who, with all the best 
intentions, I thought, were doing something that was 
counterproductive.
    We were successful finally in getting an amendment through, 
as you noted. It was Marcy Kaptur from Ohio who was the author 
of that amendment because we needed to pull some Democrat votes 
as well, that I worked very closely with Dana Rohrabacher 
making sure that small businesses and individual inventors and 
universities were excepted from the requirements of this 
legislation.
    Generally, what the legislation did was to require 
publishing of the invention. When you are a big company and you 
file for patents in every major jurisdiction in the world, that 
publishing point is moot because it is, by definition, 
``published'' anyhow. But they wanted to start the clock 
running with publishing that would run for 20 years. For the 
average inventor, it starts with the issuance of the patent, 
and it runs for 17 years, and this was going to be a major 
detriment to small people. Half the clock would have run out by 
the time you got your patent protection. So we were very 
pleased to get that through.
    Mr. Glover. Mr. Chairman, when we were involved in that 
fight, it was pretty lonely the first few months of that fight. 
There were you, Congressman Rohrabacher and a few others. When 
I submitted my testimony early on in that debate--actually, 
comments to Congress--it was a pretty lonely fight. I was 
awfully glad when we got a good many reinforcements to come in 
near the end of the fight, but it was pretty lonely there for a 
while.
    Chairman Bartlett. Well, some of those fights are primarily 
a matter of education. A majority of people agreed with us when 
we had an adequate opportunity to articulate the problem, and 
you do that through protracted debates on the Floor, and we 
were able to do that, and we fortunately had a majority of 
people who agreed with us.
    The sponsors of that bill were two of my best friends, 
Howard Coble from North Carolina, a very good guy, and his 
boss, Henry Hyde, who is about my favorite Congressman, and it 
was kind of unpleasant doing battle with these really good 
people, but I just felt that they didn't understand small 
business.
    One of you mentioned the number of people in small 
business. We probably have about 30 people who were members of 
NFIB before they came to the Congress, that is about it in 
terms of small business representation in the Congress.
    You mentioned the SBREFA Act. I wonder if you would, for 
the record, indicate the major advances that were--we have had 
your Office of Advocacy now for 25 years, but SBREFA gave you 
some additional teeth. I wonder if you could very succinctly 
indicate what those were.
    Mr. Glover. The Office of Advocacy was created under 
President Carter. When it was first created, I had the 
privilege of serving then as Deputy Chief Counsel.
    The Regulatory Flexibility Act requires the Government 
agencies to look at the impact of their regulations on small 
business, and evaluate--if there are alternatives or options 
that would put less burden on small business. But they put a 
provision in there that prohibited judicial review, so that 
basically the legislation didn't have any teeth. Although, it 
was a laudatory, good idea, agencies sometimes complied and 
sometimes didn't.
    The Small Business Regulatory Enforcement Fairness Act 
passed in 1996 put some real teeth into it. It did several 
things. For one, it created a national ombudsman where if you 
think an agency is being unfair in its enforcement against you, 
you can go to it. It created judicial review for the Regulatory 
Flexibility Act, which I think is probably the most significant 
part of that.
    It also did something that was fairly unique. It requires 
two agencies, OSHA and EPA, before they have a regulation, 
before they even propose it, to convene a panel consisting of 
myself, the Chief Counsel, senior regulatory personnel at the 
White House, and a senior person at the agency.
    We then bring in a group of small businesses--in some cases 
individual--but we bring them in to look at not only the 
proposed regulation, but the economic analysis, the cost 
analysis, and the justifications for the regulation. And then 
we have a meeting and we discuss the information. After the 
small entities tell us what they think of the data information 
and analyses the agencies have conducted, we then prepare a 
report which is given to the head of the agency. While it is 
not binding, it has to date been very successful in having the 
agency adopt the recommendations in the report. So the 
regulations that come out are much less burdensome on small 
entities and small businesses.
    The agencies will often even exempt small businesses so 
they don't even have to go through the rule making process, 
which is a very good outcome in many of the cases. We get into 
situations--and an EPA rule affecting small refiners is very 
clear in my mind because it is one very much before us--it 
turned out that all the small refiners in the country, about 25 
of them, produced only 3 percent of the pollution problems 
among the refineries, but were going to be put out of business 
if the regulation was adopted as originally proposed.
    So, by having EPA recognize the impact on small refineries 
led EPA to a decision that allowed them to wait until the 
technology develops to come into compliance. We are not talking 
about very much pollution, we are talking about de minimis when 
you think of 3 percent. The change in the rule enables us to 
sustain competition. And the important thing is that small 
business is not just nice people creating jobs, they provide 
the competitive thrust to maintain competitive low prices. This 
reality was an important factor in this instance.
    Let me just mention a couple of things that I think are 
sort of important, after listening to my friends on the panel 
talking. One is we started a program to recognize state and 
local government models of excellence, and we give awards each 
year to programs that do something well. We can't tell people 
what to do because we are not smart enough to understand how a 
state can do something better, or how a local government can do 
something better. But we can pull together a panel and judge 
who is doing something. We share those models of excellence 
with the governors and we share those with various state 
officials. I send them a copy because they may see some ideas 
they like. And they also may have some programs that they want 
to nominate next time for that.
    Bank mergers is a major concern, and I am glad to hear you 
folks raise that because we are really worried about what is 
happening. We publish banking studies in which we look even at 
farm loans and what is happening to farm lending. We are going 
to have a conference on June 15th on bank mergers, in 
Washington, in which we are bringing together some of the top 
economists in the country, with some of the top regulators in 
the country. We are going to ask the questions just asked about 
what is happening in bank consolidations and how is that 
affecting small business.
    We did one of those three years ago, and at that point the 
data and evidence was inconclusive. We don't know what the data 
is going to show by June 15th, but we are scheduling the 
conference so that we will have the latest CRA data, Community 
Reinvestment Act data, and the latest call report data. We will 
also have our studies out so that we can begin to look at this 
question. I think there will be a time in which the large banks 
decide to pull out of rural America or pull out of small 
business or pull back, and when that happens we need to know 
about it from a public policy point of view.
    Chairman Bartlett. We have been trying to add--I have been 
particularly personally aggressive--in trying to add IRS to the 
SBREFA process. Where does support for that now stand within 
the Administration?
    Mr. Glover. I think that no agency ever voluntarily chooses 
to have a burden--in this case, regulatory burden--placed on 
them, and they are opposing it, the IRS. And I think that some 
version of it should be worked out because I think we can 
benefit from it.
    Let me just share with you the pension example. In three 
different instances, we put together what is, in effect, a 
panel which is informal. It consists of small business people 
getting together, talking with the Government officials about 
problems. In each of those cases, to the shock and surprise of 
small business people, they are getting the government agency 
to understand their problems. They are beginning to see major 
changes. So, we are facilitating that dialogue informally, but 
I think a more formal relationship would have to happen in 
areas other than just pensions.
    We just had a situation that developed--that I know you 
were involved with--on installment sales tax policy. When small 
businesses using the accrual basis of accounting, decide to 
sell your business, most times they don't get cash money up 
front. They get the proceeds over time--but they would not be 
able to pay tax on the installation basis, even though they 
didn't get the money for up to ten years. That was a very 
significant burden and at the very least depressed the value of 
small businesses.
    When that IRS rule came out, we got the small business 
community together, as we often do, with all the trades, got 
together and talked about the issue. We then went to Treasury. 
They never talked to us about that issue. Now, in the pension 
area, we worked very well. I went to the senior person on 
pensions and said, ``Will you give your boss this letter that I 
am sending, saying why this is a concern and what should 
happen''.
    We eventually got their attention at the same time Congress 
scheduled hearings. We find often the combination of our 
involvement within the Administration and congressional 
hearings facilitates good decisionmaking, and we ended up being 
able to facilitate that kind of a situation where the 
Administration did not oppose legislation, but immediately put 
an administrative fix in if you had sales of under $1 million. 
But that requires this combination of things. And I think if we 
were able to look at some of these issues in advance, we 
wouldn't have those problems popping up.
    Chairman Bartlett. Our legislation to include IRS in the 
SBREFA process along with OSHA and EPA, and one of the 
Committees it had sequential referral to was Ways and Means. It 
would be very helpful if you could help us with Bill Archer, 
who genuinely wants to do the right thing, to get that pried 
loose from Ways and Means so that we can proceed with that 
legislation.
    Just as an example of one of the potential--one of the real 
problems with IRS--not a potential problem--we had a full Small 
Business Committee hearing on the IRS and the accounting 
methods that they are requiring of small businesses.
    If you are a small business of less than a million dollars, 
you can elect any accounting method you choose. If you are 
between $1 million and $5 million a year, the reality is that 
IRS will determine what method you will use because you may use 
one and they will decide you should have used the other one and 
you will be enormously penalized for that. We had one person, a 
drywall contractor, who was essentially being put out of 
business by an $80,000 IRS lien simply because he was using 
cash basis, they wanted him to use accrual basis. If you are 
over $5 million, they are going to require that you do accrual.
    I asked the IRS person who was there--and I was a small 
business person. When I retired, I liquidated my corporation. 
And I asked him would it have made any difference how much tax 
I would have paid at the end of the day, whether I used cash or 
accrual method of accounting--after I liquidated my business.
    He said, ``No, you would have paid exactly the same amount 
of money''. I said, ``It is not a question then of whether they 
paid the tax, it is simply a question of when they paid the 
tax, is that true?'' He said, ``Yes, that is true''. Then I 
said, ``Why don't you let them alone?'' The small business 
people, you ultimately get the same amount of tax from, whether 
they do accounting on a cash basis or on an accrual basis''.
    But this is one of the instances where having IRS involved 
in the SBREFA process would be very helpful to small business 
because then you could go to bat for them. This is perfectly 
silly for the Federal Government to be harassing small 
businesses.
    I carry a copy of the Constitution, I just wanted to refer 
to something--this also has the Declaration of Independence in 
it--that I thought was very interesting. One of the reasons 
that they felt that they had a right to declare their 
independence--this is one of the complaints against the King--
``He has erected a multitude of new offices and sent hither 
swarms of officers to harass our people and eat out their 
substance''. And I thought, what better definition could you 
have of our regulatory agencies--``erected a multitude of new 
offices'', that never existed when I was a boy, ``and sent 
hither swarms of officers that harass our people and eat out 
their substance'', was their definition of what the King was 
doing to them. And I thought, you know, our Federal Government 
here is pretty much doing the same thing to us.
    Mr. Glover. One of the real advantages of SBREFA is I think 
most Government officials are well intended. They don't go out 
and set out their goal is to do something bad to small 
business, it is they don't realize it. And when you put them in 
a room with the people, they begin to understand for the first 
time, and we don't get the unintended, accidental impacts that 
are negative by having that process.
    So, I think the process really is an educational process, 
and often the individuals have no understanding at all of what 
this is going to do in the real world. And this education 
process that SBREFA forces, I think, is a very important 
trigger to making those changes.
    Chairman Bartlett. They have to sit and listen, and then 
justify their actions. You mentioned before the hearing to me 
that you had been effective in reducing by $5.3 billion the 
regulatory burden. I asked you out of what total number, and 
the number you gave me was about $700 billion a year as the 
regulatory burden.
    I would just like to note for the record that this consumes 
about 15 percent of the working time of every American just to 
meet this regulatory burden. You will not be free of working to 
support Government until about July 1. About May 10 you will 
have paid all of your taxes--Federal, State and local--but you 
are not yet free to earn a dime for yourself because for about 
the next six weeks you will be working full-time to pay the 
cost of unfunded Federal mandates.
    I have a question. You know, we are all very supportive of 
these Government programs. Once the Government has taken your 
money, then everybody would like to get it back in some helpful 
way, but I have often asked myself the question, if you had the 
option of the Government not taking your money and leaving it 
in the private sector, or letting them take it and then getting 
it back from them, which would you choose?
    In other words, the question I am asking is, how much of 
this support for these Federal programs is simply because they 
have already taken your money and you would like to get it 
back, and how much of it is because the Federal Government 
really does something important?
    Would you be just as well off in your local communities if 
the Federal Government didn't take that money and you have to 
go on bended knee to get it back, or is there some inherent 
benefit in some of the Government programs that you really 
would ask them to take your money so that they could do these 
good things for you?
    Mr. Glover. One of the things that I have found in 
assisting small business is that no one program helps all small 
businesses, and no one program helps any small business all of 
the time.
    But having the programs there to give a lift up at the 
right time is something that is worthwhile. And while I think 
that we may go overboard from time to time, I think that there 
are common goals and common needs that we have. Small 
businesses perhaps pay far too much of a burden, their tax 
burden is higher than it should be, their regulatory burden 
certainly is higher than it should be. On the other, we need a 
skilled workforce, we need to educate the workforce, and quite 
frankly we have situations like now where certain parts of the 
country--in this case, in certain parts of this State--we need 
more help than others, I think that it is not unfair for us to 
be helping some of the rural parts of the State that are having 
a tougher time in terms of employment, in terms of education, 
so I think that some balancing goes on.
    I think the problem perhaps is how it is allocated and the 
degree and the percentage, more than just saying there 
shouldn't be any governmental regulation, perhaps it is the 
question of the wisdom how we do it.
    Chairman Bartlett. All of our community development people 
have emphasized the usefulness of the SBDC centers, and without 
mentioning them, several of you mentioned the free consultation 
you get. How much of that was provided by SCORE?
    Mr. Howard. None in my case.
    Chairman Bartlett. None in your case?
    Mr. Howard. No.
    Mr. Story. The answer in Howard County is both. We provide 
free offices in our Business Resource Center both to SBDC and 
SCORE, and they complement each other.
    Mr. Lyburn. We have none in Carroll County.
    Chairman Bartlett. You have no SCORE?
    Mr. Lyburn. We have no SCORE at all.
    Chairman Bartlett. Well, we need to get SCORE there.
    Mr. Howard. We have a SCORE, but they are mutually 
exclusive from the SBDC in terms of referrals.
    Chairman Bartlett. Is that so?
    Mr. Howard. Yes.
    Chairman Bartlett. Why is that not coordinated?
    Mr. Howard. It is just established as different entities, 
and our agency seeks to determine best which one to refer them 
to, or to refer them to both, but the SCORE chapter is a 
subagency of the Chamber of Commerce, while the SBDC is housed 
in our community college. And the community college, as you 
well know, with our incubator and technical innovation center 
there, has a whole higher plateau of knowledge of how to give 
assistance.
    I would like to comment on the question here, too, 
Congressman, about whether it is better to take your money or 
whatever. I think that there are both sides to that question, I 
could possibly give you an argument lasting an hour and a half 
on each, but one program that none of us have mentioned that 
comes to mind that I think merits some attention on this 
question is the Community Development Block Grant program.
    I think that it is well intended that we should socialize 
and make funds available to those communities that have less as 
the program originally was intended for, but I believe that we 
should be looking carefully as to whether or not we are 
perpetuating a low and moderate income level to the detriment 
of the per capita income needs of quality communities.
    Case in point is my own where our per capita income average 
for the 24 jurisdictions in the State of Maryland is below 
midpoint in the State. We still enjoy the benefits of the 
Community Development Block Grant program, but must comply with 
the percentages of low to moderate income workforce.
    When you are in good employment times, as we are right now, 
it is not a matter of having to make sure that you can supply a 
job to a person because most workers out there are already in 
some kind of job, but being forced to go find 51 percent low to 
moderate income in good economic times like this does nothing 
more than continue to constrain the per capita income level 
that we have. So I think maybe as we move into new times of 
technology and fewer jobs in the workplace in many instances 
because of technological innovation, we will find it tougher to 
comply with CDBG guidelines.
    Chairman Bartlett. I personally believe that there are some 
Federal Government programs that are inherently beneficial, but 
I think we always need to ask the question when we are coming 
to defend a Federal program, are we defending it because we are 
just happy to get some of our money back, or are we defending 
it because it is inherently a good program, and we need to make 
that differentiation.
    For those who are just happy to get our money back, then I 
think they never should have taken it to begin with, but we 
need to be careful that we are supporting Government programs 
because they are inherently beneficial, not simply because they 
have already taken our money and, let us see if we can't get 
some of it back.
    I want to thank you all very much for your testimony. 
Before we close, I would just like to mention the Community 
Reinvestment Act and the small banks. That is a burden on small 
banks, from my experience, which is totally unjustified and 
unnecessary.
    The small banks in the community that I live in would 
advertise for customers, and their advertisement would be ``You 
should bank with us because we invest more of our money in the 
community than our competitor does''. Now, when a bank is 
getting its customers that way, why do they have to be burdened 
with this Community Reinvestment Act?
    Mr. Glover. Most small banks, community banks, are exempted 
from the CRA.
    Chairman Bartlett. Well, the ones that I deal with--okay, 
you can be a small bank and be a national bank, then you are 
not exempted, are you?
    Mr. Glover. It depends on asset size, and I don't remember 
what the break is, $20 million or $100 million in assets. I 
think it is $100 million.
    Chairman Bartlett. Well, you have to be pretty small then 
not to be exempted from it because the banks that I deal with 
are burdened with it because they mentioned that as one of the 
specific things they have to deal with. Maybe that line needs 
to be drawn at a different--not really so much talking about 
the size of the bank as where the bank is located.
    A bank in Baltimore City may need community reinvestment 
obligation because reinvesting in that community is an 
economically tough thing to do. In Frederick, Maryland, 
reinvesting in our community is a desirable thing for the bank 
to do. They vie with each other to see who can reinvest a 
bigger percent of their money in the community because that is 
how they attract customers.
    Mr. Glover. This is one thing that I think the Community 
Reinvestment Act data will show. It is going to be very 
important for us to look to see how much big bank holding 
companies, which bought up a bunch of local banks, are they 
pulling out of that local bank and how much are they putting 
back in loans. If they pull out too much, the data are one of 
the only things that we have got that monitors that.
    So, the local bank information is very important for this. 
You don't need it to show that they lend at home that is the 
only market they have. But, the big banks can decide it is not 
economical. So, we are watching that. We have spent a good bit 
of time studying banking and looking at banking.
    Chairman Bartlett. You mentioned to me the reaction of 
large businesses and small businesses to regulations, that 
large businesses just consider it a part of the cost of doing 
business and they build it into their cost. Another incentive 
they have is that frequently the biggest competitor for large 
business is small business, and since small businesses are 
disproportionately affected by regulations, the large 
businesses actually encourage regulations, or not discourage 
them, because it helps to tilt the playing field in their 
favor.
    That is particularly true for banks. I have just had a 
number of small bankers come to me, showing me large stacks of 
regulations. They have to hire full-time people that do nothing 
but read these regulations and respond to them. If you have a 
big bank--if you have 100 people and you have to hire three to 
keep up with the regulations, that is not bad.
    If you have four people and three of them have to keep up 
with the regulations, obviously that won't work, so that is 
where our small banks are, and I think there needs to be some 
way to relieve them of many of these regulatory obligations or 
they are simply going to cease to exist.
    Mr. Glover. You are absolutely right. We don't see enough 
new banks being started to replace those that are leaving, and 
we don't have the community involvement when the bankers and 
the bank decisions are being made in North Carolina or 
California or New York and not in the local community, and 
sometimes not even the local state. And that is a real problem, 
it is a real concern. It is something we have got to watch for, 
but at the same time we need to change the regulatory burdens 
to encourage more new banks to be created, and you are right, 
the small banks are disproportionately affected by the burdens.
    Chairman Bartlett. I want to thank you all very much for 
your testimony. As Mr. Glover mentioned, we are continually 
trying to improve the legislation, and so if you have 
suggestions, specific suggestions, for improving the 
legislation, please let us know because each year we have a new 
or can have a new authorization bill which will include changes 
that would be beneficial to the small business community. It is 
not that the Congress is insensitive, we just generally are 
somewhat ignorant, and so we need your help.
    Thank you all very much for your testimony.
    Chairman Bartlett. I thank the members of our second panel. 
This is where the rubber hits the road. These are the small 
business people. Our first witness is Randall Nixon of Nixon's 
Farm. I have had the privilege of visiting his farm, and thank 
you very much for being a witness.
    Our second witness is not Robert Schulze, it is John 
Schulze, and we visited your organizations, and thank you very 
much for being a witness.
    And Ken Williams, CEO Director, Howard County Chamber of 
Commerce. Thank you very much, and we will start with Mr. 
Nixon. By the way, your full written testimony, without 
objection, is made a part of the record, so you can feel free 
to summarize, and in our discussion and questions and answers 
which follows you will have ample opportunity to expand on 
issues that are of importance.

          STATEMENT OF MR. RANDALL NIXON, NIXON'S FARM

    Mr. Nixon. Thank you, Congressman. I first want to thank 
you and the members of the Committee for giving us an 
opportunity to testify and getting outside of the bubble which 
is known as Washington, D.C. and actually coming to Main 
Street.
    I was very pleased to see Major Clark, my former immediate 
boss, who is the Assistant Chief Counsel for Advocacy for the 
Small Business Administration, and Major and I actually worked 
on the Small Business Committee together several decades ago. 
In another life, I was a Legislative Assistant to a Congressman 
and actually served on the Committee that you now sit on. And I 
learned several things when I worked in Washington.
    One was that everyone thinks that every other Congressman 
is a bum except their Congressman, and the other thing is that 
most people really don't know very much about what Congress 
does, and I am very pleased to say that I have observed you in 
action, and I do follow Congress very closely. I am one of the 
few people I know that actually subscribes to the Congressional 
Record and actually reads it. I think it is the greatest 
unedited newspaper in America. And I know what kind of work you 
do, and I am very, very pleased that you represent us in Howard 
County and in the Western part of the State.
    For the record, my name is Randall Nixon. I own Nixon's 
Farm which is located in West Friendship. As a business, we are 
both a farm and an entrepreneurial business. We are in the 
agri-tourism business. We provide services ranging from large 
corporate picnics and parties to wedding receptions, bar 
mitzvahs, conferences, retreats, we do a great many church 
events, and we essentially keep the land ``pretty'' so that 
people can come and eat our food. And by the way, I am going to 
summarize most of my testimony. I am going to read part of it 
because I want to emphasize some of it and articulate from some 
of it.
    We, as one of the State's oldest minority businesses, are 
interested in expanding our business. We think we have some 
very unique opportunities that are available to us both by 
virtue of geography and of extremely hard work and 
perseverance, and just plain, sheer pigheadedness. We just are 
not going anywhere else. And I have summarized some of our 
history and our business. We are in the midst of a million-
dollar expansion.
    Congressman, you haven't been to the Farm since last 
August, so you have got to come back and look at our new 
ballroom. We just redesigned and expanded our 137-year-old 
barn, it is now a gorgeous, what I call, a 19th century country 
ballroom. I literally take brides in there and they look at it 
and they say, ``Oh, my God, how much is the deposit''. So, we 
have done very, very well with it so far.
    We are in the midst of completing a large commercial 
commissary from which we hope to expand dramatically and become 
the dominant caterer in Western Howard County and beyond. So we 
have some very substantial plans for expansion.
    We currently have 15 full-time employees, and about 30 
part-time employees, and our aspiration is to grow quite 
dramatically. We think we can actually grow to be one of those 
larger small businesses with 400-500 employees over the next 
ten years. We think the opportunities are that great.
    I have to say that Isaac Newton, when he was elected to the 
Royal College of Sciences, said, ``If I see farther than other 
people, it is because I have stood on the shoulders of 
giants''. And it is because of the dedication and passion that 
my parents have had in literally keeping the farm when land 
really wasn't worth very much in the 1950s. My parents 
purchased the farm in 1956 for about $150 an acre, and I have 
since had it reassessed and it has appreciated about 15,000 
percent, so I would say it was a very good return on 
investment.
    I want to highlight some of the things that we have 
experienced with respect to the Federal Government and how we 
think the Federal Government both helps and has hurt us, and 
what things we think need to change in that process.
    I first want to talk about the SBA Guaranteed Loan process 
and our experience in it, and I am pleased to say that for the 
most part it has been a pleasant experience. As I said, we are 
one of Maryland's oldest and most successful minority 
businesses. When I say successful, I mean we survived. The vast 
majority of minority businesses do not survive, and that is a 
great tragedy. It is an unspoken tragedy in America. So we have 
gone through the process of trying to expand.
    And we always thought--because up until relatively recently 
we have been a debt-free business. We have run on cashflow, 
like a lot of small businesses do. And we thought that when it 
came time to borrow money, that it would be a relatively simple 
process because we are sitting on over $4 million worth of real 
estate, we have impeccable credit, we have positive cashflow.
    We said, well, when we are ready to expand, we will simply 
go expand. And we found that banks were quite reluctant to talk 
to us, and we were astonished. And we said, well, wait a 
minute, we are the Nixons, don't you know who we are? We have 
done all kinds of charitable activities in the community. We 
support the community. We are fixtures in the community, we are 
an icon. And their response was, ``Well, we think you are not 
collateral short, but cash short''. And we said, look at these 
rosy projections. Look at all these wonderful things we are 
doing. Look at what we have done in the past. And the banks 
were quite reluctant to make that leap.
    And so the SBA has been very instrumental in, number one, 
providing the loan guarantees and, number two, helping to clear 
the path. Bankers and entrepreneurs speak a different language, 
as I have often said, it is sort of a private language issue, 
and entrepreneurs see things that can happen, as you know, and 
make them happen one way or the other, and bankers tend to be 
very risk averse people, which is not to denigrate them. 
Government lawyers tend to be risk averse people, and I was one 
of those once, but I got over it. I improved.
    But the SBA really did help us in giving us the credibility 
that we needed to overcome the reluctance of the banks, and we 
have been able to--we told the banks what we would do, 
precisely how we would do it, we had a superb business plan--
and, parenthetically, there are basically two kinds of business 
plans. There is the business plan that you write to give to the 
bank, and you say, boy, done with that, and you are finished 
with it.
    And there is what I call the ``battle plan'', and the 
battle plan is my real passion in the business, and that is the 
plan that you actually work from, and I use a very crass and 
mundane example and it is one I use all the time, and I say, 
how do we clean the bathrooms here? How do we do that? What is 
the system? What is the methodology? How do we do it? How was 
it done? How was it checked? And Mr. Schulze might--and his 
passion for cleanliness in his establishments is well known.
    So that is the kind of detail that we work on. It is very 
important to us. It is as much a moral issue as it is a 
cleanliness issue. So, the SBA has helped us in that process, 
and I want to publicly thank Allen Stevenson, who is the 
District Director of the SBA in Baltimore, and his assistants, 
Frank Henson and Rick Miller, who are just outstanding public 
servants, people who have a passion for small business and 
really want small business succeed.
    I do have several criticisms of the process, of the SBA 
Guaranteed Loan process. It is very expensive, and it is 
expensive because of the regulatory requirements that it 
entails. You have to spend a great deal of time and money in 
the process, and in order to do that--very few minority 
businesses can do that because it is just very pricey. You have 
to have a lot of cash to be able to go out and borrow cash.
    And because we have always been a profitable business, we 
were able to do that, but it takes a lot of time. You have to 
hire accountants and attorneys and you have to go through the 
process. And I am sure that there is a better way that it can 
be done, something which would be less costly and less timely. 
We have literally been in this process--it took us about a year 
to go through the entire process, and a lot of businesses, a 
lot of business people, don't believe that we can actually--
they are amazed that it has taken us, with our reputation and 
our collateral, that it has taken us as long as it has to 
actually obtain the cash that we needed to expand. So, I do 
think that there is room for improvement there.
    You did mention the Community Reinvestment Act. I do think 
that with respect to the banks that we spoke to, that the 
Community Reinvestment Act is both a burden and a benefit to 
banks, depending on whom you speak to, and I do think--and we 
did speak to several small rural banks, and they have a very 
different view of CRA than large urban banks--and there has to 
be some way to rationalize the process so that--and let me say 
parenthetically that the small rural banks have been far more 
cooperative in talking to us than the large urban banks, I 
think, partly because they understand land as collateral, and a 
lot of large urban banks do not.
    They are not looking for that. And I think small rural 
banks are much more hungry for customers who can actually 
produce the goods. And so I think they have a very different 
view of things.
    And I have anecdotally, from Major Clark and from other 
people who are involved in small business, heard some real 
horror stories about small rural banks that are put in the 
position where they have to make loans that they really don't 
know very much about because of CRA. So I think that is 
something that needs to be looked at in a rational way as 
opposed to a regulatory way.
    I do want to talk about the Federal 8(a) application 
process which we are currently involved in. As a former staffer 
on this Committee, I have heard and seen very many horror 
stories regarding the 8(a) loan process, the time that it 
takes. Again, you have to be a very successful business to 
apply for the 8(a) process because it is extremely expensive.
    It is very costly. To date, we have spent over $10,000 in 
administrative and professional costs, just to be eligible to 
apply for the 8(a) process. And I recognize and I have always 
applauded the goals of the 8(a) program because it is very 
important that we grow, all business in all sectors of the 
country, and minority business in particular has been left 
behind in these prosperous times. And I recognize the need to 
police the process.
    The phenomenon we experience in minority business of 
businesses that masquerade as minority businesses and in fact 
aren't is a terrible blight on the process, and I think it is a 
wonderful concept that we try to ferret out those people that 
are trying to defraud the taxpayer.
    By the same token, it is a very expensive and elaborate and 
sometimes mindless process as you go through the regulatory 
issues which we are currently going through. We are in the 
throes of this right now. We expect to be finished in the next 
several weeks, and we are looking forward to competing, and we 
are looking forward to having the opportunity to receive 
procurement opportunities.
    And let me say again parenthetically, Congressman, that the 
8(a) program and the prospects of our getting to the program 
were a significant carrot in attracting lenders to us, enabling 
us to do what we are currently doing now.
    And I am going to read this last paragraph of my testimony, 
and it is called The Final Plea for Small Business As A Vehicle 
For Social Change. And I feel privileged to sit beside John 
Schulze today, who has done a great deal for young people in 
this County and throughout the State and in his own very quiet 
way--he doesn't know I know this--in his own very quiet way has 
been a tremendous advocate for social change and for 
opportunities for young people and young people of color in the 
State of Maryland.
    And I say that the story of Nixon's Farm is an aspiring 
one. We have always aspired to be the small business that could 
and did. Profitability and quality for our family are major 
motivations for us, but our social mission is also very 
important. As a third generation entrepreneur, I have always 
held that Thomas Jefferson's observation, God save us from 
governments that would save us from ourselves. Government 
cannot be called upon to save every social ill, nor can it be 
all things to all people. Government is at its best, it seems 
to me, when it facilitates the process of people trying to live 
their lives better. Government is at its worst when it tries to 
live their lives for them.
    Our mission, the Nixon's Farm mission, is to touch people 
in extraordinary ways, and it has applications that far 
transcend government. I am always deeply suspicious of young 
people when they get into government, particularly on the 
regulatory side--but I have seen it when I was a young staffer 
in Congress as well--people love government so much that they 
want to do it all the time, and I think that my journey is 
instructive.
    I went to Capitol Hill, I learned all about Washington and, 
like Cincinnatus, I left and I came home to run my family 
business, and I think that is a good migration to take place. 
We need to understand government and the apparatus of 
government, how it works, and then we need to go home and earn 
a living.
    I know of no better way of helping someone improve his life 
than by giving him a job and pointing him toward a morally 
sound environment. We do this at Nixon's Farm all the time. 
Every small business does it. It is slow, it is incremental, 
and it is messy, but it is the most effective method I know of.
    Winston Churchill once said, ``Some think that industry 
should be exploited, others think it should be punished, but 
they do not see it for what it is, the sturdy horse that pulls 
the plow''. When we think about small business and we think 
about how we can affect social change, and when you think about 
the mission of government versus the mission of small business, 
we really don't see the remarkable little stories--and I have 
dozens of them to tell you, and I would probably tell you ad 
nauseam if I didn't constrain myself--about young people who 
have come to me or come to John Schulze and have said, ``I need 
a job'', and in the process of taking this young person, you 
literally teach them how to work. You teach them how to conduct 
themselves. You help them get through high school or college.
    It is a wonderful, fulfilling transcendent process, and it 
is as much a part of our vision about what we do as a minority 
business, as a small business, as making a profit. And as you 
know, our political views are similar, Congressman, and I have 
long said that the difference between Conservatives and 
Liberals is that Liberals want to constrain people because they 
are afraid people are going to fly off and do terrible things. 
The Conservatives believe that people should be set free. And 
as a general rule of thumb, I do think that we need to liberate 
small business in America, constrain government, and let small 
business do what it does best.
    Thank you, Congressman.
    [Mr. Nixon's statement may be found in Appendix.]
    Chairman Bartlett. Thank you very much for your testimony.
    Mr. Schulze.

  STATEMENT OF MR. JOHN SCHULZE, VICE PRESIDENT, PIZZA HUT OF 
                            MARYLAND

    Mr. Schulze. Thank you. I won't be nearly as long, I'm not 
nearly as eloquent. I have to read a lot of what I am going to 
say here.
    Pizza Hut of Maryland was started back in 1969 by my dad, 
and we took over an area that had no stores in it, no 
development, and we have several counties, Howard and Carroll 
in your district, and then Baltimore all the way to Delaware. 
We presently have 49 stores. We have 1,400 employees and, 
coincidentally, before I came over here, I left a meeting we 
were having in our office with all of our management people. I 
was put on the agenda first so I could get over here to speak.
    And one of the things I said to them, which may sound a 
little corny--but I think it is true of anybody who has a 
business--I feel a very keen responsibility to all 1,400 that 
tomorrow morning I can open the doors to my business and they 
have a place to work. Is it self-serving? Yes, sure it is. But 
it is what I think drives most people that are in business.
    I sat here listening to the last segment of the previous 
testimony, and I was struck by two comments that were made. One 
was the unintended consequences of regulatory burdens--and I 
don't remember, which gentleman actually said it. People of 
good mind try to do something and they mess it up because they 
don't know enough about your business to really do it right. 
And that is taking it out of context a little bit, what I 
heard, but it is exactly what they said.
    And the other thing that I thought was kind of humorous was 
the IRS is being asked to take on a regulatory burden and they 
are fighting it. I almost started laughing, and I realized I 
shouldn't be laughing back there while somebody was testifying.
    In small business, regulatory burdens just come at us. We 
accept it. Small business accepts it as a part of doing 
business. We accept it because we don't have the time nor the 
energy nor the money to fight it, and we know that.
    And based on that statement--I will probably read a lot of 
this because I don't want to miss--I have gone over it several 
times, but I don't want to just ad lib it and miss something.
    When I received the request to testify, I was concerned and 
expressed that concern to Phil Straw of your office, that 
possibly there was not a great deal for me to add to the 
agenda, as there was no pending, current legislation that we 
were, per se, looking at. I did advise Mr. Straw that I was one 
of those people who believe very strongly that any time 
Government, be it Federal or State, involves themselves in my 
business to any extent, it is never good. They don't know it 
like we know it, they just can't possibly do it.
    There is a need for Government and I don't want anything 
that is said during this testimony to be misconstrued on that 
subject. When it comes to the general welfare of its citizens, 
the Government does have a role, and that role, I believe, is 
very clearly stated in the Constitution. However, as each 
Congress is elected, there is a desire of legislators to 
continually add to the regulatory bureaucratic burden that is 
carried by small businesses.
    In reviewing our files on various legislation that we have 
commented on, I think an excellent example of the point I am 
trying to make is the action that was issued by President 
Clinton to the Department of Labor to enact regulations 
allowing states to pay persons up to 12 weeks for parental 
leave.
    In a letter to the entire Maryland delegation dated 
December 2, 1999, I asked each member if, indeed, this issue 
does get to them, to vote against it. It does, however, point 
up exactly what happens to small business when some good-
intentioned ideas are made into law and government does this 
believing they have to be the sole arbiter of what is in the 
employees' and businesses' best interests.
    The Parental Leave Act may have been a good idea to protect 
an employee from not having the ability to care for a loved one 
during a time of crisis. Possibly during the Industrial 
Revolution this type of legislation may have been needed but in 
all the years I have been involved with Pizza Hut of Maryland, 
employees are not only assets to our company but, as time goes 
by, they almost become part of our family. I know of no 
employer who doesn't believe this and who hasn't tried to do 
everything they can for their employees.
    Let me stop right there and say something else. Congress is 
now passing, or just currently passed, I believe, an increase 
of the minimum wage. We are paying $8.00 an hour. You guys have 
to hurry to catch up. And I think that ought to explain exactly 
what we are talking about. We don't need Congress to tell us 
what we have to pay to get people because we know. We know how 
bad it is right now to hire people, how difficult it is to find 
employees.
    I have served on several committees in Howard County, and 
everyone who has been in those rooms have heard me say this--we 
are going to choke on our own prosperity. We continually build 
and build and build service-related industry at the same time 
refusing to build the infrastructure of blue collar, 
industrial, the type that gives you the employees necessary.
    Well, at the same time, in Howard County up until a few 
years ago, the only lots you could build on were 3-acre lots. 
People couldn't afford to live where they worked, which is here 
in Howard County, because they couldn't find a place to live.
    Therefore, we can argue the merits of the Family Leave Act, 
but that is not the point of my testimony. The point is that as 
soon as the Family Leave Act was passed, then we have in this 
case a President, or it could have been a Senator or 
Congressman, who sees a way to try and buy more votes by giving 
12 weeks of paid leave. This cannot happen under the law 
through the Federal Government, so we have a back door approach 
through the States.
    Whether or not this passes the Congress again is not the 
point of my testimony. The fact is, the effort to do it is the 
point--who is going to pay for it? Certainly not the insurance 
companies. Who is going to pay for the replacement of the 
employee for 12 weeks? Not the insurance companies and not the 
Federal or State Government.
    And who is going to handle the separation of the new 
employee when the original employee comes back? It is just one 
question after another because of one original piece of 
legislation, and how long will it take the same legislators to 
mandate that the same businesses compensate the employees that 
are leaving? Left alone, businesses will do this on their own. 
It is a precious commodity to any employer you can talk to.
    Consider this, over time, when any regulation or law is 
passed, it significantly ties our hands as responsible people 
to fairly treat and adequately compensate our employees.
    My dad--and I hate to sound like Brett Maverick, but some 
of us in this room probably remember who Brett Maverick is and 
some of you probably don't--my dad used to say certain things 
that I have grown up with, and as I have gotten older I found 
out he was right. He said, when you define, you limit, and when 
you limit, you constrain, and that is what is happening, and it 
happens to us every day.
    I would ask in the deliberations of this Subcommittee that 
you use the premise that the law of supply and demand works. It 
works at every level. It works for every instance and, if left 
alone, small business will do the right thing many more times 
than not which--here again not trying to be judgmental--I doubt 
the Department of Labor or any other department of the Federal 
Government can say. These are our interests. I thank you for 
your time.
    [Mr. Schulze's statement may be found in Appendix.]
    Chairman Bartlett. Thank you very much for your testimony.
    Mr. Williams.

  STATEMENT OF MR. KEN WILLIAMS, CEO DIRECTOR, HOWARD COUNTY 
                      CHAMBER OF COMMERCE

    Mr. Williams. Mr. Chairman, thank you very much for having 
me here this morning, and I feel quite honored and privileged 
to work with gentlemen like Mr. Nixon and Mr. Schulze with 
small business.
    As President and CEO of the Howard County Chamber of 
Commerce, we have a membership of 850 businesses in Howard 
County, 85 percent of our membership is 50 employees or less. 
So, when I talk about small business, I am really talking about 
the small businesses that make up business in not only Howard 
County, but my experience as a Chamber professional over the 
last seven years where I have served as a Chamber executive in 
both Martha's Vineyard and Geneva, New York in Central New 
York.
    I am pleased to present testimony on the subject of the 
success of Federal and community-based small business 
assistance programs and their impact on various segments of the 
small business community.
    As I said, as a Chamber professional, I have seven years of 
experience in serving what I feel is the backbone of our 
economy, community-based small business. It is from that 
perspective that I have outlined my comments in the following 
categories: What small businesses want, what they need to 
succeed, and the Federal assistance picture and how best to 
create successful public-private partnerships.
    What businesses want: A successful public-private 
partnership designed to meet small business startup and growth 
needs must start here. When I talk about public-private 
partnership, I am not talking about big Government programs 
that help small business, but where small businesses need 
assistance, and that is with counseling such as the Small 
Business Development Centers and SCORE programs run through 
SBA, Economic Development Authorities and Chambers of Commerce.
    Businesses need easy access to information, a streamlined 
business registration system, low interest loans and financial 
assistance--and what Mr. Nixon was talking about--take away 
some of the burden of the paperwork and the financial 
requirements it takes to go out and get the funding that you 
need to start a business. There are many people out there with 
terrific ideas on businesses that will enhance and grow a 
community, but are burdened by too much paperwork. It is not 
easy to find information and not too easy to apply and get to.
    Many small businesses also need access to micro-loans for 
startup costs, particularly related to technology. They might 
just need a computer, some computer training, computer 
hardware, and web development--a startup cost in the range of 
$5,000-$10,000 for some of these small home-based businesses 
that are beginning that banks won't traditionally make loans 
for. They will say, ``Go ahead and put it on your credit 
card'', at 19.9 percent, and that is not helpful or assisting 
with small business needs.
    Small businesses want a map for taking their idea to the 
marketplace, to be a success, their vision needs to be 
successful and guidance to that vision. And I think one thing 
that both Mr. Nixon and Mr. Schulze were discussing, to be left 
unfettered in their efforts to start and grow their business. 
That means keep Government away from adding new programs and 
new things that slows their growth and development.
    Paying $8.00 an hour. It takes Government longer to catch 
up where small business is and knowing the marketplace of 
supply and demand than will be of assistance to helping 
business grow.
    What business needs. Simply understanding what small 
business owners want and delivering it will not help them 
achieve success. Often there are a number of unidentified needs 
to be met on the path to achieving a vision of success. They 
include the ability to test their assumptions, coaching and 
expertise from a mentor, access to best practice information 
about small business and their business interests, technical 
assistance, and a trained and educated workforce.
    Many of those topics I just covered really come into play 
through Small Business Development Centers and SCORE programs 
where just some coaching and basic information to test their 
assumptions on what it takes to get a business up and going can 
be extremely helpful.
    Programs designed to assist small business development. I 
think one of the critical areas--and both Mr. Story and Mr. 
Nixon discussed it--was continuing assistance for women and 
minority owned businesses. In communities that I have worked 
in, those have been some of the main areas where small retail 
shops and other businesses have been opening, and they need to 
have guidance. They need to have information provided to them, 
and we need to continue to enhance those programs because it 
does do a social good for a community and enhances the growth 
of a community.
    I think one of the key things about Government programs, 
and particularly SBDC--and I keep going back to this because I 
have worked with it in three different areas of the country and 
they have been successful in the three areas of the country 
that I have been in--and that is the value at the local level, 
having a point of contact that can help them navigate through 
local, State and Federal landscape, but here locally is of 
great assistance, helping them not only design a business plan, 
but design a business plan that will help them get the money 
they need to start up a business, to grow their business, or 
take their business to the next level--and to reiterate, the 
delivery of service at the local level, to me, is of the utmost 
importance.
    One of your questions was talking about the current 
economic prosperity that we have. I am certainly not an expert 
in that area, why we have the prosperity that we do. There are 
a number of factors and a number of statistics out there 
pointing to it, but I think the discussion cannot go along 
without the discussion of technology and the importance of 
technology and ebusiness.
    Now, I will go off-track just a little bit and make a 
statement that we hope that we have continued support of 
Congress for a moratorium on new taxes, particularly on 
Internet taxes. I think one of the reasons why we have been 
growing is that business has been successful and technology has 
been successful, that the marketplace is really taking hold and 
really guiding the prosperity that we have.
    Mr. Chairman, thank you for having me this morning, and 
thank you for listening to me ramble a little bit.
    Chairman Bartlett. Thank you. Thank you all very much for 
your testimony.
    Mr. Nixon, you quoted Thomas Jefferson. He is perhaps my 
favorite President, and the quote that I like best of his is, 
``The Government which governs best is the Government which 
governs least'', and all of you have expressed that in one way 
or another, but he expressed it very succinctly at the very 
beginning of our country.
    You also mentioned helping young people, and your industry, 
the restaurant industry, the food industry in general, does a 
very, very good job of doing that. I know personally the 
managers of several different kinds of fast food establishments 
that have a real commitment to young people, incenting them to 
go to school, sometimes even providing scholarships when they 
go to school.
    Not everybody will be flipping hamburgers all their life, 
or making pizzas, but what you learn there as a young person is 
invaluable later on. You learn to show up for work when you are 
supposed to be at work. You learn to do what you are told. You 
learn to work with your colleagues. You learn to interface with 
customers frequently. These are skills that will serve you well 
no matter where you go.
    Mr. Schulze, you mentioned the reasons for regulation. I 
remember eight years ago when I first started running for this 
office, that I mentioned the two premises that I thought were 
the basis of most regulations. One premise is that you, as an 
employer, are inherently evil and greedy and you are going to 
take advantage of your employees, or if you are dealing with 
the public you are going to take advantage of your customers 
unless ``Big Brother'' prevents you from doing that.
    The other premise, the other basis for regulations, is that 
every citizen, every consumer, is incredibly stupid, and they 
are going to do something to hurt themselves unless Big Brother 
has lots of regulations to prevent them from hurting 
themselves.
    I personally reject both of those hypotheses. I think they 
are both false. And I think that your assertions, all three of 
you, that small business people really do care about their 
employees--I was a small business person--more than any other 
person in all the world, I was affected when one of my 
employees got hurt. They were my friends as well as my 
employees. I lost them as a part of the team. They could not be 
replaced.
    I did homebuilding, and you really have a team when you are 
building homes. They learn to work together. And I lost them as 
a member of the team, and I couldn't replace them. I couldn't 
go to the local ``job shop'' and get somebody to come in and 
replace them as a member of that team. They would work all day 
and hardly speak to each other about the job because they 
didn't need to, because they had worked together, they knew 
what the next step was and what they needed to be doing.
    Family leave, you mentioned. I remember I protested that, 
Mr. Schulze, when we first debated it in the Congress. I 
pointed out to them then that what we really were saying was 
that we had the ability in the Congress to mandate prosperity. 
Of course you are prosperous enough to give your employees 
family leave. And I pointed out to them that if we really have 
that kind of power, then I would like that we mandate some 
other things, like happiness. If we can mandate prosperity, you 
can just as well mandate happiness. And from a personal 
perspective, I would be very interested in mandating longevity. 
And I think that both of these are just as doable as mandating 
prosperity.
    Just a few weeks ago when the minimum wage came up--and you 
mentioned that, Mr. Schulze--I went to the Floor, and Bill 
Goodling from Pennsylvania, Chairman of the Education and Work 
Force Committee, was managing the bill, and I asked him if he 
had any time. And he said, ``You can have all the time you 
want''.
    Ordinarily, you can't get time because the Committee 
members--and I am not on that Committee--consume all the time, 
but he said they were afraid to come down and talk about 
minimum wage. Well, I wasn't afraid to talk about minimum wage, 
and so I took five minutes of time. And what I did was to point 
out that what we were really trying to do in that bill was to 
mandate prosperity, that that was manifestly impossible to do 
because if we really wanted to help these entry level workers 
who were heads of family--and very few of them are, over 85 
percent of all the people making minimum wage are either 
seniors who just want something to do or they are kids, young 
people, who just need some more spending money--for those who 
are heads of family, I want to give them back all their payroll 
taxes.
    I am delighted they are working rather than on welfare. I 
want to give them health care insurance also, and if they need 
additional help I want to give them that because you should 
live just as well when you are working as you do when you are 
on welfare, and the average family of four on welfare lives as 
well as if they made $22,600 a year. You are not going to make 
entry level $11.00 an hour gross, over $7.00 an hour net, which 
is the equivalent. You have to earn to live as well as you live 
on welfare, and I figure that when you are working, you ought 
to live at least as well as you do on welfare. So I have no 
problem helping these people who want to get off welfare and 
want to work.
    I, of course, voted against minimum wages, it is not an 
issue in our district. They are hanging out signs at Sheets, 
$7.50 an hour. Mr. Schulze, you say you are offering $8.00 an 
hour to try to get employees for your business. But I will tell 
you where it really is important, is in those few places in our 
country where what you are doing is cutting off the bottom rung 
of the economic ladder.
    You cannot mandate--what I pointed out in my testimony was, 
there when I was debating this--that if we really do have the 
power to mandate prosperity, why are we so stingy? Why only 
another dollar an hour? Why don't we make minimum wage $10 an 
hour, or even $20 an hour, if we have the power to mandate? Why 
would we want to be so stingy.
    The response was, ``Oh, we would kill jobs if you do 
that''. You are right. You also kill some jobs when you make it 
$6.15 an hour rather than $5.15--not in our district, but in 
those places where these young people desperately need that 
bottom rung of the economic ladder.
    You cannot, in Congress, determine what a job is worth, the 
marketplace does that. All we can do in Congress is to help 
those where the marketplace has set a remuneration which is not 
equivalent to what it takes to live, then we have an obligation 
to help them. They will not always be there. They stay very 
short time at minimum wage. They get seniority, they get 
experience, they move up, and soon they won't need our help. We 
have been having far too many handouts, we need to give some 
hand-ups, and that is what we tried to do in our Welfare 
Reform. It was enormously successful.
    Mr. Schulze, you also mentioned service industry versus 
manufacturing. We have, I think, far too big a focus on service 
industries rather than manufacturing. Our balance of trade 
deficit now is about $300 billion. There is no way of looking 
at that, I think, but that that is $300 billion of wealth every 
year leaving our country. We are a very wealthy country. How 
long can we continue to do that and still be a wealthy country?
    One of my staff members who is here with me today, John 
Darnell, pointed out to me several years ago that if you push 
to the ultimate this service-based industry, you come to the 
point that all we do is cut each other's hair. Obviously, we 
can't have a viable economy if all we do is cut each other's 
hair.
    Manufacturing produces wealth. Farming produces wealth. I 
am a wealth consumer now. I used to be a wealth producer, but 
now I am a wealth consumer. All of the other industries simply 
consume wealth or are a part of the structure necessary for 
producing wealth, but they don't produce wealth. You produce 
wealth only by manufacturing and only by farming where the 
cost, the value, of what goes into the process is less than the 
value of what comes out of the process, and most of our 
industries, as a matter of fact, don't produce wealth, and what 
we are doing is systematically moving the wealth producing 
industries overseas, and we need to reverse that process.
    Mr. Williams, you mentioned the Internet tax and your hope 
that we wouldn't have one. You won't with my vote. That doesn't 
mean we won't have one because Congress loves to spend money, 
and if you are going to spend it you have got to get it 
somewhere, and we now have a commitment not to go into debt 
again, not to have a deficit, so there are going to be 
increasing pressures to tax the Internet because ecommerce is 
growing very, very, very rapidly.
    In closing, let me ask you if you have suggestions for 
changes in legislation that would be helpful to small business, 
please let us know. I am very pleased that Mr. Nixon worked as 
a staffer on the Small Business Committee a number of years 
ago. You don't look old enough to have done that really in 
another life.
    Mr. Nixon. I have heard that before, Congressman. I tell 
people I am like Dorian Gray, I have got a picture in my closet 
that looks like him.
    Chairman Bartlett. When were you on the Hill?
    Mr. Nixon. From 1978 to 1982.
    Chairman Bartlett. Okay. That was a couple of decades ago.
    Mr. Nixon. It was a while ago.
    Chairman Bartlett. Okay.
    Mr. Nixon. Congressman, if I may, the idea--this idea has 
been bandied about for about 40 years now, and it shows no more 
chance of passing than it did four years ago, but I have long 
supported the concept of a wage differential, a youth wage 
differential, a senior wage differential. When you look at the 
commitment that we here, John and I, go through to hire a young 
person, to train that person, to literally in some instances--I 
mean, you literally have to train this young person how to 
talk, and let me give you an anecdote, and I will try and be 
brief.
    A few years ago, one of my employees came to me and said, 
``I really don't know what to do with my son. He is growing up, 
and we live in a very rough section of Baltimore, and I just 
can't leave it at home anymore because he is starting to 
associate with the older boys and he is starting to get in with 
a rough crowd. Would you mind if he came out here to work with 
me at the Farm?'' And she was one of my best employees, and I 
said, ``Sure, you can''.
    Well, we are talking about a young man who literally had 
never learned how to talk. He had never learned how to dress 
appropriately for work. And I literally had to stand behind him 
for three months, throughout the summer months, and mimic the 
things that I wanted him to say. I would stand behind him and I 
would say, ``Hello, how are you?'' And he would say, ``Hello, 
how are you?'' And I would say, ``Would you like some fries 
with that?'' ``Would you like some fries with that?''
    And it literally took this young man about 18 months to get 
up to speed, and I want to tell you, he was not worth what I 
was paying him. And if we had a youth differential and if we 
had some sort of program in place where I would not have to 
come out of my pocket to train this young man, I would have 
taken on five or six young men that summer instead of the one 
project that I had to take on, and five or six young men would 
have been helped, five or six young people would have been able 
to get out of their rough neighborhood and come to my beautiful 
Farm and work for me. And I am very pleased to say that that 
young man now is very interested in going to the culinary 
college in Baltimore, and perhaps one day he will be able to 
come back to me and I can hire him as a chef for $40,000.
    So that is the kind of thing that Congress needs to take a 
real world look at. One of the things that we--because we tend 
to put labels on and we tend to get focused on whether we are 
black or white, or Republican or Democrats or Liberals or 
Conservatives--and many of your colleagues tend to think so 
much in terms of labels that they really don't think in terms 
of helping people, and this is one area we can help vast 
numbers of people while we help the productivity of our 
businesses.
    Chairman Bartlett. Of course, from a personal perspective, 
what I would like to do is abolish the minimum wage and 
recognize the reality that the marketplace determines the wage, 
not some bureaucrat sitting in Washington, or some Congressman 
or some Senator. Then I think that society--and a part of that 
society is Government--has an obligation that once the 
marketplace has determined the value of a job, that nobody will 
be hungry, that nobody will be cold, that nobody will be on the 
street in this great country, but I do not think that it is a 
rational function of Government for us to pretend that we can 
mandate prosperity and determine what the minimum wage ought to 
be.
    And you have made a very effective argument that 
establishing minimum wage is hurting two groups of people, one 
are seniors who want to come back--emotionally, 
psychologically, they need to be involved in the workforce, 
they want to come back--and young people that are not worth the 
minimum wage, but they need training, and you would be happy to 
work with several of those where now you are limited to working 
with one, if you didn't have this constraint imposed on you.
    I just think that everybody would be better off if we saw 
Government's role as supporting the private sector rather than 
mandating what the private sector does. And you can't mandate 
prosperity, that is manifestly impossible. As long as we are 
lagging what is actually happening--and we are doing that 
certainly in your district, Mr. Schulze, where you have your 
stores, and if you are paying $8.00 an hour, $6.15 is not going 
to be relevant at all--but there are some places where that is 
relevant, and in those few places it will really raise the 
minimum wage, you are simply hurting the people that you are 
pretending that you want to help.
    I tell audiences that I know that Liberals love poor people 
because they keep making more of them.
    Well, thank you all very much for your testimony. Again, if 
you have suggestions for changes that we can make in 
legislation that are going to be beneficial to the small 
business community, please let us know. Thank you for your 
testimony, and our Subcommittee hearing is in adjournment.
    [Whereupon, at 12:20 p.m., the Subcommittee was adjourned.]

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