[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]



 
                      ``LISTENING TO MAIN STREET''
=======================================================================

                             FIELD HEARING

                               before the

                       SUBCOMMITTEE ON WORKFORCE,
                  EMPOWERMENT, AND GOVERNMENT PROGRAMS

                                 of the

                      COMMITTEE ON SMALL BUSINESS
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED SEVENTH CONGRESS

                             FIRST SESSION
                               __________

                             WASHINGTON, DC
                               __________

                           NOVEMBER 19, 2001
                               __________

                           Serial No. 107-37
                               __________

         Printed for the use of the Committee on Small Business





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                      COMMITTEE ON SMALL BUSINESS

                  DONALD MANZULLO, Illinois, Chairman
LARRY COMBEST, Texas                 NYDIA M. VELAZQUEZ, New York
JOEL HEFLEY, Colorado                JUANITA MILLENDER-McDONALD, 
ROSCOE G. BARTLETT, Maryland             California
FRANK A. LoBIONDO, New Jersey        DANNY K. DAVIS, Illinois
SUE W. KELLY, New York               BILL PASCRELL, Jr., New Jersey
STEVE CHABOT, Ohio                   DONNA M. CHRISTENSEN, Virgin 
PATRICK J. TOOMEY, Pennsylvania          Islands
JIM DeMINT, South Carolina           ROBERT A. BRADY, Pennsylvania
JOHN R. THUNE, South Dakota          TOM UDALL, New Mexico
MICHAEL PENCE, Indiana               STEPHANIE TUBBS JONES, Ohio
MIKE FERGUSON, New Jersey            CHARLES A. GONZALEZ, Texas
DARRELL E. ISSA, California          DAVID D. PHELPS, Illinois
SAM GRAVES, Missouri                 GRACE F. NAPOLITANO, California
EDWARD L. SCHROCK, Virginia          BRIAN BAIRD, Washington
FELIX J. GRUCCI, Jr., New York       MARK UDALL, Colorado
TODD W. AKIN, Missouri               JAMES R. LANGEVIN, Rhode Island
SHELLEY MOORE CAPITO, West Virginia  MIKE ROSS, Arkansas
BILL SHUSTER, Pennsylvania           BRAD CARSON, Oklahoma
                                     ANIBAL ACEVEDO-VILA, Puerto Rico
                      Doug Thomas, Staff Director
                  Phil Eskeland, Deputy Staff Director
                  Michael Day, Minority Staff Director
                                 ------                                

    SUBCOMMITTEE ON WORKFORCE, EMPOWERMENT, AND GOVERNMENT PROGRAMS

                  JIM DeMINT, South Carolina, Chairman
FRANK A. LoBIONDO, New Jersey        JUANITA MILLENDER-McDONALD, 
MICHAEL FERGUSON, New Jersey             California
FELIX J. GRUCCI, Jr., New York       DANNY K. DAVIS, Illinois
DARRELL E. ISSA, California          STEPHANIE TUBBS JONES, Ohio
EDWARD L. SCHROCK, Virginia          CHARLES A. GONZALEZ, Texas
SHELLEY MOORE CAPITO, West Virginia  MIKE ROSS, Arkansas
                                     DONNA M. CHRISTENSEN, Virgin 
                                         Islands
                  Nelson Crowther, Professional Staff







                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on November 19, 2001................................     1

                               Witnesses

Cooper, Elliott, Regional Administrator, U.S. Small Business 
  Administration.................................................     4
Wilson, Donald, President & CEO, Association of Small Business 
  Development....................................................     6
Beltram, Richard, Intedge Industries.............................     8
Lennon, June, Senior Partner, Martin & Lennon CPAs...............    10
Hughes, Bob, President, Hughes Development.......................    12
Hammond, Wesley, President, HBJ Home Furnishings.................    13

                                Appendix

Opening statements:
    Manzullo, Hon. Donald........................................    21
Prepared statements:
    Cooper, Elliot...............................................    23
    Wilson, Donald...............................................    30
    Beltram, Richard.............................................    38
    Lennon, June.................................................    42
    Hughes, Bob..................................................    45
    Hammond, Wesley..............................................    47








                FIELD HEARING--LISTENING TO MAIN STREET

                              ----------                              


                       MONDAY, NOVEMBER 19, 2001

              House of Representatives,    
               Committee on Small Business,
            Subcommittee on Workforce, Benefits and
                                               Empowerment,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 11:00 a.m., in 
the Spartanburg Chamber of Commerce, 105 North Pine Street, 
Spartanburg, South Carolina, Hon. Donald A. Manzullo (chairman 
of the committee), presiding.
    Chairman Manzullo. We will convene our field hearing for 
this full committee of the United States House of 
Representatives Committee on Small Business. I just want to 
thank you, Congressman, for the opportunity to come down here.
    Mr. DeMint. Thank you, Mr. Chairman.
    Chairman Manzullo. And share with the folks down here some 
of the great things that you've been doing. Let me just share 
with you a couple of major bills that Jim has been working.
    A good bill is one thing. Getting it through the House is 
something else. So it is difficult. Jim is the author of two 
bills in particular, H.R. 1923. This is a bill that will allow 
small businesses to accumulate the first five years of so-
called profits into a special account. So instead of having to 
pay taxes on those first five years, that could be used as a 
method of accumulating capital. The businesses actually do pay 
a tax, but it would be a deduction of that amount as a 
warehouse or a storehouse for future capital.
    Since most businesses fail within the first three to five 
years, I think it is a tremendous idea. Then Jim's best bill, I 
think, is H.R. 3062, which talks about small and medium-size 
growing companies' experience as they try to keep up with 
demand from expansion. The bill would allow these companies to 
make a tax deferment of up to two hundred and fifty thousand 
dollars for use as collateral in a special BRIDGE account that 
could be used by the company until outside funding becomes 
available.
    So Jim has spent his time in Congress in trying to find all 
types of new and innovative ways so that small businesses could 
have access to capital, minimizing the tax responsibility, and 
at the same time realizing that there is a very severe credit 
crunch going on in the small business industry. Jim has also 
done a lot of work on his health care account legislation, 
having a fine contribution plan to serve the poor health care 
accounts. I just want to tell you that, as a full subcommittee 
chairman, the tremendous job that he has been doing in 
Washington. He also serves on the Education and Labor 
Committee, now known as the committee on--What's it called?
    Mr. DeMint. I think it's still Education and Workforce. I 
think we've changed the name a couple of times.
    Chairman Manzullo. But he takes his experience from that 
committee and he brings it over to his subcommittee 
chairmanship and does some tremendous policy review on it. So 
it's a real pleasure to come down here and share this time with 
you. We're here to hear the views of the folks here on the 
state of the economy. The economic downturn has affected small 
businesses here in South Carolina. Small businesses need help, 
so what form should that take? And we have the Regional 
Administrator to the SBA here. Is that correct?
    Mr. Cooper. Good morning, Mr. Chairman and Congressman 
DeMint. On behalf of the Administrator, I want to thank you for 
the opportunity for us to participate in this hearing.
    Chairman Manzullo. Hang on just a second. What I want to do 
is--we can start over here and just move on down to the left. 
And the rules are that testimony is about five minutes.
    Mr. Cooper. I was told I was first.
    Chairman Manzullo. That's fine.
    Mr. DeMint. Thank you, Mr. Chairman. It's great to have you 
here. You are a real advocate of small business. And the 
reason, so you'll know, are the six hundred and twenty thousand 
berets made in China are now in warehouses. When he found out 
about it, he went wild and made sure that small businesses in 
America made those black berets; and the ones that came from 
China are going to sit in the warehouse until he can sell them 
off with these new calendars. He's a real watchdog for small 
business, and he's made a big impact already.
    And I want to welcome you to Spartanburg to study some 
important issues that relate to small business. Just so you'll 
know, Mr. Chairman, Spartanburg and the whole Upstate are 
really on the verge of a visionary growth, particularly here in 
Spartanburg where they've had a large downtown redevelopment 
project called Renaissance Project, that's moving forward, 
which will change the face of the Upstate.
    We've got some visionary and hard-working people here. 
We've got folks from Spartanburg and Greenville, two major 
areas of my district, represented here today. We know that 
small businesses will be the engine of all that growth. It's 
important that we recognize their role. The U.S. economy is now 
on a downturn. Consumer confidence is low, and the government 
must be particularly sensitive to small businesses.
    So the point of what we're doing here today is to listen to 
small businesses on America's Main Street, so to speak. It 
might be more appropriate to say listen to America's backbone, 
because that's really what we're talking about when we're 
dealing with small business. Congress is considering a lot of 
things right now, a stimulus package that would have impact on 
large as well as small business. We're still in the middle of 
debating that.
    So some of the things you say here today could help guide 
that debate. And we need to know how different issues affect 
you, how they're affecting you now, and what else that we need 
to consider that we might not be thinking about. In addition to 
short term, the downturn that we're considering now, we need to 
think long term, what legislative, administrative, or 
regulatory changes are needed to guarantee that small business 
will be a success.
    In the Upstate, Mr. Chairman, we are really a showcase of 
diversified small businesses. We have many manufacturers, 
corporate offices, warehouses, distribution centers, packaging 
companies, metalworking and stamping companies. You name it; 
we've got the small business here to be represented. We've got 
many international firms here. BMW and over a hundred 
international companies are represented here in Spartanburg 
alone.
    In fact, Spartanburg is the highest per capita 
international investment county in the country. And so there's 
a lot going on here, and we've been referred to as a world 
class international trading community, actually by a professor 
at Harvard Business School, Rosabeth Moss Kanter. In her book 
titled World Class: Thriving Locally in the Global Economy, she 
mentions the Spartanburg-Greenville area.
    But while we're proud of our large international firms, it 
is in fact our small firms that will create most of the new 
jobs over the next ten years, just as it has in the last ten 
years. Seventy-five percent of the jobs in South Carolina and 
around the country have been created by what we refer to as 
small companies, and they provide hope and opportunity to many. 
Especially minorities and women are the fastest-growing area of 
small business owners.
    And as I had the chance to experience myself in starting a 
small business, that dream of the freedom you have of owning 
your own business is a dream that many have and I think we can 
help with on our committee; although I will have to say I 
didn't have as much freedom once I started as I thought I 
would. But that's why we're here, and I want to thank and 
introduce our witnesses.
    The point today is not to get a huge public crowd to listen 
to what we have to say but to get some folks from the different 
areas of small business in the Upstate community to give us 
their opinions on things that we can include in the official 
record and use as reference and resource material as we 
consider and push legislation.
    So what we say today, what we say verbally and anything you 
submit in writing, will be included in the official record so 
that it can be used not only by us but all members of the 
committee and other committees in our deliberations. Some of 
you who have come today are not official witnesses. If you have 
comments that you'd like to submit to me in writing, I'll make 
sure that I consider it, and I'll do everything I can to have 
others consider it too.
    Chairman Manzullo. Let's keep open the record for two 
weeks. After today, anybody who wants to submit--I mean, not a 
tome--brief remarks or something like that. If you could get 
them to Mr. DeMint's office, his office could get them to the 
committee.
    Mr. DeMint. Right. And to communicate to us, the easiest 
way now, since we're not receiving any mail in Washington is, 
you could go to our Web site, which is www.demint.house.gov; 
and you'll find an e-mail location there. You can send us any 
comments you have. Let me introduce our witnesses and get 
started.
    We have Wesley Hammond. I appreciate your being here. He is 
president of HBJ Home Furnishings. He has been in the family 
business since he was sixteen. He's been president of Southern 
Home Furnishings Trade Association. He has been on the board of 
this Chamber of Commerce where we're at today. He has spent 
seven years in the U.S. Army Reserve as a combat engineer. We 
also have Bob Hughes, president of Hughes Development 
Corporation. He is chairman of the Greenville Chamber of 
Commerce. Is that currently?
    Mr. Hughes. Only one more month.
    Mr. DeMint. He is also on the board of Furman University 
that's in our district. He is the vice chair of the Small Scale 
Development Council of Urban Land Institute. I want to thank 
you for being here.
    We have June Lennon, who is a partner with Martin and 
Lennon CPAs. She is a member of the South Carolina Association 
of CPAs as well as the American Institute of CPAs. She is a 
member of the National Federation of Independent Businesses, 
South Carolina Leadership Council.
    And we have Rick Beltram, a manufacturer. He is president 
of Intedge Industries, a small privately owned manufacturer of 
food service equipment here in Spartanburg. He is a third 
generation owner. His business has been in business since 1914.
    Don Wilson, who is director of government affairs for the 
Association of Small Business Development Centers. Prior to 
that, he was director of government relations for the National 
Tire Dealers and Retreaders Association. And to show that he 
does have stamina, he has been chief of staff for three 
different congressmen, which I question your wisdom.
    Elliot Cooper, who is the district director of the U.S. 
Small Business Administration of SouthCarolina since 1991. He 
is now acting director of the SBA for this region. And before, he has 
been a co-chair of the South Carolina Rural Economic Development 
Council.
    So, folks, we appreciate your being here. And, as I've 
said, your testimony will be in the official record, and we 
look forward to hearing from you. And, Mr. Chairman, I'll give 
it back to you.
    Chairman Manzullo. The rules are five minutes per person. 
And when you get to the five minutes, I'll go like this 
(indicating). If you go much over that, then the book becomes 
airborne.
    Jim, did you want to start with Mr. Cooper? Does it make 
any difference to you?
    Mr. DeMint. No, I'll leave that to you.
    Chairman Manzullo. All right. Well, Mr. Cooper, we'll start 
with you and record your testimony. I notice this is seven 
typed pages. You're not going to try to read it all, are you?

  STATEMENT OF ELLIOTT COOPER, ACTING REGIONAL DIRECTOR, U.S. 
                 SMALL BUSINESS ADMINISTRATION

    Mr. Cooper. No, sir, I assure you of that. I've always 
heard you should be on time, be brief, and be seated. Well, I 
was on time, and I'm seated. So I'm sure I'll be brief.
    The South Carolina District Office, like most SBA offices 
across the country, is working to deliver very innovative ways 
to help America's small business community, especially after 
the disaster of September 11. Our basic mission still lies in 
helping people to get into business, stay in business, and 
expand and grow that business. And we think the best way to 
tell that story is to give you a couple of examples of what's 
gone on in this state, especially in this part of the state.
    Take Carol DeShields of DeShields Grading from Woodruff, 
South Carolina. She was our Small Business Person of the Year 
in the year 2000. And on her own initiative, she told us back 
in 1970, if it had not been for an SBA Disaster Loan, she 
wouldn't be in business today. We helped her quite a bit at 
that time, or the agency did; and she was very appreciative of 
that.
    As you know, the agency extended its Economic Injury 
Development Loan Program to cover areas outside of New York and 
Virginia. We have taken those applications. We are not at a 
point yet where we can see the numbers being approved, but 
we've had over a hundred applications presented in South 
Carolina.
    We have another economic injury loan program for companies 
that have had an impact because one of their key people have 
been called to active duty as a reservist or a member of the 
National Guard. These two programs, we think, will go a long 
way in solving some of the problems created by the disaster of 
9/11.
    Another program that's been very well received in our 
state--in fact, the state of South Carolina is number four in 
the country these loans and we are a relatively small state 
population-wise--is the Economic Adjustment Program, the CAIP 
program, which was part of the NAFTA. We've done over twenty-
four loans, I believe. One company saved about eighty-six 
hundred dollars in guaranty fees that were paid by the NADBank, 
and another created five new jobs in a rural area. And any time 
we can create jobs in a rural area, we feel like we've made a 
positive impact to these rural areas.
    Another good story of the use of SBA's programs in this 
area is Jimmy Bayne of Bayne Machine Works, who thought he'd 
faced every business challenge that he could possibly face. He 
was the recipient of two 504 loans, and he has taken his 
business from a shop in his back yard to a seventy-five 
thousand square foot facility that he recently sold and told me 
he would never have to work again. He sold a thing called 
Thinline Lift Systems. He sold it to an international company, 
and he is very appreciative of the SBA and what we were able to 
do for him.
    Most of our young entrepreneurs think that they can get out 
and take over the world after they come out of college. We have 
two over at Clemson. Tom Merrit and Mike Pereyo formed a 
company called Oobe, Incorporated, and they make sportswear. 
They say they would not be in business today had it not been 
for the Small Business Development Center at Clemson and also 
the SBA LowDoc program. Today, their company is able to meet 
the challenges that have been brought to them.
    Here in Spartanburg, you may drive by Tate Metalworks. Mr. 
Tate started his business in 1972 with a seventeen thousand 
dollar SBA loan. Our last check with Mr. Tate indicated that 
sales were more than twelve million dollars and he had eighty 
employees.
    Across the state, you'll find many businesses, like JBE, 
Incorporated, that turned to SCORE for counseling. They are 
appreciative of what SCORE did for them, and that's another 
good example of what we try to do. A minority firm, Carlos 
Garcia, president of RCS Corporation, is one of the many small 
businesses in the state that has benefited from the 8(a) 
program. He started with two employees down at the U.S. 
Department of Energy, Savannah River Plant. He now has a 
hundred employees, and he credits the 8(a) program with getting 
him started in the business and being successful.
    There are many small business stories, and I could go on 
and on. And especially as Congressman DeMint mentioned, in this 
part of the state, it's one of our strongest areas. The 
corridor from Charlotte to Atlanta is really anchored by what 
goes on in South Carolina around 85. As we continue to do 
outreach, we could not do it without people helping us. And a 
good example is the Spartanburg Chamber of Commerce.
    Chuck Ewart and his staff here have done an outstanding job 
to support SBA and its programs. And we find that all over the 
state. So we're able to leverage their membership and do things 
that we couldn't do with our own limited resources. We feel 
like that there are a lot of things that can be done and we 
look forward to working with you and the committee and the 
Administrator in bringing help to the economy to get it back on 
its feet.
    [Mr. Cooper's statement may be found in appendix.]
    Chairman Manzullo. I appreciate your testimony. Your 
members are doing a tremendous job.
    The next witness is Donald Wilson.

 STATEMENT OF DONALD WILSON, PRESIDENT AND CEO, ASSOCIATION OF 
               SMALL BUSINESS DEVELOPMENT CENTERS

    Mr. Wilson. Mr. Chairman, thank you very much. It's a 
pleasure for ASBDC to be represented at this hearing today. As 
most of you are aware, the SBDC network is comprised of roughly 
a thousand centers around the country, with roughly five 
thousand counselors providing management and technical 
assistance to small businesses. Counseling, of course, is done 
at no charge. The South Carolina SBDC, Mr. John Lenti, the 
state director, is here. We're delighted to have him with us. 
They have, I believe, if I'm correct----
    Chairman Manzullo. Spell his name for the record.
    Mr. Wilson. L-e-n-t-i. The host of the SBDC in South 
Carolina is the University of South Carolina in Columbia. They 
see several thousand small businesses a year and have one of 
the best records in terms of long-distance counseling and also 
in terms of hours per client. Their average, I believe John has 
told me, is six hours per client in their counseling, which is 
an outstanding record compared to the programs nationwide.
    The program overall, Mr. Chairman, sees roughly six hundred 
and fifty thousand small business owners and aspiring 
entrepreneurs for at least an hour face to face. Overall, we 
probably see about a million and a half. So our counselors have 
a very close connection with what's happening on Main Street, 
which is the purpose of the hearing today.
    Some of the concerns that they have brought to us are 
obviously the concerns that you share, the downturning of the 
economy. Manufactured orders are down. New orders for 
manufactured goods are down sharply. Unemployment is up. I 
noticed that South Carolina had the third highest new 
unemployment claims for the week ending November 3. The third 
quarter, of course, we had an economic downturn. Whether the 
fourth quarter will show another downturn and put us 
technically into a recession, we don't know. But small 
businesses across the country are hurting.
    We see frequently the headlines where a large company lays 
off say a thousand people, but we don't see the headlines where 
thousands and thousands of small businesses are laying off two 
or three or four people. And so we're concerned that at times 
small businesses get forgotten when a recession comes along, 
because the larger firms get the highest headlines.
    I want to thank both of you, Mr. Chairman and Congressman 
DeMint, for the role that you have played in bringing to the 
Congress' attention the needs of small business throughout this 
year through your chairmanship. There have been a number of 
major bills; 3230, which recently passed the House, would 
provide tremendous assistance to small businesses in making 
loans more available to small businesses, and also expanding 
the range of management and technical assistance that would be 
available. We hope that the House will act on that. The 
companion measure, S. 1499 in the Senate, has over half the 
senators as co-sponsors; and we hope that measure can be pushed 
through the Senate and sent to the President before Congress 
adjourns, because it would make a tremendous difference in the 
small business community throughout the country.
    One of the things that's of tremendous concern to small 
businesses--they're facing rising costs--and I know is a 
concern of both of you gentlemen, is the increased cost of 
regulations on small businesses. The Advocate's Office at SBA 
just recently released a study that indicates that the cost of 
small businesses per employee is almost seven thousand dollars 
a year, seven thousand dollars a year per employee, to comply 
with regulations; and it's primarily EPA regulations and IRS 
regulations.
    And, Mr. DeMint, I know that you, Congressman DeMint, have 
introduced legislation to have a commission to look at IRS 
regulations and seek to simplify them, and we applaud you on 
that. The interesting thing about that figure is that's for 
businesses under twenty employees. For firms with over five 
hundred employees, the cost per employee for regulations is 
sixty percent less than that. So there is no question that 
regardless of the need for the regulation, it has a much 
heavier burden on small businesses; and I know your brother is 
a small businessman, Mr. Chairman. I'm sure he's very familiar 
with the cost of regulation.
    H.R. 203, which Mr. DeMint passed out of your subcommittee 
and, with the Chairman's leadership, passed out of the full 
committee and then on to the House, would provide a pilot 
program for SBDCs to provide regulatory compliance to small 
businesses on a twenty-state pilot. We are thrilled that that 
legislation is through the House, and we are working very hard 
to try to get it through the Senate. And we thank both of you 
for the leadership in getting that through. I know that our 
clients tell us across the country that that legislation would 
make a big difference if we can provide compliance assistance 
for small businesses.
    I'll also mention a concern that I know is a concern of the 
Chairman, the rising cost of healthcare. We see estimates now 
that for small businesses, the cost of health care could go up as much 
as twenty-five percent next year. That would be a tremendous burden. We 
believe that greater attention needs to be placed on methodologies to 
help small businesses compete to get pricing that large businesses 
through self-employment, or obviously they have greater leverage with 
the insurance companies in pricing. But anything which could be done in 
that area would be a tremendous help to small businesses.
    Chairman Manzullo. You're right at the five minutes.
    Mr. Wilson. Thank you very much.
    [Mr. Wilson's statement may be found in appendix.]
    Chairman Manzullo. Mr. Beltram.

 STATEMENT OF RICK S. BELTRAM, PRESIDENT, INTEDGE INDUSTRIES, 
                              INC.

    Mr. Beltram. My name is Rick Beltram, and I am president of 
Intedge Industries. We've been in business since 1914. I am the 
third generation. We moved here from New Jersey in 1988. And 
what the first two witnesses have been talking about are the 
things that I feel every day.
    Thank you for the opportunity to participate in this very 
important hearing today. We are fortunate that the U.S. 
Congress has come to Spartanburg. We are especially gratified 
that our Congressman, Jim DeMint, is a small businessman and 
has true empathy for our current dilemma. As we all know, the 
fuel for employment and business development is always 
concentrated in the small business community. I would like to 
specifically focus my brief comments on the manufacturing 
segment.
    At a recent gathering of textile executives, Mr. Roger 
Milliken said that all U.S. manufacturing is under great 
stress. This is particularly true for the small firms who 
manufacture basic products. This past weekend--and I've 
attached a copy of this news article from our local newspaper--
stated that industrial activity has had the longest stretch of 
decline since The Great Depression. Our particular firm 
manufactures products that service the hospitality industry, 
which was weak even before the 9/11 tragedy and has 
significantly weakened since. Thus, we have seen contraction 
for well over a year already, which is consistent with the news 
report. We have seen many other local firms cease business; and 
these, unfortunately, cannot be brought back. The empty shells 
of factories and lost jobs and economic activity will remain 
for a long time, well past the current economic cycle. I urge 
you to consider some rescue efforts for those of us that are 
still open.
    We have made great strides in reducing voluntary costs, and 
we have benefited from lower prices of purchased commodities. 
However, we cannot control involuntary costs. As one example, 
our modification rate for Workers' Compensation insurance has 
actually dropped to .75.
    However, our premiums still went up with a static payroll. 
Payroll taxes, medical premiums, property taxes, and utility 
rates cannot be controlled by us, although they are regulated 
by the various government entities that can offer rescue plans. 
Since we consider our employees like family, we are very 
reluctant to use layoffs as our primary relief to cut costs. 
Large firms can make wholesale employment reductions and walk 
away from a devastated community. We just cannot do that.
    Our property taxes here in South Carolina are based on 10.5 
percent of assessment, and we have seen locally that some basic 
services are only offered if the manufacturing community 
remains solvent. And by the way, the 10.5 percent relates to 
commercial at six percent and primary homeowners at four 
percent. So we pay almost twice what somebody would if they 
owned a shopping center. Payroll taxes have consistently risen 
as Congress has raised rates and increased employer 
contributions to make up for past deficits. In order to get 
proper financing, we have been able to obtain SBA guaranteed 
loans through GE Capital.
    I suggest to you that if the manufacturing base continues 
to erode, time will run out on the USA to be able to defend 
itself and be self-sufficient for many basic products. We have 
all been witnesses to many economic failures in the 
manufacturing community in just the past few months, 
particularly in the Upstate region.
    In the past, South Carolina has performed much better than 
the U.S. economy because of our strong work ethic and favorable 
political climate. Now is not that time. This region, along 
with the rest of the country, needs some very rapid action to a 
rapidly deteriorating problem. Our instincts tell us that the 
economy is a long way from recovery. We have seen banks and 
other vendors become much more cooperative with these 
difficulties; but, to date, the government, for the most part, 
has sat on the sidelines.
    I would suggest the following plan. Since this is a federal 
hearing, my concept is focused on what Congress can do. 
However, I hope that your actions will be a role model for 
state and local governments.
    One, An immediate reduction of employers' contribution of 
payroll taxes to include FICA and FUTA.
    Two, Some amnesty provisions for past-due amounts for all 
federal taxes, penalties, and interest to be based on 
individual corporate hardships.
    Three, Monetary grants to be offered for export marketing. 
I recently had a visit from the South Carolina Export 
Consortium, and they offer a wonderful program. But we need 
government help on that.
    Four, Review of the set-aside provisions of GSA and other 
government contracting that exclude small businesses that are 
not minority owned or are not occupational disability 
workshops. I have attached to my brief a recent solicitation 
that we did get from GSA.
    Number Five, Greater focus on Congressional offices to 
liaison with district manufacturers to be sure they are 
participating in available government contracts.
    Six, Offer subsidies for interest payments for SBA 
guaranteed loans; rebates for partial return of SBA origination 
fees.
    I hope that my brief comments will be of use to passing 
legislation that will offer quick help to those many thousands 
of business owners who have ceased having restful nights. I can 
tell you from personal experience that the past few months have 
been the most stressful of my business career. A delay in 
action will only offer an irreversible environment. Thank you.
    [Mr. Beltram's statement may be found appendix.]
    Chairman Manzullo. Thank you very much.
    The next witness is June Lennon, senior partner of Martin 
and Lennon CPAs.
    Ms. Lennon. Good morning, Mr. Chairman.
    Chairman Manzullo. Are you representing NFIB here today?

  STATEMENT OF JUNE LENNON, SENIOR PARTNER, MARTIN AND LENNON 
 CPAs, PA, REPRESENTING THE NATIONAL FEDERATION OF INDEPENDENT 
                        BUSINESS (NFIB)

    Ms. Lennon. Yes, I am. Good morning, Mr. Chairman and 
Congressman DeMint. I am pleased to be here this morning to 
express to you the interests of small businesses and the 
priorities of the National Federation of Independent Business 
in the wake of the attacks in New York and Washington, D.C. As 
you know, these attacks have had a distinct impact on the 
outlook of business owners nationally, and I believe it is 
important for the Congress to enact legislation to stimulate 
the economy.
    The NFIB Education Foundation measures the state of small 
business via the Small Business Economic Trends report. This 
monthly survey, which measures the likelihood of new 
investments, new hires, and optimism among entrepreneurs, 
reveals that the SBET index had fallen to its lowest level 
since 1993 and is solid evidence that the terrorist attacks of 
September 11 have significantly hurt our national economy and 
America's small businesses. In short, the terrorist attacks 
have shaken the confidence of entrepreneurs in the American 
economy.
    As a result, it is imperative that the Congress act to 
reduce the burdens facing America's risk-takers, our 
entrepreneurs. The tax code is one of the top frustrations 
entrepreneurs have with their government. The tax code alone, 
with all of its complexities, takes time away from a business 
owner's focus on running and expanding his or her business. 
With small business owners pessimistic about the future, it 
makes sense to relieve some of the impediments in the tax code 
that slow economic growth, job creation, and community 
development. Let me take a few minutes to outline some of the 
ways that this could be done.
    Allow small business owners to expense more of the 
equipment and vital materials they need to run their 
organizations. This will allow additional investments by small 
firms to be expensed, therefore enabling those businesses to 
expand and create new jobs.
    Under the law right now, small businesses can expense up to 
twenty-four thousand dollars this year as long as the total 
investment is less than two hundred thousand dollars. Both of 
these figures are far too low. Mr. Chairman, I know you agree 
with me because your legislation, HR 1037, expands Section 179. 
I also know that the entire House of Representatives and many 
in the Senate want to expand this section. It is the right 
thing to do, but we must do it without complexity. Expanding 
Section 179 to all assets and taxpayers should be the goal of 
the Congress.
    The Congress has a temporary tax law in place right now. I 
urge Congress to permanently enact the Economic Growth and Tax 
Relief Reconciliation Act of 2001 and to accelerate the 
benefits of the new law. The benefits of permanently enacting 
this tax cut will lead to long-term health for the American 
economy, restore consumer confidence, and reduce complexity 
associated with the IRC. The President has proposed 
accelerating the individual rate reduction in his proposal. 
This is the right thing to do because it will bring immediate, 
robust growth to the economy.
    Personal tax rates on entrepreneurs are critical to 
formation of small businesses. Reducing these rates means more 
formation of small businesses, because people investing less 
than ten thousand dollars create many new businesses. The 
primary source of this money is from personal resources.
    Thousands of small businesses use vehicles to run their 
businesses every day. But once again, the tax code penalizes 
businesses because it does not allow a business owner to deduct 
the true cost of owning and operating a vehicle. The current 
thresholds are too low to enable small businesses to take full 
advantage of the depreciation deduction for business vehicles. 
They have not kept pace with the actual cost of new cars, light 
trucks, and vans, which are used by many businesses to deliver 
products, make service or sales calls, or commute between job 
sites. Due toheavy mileage, small businesses are often forced 
to replace the vehicles much faster than the depreciation life allowed.
    Many businesses make money one year and lose money the 
next. It is important for businesses to be able to survive 
tough times. The Congress has recognized this in the past and 
has written a provision in the tax code that allows businesses 
to apply for refunds of previous years' taxes in years that 
they do not make money. This provision is helpful but not broad 
enough. Right now a business owner is only eligible for refunds 
on the last two years of taxes collected. This provision should 
be expanded to allow for more dollars to be available for 
businesses in down years.
    Mr. Chairman, NFIB and I could speak much longer on the 
problems of the tax code. However, we understand the time 
constraints of this hearing. I hope I have been able to provide 
you with constructive options that will be germane to the 
debate in Washington, DC over the stimulus bill.
    In summation, I think it is clear that the tax code is the 
largest problem facing small businesses right now. If you 
simplify the tax code and avoid placing new mandates and taxes 
on America's entrepreneurs, you will produce legislation that 
will get our country's economy back on track. If you remember 
nothing else from my testimony, I would have you remember just 
two words as you work on tax legislation; simple and equitable. 
Thank you, Mr. Chairman. I yield back the balance of my time 
and will be happy to address any questions you may have.
    [Ms. Lennon's statement may be found in appendix.]
    Chairman Manzullo. Thank you very much.
    Our next witness is Bob Hughes, president of Hughes 
Development. I look forward to your testimony.

     STATEMENT OF BOB HUGHES, PRESIDENT, HUGHES DEVELOPMENT

    Mr. Hughes. Thank you. Mr. Chairman, Congressman DeMint, on 
behalf of both myself as a small businessman and the Greater 
Greenville Chamber of Commerce, of which I am the volunteer 
chair this year, I want to thank you for this opportunity to 
discuss small business issues concerning our community.
    As the fourth small businessperson in a row to chair our 
Chamber of Commerce and one of two thousand small business 
members, I guess my presence here reflects the fact that 
Greenville is a community that recognizes the values and 
contributions of small businesses. We love our big businesses 
and celebrate the jobs and investments they provide, but we 
know that future big businesses and great innovation will come 
from our small businesses. And that will be a reflection of how 
we nurture them.
    It will certainly come as no surprise that regulations, 
federal, state, and local, hit small businesses harder than any 
other. Small businesses, by definition, sell fewer units and 
therefore have less to amortize the regulatory cost over. Even 
if you exempt us from the regulation, we have to pay 
professionals to tell us we're exempt. We operate with no 
dedicated staff people to watch for and react to new laws and 
regulations.
    More important than a tax cut to small business would be a 
regulatory cut. A regulatory cut would save us money like a tax 
cut, but it would also free us up to pay more attention to 
growing our business; raising our top line, not just our bottom 
line. Congressman DeMint, your capital warehouse idea is a 
great idea. Please, no new agency for it though.
    Being located in the area with more international 
businesses than anywhere else in the nation--Not just per 
capita; more international businesses than anywhere else in the 
nation--our small businesses are keenly interested in 
international markets. Access to these markets through ports, 
air and sea, is vital; and your attention to those issues is 
welcome. More ways to do business with foreign countries, more 
access to foreign small companies, easier paths through the 
numerous governmental agencies that operate in this area would 
be valuable to our members.
    Small businesses don't have enough access to affordable 
health insurance, and what is available is on less favorable 
terms than to our big business brethren. Costs have gone up too 
fast for us to afford good coverage, and we like to be the ones 
who care more for our employees. More insurance options for 
small businesses and full deductibility for the self-employed 
will help level that field. Congressman DeMint, we thank you 
also for your work in the health care area. We know you hear 
us.
    Clemson University is ranked fifth in the nation in 
commercialized research; that is, having its university 
research actually represented by products sold in the market. 
But that is not reflected in our local economy. Those 
businesses are somewhere else. We need two things. First, we 
need more access to venture capital.
    This is, no doubt, partly due to local and state issues. 
But if we are really serious about this, an elimination or 
sharp reduction in the capital gains tax would provide instant 
activity. As I recall, there has never been an instance in U.S. 
history when a reduction in the capital gains rate has not 
produced higher tax collections. So this will cost the 
government nothing, while giving a great return to small 
businesses and the economy.
    Second, our Chamber has recognized education as the area's 
number one economic development priority. This is an especially 
important issue for small businesses. Although it may not be a 
traditional small business focus, it is the focus of our 
business community. We know that where we fund and nurture 
education, we will find the innovation capitals of the next 
century. The government's stimulus package, we are supportive 
of that; but we ask, please don't blow the budget. Deficit 
spending will raise interest rates. Interest rates will have a 
far larger impact on the economy than for whatever you can do 
with the deficit. The government can't fix the economy. Only 
people in businesses can do that. The government can make it 
only easier or harder, but you can set the field so the teams 
can play and play well.
    The economic revolutions in our society have come from 
small businesses. The current revolution, fueled by the PC, 
started in a garage, which interestingly is a direct link to 
the last great economic revolution, the automobile, which 
either started in a garage or started garages. We appreciate 
being here before the committee charged with nurturing the next 
great revolution. Anything you can do to lessen the 
distractions and burdens on these pioneers of our future will 
be repaid many times over. Thank you.
    [Mr. Hughes' statement may be found in appendix.]
    Chairman Manzullo. Thank you for your testimony. The last 
witness is Wesley Hammond, president of HBJ. What does that 
stand for?
    Mr. Hammond. Hammond Brown Jennings.
    Chairman Manzullo. Okay. Home Furnishings. I look forward 
to your testimony.

  STATEMENT OF WESLEY HAMMOND, PRESIDENT, HBJ HOME FURNISHINGS

    Mr. Hammond. Thank you, sir. Thank you, Mr. Chairman, 
Congressman DeMint. I didn't know what to expect when I was 
told I would be testifying as a witness. I've been in a court 
before. I didn't like that too much. It's a little bit like the 
fellow from Spartanburg who went to Washington, DC and went to 
a really fancy restaurant. He had on his regular work clothes, 
and the maitre d' said, sorry, you can't come in without a tie. 
So the fellow went back to his car and rambled around to see if 
he could find something that looked like a tie. All he found 
was a set of jumper cables. So he said, what the heck, and 
wrapped the jumper cables around his neck and went back to the 
restaurant. The maitre d' looked him over and said, all right, 
you can come in, but don't start anything. Small businesses are 
always starting things.
    I sell a great product that everybody needs, but it's a 
purchase that is easily deferred. If your car conks out or your 
TV dies or your refrigerator stops cooling, you'll fix them or 
replace them pretty quick. But if the old sofa starts looking 
kind of shabby, that purchase can often be put off.
    So I ride with the economy. So when do average folks buy 
new furniture? Usually it's when these four factors coincide. 
There is a need; there is a good sale, usually with free 
financing; they have enough disposable income to feel okay 
about another monthly payment. And according to a survey I 
read, couples who earn less than fifty thousand a year have no 
disposable income. The fourth thing is, when they feel secure 
about their jobs. How secure can any of us feel today when 
we've been attacked by a foreign power, seen anthrax come by 
mail, heard that the airlines may go broke, seen almost all of 
our textile mills close? You get the picture.
    In Spartanburg, I thank God for BMW, George Dean Johnson, 
Arthur Cleveland, Jimmy Gibbs, Roger Milliken, and for the 
amazing resilience of the American people. My business was 
started in 1907, and my father's dream was to keep the business 
strong enough to pass along to the fourth generation. He 
succeeded in that.
    I've been fortunate as well. My son and my cousin are 
partners. We operate with no bank debt. We pay our suppliers in 
a timely manner. We are well respected in our community and in 
our industry. And we are typical of thousands of small 
businesses throughout America. We survive and sometimes thrive 
because we are close to our customers, close to our employees, 
and we work very hard. Is the federal government our helper or 
our adversary? Sometimes both.
    With the inconsistencies of OSHA, with laws that encourage 
people to file lawsuits in hopes of personal gain, with 
excessive taxes that penalize success, with Robin Hood schemes 
that redistribute income and cause resentment in both the giver 
and the receiver, with trade agreements that send needed jobs 
to other countries to be performed by people who would be 
considered slaves in this country, I think the federal 
government makes my product more costly and my workdays a lot 
longer.
    On the other hand, I know that some of the laws I don't 
understand lead to important changes that benefit many. And I 
know what an economy that doesn't work looks like. I spent 
three weeks this summer, before September 11, in the Middle 
East. These corrupt and incompetent governments cannot offer 
their people hope, so they blame us for their miserable plight. 
I am truly blessed to live and work under the best conditions 
in the world. So how can the federal government help me and 
people like me to be more successful so I can prosper and grow 
and create jobs and pay even more taxes? Here are a few 
suggestions.
    Ease up on the taxes. Everybody should pay some taxes, but 
let people keep more of what they work so hard to earn. Unless 
they bury it in the back yard, that money is going right into 
the economy anyway.
    Give us a break on confusing rules and regulations. My 
company has two large trucks, and we have the same DOT 
regulations to follow as a fleet of a thousand trucks. Why?
    Spend our tax dollars wisely. In my business, I constantly 
ask myself, is spending this money going to make my business 
more efficient? Is it necessary to my survival? Will it add to 
my revenues? If the answer is no, I don't do it.
    Quit hiding behind the word, nexus, and let the states 
collect sales tax on Internet and catalog sales made to their 
citizens. Nexus means the business must have a physical 
presence in the state for the state to collect sales tax. If 
you took all the catalogs that I've gotten in the past months 
before Christmas and stacked them up, I believe they would 
tower over the largest building in town. That sounds like nexus 
to me.
    Let the PX system sell necessities to soldiers on active 
duty in areas where the same products are not readily 
available. The PX system was never meant to be a private 
discount department store competing with the private sector.
    And, finally, bring us together as a nation of diverse 
people. Don't make laws that push us apart.
    Today, national security is your number one job. Tell us 
how we can help. Tell us the truth. Don't let us lose the 
confidence, the generosity, the vitality, and the zest for 
living that make the American spirit the wonder and the envy of 
the rest of the world.
    Thank you for your interest and support.
    [Mr. Hammond's statement may be found in appendix.]
    Chairman Manzullo. Thank you for your testimony. I just 
have a couple of comments, if somebody wants to testify on 
them. The inability to find capital, every administration wants 
to raise SBDC fees. We go through this nonsense with every 
administration, Republican or Democrat, wants to make the SBDCs 
in the position where they have to charge consulting fees. 
Every year we fight it, and we win; but it comes back again. I 
think the reason--and I think you would agree with me--I still 
don't think that Washington gets the picture with small 
businesses.
    The NFIB does a great job. The Chamber of Commerce; Don, 
your organization; and, obviously, the SBA. But small 
businesses simply do not have the lobbying power. They don't 
have the clout. They don't have the sustained ability of the 
big businesses. One corporation received a 1.5 billion dollar 
forgiveness on a tax. Granted, that comes back down through the 
ranks.
    But still, the small businesses have really not gotten the 
tax breaks that they should have. It's almost embarrassing how 
small businesses have had to beg to get a hundred percent 
deductibility for health and accident insurance; and I think 
it's a disgrace that Congress each year strokes small 
businesses, gives them a little bit more, and says, well, next 
year, you'll get a hundred percent. My brother and his wife pay 
seven hundred dollars a month in health and accident insurance. 
Insurance companies don't community rate. There again, they 
could community rate. They could treat all small businesses as 
one big business and form that giant pool that we've been 
trying to do with associated health plans. Unfortunately, that 
hasn't gotten through Congress.
    So I just want to let you know that you need to continue to 
inform Mr. DeMint and stay very close to the SBDCs. The Small 
Business Administration has what's called an Office of 
Advocacy. It's an in-house law firm that we use constantly with 
small businesses for fighting federal regulations. It has been 
very efficient, and we always try to get it expanded.
    Three years ago, it almost was eliminated because Congress 
did not understand its function. So I guess the one question 
that I have is, the inability to access capital. I think, Mr. 
Hughes--are you a real estate developer?
    Mr. Hughes. Yes, sir.
    Chairman Manzullo. Have you had any experience in that 
line?
    Mr. Hughes. In real estate, since September 11, it's an 
unwillingness to commit anything going forward until it is sort 
of sorted out. I don't face the same kind of problem with 
capital because I've got a big piece of collateral to offer, 
not a business plan. Where that actually affects me is in my 
tenants who can't get capital, so they can't pay the rent. So 
the access to capital, and South Carolina is notoriously behind 
the other states in venture capital. And, as I said, I believe 
some of that is local and state issues.
    Chairman Manzullo. Well, not just venture capital. I'm 
talking about a line of credit. I sit on the Financial Services 
Committee, and we've been seeing bank mergers. There is no need 
for the banks to constrict when businesses are not even in 
stress. So what do we want to get out of the commercial lending 
folks, with the decrease of banks from about ten thousand 
nationwide to about six or seven thousand, especially in rural 
areas? Has anybody here expressed that?
    Mr. Wilson. Mr. Chairman, we're hearing that there is 
considerable lack of credit, and apparently bank regulators--
and I'm certainly not an expert in that area, but apparently 
bank regulators are leaning on the banks to make sure that 
their loan portfolios are sound. And apparently small 
businesses are often the first ones that they stop lending to. 
Rates are down, but the credit is just not available.
    And I noticed the lowering of the ADLI loans and things 
that have been done will help, but it's hard for a small 
business without significant collateral and so forth at this 
point to find the credit that they need. As you know, a great 
number of small businesses start up and find their capital on 
the credit card.
    You can do that when times are extremely good and sales 
keep going up and you can pay off the credit card every month. 
You can make it. But if you're relying on a credit card and 
then the economy turns down, as we've seen, then you're facing 
astronomical rates. You realize the number of small businesses, 
Mr. Chairman, that have started in the last ten years. They 
have never experienced an economic downturn. Those business 
owners have never been in a distressing time. And so they had 
adapted a certain pattern.
    And, once again, so many small businesses use credit cards, 
and now they're facing the fact that when they can't make those 
payments, they're facing eighteen and twenty-one percent 
interest rates. And so small business is facing a credit 
crunch. There was an excellent editorial on it in the Wall 
Street Journal just about ten days ago that I will share with 
your office, and it's a major problem.
    Chairman Manzullo. I was faxed a copy of that. A major bank 
cut off a line of credit to a business back home, and the 
business didn't even want a line of credit. They were in the 
home building spree. Sales were up dramatically. They were 
remodeling and decorating, and the bank said, well, we're just 
going to get out of the commercial lending business. They were 
supposed to be your SBA preferred lender. Mr. Cooper, what do 
you think about the SBA fees?
    Mr. Cooper. My personal opinion is that we've priced 
ourselves out of the market.
    Chairman Manzullo. Yes, I wish you would convey that to 
Washington.
    Mr. Cooper. I do it every time I have a chance.
    Chairman Manzullo. I have has introduced a bill, HR 3230, 
that dramatically decreases the 7(a) and 7(b) fees. The SBA 
refuses to take a position on it; and for the life of me, I 
just do not understand why the Small Business Administration is 
not in favor of lowering the fees, because it's four percent 
right off the top of a 7(a) loan.
    Mr. Wilson. Mr. Chairman, can I address that?
    Chairman Manzullo. Sure.
    Mr. Wilson. And I know you've experienced the problem, and 
you said it very clearly; that it's regardless of the 
administration, Republican or Democrat. And we understand that 
a president has to have a consistent policy and that his 
agencies and departments have to follow the goals of the 
administration. But what is happening is that in administration 
after administration, OMB so often with SBA programs----
    Chairman Manzullo. What are you referring to?
    Mr. Wilson. The Office of Management and Budget. And we're 
concerned that the White House at the highest levels, with some 
programs, is not aware of what OMB is recommending. I'll be 
perfectly candid with you. President Bush has been an outspoken 
defender of small business, and I doubt very seriously whether 
the President is fully aware that OMB has recommended the fees 
on SBDCs and higher fees for SBA loans and so forth.
    And what I have yet to understand in my twenty-five years 
in Washington since moving there from Asheville, I don't 
understand why the OMB doesn't understand where they get their 
money from. Small businesses are responsible for fifty-one 
percent of our gross domestic product.
    The money that is coming into Congress and into the 
Treasury in recent years has come because of small business 
growth. And if OMB wants to manage that money, they need to 
manage it well and realize where those dollars are coming from, 
but they continually recommend policies that are impediments to 
small businesses. And until somebody changes what is going on 
at OMB, I am afraid that we're not going to see the policy 
changes that we'd like.
    Chairman Manzullo. You understand the problem all too well.
    Mr. DeMint. A lot of things I'd like to follow up on. The 
capital retention is something that--as a small businessman, 
has come up several times today about how absurd it is to take 
money through taxes from growing small businesses when that 
money could just be plowed back in and create more jobs.
    And we have gathered a fair amount of support in the House 
and in the Senate, and the Chairman is sponsoring this BRIDGE 
Act. We hope we can actually do something with a tax deferral 
that results in growth, something that would help rather than 
punish. I think what I would like to help on, Mr. Wilson and 
Mr. Cooper--and maybe we can discuss it a little bit--is just 
this whole regulatory aspect of some comprehensive change 
regarding regulations and, again, to try to deal with some of 
the absurdities in having to do the same thing with a fleet of 
two trucks as you would do with a hundred.
    We see those types of absurdities, but I don't see any 
comprehensive proposals or legislation that would somehow 
correct these things for smaller businesses so that the cost 
per capita for a small business employer is not so much higher 
than a large business. But we would have to have, I think, a 
lot of input from your side.
    These hearings help, and I think some of you have gone to 
lengths today to list some things that begin to confirm what 
we're hearing. The frustration that I feel is, where do you get 
comprehensive legislation that pulls a lot of this regulatory 
reform in? Because as we look forward to some kind of global 
economy where we're looking at putting our small businesses in 
the export business to compete with companies all over the 
world, we seem to be working at odds back home by making it 
harder and harder to do business through our tax codes and 
regulations.
    Is it something you're considering at the SBA or the Small 
Business Association? Is there a white paper on regulations, 
something we can use to put together a comprehensive 
legislation that doesn't appear to exist now?
    Mr. Wilson. The Advocate's Office at SBA has been a 
tremendous watchdog for small business. I think agencies are 
taking the impact into consideration on small businesses, more 
than they were a few years ago; but so many of the regulations 
were already in place. We all know the horror stories. You have 
to have the beeper on a truck. You put the beeper on the truck 
when it's in reverse. Then it exceeded EPA noise standards and 
so forth a few years ago, those kinds ofridiculous 
contradictions.
    One of the real problems was that so many of the folks were 
writing the regulations, and Congress writes laws that are very 
well intended. And then I think the regulators go beyond what 
you gentlemen intended in their zeal and advocacy. And it has 
improved in recent years, and the folks from NFIB have been at 
the forefront in, I think, advocacy in terms of regulation.
    But the folks who write the regulations in the agencies 
have almost no familiarity with small businesses, how they 
operate; and that's a real problem. They bring in folks who 
just have never run a business, met a payroll, and so forth, 
the ones who are writing them; and I think that is a real 
problem. And also with the regulations, so many different 
committees.
    It's difficult to get an ombudsman bill to deal with the 
regulatory burdens on small businesses; but the numbers that 
you're very aware of, they're just staggering. And small 
businesses cannot afford a team of attorneys to read the 
Federal Register every day, and that's the reason we're hoping 
the pilot project that came out of your subcommittee and your 
committee, Mr. Chairman, that has now passed the House, that 
sets up the pilot for Small Business Development Centers to 
provide some compliance assistance, may help. If the 
regulations are going to stay, at least you owe the small 
businessman information on how you can best comply with them 
and the most cost-effective way to comply with them.
    Mr. DeMint. One of the things, as you know, that we added 
to that bill is not only to help people with small business 
regulations, but then the SBA is to get back to us.
    Mr. Wilson. Yes, and that was a very important amendment, 
and we commend you for that.
    Mr. DeMint. So, hopefully, we will actually learn and do 
something. It's one thing to know about these things, but to 
get them changed is why we're there, Mr. Chairman.
    Mr. Wilson. It's very difficult.
    Mr. DeMint. I appreciate the specific comments. As all of 
you have heard, the others have made comments. Are there any 
additional statements?
    Mr. Beltram. I'd just like to address something about the 
fees and so forth. Since we do have an SBA guaranteed loan, we 
are a payer of that huge fee you're talking about, so we 
understand what that's all about. And the reason we went that 
route rather than conventional banking is that in 
manufacturing, our biggest assets are receivables and 
inventory, which instantly, by normal banks, get discounted 
heavily, because a lot of that is component parts, work in 
process, and so forth.
    So it dramatically changes our balance sheets after the 
conventional banks go and write all that stuff down. So that's 
always a problem of obtaining credit, that our true assets can 
never be shown on what the banks will look at to make 
underwriting decisions.
    Mr. DeMint. Anything else? Any other comments?
    Mr. Cooper. I would go along with what Don said. I hope the 
committee will stay behind that because I think it is a step in 
the right direction, to look at the impact of all these 
regulations. I just think it's a good start; but, like most 
things, we can't let it falter. We've got to stay behind it.
    Chairman Manzullo. We appreciate you all coming. Mr. 
Cooper, I just want to let you know how much I appreciate your 
coming with the rest of the witnesses. The testimony of the 
regional SBA directors is oftentimes a lot more particular. 
It's totally unpolitical. It's untouched by the Office of 
Management and Budget. And your remarks have been extremely 
refreshing.
    Mr. Cooper. Thank you, sir.
    Chairman Manzullo. The new SBA director has to deal with 
those OMB people all the time. You have the luxury of being 
down here and separated from them. But I know his troubles 
also, to try to stay within the President's guidelines and also 
trying to help the small businesses at the same time.
    Mr. Cooper. We're very impressed with him at the agency. 
The first meeting we had with him, he sat and listened to us 
for a day and a half.
    Chairman Manzullo. He's a good man. We're very much 
impressed with him. Let me just throw something out that you 
might want to chew on. There is an interesting phenomenon going 
on in the automobile industry that proves conclusively what 
happens when you have dramatically lowered interest rates. 
These rates are at zero, and now one of the companies is going 
to have it tomorrow. But the American people have got just a 
taste of what it's like to live under low interest rates, and 
they like it.
    More Ford trucks have been sold this year than any other 
year in history. The last quarter was astounding, but the sale 
of automobiles was up. And the question is, how long can you go 
with zero percent financing? You can go a long period of time, 
because we've seen development of this in my own case.
    If I could convince my wife, it's the fact that I was never 
intending to look at a new car; but I did see a four-wheel 
drive pickup truck, club cab, CD player, one that I could put 
the Dixie Chicks in. And the color of the truck is the same 
color of my hair. And I could buy that for three hundred 
dollars a month, and I could see it sitting in my garage with 
my brown Lab sitting next to me, sleeping, and going across my 
pasture and putting in a trailer the same color as the pickup 
truck. But what it's doing is, it's people are rethinking the 
way they buy things now with the lower rates of interest.
    I would hope, with all due respect, that the banks would 
catch on. The banks would make a lot more money, writing a lot 
more loans out there at affordable interest rates, with people 
being able to make the payments on it. So as far as the 
horrible tragedy on 9/11, we're seeing consumers react in many 
different ways.
    Again, all the statements of the witnesses will be a part 
of the record. We will leave the record open for another two 
weeks. Anybody who wants to make a statement for the record. Do 
you want them to e-mail to you, Jim? Is that the best way?
    Mr. DeMint. Well, I think these folks can send additional 
statements to my staff. The e-mail is www.demint.house.gov. And 
we'll pass all along to the committee.
    And thank you. This has been great testimony and a 
tremendous help. We appreciate you all taking your time.
    [Whereupon, the hearing was concluded at 12:45 p.m.]
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