[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]




  THE STATE OF THE SMALL BUSINESS ECONOMY AND IDENTIFYING POLICIES TO 
                        PROMOTE ECONOMIC RECOVERY

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

                                MEETING

                               before the

                      COMMITTEE ON SMALL BUSINESS
                             UNITED STATES
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                              MEETING HELD
                            JANUARY 14, 2009

                               __________

              [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
                               

            Small Business Committee Document Number 111-001
Available via the GPO Website: http://www.access.gpo.gov/congress/house

                                 ------
                   U.S. GOVERNMENT PRINTING OFFICE
46-820 PDF                  WASHINGTON : 2008
----------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Printing 
Office Internet: bookstore.gpo.gov Phone: toll free(866) 512-1800; DC 
area (202) 512-1800 Fax: (202) 512-2104  Mail: Stop SSOP, 
Washington, DC 20402-0001






                   HOUSE COMMITTEE ON SMALL BUSINESS

                NYDIA M. VELAZQUEZ, New York, Chairwoman
                  SAM GRAVES, Missouri Ranking Member
                  Michael Day, Majority Staff Director
                 Adam Minehardt, Deputy Staff Director
                      Tim Slattery, Chief Counsel
                  Karen Haas, Minority Staff Director

                                 ______

                                  (ii)



                            C O N T E N T S

                              ----------                              

                           OPENING STATEMENTS

                                                                   Page

Velazquez, Hon. Nydia M..........................................     1
Graves, Hon. Sam.................................................     2

                               WITNESSES

Allison, Mr. Ted, President and CEO of the St. Joseph Area 
  Chamber of Commerce, St. Joseph, MO............................     3
Ehmann, Mr. Tim, Senior Project Manager, O'Connell Electric, 
  Victor, NY On behalf of the National Electrical Contractors 
  Association....................................................     5
Massie, Mr. Steve, CEO, Jack L. Massie Contractor Inc., 
  Williamsburg, VA On behalf of Associated General Contractors of 
  America........................................................     7
Therrien, Mr. Robert W., President, The Melason Co. Inc., Keene, 
  NH On behalf of the National Roofing Contractors Association...     9
Dorfman, Ms. Margot, CEO, US Women's Chamber of Commerce.........    24
Merski, Mr. Paul, Senior Vice President and Chief Economist, 
  Independent Community Bankers of America.......................    26
Roth, Mr. Alan, Senior Executive Vice President, US Telecom 
  Association....................................................    28
Seiffert, Mr. Grant, President, TIA..............................    30

                                APPENDIX


Statements for the Records:
Clarke, Hon. Yvette..............................................    37
National Steering Committee, 25x'25 Alliance.....................    41
Carpenter, Mr. Dave, President and CEO, J.D. Carpenter Companies. 
  On Behalf of the National Association of Convenience Stores....    48
Ehmann, Mr. Tim, O'Connell Electric, Victory, NY On Behalf of the 
  National Electrical Contractors Association....................    56
U.S. Chamber of Commerce.........................................    69

Prepared Statements:
Allison, Mr. Ted, President and CEO of the St. Joseph Area 
  Chamber of Commerce, St. Joseph, MO............................    79
Ehmann, Mr. Tim, Senior Project Manager, O'Connell Electric, 
  Victor, NY On behalf of the National Electrical Contractors 
  Association....................................................    82
Massie, Mr. Steve, CEO, Jack L. Massie Contractor Inc., 
  Williamsburg, VA On behalf of Associated General Contractors of 
  America........................................................    87
Therrien, Mr. Robert W., President, The Melason Co. Inc., Keene, 
  NH On behalf of the National Roofing Contractors Association...    92
Dorfman, Ms. Margot, CEO, US Women's Chamber of Commerce.........    97
Merski, Mr. Paul, Senior Vice President and Chief Economist, 
  Independent Community Bankers of America.......................   100
Roth, Mr. Alan, Senior Executive Vice President, US Telecom 
  Association....................................................   112
Seiffert, Mr. Grant, President, TIA..............................   124

                                 (iii)



 
                    THE STATE OF THE SMALL BUSINESS
     ECONOMY AND IDENTIFYING POLICIES TO PROMOTE ECONOMIC RECOVERY

                              ----------                              


                      Wednesday, January 14, 2009

                     U.S. House of Representatives,
                               Committee on Small Business,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 10:06 a.m., in Room 
2360, Rayburn House Office Building, Hon. Nydia M. Velazquez 
[Chair of the Committee] Presiding.
    Present: Representatives Velazquez, Clarke, Kirkpatrick, 
Dahlkemper, Moore, Schrader, Schock, Graves and Luetkemeyer.
    Chairwoman Velazquez. Good morning. I call this forum to 
order.
    Last month, the National Bureau of Economics made it 
official. The country is in a recession, and it has been for 
over a year now. Of course, most Americans already knew this. 
From plunging consumer confidence to soaring unemployment, the 
signs were and continue to be everywhere. In December alone, we 
lost a half million jobs, bringing last year's job loss to a 
63-year high.
    Work has already begun to turn the economy around. The end 
goal of this recovery effort should be growth and job creation, 
two areas in which small businesses excel. After all, small 
firms are the engine of our economy. They not only create 80 
percent of all new jobs, but they also represent 99 percent of 
American businesses. Today, however, they are struggling to 
play their traditional role of economic catalyst.
    In this morning's forum, we will look for ways in which 
small firms can assume that role once again. We will also 
discuss the current economic climate and the roadblocks it has 
created for our country's entrepreneurs.
    From the local tech to the mom and pop restaurant down the 
street, small businesses are suffering everywhere. Many have 
been forced to close up shop all together.
    At a hearing in November, this Committee met Thomas Franke, 
an entrepreneur whose 83-year-old family business had managed 
to ride out the Great Depression but was unable to endure the 
current downturn. In November, his business closed its doors 
for good.
    All across the country entrepreneurs like Franke are 
struggling to secure the capital they need to survive. 
According to the Federal Reserve Senior Loan Officer Survey, 75 
percent of commercial banks have tightened lending standards to 
small firms. On top of that, 90 percent of respondents said 
that they have upped the cost of small business credit lines.
    During past downturns, small businesses have managed to 
survive on loans from the Small Business Administration, but 
today even those loans are disappearing, with lending down 
almost 60 percent since last year. As funding dries up, many 
entrepreneurs are taking desperate measures, from maxing out 
credit cards to draining 401(k)s.
    It doesn't have to be this way. The resources of the SBA 
loan program could be leveraged to help break the financing 
logjam. Our Nation should use targeted tax incentives to 
increase investments, generate cash flow and encourage small 
firms to hire workers. Tax policies can also help spur 
innovation and encourage investors to put resources behind 
promising startups.
    If we have learned anything in the last year, it is that 
there is no single silver bullet fix for our financial woes. 
With that said, we also know that if we are going to bring our 
economy back on track we are going to have to start with the 
fundamentals. That means job creation and economic growth.
    As the backbone of the American industry, small businesses 
can help accomplish both. But before small firms can revive the 
economy, they will need to survive the recession. In today's 
forum, we will look for ways to ensure that they do both so 
that they can play their historic role as economic catalyst.
    I am delighted everyone could join us for this discussion 
and I look forward to your input on this issue.
    Now I would like to yield and welcome the new ranking 
member of the minority side, our colleague, Sam Graves. I look 
forward to working with you. As you all know, we had a great 
relationship with the previous ranking member. I have really 
enjoyed the work that we have done in the past on the 7(a) and 
SBIR programs, and I look forward to two productive years.
    Mr. Graves. Thank you, Madam Chair. I, too, look forward to 
two productive years and intend to conduct myself exactly the 
same way as Representative Chabot did and thank you for holding 
this roundtable. I think it will be a positive and active 
working relationship between the chairwoman and I and the 
Committee as we move forward in a very bipartisan manner to 
address the vital issues facing small businesses. So thank you 
very much for your opening.
    During the past few months, Congress and the American 
public have heard that it is important to stimulate the economy 
but almost nothing about what America's small businesses need. 
As larger enterprises lay off workers, small businesses will 
help to fill that gap, either through the hiring of new 
employees or the creation of new enterprises. I hope this 
hearing will correct that oversight.
    In developing an economic stimulus package, I am heartened 
by the President-elect's willingness to hear new ideas and 
consider elements of the economic stimulus package--reconsider 
elements of that package. I would expect that he understands 
the importance of small business in the economy and seriously 
considers the suggestions offered at today's event.
    Any stimulus package that helps small businesses must 
include significant tax cuts. In many ways, tax cuts will 
provide small business owners with more liquid assets that 
enable them to allocate resources in the manner most designed 
to grow their businesses.
    Whatever we may think of the wisdom, as far as the wisdom 
of the Federal Government is, it is small business owners that 
have the real expertise in creating growth in the American 
economy. That capacity should be fostered through the 
appropriate tax cuts.
    Support for tax cuts does not mean that infrastructure 
investments should be ignored. There is little doubt that an 
appropriate investment by the Federal Government and 
infrastructure can provide jobs to unemployed Americans. 
However, I would caution that any such program carefully 
consider the long-term economic benefits as well as the short-
term gains.
    Investment that has long-term benefits should receive 
priority over projects that are simply designed to increase 
employment on a temporary basis. For example, projects to 
reduce reliance on imported oil or to increase broadband access 
throughout America should have a higher priority than projects 
that are designed simply to get a piece of the pie.
    I am looking forward to hearing from our witnesses about 
what infrastructure investments and tax policies will have both 
short-term and long-term payoffs. Again, I want to thank the 
chairwoman for convening this important event; and I hope that 
leaders of the House and Senate seriously review what has been 
discussed here today in the further development of a stimulus 
package and spark real economic growth.
    Again, thank you, Madam Chair, and I yield back.
    Chairwoman Velazquez. Thank you.
    Now I would like to welcome all the members of the panel, 
especially Mr. Ted Allison.
    We will apply the 5-minute rule. You are watching the clock 
there. It will tell you when your 5 minutes are up.
    Mr. Ted Allison is President and CEO of the St. Joseph Area 
Chamber of Commerce in Missouri. With over 1,000 members, the 
St. Joseph Area Chamber of Commerce works to create an 
environment that allows businesses to succeed in this 
community.
    Welcome.

 STATEMENT OF TED ALLISON, PRESIDENT AND CEO, ST. JOSEPH AREA 
           CHAMBER OF COMMERCE, ST. JOSEPH, MISSOURI

    Mr. Allison. Thank you. It is truly an honor for me to be 
here and give testimony on behalf of the business community of 
St. Joseph, Missouri, a small MSA of about 125,000 people in 
northwest Missouri. As is in most local economies, small 
businesses in St. Joseph represent the vast majority of private 
sector employment.
    Ladies and gentlemen, 93.5 percent of net employment growth 
in the United States from 1989 to 2005 was created by small 
businesses. The small business sector employs more scientists 
and engineers than the large business and higher education 
sectors. Small businesses are also far more productive, as they 
generate five times more patents per research and development 
dollar than big businesses and 20 times more than universities.
    While 80 percent of the registered voters in America agree 
that our government should encourage more entrepreneurship, 
public policy continues to give a disproportionate preference 
to the big business sector. The small businesses sector 
delivers a higher yield for dollar of public investment than 
big business and offers the greatest potential for rapid 
economic recovery and growth in quality jobs.
    Immediate action from Congress is imperative. Therefore, I 
hereby submit the following recommendations for your 
consideration that I feel would stimulate rapid economic 
recovery for the small business sector:
    One, increase the current 2.5 percent set aside allocation 
for Federal research and development funding to 5 percent for 
Small Business Innovation and Research grants, what we often 
call SBIRs.
    Two, encourage the development of local angel capital 
networks by establishing a 20 percent tax credit for individual 
investors participating in the deployment of angel capital 
funds.
    Three, establish a 20 percent tax credit to encourage 
private contributions to qualified nonprofit or publicly owned 
business incubators.
    Four, improve access to market research data, training 
programs and SBIRs by substantially increasing the Federal 
funding to put more SBDC counselors in the field.
    Number five, provide additional funding toward 
entrepreneurial education programs for local school districts, 
colleges and universities.
    Six, encourage growth of college accredited internships by 
providing tax credits to sponsoring small businesses.
    Number seven, reduce excessive regulatory standards for 
small businesses by exempting them from Section 404 of the 
Sarbanes-Oxley Act.
    Number eight, take aggressive action to reduce the cost of 
health care insurance and provide a 20 percent tax credit to 
insure individuals and employers contributing to employee 
health care coverage.
    Nine, improve the availability and reduce the cost of fully 
developed building sites in publicly owned or 501(c)(3) non-
profit business parks by increasing funding for EDA grants 
towards infrastructure.
    Ten, improve access to commercial loans by increasing the 
government guaranteed percentage on SBA 7(a), reduce 
qualification standards, eliminate loan fees, and incrementally 
forgive the SBA portion of 504 loans for each quality job 
created that provides health care benefits to its employees.
    Eleven, enhance credit access for entrepreneurs through the 
expansion of local revolving loan fund programs funded through 
EDA grants by lowering the local match requirement.
    Number twelve, increase the tax credit for dependent 
children to $2,000 and extend the credit to age 21 if the child 
is a full-time college or technical training student, provided 
the parents are contributing at least half of their college 
expenses.
    Thirteen, reduce tax rates for small businesses with gross 
receipts of less than $2.5 million.
    Fourteen, exempt the first $30,000 of small businesses net 
earnings from self-employment tax.
    Fifteen, reduce or eliminate the corporate capital gains 
tax.
    And, sixteen, extend bonus depreciation, increase section 
179 expansion provisions, and adopt a temporary investment tax 
credit.
    Again, I thank you for this opportunity; and I welcome any 
remarks or questions you may have.
    Chairwoman Velazquez. Thank you, Mr. Allison.
    [The statement of Mr. Allison is included in the appendix 
at page 79.]
    Chairwoman Velazquez. Our next witness is Mr. Tim Ehmann. 
He is the Senior Project Manager for O'Connell Electric in 
Victor, New York. Founded in 1911, O' Connell Electric is a 
full service regional contractor serving the diverse electrical 
needs of a wide range of clients.
    Mr. Ehmann is testifying on behalf the National Electrical 
Contractors Association. NECA provides service to the $130 
billion electrical construction industry across the United 
States.
    Welcome.

  STATEMENT OF TIM EHMANN, SENIOR PROJECT MANAGER, O'CONNELL 
     ELECTRIC, VICTOR, NEW YORK, ON BEHALF OF THE NATIONAL 
               ELECTRICAL CONTRACTORS ASSOCIATION

    Mr. Ehmann. Madam Chair, Ranking Member Graves, members of 
the Small Business Committee, thank you for the opportunity to 
appear before you today. It is an honor and privilege to appear 
before a Committee that has tremendous impact on my business 
and the thousands of electrical contractors who operate as 
small businesses.
    I am Timothy Ehmann, representing O'Connell Electric of 
Victor, New York, which has been in business since 1911 and is 
a member of the National Electrical Contractors Association. I 
am a senior project manager specializing in emerging electrical 
construction markets, including renewable energy technologies 
like wind power, converting landfill gas into electric power 
and solar photovoltaic. I also work in the natural gas and 
utility security industry.
    NECA is the nationally recognized voice of the $130 billion 
electrical contracting industry that brings power, light and 
communications technologies to buildings, communities and homes 
across the U.S. NECA's 119 local chapters advance the industry 
through advocacy, education, research and standards 
developments.
    I am thrilled at the opportunity to speak regarding the 
upcoming economic stimulus legislation that will soon be 
deliberated before Congress. My testimony will focus on two 
elements that need to be included in the upcoming legislation.
    Green jobs. President-elect Obama's $1 trillion stimulus 
plan emphasizes significant investment in transportation and 
infrastructure, including roads, bridges and dams. NECA 
supports these infrastructure projects that will help spur 
economic growth and create jobs. NECA also believes the 
emphasis must be placed on investment in buildings such as our 
schools, hospitals and public facilities through investment in 
green energy construction and high performance buildings. We 
therefore seek provisions that would require the construction 
and retrofitting of energy efficient buildings.
    From the proper installation and maintenance of wind 
turbines to light rail and mass transit systems, O'Connell 
Electric is playing an increasingly important role in the 
building of the new American infrastructure.
    The size and scope of electrical contracting businesses has 
fundamentally expanded over the past several years, thanks 
largely to Federal and State tax incentives. O'Connell Electric 
and hundreds, if not thousands, of other NECA contractors have 
made renewable energy an integral part of their business 
strategy. In turn, this has facilitated job creation, 
contributed to the construction of more energy efficient 
buildings and moved our Nation towards energy independence.
    Electrical contractors support numerous other industries 
through our work--solar panel manufacturers, software 
developers and inventory managers--and we must hire additional 
personnel to perform both the pre-construction work and the 
actual building projects.
    The green job creation for construction of alternative 
energy sources such as wind farms is immense. Over the course 
of the last 5 years, O' Connell has become increasingly 
involved in the construction and maintenance of large wind 
energy generation fields throughout New York State. Our 
revenues from clean energy technologies has gone from about $1 
million to more than $20 million, which represents more than 25 
percent of our total revenues. Such an increase in revenues can 
contribute to job creation. The influx of renewable energy 
projects has allowed O'Connell to hire 50 new employees.
    O'Connell Electric's experience is not unique. It is a 
shared experience among NECA contractors. Due to the increased 
demand for personnel equipped with the skills to install and 
maintain these new technologies, the growth of the solar and 
wind industries, for example, has triggered increased 
investment in research and development, manufacturing and 
distribution.
    I am encouraged by the economic stimulus proposal that 
President-elect Obama has begun to lay out, which could create 
as many as 2 to 3 million green jobs. The electrical 
contracting industry would stand to benefit from several of the 
provisions being mentioned, including group re-lamping and 
installation of updated energy efficient heating and cooling 
systems for the Federal Government.
    Federal tax incentives provide the necessary offset to a 
capital investment that clean and renewable energy technology 
require to be constructed and utilized.
    The economic stimulus legislation is not only an 
opportunity to stop the economic contraction our Nation is 
facing but also the opportunity to create confidence and long-
term sustainability of the renewables market. We therefore ask 
for the extension of Federal incentives for renewable energy 
sources. These extensions would provide necessary 
predictability in a marketplace that often suffers from 
projects being delayed or put on hold because of the temporary 
nature of the renewable energy tax incentives.
    Another key policy that would provide predictability within 
the market would be an increase and expansion of the production 
tax credit, which incentivizes the generation of energy through 
clean, renewable resources like wind power and solar.
    The credit crunch has put funding sources at risk for many 
clean energy projects. Consequently, we support the expansion 
of the Clean Renewable Energy Bond Program, which provides 
financial incentives for investment by consumer-owned utilities 
in new renewable electrical generation facilities.
    Madam Chair, I have witnessed firsthand the effects of what 
happens to jobs, to business growth and to the economy when 
these incentives are suspended or reduced. If the cost of 
market entry is not addressed and the investments are not made 
to incentivize the renewable energy markets, I assure you that 
the electrical contracting industry as well as numerous other 
industries will become stagnant or contract, creating job loss 
and reduce business revenues. It is absolutely critical to fund 
and expand Federal programs for a renewable energy market. They 
are the vehicle to create economic stimulus and provide our 
Nation with a chance to build a new energy economy.
    Thank you, Madam Chair. On behalf of O'Connell Electric and 
the National Electrical Contractors Association, I appreciate 
the opportunity to appear before this Committee.
    Chairwoman Velazquez. Thank you, Mr. Ehmann.
    [The statement of Mr. Ehmann is included in the appendix at 
page 82.]
    Chairwoman Velazquez. Our next witness is Mr. Steve Massie. 
Mr. Massie is the President of Jack L. Massie Contractor, Inc. 
in Virginia. Massie Contractor provides a full range of 
services in every step of the construction process.
    Mr. Massie is here to testify on behalf of the Associated 
General Contractors of America. AGC represents more than 32,000 
leading firms in the industry, including general contractors, 
specialty contractors and service providers and suppliers.
    Welcome, sir.

 STATEMENT OF STEVE L. MASSIE, CEO, JACK L. MASSIE CONTRACTOR, 
 INC., WILLIAMSBURG, VIRGINIA, ON BEHALF OF ASSOCIATED GENERAL 
                     CONTRACTORS OF AMERICA

    Mr. Massie. Thank you, Madam Chair and Ranking Member 
Graves, for this opportunity to testify. I am here testifying 
today on behalf of the Associated General Contractors of 
America, better known as AGC.
    My name is Steve Massie. I am CEO of Jack L. Massie 
Contractor of Williamsburg, Virginia. We specialize in highway 
site and utility construction. I am also the immediate past 
President of the Associated General Contractors of the America.
    AGC's members are comprised of a diverse group of general 
contractors, specialty contractors, suppliers and providers 
that engage in all areas of commercial construction. In a 
strong economy, the construction industry employs more than 7 
million people and annually represents more than $1 trillion in 
economic activity. Today, however, construction companies and 
our employees are suffering as the economy continues to 
deteriorate. Contractors are terminating employees.
    Our company has already reduced our work hours by 33 
percent. A further reduction to 50 percent will take place 
today while I am up here; and the next step, unfortunately, for 
us would be layoffs.
    AGC supports construction as a economic stimulus both 
through enhanced construction spending and through construction 
tax incentives. Nonresidential construction employment peaked 
in January of 2007 and has steadily decreased over the last 24 
months.
    AGC's Chief Economist reports that an additional layoff of 
construction personnel ranging from 10 to 15 percent nationwide 
is possible if the economy does not turn around. He also 
estimates that every $1 billion invested in infrastructure 
projects would create over 28,500 jobs, add $3.4 billion to the 
gross domestic product and about $1.1 billion to personal 
earnings.
    An infusion of Federal infrastructure funding would have a 
direct stimulus effect by providing opportunities for 
contractors to compete for work. Once projects are awarded, 
firms will be able to put people on the project in 
approximately 30 days.
    A recent survey showed of AGC members showed that every 
type of construction market has seen a downturn. Seventy-two 
percent of respondents have laid employees off in the past 6 to 
12 months. Sixty-five percent anticipate laying off employees 
in the next 6 to 12 months.
    However, 85 percent would defer layoffs or hire additional 
workers if States received Federal stimulus. Seventy-three 
percent would purchase new equipment if markets improved. I 
know these statistics hold true for our company.
    The study also shows that there is available workforce 
capacity to build these projects, and once the money begins to 
flow workers will quickly be put to work.
    Additional Federal infrastructure funding will improve our 
economic efficiency and make our country more competitive. In 
Virginia, Governor Tim Kaine has stated that Virginia has, and 
I quote, more than a billion dollars in ready to go bridge, 
highway, rail, transit, port and airport projects that have 
been through appropriate local, regional and State planning 
processes and that can be under contract within 180 days.
    Tax provisions should also be a part of this debate. AGC 
believes Congress should extend expensing, depreciation, energy 
efficiency and worker training tax policies to create 
additional incentives to invest in America. One provision that 
is of particular concern to AGC is the repeal of the 3 percent 
withholding on Federal, State and local contracts.
    Without action by the 111th Congress, firms that receive 
contracts with funds derived from the economic recovery package 
would ultimately face a Federal tax withholding requirement 
that exceeds the average net revenue on construction projects. 
The provision is unnecessary because the performance bonds 
required for Federal work ensure tax compliance. AGC urges 
Congress to include a repeal of the 3 percent tax withholding 
law in the upcoming economic recovery package.
    The country needs your help. The current shortfall in 
infrastructure investment provides a unique opportunity. With 
material capacity, readily available labor and a backlog of 
deferred projects, the construction industry stands ready to 
build now. Increases in infrastructure investment can put 
people to work quickly and will have a direct, immediate and 
dramatic impact on the economy.
    Again, thank you very much, Madam Chairman, for the 
opportunity to testify today for AGC.
    Chairwoman Velazquez. Thank you, Mr. Massie.
    [The statement of Mr. Massie is included in the appendix at 
page 87.]
    Chairwoman Velazquez. Our next witness is Mr. Robert W. 
Therrien. He is the President of the Melanson Co., Inc., a 
roofing contractor in Keene, New Hampshire. Mr. Therrien is a 
member and serves as President of the National Roofing 
Contractors Association with approximately 4,000 members. NRCA 
is the trade association that represents professional roofing 
contractors worldwide.
    Welcome.

 STATEMENT OF ROBERT W. THERRIEN, JR., PRESIDENT, THE MELANSON 
  CO., INC., KEENE, NEW HAMPSHIRE, ON BEHALF OF THE NATIONAL 
                ROOFING CONTRACTORS ASSOCIATION

    Mr. Therrien. Thank you Madam, Chairwoman and members of 
the Committee. Thank you for the opportunity to testify on 
behalf of the National Roofing Contractors Association.
    I am Rob Therrien, President of the Melanson Company, a 
roofing contractor based in Keene, New Hampshire; and I now 
serve as President of the National Roofing Contractors 
Association.
    The roofing industry is uniquely positioned to play a 
significant role in quickly stimulating economic growth and job 
creation across this Nation. However, the Tax Code contains an 
obstacle that is limiting economic activity in the emerging 
green building sector.
    Congress can address this problem by including the Green 
Roofing Energy Efficiency Tax Act, or GREETA, in the economic 
stimulus legislation now being considered. This investment in 
the emerging green economy will immediately help jump-start our 
economy.
    By accelerating demand for green roofing systems, GREETA 
will create 40,000 new jobs in the manufacturing and 
construction industry; add $1 billion in taxable annual revenue 
to the economy; reduce the U.S. energy consumption by 13.3 
million kilowatt hours annually; cut carbon dioxide emissions 
by 20 million pounds per year; and save small business millions 
of dollars through a simpler and more equitable system of 
taxation and lower energy costs.
    GREETA amends the Internal Revenue Code to provide a 20-
year tax depreciation schedule for commercial roof systems that 
meet specific energy efficiency standards. Passage of GREETA is 
necessary because between 1981 and 1993 the depreciation 
schedule for non-residential property was increased from 15 
years to 39 years. However, the current 39-year depreciation 
schedule is not a realistic measure of the average life 
expectancy of a commercial roof, which is about 17 years.
    The large disparity between a 39-year depreciation schedule 
and 17-year average life span of a commercial roof serves as a 
major disincentive to building owners to replace their failing 
roofs. A building owner who replaces a roof before 39 years 
have elapsed may have to continue to depreciate for tax 
purposes, even though their roof no longer exists. As a result, 
many building owners choose not to only do piecemeal repairs, 
most often with outdated technology, but they do this rather 
than replace their failing roof in its entirety with new, 
energy efficient materials. This problem is slowing the 
adoption of more advanced energy efficient roofs.
    GREETA will rectify this situation by reducing the tax 
depreciation schedule for commercial roof systems from 39 years 
to 20 years on roofs that meet benchmark energy efficiency 
standards. Enactment of this legislation will accelerate the 
adoption of energy efficient commercial roof systems by 
eliminating the disincentive in the Tax Code for building 
owners to install such systems.
    Enactment of GREETA would also benefit millions of small 
business owners by eliminating the need to depreciate more than 
one roof in instances where the roof must be replaced before 
the 39-year depreciation schedule has been completed.
    Given the many economic as well as environmental benefits 
of GREETA, this legislation enjoys strong support among 
business groups as well as organized labor.
    NRCA greatly appreciates your support, Madam Chairwoman. As 
a co-sponsor of GREETA, it looks forward to working with you 
and other members to enact this legislation into law.
    A related short-term incentive to increase employment in 
the commercial roofing sector could be to provide a 50 percent 
bonus depreciation for energy efficient roof replacements. This 
would permit an owner to deduct 50 percent of the adjusted 
basis of the qualified roof replacement placed into service in 
the years of 2009 and 2010. This would provide a greater 
incentive for building owners to initiate energy efficient roof 
replacements in the economic downturn, and I would say also 
supports funding for green infrastructure improvements in our 
Nation's building sector and in the economic stimulus 
legislation you are looking at.
    We believe that current trends towards the adoption of 
green buildings are keen drivers in the economic growth of our 
industry. We are working to maximize economic, environmental 
and energy conservation benefits of green buildings.
    Roof services, for example, across this Nation offer an 
economic, ready to use platform for the production of renewable 
solar energy. The U.S. Right now possesses 225 billion square 
feet of stable roof surface among its existing commercial and 
residential buildings. If only one-third of this area could be 
used for solar energy production through photovoltaic systems, 
our roofs would generate over 50,000 megawatts of power 
annually, or approximately 8 percent of our current generating 
capacity.
    In conclusion, including GREETA for funding for green 
infrastructure improvements in the economic stimulus 
legislation will immediately create more jobs and more green 
collar jobs while also benefiting the environment and 
conserving energy. Again, thank you for this opportunity to 
testify today. I would be pleased to answer any questions the 
members of the Committee may have.
    [The statement of Mr. Therrien is included in the appendix 
at page 92.]
    Chairwoman Velazquez. I would like to address my first 
question to Mr. Massie.
    A massive stimulus bill is going to require increasing a 
budget deficit that is already over $1 trillion. This requires 
careful assessment of what policies will generate the largest 
bang for the buck. For your business, in terms of your own 
perspective, can you tell us about those initiatives? Whether 
they be tax or infrastructure, which will generate the most 
jobs?
    Mr. Massie. I need to be careful that that is not a 
completely self-serving answer.
    When I talk to the people at home, the people that work for 
us, everybody likes the idea if you reduce their taxes they 
have more money to spend, but it won't do any good if they 
don't have a job making money in the first place. And, quite 
frankly, we are right at 170 employees right now, and they are 
smart people, they have a lot of common sense and see what is 
going on in our area.
    There is a competitor of ours for 30-some years who is 
gone. That company no longer exists. And the typical worker in 
our industry absolutely loves a 60-hour week. They kind of base 
their life on working that many hours at that level of income. 
We cut our workweek by 33 percent about 2 months ago. Today, 
while I am here, we did cut it to 50 percent; and we have not 
laid people off as of yet. And there is some work that we have 
gotten in the last month and a half, but it is all little jobs, 
nothing big. And the people see it and, quite frankly, the 
employees are scared. So the idea of being able to put people 
to work where they know they can come every single day and be 
able to create income within themselves is very, very important 
to them.
    Chairwoman Velazquez. Thank you.
    Mr. Massie. I think that is the best way I can answer that.
    Chairwoman Velazquez. Would any other members of the panel 
like to comment on that question?
    Mr. Allison. I would like to commend the gentleman. I think 
his statement that people first have to be employed before they 
can pay taxes--quite frankly, I think a great majority of 
Americans don't mind paying their fair share of taxes. They 
just like to know where it is going. Of course, we could argue 
all day long about we would like to pay lower taxes, but, 
again, the important thing is just to be among the living and 
employed and having that great opportunity to be a taxpayer.
    I think what we are experiencing at this point in our local 
economies is a problem of confidence, consumer confidence and 
confidence among the business community. You have people that, 
as we speak, are juggling issues and trying to make decisions 
that will affect many people's lives. So I just implore you to 
act boldly and quickly because time is of the essence. Every 
day that goes by, more damage is being done.
    Chairwoman Velazquez. Thank you, Mr. Allison.
    Mr. Ehmann, last year, Congress passed legislation 
extending the renewable energy tax credit for electricity 
generation. This year, however, many key incentives are set to 
expire. How would extending this renewable energy programs act 
as a stimulus in moving our economy forward?
    Mr. Ehmann. A perfect example of what that yearly 
production credit does to the large wind industry, we have 
experienced it. It is a yearly issue; and, of course, you 
extended it until 2009. What that is doing right now is a 
construction process in a large wind firm is a 10- to 12-month 
construction period. The development of that project could be 2 
years before that.
    The overall problem with that is the utility interconnect 
is usually a 14-month process. Where actually all those numbers 
put into the equation with a definite end date of the 
production tax credit ending each year adds severe instability 
to a normal construction project. It is an unnatural curve when 
people can't make the decision right now to say, okay, can we 
get--with all these lengths in our schedule, can we get them 
done by December 31st?
    And as of this date right now, you would be hard pressed to 
have any project moving forward. As a matter of fact, of the 15 
projects that I know of in the northeastern United States, I 
think there are only two committing to get under way right now.
    It isn't just giving us another year. It is more like give 
us 2 years or 3-year pieces. Then you have an economic smoother 
curve and let a project develop. Instead of a project being 
crimped into such a short period of time where you have an 
unnatural amount of overtime and trucking and economic issues 
that need time to be addressed and are all forced into a short 
window--you have people putting up wind turbines in the 
evenings under light, as soon as the day gets shorter; and 
there is a big rush to get them done by December 31st. And by 
some time in November, oh, the production tax credit--and 
everybody can relax. But they can't relax. They have already 
committed.
    So it is making a very unnatural construction curve. We are 
doing it and setting records and unbelievable hurdles are being 
made over, but there are sacrifices. It could be environmental, 
it could be safety, or it could be trucking.
    Chairwoman Velazquez. What about cost?
    Mr. Ehmann. Costs are incredibly higher. That is the whole 
thing. From January to March you are trying to economize a job, 
and then June through December you are just spending like a--
    Chairwoman Velazquez. Okay, thank you, Mr. Ehmann.
    Mr. Therrien, Congress is facing a number of competing 
proposals, and we want to select, of course, the ones that 
promote energy conservation most effectively. How would 
shortening the depreciation schedule for green roof systems 
accelerate innovation and demand for energy efficient 
commercial roofs?
    Mr. Therrien. There are several ways that we have the 
opportunity to do that. One of the interesting scenarios that 
we have is the industry is poised and ready. We already have 
extremely efficient insulations that we can utilize. We have 
reflective roof systems which help with the heat island effect. 
Vegetative roof systems are continuing to grow and develop a 
sector of our industry. Solar roof systems continue. As I said, 
we have a platform for solar that is unmatched and ready to go 
to work. Also, there are opportunities for wind up on our 
roofs.
    One of the interesting things we find about this 
legislation is the industry is ready to go. Ninety-five percent 
of the products that are used and brought to the project are 
developed in the United States. So when we go to work as 
contractors, our manufacturers and supply chain go to work, 
too. We are ready to put boots on the roof, quite frankly. We 
have the opportunity to go to work immediately with no delay.
    As many of the gentlemen here noted today, we are in a slow 
time naturally because of the time of year in my region in the 
Northeast. But the economy itself has slowed our workloads 
back, and we don't have the same workloads that we have seen in 
the past. So, therefore, we do have the opportunity to get more 
guys back on the roofs, get them to work and give them an 
opportunity to earn a decent wage and income.
    Chairwoman Velazquez. Thank you.
    Mr. Graves.
    Mr. Graves. Thank you, Madam Chair.
    My question, I guess, is for everybody. I don't know. It is 
kind of a tough one.
    I am struggling with what we are seeing in the country 
today. Because it is a very vicious cycle. People are 
conserving, and they are trying to get by. They are worried 
about losing their jobs, so they are spending less. So that 
means manufacturers are selling less, which means they are not 
expanding. Which means people in your business, if you are a 
contractor, you are not building or helping them build for 
expansion. Then you lay off people or whatever the case may be 
because you are not building. Manufacturers lay off people, and 
then people lose their jobs, and then they are not paying 
taxes. And it just goes around and around and around.
    Mr. Allison, as head of a chamber in a city, you are seeing 
it with small businesses. How much of this is almost like a 
self-fulfilling prophecy? We continue to be told, day after day 
after day, how bad the economy is and how bad it is going to 
get. And so people continue to conserve and continue to hold 
back with the idea that, my gosh, I may lose my job next week 
or in a month. And all that does is again make it even worse 
and make it even worse.
    Now we are talking about the government coming up with a 
stimulus package and providing all of the jobs. Does the 
government create jobs or is it small business that creates 
job? I am trying to figure out what is the best way to do this.
    You touched on green roofs, bonus depreciation for green 
roofs. Maybe we should expand it for anything, trying to get 
manufacturers or whoever is in business out there to expand, 
maybe take that leap of faith. We know this thing is going to 
turn around eventually, sooner or later. It always does. It is 
cycles. If we give them all the tax opportunities that we 
possibly can to expand their business, which will obviously put 
contractors to work to add that new equipment, to update their 
equipment, to change out all of those trucks and try to get new 
trucks, whatever it takes--should we be looking at this in a 
huge, broad spectrum and get those businesses and manufacturers 
to expand?
    Again, I am not so sure that government--I don't think 
government creates jobs. I think the private sector creates 
jobs. That is where job creation is. I am curious. You can 
address--and I would like to hear from each one of you. You can 
address how much of this is just continuing to be battered on 
the radio and TV about how bad it is and how much worse it is 
going to get. And how much of a role does that continue to push 
us into the government spending?
    The chairwoman pointed out, rightly so, there has been a 
lot of money spent, a tremendous amount of money spent; and it 
adds to the deficit which was already there. How much farther 
can we go? When is enough, enough?
    I would just be curious from each of you. Mr. Allison, you 
first.
    Mr. Allison. Congressman Graves, I appreciate the 
opportunity to address that.
    I agree government should not be the primary creator of 
quality jobs. Obviously, you need great people working in 
government; and we appreciate their dedication. However, the 
private sector is what makes that possible. What we have going 
on right now is a crisis in not only access to capital, not 
only a problem with our energy sector, a consumer confidence 
crisis. We can go on and on.
    Let's not forget really what this great country has been 
most known for throughout history is creativity, it is 
innovation capacity, it is entrepreneurial spirit; and that 
still exists, that still exists. There are people out there 
today in laboratories all across America that have products 
they are trying to bring forward. They often have laboratory 
incubator environments around them. They have assistance from a 
myriad of different resources. However, just look at public 
policy. 2.5 percent of Federal R&D dollars are going to SBIR 
grants. What about the other 97.5 percent?
    As I said earlier, small businesses--in particular those 
with SBIR grants--are far more productive in obtaining patents 
for new products and bringing those to market than big business 
and/or universities. If I had to pick from the 16 components 
that I have recommended today, I would say that that is 
probably the first starting point. Because if you do, if you 
raise that to even 5 percent, that still leaves big business 
and universities, the other 95 percent. Then I think we have 
taken a major leap in assisting the entrepreneurs in bringing 
their products to market. And if they do and they are 
successful and the percentage of success is very high, then 
they are going to be building buildings, they are going to be 
buying equipment and employing people in quality jobs with 
health care benefits. Aren't those the goals we are trying to 
pursue?
    I just think too often we have neglected the golden goose 
here. Nothing against big business. Obviously, we have great 
challenges with the auto industries and aerospace and so forth. 
We must maintain those industries. But Main Street cannot be 
forgotten.
    We have people as we speak that are waiting to see what 
Congress and the new administration are going to do. And if you 
want to know what the real vacuum has been, it is leadership. 
They are waiting for a signal. So I ask you to give them that 
signal. Thank you.
    Mr. Graves. Mr. Ehmann.
    Mr. Ehmann. I believe along with large wind we are very 
involved in residential photovoltaic, solar electric and solar 
hot water; and small wind is another one of our things that we 
supply. And what you are saying, what I see the government has 
is the capacity with the incentives to push that industry. That 
industry is being taken advantage of. Solar electric is being 
taken advantage of today; and through the incentives, both 
Federal and State levels, they are working. The people are 
generating electricity. Reducing their cost of electricity is 
their goal. They, therefore, have more money in their pocket. 
That is their incentive. And their incentive is not only just 
to do something green, but it is also as a return in their 
pocketbook.
    Both the solar hot water and the small wind, those are not 
incentivized as well. The problem with that is it is a little 
bit more out of the residential guy's pocket, a little longer 
payback. It is harder to jump that hurdle. If you can 
incentivize those any much--better than they could--they are 
viable products.
    People want their dependence, their electric bills less. 
They want their heating bills less. And those are your working 
class people. And what it does is it creates jobs for me as an 
installer. It creates jobs for our salespeople. It creates jobs 
for maintenance people. Because all of these are electrical 
generating devices. They are generating at the house level. 
They will need maintenance in the future.
    It isn't that you will install it and go away. You will 
have a maintenance plan and go back after 2 years. You have to 
maintain your systems and make sure they are operating and make 
sure the grid connection is maintained and make sure the 
electric grid is safe. Everybody has the potential to back-feed 
the electric grid. So it just creates more and more jobs. And 
that is working well.
    Mr. Graves. Mr. Massie.
    Mr. Massie. I am going to answer a little bit different.
    My clients--I work for the Federal, State and local 
governments; and we also work for private investment. On the 
private side, what we see our clients doing is, one, they have 
to be able to get money. What is the credit market and is money 
available that they can afford?
    Right now, they are doing two things. They are waiting to 
be able to get the money, and they are also waiting to see what 
you are going to do. What is going to be the pattern of the new 
administration in this Congress? And how long is it going to 
take them to become comfortable that, yes, I see a path that 
they are headed on, and I feel comfortable that they are going 
to stay on that path, so that they don't get in trouble again 
by starting to borrow money and starting to go back to work, 
getting comfortable and then all of a sudden there is a change 
in direction and, oh, no, we are back in trouble again.
    We had one project that we were working on where the owner 
went bankrupt. It just came to a screeching halt. We have other 
projects where they didn't go bankrupt, but we came in to work 
one day and they said, go home. So the private sector is very, 
very leery and they want access to money on terms that they can 
make money. And, right now, they can't and they are waiting for 
direction before they start going back to work again.
    From the local, State and Federal Governments, they just 
don't have any money to spend. So, from that perspective, yes, 
it will take money to get back to building the projects, 
whether they are buildings or highways or whatever they may be. 
From an infrastructure standpoint, it will not happen until 
money is available to do it.
    So my answer for you is both. From a private point, it is 
still getting back to the government and what are the policies 
and the regulations that they are going to have to adhere to. 
But they have to have a level of comfort that this 
administration and this 111th Congress is heading in a 
direction, and they are going to stay in that direction. You 
can't be all over the board with everything.
    Our line of work, we work around the weather. What is the 
weather, today, tomorrow and the next day? We have gotten to 
where we can handle that. What absolutely bamboozles us is what 
is going to come out of Washington and predicting what that's 
going to be on the long term. Because we make huge investments 
on capital, whether it is the owner or us.
    Right now, we are going through a renewal of equipment, had 
been doing it for the past 4 years where we are getting more 
efficient and more environmentally friendly equipment. We 
stopped. We still have a list that we are working on, but we 
quit because we don't know where things are going.
    Chairwoman Velazquez. I am going to have--Mr. Therrien, do 
you want to make a brief comment?
    Mr. Therrien. I will attempt that, yes.
    Quite frankly, I agree the legislation is a slight tweaking 
of our current tax policies. It is not making something go away 
that exists now. It is shortens it and puts guys to work. It 
gives us an opportunity to stay within a realistic time line 
and scale. But the depreciation if it is retarding spending on 
new energy efficient roofs. That is not putting my guys to 
work, and that is what we are looking to do with that 
legislation.
    I will also echo some comments about the 3 percent 
withholding and the fact that that truly is a net income of 
most construction firms in this country, I believe. So, 
basically, you are taking that off the table for our ability to 
have the needed capital to go to work. It does affect our 
overall income, which affects our loan and our ability in our 
lines of credit as well as our bonding.
    I don't think there are many State and local groups that 
are very happy about the prospect of having to collect this and 
do the processing work associated with it. So I am hopeful that 
some slight tweaks in the depreciation schedule would do a 
great step forward to helping our industry continue to grow and 
prosper.
    Chairwoman Velazquez. Your time has expired.
    I will recognize the gentleman from Oregon, the Fifth 
Congressional District, Mr. Schrader, for 5 minutes.
    Mr. Schrader. Thank you very much, Madam Chair.
    Only Mr. Allison referred to the Small Business Association 
in a somewhat oblique manner and their role in the recovery and 
stimulus package. I am curious--this is the Committee on Small 
Business--if any of you would see an enhanced role for the 
Small Business Administration in terms of perhaps providing the 
loans that Mr. Massie is talking about, some of the cash flow 
that is out there, so it can go to small business and not just 
business in general.
    Mr. Allison. Well, sir, let me first explain I comment a 
lot about the SBA programs because I get exposed to them 
probably more frequently than the other colleagues here. But, 
as I said earlier, you have an environment right now where so 
many small businesses need assistance.
    We have an SBDC counselor in our chamber office, and we are 
very fortunate to have this brilliant young lady, but the fact 
is she is overbooked, she is underfunded, stretched too thin. 
It is one of my recommendations this morning for Federal 
funding to make it possible to put more SBDC people out in the 
field along with the action of moving from 2.5 percent of the 
set aside of Federal research and development funds to 5 
percent. That is a giant leap, but you have still left the 
other 95 percent with big business and universities.
    I think if you look at the facts, small business has 
delivered the results: Five times more patents issued for 
public funds per dollar of public funds than big businesses, 20 
times more patents than universities.
    I think the SBDC is an avenue that can be pursued quickly 
to get some rapid results. EDA as well. EDA is in the practice 
of offering grants to communities. One that I was experienced 
with several years ago, they provided monies for infrastructure 
in the development of a new local business park that was 
primarily designed for small businesses. Today, that business 
park is relatively full, with thriving new businesses with new 
rooftops.
    So, in my view, I think that much of what we could do 
isn't--we are not talking about a lot of money here. Federal 
dollars are already being put out there in research and 
development. I am talking about changing the allocation ratio a 
little bit. Put a little more into where you get more results.
    Thank you.
    Mr. Schrader. Could the others comment?
    Mr. Ehmann. Yes. Even though O'Connell Electric and the 
solar electric business in New York State--we are a large 
electrical contractor, but 35 out of the 40 NYCERTA-approved 
installers out there are one, two and five-man shops. I do know 
them. I do know individually friends who are doing the same 
business we are. What happens when this downturn or incentive 
runs out and they only have three or four jobs lined up that 
are essentially 2 months worth of work? They pull back. They 
don't expand.
    At O' Connell, we are able to reallocate our forces to 
another division. Small businesses aren't able to do that. They 
just have their normal employees, and then they don't want to 
lay them off, so they stretch out their jobs and eventually 
don't reinvest. So I see them not buying a new truck or a new 
way to do their work better because they don't have the work 
booked for the next 3 months, 4 months.
    So they are holding back. They are definitely holding back 
and trying not to lay off their people. They are working a 
little less efficiently. Whereas if they had some work booked, 
they would be buying some new technologies and keeping their 8 
and 10 and sometimes 12 people working.
    Mr. Massie. I think anything that we look into will help. 
You are going to have to study what is the best way to do it. 
The small businesses are fantastic, okay? I am one. Okay? And 
we do invest in new technology. What we have found by doing it, 
we have an advantage over larger companies that we compete with 
and we can do work cheaper, faster and just as long as we take 
advantage of it, but to take advantage of it has got to be 
there and we have to have the money to be able to do it.
    Mr. Therrien. I think the SBA is a good vehicle to run 
things through. I mean, I think if you can allow small 
businesses such as mine or any others to have the ability to 
access loans, short-term loans, to get through the timeline of 
the projects, whether they are working with anybody at this 
panel or any of our other brothers in the construction 
industry, it is a good deal. And I think that that is an 
opportunity that affords us a way or a vehicle to get that 
money to these small businesses.
    Chairwoman Velazquez. Time has expired. The gentleman from 
Missouri, Mr. Luetkemeyer.
    Mr. Luetkemeyer. I have one question for Mr. Therrien. You 
made a comment during your testimony and you quoted a figure of 
8 percent savings with regards to energy, that if we put a 
solar system on every roof or on a third of the roofs in the 
country. Can you tell me how you came up with the figure? Is it 
total daylight exposure for that period, average daylight 
exposure for everybody in the country, part of the country? 
Just give me some background.
    Mr. Therrien. I believe those figures were from the Center 
for Environmental Innovation in Roofing. They are the ones that 
provided the figures in the background. Some of the other 
figures that I have also cited were from a Ducker study done by 
the National Roofing Contractors through their Alliance for 
Progress Group. It is part of our foundation and they did a 
Ducker study back in 2003, which also cited many of the job 
creations, as well as the areas of savings that would be--that 
were used. And that is included in the Ducker study that we 
have.
    Mr. Luetkemeyer. Can I get a copy of that study because 
that is a great figure? It certainly shows the ability to 
conserve and to look at alternative sources. But if your figure 
is every--a third of the roofs with 100 percent of daylight for 
24 hours, I--
    Mr. Therrien. I think these are realistic with--
    Mr. Luetkemeyer. We need to have some idea of how you came 
up with those figures.
    Mr. Therrien. I know in the Ducker study, for instance, 
some of the things they looked at was also the difference in 
the amount of return. Monies wise, it is completely different 
in Phoenix, Arizona, than it is in Keene, New Hampshire, 
because the sunlight, the daylight and the amount of available 
light, cloud days and everything else are taken into effect. So 
they did have a flowing chart looking at the country and that 
type of demographic because it is a reality of how sun hits 
this country.
    Mr. Luetkemeyer. As you point out, I think the alternatives 
look at different--should be looked at in different areas. I 
mean, wind in certain areas, solar in other areas. Whatever we 
can do. If I could get ahold of that study, that would be 
great. I would appreciate it.
    Mr. Therrien. I would be happy to get it to you.
    Mr. Luetkemeyer. I yield back the balance of my time, Madam 
Chairman.
    Chairwoman Velazquez. Thank you. The gentleman from Kansas, 
Mr. Moore.
    Mr. Moore. Thank you, Madam Chair. Small businesses in this 
country have been particularly hard hit by the freeze in the 
credit markets because without access to credit, particularly 
short-term credit, most small businesses have a difficult time 
maintaining current operations. This seems to be exactly the 
time that the Small Business Administration should be able to 
be there to ensure that businesses have access to credit. But 
the amount banks have loaned through SBA's general business 
loan guarantee program has fallen substantially over the past 
year. My question to any of the panel members is what steps do 
you believe Congress and the Small Business Administration can 
take to ensure that viable small businesses have access to the 
credit they need to maintain operations or make capital 
investments? Any of you have thoughts about that?
    Yes, sir, Mr. Allison.
    Mr. Allison. Yes. I would like to refer back to Item 10 in 
my recommendations, referring to the SBA 7(a) and 504 programs. 
I agree that right when we need them the most, that access to 
commercial credit has fallen off. Not that--you know, you could 
blame any one particular thing, but this is a great concern.
    Mr. Moore. Certainly.
    Mr. Allison. Main Street needs SBA lending and frankly 
commercial banks, because of the current shift towards more 
regulation, more scrutiny, which we can certainly understand 
given where we have been over the last year in the financial 
market, but let us not overreact and take it all out on the 
small business sector. And really this is what I see is 
probably one of the greatest problems in the capital end of the 
problem, is you have got local banks that are sitting on money, 
even with SBA taking the majority of the risk. However, I do 
recommend that SBA take a greater percentage of the 
underwriting of these loans in this--in at least the interim 
period and that we think in terms of lowering qualification 
standards, that we exempt fees, anything we can do to 
streamline it and make money more accessible and quickly.
    Mr. Moore. Any of the other panel members have a comment?
    Mr. Therrien. I have a quick one. Our line of credit 
fortunately because of our fiscal year we wound up renewing it 
before everything got to a really bad place and I finished my 
year end at the end of October. So my bankers quite frankly 
even made statements that thank God you are renewing your line 
of credit right now because it could change if we are looking 
at this in the first quarter or the middle of next year and it 
could be altogether different next year. So I think 
unfortunately small business isn't getting a direct line of the 
bailout monies. And so anything we can do to help allow our 
lenders the ability to give us needed lines of credit to 
continue to operate our business would be very valuable.
    Mr. Massie. We did the exact same thing. We had our line of 
credit set up just prior to all of this. So that part is good.
    Mr. Moore. Very good.
    Mr. Massie. But just to yield time, I have to agree with 
what has been said so far.
    Mr. Moore. Thank you, sir. Thank you, Madam Chair.
    Chairwoman Velazquez. Thank you. The gentleman from 
Illinois, Mr. Schock. No questions. Ms. Clarke. Ms. Dahlkemper.
    Mrs. Dahlkemper. Thank you, Madam Chairwoman. Mr. Ehmann, I 
wanted to ask you a question regarding renewable energy tax 
credits. As I talked to people during the campaign, many 
expressed big concern on the time. And you talked 2 to 3 years. 
But I have actually heard that most people in these industries 
actually look at something further out than that in terms of a 
length of time where we would really be able to have the 
benefit and see these industries really flourish and grow. 
Could you just address that?
    Mr. Ehmann. I think 2 years would be anything better than 
one. But I think the number is 5 to be personally--because 
product development or project development in these large wind 
farms right around our area in western New York, they are a 3-
year, 4-year--from inception, from out there handshaking with 
the communities. The communities ramp up and they ramp up for 
these projects. They get excited, they get mad, they get 
everything. They ramp up to this thing. And everybody from all 
the suppliers, the truckers, the gravel people, everybody ramps 
up to this, and then all the sudden time frames. And if 
somebody misses a time frame and--or if some--a developer who 
is looking at different sites throughout the United States, if 
one can't be built in a time frame, they will just resort to 
another: It really falls off of that community that loses out, 
the community that built themselves up and then it is just a 
decision, a checkmark didn't fit their box and they--they are 
off the table. But having a nice, smooth, you know, curve of 
the production--of the tax credit not being there, limit being 
there, would, you know, let these people make decisions, make 
supplies available, make good decisions and not be forced to be 
behind the eight ball. And so longer periods are--it helps with 
the communities and the financial people.
    Mrs. Dahlkemper. And, Mr. Therrien, maybe you can address 
this because this actually has more to do with solar in terms 
of those I talked to. Competitively in a global world--actually 
I think we are falling behind, because other countries have put 
out tax credits up to 12 years, 20 years out. So the 
development of these products are such that--some of our 
manufacturers are actually moving overseas for product 
development because of those incentives. Maybe if you could 
address that?
    Mr. Therrien. We are seeing that. One of the interesting 
things was this past fall we got invited by Performance Roof 
Systems. It is a company that is based--has operations in 
Kansas City for the U.S. and they also produce over in Belgium. 
And the tax incentives that they have enjoyed using their 
DERBIWHITE product, which is a reflective roof in conjunction 
with FINFILM solar panels in both Belgium and France, they 
basically can't keep up with the demand for it because the 
incentives there and the return on investment--we saw some 
spectacular projects where it was Belgium's largest 
telecommunications television station. Did their whole roof 
entirely in panels in a solar project to reduce the demand on 
the community for electricity, and it is working for them, even 
in an environment in Europe which has many of the same cloud 
cover issues that we have here within the United States and the 
like. It is not a northern--northern Europe is still very much 
like the--from D.C. north in this country, and yet the projects 
still work for them and we are seeing that development.
    Mrs. Dahlkemper. I appreciate that. I just think it is time 
for some bold action in this area and I think further tax 
credits would actually help us to get there.
    Chairwoman Velazquez. Ms. Clarke.
    Ms. Clarke. Thank you very much, Madam Chairwoman, and to 
Ranking Member Graves. I am honored to serve with you once 
again in the 111th Congress. Let me start by just 
congratulating you, Madam Chair, on becoming chairperson of the 
Congressional Hispanic Caucus. If you conduct the caucus in the 
same way and manner that you have conducted your hearings in 
this committee, I have no doubt that you will be successful and 
accomplish many great things.
    Now to the concern that brings us all here today. Small 
businesses from the construction to the financial services 
industry are daily facing enormous challenges. They continue to 
suffer from what many say is one of the worst recessions this 
country has ever experienced. So it is imperative that our 
government plays a critical role in assisting our Nation's 
small businesses, which will create jobs and especially for the 
unemployed and working poor in urban communities and 
communities across our country. As we all know, President Bush 
failed to implement the SBA's women's procurement program, but 
the administration was quick in its demand for $700 billion to 
bail out the so-called financial giants of Wall Street. So I 
urge my clients to move with swiftness to help small business 
that will help stimulate and sustain our communities and, by 
extension, our economy. It is my hope that the second economic 
stimulus package adequately addresses our Nation's small 
businesses and addresses, establishes and reinforces objectives 
that ensure minority and women-owned businesses will fully 
participate in contracting opportunities created by the 
infrastructure improvement plan and economic recovery plan.
    My first question is to Mr. Robert Therrien and to Mr. 
Steve Massie. It is almost definitive that the second economic 
stimulus package, Congress will target infrastructure 
improvement projects. It appears that this will be extremely 
favorable towards the construction industry, which is suffering 
from this economic downturn. Balancing the need for small 
business productivity, hiring and retention of dedicated 
workforce is truly a challenge. We are trying essentially to 
develop a win-win-win economic policy that is critical to the 
future prosperity of our civil society. Do you support pre-
apprenticeship programs in your sector to benefit disadvantaged 
workers, especially if these programs are targeted towards 
green jobs, and do you know of any successful pre-
apprenticeship programs that benefit disadvantaged workers that 
can be used as a model? And please explain the difference 
between a pre-apprenticeship program and apprenticeship 
program.
    And just so you know, I am from Brooklyn, New York and that 
is why I come from this perspective. Thank you.
    Mr. Therrien. I know that I am not very astute with the 
pre-apprenticeship or apprenticeship programs per se that come 
through the organized labor. I am an open shop contractor. And 
I know we do have our own training protocols and procedures. I 
will quite frankly tell you up until recent time, we would take 
anybody that will walk through the door, had a pulse and could 
pass a drug test and just about put them to work. So that is 
where we were in New Hampshire and Vermont where I operate out 
of, had very low unemployment rates and still enjoy relatively 
low unemployment rates fortunately. But we sit there and we 
work hard to train our people and retain our people.
    One of the biggest things we work on is not just system 
installations in the products that we install, one of the first 
things we do is spend the first day with them working solely on 
safety. Because one of the things we do run into in our 
industry especially is when we do have an accident and it is a 
fall especially, it is a significant issue. And the result is 
not a good product. So safety is paramount importance to our 
country. We work hard to train in that and then we work with 
training with the systems at hand. While I don't understand 
these programs exactly, training is very important. One of the 
things that our association has done is actually started to put 
training programs online. Roofing 101, basic roofing program of 
just getting people to understand roofing, is actually online 
now so our workers can do this on their own time. We bring them 
in on rain days and the like, when it is snowing out and it 
gives us the opportunity to help train our guys. We have got 
reach programs which are energy efficiency programs. There is a 
section on vegetative roofs, on solar roofs and the like that 
you can take online through the association to better 
understand what it is that is demanded of you in our industry.
    Mrs. Dahlkemper. Thank you.
    Chairwoman Velazquez. Time expired.
    Mr. Westmoreland.
    Mr. Westmoreland. Thank you, Madam Chairwoman, and I want 
to thank you for having this important hearing. Coming from a 
construction background, I understand what is happening in the 
economy right now.
    Mr. Massie, how many projects would you say that you might 
have where you are ready to go to work and people cannot get 
financing?
    Mr. Massie. Well, half a dozen.
    Mr. Westmoreland. So from what we have seen originally, we 
were told that our credit was in a major accident on the 
expressway and it had all the lanes blocked with business 
loans, car loans, student loans, backed up in the traffic, and 
this $350 billion or $700 billion was supposed to clear that 
out of the way to allow this credit to flow. What I have seen 
in my district and what I have heard all over the State of 
Georgia and throughout the construction industry is that this 
credit is not flowing as of yet, even though we spent $350 
billion so far with the main objective of that to make sure 
that there is credit out there to keep especially small 
business going. Was that your understanding of what this was 
supposed to accomplish?
    Mr. Massie. Yes, sir.
    Mr. Westmoreland. Mr. Ehmann, I wanted to ask you a 
question. I have read your testimony here and you talked about 
that your company over the last 5 years, I guess with green 
technology, had gone from 1 million to $20 million in revenue. 
And you talked about adding 50 new employees. Is this--the 50 
new employees over a 5-year period, a 1-year period?
    Mr. Ehmann. In the past 5 years, we have probably added 
across New York State 7 to 10 new office personnel that are 
strictly project managers, estimators and salespeople across 
our three offices in New York, and the balance of those 
projects are the technicians that are in the field and those 
are permanent employees. And those technicians that we have 
trained specifically for large wind, solar power 
interconnection, utility interconnection and those are--the 
luxury we have with those other 40 employees is we share them 
in our other--
    Mr. Westmoreland. I understand. But is 50 over a 5-year 
period; is that correct?
    Mr. Ehmann. 50 permanent. When you are in construction--
when you need 40 electricians on one project, we just don't get 
those journeymen electricians--
    Mr. Westmoreland. What is your total full-time employment?
    Mr. Ehmann. About 500.
    Mr. Westmoreland. I understand. Let me ask you this. How 
many people would you say are actively employed on a single 
wind farm or one of these wind farms that you were talking 
about?
    Mr. Ehmann. Electricians I just finished--and just last 
week I was at a finish-up project meeting and we had four major 
subcontractors on the project. The project made the North 
American Wind Power Magazine as a model project. It was in 
western New York. And one thing that doesn't make the paper is 
our safety report at the beginning of the onset of meeting and 
basically we report our craft hours and before the four 
subcontractors, craft manpower hours was over 220,000 man-hours 
performed from May 1st to December 31st of last year on one 
project. Those are craftsmen working on the job. It doesn't 
include engineering or--
    Mr. Westmoreland. About how many people would you say that 
was?
    Mr. Ehmann. There were probably over 2--over 200 people for 
1,000 hours a piece. Half a year--
    Mr. Westmoreland. We are going to have to start a lot of 
wind farms to employ 2 or 3 million people on some of these 
green projects. How much on one of these wind farms, just out 
of curiosity, what is the cost per kilowatt hour of electricity 
generated versus a coal plant or a hydro plant?
    Mr. Ehmann. I cannot answer that for you specifically, but 
I can get you that information as testimony backup.
    [The information is included in the appendix at page 56.]
    Mr. Westmoreland. If you will do that. And last, Mr. 
Allison, down with the Chamber, one of the things--we had the 
Chamber calling us about the stimulus package, asking us to do 
it. Not the stimulus, but the bailout originally. A lot of my 
Chamber members are coming back and saying I don't know if this 
was a good idea or not because we haven't gotten any relief 
from the credit. What is the Chamber of Commerce doing as far 
as putting your 2 cents into the release of the other 350 
billion and some ideas that you might have for what that money 
really and truly needs to be doing?
    Mr. Allison. Well, sir, I can only speak for my own Chamber 
of Commerce in St. Joseph, Missouri. And obviously no 
disrespect to the U.S. Chamber or the Missouri Chamber of 
Commerce. But on Main Street, we get it, that this is something 
we have to do. The patient is on the table and in intensive 
care. So we need to take some action that we wouldn't otherwise 
take, hoping at some point we will get him off the table and 
back out there. So there is no question, we are going to have 
to take aggressive action. I think the question is, can we do 
it, learning from recent experiences. And I didn't fly here 
today in a private corporate jet, nor did any of my colleagues. 
We work day to day with average people that as I said before, 
they don't mind paying their taxes. They are just thankful to 
be employed and hoping that things are going to work out.
    As I have already asked, I think that if we look at the 
facts, small business delivers. Time and time again there has 
been studies done that shows that per dollar of public 
investment at every level of government, small business brings 
a much greater return on desired outcome. And I have outlined 
some ideas here and my colleagues have that I just ask that you 
work with the incoming administration to get their attention 
that it is not all big business. This country was built on 
small business and will continue to be so, and I think that 
there are steps we can take without spending more money. As I 
said earlier, changing the allocation percentage on Federal 
research and development dollars from 2 1/2 to 5 percent, if 
you just spent the same R&D dollars that you have in previous 
years, you have at least put more of that towards an area where 
you are going to get a lot more results. I mean, there are some 
steps that can be taken to help ignite this thing.
    Chairwoman Velazquez. Time is expired. We are going to have 
a second panel and there is going to be some votes coming up. I 
just would like to take this opportunity to thank you all for 
being here this morning and let me just say that we agree with 
you. We conducted two hearings regarding the bailout of the 
TARP money and made it very clear to the administration that we 
understood that the $350 billion will not have the effect of 
trickling down to help small businesses facing the credit 
crunch that they are facing today. But in this coming week, we 
are going to be setting up the parameters for the remaining of 
the TARP money.
    And let me say that this committee is run in a bipartisan 
manner. I really believe that there is no Republican or 
Democratic approach when it comes to small business issues. But 
that doesn't mean that we will not disagree sometimes. I found 
myself this morning agreeing with Mr. Westmoreland regarding 
the credit crunch that small businesses are facing. And Mr. 
Graves, let me just say that for the first time in 8 years, I 
really agree with Mr. Cheney when he said that Reagan proved 
deficits don't matter.
    This is a monumental economic crisis that requires a 
monumental response, and it might mean growing the deficit. To 
all of you, thank you very much. You are excused.
    I call on the second panel to please take your seats. The 
committee is called to order.
    Our first witness on the second panel is Ms. Margot 
Dorfman. Ms. Dorfman is the founder and CEO of the U.S. Women's 
Chamber of Commerce. Ms. Dorfman has an extensive background in 
business, business ownership, publishing and nonprofit 
leadership. The U.S. Women's Chamber of Commerce is the leading 
national voice advancing economic opportunities for women in 
America. Welcome.

STATEMENT OF MARGOT DORFMAN, FOUNDER, CEO, U.S. WOMEN'S CHAMBER 
                          OF COMMERCE

    Ms. Dorfman. Chairwoman Velazquez, Ranking Member Graves, 
members of the committee, thank you again for the opportunity 
to speak on behalf of America's small business owners at this 
important time. The future of America small businesses are in 
your hands. Through your earnest work towards the promotion of 
economic recovery, you will profoundly influence the future of 
millions of small businesses and their employees and their 
families and communities. Literally, the future of the American 
dream is in your hands today.
    We all know too well the challenging economic times we are 
in and the need to act swiftly, strongly and with focused 
precision to bring about economic recovery. Time is of the 
essence for Congress and the incoming administration to act. 
Consumer spending is down. Many of the States, cities and 
counties have budget shortfalls which will cause local 
government spending to decline. Unemployment is up, business 
lending is in a free fall, commodities and health care costs 
are rising and business margins are declining. To promote an 
economic recovery, we encourage you to consider policies and 
investments that will energize consumer, business and 
government spending, jump start lending, and return liquidity 
to the lending markets, and bring down the cost of doing 
business. The Small Business Administration and targeted small 
business policies can have a great impact in these areas.
    First, I ask you to support targeted small business 
spending as we leverage investments in infrastructure, new 
energy technology and health technology. It is vitally 
important that we ensure an appropriate percentage of these 
investments be made with small businesses. It has been 
discussed that a sizeable amount of the investment in our 
economic recovery will come through the funding of State and 
local government infrastructure needs. This committee should 
assure that these funds at both Federal and local levels 
require the Federal mandated 23 percent participation by small 
business and that all socioeconomic goals be met without 
exception.
    Next, as small business lending is in a free fall, it will 
require very strong action to stop. Loan volume has dropped 
dramatically, thanks in large part to the collapse of the 
secondary market for small business loans. And this free fall 
has brought about other negatives as well. We strongly 
recommend that the SBA act as a catalyst, disburse small 
business lending. The SBA should directly process small 
business loans and, when necessary, provide high government 
guarantees. Let the SBA fully process and close loans, 
providing the loan as an asset for purchase by the bank. We 
recommend that funds allocated towards unfreezing secondary 
markets include appropriate requirements for inclusion of small 
business lending. There must be secondary market participation 
so that lenders can sell portions of these assets to make new 
funds available for additional loans. The SBA should also 
establish programs and guarantees to bolster confidence in the 
secondary markets so as to encourage investor participation and 
increased liquidity. To further drive liquidity and prevent 
against the potential of rising default, the SBA should be able 
to engage in refinancing and underwriting, enabling lenders and 
borrowers to leverage this option to save the loan relationship 
and prevent default or bankruptcy.
    The SBA should also relax the rules on refinancing and be 
able to raise their guarantee so as to bring greater elasticity 
and save loan relationships. For example, many small business 
owners have turned to credit cards to cover their cash flow 
shortfalls and in many instances the equity in their home that 
was leveraged to establish a loan may have declined.
    We also recommend that the SBA relax some of the rules that 
add cost and delays to securing a loan like life insurance 
requirements and job creation requirements.
    The final area of attention should be bringing down the 
cost of doing business. We recommend a combination of tools be 
used to decrease the cost of doing business generally and 
decrease the cost associated with keeping employees. We support 
the reduction in short-term suspension of payroll tax, the 
abolishment of self-employee tax on health insurance, giving 
small businesses the ability and incentives to form their own 
health insurance groups, and extending the net operating cost 
carry back rules for longer terms.
    In closing, I ask you to act now. As we watch the falling 
business lending statistics and the climbing unemployment 
numbers, I can assure you that the next fatality will be marked 
by a declining number of small businesses and increased number 
of business and personal bankruptcies. The majority of the 
recommendations I have outlined today are short-term positions 
aimed at getting small business lending moving quickly, 
improving small business cash flows, and assuring that the one-
time big investment in infrastructure includes small 
businesses.
    As you complete the work on legislation to spur on economic 
recovery, please save the broader strategic moves for later. 
For now, just focus on specific steps to help small businesses 
get moving back into a positive direction. Thank you.
    [The statement of Ms. Dorfman is included in the appendix 
at page 97.]
    Chairwoman Velazquez. Thank you, Ms. Dorfman. I welcome Mr. 
Paul Merski, who is the Senior Vice President and Chief 
Economist for the Independent Community Bankers Association. 
Before joining ICBA in 1999, he was the top policy adviser to 
Senator Connie Mack and served as the Chief Economist of the 
Joint Economic Committee of Congress. ICBA represents community 
banks of all sizes and charter types throughout the United 
States.
    Welcome.

    STATEMENT OF PAUL MERSKI, SENIOR VICE PRESIDENT, CHIEF 
      ECONOMIST, INDEPENDENT COMMUNITY BANKERS OF AMERICA

    Mr. Merski. Chairwoman Velazquez, Ranking Member Graves, 
and members of the committee, I am pleased to present the 
ICBA's views on the small business economy and on 
recommendations to promote an economic recovery. ICBA 
represents 5,000 community banks throughout our country, and 
community banks are independently owned and specialize in small 
business relationship banking. Notably half of all small 
business loans under $100,000 are made by community banks. 
Forty-eight percent of small businesses get their financing 
from community banks with 1 billion and under in assets.
    Today our small businesses are facing the most difficult 
economic conditions in decades and accessing credit is getting 
more problematic due to the turmoil in the credit markets. The 
National Federation of Independent Business Index of Small 
Business Optimism has dropped to its lowest level since it 
began in 1986. Additionally, the free fall in SBA lending is 
cause for alarm and immediate action. Therefore, fiscal 
policies focused on restoring consumer confidence, broad credit 
availability, a robust housing market and job growth are all 
vital to an economic recovery.
    We all know that many of our Nation's largest lenders and 
money center banks tripped up on subprime lending, toxic 
investments and now they are the ones pulling in their lending, 
writing down losses, and rebuilding their capital. However, 
there is another story out there. Thousands of community banks 
represent that other side of the financial story. Community 
banks rely on relationships in their communities, not on 
relationships with investment banks or hedge funds. Community 
bankers actually live and work in their communities that they 
serve and they certainly do not put their customers in loan 
products that they cannot possibly repay.
    While community banks did not cause the current turmoil, 
they are very well-positioned and willing to help get our 
economy back on track. To complement the aggressive monetary 
policy easing, ICBA recommends additional fiscal incentives, 
including individual and small business tax relief, enhanced 
home buyer tax credit, expanding SBA programs and Subchapter S 
tax reforms.
    Additionally, we really need to address our fair value 
accounting system and improve community banks' access to the 
TARP and TALF programs that this committee has worked hard on.
    SBA lending programs are vital. SBA lending should serve as 
a counterbalance during these challenging credit times for 
small businesses. Unfortunately, what we see is a dramatic drop 
in the dollar amount and number of small business loans being 
made. While the typical commercial small business loan has a 
maturity of 1 to 3 years, SBA 7(a) loans typically average 12 
or more years in maturity. This lowers the entrepreneur's 
monthly loan payments and frees up needed cash flow to start or 
grow the small business.
    ICBA recommends immediately offering a super SBA loan 
program for 1 year as an economic stimulus to help small 
businesses access the capital they need. This could be an 
expedited 7(a) loan program with a 95 percent guarantee for 
small business loans up to 500,000.
    The vicious downward cycle in the housing sector must also 
be broken. Extending the $7,500 first-time home buyer tax 
credit and removing the repayment provision will help jump-
start home sales, stabilize home prices, and address 
foreclosures.
    ICBA also recommends an immediate increase in the annual 
limit on tax-exempt municipal bonds from 10 million to 50 
million. This would create greater low cost funding for local 
projects such as school construction, water treatment plants 
and other municipality projects.
    Chairwoman Velazquez, ICBA greatly appreciates your efforts 
to work with the Treasury and the Federal Reserve in 
successfully launching the TALF program. By providing liquidity 
to issuers of consumer asset backed paper, the Federal Reserve 
facility will enable more institutions to increase their 
lending.
    ICBA also appreciates the Small Business Committee's 
attention to the TARP capital purchase program. Community banks 
are very concerned that 3,000 financial institutions still do 
not have access to the capital purchase program.
    In conclusion, community banks did not cause this financial 
crisis, but we certainly will be there to help ensure our 
Nation's small businesses will have the access to credit that 
they need.
    I appreciate the opportunity to testify. Thank you.
    [The statement of Mr. Merski is included in the appendix at 
page 100.]
    Chairwoman Velazquez. Thank you, Mr. Merski.
    Our next witness is Mr. Alan Roth. He is the Senior Vice 
President of USTelecom. Prior to joining USTelecom, he was a 
former Staff Director and Chief Counsel to the House Energy and 
Commerce Committee. Welcome back.
    USTelecom is the premier broadband trade association 
representing service providers and suppliers for the telecom 
industry. Welcome.

   STATEMENT OF ALAN ROTH, SENIOR EXECUTIVE VICE PRESIDENT, 
                     USTELECOM ASSOCIATION

    Mr. Roth. Thank you, Madam Chairwoman. Madam Chairwoman, 
Ranking Member Graves, members of the committee, as you said, 
the USTelecom Association is the Nation's leading broadband 
industry trade group, representing service providers, 
manufacturers, and suppliers of advanced communications, 
applications and entertainment. We appreciate the opportunity 
to share with you our perspectives on the emerging American 
reinvestment and recovery plan, and on what policy approaches 
in that package can encourage the deployment and adoption of 
broadband and thus provide consumers with its many life 
enhancing benefits while stimulating job creation and the 
growth of small businesses.
    And, Madam Chairwoman, like you and Ms. Clarke, I come from 
Brooklyn, New York, and my mother grew up in your district. So 
I especially appreciate the opportunity to appear here today 
before you.
    You are no doubt familiar with our two largest members, 
Verizon and AT&T. But we are also proud to count many more 
midsized companies and hundreds of small ones in our membership 
ranks. Indeed, the vast majority of the companies we represent 
are rural providers. They are generally small businesses 
serving small communities. Collectively they are at the 
forefront of building America's broadband infrastructure, and 
they are united by a shared determination to deliver innovative 
voice, video and data services to their customers, including in 
turn the small business customers they serve, a commitment we 
know this committee shares.
    Page 2 of my written testimony includes three stories from 
a remote community in the Pacific Northwest that illustrate how 
broadband can be used to start or grow small businesses 
anywhere in America. I encourage you to study those examples 
more closely because they explain why broadband has emerged as 
an essential driver in 21st century American life.
    Like the telephone networks, electrical grids and pipelines 
of the 20th century, broadband is now propelling forward 
virtually every category of the U.S. economy. Achieving the 
objective of universally accessible broadband--an objective we 
support--requires policies that encourage vigorous investment 
in the sophistication and capacity of the Nation's broadband 
networks, as well as innovative public-private partnerships to 
reach every pocket of our geographically vast Nation. We are 
delighted that policymakers in both branches and on both sides 
of the aisle have recognized the importance of broadband to the 
Nation's economic health.
    Let me hasten to note that as an industry, we are not 
asking Congress for financial help to fund our ongoing 
operations or to execute our business plans, which do call for 
the continued investment of very substantial sums in broadband 
buildout. But in response to the interest the President-elect 
and leading Members of Congress have shown in using the 
economic recovery package to stimulate increased broadband 
deployment and adoption, particularly in unserved areas of the 
country that are sparsely populated and hardest to reach, we 
have developed a series of ideas and approaches calculated to 
accomplish those desired ends.
    First, we encourage the 111th Congress to fund two of the 
110th Congress' major accomplishments, the Broadband Data 
Improvement Act, commonly known as Broadband Mapping bill, and 
the Rural Utilities Service Broadband Loan Program, which was 
significantly reformed in the 2008 Farm bill.
    Next, some of our member companies, particularly those in 
areas where the population density is very low so that the cost 
of buildout and operations are conversely very high, have 
suggested the creation of a one-time grant program to assist in 
the cost of initial deployment to unserved areas for which 
reliance on private capital alone cannot suffice.
    In the tax area, a refundable consumer tax credit of up to 
$30 per month per household to offset the cost of broadband 
subscriptions for low-income, unemployed, and rural Americans 
would expand opportunities for those individuals who currently 
are least likely to be connected to the Internet. An investment 
tax credit targeted to incentivize more, and more rapid, 
broadband deployment will also help to increase the 
availability of affordable broadband to small businesses and 
residential consumers across the country. And extending the 
bonus depreciation provision that expired on December 31st 
would encourage companies to accelerate their capex plans, 
including broadband deployment projects.
    Broadband and small business are each an essential building 
block in our economy. If we want those businesses and their 
communities to thrive, we must ensure that broadband's many 
benefits, such as better health care, education, and a cleaner 
environment, are made accessible to all Americans.
    So whether you adopt the specific ideas we have set forth 
or look at proposals being suggested by others, we hope you 
will incorporate three basic principles into your 
consideration. First, maintain an economic and regulatory 
climate that continues to encourage private sector investment 
in broadband infrastructure; second, look carefully at the 
consumer side of the equation by addressing barriers to 
broadband adoption; and, third, make sure broadband deployment 
policies are focused on remaining unserved, underserved and 
high cost areas. Adherence to those principles will contribute 
to both the short-term recovery and long-term prosperity we all 
seek.
    We thank you for your invitation and your consideration of 
our views.
    [The statement of Mr. Roth is included in the appendix at 
page 112.]
    Chairwoman Velazquez. Thank you, Mr. Roth.
    Our next witness is Mr. Grant Seiffert. He is the President 
of the Telecommunications Industry Association. Mr. Seiffert 
oversees the policy standards, trade show, and marketing 
efforts for TIA. TIA is the leading trade association 
representing the global information and communications 
technology industry.
    Thank you.

  STATEMENT OF GRANT SEIFFERT, PRESIDENT, TELECOMMUNICATIONS 
                      INDUSTRY ASSOCIATION

    Mr. Seiffert. Thank you, Madam Chairwoman and Ranking 
Member Graves, and other members of the committee. TIA 
represents over 500 companies in the information communications 
technology industry through standards development, advocacy, 
business opportunities, trade shows, and marketing 
intelligence, and for over 80 years we have enhanced the 
business environment. Today our members' products and services 
empower consumers in every industry in marketing, including 
health care, education, security, public safety, 
transportation, the government, the military, the environment, 
and entertainment.
    And in these difficult economic times, TIA has looked 
closely at the ICT industry to see how the member companies can 
facilitate a rapid recovery and promote the continuing 
expansion of the Nation's information communications 
infrastructure. TIA hopes to support Congress in the creation 
of policies that deliver on the promise of broadband technology 
for the American people. Information communications technology 
is vital to our Nation's economy and society. Whether ICT has 
an impact on both large and small businesses is indisputable. 
The sum of all other industry segments in consumer activities 
which ICT affects, however, is often underrated and perhaps 
immeasurable.
    According to the U.S. Department of Commerce's Bureau of 
Economic Analysis, the ICT industry accounted for 4 percent of 
GDP in 2007, and accounted for over 20 percent of real GDP 
growth in that year. Thus, the significant slowdown we have 
experienced in this industry may have a meaningful effect on 
the health of the overall U.S. economy in the economic 
recovery. Without directed measures to combat this slowdown, 
real GDP growth and productivity will be negatively impacted.
    The economic crisis has had a debilitating impact on the 
sector's growth and survival. TIA's membership is made up of 
approximately 80 percent of small and medium-sized businesses. 
Start-ups and garage inventors are the life blood of our 
industry. Innovation that results from high risk endeavors many 
times leads to the household names we have become familiar with 
over the years. However, the current economic crisis is 
contributing to the crippling of this essential part of the 
innovation cycle, making it difficult, if not impossible, for 
these groundbreaking technologies to be realized.
    According to the National Venture Capital Association, in 
all of 2008 there were just six companies that have gone public 
and compared to that with several hundred of the many, many the 
past several years. These numbers illustrate the unwillingness 
of otherwise independent inventors to take personal financial 
risks in an uncertain marketplace. The significant pan-industry 
downturn has threatened the promising economic opportunities of 
the industry. Under these market conditions, investors will not 
continue to support increased broadband infrastructure 
buildout, yet the United States cannot afford to sit idle while 
other countries continue to strive ahead in deploying 
widespread broadband networks.
    Our Nation's near and long-term economic welfare, jobs and 
leadership all depend on the continuous success of broadband 
deployment. Broadband deployment and other industry growth 
relies in part on the government's next steps.
    There are early actions the government can take to change 
this course. First, do no harm, and let me personally thank you 
again for your work in the committee's work on Sarbanes-Oxley 
and how it has impacted small businesses. Second, including 
broadband incentives in the stimulus package will lead to job 
growth and have a direct impact on the continuing impact of our 
Nation's economy. We call on this committee to support 
broadband incentives in the stimulus package currently being 
considered.
    TIA's proposal outlines the types of deployment adoption, 
supply and demand side incentives that should be included in a 
package to most effectively achieve the goal providing 
broadband to all Americans. It is important to note that jobs 
will be created from such a plan. An estimate put forth by the 
Communications Workers of America indicated that for every $5 
billion invested in broadband, it would create 97,500 direct 
jobs and 2.5 million jobs throughout the economy in the near 
term.
    TIA, representing the communications manufacturers, 
suppliers of all broadband platforms, believes that the full 
panoply of broadband technologies will be needed to ensure 
universal deployment in America.
    Other groups have called for direct grants for rural 
broadband deployments. TIA agrees and would suggest a $25 
billion grant program for the deployment of broadband 
infrastructure in unserved areas. The grant program would be a 
technology neutral opportunity for interested providers to bid 
for partial subsidies to provide broadband service at minimal 
speeds and appropriate capabilities.
    We would also ask that there be an expensing provision in 
investment tax credits for both wireless and wireline networks 
allowing for greater incentives for the deployment of high 
capacity networks.
    Congress should also consider that it will stimulate the 
demand for broadband. It is indisputable that broadband 
provides a host of benefits to communities, especially rural 
communities. To that end, the stimulus package should include 
measures that would help drive broadband demand, including 
vouchers for loaning to Americans, including both adults and 
students so that they may purchase laptops and mobile handsets. 
A tax credit for small and medium-sized businesses who purchase 
or upgrade their PCs, laptops, mobile handsets, broadband 
equipment services also should be implemented.
    In conclusion, it is without question that broadband is an 
accelerator for our economic development, providing significant 
benefits for many industries. Without broadband access, work or 
productivity increases--will not increase. Jobs are created and 
wages will grow. Broadband enables operators to offer more 
services to consumers for less, creating added efficiencies in 
both time and money. And in addition, related industries grow 
with the continued deployment of broadband. As broadband 
penetrates and rates increase, there will be a resulting demand 
for more advanced computer and home networking equipment.
    In the near term including broadband deployment and 
adoption incentives and public safety networking equipment will 
have a direct impact on the recovery of the ICT industry. We 
applaud Congress' position and, of course, we also like to 
recognize President-elect Obama's desire to include 
infrastructure funding in the economic stimulus legislation and 
encourage Congress to place a priority on the deployment of the 
most critical 21st century infrastructure, broadband 
technology.
    And I would like to thank you for the time this morning.
    [The statement of Mr. Seiffert is included in the appendix 
at page 124.]
    Chairwoman Velazquez. Thank you, Mr. Seiffert. Mr. Merski, 
if I may, I would like to address my first question to you.
    We have heard many small financial firms express concerns 
that the Fed's TALF would not be adequate or timely enough to 
resolve issues in the SBA secondary market. Can you discuss the 
continuing need to address the secondary market issues for SBA 
loans?
    Mr. Merski. Thank you, Madam Chair. That is an excellent 
question that gets at the point of concern for many small 
business lenders, the fact that the secondary market for many 
small business loans and consumer loans is completely frozen, 
and your efforts to bring in the Federal Reserve, bring in the 
Treasury Department to address those have had some very 
positive results with the Federal Reserve and Treasury working 
to start this new TALF program. But you are absolutely correct 
that it needs to be structured in a way that works for the SBA 
loan poolers, structured in a way that works to help open the 
secondary market for consumer loans, credit card businesses and 
small business lending. So we are continuing to work with the 
Federal Reserve and the Treasury Department to make that work, 
and we will continue to call upon you and this committee to 
make sure that is a robust program and works as you intended it 
to work. We have yet to see the final implementation of that 
program, and the number one concern we have from lenders is 
that the secondary market for their loans is frozen. So they 
can't sell off their loans on their books now and create new 
loans. And that has to be addressed. So we appreciate your help 
on that.
    Chairwoman Velazquez. Thank you.
    Mr. Roth, broadband connectivity can be a critical economic 
driver. Small firms rely on broadband to expand their markets 
and become more competitive. To what extent could broadband-
related dollars translate into immediate jobs for American 
workers, and more importantly, how long will it take? Months, 
years?
    Mr. Roth. Thank you, Madam Chairwoman. With regard to our 
suggestion of one-time grants for broadband buildout, 
particularly to unserved areas, there is a positive side to 
having lots of old infrastructure and old telephone lines out 
there. And that is that our companies already have the rights-
of-way, they already have the conduits, they already have the 
basic building blocks in place. So they could put a lot of 
people to work quickly, digging trenches, laying new lines, 
upgrading existing equipment and employing salespeople to serve 
new customers. So in that respect, in terms of new service to 
unserved areas, we think there actually is great potential 
there for broadband grant programs.
    There is also an RUS, or Rural Utilities Service, telecom 
loan program that I spoke about in my testimony. Our 
understanding is that in the last go-around, in the fiscal year 
2008 go-around, that program was oversubscribed by $250 
million, showing that there is a great deal of interest among 
smaller companies that are eligible for those loans seeking 
assistance that RUS was not able to provide. A relatively small 
amount of money, about a half million dollars in 
appropriations, could underwrite about another $250 million in 
loan authority and fulfill all of those pending requests, which 
could come forth very, very quickly.
    Chairwoman Velazquez. Thank you. Mr. Seiffert, would you 
like to comment?
    Mr. Seiffert. I absolutely agree fully. I mean, there are 
lots of--well, let me just start with saying given the fact 
that in 2008, 180,000 employees in our sector lost their jobs. 
So if the grants and different programs were to stimulate 
broadband investment in new infrastructure buildout you have a 
lot of people ready to go back to work. I absolutely agree with 
Mr. Roth and his assessment.
    Chairwoman Velazquez. When it comes to broadband access, 
policy incentives can play an important role in encouraging 
deployment, a public-private partnership come from a rapid and 
extensive deployment. Can you talk to us about why further 
incentives and funds are necessary, even though the private 
market is generating demand for broadband?
    Mr. Seiffert. Sure. And it goes back to the issue of 
unserved communities and communities that the economics don't 
work as well in the larger market. And so a public-private 
partnership is one way to get around the market conditions and 
make sure that companies can get a return on that investment. 
And so we support that.
    Chairwoman Velazquez. Mr. Graves. No questions. Mr. 
Schrader.
    Mr. Schrader. Question for Ms. Dorfman. I am trying to 
follow up on Bart's comments. In my State oftentimes there is a 
lot of lip service paid to limited minorities and small 
businesses and their access to some of the larger construction 
grants and/or opportunities like the stimulus. And they never 
really happen. Is there a better way that you or the Women's 
Chamber has come upon that we should be using to deliver funds 
to make sure that there is adequate representation by women and 
minority small business?
    Ms. Dorfman. Thank you. What we have found is that women 
have really relied heavily on SBA lending because they often 
aren't able to access traditional loans, and so putting the 
money into the SBA lending programs and making sure that they 
do have access to those programs would be the first, I think, 
way to get into the money into their hands.
    Mr. Schrader. Thank you very much.
    Chairwoman Velazquez. Ms. Clarke?
    Ms. Clarke. I think you took my question, Mr. Schrader, but 
I will try. Ms. Dorfman, I just want to thank you for 
testifying today because I believe the U.S. Women's Chamber of 
Commerce is a great organization and is always in the forefront 
of fighting for women-owned businesses.
    On October 28th of 2008, you had testified before this 
committee that Congress should take legislative action to help 
restore the flow of credit and capital to small business owners 
as soon as possible. In particular, you mentioned that the SBA 
should relax the rules on credit worthiness and job creation 
requirements. Can you give us a little bit more insight into--
and give us some guidance as to how we can achieve this?
    Ms. Dorfman. Sure. Thank you very much. What we see out 
there is that--I mentioned the credit cards--small businesses, 
women-owned firms in particular, rely heavily on using their 
credit cards when they have a shortfall of funding. 
Additionally, when we look at the housing market, the loans 
that have been given to them have relied on their equity in 
their home or, if they are looking to get a new loan, it always 
attaches their home to it. So the equity that might have been 
there in the past won't be there now.
    So those are some of the issues. If we can allow some of 
the SBA funding to be used for maybe the credit card debt that 
they have already taken out, which in the past has not been the 
case, doing some of those innovative funding for the loans, I 
think that would ease the pain greatly.
    Ms. Clarke. Can you just quickly speak to the job creation 
requirement?
    Ms. Dorfman. Sure. Right now what we are seeing is our 
members are struggling to keep their doors open and keep the 
employees that they already have. If you were to say we will 
give you some money, but you have to hire--and I think there is 
something out there about a $3,000 and then you get--but you 
need to hire somebody if we have that. And we are talking about 
a job that might be $50,000 for an employee. That doesn't even 
cut it and they are struggling to keep their doors open. It 
doesn't make a lot of sense right now.
    Ms. Clarke. So would you then think or say that if we 
incentivized employee retention--
    Ms. Dorfman. Yes.
    Ms. Clarke. --that would help at least to just sort of 
stabilize things, and were the SBA able to do some sort of 
refinancing--
    Ms. Dorfman. Yes.
    Ms. Clarke. --for those businesses, this that would be a 
helpful tool.
    Ms. Dorfman. Absolutely. That would be great. Thank you.
    Ms. Clarke. Thank you, Madam Chair.
    Chairwoman Velazquez. Mr. Merski, I would like to ask you a 
last question, since we are going to be dealing with the TARP 
reform on Financial Services where I serve.
    Although this recession started from the collapse of the 
mortgage lending, recent economic indicators have raised 
significant fears about witnesses in other types of financing, 
particularly commercial real estate and consumer credit. Do you 
believe that efforts such as the Treasury's capital purchase 
plan or the Fed's TALF will be adequate to help small banks 
weather the extended economic downturn if credit defaults 
continue to spread?
    Mr. Merski. That is a very good question. And the 
programs--the capital purchase program and the TALF that you 
were instrumental in jump-starting are going to help, but the 
banking sector has already written off about $700 billion in 
real estate value that they will not be paid back on. So if you 
think about the economics of it, about 60 percent of all small 
business lending is backed up by some sort of real estate 
collateral. And, as we pointed out in our testimony, unless you 
stem this decline in real estate values, whether it is 
commercial real estate or individual's homes, the financial 
credit crisis and economic crisis is going to continue to get 
worse, not better.
    So as the Congress is looking at fiscal stimulus plans to 
match what the Federal Reserve has done on cutting interest 
rates to nearly zero, additional policies have to be put in 
place to stem the tide of declining real estate values, because 
that is what the collateral is for many small business loans. 
And also the fact that, until this real estate is stabilized, 
banks are going to have a very difficult time of lending more.
    Chairwoman Velazquez. Thank you.
    Mr. Seiffert, the availability of broadband can be broken 
down into two groups, areas with access and areas where high-
speed access is not yet affordable or reliable. While it is 
clear we should be reaching underserved markets, can you 
discuss the importance of high-speed Internet and how does 
improving it generate economic opportunities?
    Mr. Seiffert. Well, for starters, any consumer business, 
higher speed improves experience. It makes everything real time 
and creates efficiencies across the board.
    We still as a country have to focus on our national 
broadband strategy and create incentives to upgrade our current 
infrastructure to next-generation broadband infrastructure and 
through the recommendations we have suggested through expensing 
and direct tax cuts. We believe that will stimulate that 
investment for these next-generation broadband networks for all 
consumers as well as small, medium and large businesses. We 
should not be satisfied with the current state of our broadband 
infrastructure.
    Chairwoman Velazquez. Well, we have to go to the floor, but 
let me thank all of you for your willingness to be here this 
morning. And I don't have to remind you that, in all the 
discussion about this economic downturn, people need to 
understand that small businesses must have a seat at the table. 
If we want to get this economy back on track again, we need to 
create jobs. Those jobs will be created by small businesses. So 
we are going to make this forum today part of a report that 
will be provided to the Democratic leadership and the new 
Members of Congress.
    So thank you again, and I look forward to working with you, 
and this forum is now adjourned.
    [Whereupon, at 12:10 p.m., the forum was adjourned.]

              [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

                                 
