[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]


 
PUTTING AMERICANS BACK TO WORK: THE STATE OF THE SMALL BUSINESS ECONOMY

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

                                HEARING

                               before the

                      COMMITTEE ON SMALL BUSINESS
                             UNITED STATES
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                              HEARING HELD
                           FEBRUARY 16, 2011

                               __________


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            Small Business Committee Document Number 111-059
Available via the GPO Website: http://www.access.gpo.gov/congress/house



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                   HOUSE COMMITTEE ON SMALL BUSINESS

                     SAM GRAVES, Missouri, Chairman
                       ROSCOE BARTLETT, Maryland
                           STEVE CHABOT, Ohio
                            STEVE KING, Iowa
                         MIKE COFFMAN, Colorado
                     MICK MULVANEY, South Carolina
                         SCOTT TIPTON, Colorado
                      CHUCK FLEISCHMANN, Tennessee
                         JEFF LANDRY, Louisiana
                   JAIME HERRERA BEUTLER, Washington
                          ALLEN WEST, Florida
                     RENEE ELLMERS, North Carolina
                          JOE WALSH, Illinois
                       LOU BARLETTA, Pennsylvania
                        RICHARD HANNA, New York
               NYDIA VELAZQUEZ, New York, Ranking Member
                         KURT SCHRADER, Oregon
                        MARK CRITZ, Pennsylvania
                      JASON ALTMIRE, Pennsylvania
                        YVETTE CLARKE, New York
                          JUDY CHU, California
                     DAVID CICILLINE, Rhode Island
                       CEDRIC RICHMOND, Louisiana
                         GARY PETERS, Michigan
                          BILL OWENS, New York
                      BILL KEATING, Massachusetts

                      Lori Salley, Staff Director
                       Paul Sass, Staff Director
                     Barry Pineles, General Counsel
                 Michael Day, Minority Staff Directory


                            C O N T E N T S

                              ----------                              
Opening Statements:
    Graves, Hon. Sam.............................................     1
    Velazquez, Hon. Nydia M......................................     2

                               WITNESSES

Frank, Ms. Terry, Owner, Nature's Marketplace, Oak Ridge, TN.....    21
Kolditz, Ms. Dixie, Owner, Open-Box Creations, Cathlament, WA....    35
Phelan, Mr. William, President and Co-Founder, PayNet, Inc., 
  Skokie, IL.....................................................     4
Feinberg, Mr. Bill, President, Allied Kitchen and Bath, Ft. 
  Lauderdale, FL. On behalf of the U.S. Chamber of Commerce......    26

                                APPENDIX

Prepared Statements:
    Frank, Ms. Terry, Owner, Nature's Marketplace, Oak Ridge, TN.    23
    Kolditz, Ms. Dixie, Owner, Open-Box Creations, Cathlament, WA    38
    Phelan, Mr. William, President and Co-Founder, PayNet, Inc., 
      Skokie, IL.................................................     7
    Feinberg, Mr. Bill, President, Allied Kitchen and Bath, Ft. 
      Lauderdale, FL. On behalf of the U.S. Chamber of Commerce..    29
Statements for the Record:
    Associated Builders and Contractors, Inc.....................    60


                    PUTTING AMERICANS BACK TO WORK: 
                THE STATE OF THE SMALL BUSINESS ECONOMY

                              ----------                              


                      WEDNESDAY, FEBRUARY 16, 2011

                          House of Representatives,
                               Committee on Small Business,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 1:03 p.m., in Room 
2360, Rayburn House Office Building. Hon. Sam Graves [chairman 
of the Committee] presiding.
    Present: Representatives Graves, Coffman, Ellmers, Herrera 
Beutler, Fleischmann, Landry, Tipton, Walsh, West, Velazquez, 
Clarke, Cicilline, and Richmond.
    Chairman Graves. I will call this hearing to order.
    We obviously have a series of votes that just started and 
it is going to take a little bit of time to get through those. 
What I thought we would do is myself and the ranking member 
will give our opening statements and we will recess for the 
period of time that we have our votes and then we will come 
back and take the testimony from the witnesses. But I want to 
thank everybody for being here today, particularly the 
witnesses. Obviously, you have come from a long way and I 
appreciate that very much. And today we are going to be 
listening to testimony on specific tax, regulatory and health 
care policies that inhibit job creation and economic growth.
    Running small businesses in a prosperous economic time is 
hard enough, but during an economic downturn entrepreneurs face 
even more challenges. When meeting Friday's payroll becomes the 
most pressing concern, it is unlikely that small business 
owners can dedicate the necessary time and resources to 
expanding their businesses and creating jobs. Even though there 
have been recent signs that our economy is starting to improve, 
our recovery from this recession remains erratic at best. As we 
have said many times before, small businesses need certainty to 
plan for not only the next day but also for the next month and 
the next year.
    The National Small Business Association recently released 
its 2010 Year-End Economic Report in which small business 
owners ranked the top issues that they believe Congress and the 
administration should address. Traditional issues like lowering 
the tax burden, reigning in health care costs and reducing the 
regulatory burden still reign supreme, outpaced only by the 
demand that Congress and the administration take the steps to 
reduce the national deficit.
    Let us take a moment to talk about one of small business 
owners' longtime concerns, the sheer magnitude and complexity 
of the tax code. Entrepreneurs, many of whom have limited 
resources, are forced to spend their time attempting to comply 
with the tax obligations instead of growing their businesses. 
According to the IRS itself, today's tax code has ballooned to 
3.8 million words. That is nearly three times larger than it 
was in 2001. Small business owners have long been concerned 
about the costs involved in providing quality health care 
coverage for their employees, and for the last 10 years job-
based health insurance costs have substantially outpaced 
inflation and wage increases. The Kaiser Family Foundation 
reports that the average cost of a family premium for employer-
sponsored health insurance increased 114 percent between 2000 
and 2010. Only 68 percent of businesses with fewer than 200 
employees were able to afford or offer these health care 
benefits in 2010, and the outlook is even worse for the 
smallest firms that employ three to nine people. Only 59 
percent of those firms were able to afford benefits.
    And since the new health care law passed last year, I have 
heard from countless small business owners in my district and 
right here in this Committee room that not only will this new 
law fail to provide them with health care benefits for their 
employees, but it will cost them or could put them out of 
business.
    As we try to encourage a lasting economic recovery, we must 
also address the problems that small businesses face due to 
harmful federal regulation. According to the SBA's Office of 
Advocacy, the annual cost of federal regulation in the United 
States increased to more than $1.7 trillion in 2008. And the 
Office of Advocacy also reports that small businesses face an 
annual regulatory cost of over $10,000 per employee, which is 
36 percent higher than the cost facing larger firms. As more 
federal regulations are created daily, it has become next to 
impossible for small business owners to keep track of the 
associated costs and paperwork. Recognizing our economy and 
rekindling the American spirit of entrepreneurship must be the 
central focus of the 2012 Congress. Small business owners who 
create the majority of new jobs need a government that will 
work with them and not against them to put our nation back on 
the path to prosperity.
    My colleagues on the House Small Business Committee and I 
are listening to the concerns out there and are ready to get to 
work to put an end to the devastating uncertainty that has 
plagued entrepreneurs for far too long. So again I appreciate 
everybody being here. I look forward to your testimony. I will 
now turn to the ranking member for her opening statement.
    Ms.  Velazquez. Thank you, Chairman Graves.
    Since the financial crisis, this Committee has been closely 
following the health of the small business sector. This has 
included holding hearings here and throughout the country, as 
well as addressing the problems we found through legislation. 
Now the economy has begun to grow again and the recovery is on 
the way. However, it is clear that there is a long way to go 
and we are still struggling on many fronts. This hearing will 
help us understand how much the small business economy has 
changed and what, if anything, we should do here in Congress to 
address it.
    This recovery started in mid-2009, and according to the 
Federal Reserve appears to now be strengthening. GDP has grown 
for six consecutive quarters and exceeds the 2007 end of year 
pick. Today, the U.S. economy is larger than ever, and consumer 
spending was growing at an annual rate of 4.4 percent for the 
last quarter of 2010. As a result, many small businesses are 
more optimistic than they have been in a long time. This 
newfound confidence is seen in the most recent NFIB Optimism 
Index, which is at its highest point since December 2007.
    Surveys by NSBA and Gallop also show that small business 
confidence was increasing. Small firms are also finding easier 
credit conditions as confirmed by both the Federal Reserve and 
the Thomson-Reuters PayNet Small Business Lending Index, which 
we will hear about today. This is a very positive development 
since small businesses have been all but locked out of the 
capital markets for a long time. This positive news is tempered 
by the challenges we see in the labor market. With losses of 
more than eight million jobs in 2008 and 2009, the four 
consecutive months of positive job creation we have seen are 
simply not enough. The unemployment rate has declined 
significantly but we are still not seeing the level of 
employment gains we need to achieve a full recovery.
    According to research, small firms have shed jobs at a more 
rapid pace than larger firms. In addition, they have chosen not 
to add employees even though they need it citing the 
uncertainty they face about sales revenues and cash flows as 
the top reasons for not doing so. This issue, job creation, is 
the most important facing Congress today and small businesses 
are instrumental to the solution. Responsible for generating 64 
percent of net new jobs over the last 15 years, small firms 
have typically driven employment gains after recessionary 
periods. We saw this in the early 1990s and again in 2001. It 
is important that while we seek to encourage entrepreneurship 
of all types, we focus on businesses that tend to dramatically 
increase job creation. These are high growth firms, typically 
undertaking a market opportunity rather than out of necessity. 
Such firms need plentiful capital, the ability to access a 
highly skilled workforce, and a business environment conducive 
to risk taking. They can grow in size rapidly and in doing so 
can add tens or even hundreds of employees in the course of 
months.
    With that said, small businesses of all sizes and stripes 
remain absolutely critical to our economic health. During 
today's proceedings I am looking forward to hearing both 
anecdotal accounts as well as empirical evidence about the 
state of the economy and its impact on small firms. By doing so 
this Committee can identify the bright spots, as well as where 
entrepreneurs are facing the greatest challenges. As a result, 
we will be better informed as we try to tailor policy solutions 
regarding these problems.
    In advance of the testimony I also want to thank all the 
witnesses who travel here today for both their participation 
and insight into this important topic. And with that I yield 
back. Thank you, Mr. Chairman.
    Chairman Graves. We will go ahead and recess for whatever 
amount of time it takes to go through the votes and we will be 
back right after that. Again, I apologize for the 
inconvenience. We do not always know when votes are going to be 
so the Committee is in recess for however long it takes.
    [Recess.]
    Chairman Graves. We will call this hearing back to order. 
And I would like to explain the light system. When you give 
your testimony you have got five minutes and the light will be 
green. When you are down to one minute left it will go yellow 
and then red when time is up. If you go over a little bit I am 
not going to break anybody's arm but we want to try to keep it 
to five minutes.
    And now I will turn to the ranking member to introduce our 
first witness.

 STATEMENTS OF WILLIAM PHELAN, PRESIDENT, PAYNET; TERRY FRANK, 
   OWNER, NATURE'S MARKETPLACE; WILLIAM FEINBERG, PRESIDENT, 
    ALLIED KITCHEN AND BATH; DIXIE KOLDITZ, OWNER, OPEN-BOX 
                           CREATIONS

    Ms. Velazquez. Thank you, Mr. Chairman.
    Our first witness is Mr. William Phelan. He is president 
and cofounder of PayNet, a provider of risk management tools 
and market insight to the commercial credit industry. As 
president, Mr. Phelan has grown PayNet into a firm with the 
largest collection of commercial loans and leases encompassing 
more than 17 million contracts worth $100 billion in loan 
value. Under his direction, Mr. Phelan overseas the sales, 
marketing, analytics, and information technology functions of 
the business. Welcome.

                  STATEMENT OF WILLIAM PHELAN

    Mr. Phelan. Thank you. Good afternoon, Mr. Chairman, 
members of the Committee. Thank you for that introduction.
    PayNet is based in Skokie, Illinois. I appreciate the 
opportunity to speak today on behalf of PayNet, which provides 
the information that the Congresswoman alluded to. My role 
today is to help you with insights into the state of the small 
business economy with quantifiable data, trends, and analysis.
    As you alluded to, PayNet has the largest database of small 
business loans in the country at this point. Access to this 
small business credit information increases access to capital 
for small businesses. It spurs economic growth, jobs, and it 
significantly reduces the cost of doing business.
    I think the perplexing aspect of the small business economy 
is not its importance to the U.S. economy. The perplexing 
aspect is how little we know about small business. Limited 
information hinders the ability of bodies such as this 
Committee to create policies that can help small businesses. I 
applaud your efforts to better understand the small business 
economy. In doing so, to create policies that promote small 
business.
    The Thomson-Reuters PayNet Small Business Lending Index 
measures new borrowing activity on millions of U.S. small 
companies and it serves as a leading economic indicator. The 
index declined from a peak of 131 in January 2007 to 66 by May 
of 2009. This is a fall of approximately 50 percent. This index 
allows us to calculate the demand for credit by factoring in 
credit approval rates. When we do that, we can see that the 
credit approval rates, in other words the demand for credit 
from small businesses, actually fell during that same 
timeframe. It fell from an index of 176 down to 103 by May of 
2009. There certainly are cases of small businesses being cut 
off by their bank, but from just a pure demand standpoint it 
appears like the credit applications have declined during that 
timeframe based on the data that PayNet has.
    For the broader small business economy, it is clear that 
lower applications are this indication of falling demand for 
credit. At the same time, the banking system's reserves were 
expanding by a factor of 1,800 percent. Even though businesses 
are beginning to borrow more and are finding it easier to pay 
their bills, small business owners are not yet ready to declare 
victory over the recession. The index as of December 2010 
confirms the recovery in small businesses is gaining and it is 
starting to get on solid financial footing.
    The construction industry increased more than any other 
sector last month as those companies began to borrow more 
money. The transportation, health care, and farms all expanded 
borrowings during that same timeframe. Surprisingly, the 
professional services companies that we track showed borrowings 
were flat over that timeframe.
    The sobering facts about the economy remain before us. We 
have high unemployment. We have improving but still very low 
consumer confidence. We have modest income growth. Another 
sobering fact. The index is still six percent below its 2005 
levels when it began. So we are still below at this point the 
level that the index was at in 2005. And that was six years 
ago.
    Most small businesses are dependent upon domestic demand 
and they often lack the resources to deal with trade barriers 
and tariffs, and they are shut out of the booming growth in 
emerging economies. This 20 percent uptick that we reported 
last month in the index may prove to be illusory as well. In 
speaking anecdotally with a major seller of equipment, we found 
that much of the buying was to replace old worn out equipment, 
rather than to invest in growth.
    Additionally, many of these companies took advantage of the 
year-end tax credit to realize that benefit for their 
organizations. When you consider the effects of the recession, 
the small business owner's survival is a testimony to the 
resilience and their grit. Their demand for their products and 
services in many cases cratered. The regulations increased. 
Uncertainty abounded and payment terms extended to beyond 60 
days. Yet the small business owner managed to not only stay 
afloat but to reach solid financial footing. Loan delinquencies 
are down to 2.45 percent. These are levels not seen since 2006. 
Loan delinquencies have decreased 43 percent over the last year 
for small business loans, and that is the largest year over 
year decrease on record.
    I think transition is the best way to describe the small 
business economy. Rising regulatory costs, high taxes, 
technological change, an increased competition are small 
businesses to seek more efficient and sustainable ways to do 
business. We are seeing a definitive recovery start to emerge 
in small businesses. However, market conditions, such as these 
regulatory costs, health insurance regulations, fewer markets 
for products. These present challenges to growth and even 
survival still for small businesses. The recession has forced 
many small businesses to get leaner and smarter. They have 
introduced technology to cut costs, to increase productivity, 
but unfortunately, that is resulted in fewer jobs. The trick 
will be to help these unemployed workers acquire skills for the 
jobs of the future.
    Unknown future costs for regulations, health care and taxes 
heightened the uncertainty for the small businesses. Cash 
hoarding is the best indicator of the uncertainty that small 
businesses are feeling right now. Businesses are building cash 
to levels not seen since 1963. They are doing that rather than 
spending, borrowing, and hiring employees. Removing that 
uncertainty where it exists will go far towards encouraging 
businesses to spend, borrow, or hire, which in the long run 
will assist to create jobs and further economic growth.
    Thank you, Mr. Chairman , and members of the Committee for 
the opportunity to address you today. I offer to present 
further analysis and data for your use if you so wish.
    [The statement of Mr. Phelan follows:]

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    Chairman Graves. Thank you, Mr. Phelan. Next I will turn to 
or yield to the gentleman from Tennessee for the introduction 
of his witnesses.
    Mr. Fleischmann. Our next witness today is Ms. Terry Frank. 
Ms. Frank is the owner of Nature's Marketplace in Oakridge, 
Tennessee. Ms. Frank is a graduate of Middle Tennessee State 
University and is also a current board member of the Anderson 
County Economic Development Association. Ms. Frank took a bold 
step and opened her own small business in 1993. Ever since that 
time she has faced the problem millions of hardworking 
Americans face every year. Oppressive taxation and regulations 
that threaten the livelihood of small business owners.
    Ms. Frank's perspective on small business issues is more 
than welcome, and we thank you for taking time out of your busy 
schedule to come be with us today. Ms. Frank.

                    STATEMENT OF TERRY FRANK

    Ms. Frank. Thank you. Chairman Graves, Representative 
Velazquez, Representative Fleischmann, members of the 
Committee, thank you for the opportunity to testify.
    Nearly 20 years ago my husband and I sought the American 
dream of owning our own business. With very little capital we 
opened a produce market and eventually expanded into a busy 
market with gifts and an eatery where we prepared sandwiches 
and soups and baked deserts.
    We love our small business and the blessings of home 
ownership it has afforded us, not to mention that we were able 
to raise our three sons alongside us, much to the amusement and 
fondness of many customers. My oldest son is now attending 
College at the University of the South at Sewanee on 
Presidential Scholarship. Our second son has been accepted to 
Yale, and our youngest son is a fifth grader at St. Mary's 
School in Oakridge.
    Our customers and our employees have taken part in the 
shaping of these fine young men. One of my favorite quotes is 
from Patrick Henry, ``I have but one lamp by which my feet are 
guided, and that is the lamp of experience.'' My experience of 
owning our own business has been one of great commitment, 
numerous sacrifices, and the foregoing of many pleasures for 
the opposability of feature reward. Many of those experiences 
have been rewarding; others frustrating. I often wonder if it 
is not easier to just work for someone else than it is to 
navigate the tax code.
    Engaging in commerce should allow for the simple reporting 
of profit or income. It should be so simple that any producer 
should be able to be a good citizen and comply with the law. 
But as it stands, even with a college degree, I have been 
utterly lost on many occasions. The tax code is a maze of 
fiddles. A game for those who seek to find the loopholes for 
the sophisticated to work various formulas in order to pay less 
to Uncle Sam.
    Until four years ago I performed all of our taxes myself 
with a tax program until I finally relented and started paying 
a CPA. Time is money and money is time, and the U.S. Government 
robs the small business community and its own coffers of 
potential revenue by eating up hours of time in bookkeeping, 
reporting, and compliance. Keeping up with the tax changes that 
Congress is considering can be a full-time job itself. The 1099 
requirement that you discussed in this Committee here last week 
would only add to that nightmare.
    The tax code should be so simple that it actually serves as 
an incentive to bringing more people into the ranks of small 
business. Instead, it stands as an intimidating obstacle. My 
husband and I depend on a network of other small businesses to 
produce our goods. Every element of our business network shares 
a sense that we are viewed as, well by government as cows to be 
milked. We sense that we viewed as exploiters of people. I 
speak not just for myself. I discussed my testimony with many 
friends. Our profits, if we have any, are not windfalls. They 
are produced by our hard work. Our risk taking and ingenuity. 
Profits are not something nasty to be punished and taken and 
given to someone else.
    The small business community and the great middle class of 
which it is part currently are carrying more than their fair 
share of the tax load. Congress should not remove dollars from 
the economy and reinject them in a so-called stimulus game of 
picking the winners. Small businesses should be allowed to keep 
more of what we earn. When we do, we give our economy and the 
federal tax coffers a better return on our investment and we 
can provide more jobs to others.
    I will close by calling for a simple solution to growing 
the small business community. Truly reform the tax code. Do not 
micromanage us and let us keep more of our hard earned profits. 
But specifically, I call for a far better tax code. The Fair 
Tax HR-25 taxes consumption instead of earned income so it does 
not punish initiative. A flat tax sounds simpler but the fine 
print could wind up hurting small business if we cannot deduct 
our operating costs. Federal policy itself promotes distrust 
and resentment. It puts we, the people, against government and 
neighbor against neighbor as a prevailing sense of unfairness 
festers and then divides us.
    We need a stable dollar and tax and monetary policy that 
does not intentionally hurt small business. Monetary policy of 
the Federal Reserve purposely manipulates the dollar's value 
and interest rates. Such policy has served to dry up lines of 
credit and loans to small businesses of my friends and even to 
me personally. Small businesses cannot thrive and provide 
general prosperity so long as it is oppressed by federal 
policies designed to serve the interest of Wall Street 
financiers. We need cheap and affordable energy in the 
operation of our businesses and most importantly, we need the 
stability that comes with an end to micromanagement of small 
business. There can be no growth when business owners like me 
are constantly fearing what lies around the corner.
    Thank you for hearing my views today.
    [The statement of Terry Frank follows:]

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    Chairman Graves. Thank you very much, Ms. Frank. I will 
next turn to the Gentleman from Florida, Mr. West, for the 
introduction of his witness.
    Mr. West. Thank you, Mr. Chairman and Madam Ranking Member.
    Our next witness is Mr. William Feinberg, president of 
Allied Kitchen and Bath in Fort Lauderdale, Florida. He founded 
his company along with his brother Joe in 1984. Bill is 
currently a member of several industry trade associations, 
including the National Kitchen and Bath Association, and he 
serves on the Board of Directors of the Fort Lauderdale Chamber 
of Commerce. Mr. Feinberg is testifying on behalf of the United 
States Chamber of Commerce today, the world's largest business 
federation representing the interests of more than three 
million nationwide businesses, as well as state and local 
chambers and industry associations.
    Welcome, Mr. Feinberg. You have five minutes to present 
your testimony.

                 STATEMENT OF WILLIAM FEINBERG

    Mr. Feinberg. Thank you. Chairman Graves, Ranking Member 
Velazquez, and distinguished members of the Committee, thank 
you for asking me to testify before you today on the state of 
the small business in our nation with a specific focus on the 
issue of health care. My name is Bill Feinberg and I am 
president of Allied Kitchen and Bath, which is located in Fort 
Lauderdale, Florida. I am here to speak to you today on behalf 
of the U.S. Chamber of Commerce.
    In 1984, my brother Joe and I founded Allied Kitchen and 
Bath in Fort Lauderdale, Florida. Our two other brothers, David 
and Rob, also joined and worked for the company, making it 
truly a family business. We take great pride in having earned 
an outstanding reputation in our community. In early 2007, my 
brother and I pursued our dream to expand our company. We 
obtained financing which enabled us to tear down our old 
facility and build a new two-story, first-class, 15,000 square 
foot showroom. We literally invested not only our life savings 
but also our reputation. At times we wondered whether we could 
survive.
    We are continually optimistic about the future but this is 
not to say that things are easy or that we are achieving the 
level of financial stability and security which we had 
anticipated prior to this economic downturn. We know that 
achieving our goal of exceptional customer service and 
satisfaction is only possible through our staff members. In 
fact, many of our staff have been with our firm for more than 
15 years now. At this time, I have 35 full-time employees, as 
well as a few part-time employees and others that we use on a 
subcontract basis. At the peak of my business we employed about 
45 people.
    With the severe economic downturn, especially in the 
building sector in Florida, we tried our best not to lay off 
anyone. Myself and brother as co-owners personally sacrificed 
everything. We cut our inventory, we tightened our belts in 
every way, trying to meet cash flow needs while waiting for 
business to pick up and consumer confidence to return. 
Ultimately, we were forced to lay off people. To be blunt, it 
has been a struggle, and at times we have been hanging on just 
by a thread. I believe things are slowly getting better, but 
even as the economy seems to inch toward recovery, businesses 
like mine have to worry about new laws, new regulations, new 
challenges created for us by Congress.
    Allied is a very good business on a sound financial footing 
but we are not flush with cash. As far as health care and 
health insurance goes, we continue to believe, as we always 
have, that offering health insurance to our employees is a 
valuable benefit. It is also critical to obtaining new 
employees and retaining the existing ones that we have. Right 
now Allied offers a Blue Cross Blue Shield PPO plan to all of 
our employees. We pay 50 percent of the premium. Every year we 
pay more and more money but we get less coverage. Last year we 
got a 20 percent premium increase. This year it would have been 
worse. We were able to keep our increase to 20 percent by 
raising the plan deductible from $500 to $1,500 per person. I 
would like to keep offering health insurance to my employees, 
and I would like Allied to continue to grow and be able to 
create jobs and prosper. However, with the new health care law 
it is making it much harder for us. I know that some of our 
premium increases are due to the new rules in the health care 
law. We have less leeway in how we can control costs by 
changing plan design and it makes it harder to afford 
insurance.
    I am hopeful that in the next few years Allied will grow 
again and be in a position to have 50 employees at a minimum 
but I know that in 2014 the new employer mandate starts. The 
mandates says an employer with 50 or more employees must offer 
government-approved health insurance or pay steep fines. Is 
this the message Congress meant to send to businesses like 
mine? Would not incentives, rather than penalties, have been a 
better way forward? Unfortunately, there is no way I will be 
able to hire a 50th employee once this mandate kicks in, at 
least as I understand it. Hey, I am just a kitchen guy. 
Apparently, if I have 50 or more employees and I do offer 
health insurance I will face steep fines because of the 
complicated formula in the new law that lets the employees opt 
out of our health insurance plan, receive a government subsidy, 
and fine the company $3,000 each time this happens. How can 
this make any sense? It simply does not. The uncertainty caused 
by just the employer mandate alone can hardly be emphasized 
enough. I hope Congress will repair this provision as soon as 
possible regardless of the plans to repeal the full health care 
law.
    I was hoping that health care reform would mean more 
competition, lower costs, better quality care. I do not see how 
the health care law will achieve any of that though. Plenty of 
common sense ideas that would help small businesses like mine 
were just left out. The law did not include the meaningful 
medical liability reform. It does not give Allied the 
opportunity to buy health insurance from companies outside 
Florida and it does not allow Allied to freely band together 
with other small businesses to get better rates on insurance or 
form reinsurance pools. It does not even fix the problem of 
cost shifting where low payments by Medicare or Medicaid 
providers translates to a higher insurance cost for small 
businesses. I hope this Congress will take a serious look at 
the policy changes and help lower health care costs for 
businesses like Allied so it can keep offering the benefits our 
employees so value.
    In conclusion, we are hopeful that we have weathered the 
worse of this economic storm. We are cautiously optimistic 
about the future. That being said, this uncertainty being 
generated in Washington, D.C. by a dizzying array of unanswered 
questions about health care, taxes, energy, and regulations 
impacts our decisions and hampers our ability to effectively 
plan for the future. We need answers. We need clarity. Perhaps 
most importantly we need these issues to be resolved in a 
manner that encourages entrepreneurism, investment, and job 
creation. I am a business owner and the livelihood of my 
employees and their families depends on the decisions I make. I 
say this similarly. The decisions that you make as members of 
Congress have a direct impact on my business and my employees. 
I hope that you would ask that you continually be mindful of 
this reality as you consider the weighty issues facing our 
nation. Please, invest in small business and help us. Work with 
us, not against us. And we will create the jobs necessary to 
put Americans back to work.
    Thank you for this opportunity to testify, and I will look 
forward to your questions.
    [The statement of William Feinberg follows:]

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    Chairman Graves. Thank you. And I will now yield to the 
Gentlelady from Washington, Ms. Herrera Beutler.
    Ms. Herrera Beutler. Thank you, Mr. Chairman.
    And it is my honor today to introduce to you all Dixie 
Kolditz. She and her husband, who is in the back corner with 
their little one asleep, co-own two businesses, Open-Box 
Creations, a wholesale home decor company, and also an agency 
that provides care for developmentally disabled adults. Dixie 
is here today to talk specifically about Open-Box Creations, 
which is located in the small town of Cathlamet, which is in 
the middle of my district in southwest Washington, the region I 
represent.
    I was meeting with employers across my district a few weeks 
ago and had the pleasure of reconnecting with Dixie and her 
husband on that trip. And to me she represents all that is 
great about America and the American dream, and she is going to 
tell you about that. She was raised in South Africa, came to 
the United States to attend college, and it was there that she 
majored in public relations and journalism, and also met her 
husband and future business partner, Ross. She came to the U.S. 
in '95 and became an American citizen in 2004, and is now the 
mother of seven children and the owner of two businesses that 
employ more than 150 people. Only in America. Now Dixie is 
facing a set of challenges that make it extremely difficult to 
continue as a small business owner, and rather than have me 
recount those challenges to you I am going to turn it over to 
an expert witness who knows firsthand the difficulties that 
small businesses are facing today.

                   STATEMENT OF DIXIE KOLDITZ

    Ms. Kolditz. Thank you, Mr. Chairman and members of the 
Committee.
    I am going to talk about regulations. And we deal with this 
when we bring in our containers, which is our shipments that 
come in from Thailand. Our products are handmade, the flowers 
and the vases. And what happens is when the containers come in 
they get delayed by Customs. And that becomes really hard 
because it adds more fees to what we are bringing in. And so 
what we found--so I am going to just read some of the stuff 
that we have that has been happening. I will relate this with 
the container that we just recently received.
    Most of our containers when they come in we fill out an ISF 
form, which is an Import Security Filing form. And this form, 
it just tells everything that is on the container. And what 
happens is now Customs requires that we file this form before 
the container leaves the country of origin. Now this becomes 
really hard because the shipping company cannot give us the 
information two to three days before the container leaves. And 
we understand that Homeland Security is very important. 
However, before the economy took a downturn, our containers 
were not scanned as often as they are right now. And we have 
agreed that the Customs' scans and inspections were indeed 
random. Now all our shipments are scanned or inspected at our 
expense every single time. It feels like a government 
moneymaking scheme. The fees are higher than our labor cost to 
load and unload. It seems that because they are not footing the 
bill they do not care how long it takes and they can even use 
whatever facility that is convenient to them, even if it means 
taking containers that have been trucked to Portland, Oregon, 
our home shipping port from San Francisco, back to San 
Francisco and then back to Portland to be scanned. This just 
adds more fees. Why do we then have to pay for their 
inefficiencies. There has to be ways that they can be 
accountable to us or share the expenses. Maybe then they will 
work faster, efficiently, and cost effectively.
    When we receive the shipment, normally I pay about $350 
when they scan my product every single time; $150 of it for the 
delays and $150 of it that goes to Customs for them scanning 
it. Now my bill was about $822, which is a little bit double, 
almost triple what I have paid before. With the ISF form, if we 
do not fill--the new rule that they just enacted is that if we 
do not fill this we will be penalized about $5,000 which is a 
lot of money for most of us. And like I said, we cannot control 
how we can get the information from the shipping companies. So 
when they add these things it just adds more and more things 
that we have to deal with. Also, when we bring in our 
containers, most of our product, like I said, they are 
handmade. It is something that is not produced in the U.S. We 
now have to pay duties and this is done through the general--it 
is called the GSP, which is the Generalized System Preference. 
Now, with the GSP, this is something that the government 
started a couple of years, in 1976, to help developing 
countries so that they can be able to sell their products to 
the U.S. Now with this system, now all of our products we now 
have to pay duties when we never used to pay duties. I had to 
pay over $800 on our products and I have got several containers 
that are coming in. And when they do this it just adds more and 
more fees. I am not complaining about the fees, it is just the 
fact that we are getting fees from all different directions, 
and the more fees you add, the more I cannot make profit. And 
if I can make a profit I can employ more people, which is 
really, really hard. And I know that the generalized system is 
being worked on so that it can be renewed, but if it is not 
renewed it is now a new tax. It might not be called a tax but I 
think it is.
    One of the other things is, if you put less regulations, 
what that does is that it gives a company like mine, a small 
business, to be able to work with a big company. We now have an 
opportunity that we get to work with Costco, which one of my 
friends called Costly. It is like David working with Goliath. 
Now, if you add more regulation, I cannot have that 
opportunity. What we now have is that I can sell my products 
through Costco instead of them. You know how everybody says 
that the big company kicks out the mom and pop shops? Now they 
are bringing us in which helps us so that we can hire more 
people and they also can employ more people. So this is a 
system where we are now working together. We are having a 
mutually beneficial system.
    So I say do not regulate us. Do not overregulate us. Give 
us some rules. We expect some rules, and we are fine with 
having a few rules here and there so that we can all work 
together. But the more you get into giving us so many rules, 
you are taking away our opportunities to give. And I also think 
that we have also been vilified. We are being told that we want 
to make profits all the time. Profits, there is nothing wrong 
about having profits. That is part of the American dream, is 
that we can reach, we can achieve anything, and at the same 
time create jobs.
    So I say less regulation. Give us the opportunity so that 
we can partner with you and create more jobs. I am thankful for 
this opportunity and I hope that I was able to give you some 
information that could be useful. Thank you.
    [The statement of Dixie Kolditz follows:]

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    Chairman Graves. Thank you very much. Now we will move to 
questions, which I have a question for Mr. Phelan. You 
mentioned the credit market is thawing a little bit. I am just 
curious where you are seeing the majority of that--small banks, 
larger banks, lending institutions? And I would also be 
particularly interested in where you are seeing that directed--
lines of credit or is it more on new business startups, that 
sort of thing?
    Mr. Phelan. So the question is are we seeing the credit 
approval rates increase in different types of institutions, 
whether it is a bank or independent finance business, a large 
bank or a small bank.
    Chairman Graves. Where are you seeing it most, large banks 
or small?
    Mr. Phelan. Yeah. Yeah. And I think we--to be honest with 
you on the data side, we have not drilled into the data to that 
kind of degree of specificity to be able to tell you that. We 
can tell you that most of the data that we collect, on the 
credit approval side, is from the larger institutions. And so I 
think it is representative more of the larger institutions that 
where we are seeing just the credit approval rates increase 
from a very low point in May of 2009 to not quite to pre-
recessionary levels but it has certainly gotten much closer to 
where it was before the recession.
    Chairman Graves. Are you seeing that more--we were hearing 
a lot about lines of credit being, you know, either banks were 
requiring more equity for the same line of credit or they are 
just reducing their line of credit for the same equity that 
they had put up. Are you seeing that loosening up just a little 
bit?
    Mr. Phelan. Again, I apologize. We have not studied in that 
kind of depth. We could do that for you if that is something 
you are interested in. We do know overall though that the 
credit applications are increasing. The credit approval rates 
are increasing. But I do not have--I was not prepared with that 
kind of depth of detail. I could provide that to you at some 
further point.
    Chairman Graves. If you could I would appreciate it.
    Mr. Phelan. Sure. I could do that.
    Chairman Graves. I know we have a lot of questions out 
there so I will go ahead and turn to the ranking member.
    Ms. Velazquez. Thank you, Mr. Chairman.
    Mr. Phelan, you noted that the Small Business Lending Index 
has increased 20 percent between December 2009 and December 
2010. What do you attribute that to?
    Mr. Phelan. Well, the approval rates have increased so we 
know that there is more credit being granted and we can see 
that in the data, so that's one aspect of it. We really see 
three drivers as the reason for the change year over year. One 
is we think the economy is getting a little bit better. It is 
not certainly completely healed but we do see elements of the 
economy improving. Secondly, at some point some of this 
property plant and equipment just wears out and you have to 
replace it so there is replacement investment going on. Then 
thirdly, I think companies were taking advantage of some of the 
year-end tax credits that were available. So it's really a 
combination of those three where there is some investment 
growth occurring, there is replacement investment just to 
replace worn out equipment and worn out assets, and then there 
is certainly some taking advantage of year-end type 
opportunities in the tax structure.
    Ms. Velazquez. What about the federal stimulus? Did it play 
any positive role?
    Mr. Phelan. We have no way to track exactly what credit is 
being attributed to the stimulus and as you can imagine that 
would be a very complicated project. I can tell you though that 
the construction companies, we've seen certainly some 
improvement in their borrowing patterns and that was probably 
the largest jump that we saw last month in December was among 
construction companies.
    Ms. Velazquez. The housing tax credit was included, $7,500, 
and then increased to $8,000, will that have any impact on the 
construction side for first-time buyers?
    Mr. Phelan. I really can't answer that question with that 
kind of specificity, but I can tell you in the data that we 
have seen construction companies start to borrow more money and 
become more active.
    Ms. Velazquez. Much of the turmoil in the economy can be 
tied to the decline in real estate prices and real estate 
represents the single largest source of collateral for small-
business lending loans. Do you believe that the declines in 
real estate prices are continuing to hamper business lending?
    Mr. Phelan. Again I have anecdotal information on that. I 
don't have data-driven information at my fingertips, but I 
think that certainly any kind of collateral that is being used 
to secure a loan would certainly impact the degree to which the 
financing available. There is no question about it. But I do 
not have empirical data to tell us whether it's gone down 20 
percent or 10 percent or whatever the number is.
    Ms. Velazquez. Mr. Feinberg, we have spent a lot of time 
talking about health care reform and insurance companies used 
to be able to cap benefits meaning that once that cap was 
reached, individuals will be forced to pay their medical bills 
themselves. As someone who employs over 100 employees----
    Mr. Feinberg. No, no, no, 35.
    Ms. Velazquez. Thirty-five. And you provide health 
insurance?
    Mr. Feinberg. Yes.
    Ms. Velazquez. Should insurance companies be able to cut 
off benefits if an employee of yours gets extremely ill and 
goes over their cap even though you are paying for their health 
insurance?
    Mr. Feinberg. I can't say whether or not the insurance 
company should do that and I think as a small-business owner 
I'm----
    Ms. Velazquez. No, my question is do you think it is fair 
that you the employer pays health insurance for your employees 
and if it is fair that once that employee reaches the cap 
imposed by the insurance company that the benefits will be cut 
off where you are the one paying the insurance?
    Mr. Feinberg. I don't think that is fair and I think that 
it's important that as an employer that we are offered 
incentives.
    Ms. Velazquez. So we agree.
    Mr. Feinberg. I don't know that we agree, but I know that 
I'm not an expert.
    Ms. Velazquez. That it is not fair.
    Mr. Feinberg. I am not an expert on health care and I think 
it is up to you the lawmakers to decide. And I'm not saying 
that the bill needs to be repealed completely either. There are 
good parts of the bill and there are also bad parts. As a 
business owner my job is to grow my business. That is what I am 
looking to do, create jobs and grow my business. I cannot 
possibly grow my business if I have all these mandates put on 
me.
    Ms. Velazquez. My question if I were fair or not once a 
person gets sick and reaches the cap of those benefits that the 
insurance company even though you are paying those benefits, 
that they will cut it off. Ms. Kolditz, in this Committee we 
have worked in a bipartisan way to deal with the issue of 
regulatory burden on small businesses and we do know the burden 
that it imposes on small businesses and many entrepreneurs 
simply do not have access to the complying resources that their 
larger competitors do.
    Ms. Kolditz. Yes.
    Ms. Velazquez. There is a national network of small-
business development centers across the country and I know 
you're from Florida.
    Ms. Kolditz. Washington State.
    Ms. Velazquez. Washington State, and I'm sure that in 
Washington State there are small-business development centers. 
Have you had any contact with those small-business development 
centers that provide technical assistance?
    Ms. Kolditz. No, not yet.
    Ms. Velazquez. That is a network created by the Small 
Business Administration and it would be great for you to check 
on those services that they provide so that they could help you 
sometimes deal with the issue of regulatory compliance.
    Ms. Kolditz. Right.
    Ms. Velazquez. Thank you, Mr. Chairman.
    Chairman Graves. Mr. West, questions?
    Mr. West. Thank you, Mr. Chairman. On a positive note I'd 
like to ask the panel have there been instances where the 
Federal Government has been a good partner in helping you to 
expand your businesses outside of accessing capital? Anyone? 
Ferris Buehler? Anyone?
    Ms. Frank. I will just say that I don't really want help 
from Government. I think that is the point. I know Ms. 
Velazquez addressed Dixie saying have you gone to the outreach 
center or the community--that is my story. I do not want any 
help. I want to contribute, I want to be a good citizen, I want 
to raise my family. That is not what Government should be 
about. There are a very few things I think Government should be 
about, national security, our roads, prisons, a very few 
limited things and I think Government has grown so much that 
that should not be the mindset of every business or elected 
official that ask your Government for help. I do not want help.
    Mr. Feinberg. I think I also agree with Ms. Frank. I am a 
businessman. That is what I do best. I know how to work with my 
company and create jobs for the people around me. The more 
restrictions that are out on my company the less that I am able 
to operate. We already have so many regulations and laws that 
restrict us. The mandates are just adding more to this. I know 
that as a business person I can create jobs.
    Mr. West. Can you give examples of some of these 
regulations or mandates that you are addressing?
    Mr. Feinberg. With health care alone if I reach 50 
employees that will stop me in my tracks from growing my 
business. There is no way that I can possibly hire more 
employees knowing that I will either face steep fines or have 
to pay these high rates or have to pay insurance for 50 
employees. My job as a business person is to grow my company 
and the more that I see the Government get involved and 
regulate me the less I am able to do. The saying one size does 
not fit all is so true. It does not. I know how to do kitchens 
and bath remodeling. Let me do what I do best. I know how to 
create jobs in my community. I was on my way when the economy 
was strong. Now with the economy coming back, I think it could 
be done. I think that we are on a positive note right now where 
the economy is coming back and I do believe it is going to come 
back strong. But again allow me to do it the way that I think 
that I can grow my business.
    Ms. Kolditz. Actually I agree with that. One of the things 
that we deal with like I said is customs. One of the things is 
they just bill us. I cannot go to anybody and say why do I have 
this bill. I am just stuck with the bill. And when I speak with 
some of my colleagues and I ask them, even before I came here I 
called a couple of them to just find out how do you deal with 
this, they do not. That is just how it is is what everybody 
said which is really, really horrible, that you just give me a 
bill and just say pay $800 and I do not care, I just want you 
to pay for it and I have to pay for it because I want my 
product and I want to be able to run my business. And to 
respond to Ms. Velazquez, we started this business without any 
assistance. We have been doing this for a while. And I think 
the fact that we are employing 150 employees means that we got 
to do this on our own two feet. We have been doing this for a 
while and most of us have started businesses and we are doing 
it. We are your partners. We are the ones that you should be 
saying what can we do? Right now you're just putting bills and 
putting things in front of us. Take them away. I was saying to 
somebody it is like having kids. You have one child and you 
watch them like a hawk. By the time you have the seventh they 
can eat a stone that is iron. It is fine. Do the same thing. 
Just watch us and let us go and just see what you can do. You 
are still there to protect us. You are still there to guide us. 
But give us a little bit of space. Right now it feels like 
there is just too much love.
    Mr. West. Thank you, Mr. Chairman. I yield back.
    Chairman Graves. Mr. Cicilline.
    Mr. Cicilline. Thank you, Mr. Chairman and thank you to the 
witnesses. I think we are all very interested in what we can do 
to make small business grow and to create more jobs. So I am 
interested in specifics because I understand the sort of 
feeling that you may have or some other businesses have of 
being overregulated and overburdened, but to be helpful in 
terms of how to address that, we sort of need to understand 
what the specifics are. I want to ask first Mr. Feinberg you 
talked about health insurance. You are not currently required 
by the new legislation to provide health insurance but you do.
    Mr. Feinberg. That is correct.
    Mr. Cicilline. I presume you do that because you have 
decided that it is valuable to have employees who are healthy 
and well and can be more productive.
    Mr. Feinberg. My employees are my partners. In other words, 
that is what grows my business.
    Mr. Cicilline. And probably the most important asset in 
your business.
    Mr. Feinberg. Absolutely. Without a doubt.
    Mr. Cicilline. Do you think it is a good idea to actually 
be sure that we have a system in place that provides affordable 
health care to small businesses?
    Mr. Feinberg. I cannot say whether or not. As a business 
owner I look at what is going to grow my business and knowing 
that I have to provide insurance, that limits me. It does not 
give me the flexibility as a business owner that I think is 
required to grow my business.
    Mr. Cicilline. Though you have elected to provide health 
insurance without being required to?
    Mr. Feinberg. But I provided--I pay 50 percent of my 
employees, but they can also opt out.
    Mr. Cicilline. Has someone discussed with you the 
availability of the tax credit that you will be entitled to if 
you go beyond 50 employees? Are you familiar with that?
    Mr. Feinberg. No, I'm not familiar with it. And like I 
said, I am just a businessman.
    Mr. Cicilline. The reason I asked that is because I think 
that it's important that we also, that the SBA or whoever the 
relevant Federal agencies are, share that information with 
small businesses because the tax credit is designed to help 
small business and make the providing of health care 
affordable. So I think that is an important responsibility that 
we have to be sure small businesses get that information. Ms. 
Kolditz, thank you for being here. You are in the import 
business?
    Ms. Kolditz. Yes, I am.
    Mr. Cicilline. The products that you are shipping here are 
made in?
    Ms. Kolditz. They are made in Thailand.
    Mr. Cicilline. Of course when I was hearing your testimony 
about the difficulties of getting those containers here, the 
first thing I thought of is one of my passions. How do we find 
out how we can make whatever you are importing here in America 
made by American workers in American businesses. Is that 
something you have explored?
    Ms. Kolditz. Yes, we have.
    Mr. Cicilline. Buying those products here from American 
companies that are employing Americans?
    Ms. Kolditz. The thing is our product, the material does 
not grow here naturally. It grows in Thailand in abundance and 
we have been looking at things that we can try to find here. 
Most of the things that you try to buy here are more expensive 
and that is one of the problems. And one of the things that 
raises the costs is the fact that there is a rule that you have 
to pay your employees a certain amount of money. You are 
already regulated with how much you have to pay people so it 
makes it harder on what you can do. I get most of our florists 
locally to try to create something out of what we already have. 
Like what we are selling to Costco are predone arrangements. I 
have them done here in the U.S. so I get the raw material out 
of another company and I employ people here in the U.S. so that 
they can create what I now have. So not only are we now 
providing employment for people overseas, we are also providing 
people here with work.
    Mr. Cicilline. I would ask any of the witnesses, that if 
you do not have particulars that you can suggest today, I would 
love for you to share them with the Committee, if you could 
identify specifically what sorts of regulations or burdens that 
you have encountered that you think we ought to look at. I 
think in a bipartisan way this Committee has been very serious 
about reducing regulation and making it easier for small 
businesses to grow, and any specifics that you might be able to 
provide to me or to members of the Committee of things we 
should be looking at, I know I would appreciate very much and I 
really appreciate your being here to share testimony today.
    Chairman Graves. Mr. Fleischmann.
    Mr. Fleischmann. Thank you. Thank you, Mr. Chairman. Ms. 
Frank, thank you for your testimony and witnesses thank you for 
your testimony. Outstanding. Ms. Frank, you mentioned in your 
testimony a preference for a fair tax or a flat tax. Could you 
please tell us how a national sales tax or a flat tax would 
possibly be more preferable than the current tax companies as a 
small-business owner?
    Ms. Frank. I like a fair tax of course in conjunction with 
the repeal of the Sixteenth Amendment. I did not finish the 
other part of the Patrick Henry quote which is ``History is how 
I judge the future.'' In history I have seen one tax eliminated 
in favor of a new tax and then lo and behold a few years later 
with the crisis we get both of them back. So that is kind of my 
disclaimer on the fair tax. I like the idea of a fair tax 
because I have done my taxes and it is a nightmare. It becomes 
a game of what you know and even what your accountant knows. 
Sometimes your accountant is wrong, sometimes your account does 
not have all the information, sometimes as the last year I went 
he told me ``Things are changing daily. We need to wait a 
couple of weeks.'' I think now there are even some deadlines 
that have been forward. You could not instantly file because of 
changes that were taking place. But the best part about the 
fair tax is it taxes consumption instead of production, 
consumption instead of initiative and I really like that. I 
have a good friend who lives in California, Wayne Jett. He is 
an economist. He calls it the trillion-dollar sure thing 
because it immediately eliminates $300-plus-billion in 
compliance costs. It immediately eliminates I think $300 or 
$345 billion in unpaid or uncollectable taxes. It does away 
with the bureaucracy. It does so many things that free people 
up. It also removes taxes on payroll, you name it across the 
board. I think you already have in place retailers like me who 
are already collecting sales tax. And I need to address the 
poverty issue as well. For folks who are below that poverty 
level, they would actually get a rebate that is equivalent to 
money that would be spent there. I could go on and on and on, 
Congressman Fleischmann, about the benefits of the fair tax, 
but what I like is that it does not punish and you only have to 
pay as much tax as you want to buy and I see it as a benefit in 
that regard.
    Mr. Fleischmann. Thank you, Ms. Frank. Mr. Chairman, I 
yield back.
    Chairman Graves. Ms. Clarke.
    Ms. Clarke. Thank you very much, Chairman Graves and to 
Ranking Member Velazquez, and thank you to each of you 
witnesses here today. As you know, our nation's small 
businesses will dictate how robust our economic recovery will 
be and that is something we all agree upon. The SBA is 
reporting an increase in lending through their 7(a) Loan 
Program with the bulk of those loans being equal to $1 million 
or more. Also the Thomson Reuters PayNet Small Business Lending 
Index recently released a report indicating that fewer 
companies are falling behind on their existing loan payments. 
This could provide incentive for lenders to free up capital 
they might otherwise hold onto to protect against defaults. 
While this is promising news, job creation as a lagging 
indicator during an economic recovery does not fully reflect 
the improving health of our economy. I do not believe as some 
do that all taxes are regulations are inherently bad. 
Regulations are usually implemented as a response to or to 
prevent malfeasance by bad actors. However, when well-intended 
regulatory policy creates unnecessary bureaucracy and tax 
policy related to those Government inefficiencies and adversely 
affect the ability of small businesses to invest and grow, I 
support the review and if necessary the revision or elimination 
of these policies. So I want to just ask the entire panel, 
quite a bit has been made of the term regulatory uncertainty 
especially with regard to why the economy has not rebounded 
more rapidly. My question is, as opposed to being used as a 
blanket term, what exactly does regulatory uncertainty mean to 
you and your small business and we'll just start with you, sir. 
Mr. Feinberg.
    Mr. Feinberg. Thank you. With so many regulations, I guess 
it just impacts the decisions that I make and the ability to 
plan for my future. With so many restrictions put on me there 
is no flexibility and with so many regulations I cannot grow my 
business as I need to. I have Government telling me how to do 
it.
    Ms. Clarke. Have you been able to identify specifically 
where those obstacles are? I am sure you face them one on top 
of the other according to your description. I am just wondering 
if you could be a bit more specific. I know it may feel 
overwhelming to you, but it is that specificity that we need 
that actually gets us where we need to be.
    Mr. Feinberg. Sure. I have so many local regulations put on 
me. As a general contracting firm, I cannot tell you how 
difficult it is every day dealing with the permitting process 
and regulations in our cities, in our counties, in our state, 
the laws that are mandated with the new Lead Act. There are so 
many regulations in particular that just keep me from doing 
what I do best.
    Ms. Clarke. You are saying it is sort of a compounded 
situation because there are of course your local regulations 
which I am sure based on wherever your jurisdiction is are 
meant to effect concerns there. And then there is the state 
that has its own regulatory processes and then there is the 
Federal. So you are saying it is the compounding of all of this 
that makes it difficult for you and that creates this 
environment of regulatory uncertainty?
    Mr. Feinberg. It is total uncertainty. There is no clarity 
in any of the regulations.
    Ms. Clarke. Let me go on to our next panelist and see what 
that means to you.
    Ms. Kolditz. I agree with regulations. I think there has to 
be some sort of regulation in some stuff. I will give an 
example. We have an arrangement that we just put in a box and 
you just have to open it and put it in a vase and that is it. 
And we had a customer who bought that arrangement, did not take 
it out the rubber band and put it in their vase. And because it 
was sitting that way they had to return it and there was 
something wrong with it. We went home and we were sitting and 
we were thinking now we have to come up with something to make 
it easy. So it is now the rule in our little company that we 
have to have a card that tells the person you have to cut the 
rubber band before you put it inside there. You would think 
this is very basic and I think that is how the Government 
works, is if somebody makes a mistake, it does not matter what 
it is, we are just going to put a rule for everybody because we 
now have to do this. And so that is why I was saying with 
Costco as one of the people that we are now working with, for 
the small business this is a great opportunity but we know 
there are going to be regulations and the more regulations 
you--for the big guys they have more things. They have lawyers, 
they have everything and they are going to look and say there 
might be something maybe we do not want to have the small guys 
inside our stores anymore. So those are the uncertainties that 
we are talking about, is the fact that there are so many little 
things that keep adding up, adding up, adding up that you are 
taking away opportunity which means you are taking away the 
jobs that we are supposed to create. So I say before we do a 
regulation or before you do a regulation, think about it in 
terms of the big guys and the little guys and write it in such 
a way that it can be simple. We do not all have to have a 
rubber band on that thing because we know we can cut it off.
    Ms. Frank. I do not believe so much in regulation, period. 
I think we need general rules of the road, that we cannot all 
drive at 60 miles per hour in different directions, we have to 
have stop signs, yield signs and I think that is the mentality 
that Congress should have, just general rules of the road 
instead of, for instance, hiring more IRS agents and Department 
of the Treasury workers, we need more DOJ workers to ferret out 
corruption, to deal with people who are operating outside of 
the law in our system. As far as regulation, there are probably 
a ton of laws that I violate myself not even knowing and when I 
talk to other friends, we are a small-business network, we are 
all of the mindset that a lot of the regulations are intended 
to pick a target. If you happen to be the wrong guy or you are 
speaking the wrong message, then those regulations can be used 
against you and so a lot of people operate outside them. And I 
think the regulations should be so easy to understand and 
figure out that it is natural to follow the law. They just keep 
piling up and maybe what I am regulated for is not the same as 
Dixie or Mr. Feinberg, but all together it serves as a downward 
force on the economy.
    Ms. Clarke. Thank you, Ms. Frank.
    Ms. Frank. Thank you.
    Ms. Clarke. My time is back and I yield back. Thank you, 
Mr. Chair.
    Chairman Graves. Mr. Walsh.
    Mr. Walsh. Thank you, Mr. Chairman. Thank you, Mr. Chairman 
and thank you, Ranking Member Velazquez. Amen to the four of 
you. Thank you so much for being here. Amen. You all and the 
folks you represent are the heart and soul of this country. 
What you do will keep this country going. Like so many of my 
freshman colleagues, there was not a day that went by during my 
campaign last year where I did not hear from hundreds of small 
businessmen and women who had just had it, who were scared, who 
were frustrated, who were uncertain. So I think most of us here 
in Washington have no clue as to what you go through. My 
Democratic colleagues keep asking for specific regulations and 
fees. That might be a good idea. That might teach us something. 
I would encourage you all if you got examples of specific 
regulations and fees, throw them at us. This body needs to be 
educated. We need to understand what small businessmen and 
women are going through. Let me just fire a quick question at 
each of you. Ms. Kolditz, let me start with you. Try to keep 
your answer short. You said you did not want to complain about 
all the fees and regulations. I would say complain away. As 
much as you can complain the better. We will hear you. A simple 
question. The fees and regulations that you deal with, do they 
make you hire more and do they keep you from hiring employees?
    Ms. Kolditz. They're making me rethink about hiring 
employees because the money that I would have had to hire the 
employee I now have to use to pay for all these fees.
    Mr. Walsh. Mr. Feinberg, you mentioned that you're not an 
expert on health care. We are not either. It is a huge issue. 
When you look at the uncertainty you face with this piece of 
health care legislation that truthfully most people who voted 
for it did not really understand what was in it, how do you 
plan a week, a month, a year or two down the road?
    Mr. Feinberg. It is very difficult. At times like I said I 
am hanging on by my fingernails and it is so difficult because 
the fees--the health care costs that I pay now, it is 
outrageous.
    Mr. Walsh. Do you know offhand what this legislation will 
cost you a year from now or two?
    Mr. Feinberg. I think it will cost me a lot more than I am 
paying now.
    Mr. Walsh. Ms. Frank, you said a phrase that if I had a 
nickel for every time I heard this on the campaign trail I 
would be a wealthy man, ``Get out of my way.'' I heard that 
continually from people. Crystallize what that means for you 
and again be brief. You want your Government out of the way. 
Why?
    Ms. Frank. I think we do a better job or creating jobs and 
creating wealth for the nation, and I think what happens is a 
lot of politicians look to the rules, the regulations, the 
taxes, to try to social engineer us to guide us in whatever 
path or direction they want us to go in and I guess that would 
be kind of boiling it down there.
    Mr. Walsh. Let you do your thing?
    Ms. Frank. Yes.
    Mr. Walsh. Mr. Phelan, you mentioned in your remarks that 
you see small-business owners finally opening the bunker door 
and starting to look outside. What concerns you is that will 
cause them to go back in and close the bunker door in this next 
year or two?
    Mr. Phelan. I think it has been touched on here. I think 
that uncertainty is a businessman's worst nightmare because 
they cannot plan and they have a lower probability of success 
and there is just a lower chance of success. If you do not 
understand what the future holds for you or if you have less 
confidence in the future, you are unlikely to go out on a limb. 
You are not going to borrow money, you are not going to take on 
a new project. So you are right, the image is they're finally 
going outside and seeing the green shoots that were talked 
about over a year and half ago or something and I think that is 
comforting to everybody that we are seeing that kind of growth 
start to occur or emerge, but it could certainly go the other 
way. There is no question about it and it gets to uncertainty 
in my mind that if you just don't have confidence about the 
future you are unlikely to go out on a limb as a small-business 
owner. You hear the panel. Everybody operates on razor-thin 
margins these days. There are a lot of challenges in making a 
buck basically and so why would you take on some additional 
cost or some additional project that has some risk to it if you 
did not have a lot of confidence in it?
    Mr. Walsh. Keep doing what you are doing. Educate us. If 
you have got specific regulations and fees, let us know about 
them, but amen. You guys are right on and it is up to us to get 
out of the way so you can do your thing. Thank you, Mr. 
Chairman. I yield back.
    Chairman Graves. Mr. Richmond.
    Mr. Richmond. Thank you, Chairman Graves and thank you to 
the panel for coming today. Just a general question. I guess I 
am hearing that we are on the up side of the economic downturn 
or recession or so we have it. How did you all cope during 
those times? Were you hard during those times? We can start 
with you, Mr. Feinberg.
    Mr. Feinberg. Absolutely. I do not think I have taken a 
check in 6 months. I am living off of life savings. I have 
utilized every source that I can to keep my business going. 
Myself and my three brothers, we are constantly just where do 
we get the next check to pay our employees because that is 
first, our employees. They are our lifeline and we have to keep 
them happy and it is very, very difficult because banks are not 
lending money. I have tried. Trust me.
    Mr. Richmond. Okay. Ms. Kolditz.
    Ms. Kolditz. We definitely have been hard hit. One of the 
things with an entrepreneurial small business is you learn to 
change and adapt and that is why the final thing is that we can 
try different things and that is what we have. We have tried 
different things to make sure that we can survive and that is 
why we have this opportunity that we have with our business 
with Costco and that what has helped us kind of stay afloat.
    Mr. Richmond. Ms. Frank.
    Ms. Frank. Yes, definitely, and I would say employee costs, 
my husband and I actually work more--we work more with what we 
have instead of normally bringing in some additional help. So I 
would say just the nature--I say small-business people are like 
cockroaches, we find ways for the most part if we can to 
survive and we do whatever it takes.
    Mr. Richmond. Mr. Phelan, I guess my question to you and 
there has been a consistent message. I am a son of a small-
business owner so I know the struggles and to me you are not a 
small-business owner unless you have had that struggle making 
payroll at the end of the week and then you understand. My 
question, Mr. Phelan, is what do you give credit or where do 
you give the credit for us getting out of the economic 
downturn? Would it be the stimulus? Would it be the Jobs Act? 
Was Government involved in getting us out of the recession that 
we were in?
    Mr. Phelan. What we can see in the data is that small 
business reacted in a very I guess resilient way to this 
terrible recession that we had and they reacted without a lot 
of assistance. We can see that in the data that the default 
rates, these are measures of risk, the delinquency rates on 
their loans, have come way down so that they have managed to 
get their financial houses in order. They have done that by 
cutting expenses and cutting costs. We have seen in the index 
that was mentioned here that it was down 50 percent from the 
height of the recession or from the peak before to the height 
of the recession and so sales have fallen dramatically for all 
these small businesses. So what they have done is they have 
used their own ability to pull themselves up by their 
bootstraps and be able to react to what conditions they faced.
    Mr. Richmond. I understand that they are survivors.
    Mr. Phelan. Right.
    Mr. Richmond. But now the economy is starting to turn.
    Mr. Phelan. Right.
    Mr. Richmond. And all the indicators are that the economy 
is moving in the right direction. I guess my question is did 
Government have any role in moving the economy now in the right 
direction in your opinion?
    Mr. Phelan. There was an awful lot of money put into the 
economy from the Government. There is no question about it. I 
do not have direct evidence linking any of that money to 
turning around--having the index turn around or having 
delinquencies improve or what-not. I know there was a direct 
stimulus directly for small businesses and so it is very hard 
for me to say definitively that there is a direct correlation 
there. I am an information person and I rely on information to 
make these kinds of decisions.
    Mr. Richmond. I guess that, and my colleagues and everyone 
has been asking the question about specific regulations and I 
guess that I'm from an area where we are prone to hurricanes, 
and Mr. Feinberg I know you are, so when you talk about 
regulations I would assume that you are not talking about 
building codes and things of that nature in terms of Government 
should get out of the way.
    Mr. Feinberg. That is just some of them. That is some of 
the regulations, too, but even the Federal ones recently in the 
building codes and the lead mandate as far as us having to 
check before we do a job where our hands are tied. The 
information that we can use to run our business properly is 
everywhere we look there is another law or regulation that is 
put in place.
    Mr. Richmond. Mr. Chairman, I see my time is up. I will 
yield back. Thank you. And thank you all for coming.
    Chairman Graves. Ms. Ellmers.
    Mrs. Ellmers. Thank you, Mr. Chairman, and thank you Ms. 
Ranking Member Velazquez. To Mr. Feinberg, Ms. Kolditz and Ms. 
Frank, we were just discussing the issue of coming out of--and 
feeling as if according to the numbers that we are coming out 
of the recession. Those are very technical numbers, but in your 
opinion, a yes or no answer, do you feel that you or we are out 
of the recession?
    Mr. Feinberg. Not as of yet. I think we are coming out.
    Mrs. Ellmers. Ms. Kolditz.
    Ms. Kolditz. I think we are not out yet, no.
    Mrs. Ellmers. Ms. Frank.
    Ms. Frank. No, especially with gas prices increasing.
    Mrs. Ellmers. My next question is for Mr. Feinberg 
specifically. Earlier we were discussing how you felt if it was 
fair that an insurance company would put a cap or if you had an 
employee that had reached the cap, how did you feel about that 
and whether that was fair. Have you ever had that happen? In 
the best of your knowledge, have you ever had an employee reach 
a health care cap level and be destitute because of that?
    Mr. Feinberg. Not to my knowledge.
    Mrs. Ellmers. Thank you. That's what I thought. In your 
opinion and this is to all the members, do you feel that a 
Government-run health care system would be better or a free-
market private health care system is the way for us to go in 
this country? I'll go right down the line, Mr. Feinberg, 
starting with you.
    Mr. Feinberg. I cannot say for sure whether it would be 
better. I think though it should be left up to us as 
individuals.
    Mrs. Ellmers. As a business owner how do you feel?
    Mr. Feinberg. Individually.
    Mrs. Ellmers. Ms. Kolditz.
    Ms. Kolditz. I think individually and actually my mother-
in-law she actually had a cap and she went above the cap.
    Mrs. Ellmers. She did?
    Ms. Kolditz. She did.
    Mrs. Ellmers. How did that----
    Ms. Kolditz. And you know what? She managed to get out of 
it on her own without the Government's assistance. So I think 
you have to leave it to the free market and leave it to people. 
She actually started a company, so you can do that. Just have 
the people do what they can.
    Mrs. Ellmers. Ms. Frank.
    Ms. Frank. Free market.
    Mrs. Ellmers. Mr. Phelan.
    Mr. Phelan. Free market.
    Mrs. Ellmers. Now, Mr. Phelan, I do not know that your 
business is a family-owned business, but I do believe that the 
other panelists are so this is a question for you. My 
understanding, the inheritance tax, this is yet another 
cumbersome tax or regulation on you. Are you in favor? Will 
this hurt you for your businesses as you pass your businesses 
onto your families having the inheritance tax starting with Mr. 
Feinberg?
    Mr. Feinberg. I'm not familiar.
    Ms. Kolditz. Actually I'm not familiar either.
    Ms. Frank. I don't know the rules about inheritance taxes 
either, but I mean, I'm assuming if I leave a business of any 
value, the real estate and I guess just the value of that 
business of course is the day-to-day operation and if my 
children had to pay a tax on that then, no, they couldn't come 
up with that kind of money if that's what I'm understanding it 
would be.
    Mrs. Ellmers. Mr. Phelan, I don't know if that affects you.
    Mr. Phelan. It probably does not, yes.
    Mrs. Ellmers. I have only got less than a minute or I have 
a little over a minute. In relation to our President during the 
State of the Union, basically stated that in 2 years he would 
roll back on the Bush tax cuts for anyone who makes $250,000 or 
more. Now I do not know what kind of income your businesses 
create, but will that provision hurt you, does that hurt you 
today in the relation to the possibility of hiring new 
employees starting with Mr. Feinberg?
    Mr. Feinberg. I do not think I am familiar with that.
    Ms. Kolditz. I think it will affect us. Personally it will 
affect us, yes.
    Mrs. Ellmers. Thank you.
    Ms. Frank. I do not know.
    Mrs. Ellmers. Okay.
    Mr. Phelan. Yes, it would.
    Mrs. Ellmers. Thank you very much for your testimony. Ms. 
Frank, Mr. Feinberg, if he ever decides to not be in Congress, 
would you consider running for Congress? I think you could 
teach us, all of you actually could. We need more small-
business owners in Congress. Thank you. I yield back my time.
    Chairman Graves. Ms. Herrera Beutler.
    Ms. Herrera Beutler. Thank you all for being here. It is 
interesting to hear some of the comments from both sides and 
there is this quest for specifics. I cannot help but think 
every time I am in the District I get specifics whether its 
locally, state or Federal. Federal, it is everything from EPA 
rules and it affects everything from hospitals to small guys to 
building a new parking lot in your back yard, whether you can 
do that, whether you get the right permit or the wrong permit 
and you get fined. What you were saying, Ms. Kolditz, was 
customs so that you will get a container, it will be shipped to 
Portland so that they can scan it or because they did not scan 
it when it came in, they will then ship it back to San 
Francisco and then back to Portland and then they hand you the 
bill. That seemed pretty specific I assume.
    Ms. Kolditz. That is very specific, yes.
    Ms. Herrera Beutler. Yes, that was something that you 
shared that it is nonsensical. Do it at one point. Right? You 
would say Customs folks who work for the Government, you work 
for us, you want to protect our homeland, you are an American. 
We want people safe and healthy. What I seem to have heard from 
you was that the run-around is the problem. It is not that you 
cannot provide the specifics. It is almost as if people are not 
listening.
    Ms. Kolditz. Yes. I think we are just thrown with a bill. 
We have trucks. I have heard that we have the scans. Why don't 
they use those instead of--you see the problem is you look at 
it and I'm thinking if Customs had to pay the bill, they might 
be a little bit more responsible because if they say I should 
unload my container, I am efficient. We get more people. We 
them in and out. And I think if Customs had to have the bill 
that they would do a lot better than what they are doing right 
now.
    Ms. Herrera Beutler. That's an idea for us, an area of 
regulation, to make sure that there is some skin in the game 
with these regulators.
    Ms. Kolditz. Yes.
    Ms. Herrera Beutler. A timeframe or some sort of 
requirement that they are engaged so that there is some skin in 
the game there.
    Ms. Kolditz. Yes.
    Ms. Herrera Beutler. One of the other things I heard was--
the Government trying to helpful to you all, one of the 
comments I heard was whether it is either find the small-
business center and they will help you with the technical 
problems which I kind of had to scratch my head a little bit. 
Or don't you know that the bill that was passed last year is 
for your own good. You are going to like it. You just need to 
get someone to help you with it. Is that the way you would like 
to operate or would you prefer that you kept a little bit more 
of your own money and then you went ahead to provide a plan for 
your employees that met your employees' needs?
    Mr. Feinberg. For myself, my whole goal was partnering with 
my employees. Let me decide as a business owner the best way to 
do that. My employees get behind--we work together to figure 
out the best way what is going to work for us? How can we be 
profitable as a company? The last thing I need is more 
regulations.
    Ms. Herrera Beutler. I guess one thing as some of these 
other massive pieces of legislation that we went through last 
year whether it is the health care bill or whether it is things 
that are going to affect small-business credit and lending, 
those 350-plus working groups who are coming out with new 
regulations. The EPA last year came out with over 928 new rules 
last year alone. The Administration in the fall said that they 
have over 4,000 new rules in the works. We know that you all 
are on the front lines and when you are successful we are 
successful. I do not say we the Congress. I say we as a 
country. I know of Democratic business owners and Independent 
business owners, people who are apolitical, people who are 
Republican, and that is the one thing I get from them is we are 
not trying to pick partisan lines, just help us help you. So I 
would just ask as we move forward I appreciate you taking the 
time away from your businesses to be here today. Please keep in 
contact with us. Please continue to share e-mails. That's what 
this whole Committee is about is hearing and listening to you 
all because we are in a place to bring some balance to some of 
those regulations and we would like to do that. So thank you.
    Chairman Graves. Mr. Coffman.
    Mr. Coffman. Thank you Mr. Chairman, and thank you so much 
for coming here today. As a former small-business owner I know 
how tough it can be owning a small business. My question goes 
back to January 2009 when I was elected to Congress. I know 
starting in December of 2008, or earlier, that the economy was 
in a freefall and I think there was consensus among many 
economists that the Government needed to do something. I think 
supply-siders felt that it was lowering the tax rates to put 
more money into the economy for the private sector and then 
there were those on the demand side who felt that it was 
through Government spending that we would stimulate the 
economy. I just want to know from your perspectives, if you 
felt that the demand side, which is the side that the Congress 
of the United States took and of course the President 
supported, was the right direction; and in your view? If not 
where do you think the economy would be right now relative to 
your businesses if we had instead of, the first traunch of 
stimulus, if that had gone to the private sector, injected into 
the private sector versus Government spending, where do you 
think your small business would be today, where do you think 
this economy would be today? Let's start left to right.
    Mr. Feinberg. Thank you. I think that I would have been 
much better off had the money gone to the public. I know for a 
fact that there is not that much that has been done to 
stimulate my business. It has been done by myself and my 
employees. We are the ones coming up with the answer and the 
solutions to help us because there is really no help for us out 
there as a small-business person.
    Mr. Coffman. Thank you.
    Ms. Kolditz. We also said the same thing. It was more like 
if you had given us the money maybe something could have 
happened. But I think it would have probably been better if the 
money was not even handed out to anybody. I think you would 
have let us fail. If you have us fail, we would have come up 
probably with a better system that would have made it so that 
we are better to--on our way to recovery. So I think sometimes 
it is better to probably take a stand back and just let things 
happen, let people fail. It is okay to fail. When you fail you 
sometimes find better ways of doing things.
    Mr. Coffman. Thank you.
    Ms. Frank. I disagree with what the Government--how they 
responded and I would have actually been for an immediate tax 
cut. I like numbers, I like results and statistics and 
statistics show that even John F. Kennedy, a Democrat, cut 
taxes and it worked. Ronald Reagan cut taxes and it worked and 
so that is immediately what I would have called for. I think 
you can trace all of the problems with the economic downturn 
back to the Government in the first place whether it was Fannie 
and Freddie, whether it was taxation and regulation of the oil 
industry and we cannot drill here and create jobs here. 
Whatever it is, we can trace most of the time the problems back 
to Government in the first place. So I do not think the economy 
would--I actually think the economy would be better off if you 
wouldn't have done what has been done.
    Mr. Phelan. I think working with the Tax Code could have 
been very effective. It's so hard. Right now we're still 
talking about shovel-ready projects and it is hard to measure 
that. It is hard to understand if that is really working or not 
and I think that is part of the problem. Do we if it's been 
effective or not? And you are setting policy and you want to 
set the right policy and you want it to work. Certainly if you 
had put money back in a lot of business owners' pockets they 
could have reinvested that money to expand their business and 
that may have led to more job creation, it certainly may have 
led to more investment of capital, equipment and expansion. We 
are going to run deficits no matter what. Under either scenario 
deficits were going to occur. Right? So if is just a question 
of choose your poison. I think putting the money back into the 
pockets of folks like this and allowing them to decide where to 
invest it could have been a very effective route.
    Mr. Coffman. Let me ask you all one quick question just to 
go back and get a very short answer. All the incentives and 
mandates are on businesses in terms of offering health care. Do 
you think it would be better if we shifted and provided the 
incentives onto individuals and shift that model away from 
employers in terms of offering health care so we would have tax 
incentives which are not available right now to individuals? 
Why don't we go right to left this time?
    Mr. Phelan. I think incentives work for individuals. 
Economic incentives certainly work. I have not studied the 
issue at that kind of granularity to really provide you a 
policy position on it. But certainly providing an individual 
incentive I think is important and that has been proven in so 
many different ways over time with different subpopulations and 
plans.
    Ms. Frank. I totally forgot your question. Would incentives 
be a better way of providing--or getting people to insure 
themselves?
    Mr. Coffman. Tax incentives as opposed to employer 
mandates.
    Ms. Frank. Absolutely. Yes, absolutely I would agree with 
that. My own employees because I am in the food business, I do 
not have long-term employees so I encourage mine to move along 
to get further education. I see my place as a stopover for 
them. I would like for them to own their own business. And I 
pay almost double what the average rates are for that type of 
pay and the mindset I try to teach my employees is you can do 
it yourself. My husband and I did not have our own health 
insurance for many, many years. We were young. Young people 
don't tend to get sick. We were taking the gamble. We saw 
insurance as a way of protecting our assets. Once we developed 
assets then we went to a high-deductible health insurance plan 
that will basically keep us from being wiped out but we don't 
look at it as paying our day-to-day doctor bill.
    Ms. Kolditz. I actually agree with shifting the 
responsibility to the individuals than to the business because 
then we can then as business owners work on creating more jobs 
instead of now trying to figure out how to make the health care 
bill and carrying that burden.
    Mr. Feinberg. I also think tax parity is very good and I 
think that everyone should really be treated the same no matter 
where we buy health care. I think it should be up to us as 
individuals how we want to buy and treat our health care plan.
    Chairman Graves. Mr. Tipton.
    Mr. Tipton. Thank you, Mr. Chairman. I appreciate you 
calling this hearing and I want to applaud each one of you 
fellow small-business person in this country. I am hearing some 
great stories and they echo words that my parents raised me 
with and I am hearing expressed in your stories and it is 
American know-how and Yankee ingenuity to be able to get that 
job done. As a small-business person and now as a member of 
Congress, I just went out and toured our district. We traveled 
better than 1,700 miles over the course of about 5 days. In 
every meeting be it with potato growers in the San Luis Valley 
to small-business shop owners going throughout our district, 
city Governments, county Governments, every corner that we 
stopped at within no more than 10 minutes Government 
regulations came into play and how it was impacting the ability 
to be able to deliver a service, to be able to get that job 
done. If you are a small-business person as you are much like I 
am, and this is the question I would like to ask, we did not 
codify the Tax Code and we only extended it for 2 years. Did 
that impact business decisions that you made last year? And 
with the short-term extension, is that impacting or will that 
impact do you suspect business decisions that you will make in 
the future? Mr. Phelan, if you would start.
    Mr. Phelan. Sure. Certainly. Yes, it did. In my because, we 
put together an annual and 3-year plan so we plan out over the 
next 12 months and the next 36 months and we get very specific 
about our expenses. We didn't understand what the expenses were 
going to be in totality. Now we understand at least for the 
next 2 years and that helps us to plan again. It helps us to 
get organized and helps us to put our projects into place. So 
having more clarity, and I think that's one of the 
uncertainties that was out there at year end, was what's going 
to happen with the Tax Code? And having that clarity I think 
gives us all just a little bit--one ounce more of confidence 
about the future, helps run our businesses a little bit more 
smarter.
    Ms. Frank. I'm probably the Department of Treasury's dream 
small-business owner because I never consider or plan for what 
my tax liability is going to be. I just know how to work and I 
guess from the Government's perspective I materially 
participate, and I'm usually about the business of getting my 
job done, getting what my customers need and paying my own 
bills. So a lot of times I come to the end of the year or I 
come to April and I realize I should have planned for this, I 
should have seen this coming and I didn't know. So I hope that 
answers your question. I just do a terrible job of planning and 
I think that is one of the criticisms I have is it should be so 
simple and there shouldn't be all these changes so we kind of 
have an operating knowledge of how to go forward and be 
successful.
    Ms. Kolditz. I think for us it is still--kind of still that 
uncertainty. What it did is it just offered a short-term relief 
because now what this means is that in 2 years I have to deal 
with the same situation all over again. So I can only plan--for 
now it's kind of like we can grow a little bit but there is 
still that looming uncertainty and I think when you are trying 
to run a business you want a plan, you want to figure out where 
you are going to go so I would rather have this more resolved 
than and done with, to just say this is what you are going to 
pay and stick with it. It's kind of like I always want to know 
what's the final thing. I don't want to hear all this other 
stuff. I just want to know exactly what I'm going to pay and 
what this has done is just give us more uncertainty.
    Mr. Feinberg. I would have to agree. I just think the 
complexity of the system and the uncertainty of not knowing 
what our future brings and not knowing what next year is going 
to be just makes it much more difficult for us to run my 
business and knowing that I can't make decisions because it's 
not clear what really hampers us.
    Mr. Tipton. Thank you. Mr. Feinberg I wanted to compliment 
you because I think so many people in this country failed to 
recognize what you verbalized. You said you missed a paycheck 
but in prior testimony you are still providing health care 
insurance. You're putting your people before yourself. As a 
small-business person maybe you feel a lot like I do, you just 
happen to be the person privileged to lock and unlock the door 
in the morning and sign the back of that paycheck. So your work 
is incredibly admirable, but we've heard comments and they say 
statistics are bearing out that we are no longer in a 
recession. What is your sense right now? Are your communities, 
are your businesses still in a recession?
    Mr. Feinberg. We are definitely still in a recession. I've 
just seen last month one of my largest competitors that had 
been in business for 43 years, someone I respected highly, a 
great competitor for me, just went out of business. The real 
estate market in our area is still in decline. I do believe 
that we are still in a recession. I am optimistic that we are 
coming out of it. And I know for a fact had my employees not 
helped me and jumped on our bandwagon to work together, 
sacrificed their time, their efforts and pooling together, 
there is no way that my company would have survived these past 
couple of years. Like I said, I took on the most debt I've ever 
taken on in my life just at the time when the economy took a 
tank and my employees--I applaud my employees because without 
them there is no way I would have made this.
    Mr. Tipton. I want to be respectful of our time and that 
was thanks probably to a boss that was willing to miss a 
paycheck so thank you for being here. Mr. Chairman, thank you 
for my time.
    Chairman Graves. I want to thank all of our witnesses for 
coming. I apologize for the vote that was in the middle of the 
hearing and if it inconvenienced you any. Your testimony today 
kind of set the stage for some of the debates we're going to be 
having coming up and I look forward as a Committee to try and 
remove some of the burdens that you all face. So thank you very 
much for coming in. I'd ask for unanimous consent that all 
members have five legislative days to submit statements or 
materials for the record. There are no objections. So ordered. 
This hearing is adjourned.
    [Whereupon, at 4:17 p.m., the Committee was adjourned.]

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