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


 
  IS UNCERTAINTY CONTRIBUTING TO THE JOBS CRISIS: THE VIEWS OF LOCAL 
                       ILLINOIS SMALL BUSINESSES 

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

                                HEARING

                               before the

        SUBCOMMITTEE ON ECONOMIC GROWTH, TAX, AND CAPITAL ACCESS

                                 of the

                      COMMITTEE ON SMALL BUSINESS
                             UNITED STATES
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                              HEARING HELD
                           DECEMBER 12, 2011

                               __________

                    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 
                               

            Small Business Committee Document Number 112-048
           Available via the GPO Website: www.fdsys.gov/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
                         JEFF LANDRY, Louisiana
                   JAIME HERRERA BEUTLER, Washington
                          ALLEN WEST, Florida
                     RENEE ELLMERS, North Carolina
                          JOE WALSH, Illinois
                       LOU BARLETTA, Pennsylvania
                        RICHARD HANNA, New York
                       ROBERT SCHILLING, Illinois

               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
                        JANICE HAHN, California
                         GARY PETERS, Michigan
                          BILL OWENS, New York
                      BILL KEATING, Massachusetts

                      Lori Salley, Staff Director
                    Paul Sass, Deputy Staff Director
                      Barry Pineles, Chief Counsel
                  Michael Day, Minority Staff Director
























                            C O N T E N T S

                               __________

                           OPENING STATEMENT

                                                                   Page
Hon. Joe Walsh...................................................     1

                               WITNESSES

Eric Treiber, President and CEO, Chicago White Metal Casting, 
  Inc., Bensenville, IL..........................................     3
Perry Moy, Owner, Plum Garden Restaurant, McHenry, IL............     5
Craig Larsen, Founder/President, AHC Advisors, Inc., St. Charles, 
  IL.............................................................     7

                                APPENDIX

Prepared Statements:
    Eric Treiber, President and CEO, Chicago White Metal Casting, 
      Inc., Bensenville, IL......................................    16
    Perry Moy, Owner, Plum Garden Restaurant, McHenry, IL........    24
    Craig Larsen, Founder/President, AHC Advisors, Inc., St. 
      Charles, IL................................................    28


  IS UNCERTAINTY CONTRIBUTING TO THE JOBS CRISIS: THE VIEWS OF LOCAL 
                       ILLINOIS SMALL BUSINESSES

                              ----------                              


                       MONDAY, DECEMBER 12, 2011

              House of Representatives,    
           Subcommittee on Economic Growth,
                           Tax, and Capital Access,
                               Committee on Small Business,
                                                    Washington, DC.
    The Subcommittee met, pursuant to call, at 10:05 a.m., at 
the Woodstock City Hall Council Chambers, 121 West Calhoun St., 
Woodstock, Illinois, Hon. Joe Walsh (Chairman of the 
Subcommittee) presiding.
    Present: Representative Walsh.
    Chairman Walsh. Welcome. Thank you, everybody, for coming. 
Let me officially gavel in this hearing of the Small Business 
Subcommittee on Economic Growth, Tax, and Capital Access. We 
are now in order.
    It is great to be in Woodstock. This is a field hearing 
away from D.C.
    I would like to, before I get started, and I will do this 
again, thank our three witnesses for coming this morning. And 
we look forward to your testimony on a very important and 
timely topic, so thank you.
    And welcome to everybody else who has come this morning.
    According to economists, the recession ended more than 2\1/
2\ years ago. While that may be the view in certain academic 
circles and on Wall Street, it is definitely not the view or 
experience of small businesses in Woodstock and on Main Street, 
or the over 13 million Americans who remain unemployed.
    According to statistics from the Small Business 
Administration's Office of Advocacy and the National Federation 
of Independent Business, small businesses suffered more than 
their larger counterparts in the recession, and their optimism 
about the future is also lower than expressed by large 
businesses.
    While the experiences they face in the difficult recession 
may account for some of this sentiment, a growing body of 
evidence and the voices of small-business owners are 
demonstrating that policy actions and inactions in Washington 
are in no small part causing their malaise.
    The economy, our economy, needs entrepreneurs to take risks 
and invest in the kinds of capital improvements that will 
expand their businesses and create new jobs. However, when 
faced with uncertainty, businesses are often reluctant to bear 
new risk. And as a result, they hold off on making new 
investments.
    In a recent research paper, economists with the University 
of Chicago and Stanford University created a policy uncertainty 
index that tracked business concerns about the direction of 
Federal spending, tax and other policies, and measured their 
impact on the broader economy and on employment.
    In applying these models to publicly available data going 
back to 1985, the researchers found that policy uncertainty has 
had significant impact and effects on the broader economy and 
has impaired the creation of some 2.5 million jobs.
    A similar study by the Federal Reserve Bank of Cleveland 
found that in 2011 the percentage of small-business owners 
planning to hire would be 6 percentage points higher if it were 
not for policy uncertainty.
    This is not rocket science. It is common sense. If you are 
a business owner and need to hire another employee or buy some 
new equipment, but you are unsure about how Washington is going 
to change your taxes or how much a new regulation is going to 
cost your company, you will hold off on that purchase and you 
will hold off on that hire. Scenarios like this are playing out 
all across our district and all across the country.
    This policy uncertainty is preventing American small 
businesses from creating jobs, and it is crushing economic 
growth.
    The current Administration does not understand this. It 
doesn't understand how business works. In the last fiscal year 
alone, Federal agencies unleashed 43 major new rules. According 
to the National Federation of Independent Businesses, the cost 
of implementing these rules is $28 billion, the highest level 
since 1981.
    Who is going to make new hires or buy any new equipment 
when they have to comply with $28 billion in new rulemaking?
    The purpose of today's hearing is to learn how policy 
actions and inaction in Washington are affecting local Illinois 
small businesses and to hear their recommendations on how 
government can create a more positive business environment more 
conducive to job creation.
    So again, to our witnesses, welcome. Thank you for coming. 
Let me just take a moment to explain the timing lights. You 
will each have 5 minutes or so to deliver your testimony. The 
light will start out as green. When you have 1 minute 
remaining, the light will turn yellow. And finally, it will 
turn red at the end of your 5 minutes. Try to keep within that 
time limit, but your chairman has been known to be quite 
lenient when it comes to finishing testimony.
    And, again, your written testimony will be part of the 
official record.
    Our first witness this morning is Eric Treiber. He is 
president and CEO of Chicago White Metal Casting in 
Bensenville, Illinois. The company was started by his 
grandfather in 1937 and manufactures metal castings for a 
number of industries. Eric is testifying today of behalf of the 
North American Die Casters Association.
    Mr. Treiber, thank you, and welcome. You are welcome to 
deliver your testimony.

 STATEMENTS OF ERIC TREIBER, PRESIDENT AND CEO, CHICAGO WHITE 
 METAL CASTING, INC., BENSENVILLE, ILLINOIS, ON BEHALF OF THE 
  NORTH AMERICAN DIE CASTERS ASSOCIATION; PERRY MOY, OWNER OF 
  PLUM GARDEN RESTAURANT, McHENRY, ILLINOIS, ON BEHALF OF THE 
NATIONAL RESTAURANT ASSOCIATION; AND CRAIG LARSEN, FOUNDER AND 
   PRESIDENT OF AHC ADVISORS INC., ST. CHARLES, ILLINOIS, ON 
    BEHALF OF THE FINANCIAL PLANNING ASSOCIATION OF ILLINOIS

                   STATEMENT OF ERIC TREIBER

    Mr. Treiber. Thank you. Good morning, Chairman Walsh. You 
cut about a minute out of my presentation, so I appreciate 
that. That gives me some additional time.
    Today, there are over 350 U.S. die casters manufacturing 
thousands of nonferrous casters. More than 90 percent of all 
manufactured goods and capital equipment use metal castings as 
engineered components, or rely on castings for their 
manufacture.
    In Illinois, Chicago White Metal is one of nearly 40 die-
casting facilities, and our company is a leading manufacturer 
of aluminum, magnesium, and zinc castings.
    We have 230 employees. Many of them are in skilled trades, 
with an average tenure of 17 years.
    Our customers come from the medical, automotive, 
industrial, telecommunications, and recreational industries. As 
an example, for the automotive sector, we produce a number of 
intricate die castings that become parts of rearview-mirror 
housings, headlight housings, and the power system of electric 
vehicles.
    The manufacturing sector has been deeply affected by the 
recession with more than 2 million jobs lost. A strong U.S. 
manufacturing sector is key to jobs, innovation, and prosperity 
in the State of Illinois and America.
    To regain momentum and encourage hiring, the U.S. needs not 
just improved economic conditions but also consistent policies 
in taxation, energy, labor, trade, health care, education, and, 
certainly, regulation.
    Unfortunately, many die casters are holding off hiring new 
employees for the following reasons: uncertainty about the 
economy, uncertainty about tax liability, double-digit 
increases in our health care premiums, increased costs with 
waves of new regulations, and potential increases in our energy 
costs.
    In particular, we are troubled by three new costly 
Environmental Protection Agency regulations--the Boiler MACT, 
Utility MACT, and Cross-State Air Pollution Rule.
    We are extremely alarmed that Utility MACT could endanger 
America's power supply. The electric industry has only 3 years 
to comply with the new rules that are designed to force dozens 
of coal-fired power plants to shut down. It is likely that the 
Nation's power grid will be stressed in ways it has never 
experienced.
    Given the great amount of uncertainty over critical 
government policy areas, instead of hiring new employees, the 
die-casting industry is faced with utilizing overtime with its 
current workforce and/or hiring temporary workers to fill 
employment needs.
    This Administration has imposed excessive regulations with 
little regard for their impact on job creation and the economy.
    In my testimony, I am focusing on two areas, the EPA and 
U.S. tax policy. The die-casting industry has long recognized 
the need for sensible regulations to ensure workplace safety 
and protect public health. But the Federal Government has gone 
too far.
    The Obama Administration has 4,257 new regulations in the 
works, 219 of which will cost over $100 million annually, which 
is 15 percent more than last year.
    A recent Small Business Administration report showed the 
total cost to employers of Federal regulations is $1.75 
trillion. The average regulatory cost for each employee of a 
mid-sized manufacturer now exceeds $13,000 per year.
    Meeting the demands of Federal regulations can cost 
companies millions of dollars each year in staff time. We 
specifically had one and a half people devoted to following 
regulatory compliance.
    Some of the most economically threatening regulatory 
proposals come from the EPA. The agency is currently advancing 
20 proposed major rules with 173 others.
    In 2011, the agency began regulating greenhouse gas 
emissions from stationary sources under the Clean Air Act. 
While only the largest facilities will be regulated at first, 
this action sets the stage for future regulation of much 
smaller sources.
    Despite being a small business, it turns out our company is 
already bound with a set of reporting requirements under the 
new greenhouse gas requirements. Nowhere did the EPA announce 
and/or outline these new reporting obligations. There was no 
public outreach to business. We had to do it all on our own. 
Our environmental manager spent hours researching potential 
reporting triggers and discovered that die casters that utilize 
magnesium, which we do, are immediately covered.
    Beginning in 2012, we have to register at E-GGRT, which is 
the electronic greenhouse gas reporting tool, and start 
reporting our emissions. It takes about 6 hours a year to 
monitor, not even including the reporting time it will require.
    We believe that major regulations that place new burdens on 
the private sector should be subject to congressional approval. 
I support the REINS Act, which is Regulations from the 
Executive in Need of Scrutiny, which passed the House on 
December 7th, which would require all bills be signed off by 
Congress and the President that have a $100 million or greater 
impact.
    As Congress begins debating tax reform, the tax code should 
provide businesses relief from burdensome and confusing tax 
rules. Many of these provisions are enacted on a temporary 
basis, requiring repeated extensions.
    The uncertainty resulting from such temporary tax policy 
makes it difficult for die casters, which rely on 5- and 10-
year business strategies, to plan effectively.
    The bonus depreciation and section 179 expensing will be 
extended in 2012, but at a much lower rate. Bonus depreciation 
and section 179 expensing provide tax relief for companies that 
want to buy capital assets, such as plant machinery and 
equipment. These investment incentives have had a positive 
impact and incentivized business purchasing and job creation.
    While it is possible that Congress may choose to extend 
some of the expiring tax provisions, there is no guarantee that 
they will be available to the same extent. We need a national 
tax climate that does not place manufacturers at a competitive 
disadvantage in the global marketplace. Our tax rate is higher 
than trading partners such as Canada, and they pay perhaps half 
the taxes that we do, 18 percent compared to our 40 percent.
    The bottom line is predictability and consistency in U.S. 
tax code will offer the long-term planning in investments that 
enable us to stay competitive.
    Chairman Walsh, thank you again for the opportunity to 
testify today. I would be happy to ask respond to any questions 
at the appropriate time.
    [The statement of Mr. Treiber follows on p. 16.]
    Chairman Walsh. Thank you. Thank you, Mr. Treiber, for your 
testimony.
    Our next witness is Perry Moy. Perry is the owner of Plum 
Garden Restaurant located right in McHenry. He is testifying 
today on behalf of the National Restaurant Association and 
previously served on that organization's board of directors.
    Mr. Moy, you may now deliver your testimony.

                     STATEMENT OF PERRY MOY

    Mr. Moy. Thank you, Mr. Chairman.
    I speak from close to 50 years of experience in the 
restaurant business. My dad was a naturalized U.S. citizen, a 
descendant of the Chinese immigrants who built the railroad 
from San Francisco to St. Louis. He died at an early age of 30, 
leaving my mom with four kids.
    In 1965, we moved to Park Ridge, which was a suburb just 
outside of Chicago, and my mom and I took the train down to: 
McHenry. We stopped in McHenry and went to Main Street. It was 
a bustling street. It had the bank. It had the post office. It 
had the famous Althoff's plumbing. That is where they started.
    We walked down that street and I asked this big man--and I 
was all of 14, and my mom was all of 4,1" and couldn't speak a 
word of English. ``How much to rent this building, sir?'' And 
he looks at us and looked at us and he finally said, ``How 
about $70 a month? I will throw in the utilities, and you can 
live upstairs.'' And that was it. That is how the Plum Garden 
started. And I graduated from McHenry High School in 1969.
    From that then, I am proud to say we are the oldest 
independent restaurant in the history of the county, close to 
46 years. A lot of you in this room have been to my restaurant, 
and I employ about 18 people. I consider them to be a part of 
my family. We have worked hard to try to maintain the quality 
of service.
    But this county has gone through some very, very tough 
times. We were the fastest growing county, as you alluded to, 
Mr. Chairman, due to the construction of homes being built 
here, 20,000, 30,000 homes a year sometimes. And now that 
industry is over.
    We saw a 30 percent drop in my business in 2009. How do we 
handle the skyrocketing costs? And the fuel costs, we are at $5 
a gallon, and stuff like that. The food costs are going up. How 
do we deal with things like this?
    I got my team together and said, ``We have to work harder. 
I am asking you to do more for less.'' And a lot of my staff 
have been with me since high school, over 20, 30 years. And 
that's how we began the turnaround.
    From this, then, we worked harder. We worked smarter. We 
tried to do more. My staff did more for less, and I thank them 
for that. And that was a part of the spirit of our community.
    I have learned a lot in this these past few years. First, I 
think America has ignored Main Street. Small business can't get 
access to capital they need. Nobody qualifies, especially in 
the restaurant business. Banks sit on funds, but we cannot 
achieve any of those funds. The SBA has great programs. I have 
looked into them.
    And I encourage the Federal Government to make the SBA loan 
process as easy as possible. If Congress can keep the SBA loan 
guarantees high, and the bank's exposure--especially the local 
community banks' exposure at a minimum, it would be a great way 
to ease the pain during these tough times.
    Secondly, I would like to see a moratorium on new taxes, 
regulations, and mandates. Let's just stop this craziness that 
is going on. As entrepreneurs, we don't know what is around the 
corner. Health care is a major concern. Maybe I may not qualify 
for the mandated national health policy that is going to come 
around, but I know every small-business guy and every 
restaurateur is so afraid of what is around the corner, they 
don't know how to react to that.
    A business like mine is hit hard by not just Federal 
Government but local government. Everybody is seeking taxes, 
and mandates, regulations. Because they are hurting, they want 
to pass that burden onto us, and I have to pass that burden 
onto my guests and customers who have been with me close to 40 
years. And it is just impossible to handle that challenge 
sometimes.
    We all want to comply with the law, but these government 
mandates divert our savings and our energies to try to produce 
a great product.
    And finally, the State of Illinois created--we went through 
an audit, a random audit, so they say. And at the end of the 
day, the Illinois Department of Revenue said, ``Perry, the 
State of Illinois owes you $112.'' But then he asked for my 
purveyor bills, and he looked at them. He spent another 4 hours 
with me and looked at all my--he handed me a bill for $5,000. 
And I said, ``I thought you said you owe me $112.'' He finally 
came up with a thing that had said, ``Well, you use cooking 
oil, don't you, in your food?'' And I said, ``Yes, I do.''
    ``Cooking oil is defined by the State of Illinois as a use. 
It is not deemed as food. Ten percent is food; 90 percent is 
use, so I am going to charge you 6 percent on your cooking oil, 
so you owe us $5,000.'' Never heard of it. I called up all my 
friends in the restaurant business, and they never heard of 
things like that.
    These are some of the predatory things the government tries 
to do. They come out to reach in these times against small 
business.
    As my friend here, Eric, has stated, we need a fair tax 
code. We want to know what is coming around the corner. I mean, 
things like I just put in a small bar and a new floor, and it 
cost me $8,000. If Congress could support that 15-year 
depreciation schedule for restaurants, I think that would be 
great. Instead, that is going to expire. It is going to go to 
39 years. I know that both sides of the House are wrangling on 
it.
    The other thing that I could see happening is the work 
opportunity tax credit incentive for restaurants. We hire 
people that fall through the cracks sometimes.
    As a basic principle, the tax code always says that 
business expenses should be fully deductible. I remember back 
in the '80s that we had 100 percent business meal 
deductibility. I was honored to be a delegate to the White 
House Conference on Small Business, and that issue to maintain 
and retain business meal deductibility was the number two issue 
coming out of the White House Conference on Small Business 
under President Clinton, 14 or 40 votes short of being the 
number one issue. And I remember President Clinton asking me, 
why is this so important? Because it means jobs. It means a 
future. Because small-business people like myself and like 
sitting at this table need a place to share some coffee and 
some bread so that they can market themselves and create new 
jobs. And I think that is important.
    Finally, I think that I want to thank Senator Durbin for 
helping us, for lowering the fees on debit cards. I mean, we 
have had partners in our restaurants, people that use credit 
cards and debit cards, the fees are outrageous. And he helped 
us lower those fees, and I thank him for that.
    Unfortunately, government sometimes doesn't really 
understand that--just get out of our way, and I think we can 
create jobs. And the restaurant industry is the second-largest 
job creator in the country. We employ almost 13 million people.
    So from this testimony, I hope that we can move forward. 
Just a moratorium on new taxes would be great.
    Thank you, Mr. Chairman. Thank you, everybody here.
    [The statement of Mr. Moy follows on p. 24.]
    Chairman Walsh. Thank you.
    Our next and final witness is Craig Larsen. He is founder 
and president of AHC Advisors, Inc., a financial planning 
company located in St. Charles. Mr. Larsen began his career 
working on the floor of the Chicago Mercantile Exchange before 
leaving to found AHC Advisors in 1995. He is testifying today 
on behalf of the Financial Planning Association of Illinois.
    Mr. Larsen, thank you for coming, and I look forward to 
hearing your testimony.

                   STATEMENT OF CRAIG LARSEN

    Mr. Larsen. Thank you, Chairman Walsh. Thank you for 
inviting me here today to speak about the difficulties that 
small businesses face in today's uncertain political and 
economic climate.
    I think my testimony will be less than 5 minutes, because 
in many places, I can say ditto. Although we are from three 
different industries, there is a common theme that I hear.
    My company is a small business, a very small business. I 
have one full-time employee and one part-time employee. My 
company is expanding, and I need to hire another person. I will 
relate some of the challenges that I am facing later in my 
testimony.
    The first area I would like to focus on is tax policy. The 
tax code is continuously being modified. In 1986, the goal of 
tax reform was to make the code more fair and simple. Since 
that time, there have been tens of thousands of changes and 
additions. That isn't simple.
    This complexity adds to businesses uncertainty. Many of 
these changes are driven by special interests who are able to 
secure preferential treatment. These changes have been 
supported by both Democrats and Republicans over time.
    For example, in Illinois, both the CME and Sears are 
seeking preferential treatment that won't be available to small 
businesses.
    The current tax rates will be in effect until the end of 
2012. New business projects or an expansion of existing 
ventures are evaluated by using models that estimate take-home 
profits to their owners over the life of the project. A very 
important component of this evaluation is the expected tax 
rate.
    If businesses are unable to reasonably predict future tax 
rates, how can they be expected to expand or undertake new 
projects on the margin if it is possible that future tax rates 
could be so high as to make these projects unprofitable?
    If businesses don't expand existing projects or take on new 
projects, employment growth will remain muted. Although 
differences in political philosophy will shape an individual's 
view of how the tax code should be written, it cannot be 
disputed that more complexity and uncertainty in the tax code 
reduces the likelihood that businesses will invest in existing 
or new projects that will produce economic growth and, most 
importantly, create jobs.
    Regarding regulation, although there has been a significant 
increase of regulation of many industries--we have heard some 
examples here--including health care and energy also, I am 
going to focus on the industry in which my company is engaged, 
which is financial services.
    The financial services industry is one of the most heavily 
regulated sectors of our economy. There are tens of thousands 
of pages that regulate financial companies. However, what we 
see time and again is that new regulations don't eliminate 
problems in the future, even in the areas that they were 
specifically designed to address.
    For example, the Madoff scandal is a good example. What 
Madoff did violated the laws that were currently on the books, 
and I don't believe that additional regulations would have 
stopped him from engaging in fraudulent behavior.
    Compliance is so complex and ambiguous in the financial 
services industry that I have had to outsource this area to an 
outside legal firm. Despite this, we spend quite a bit of time 
internally dealing with compliance issues. I estimate that our 
external and internal regulatory compliance costs exceed 
$10,000 per year. These costs have increased since the passage 
of Dodd-Frank.
    This is time and money that is spent dealing in large part 
with ambiguous and unclear legislation as it is written. This 
is time and money that could otherwise be spent growing my 
business.
    However, I don't believe that all regulations are bad. A 
set of consistent, clear, and reasonable regulations are 
important to have. Unfortunately, that is not what we have in 
the financial services industry. Instead, we have financial 
regulations that are vague and ambiguous in many areas, that 
were designed in large part, many of them, in the '30s and 
'40s. They are also, in large part, a product of the lobbying 
efforts of the very same financial institutions that were at 
the heart of the financial crisis.
    George Stigler found that oftentimes regulators become 
captives of the regulated, because that is who lobbies the 
regulators. That is important to remember.
    My experience as a business owner is such: My business is 
expanding. I need to hire more people. Given elevated costs 
related to tax increases and increased regulation, and, 
importantly, uncertainty about potential even greater costs in 
the future, I have made a decision to hire only a part-time 
employee, instead of a full-time employee.
    How am I supposed to make informed and rational decisions 
on hiring when there is so much uncertainty? This is 
uncertainty both in the tax code and the regulations that my 
firm operates under.
    I don't think that I'm alone. In fact, we have heard that 
here. I think that businesses large and small are dealing with 
similar issues and that this directly contributes to the 
stellarly high unemployment rate that we face today in the 
United States.
    It is my hope that we can leave the environment of tax 
uncertainty and excessively politically driven regulations 
behind us. Our country would be better off if we put in place a 
set of limited but commonsense regulations and a tax code that 
is less complex and provides businesses with the certainty of 
knowing what their future tax rates will be. Businesses would 
then be able to plan for the future, grow, hire even more 
employees, and get our country back on the path of growth and 
prosperity.
    Thank you for your time, and I will take any questions that 
you may have.
    [The statement of Mr. Larsen follows on p. 28.]
    Chairman Walsh. Thank you. Thank you all for your 
testimony.
    Let me sort of weave my way around a few different topics 
with some questions.
    Let me address the first couple toward each witness.
    It was former Illinois Senator Everett Dirksen, I believe, 
who said a billion here, a billion there, pretty soon you are 
talking about real money.
    I have been in Washington a year now. We are not talking 
billions; we are talking about trillions of dollars that 
Washington is spending that Washington doesn't have.
    All of this Federal spending, all of the debt, all of the 
deficits, give us your take on what that does to your 
particular type of a business. What sort of uncertainty in 
general does that create for you as small-business men? The 
overall debt that Washington finds itself faced with.
    Mr. Treiber. From our standpoint, not just as a 
businessman, but as a person in the community, it is as if--if 
we ran our business like the government is running theirs, we 
would be bankrupt. We would be out of business. So it leaves me 
specifically wondering how can they operate this way, because 
if we were to do that, we would no longer exist. So it leaves 
me wondering who is really in charge.
    Mr. Moy. Mr. Chairman, it is such a negative role model 
that we look at. We look for leadership. There is a lack of it. 
And that then, we feel that we have been left down. And I think 
that is the major concern. And that creates that uncertainty 
and that cloud.
    Mr. Larsen. I would just say from my perspective the huge 
debt we have--I think our total debt is almost 100 percent of 
GDP, so we owe almost as much as we produce in a year--as I 
look at that and plan, my assumption is that we obviously have 
to pay that debt back in the future. And unfortunately, I think 
that is going to come through increased taxes. However----
    Chairman Walsh. No, Craig, continue that was--or maybe come 
back to that as well. Do most business men and women understand 
or assume that that is going to have to be paid by someone?
    Mr. Larsen. So money doesn't grow on trees. You can only 
spend the same dollar once. So if a dollar is spent, it is 
spent on some venture and it is owed, it has to be paid back. 
And that has to come from either a cut in spending or an 
increase in taxes. Unfortunately, I think in this environment, 
we are going to narrow the deficit by increased taxes. It is 
unfortunate, but I see that.
    So when it comes to planning, for example, my expansion, 
I'm looking at new office space and all the capital costs that 
go into that. Now I have to discount what additional profits 
may be sent to the government, and that is less money that can 
be used to pay back----
    Mr. Moy. And there is also a concern of inflation. You keep 
printing that money out and all of a sudden now the charge of 
my food has to go up to coincide. It is a domino effect. It is 
just a horrible, vicious cycle that we seem not to be able to 
get out from under.
    Chairman Walsh. Eric, any final thoughts on the whole debt 
and the uncertainty that that creates for business?
    Mr. Treiber. Well, again, it is unknown, but one would 
assume that the way to mitigate this in the future is going to 
be through increased taxes.
    Chairman Walsh. Let's then segue into taxes and tax policy. 
The House will probably vote this week on another extension of, 
say, the payroll tax cut. The Bush tax rates are going to be up 
again, so there will be debate and discussion as to whether 
they should be extended temporarily.
    The prevailing mood in Washington seems to be to extend 
things temporarily, to fiddle around with taxes temporarily. 
Give me your notions on this whole movement toward temporarily 
raising or cutting taxes and doing something permanently, 
either raising or cutting them, and how that impacts business.
    Start with Craig.
    Mr. Larsen. So Milton Friedman won the Nobel Prize in 1976 
for something called the permanent income theory. In a 
nutshell, what that means is that people make rational 
decisions based not upon what might happen next week or next 
year, but what is going to happen in the long run. And so when 
you apply that to temporary tax cuts, what he found is that 
what happens next year really doesn't matter because businesses 
essentially expect that in the long run, this temporary tax cut 
might expire or you have uncertainty. So temporary tax cuts 
might do nothing but build the deficit.
    Chairman Walsh. Will extending the payroll tax cut, and 
even cutting the employer's piece of it temporarily, will that 
lead to any hiring?
    Mr. Larsen. No, because--I am very surprised that this is 
being talked about and continues to be something that is found 
as a way to stimulate the economy. You are taking a system that 
is already under stress, Social Security, and now we are paying 
less into it. Well, you are paying less into it. Eventually 
that money has to be paid back.
    And so it is a very clear example of how temporary tax cuts 
are going to lead to future tax increases, because if you are 
paying this much less to Social Security, which is already 
under stress, in the future, you are going to have to pay this 
much plus what you didn't pay in the past. It is, in my 
opinion, a terrible idea.
    Chairman Walsh. It shouldn't be surprising.
    Perry, so we temporarily cut your share of the payroll tax. 
Is that going to lead to more hiring?
    Mr. Moy. A short-term fix creates long-term problems. I 
support the permanent. Cut it permanently. Then we can adjust 
to the budget. Maintain the Bush tax cuts. We are overtaxed, as 
it is. And from that then, we can plan for the future.
    When government acts in a way of a temporary fix, a short-
term fix, it creates long-term concerns and problems. And the 
big problem will be that it is not going to create a workable 
job creation economy.
    Chairman Walsh. The whole issue of the payroll tax and 
Social Security is an issue that nobody in Washington really is 
even talking about. Members of both parties are, ``It is a tax 
cut, it is the tax cut,'' not even mentioning the fact that we 
are dipping into the money to pay for Social Security.
    So an important issue, a separate issue, because everybody 
is just on the tax cut bandwagon.
    But, Eric, this notion of temporary vs. permanent when it 
comes to tax policy?
    Mr. Treiber. That would spur absolutely no job creation for 
us. A temporary tax credit, we are going to have to--it is not 
going to----
    Chairman Walsh. Not going to compel you to hire.
    Mr. Treiber. Absolutely not. Absolutely not.
    We talked about the R&D tax credit, which expires basically 
every year. It is set to expire again at the end of this year. 
It is the 14th or 15th time. That type of policymaking really 
hinders our desire to go out and make investments in our 
company and capital equipment because we don't know what the 
future holds.
    So temporary tax cuts or those that require renewal every 
year are very self-defeating.
    Chairman Walsh. If the three of you could each be king for 
a day and you could enact one permanent piece of tax policy, 
what would it be?
    Mr. Moy. A moratorium.
    Chairman Walsh. A moratorium on?
    Mr. Moy. A moratorium on any new tax, regulation, mandate.
    Chairman Walsh. Craig, if you could specifically 
permanently alter one aspect of taxation, what would it be?
    Mr. Larsen. Pick a rate and stick with it. Let us plan. 
Obviously, I would prefer lower rates, but whether the rate is 
23 percent or 26 percent, that really doesn't matter. What 
matters is, pick a rate and stick with it. Let businesses plan.
    Chairman Walsh. Eric.
    Mr. Treiber. I would reduce the corporate tax rate to 
something that is comparable with those countries that we are 
competing with across the globe.
    Chairman Walsh. Quickly, let's move to health care. The 
health care legislation that was passed last year, what has 
that done negatively or positively in each of your estimations 
to the overall business jobs climates in the country?
    Perry, let's start with you.
    Mr. Moy. In 1965, when we opened the restaurant, I offered 
health insurance in 1971. I was the oldest and one of the first 
groups that Blue Cross Blue Shield--it was innovative at that 
time, because I offered it to my staff. From that then, I had 
to take it away, because of this great recession that we are 
having.
    And what the mandated health care does is create false 
hopes for my staff. ``Oh, we are all going to be taken care 
of.'' And no matter what I say to them, ``It is not going to be 
that way for you. It is not going to be like it was in 1971 
when I offered you and gave you the health care benefits. That 
is not going to be the same. It is going to be different. It is 
going to be challenging, and no one knows how it is going to 
be.''
    Chairman Walsh. Craig, when it comes topic of this hearing, 
the overall uncertainty in the environment right now, combine 
that with a favorable or unfavorable climate for small 
businesses, what will this health care legislation do?
    Mr. Larsen. Like a lot of the other regulations, create a 
lot of uncertainty and make it difficult to plan.
    The whole health care act, part of what balanced this act 
and made it revenue neutral was the CLASS Act when it came to 
long-term care, and that is falling apart. So now there is a 
hole where we don't have that revenue. Somebody has to fill 
that. So it is going to come either through increased taxes or 
possibly, I would expect, businesses could expect their penalty 
that they pay for not insuring employees will go up.
    Again, it comes back to uncertainty and the known. Now 
there is uncertainty, but there is the known that we are going 
to be dealing with some bad things down the road.
    Chairman Walsh. Eric.
    Mr. Treiber. Our costs to insure our employees is 
increasing in double digit percentages each year. Our agents 
and providers have told us that that is what is going to 
happen, that is what we should expect going forward. We are a 
$30 million a year revenue company, and our health care burden 
has gone to $650,000 a year, so it is going up by $65,000 or 
$70,000 every year. That is a big number.
    Chairman Walsh. And so what will that force you to do?
    Mr. Treiber. What we have done is we passed those increases 
along to our associates. And, in some cases, we pared back 
various benefits. For example, the dental benefit became an 
option and you have to pay for it extra. And people have a 
difficult time understanding that.
    But it was mentioned here, the penalties for eliminating 
coverage altogether, we have run the numbers on that, in the 
absence of all the data out there, but it would be less 
expensive for us to forgo coverage----
    Chairman Walsh. Forgo coverage.
    Mr. Treiber [continuing]. And pay the penalty.
    But where does that leave our associates? That is not 
something that a four-generation family business wants to do.
    Chairman Walsh. You have how many employees?
    Mr. Treiber. Two hundred and thirty.
    Chairman Walsh. Okay. But even----
    Mr. Treiber. They are not all in the program. Some may be 
through their spouse--covered. We have about 120 people that 
are in the program.
    Chairman Walsh. You are telling me what I have heard from 
most companies in the 100- to 200- to 300-employee range, that 
when you run the numbers, it will be much less expensive to 
basically just forgo coverage.
    Mr. Treiber. And I say that with not knowing what the 
future holds. There are a lot of things that haven't been 
enacted yet as part--in 2013 and 2014 that are going to hit the 
road.
    Chairman Walsh. One specific question for each one of you. 
Eric, I will start with you. Manufacturing and the fact that--
this is something that I hear at my town halls all the time: 
How are we going to get these jobs back here? How are we going 
to get the manufacturing sector back into this country?
    In your estimation, balance all the regulation, what we 
have been talking about this morning, regulations and taxes, 
how that contributes to us not being able to keep manufacturing 
jobs here, balance that with policy toward China, other 
external forces that are preventing us or causing us to lose 
manufacturing jobs. How do you wrap it all up?
    Mr. Treiber. If the question was asked of me a few years 
ago for manufacturing in general, there would be a heavier 
slant toward offshore competition, currency manipulation, 
unfair trade practices, things of that nature. That is shifting 
more toward a focus on taxes and regulations in the fast past 
few years, as the cost of doing business in low-cost regions is 
rising. As their overall economies improve and their employees 
ask for higher wages, the costs levels are shrinking. And now 
we are focusing on other things, such as regulatory policies 
and taxes.
    In no way diminishing the importance of what Perry does, it 
is our belief and has been our belief that manufacturing is the 
economic engine that drives this country. If you look back at 
all times of recession and times of prosperity, it is having a 
strong manufacturing sector. When that exists, we get to go use 
Perry's restaurant and we get the financial services from 
Craig. Without that, a nation that relies on Starbucks and 
McDonald's and banks is doomed for failure.
    Chairman Walsh. So what are two or three things that your 
government can do to bring back and keep manufacturing jobs 
here?
    Mr. Treiber. Establish sound and responsible regulations 
through, for example, the REINS Act, which would require 
Congress to approve and the President to sign off on 
regulations that are of such a financial magnitude that they 
pass a certain threshold. That would be one ready example.
    Chairman Walsh. So is it fair to say from your perspective 
that the regulatory environment in this country makes it very 
difficult to keep manufacturing jobs here?
    Mr. Treiber. No doubt about it. And all regulations aren't 
bad. We need environmental regulations. We need regulations for 
our employees to have a safe and comfortable workplace to go 
to. We understand that. We promote that. We are an 
environmentally very proud steward of our footprint.
    But give us a chance to compete against other countries.
    Chairman Walsh. Craig, we are losing small and community 
banks weekly in this country. Nobody worries for the big banks. 
They are fine, and they are sitting on a lot of cash. They have 
been taken care of. It is the small and community banks that 
have really taken it on the chin. I hear from small businesses 
in my district all the time that they can't get access to 
capital.
    We held a hearing in Washington a few months ago and 
brought in the heads of small and community banks, and they all 
said the same thing to us: ``The reason we can't lend is 
because of regulations.'' Namely, they pointed toward Dodd-
Frank.
    Give me your 30 seconds to a minute on Dodd-Frank, what we 
can and should do. I will limit you to 30 seconds.
    Mr. Larsen. Okay, I guess first of all, removing a lot of 
ambiguity in the bill. It was well-intentioned. I think they 
try to take care of the too big to fail. Part of the problem is 
that we didn't take care of too big to fail as it relates to 
overseas branches. So if they went down, I don't think that 
would solve the problem.
    I think Dodd-Frank is a good example of legislation that 
was passed on the heels of a crisis that tried to address 
everything, and it didn't do much, in my opinion, to help. I 
think smarter regulation, more clear regulation, would be more 
helpful.
    Chairman Walsh. Are you telling me you have the nerve to 
sit here, Craig, and tell me that Washington passed a piece of 
legislation without fully understanding what was in it?
    Mr. Larsen. Yes, believe it or not, yes.
    Chairman Walsh. Okay.
    Perry, I think you told me that before, but as a 14-year-
old, how you and your family started that business, your 
business, back in the good old days; I don't mean this to be an 
easy question, but can you imagine doing that today? Would it 
be as easy to simply start a new business like that today?
    Mr. Moy. We have to bring back that climate, Mr. Chairman. 
And we have lost sight of that. The strength of this country 
has always been the middle class. We are a blue-collar country. 
We have the values. We have the people. We have the wherewithal 
and the desire to succeed, but we have stopped them. Government 
has put a block right in front of them.
    Chairman Walsh. My final question, short answer from each 
of you, there is obviously a lot that we as a country have to 
get right in the next year, or two or three. The biggest 
problem we have, which impacts everything, is we are not 
working. Americans are not working. Too many of us are not 
working.
    Give me a brief answer as to, again, if you want, connect 
it to what we are talking about today, but when it comes to 
jobs policy, what can or should your government do or not do to 
help put this country back to work?
    Eric, start with you.
    Mr. Treiber. I think things that are focused on creating 
jobs. I was lucky enough to sit in the Congress when President 
Obama addressed a joint session of Congress, and it was all 
about creating jobs. And now it looks like we are blocking it. 
There are a lot of holes out there.
    As Perry said earlier, get out of the way of small 
business. We are the creators of the majority of jobs in this 
country. Get out of our way. Let us do business the way we need 
to do business, responsibly regulated, and we will create the 
jobs the way we have been doing it for decades.
    Chairman Walsh. Perry, how are we going to get this country 
working again?
    Mr. Moy. As an industry that employs almost up to 10 
percent of the jobs here in this country, get out of our way. 
Don't regulate us. Don't mandate us. And again, no new taxes.
    Let us create the jobs that we are capable of doing.
    Chairman Walsh. Craig, you are president for a day. What is 
your jobs policy?
    Mr. Larsen. Reduce regulations, a stable tax policy, and 
the realization that government doesn't create jobs, business 
creates jobs. So every time you hear the government talk about, 
``We want to grow jobs, and we have a certain policy to do this 
or that,'' what they are doing is picking winners and losers.
    I love what Perry said: Get out of our way.
    Chairman Walsh. Thank you, three. And we are going to wrap 
up this field hearing here right now.
    I would like to acknowledge Woodstock's finest, our mayor, 
for letting me sit in his chair this morning, Mayor Brian Sager 
in the back row there. Raise your hand?
    Thank you.
    Stick around, anybody, when I gavel the hearing to a close, 
I would be happy to answer anybody's questions informally and 
get your thoughts. And maybe we can get the witnesses to stick 
around for a little bit as well.
    I would like to thank all three of you for coming today. 
You have all provided, I think, valuable insight into how 
decisions that we make in Washington impact you all. Most of 
the hearings that we hold, obviously, are in D.C. It is always 
enjoyable and, I think, as informative to get outside the 
Beltway and hold a field hearing.
    I ask unanimous consent that any members of the 
Subcommittee have five legislative days to submit their 
statements and any supporting materials for the record.
    Your written testimony as witnesses will be made part of 
the written record.
    And without any objection, that has been ordered.
    Chairman Walsh. Now we will gavel this hearing to a close. 
Thank you for coming.
    [Whereupon, at 10:55 a.m., the Subcommittee was adjourned.]

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