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

       TENNESSEE JOB CREATION: DO FEDERAL GOVERNMENT REGULATIONS HELP OR
                    HINDER TENNESSEE'S ECONOMIC DEVELOPMENT?

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

                                    HEARING

                                   before the

                             COMMITTEE ON OVERSIGHT
                             AND GOVERNMENT REFORM

                            HOUSE OF REPRESENTATIVES

                          ONE HUNDRED TWELFTH CONGRESS

                                 FIRST SESSION

                                   __________

                                 June 18, 2012

                                   __________

                               Serial No. 112-156

                                   __________

    Printed for the use of the Committee on Oversight and Government Reform

             Available via the World Wide Web: http://www.fdsys.gov
                          http://www.house.gov/reform

                      U.S. GOVERNMENT PRINTING OFFICE
    75-304                    WASHINGTON : 2012
    -----------------------------------------------------------------------
    For sale by the Superintendent of Documents, U.S. Government Printing Office,
    http://bookstore.gpo.gov. For more information, contact the GPO Customer Contact Center, U.S. Government Printing Office. Phone 202�09512�091800, or 866�09512�091800 (toll-free). E-mail, gpo@custhelp.com.

                  COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

                     DARRELL E. ISSA, California, Chairman
    DAN BURTON, Indiana                  ELIJAH E. CUMMINGS, Maryland,
    JOHN L. MICA, Florida                    Ranking Minority Member
    TODD RUSSELL PLATTS, Pennsylvania    EDOLPHUS TOWNS, New York
    MICHAEL R. TURNER, Ohio              CAROLYN B. MALONEY, New York
    PATRICK T. McHENRY, North Carolina   ELEANOR HOLMES NORTON, District of
    JIM JORDAN, Ohio                         Columbia
    JASON CHAFFETZ, Utah                 DENNIS J. KUCINICH, Ohio
    CONNIE MACK, Florida                 JOHN F. TIERNEY, Massachusetts
    TIM WALBERG, Michigan                WM. LACY CLAY, Missouri
    JAMES LANKFORD, Oklahoma             STEPHEN F. LYNCH, Massachusetts
    JUSTIN AMASH, Michigan               JIM COOPER, Tennessee
    ANN MARIE BUERKLE, New York          GERALD E. CONNOLLY, Virginia
    PAUL A. GOSAR, Arizona               MIKE QUIGLEY, Illinois
    RAUL R. LABRADOR, Idaho              DANNY K. DAVIS, Illinois
    PATRICK MEEHAN, Pennsylvania         BRUCE L. BRALEY, Iowa
    SCOTT DesJARLAIS, Tennessee          PETER WELCH, Vermont
    JOE WALSH, Illinois                  JOHN A. YARMUTH, Kentucky
    TREY GOWDY, South Carolina           CHRISTOPHER S. MURPHY, Connecticut
    DENNIS A. ROSS, Florida              JACKIE SPEIER, California
    FRANK C. GUINTA, New Hampshire
    BLAKE FARENTHOLD, Texas
    MIKE KELLY, Pennsylvania

                       Lawrence J. Brady, Staff Director
                    John D. Cuaderes, Deputy Staff Director
                         Robert Borden, General Counsel
                           Linda A. Good, Chief Clerk
                     David Rapallo, Minority Staff Director

                                C O N T E N T S

                                  ----------
                                                                       Page
    Hearing held on June 18, 2012....................................     1

                                   WITNESSSES

    The Honorable Bill Haslam, Governor, State of Tennessee
        Oral Statement...............................................     7
        Written Statement............................................    10
    The Honorable Lamar Alexander, A U.S. Senator from the State of
      Tennessee
        Oral Statement...............................................    13
        Written Statement............................................    15
    The Honorable Bob Corker, A U.S. Senator from the State of
      Tennessee
        Oral Statement...............................................    17
    Mr. William F. Hagerty, IV, Commissioner, Tennessee Department of
      Economic and Community Development
        Oral Statement...............................................    19
        Written Statement............................................    22
    Mr. Mark Faulkner, Owner, Vireo Systems, Inc. On Behalf of The
      National Federation of Independent Business
        Oral Statement...............................................    35
        Written Statement............................................    38
    Mr. H. Grady Payne, Chief Executive Officer, Conner Industries,
      Inc.
        Oral Statement...............................................    42
        Written Statement............................................    44
    Mr. Scott Cocanougher, Chief Executive Officer, First Community
      Bank of Bedford County
        Oral Statement...............................................    47
        Written Statement............................................    49
    Mr. Bob Bedell, Sales Unit Manager, Coca-Cola Bottling Company
      Consolidated on Behalf of The Beverage Association of Tennessee
        Oral Statement...............................................    51
        Written Statement............................................    53

       TENNESSEE JOB CREATION: DO FEDERAL GOVERNMENT REGULATIONS HELP OR
                    HINDER TENNESSEE'S ECONOMIC DEVELOPMENT?

                                  ----------

                             Monday, June 18, 2012

                      House of Representatives,
                   Committee on Oversight and Government Reform
                                                       Washington, D.C.
        The Committee met, pursuant to call, at 9:05 a.m., in S102
    Business and Aerospace Building, Middle Tennessee State
    University, 1301 East Main Street, Murfreesboro, Tennessee,
    Hon. Darrell Issa [Chairman of the Committee] presiding.
        Present: Representatives Issa and DesJarlais.
        Also Present: Mrs. Black and Mrs. Blackburn.
        Staff Present: Sharon Casey, Senior Assistant Clerk; John
    Cuaderes, Deputy Staff Director; Kristin L. Nelson, Counsel and
    Cheyenne Steel, Deputy Press Secretary.
        Chairman Issa. You know, Bob, before we lost the gavel, I
    took it for granted. Once I got it back, it has been a whole
    different world.
        [Laughter.]
        Mr. DesJarlais. Mr. Chairman, I ask unanimous consent that
    our colleagues from Tennessee, Mrs. Blackburn from the Seventh
    District and Mrs. Black from the Sixth District, be allowed to
    participate in today's hearing and ask questions of the
    witnesses.
        Chairman Issa. Without objection, so ordered.
        I want to thank everyone in the audience for being here,
    before we begin. Further, this is a regular federal
    congressional hearing, so all the normal rules apply. The only
    difference is you all did not have to drive as far.
        So with that, the hearing will come to order.
        This hearing is entitled ``Tennessee Job Creation: Do
    Federal Government Regulations Help or Hinder Tennessee's
    Economic Development?'' Now knowing the answer to that, I will
    go on anyway.
        [Laughter.]
        Chairman Issa. The Oversight and Government Reform
    Committee exists to secure two fundamental principles. First,
    Americans have a right to know the money Washington takes from
    them is well spent. And second, Americans deserve an efficient,
    effective government that works for them. Our duty on the
    Oversight and Government Reform Committee is to protect these
    rights. Our solemn responsibility is to hold government
    accountable to taxpayers, because taxpayers have a right to
    know what they get from their government. It is our job to work
    tirelessly in partnership with citizen watchdogs to deliver the
    facts to the American people and bring genuine reform to the
    federal bureaucracy.
        I am pleased today to be here in Tennessee, mostly because
    Dr. DesJarlais has asked me to be here and pushed on this
    schedule for more than a year; but also because since joining
    the Committee, he has gone around his District and asked job
    creators where the problems were coming from Washington. And
    that is the basis for today's hearing.
        We understand that we are in the Volunteer State, and there
    have been many successful job stories here. Your Governor
    continues a tradition that Senator Lamar Alexander did before
    him. The fact is that whether it is Senator Corker or my two
    colleagues here, Marsha Blackburn and Diane Black, we
    understand that in fact government has to be reined in, that
    the good intentions of our predecessors and good law, laws
    designed to protect clean air, clean water and in fact improve
    the quality of life and the safety for all Americans have to be
    protected. At the same time, we cannot regulate ourselves into
    unemployment.
        The national unemployment rate stands at 8.2 percent. It
    was falling, it is now rising. Here in Tennessee, it has risen
    also from about 7.8 to 7.9 percent. This in a state that
    welcomes business, that has in fact been attracting new
    companies including perhaps some from my home state.
        I periodically have the opportunity to call one of my old
    friends and mentors who used to live within my congressional
    district and who was Ronald Reagan's economic advisor, a
    gentleman named Art Laffer. Art Laffer is now a resident of
    Tennessee and he rubs it in every time I talk to him. He left
    California because California's regulations? No. He was a
    financial manager and a member of a board. He left for the
    simple reason that our state taxed its way right out of
    successful people like him wanting to remain in that state.
        But he too understands, as most of here on the dias do,
    that regulations and red tape can often add no value, they only
    add cost. And cost is passed on in products. And if those
    products, like those produced here in Tennessee, in fact
    compete in a world market, they either will not sell in America
    or often will not sell to the rest of the world as we once did.
    Our export sector is healthy in areas such as raw copper ore,
    areas such as raw coal, but less and less are we productively
    able to export our finished products. Even Boeing, a company
    that is renown for being the largest exporter from America
    finds itself often unable to compete.
        This Committee went to Charleston, South Carolina
    specifically for Boeing some months ago, because Boeing needed
    a plant in a state that was right-to-work that could guarantee
    delivery to customers around the world who wanted Boeing to
    match Airbus' must-deliver, will-deliver policy. Fortunately,
    that has ended well. But today, we look here in Tennessee at
    some critical areas including, on our second panel,
    agriculture. As we know, crops can be grown overseas, but farms
    cannot move overseas. A job not producing food in America will
    mean that America does not feed itself, it will mean that in
    fact the jobs are lost here in America. So whether it is mining
    or agriculture, the 112th Congress has been about learning
    about the areas in which we need to make changes, going over
    those that are going the wrong way under this administration
    and in fact those who have gone the wrong way under previous
    administrations.
        Our goal at this point is to make sure that the next
    administration, the next Congress, has ample warning of the
    areas that have been hurting job creators and that in fact we
    push back on as many as 106 new major rules that have been made
    just in the last three years which cost over $46 billion to
    taxpayers. And I know that in Washington, $46 billion seems
    just like a rounding error; unless you do it over ten years, it
    doesn't add up to real money.
        But we know, in the private sector, that a few dollars or a
    few pennies, perhaps just the increase in the cost of
    healthcare under Obamacare or the increased cost of regulations
    under Dodd-Frank, can in fact make the difference between a
    successful business and one that is beat out by foreign
    competition.
        We are here today to hear from our first panel, without a
    doubt the most blue-ribbon panel we have had in our seven
    hearings in the field; but also to hear from our second panel
    of job creators.
        With that, I would like to once again thank my colleague,
    Dr. Scott DesJarlais, for insisting that we come here, for
    being patient as we were able to make it work within our two
    schedules, and also for our two guests to the Committee, who
    have taken time to be here to meet with job creators.
        With that, I would recognize Dr. DesJarlais for his opening
    statement.
        Mr. DesJarlais. Thank you, Mr. Chairman, and a special
    thanks to MTSU for this wonderful facility and hosting this
    venue, and a special thanks to our distinguished panel for
    making this fit your schedules. I know it has been very
    difficult.
        Chairman Issa, I would like to thank you for holding this
    field hearing and welcome to the great State of Tennessee. I am
    extremely grateful to be a member of the House Oversight
    Committee and Government Reform, and I want to thank you
    personally for your leadership of this Committee and your
    dedication to upholding the principles of what our Committee
    should be doing on behalf of the citizens of this country.
        I know that we have a tradition of repeating our mission
    statement at the commencement of each of our hearings, but I
    wanted to reiterate one of these core principles in my opening
    statement because I believe it strikes at the core of what we
    are highlighting in this field hearing. Americans deserve and
    efficient and effective government that works for them.
        Mr. Chairman, that quote is simple, straight-forward and to
    the point, and just about all of us would agree with it,
    regardless of party or affiliation. Yet, I think we have
    discovered that in many instances, the reality of what is
    happening today is that this idea of an efficient, effective
    government that should work for us is actually working against
    us.
        One of the primary reasons I chose to run for Congress two
    years ago is that I discovered that people had lost faith in
    the federal government. As a private practice physician in a
    small community, I was seeing folks from all walks of life and
    the tone of their conversation had changed. For years, I would
    look forward to talking to patients about their families, their
    children, grandchildren, their jobs, their hobbies and other
    interests. But recently, I began to notice a change in the
    topics of discussion. More and more folks were talking about
    lost jobs, uncertain futures for their children, and crushing
    debt awaiting future generations. And in almost all of these
    cases, people were showing frustration that their government
    and their elected officials were not only failing to listen to
    their concerns but were also incapable of solving our current
    problems. Finding myself agreeing with their concerns, I chose
    to get involved. From the campaign to my 18 months on the job
    as a United States Congressman, I have made it a point to reach
    out and visit people on the ground, with the lifeblood of our
    economy--the job creators.
        This Committee as a whole has focused on the subject, and I
    initiated my own Tennessee job creator's tour. Throughout the
    Fourth Congressional District of Tennessee, I visited employers
    large and small with over 40 visits, from small family-owned
    businesses to major multi-national corporations with factories
    and plants in Tennessee. I wanted to get first-hand information
    on what is working and what is not in Washington.
        Of course, one of the over-reaching themes of these visits
    focused on the interference from Washington and from the
    federal government. The topics were varied, from tax and
    paperwork compliance to regulatory burdens requiring more
    administrative time, and legal costs, to the fear and
    uncertainty of new regulations and proposed rules. The
    narrative often led to a similar conclusion, the federal
    government is either directly or indirectly getting in the way
    of creating more jobs, or has created an environment of fear
    and uncertainty that is keeping businesses from expanding,
    hiring new personnel or taking those entrepreneurial risks that
    have been a linchpin of our economic engine for so many years.
        There are many representatives with us today who were part
    of these stops. I was humbled at the reception that I received
    and most appreciative for the feedback that was allowed to me
    to make decisions with my debate and votes in the House.
        We have a distinguished set of panelists before us today,
    government leaders who also bring successful private sector
    experience. We will hear from them directly as to what they
    have brought from their private experience and transferred into
    a perspective that should be followed by all of our elected
    officials in Washington.
        We will focus on what Tennessee is doing to create and
    attract jobs and lessons that can be learned from their
    proactive, flexible approaches. And we will hear from a panel
    of witnesses representing large and small businesses both in
    the Fourth District and from other parts of our great state.
    They will highlight some of their stories and their concerns,
    and I look forward to their testimony and answers to our
    questions.
        Mr. Chairman, I again thank you for your desire to hear
    first hand from our people here in Tennessee. I think you can
    see from the distinguished witnesses on the panels, not to
    mention the desire of my colleagues from the Tennessee
    congressional delegation to spend time here today with us on
    the panel, that there has been a keen interest to explore this
    topic as much as possible. I am proud of this Tennessee job
    creator's tour and I look forward to continuing to build on it
    with this hearing.
        Chairman Issa. Thank you.
        Mrs. Blackburn.
        Mrs. Blackburn. Thank you, Mr. Chairman. I want to welcome
    you to Tennessee. We are absolutely thrilled that you are here
    and want to make certain that you go home with plenty of good
    barbecue, and glad you enjoyed----
        Chairman Issa. I have got to come back, you keep telling me
    to come down to Nashville but it is always about music and
    food, not about field hearings.
        [Laughter.]
        Mrs. Blackburn. Actually, Mary Bono Mack and I are going to
    do one later this year. I vice chair Commerce, Manufacturing
    and Trade. As we look at this very important issue, we are
    going to be doing some more work in the field.
        I want to commend Scott DesJarlais. Congressman DesJarlais
    has done a fabulous job as a freshman, and the fact that he has
    worked so hard and so diligently to get this field hearing in
    place is exemplary work.
        I want to thank all of the witnesses for coming before us.
    I have the opportunity to talk with you each regularly about
    what I think is so important to our state, and it is jobs, it
    is the economy. There is an equation that I use regularly that
    I say sums it all up. You know, when the President says that
    jobs is all about math, I say yes, Mr. President, there is an
    equation that works, it is called less regulation plus less
    litigation plus less taxation equals more innovation and job
    creation. It is an equation you can take to the bank, it works
    every single time. And certainly for our Tennessee businesses,
    Governor, you are to be commended for keeping the focus on what
    we can do to grow businesses that are here.
        Commissioner Hagerty is doing a stellar job and yes,
    indeed, Mr. Chairman, we are recruiting lots of your
    constituents. They are becoming our constituents here in
    Tennessee and we welcome them with good old southern
    hospitality and are delighted to see those companies and those
    jobs choosing to say Tennessee is the place where we want to
    be. You mentioned Mr. Laffer. Indeed, the fact that we had a
    state income tax battle in this state, I was fortunate to lead
    that fight, Diane was a big part of that fight. But leading
    that fight, that is what caused Tennessee to come to his
    attention. And the fact that we had citizens and businesses
    that were willing to take a stand and say no, we are not going
    to have a state income tax in this state and we are going to
    focus on being a business-friendly state. You all have done a
    great job with that, Governor, and we appreciate the attention
    that is there.
        Welcome to everyone. We want to get rid of some of this
    80,000 pages of new regulation and 4000 new regulations.
        And with that, I yield back my time.
        Chairman Issa. Thank you. And now due to the miracle of
    redistricting, we are in two Members' districts, depending upon
    last Congress, next Congress. We recognize our host for today,
    Mrs. Black.
        Mrs. Black. Well, thank you, Mr. Issa, Chairman Issa. We
    appreciate your coming here. I know that our schedules are busy
    and we really appreciate your coming to the district. I want to
    thank my colleague, Scott DesJarlais, for putting all this
    together and helping to raise the awareness of what is so
    important. The number one issue, jobs, jobs, jobs.
        Thank you so much for our blue ribbon panel as you said. It
    is really an honor to have our great leaders both at the state
    level and also at the national level here today. So thank you.
        Over the last 18 months, I have led 12 job task force
    meetings and visited businesses, small, medium and large, in
    all 15 of my counties in the Sixth Congressional District. And
    while each business and community faces its own unique
    challenges, in this tough economy, the over-arching message has
    been the same--federal regulatory burdens and the constant
    growth of bureaucratic red tape are stifling our job creation.
    And as a small business owner myself for many years, I know
    first hand how economically destructive and frustrating over-
    regulation can be to one's own business and the local economy.
        Since President Obama has taken office in 2009, the
    acceleration of new regulations and economically significant
    regulations have been staggering and stifling to our economy.
    In his first three years in office, President Obama has
    finalized 620 economically significant rules, and each of these
    rules has at least a $100 million impact annually. His record
    of regulations gets even worse when you consider how many more
    rules have been mandated by the Dodd-Frank Act and of the
    Obamacare, and these are still regulations that are being
    written and they are in the progress, not being finalized.
        Thus far, one of the most aggressive regulatory bodies of
    the administration has been the EPA, the Environmental
    Protection Agency, with boiler MACT, national ambient air
    quality standards, utility MACT, green gas regulations, just to
    name a few. And this avalanche of new regulations is driving up
    the costs and killing jobs.
        In Rutherford County, the EPA boiler MACT regulation is
    already having a devastating impact on our businesses such as
    the International Paper Company, which I visited, and they just
    talked how much this is going to impact them. They are frozen
    by the uncertainty and the new compliance cost. And the final
    boiler MACT rules could likely cost $14 billion--and yes, that
    is billion, not million--in capital for the manufacturing
    sector, plus billions more in annual operating costs with very
    minimal environmental effects.
        Rolling back the costly and unnecessary regulations is
    imperative to jump start our economy and provide certainty for
    our job creators.
        I look forward to hearing from both panels on their
    experience of how we can help to address these issues in
    Washington and help create conditions for a robust economic
    recovery.
        And I yield back my time. Thank you, Mr. Chairman.
        Chairman Issa. I thank the gentlelady.
        When I said we had a blue ribbon panel, obviously I was not
    being just complimentary. I do not do that, if you have seen us
    in Washington. To have the Governor of the state, the Honorable
    Bill Haslam, who is also a former mayor here and somebody who
    understands from his family business what it takes to create
    jobs, is truly an honor. And I guess you are welcoming me to
    your state, but I am welcoming you to the Committee.
        My friend, Lamar Alexander, who has for so many years, both
    when he attracted companies such as Nissan and others during
    his tenure before becoming a U.S. Senator in 2003, and now as a
    member of the leadership of the Senate. It is an honor to be in
    your state.
        And Senator Corker, my staff helped get you elected, we
    believe in you.
        [Laughter.]
        Chairman Issa. You have not let us down. But also, in your
    time as mayor, you come with a variety of insight that we
    wanted to hear here today before we get to the current business
    creators.
        And Mr. Hagerty, this is the first time that I have met
    you, but your credentials also as a job creator, somebody that
    was helping in the private equity and banking industry before
    becoming the head of the Department of Economic and Community
    Development in 2011, makes your testimony well worthwhile.
        I would let you know, as the Senators would let you know,
    that your entire written statements will all be placed in the
    record, so you can use your five minutes in any way that you
    wish. Governor, I must admit that if you go a little over, I am
    not going to stop you, but members of the House being able to
    gavel a Senator for speaking too long is something we cannot
    resist.
        [Laughter.]
        Chairman Issa. With that, pursuant to our rules, would you
    please all rise to take the oath, and raise your right hands.
        [Witnesses sworn.]
        Chairman Issa. Let the record reflect that all witnesses
    answered in the affirmative. Please have a seat.
        I have already belabored the whole point on the five
    minutes, but Governor, you are recognized.

                        STATEMENTS OF WITNESSES

                 STATEMENT OF THE HONORABLE BILL HASLAM

        Governor Haslam. Thank you, Mr. Chairman, and welcome to
    Tennessee. I join all of our congressional colleagues in
    welcoming you. We appreciate the work you do. And I will also
    make a note, speaking on behalf of the State, we are incredibly
    proud of our congressional delegation. We are biased, but we
    tend to think we have the very best in the country.
        Chairman Issa. I am proud of them too.
        Governor Haslam. They are terrific. They work hard up there
    and down here, they all do. And I appreciate that.
        Let me just start, I loved the Committee's mission
    statement about that the government owes the people to give
    effective service for their tax dollar.
        In Tennessee, we think there are two kinds of taxes. There
    is the income tax or sales tax or business tax that you pay.
    There is also a tax when government does not give you effective
    service for the dollar you pay. You give a dollar's worth of
    taxes, but you only get 60 cents of service in return. And that
    tax is as onerous as anything there is. So we focused here on
    trying to be the very best-managed state in the country. It is
    what we think our obligation is to the people who pay taxes.
        But within that, our biggest mission is to try to be the
    number one location in the entire southeast for high quality
    jobs. And so we spend a lot of time talking about that and we
    think we have made some great headway. Here is what we believe
    in Tennessee, that government does not create jobs. We can
    create the environment for them but we do not create jobs.
    Capital is always going to go where it can get the very best
    return, that is just the nature of capital, it does not know
    boundaries.
        So my big idea for this morning is to have Congress think
    about using the states as--states have been called the
    laboratories for democracy by the founders, but think of that
    in terms of job creation as well. You have 50 laboratories out
    there doing things very differently in terms of their approach
    to regulation and taxation and job creation. So what are the
    places that are having success, now I realize it is not an
    equal gain, some people have more natural resources or better
    climate or more history of capital, et cetera. But taking all
    that into account, you really can see the states that are
    making progress. And I would argue it is the states that do
    understand it is about giving capital, getting the very best
    return it can and that is where jobs are being created.
        Over the past year and a half that we have been in office,
    Commissioner Hagerty and I have been touring the state and the
    country talking with people. And we have taken very seriously
    that mission to do that and you are going to hear more from
    Commissioner Hagerty, so I will not steal a lot of his thunder.
    But suffice it to say there are states where the recruiting is
    a little better than other places and you were nice enough to
    mention that maybe your state is one of those. And we literally
    can go into states and we spend more time in states that are
    higher taxes and higher regulation because more companies are
    becoming frustrated.
        Chairman Issa. You have been to California?
        Governor Haslam. I have been there once or twice, yeah. And
    we really appreciate the hospitality.
        But that would be my point. If Congress would look and see
    what is working in these laboratories out there and see what is
    the lesson for us as a country. There has been a lot of
    discussion recently about whether the private sector was doing
    fine and whether the public sector needed more stimulus. Well,
    I would just say this, since we have been in office, the state
    has lost over a billion dollars in federal funding when the
    stimulus plan ran out. And yet, we have not cut teachers, we
    have kept our K-12 funding increasing, all the things that the
    states are supposedly, you know, in a hard spot on. We have
    done that while cutting taxes even.
        So my point would be those states who are managing their
    states well, doing the right things to bring in business,
    increase revenue, we are not seeing that same kind of need. And
    again, I would say that is a model for what we encourage the
    federal government to look at doing.
        When Commissioner Hagerty and I toured the state, we talked
    with businesses all over about federal and state regulations.
    Most of the feedback that came to us was from federal
    regulations. But in the process, we looked at our state,
    everything, from top to bottom, reviewed every department, to
    make certain we were being as customer-friendly as we can. I
    think the federal government can do that exact same thing. Our
    model is to keep taxes low, as Congresswoman Blackburn said, to
    work hard at education, preparing our teachers to make certain
    in K-12 that we have the very best people speaking in front of
    the classroom every day. And then to address other things.
    Recently, we have cut out the estate or the inheritance tax in
    Tennessee. We visited a farm, the Luckey family, well-named, in
    west Tennessee. Farm had been in their family for over 100
    years and the gentleman who is running the farm now said I do
    not want to sell this or even a piece of it, it would be like
    selling one of my kids. But if I passed away right now, we
    would have to. And his father, who is 85 and could not get out
    of the car because he had oxygen on, called me over to the car
    and said, ``Governor, I really appreciate you doing this.'' We
    are actually phasing it out over four years. He said, ``If you
    could pick up the pace a little, I would very much appreciate
    it.''
        [Laughter.]
        Governor Haslam. So we think we have the right model here.
    We are excited about being part of what you are doing. The
    purpose of this hearing we could not applaud more. We are in a
    competitive world, we know that as a state, we know that as a
    country. And we salute what you are trying to do here.
        Thank you.
        Chairman Issa. I was recently in New Hampshire for one of
    these field hearings and there they live free, but I guess here
    it will be cheaper to die than it used to be.
        Governor Haslam. Right. I have made that point a couple of
    times.
        Chairman Issa. Senator Alexander.
        [Prepared statement of Governor Haslam follows:]

        [GRAPHIC] [TIFF OMITTED] T5304.001

        [GRAPHIC] [TIFF OMITTED] T5304.002

        [GRAPHIC] [TIFF OMITTED] T5304.003

               STATEMENT OF THE HONORABLE LAMAR ALEXANDER

        Senator Alexander. Thanks, Mr. Chairman.
        I have been in New Hampshire myself some time ago.
        [Laughter.]
        Chairman Issa. Lamar, I went after the primary though.
        Senator Alexander. Darrell, we are delighted to have you
    here. And Scott DesJarlais has been a real workhorse in putting
    this together. I am delighted to be a part of it. It is a treat
    to work with Marsha Blackburn and Diane Black in Washington,
    and it is an honor really to serve with Bob Corker and to watch
    Bill Haslam with Bill Hagerty, as Governor of Tennessee.
        It is good to be at Middle Tennessee State University, a
    tremendous campus.
        During the last three years, the Obama administration has
    produced an avalanche of regulations that have thrown a big wet
    blanket over the American economy and made it more difficult
    and more expensive to create private sector jobs. The most
    conspicuous examples are the Dodd-Frank Act and the healthcare
    law, which was a historic mistake in my judgment.
        But let me just mention quickly three specific examples of
    how federal regulations are hurting job creation in Tennessee.
    The first is the NLRB's attack on the right-to-work law. Nissan
    is in this county. It came here first because of our central
    location; but second, because every state north of us does not
    have a right-to-work law and we do. So when the National Labor
    Relations Board told Boeing it could not go to South Carolina
    because presumptively it was moving from a non-right-to-work
    state to a right-to-work state, that sends a chill through
    every auto supplier who might be thinking about doing the same
    thing. And they may not have the money and the determination to
    fight the NLRB in the same way. So that makes it harder to
    create jobs in Tennessee, an attack on a right-to-work law.
        Second, the healthcare law is taxes and mandates. I met not
    long ago with the CEOs of all the big chain restaurant
    companies in America. Other than government, they are the
    largest employer of young people and low income people. One of
    them, my friend Sandy Bell, head of Ruby Tuesdays in Maryville,
    told me that the cost of complying with the healthcare law
    would more than equal the entire profit his company would make
    in that year. So what is he doing? He is not investing in new
    jobs in the United States. A bigger restaurant company told me
    their goal was to run their store with 90 employees; because of
    the cost of the healthcare act, they are going to do it with 70
    employees. That is not a good way to create jobs.
        A third is the Medicaid mandates on the states. As a former
    Governor, I am very sensitive to this but I know that Governor
    Haslam is doing all he can to have Tennessee have more college
    graduates. Yet when Medicaid mandates make it harder for him to
    put the money he wants to into Middle Tennessee State
    University, what happens? The quality is not as good, the
    tuition goes up, it is harder for people to graduate from
    college. So that is the effect of Medicaid mandates on the
    State of Tennessee.
        I agree with Representative Black, perhaps the worst
    offender of this avalanche of regulations is the Environmental
    Protection Agency. It has become a happy hunting ground for
    goofy regulations. And we can list them--boiler MACT, I am sure
    you will hear from the President of the Farm Bureau about
    regulating dust on farms, changing the Clean Water Act so that
    you are regulating puddles of water. But as the late William
    Buckley used to say, even a stopped clock is right twice a day.
    And there are two of their regulations that I support because
    they help make it easier to create jobs in Tennessee. They are
    the clean air regulations. We have a big clean air problem in
    our state. We have done a lot of good work on it, but when
    Nissan came to this county, the first thing it had to do was
    get an air quality permit from the State Air Quality Board, and
    if it could not get it, it would have gone to Cartersville,
    Georgia. Fortunately, local leaders have been working to clean
    up the air.
        Chattanooga in 1959 had the dirtiest air in the country and
    local leaders, including Senator Corker, worked hard to clean
    that up. So by the time Volkswagen was looking for a site,
    Volkswagen came to Chattanooga. But if our air had not been
    clean, Nissan would be in Cartersville, Georgia and the
    Volkswagen site would be a vacant lot. We cannot stop now,
    especially stopping dirty air blowing in from other states.
        But overall, this avalanche of regulations has been a big
    wet blanket on our economy and the best thing we could do as
    elected officials is to lift that wet blanket from the economy
    and free it to create more jobs and the way to start with that
    would be to repeal the misguided healthcare law and the Dodd-
    Frank Act.
        Chairman Issa. Thank you, Senator.
        Senator Corker.
        [Prepared statement of Senator Alexander follows:]

        [GRAPHIC] [TIFF OMITTED] T5304.004

        [GRAPHIC] [TIFF OMITTED] T5304.005

                 STATEMENT OF THE HONORABLE BOB CORKER

        Senator Corker. Mr. Chairman, thank you for being here.
        I was thinking as we were driving over today that so many
    of the companies around the country today are having their
    board meetings in Washington, and being on the Banking
    Committee and having had the background that I have, I am asked
    often, as I am sure you are, to present to these boards who
    come to Washington for their board meetings, which speaks, I
    think to the unhealthy situation that exists in our country
    where so much of Washington is affecting what they are doing.
    So I thank you so much for coming to Tennessee and being out
    here with people who are creating jobs in Tennessee. We are
    importing jobs, as the Governor mentioned, due to the
    outstanding job he and those before him have done, and
    exporting products. So we are proud of our state, we are
    especially proud of the three Congressmen who sit with you, who
    I love serving with and I think do an outstanding job. And as
    you can imagine, tremendous pleasure for me to serve with Lamar
    Alexander, who is one of the best that exists in the Senate and
    of course to be able to do so with Bill and Bill.
        I do want to mention that I know there has been a lot of
    discussion today about regulations and I think both Governor
    Haslam and Senator Alexander have done an excellent job in
    talking about those. I still believe the biggest issue that
    faces our nation as it relates to job creation is the issue of
    us in Washington not solving the fiscal issues that we have. I
    think if you talk with the business folks here, they will tell
    you that the uncertainty of whether we are going to be able to
    come together and solve this fiscal issue is the biggest
    impediment to job creation.
        As I meet with these board members, as I know you do,
    Chairman--and for what it is worth, for those of you in the
    audience, I have been on panels with Chairman Issa here but
    also around the world in other places, and the way he conducts
    himself causes people to listen to him in many, many places,
    not just here in our country. But I think we both listen to
    corporate boards as they talk about the fact that they are
    unwilling to invest in capital and they are unwilling to invest
    in people because they are concerned about whether we in
    Congress are going to have the ability to come together and
    deal with this fiscal issue. And I think in spite of our
    frustration with the many regulations that we are dealing
    with--and again, I applaud this tremendously and you have a
    wonderful panel coming after us--that still is the biggest
    issue as it relates to job creation in our nation.
        I think all of us know at the end of this year, we have
    another issue, which is the tax issue, the fiscal cliff is
    coming at the end of the year, which, by the way, people on
    both sides of the aisle understand is a problem and becoming
    more of a problem, but the overall insolvency of our country is
    the biggest.
        I want to add just a little detail to what Senator
    Alexander mentioned earlier, and that is as I travel the state,
    I was highly involved, as you were, in the financial regulatory
    legislation that took place. I do not think any of us here at
    Middle Tennessee--by the way, the largest university in the
    state now--supported that legislation. But as I travel the
    state, in counties that especially depend on their local
    community banks, the banks that have leaders that are in their
    Kiwanis Club, their Lions Club, their Rotary Club, these
    leaders tell me that in many cases now they have more
    compliance officers than they have lenders. And some people
    think that is a great way to create jobs, is to create
    regulations that cause people to hire compliance officers.
        But I think what we have seen and what Washington does so
    often is we create a one-size-fits-all piece of legislation, a
    piece of legislation that is intended to deal with some of the
    complexities of organizations like J.P. Morgan or Bank of
    America or CitiBank or Wells Fargo. And what we do is cause
    these same rural community banks to have to comply with those
    regulations, and it is absolutely stifling credit. In many
    cases, these banks have no idea what the examiner in charge is
    going to do in their particular entity. As a matter of fact,
    one bank might have an examiner in charge that comes in and
    talks with him about one thing. Another institution has another
    examiner in charge who is totally different, who comes in and
    so it is not just the regulatory over-burden that is taking
    place, it is also the lack of consistency that is really
    creating a lot of fear.
        And what happens is when many of the small businesses that
    are represented in this room go to an institution like this,
    they are more fearful about whether they are going to be in
    business than they are being able to create jobs in their own
    community, more focused on creating jobs in their own
    community.
        So I do hope--and by the way for what it is worth, I think
    most people in Washington are beginning to understand that
    Dodd-Frank missed the mark and I hope that during this next
    Congress, we will peel away these things that I absolutely know
    are hurting job creation, especially in some of the places that
    are not major metropolitan areas.
        I will second what Lamar mentioned about the healthcare
    bill. I do not think there is any question, especially people
    who have the ability to not hire people for a full 40-hour
    week--what we are seeing with numbers of companies around our
    state is that if they can cause an employee to work under 30
    hours as they move ahead, that is what they are doing. And so
    you have major employers who have had people working with them
    for years, decades, and they have become very important to
    their institutions, but as they look at the healthcare bill
    beginning to be implemented, what they are doing is focusing on
    ways of reducing those hours below 30, so they will not have to
    comply. I think all of us know that that is not a good thing
    for our state.
        For what it is worth on that note, candidly, I think there
    are people on both sides of the aisle that understand that this
    is not workable. I do not know of a thinking person on either
    side of the aisle that believes this bill can work as it is
    laid out. And I certainly look forward to working with you and
    others to make sure that we rectify many of the problems that
    are being created.
        And, of course, Lamar mentioned the EPA. There is no
    question you are going to have people from the agriculture
    community and others that can speak specifically to that. But
    all of us have heard horror stories about the EPA and the kind
    of inflictions that it is creating on business.
        So I thank you so much for being here. I know everybody
    wants to get to the meat and that is the panel of folks who
    actually create jobs, but all of us are committed to creating
    an environment. We know it is the environment, as our Governor
    said so well, that we all need to focus on that allows those in
    the private sector to create jobs. And I thank you for
    ensuring, through this field hearing, that we continue our
    focus on that.
        Chairman Issa. Thank you, Senator.
        Mr. Hagerty, you have been on the job for more than a year
    trying to create jobs. Do you want to tell us about it in five
    minutes?

                  STATEMENT OF WILLIAM F. HAGERTY, IV

        Mr. Hagerty. That is correct, Mr. Chairman. It has been my
    great pleasure to come into Governor Haslam's administration at
    the outset in January of 2011. And I cannot tell you what a
    great honor it has been to serve with each of the leaders to my
    left here and also with each of your congressional colleagues.
    Congressman Blackburn, Congressman Black, Congressman
    DesJarlais are in regular contact with my office and certainly
    Senator Alexander, Senator Corker stay in close touch, and
    Governor Haslam could not be a better leader of our state as we
    move forward in the effort to create jobs. Their advice, their
    guidance and their support really has made a big difference in
    terms of our success.
        I also think it might be helpful to give you a taste of
    some of the success we have had here in Tennessee, to put some
    matters in context, then I would like to go into some
    specifics, if I might.
        But to put things in context, when Governor Haslam came
    into office in 2011, he set some very specific goals for our
    department. He mentioned the fact that we have had significant
    cuts in terms of our federal money coming to the State and he
    also mentioned that he has been able to maintain priorities
    like teachers and schools and delivering substantive services
    that we need. But at the same time, he challenged every member
    of his cabinet to undertake a top-to-bottom review. We reduced
    the size of my department by 42 percent as a result of that
    effort and in 2011, we had the second best year of job creation
    in history in 2011, only surpassed in 2007 at the peak of the
    bubble.
        And I would like to say this, in January of 2011, when
    Governor Haslam came into office, Tennessee was at a 9.5
    percent unemployment rate while the national average was nine
    percent. Today, we stand at 7.9 percent while the national
    average is at eight--sorry, at 8.2. What we have done is we
    have moved our unemployment rate 1.6 percent, 1.6 percent
    improvement while the national average has improved only eight-
    tenths of a percent. Tennessee has improved at twice the
    national average and that is due in no small part to the
    leadership here in this room and the leadership of Governor
    Haslam.
        Our department had to reorganize the way we do business. We
    put people in the field in nine different regions. We have
    explicit outreach to entrepreneurs and to investors. We manage
    two venture capital programs now in the state, constantly
    reaching out to entrepreneurs. We have launched nine
    accelerators in each of our regions and last year, we reached
    out to more than 2000 companies here in the state of Tennessee.
    We conducted meetings with over 700 stakeholders in economic
    development. And this year, in 2012, we are moving that pace
    ahead at an even higher rate. We have undertaken 12 regional
    roundtables now focused on rural economic development. We think
    our job is to try to get out and understand what is happening,
    just as you are, at the state level, how we can help businesses
    thrive and grow.
        One of the things that Governor Haslam challenged us to do
    was to undertake a regulatory review last year. Our department
    organized a working group led by my Assistant Commissioner Paul
    Fassbender. Commissioner Fassbender led a series of 12
    roundtables across the state, all focused on opportunities to
    improve the regulatory climate for Tennessee businesses. The
    group identified existing federal and state regulations that
    negatively impact business in this state and Commissioner
    Fassbender's team delivered a report to the Governor last year
    with several recommendations. As the Governor said, the
    majority of our issues were federal regulations. What I would
    like to do is touch on the four primary areas and we can get to
    specifics in questioning.
        The number one area of concern amongst the businesses that
    we met with and interviewed was the new healthcare legislation,
    the Patient Protection and Affordable Healthcare Act. That
    uncertainty that the Act creates, and the example that Senator
    Alexander mentioned with restaurant owners, it permeates our
    entire state. Every business owner is concerned about the cost
    and the uncertainty of what is happening with that legislation.
    As it gets batted around through the judicial system, as we
    wait for an answer later this month from the Supreme Court,
    there is a great chilling effect that this regulatory burden
    has created in the State of Tennessee.
        A second federal issue that creates a tremendous amount of
    concern is the one that Senator Alexander mentioned, that is
    the National Labor Relations Board activity. The Boeing
    decision could not have had a more chilling effect on companies
    looking at the State of Tennessee. As companies who are in
    states that have union activities, they look at right-to-work
    states as a very desirable location. But many of those
    companies are stifled or frozen in terms of their inability to
    move forward. We need clarity on that matter. Certainly we are
    not a regulatory agent, my department, but we hear a lot of
    feedback from businesses in terms of the constraints that the
    NLRB decisions have imposed upon us.
        Third, as Senator Corker mentioned, the Dodd-Frank reforms
    have had a tremendous chilling effect on community banking.
    Tennessee is mostly a rural state, community banking is the
    lifeblood of our state. And community bankers tell us that the
    regulatory and compliance costs are exceeding their ability to
    manage their business. They are not certain what the law means
    for them, but they feel imperiled as they undertake lending
    decisions and as they look at their cost structure, they see it
    increasingly challenged by the ramifications of this law.
        And fourth, and as has broadly been discussed, the EPA
    regulations have a tremendous negative effect in our state. Our
    Tennessee Department of Environment and Conservation does an
    excellent job of trying to help businesses comply with these
    regulations, but many companies told us through our regulatory
    review that the regulations have become so unduly burdensome
    that they have a very great concern about their ability to
    expand and to grow.
        Overall, Tennessee is blessed with a wonderful business
    climate. We have great leadership, we have a great
    entrepreneurial spirit in this state and we are very optimistic
    here that we are going to continue to expand and grow. But we
    very much appreciate you being here today to listen to our
    problems and to work with us, work with Governor Haslam and
    everybody in our state to try to help continue to make
    Tennessee the place that it can be.
        Thank you.
        [Prepared statement of Mr. Hagerty follows:]

        [GRAPHIC] [TIFF OMITTED] T5304.006

        [GRAPHIC] [TIFF OMITTED] T5304.007

        [GRAPHIC] [TIFF OMITTED] T5304.008

        [GRAPHIC] [TIFF OMITTED] T5304.009

        Chairman Issa. Thank you.
        Governor, this is a successful state, so we will stick
    strictly to the federal problems, but I must tell you that I
    did not give Rick Perry any credit for taking jobs from
    California, so I will not give you very much either.
        Governor Haslam. Is this the fish-in-a-bill analogy, or
    what are we doing?
        Chairman Issa. Yeah, pretty much. I was a Romney supporter
    early on, so I maybe was disingenuous a little bit.
        But, Governor, you mentioned what you have dealt with post-
    stimulus. The stimulus was $800 billion roughly spread over two
    years, more than half of it going to essentially state and
    local employees.
        Governor Haslam. Right.
        Chairman Issa. A lot of teachers, no question at all. And
    you have had to deal with that. But for about a decade, we have
    been on a stimulus pace, in other words, large deficits. We
    have a trillion dollars a year deficit right now. Now a
    trillion dollars a year of deficit spending is, by definition,
    a trillion dollar stimulus every single year.
        Governor Haslam. Right.
        Chairman Issa. We borrow the money and spend what we are
    not taxing for. Job creation is important. Can you do a better
    job if over time the federal government cuts back the portions
    that essentially go to Washington and come back or come from
    China and go to the states--can you adjust to where over time
    states are more self-reliant and less money comes to the states
    if it is phased in as a matter of policy, recognizing that,
    particularly in the case of Medicaid there is a federal-state
    match, highway there is a federal-state match? Is this
    something you would like to have or would you prefer that we,
    in order to continue this kind of circular money, increase
    taxes at the federal level, basically take it from your
    stockholders?
        Governor Haslam. I would make two comments. Number one,
    when the President talks about we need to provide more to the
    public sector, what he is really saying to the people in
    Tennessee is you have managed your budget well, you have made
    the cuts that you need to, we have a surplus this year, which
    we will wisely invest next year, but other states have not; and
    so we would like the people of Tennessee to pay more taxes so
    that the other states which have fundamental structures of
    their state government that do not work, their costs have
    gotten too high just fundamentally, but we would like the
    people of Tennessee to make up that difference because the
    people in these other states have budgets that do not balance.
    So it does feel like it is just basically wrong for my
    shareholders, who have been disciplined.
        The second comment I would make to your question would be
    this--like I said, when the stimulus plan money ran out, we saw
    that coming, it was right when we were transitioning in and our
    predecessor did quite frankly a good job of laying out a road
    map and we took that and changed that but made it work. But I
    actually go back to his comments, my predecessor Democrat, but
    back when the recession happened, state revenues fell off, he
    said we can make the adjustments here now. We will take the
    federal money if they send it, but we are prepared and can make
    the adjustments in Tennessee. And I feel like that.
        But the last thing is this, you talked about Medicaid. I am
    with those folks who said if you will just block grant the
    money to states for Medicaid, give us much more authority over
    how we use that, trust us to make decisions. I think there is a
    sense that the federal government says we cannot trust states
    to do the right thing. I will say it is really interesting, and
    I will stop with this, the current Obama administration really
    I thought in some ways took the right steps when they ended--or
    gave waivers to states with No Child Left Behind. It was not
    the perfect approach I would like, but they did say states if
    you will show us how you will do it the Tennessee way, then we
    will give you a waiver from the requirements for No Child Left
    Behind. I would submit for the administration that is a great
    road map for how to do it in other ways, to do that in
    Medicaid. Let us put the basic parameters and then let you run
    the program. I guarantee you every state will run it better
    than the federal government. The closer to home government is,
    the better. That is just a truth and it always will be.
        Chairman Issa. Mr. Hagerty, you particularly mentioned some
    of the challenges for the community banks. Would you
    particularly feel that we, the Senators with you and the House
    Members, need to reopen Dodd-Frank specifically as to
    recognizing that these non-international, non-credit default
    swap entities who simply bring in dollars from the community
    and send them back out to the community should be under a
    different standard, if you will, a much closer standard to what
    had done well for so long before the meltdown in 2008?
        Mr. Hagerty. Mr. Chairman, our agency is not a regulatory
    agency with specific expertise on banking, so I can only offer
    you general comments.
        Chairman Issa. But you do come from that background.
        Mr. Hagerty. I do, I can offer you some general comments.
    If I think about the response that we have gotten from the
    field and from community banks in particular, Dodd-Frank has
    been imposed upon them in a one-size-fits-all perspective. That
    is great for J.P. Morgan, they have got 100 lawyers on staff,
    maybe more. Same for many of these other international banks
    that do business in the United States. That is not the case for
    rural Tennessee community banks. They do not have the overhead.
    This is absolutely diverting attention that needs to be paid to
    businesses the compliance activity, it is diverting capital
    that needs to be invested in more lending, more loan officers
    the compliance activity; and frankly, I think it is having a
    significant effect, curtailing lending into an area where we
    need it the most. So anything that you could do to ease the
    burden on those sized community banks and not impose a one-
    size-fits-all on them, seems to me to fit squarely into the
    area where the community banks would benefit from some type of
    change or redress.
        Chairman Issa. If I could just ask one quick followup. Our
    Committee in the House has voted out unanimously something
    called the Data Act. It is designed to have all recipients of
    federal dollars report in a format that is completely, if you
    will, data searchable, similar to the way you reported the
    stimulus act. As a matter of fact, it is taken from the way
    that recovery board went.
        If that bill becomes law, which of course depends on the
    Senate--that must be why I am asking this question----
        [Laughter.]
        Chairman Issa. --you would have transparency for all the
    dollars passing through, back and forth, not just from your
    state, but every other state. Would that be helpful if the
    federal government standardized a system so that you really
    would be able to use the money flowing in and out, being able
    to see where it is, including, for example, Medicaid, you would
    be able to see every entity that was ever barred from Medicaid
    on a national basis and so on.
        Mr. Hagerty. Real short answer--yes.
        Chairman Issa. Thank you. I just needed to ask that one,
    for some reason.
        Scott.
        Mr. DesJarlais. Thank you, Mr. Chairman.
        Chairman Issa. Mr. DesJarlais is recognized for five
    minutes.
        Mr. DesJarlais. Senator Corker, you started your own
    business, you were a job creator prior to being Mayor of
    Chattanooga and becoming Senator. Do you think that you would
    be willing to start that company in today's regulatory
    environment?
        Senator Corker. Well, I like swimming upstream, so you
    know, I would say I would. I will tell you though that many of
    my friends who have now, later in life, attempted to go out in
    business are finding it much more difficult. And I do not think
    there is any question about that. And I think it has been
    building for a long, long time. I just think as our country has
    continued to evolve rule on top of rule--you know, one of the
    things that we do well, and I say that euphemistically, we pass
    a lot of laws, but what we do not do is repeal laws underneath
    them. And so we end up building a lot of bureaucratic issues
    and I know Governor Haslam even has to peel back and deal with
    that here in the state of Tennessee.
        So I would just say this; number one, thank you for having
    this hearing; thanks for all the work you did in creating this;
    thanks for your focus on regulation. You too are a job creator
    and have been a job creator.
        It is no doubt more difficult in today's society with all
    the things that have been mentioned here to create a business.
    And as a country, we need to be moving in exactly the opposite
    direction.
        Mr. DesJarlais. Thank you, sir.
        Senator Alexander, the Oversight Committee has voted
    multiple regulatory reform bills out of the Committee to help
    curb burdensome and costly regulations and some of these bills
    should be going to the House floor soon. Can you help move
    regulatory reform through the Senate?
        Senator Alexander. Yes.
        [Laughter.]
        Mr. DesJarlais. Will you?
        Senator Alexander. I could do a lot more if we had more
    Republican Senators, just to be very blunt about it.
        One I have thought a lot about--Senator Corker just said
    something that I think is worth pausing on. The problem is you
    have all these pressures for more regulations. I mean this not
    necessarily an evil force or a Democratic force or a Republican
    force, it is just a natural force. You come in every two years
    and you forget about all this stuff you have already done.
        For example, when we were reauthorizing the higher
    education bill, here we are at a university, I worked on it for
    a year and a half and voted against it. Why? Because the higher
    education regulations today are as tall as I am, and the new
    bill would double the size of it. And the President of Stanford
    said that seven cents out of every dollar the university spent
    is complying with regulations. So how do you stop that?
        I think the best structural way to develop a countervailing
    force is a two-year budget. Does not sound very sexy, does not
    sound very glamorous, but the idea would be every other year we
    would pass our budget for two years, which states do. And then
    in the odd numbered year, we would devote our entire time to
    oversight and repealing laws and repealing regulations that
    have become unnecessary. We could sunset more laws and
    regulations, we could start over again. And I think if we had
    that pressure going in the other direction, every other year--
    one year to consider what laws and appropriations need to be
    passed, the next year the main focus being what could we get
    rid of. I think that we create a countervailing force and would
    do a lot for regulatory reform. The answer to your question is
    yes, and that is one example of how I would like to try to do
    it.
        Mr. DesJarlais. Thank you, Senator.
        Governor, I applaud one of your mission statements when you
    became Governor and that was to focus on improving Tennessee's
    education. One of our attendees at our roundtable breakfast
    this morning, Jim Greene, from Richland LLC, brought up the
    point that he has had for months, if not up to a year now,
    multiple job positions available but does not have skilled
    labor to match those jobs. What are you doing in the state to
    help bridge that gap?
        Governor Haslam. That is probably the thing we are focused
    on the most. It begins obviously with K-12 education. Tennessee
    has made some big strides recently, over the last three or four
    years, with kind of the Tennessee Diploma Project, requiring
    higher standards. Our ten-year reform law I think will make
    certain that we only have the very best teachers standing in
    front of the classroom.
        But then I think what you will see, and let us turn our
    focus to now, what is our role in post-secondary education in
    terms for preparing that workforce, we do hear whether it be a
    manufacturer, whether it be a Volkswagen or IT professionals in
    middle Tennessee, and I can go--or truck drivers, all across
    the board, employers who say I have got jobs to fill, I just do
    not have the people with the right training to fill them. And
    so we are beginning to focus on that. How do we help, again,
    post-secondary education of all types--technical centers to
    four year schools to Ph.D. programs--to prepare those
    graduates. And I think the good news is, I think our
    institutions of higher ed are understanding that and they are
    starting to focus not just on enrolling students but graduating
    them and making sure those graduates are prepared in the right
    way.
        Mr. DesJarlais. Thank you, Governor.
        My time has expired.
        Chairman Issa. I thank the gentleman.
        Mrs. Blackburn.
        Mrs. Blackburn. Thank you. I appreciate that and appreciate
    so much that you all are giving us this time this morning.
        Governor and Commissioner, I want to start with the two of
    you. I appreciated what you had to say about having Tennessee
    be customer friendly. I think that is so important. And much of
    the emphasis has been reshaping the interaction between
    government and the citizens. And you all have done a stellar
    job of that.
        So what I would like to get on the record is just a little
    bit from each of you, a minute or so, about your process and
    what lessons the federal government could learn. Because,
    Commissioner Hagerty, the fact that you have reduced your
    department by 42 percent, the fact that every department in the
    state is reducing, employee counts are going down, square
    footage that you use is being reduced. We need to be looking at
    this at the federal level and indeed the states are the labs
    for innovation.
        Governor.
        Governor Haslam. When I came into office, we literally
    asked all 22 agencies to do a top-to-bottom review, which
    basically said this, if you were starting that department all
    over again, would you set it up the same way you have now. And
    when people were honest, they said no, we would not. And so we
    began to make those changes and we morphed that effort into
    what we call customer-focused government to say, okay, what is
    the best way to set it up for the lowest price, which is what
    taxpayers pay, and that gives the best service. We have made
    dramatic changes, everything from Bill restructuring his
    department to looking at how we lease office space when the
    state needs it, to how we use vehicles in the state. All of
    that, as Lamar said, sometimes real government is not real sexy
    or exciting but it is finding a way to save $100,000 in a $30
    billion budget that if you save enough of them, it can make a
    real difference. So we focused on both the cost side and then
    on our customer response time. Everything from how long does it
    take--if a child is up for adoption in Tennessee, how long does
    it take us to find a family or to find a foster family to how
    long does it take you to get a driver's license. All those
    things we do, we want to see if we can do them faster, better
    and cheaper.
        Mrs. Blackburn. The superman way.
        Mr. Hagerty.
        Mr. Hagerty. Thank you very much, Representative Blackburn,
    for the question. It really gets to the insight Governor Haslam
    brought to our administration with his private sector
    background. And it was very simple. He challenged each of us to
    question our departments and say is this function, is this
    activity, is this structure something we should be doing as a
    state. And if the answer to that question were yes, then it was
    are we doing it the best way, are we going about it the best
    way.
        We took that sort of approach, a very simple and straight-
    forward approach, and really looked at our department at least,
    and I can speak from specific experience, like you would a
    business. There were a number of activities that just needed to
    be repositioned and restructured and moved to a place where
    people could be more efficient.
        I mentioned we did a 42 percent reduction of the staff, the
    number of positions. But of the remaining positions, I turned
    50 percent of those over. We brought in a lot of new blood and
    we have been knocking the ball out of the park.
        We called on over 2000 businesses last year. We implemented
    that measure in July and so that really was half a year of
    activity that we captured. We are going to be way beyond that
    this year. We are out touching the customer, as Governor Haslam
    wants us to, we are there with them every day now. Whatever
    they need to expand and grow, we are doing our best to help get
    these burdens out of their way.
        So I think that sort of fresh approach that Governor Haslam
    brought has made all the difference in the world in our state.
        Mrs. Blackburn. Thank you.
        Senator Corker and Senator Alexander, you each have
    mentioned federal agencies and regulations as being a problem.
    And Mr. Chairman, I want to, at this point, give my website,
    because at Energy and Commerce we handle the EPA. I am also on
    the Healthcare Subcommittee, we are handling a lot of what will
    be next in healthcare. And it is blackburn.house.gov and people
    can follow us on Facebook and Twitter and we tweet out the
    links to the hearings that we are doing on these issues.
        Senator Corker, you mentioned something about access to
    capital. I hear a lot about that and just very briefly from the
    two of you, when you are across the state meeting, what do you
    hear from people? I hear frustration, but I do not know if
    there are other agencies that you mentioned that they are
    having frustrations with that you would like to add to the
    record.
        Senator Corker. And you are talking about on the access to
    capital component or just in general?
        Mrs. Blackburn. In general.
        Senator Corker. I do think that the most direct, aside from
    the big picture of us not dealing with the fiscal issues and
    just the concerns that that creates, I mean if people want to
    build a wall around where they are because they are concerned
    about, you know, what we are not going to do and where the
    country is going from the standpoint of solvency, but I think
    the most direct really is going out into these smaller
    communities and them going down to see their loan officer and
    candidly the loan officer being concerned. Dodd-Frank was put
    in place, as you well know, and the speed that it was put in
    place, to create certainty.
        Mrs. Blackburn. Uh-huh.
        Senator Corker. And what has happened is it has done just
    the opposite. There are--there was a 2400 page bill, the
    rules--what happened was Congress did not do its job, it punted
    all of the decisions to the regulators. And so it will take at
    least three years for all of the regulations to come out. In
    the interim, the local financial institutions, because they do
    not know the rules of the road, are withholding capital. And so
    I do think that is one of the most direct issues.
        These other things--credit clout, some of the things with
    NLRB, people just do not know, it is sort of a fog. But I think
    from the standpoint of a direct issue, and possibly it is
    because I am on the Banking Committee and people talk with me
    more directly, it is this issue of really not being able to get
    the capital.
        I borrowed a little money, I had $8000 when I went in
    business and as time went on, I borrowed a little bit of money,
    not much, $12,000. But I think the difficulties of that today
    are far different than they were at that time. And I think a
    lot of it is again, because of that uncertainty.
        Mrs. Blackburn. Senator, anything to add?
        Senator Alexander. Marsha, what you are making me think
    about, a few years ago when I walked across Tennessee to be
    Governor, I had a lot of time to think out there walking by
    myself. And one of the things I thought about was would it not
    be great if in the State of Tennessee, if you wanted to start a
    business you could call up the state government and say send me
    two pieces of paper that have everything on it that I need to
    fill out in order to go into business. Of course, I never got
    that done. I would like to see it done for the federal
    government, but maybe we could do it piece by piece.
        We could start with the forms you have to fill out when you
    buy a car or get a mortgage on your house. They are absolutely
    absurd. What happens today is you go in and they are that thick
    [indicating] and the bank or the car dealer has it all worked
    out on the computer, so you sign a bunch of pages without know
    what is in it and then they run it through the computer and it
    is that thick and you go on and you are not warned of anything,
    because you have not really understood it.
        I think if we took the consumer protections that were
    really important for a car or a mortgage and put them on one
    page, that we would protect the consumers a lot better, we
    would have a lot more loans, and we would have--to reverse Bob
    Corker's statement, we would have more people making loans than
    complying with federal regulations.
        Mrs. Blackburn. Thank you. I yield back.
        Chairman Issa. Thank you.
        Mrs. Black.
        You know, feel free to applaud as long as it is quick.
        [Laughter.]
        Mrs. Black. Thank you, Mr. Chairman. And I so appreciate
    all of you being here today.
        You know, we keep talking about uncertainty. I think, just
    as you have just said, Senator Alexander, there are some really
    just common sense ways to boil all this down and to get us back
    under control.
        So let me go to--actually, Senator Corker, I want to ask
    you first, because I am interested, you have a bill that is the
    Global Investment American Jobs Act, where you in that bill
    help to identify some of those outdated barriers. And what I
    want to do is have you talk a little bit about that to show
    that not only are we recognizing the issues, we are listening
    to our job creators, but that we are also thinking about ways
    that we can find solutions. So if you can talk a little bit
    about that.
        Senator Corker. Sure. You know, our state, because of the
    great leadership of Bill Haslam and Bill Hagerty and people
    before them, Governor Alexander when he was here, it has been a
    magnet for investment and, you know, one of the things we like
    to encourage is even more foreign direct investment. I mean,
    you know, we do not differentiate in the State of Tennessee
    between jobs at Springhill and jobs at Nissan or jobs at
    Volkswagen. All of them to us are Tennessee jobs, they are
    American jobs and we would like for them to be here. So I have
    co-sponsored a bill--I think we are speaking of the same bill--
    with Senator Kerry, it is a bipartisan piece of legislation, to
    really break down--look at the barriers that keep foreign
    direct investment from occurring here. I know California has
    been the tremendous beneficiary in years past, maybe not today,
    of----
        Chairman Issa. Well, they have got to get to America on
    their way to Tennessee.
        Senator Corker. That is exactly right.
        [Laughter.]
        Senator Corker. That is right. I could say that a little
    differently, but I will not out of courtesy. They have got to
    go through California to get to America, that is for sure.
        [Laughter.]
        Senator Corker. But the fact is----
        Chairman Issa. The gentleman is not in order.
        Senator Corker. The fact is that, look, we want to see
    investment in our country. We know in Tennessee we have the
    best workforce you could possibly imagine, we have the best
    environment you can possibly imagine, and yet we have barriers
    for foreign investment and we want to break those down and make
    sure we continue to create even more jobs here.
        Thank you for the question. And thanks for your great
    service.
        Mrs. Black. You are welcome, and thank you because barriers
    are absolutely--the uncertainty of the barriers are absolutely
    what are keeping our job creators. I was visiting with Boeing
    not too long ago, and they said uncertainty creates paralysis
    and the retraction of our businesses from growing because of
    that uncertainty and breaking those barriers down.
        I want to go to you, Commissioner Hagerty, because you also
    did a study to take a look at what some of those federal and
    state regulations were that were negatively impacting our
    businesses, which are also barriers. Can you talk a little bit
    about what you found there and share that with us?
        Mr. Hagerty. I would be happy to provide a copy of the
    survey.
        Mrs. Black. That would be great.
        Mr. Hagerty. And again, we are not a regulatory body, but
    we reached out and asked questions to the business community.
    And I would just like to summarize that in the broadest sense,
    uncertainty, as has been mentioned by each of my panelists
    here, each of the leaders that are to my left, has been the
    over-arching concern, whether it is uncertainty driven by the
    NLRB, it is uncertainty with the healthcare legislation, it is
    uncertainty from Dodd-Frank. EPA, for example, just creates a
    stifling amount of uncertainty. That has been the over-arching
    theme. It is uncertainty, cost and the whole burden of
    compliance.
        And I think that the Tennessee business people that we
    spoke with feel stifled and feel very concerned that they just
    cannot tell which way things are coming from Washington. And I
    wish I could be more specific, and indeed I could go through
    specific examples, but they all roll up to this one common
    theme of uncertainty.
        Mrs. Black. Well, I appreciate what you have done in your
    work and if you can share it with us, this is a good piece of
    information for us to take back. All of our committees deal
    with issues of job creation, so that would be good information
    for us all to be able to use as we talk about it in our various
    committees.
        Governor Haslam, why don't I go to you. One of the things
    that you did not mention that was a shining star this last year
    in the legislative session is what happened with the--I cannot
    believe I just lost my train of thought there--with the----
        Governor Haslam. Tort reform?
        Mrs. Black. --with the lawsuits.
        Governor Haslam. Okay.
        Mrs. Black. And tort reform, so if you could just talk
    about tort reform.
        Governor Haslam. You know, back to the predictability that
    Commissioner Hagerty was talking about, businesses want to
    know, tell us the rules, tell us what is coming and let me know
    that. And I think what we tried to do is provide a more
    predictable business environment. Again, we do not think
    government creates jobs, but we can create the environment
    where that can happen and the tort reform bill that put a cap
    on damages I think for businesses helped to define that. It
    also helped to define okay, where a lawsuit could happen, under
    what circumstances. So I think again, most people--there was a
    lot of people who questioned that, said oh, that does not
    really feel like that will create jobs, but I know of three
    companies, two or three companies, who have said I was not
    considering Tennessee, but now it is on our list of places.
    That is just anecdotally that I know of. So I do think again
    that is part of setting the environment right.
        Mrs. Black. Tort reform has been talked about a lot here in
    the State of Tennessee over the years when I was in service
    here and I congratulate you and commend you for listening to
    our job creators, because we did hear that consistently, that
    lawsuits are very difficult for our job creators.
        Governor Haslam. Right.
        Mrs. Black. And maybe that is not one that always rises to
    the top in the discussion, but certainly it is one that we have
    to look at very closely to see what that does for our job
    creators.
        Thank you and I yield back my time.
        Chairman Issa. Thank you.
        I want to thank our panel of witnesses.
        Since each one of you mentioned NLRB more than once, I will
    tell you that after Boeing came to a union settlement out in
    Everett, Washington and suddenly their problem in South
    Carolina went away, our Committee has not given up on getting
    to the bottom of whether or not there was a wink and a nod,
    because there is no logical reason to pursue them for
    wrongdoing and then give it up because they sign a new union
    contract that apparently fit the administration. So we do
    oversight and we do oversight even after someone says oh, no,
    it is okay, we have settled that. So we will get to the bottom
    of it to make sure that never again will that technique be used
    to coerce some sort of an agreement.
        Again, I want to thank our panel. Senators, Governor and
    Mr. Hagerty, we are pleased to have you, but this is not a
    typical field hearing, so the level of participation, we very
    much appreciate.
        And with that, we will take a short recess to set up the
    next panel. Thank you.
        [Recess.]
        Chairman Issa. The hearing will come back to order.
        We are now joined by our second panel of witnesses. Mr.
    Mark Faulkner is owner of Vireo----
        Mr. DesJarlais. Vireo.
        Chairman Issa. Oh, Vireo. Okay, I do actually know that
    name. It just looks hard to spell. --Systems, a small
    manufacturing plant that produces various chemical compounds.
    He is testifying on behalf though of an organization we respect
    a great deal in Washington, the National Federation of
    Independent Business. Mr. Grady Payne, a returning witness to
    the Oversight Committee, is CEO of Conner Industries, a lumber
    and assembled wood products supply company, which has a plant
    in Fayetteville, Tennessee. And Mr. Scott Cocanougher?
        Mr. Cocanougher. Very good.
        Chairman Issa. CEO of First Community Bank of Bedford
    County. And of course we talked a great deal on the first panel
    about the plight of community banks after Dodd-Frank. And Mr.
    Bob Bedell is the Unit Sales Manager for Coca-Cola, a small but
    meaningful company that we have heard about before.
        [Laughter.]
        Chairman Issa. Actually a worldwide leader in beverage. He
    is testifying on behalf of the Beverage Association of
    Tennessee.
        Gentlemen, you saw on the first panel, pursuant to our
    rules, would you please rise and take the oath? Raise your
    right hands.
        [Witnesses sworn.]
        Chairman Issa. Let the record reflect that all witnesses
    answered in the affirmative. Please be seated.
        Now I have noted that none of you are governors or
    senators, so that red light means stop. Please stay within your
    five minutes, to allow time for questioning. And your entire
    opening statements plus additional things that come from you
    will allowed to be placed into the record so that we have a
    full understanding.
        Mr. Faulkner.

                       STATEMENT OF MARK FAULKNER

        Mr. Faulkner. Very good. Chairman Issa and Members of the
    Committee, thank you very much. I appreciate the opportunity to
    testify on the federal regulatory climate and its effects on my
    business. As you mentioned, I own Vireo Systems. We are a small
    manufacturing plant that produces chemical compounds, and I
    currently have 22 employees.
        And although this is an over-simplification, current
    interactions with regulatory agencies boil down to a process of
    audit, review and critique, issuance of fines and then
    potentially the engagement of some combination of hindrance,
    threats, seizing of property, et cetera, all in an adversarial
    manner. Most times, the agencies do succeed in collecting money
    from businesses because most owners are simply very scared of
    the authorities. They can declare us guilty, assess huge fines,
    and we are left to have to try and prove ourselves innocent--
    guilty until proven innocent. But most small businesses do not
    have the financial resources or time to defend ourselves and we
    know the punitive powers that the agencies wield.
        We know that job growth in America remains stagnant and for
    small businesses, government requirements are the most
    significant problem facing us after taxes and demand for our
    products. Reducing the regulatory burden is a step the
    government could take that would go a long way towards giving
    entrepreneurs the confidence that they need to expand and hire
    more people.
        I personally have held off hiring people over the past year
    because I do not know how a recent OSHA audit may hit us in the
    way of fines, fines for things that have been safe and within
    codes for years. I could add at least six new jobs to my
    payroll right now, but I am unwilling or actually unable to do
    so because the budget that I have for payroll may be needed to
    pay for fines for somewhat dubious regulations or regulatory
    interpretations.
        So simply stated, government regulations are stopping me
    from creating new jobs. And while a few jobs at our little
    business may be small potatoes, if that is multiplied across
    the nation by thousands of small businesses, it adds up to a
    serious squelching of economic activity and job creation.
        As I just mentioned, I am currently undergoing an audit
    with OSHA and this and other agency experiences have made me
    think that the main goal of the various agencies has become to
    target businesses for fines that support their departments in
    what feels like a government shakedown. Agencies like OSHA
    assess fines for alleged compliance infractions, but then also
    they will end up suggesting that they will reduce the fines if
    we agree to rapid payment and skip any appeals processes or
    legal challenges. Basically it is a pay now or risk paying more
    later if you fight the charges and want to try and introduce
    some due process into the situation.
        After one particular DOT audit, it was alleged that a
    torque wrench at my facility was not calibrated correctly even
    though the wrench was working fine and we had never had any
    leaks in using it to tighten container lids. Regardless, to
    make sure, I bought a new one for $40 so that there was no
    question, but the DOT auditor wanted to fine me about $5000 for
    this. I refused, saying that it was ridiculous. After going
    through a few rounds of DOT employees and managers offering to
    cut the fines, which made me feel like I was living ``Let's
    Make a Deal,'' they insisted that if I did not take the reduced
    fines offered on the table, I would be forced to pay the
    original amount. I finally threatened to get my attorney
    involved and they eventually agreed to just have me pay $200 to
    get the situation put to bed. I felt like it was a case of
    attempted government extortion.
        It seems as though regulators need to justify their
    existence and generate some of their own job survival revenue.
    And I believe that Congress should mandate a change in the
    culture of those agencies from policing to education, because
    most businesses want to be safe and in compliance. So for any
    first time offenses, rather than punitive fines, if the small
    business is showing good faith and good faith efforts, then the
    department should be limited to giving supportive guidance and
    warnings and only resort to fines if the business does not
    resolve issues and if legal action finds them guilty of
    repeated non-compliance. Agencies should be tough on businesses
    that blatantly ignore regulations, but they should not treat
    every small business as a bad actor.
        Right now, there is none of our American tradition of
    checks and balances against growing agency power. Congress can
    help this situation by holding federal agencies accountable. I
    hope Congress will seriously consider the reforms that I
    included in my written testimony and specifically Congress
    should expand the Small Business Reg Enforcement and Fairness
    Act to include additional agencies, and require all agencies to
    include indirect costs as economic analysis for rule. And then
    also strengthen the U.S. Small Business Administration's Office
    of Advocacy to be able to fight on behalf of small business.
        Thank you and I will look forward to any questions.
        Chairman Issa. Thank you.
        Mr. Payne.
        [Prepared statement of Mr. Faulkner follows:]

        [GRAPHIC] [TIFF OMITTED] T5304.010

        [GRAPHIC] [TIFF OMITTED] T5304.011

        [GRAPHIC] [TIFF OMITTED] T5304.012

        [GRAPHIC] [TIFF OMITTED] T5304.013

                      STATEMENT OF H. GRADY PAYNE

        Mr. Payne. Yes. Thank you, Mr. Chairman and Members of the
    Committee for this opportunity.
        I am Grady Payne, CEO for Conner Industries headquartered
    in Fort Worth, Texas. We have plants in eight states including
    the plant in Fayetteville, Tennessee. We supply cut lumber and
    assembled wood products to manufacturing companies for their
    shipping and crating needs as well as logistics and supply
    training management services.
        Our company was started in 1981 with five people. Today, 31
    years later, we have got over 450 people in 11 plant locations.
    Over 120 of our people have been with us more than five years
    and over 22 have been with us over 15 years. Our locations
    operate in distinct markets and each location employs fewer
    than 50 people.
        In each of our markets, we compete against companies with
    fewer than 50 people and companies importing crating products
    into our markets. These companies will not be subject to the
    penalties and mandates imposed under the Obamacare law.
        According to the SBA, we are a small business, but not so
    by the Affordable Care Act. We are caught in a no man's land
    between assistance and exemptions for small business and
    waivers for large corporations and other powerful entities.
        We started our medical plan in the 1990s and offered
    coverage to all employees. Most of our production people opted
    out due to the cost of the programs. To meet federal
    discrimination rules, we were forced to redesign our plans and
    that redesign is what we are working on today.
        We offer a fully insured plan to about 140 employees and we
    struggle every year to keep 75 percent participation in the
    plan. The company pays approximately 55 percent of the total
    premium cost. The new discrimination rules created by the law
    forces us immediately into a self-insured alternative or face
    fines of up to $500,000 under the law. The IRS has delayed
    enforcement of this new non-discrimination testing until
    regulations can be written. However, our plan could be tested
    as early as next year. Without changes we may be forced to drop
    our plan completely prior to state-based exchanges becoming
    available. The mandate to us may be 2013, not 2014.
        In 2014, we do face some other difficult choices. One
    option is to expand coverage to all our employees and pay the
    full premium cost. This additional cost to us will be
    $1,750,000 or more, over and above the $750,000 we spend today
    in premiums.
        On the other end of our options, we discontinue all
    policies and pay a non-tax deductible penalty of $2000 for each
    of our employees at a cost to us that will be well over a
    million dollars, and again, it is not tax deductible.
        Other available options with employee participation are
    projected to cost upwards to a million and a quarter in
    additional cost.
        The impact of this law will cost our company over a million
    dollars, no matter which option we take. Some of the extra cash
    cost, if not all of it, will be penalties and not tax
    deductible. Today, these costs could significantly impact the
    company's financial strength and stability. We have been a very
    blessed company, profitable even through these hard times in
    the past few years. We have had to make many sacrifices in pay,
    bonus programs and people. We have no tax loopholes, our
    company is a taxpayer; and no, the private sector strapped with
    this law and continued new rules and regulations is not doing
    fine.
        We are a company caught in the middle. As the law stands
    now, our 30-year business is at risk of being legislated out of
    existence. How can this be? Our lives are in this company. We
    have done a good job for our customers, our employees and all
    of our families. This law has taken a problem and made it a
    potential fatal blow--jobs versus insurance.
        We understand the goal of getting everyone medical coverage
    and agree that it is a worthy goal. But the massive cost hits
    us right between the eyes. We are too small to get favorable
    group rates and self-insurance contracts and too large, by
    statute, to be exempt even though each of our profit centers
    are less than 50 employees. There has to be a more equitable
    way to achieve this goal than to cripple a small business like
    ours.
        Our current capital expansion and business development
    plans are and will be stopped by this law because expansion and
    hiring requires cash. The impact of the law robs us for needed
    growth capital. Our goals turn from hire and grow to cut and
    survive.
        Our Tennessee plant was started as an expansion plant in
    2007 and today has 48 employees. This law may force us to close
    our expansion locations as the new cost and penalties may not
    be able to be absorbed. Men and women working hard and
    providing for their families today may be faced with going home
    with no job in a difficult job market and fearing how they are
    going to face their families and meet their needs. A man
    without work carries a sense of shame and feeling of failure to
    his wife and children. The family may have subsidized
    insurance, but the job he knows may be gone.
        I and managers feel the burden. Our people depend on us.
    This law mandates a cost that is difficult to overcome. No new
    efficiency can offset the big cost. I work with men like Adolfo
    and Ricky, brothers who started their careers with us in high
    school; and today, after 21 years, have both advanced to
    leadership roles. They are married and have young children and
    like all our people do a great job and are proud of our
    company. These men and many others like them and their families
    deserve the jobs they have, they have earned them. This federal
    mandate that was not well-thought-out could destroy these men's
    lives, careers and plans. I pray something might be done that
    these working families may not see and feel the pain caused by
    such a reckless legislation.
        I thank all of you for your service to our great nation and
    allowing me to plead the case of Conner Industries and our
    people.
        Chairman Issa. Thank you.
        Mr.Cocanougher.
        [Prepared statement of Mr. Payne follows:]

        [GRAPHIC] [TIFF OMITTED] T5304.014

        [GRAPHIC] [TIFF OMITTED] T5304.015

        [GRAPHIC] [TIFF OMITTED] T5304.016

                     STATEMENT OF SCOTT COCANOUGHER

        Mr. Cocanougher. Thank you for allowing me to come down and
    speak to you all today and taking your time to come down.
        My name is Scott Cocanougher, I am the CEO of First
    Community Bank of Bedford County, which is located in
    Shelbyville, Tennessee. We are about a $320 million bank that
    serves Bedford and Moore Counties. We also own a mortgage
    company that services Tennessee and its surrounding states.
        Although we have identified and taken some losses on loans
    made in the development and construction industry, we have set
    aside sufficient funds to cover those losses and any losses in
    the future, while also returning a good return to our
    shareholders.
        Before I get started, I do want to say that I wish Senator
    Corker and Commissioner Hagerty were back here because they
    pretty well took the thunder out of my speech today. And I do
    want to let you know that we do have a good working
    relationship with the FDIC and State regulators that examine
    us. We are a conservative run bank and over the past 24 years,
    we have assisted our community through local projects, sports
    teams, and by simply being a good neighbor, which I think is
    important in community banking. We also have financed small
    businesses and are there to watch them grow and develop.
        I want to let you know that over the last few years, we
    have been financing a different type of business, one that
    started with two employees in the late 1980s, grew to four
    employees in 2005-2006 and now has eight employees. It does not
    sell a product, nor does it earn a profit, but it does provide
    a valuable product to the bank. That small business is our
    compliance department within our bank. It performs feats of
    nature never seen before, including creating interest rate risk
    shock analysis on loan portfolios as well as investment and
    deposit portfolios, keeping logs on complaints received no
    matter how small or trivial. One of those is whenever somebody
    calls in and complains about an ATM card that does not work and
    when we do the investigation, find out it is because they did
    not have any money in their account. Or maybe they lost their
    PIN number, or maybe when a loan officer calls a customer, they
    call and complain because that loan officer was not nice when
    he told me I was past due.
        And my personal favorite is the Suspicious Activity Report,
    classified as a SAR, which essentially turns normal, everyday
    bankers into police officers by having them assist in capturing
    criminals by reporting suspicious activities of our customers'
    bank accounts, check writing habits, and the use of cash. We
    log in that information, create reports for instances of
    suspicious activities and submit it electronically where it is
    then stored in case a law enforcement agency needs it in the
    future. They can then look at it and find some background and
    see if anybody is moving, hiding, or laundering funds. Just
    this compliance requirement takes two full time employees at my
    institution.
        Meeting these compliance requirements continually drains
    our bank of the ability to produce new products or services for
    our customers that will serve their needs and in the end earn a
    profit for the bank, and those customers. We have 69 employees,
    of those eight work in the compliance department. As Senator
    Corker said, they do outnumber our lenders. As of yesterday, we
    had seven lenders in our bank. We have one more person working
    in our compliance department than we do lending. Each one of
    these regulations affect our daily operations and although we
    do have eight people that work in the compliance department,
    the other 61 spend approximately 10 percent of their day
    gathering information, completing paperwork to assist the
    compliance department.
        Because of the Dodd-Frank Act, which has been mentioned
    several times today, my bank is looking forward to the
    opportunity of hiring over the next couple of years seven
    additional officers, bringing our total to 15. Once again, we
    have seven lenders at our bank.
        As for the businesses we serve, as you will hear from these
    gentlemen here, they too are struggling. They too feel the same
    effects of over-regulation and the uncertainties in the market,
    and uncertainty of what will come out of Washington. Are
    businesses in the community hiring people right now or do they
    plan to hire in the future? No, they do not. Are regulatory
    burdens on banks and mom and pop businesses affecting the
    ability to make loans to people and create jobs? Yes, they are.
        It is not actually the rules and regulations a lot of
    times, it is the interpretation of the rules. I just mentioned
    the SARs, the Suspicious Activity Reports. We have examiners
    come in and basically say that a bank our size should have X
    number of Suspicious Activity Reports monthly on a basis and
    that we are behind that particular number, and gave us
    information on how to look deeper into those things and find
    things that are suspicious nature so we can report. So yes, we
    are now filling out Suspicious Activity Reports on things that
    I am not sure are actually suspicious activities, but we are
    meeting the examiners' goals.
        You know, whenever we can get rid of these things and
    getting out with our customers and helping them find ways to
    increase revenues, decrease costs and produce a better product,
    when we have the time, resources, and staff to do these things,
    I believe the country stands a better chance of creating
    opportunities for jobs than just sitting behind our desk and
    filling out reports. When we can cut down on regulations and
    have time to spend with customers, I look forward to being
    there with that new startup business and watching it grow and
    prosper. That is why I got in this business, is to help people.
        Thank you.
        Chairman Issa. Thank you.
        Mr. Bedell.
        [Prepared statement of Mr. Cocanougher follows:]

        [GRAPHIC] [TIFF OMITTED] T5304.017

        [GRAPHIC] [TIFF OMITTED] T5304.018

                        STATEMENT OF BOB BEDELL

        Mr. Bedell. Mr. Chairman, Committee Members, I am Bob
    Bedell, Sales Unit Manager for Coke Consolidated, representing
    the Beverage Association of Tennessee. We appreciate the
    opportunity to appear before the Committee today.
        Coke Consolidated is the local Coke bottler here in middle
    Tennessee; however, we do business in ten other states
    employing 6000 people including 700 in five facilities right
    here in Tennessee. Those include 440 workers at a nearby sales
    center here in LaVergne and then we have got 120 in our
    production facility in Nashville.
        Nationally, the industry provides 227,000 jobs paying $18
    billion in wages and $900 million in charitable contributions.
    We have a long history of good corporate citizen and we are the
    companies people turn to first when they need a product
    donation for their charity or community event. We are usually
    the first ones on the scene in a national disaster to provide
    potable water. We are proud of the relationship we have with
    our consumers and the communities we serve.
        In recent years, we have become the scapegoat on the issue
    of obesity. While this indeed is a serious health issue,
    singling out one type of food or beverage for blame is not an
    effective way to seek a solution.
        Our industry is a leader in innovation. We provide a wide
    variety of choices to consumers so they can decide what best
    fits their lifestyle. We clearly post the number of calories on
    our product so our consumers know what they are consuming. We
    put it right on the front of all of our packages. We did this
    after another successful program in schools where we removed
    the full calorie drinks from the schools, because we realize
    schools are places where kids do not have their parents to help
    guide their choices. This resulted in an 88 percent drop in
    beverage calories from schools, and in fact, regular soft drink
    consumption is now down 39 percent over the last decade. That
    is according to the CDC. Yet obesity rates continue to rise.
        In spite of all this, we were shocked to learn that our own
    tax dollars are being used against us in the form of CDC grants
    under the guise of obesity prevention. Incredibly, the CDC has
    funded advertisements in communities across the nation not only
    demonizing our industry, but urging people not to drink our
    beverages. The ads are inaccurate and they are over the top.
    They lead the viewer into believing soft drink consumption will
    cause diabetes and make people sick. Language such as ``Are you
    pouring on the pounds?'' and ``Do you know what your kids are
    drinking?'' and ``Don't get smacked by fat.'' The fact is that
    all calories matter, not just those from beverages.
        Even the New York Times looked into these grants and
    uncovered a string of emails between the state's public health
    officials who argued about the appropriateness of targeting one
    element of the diet. Included in that exchange was a comment
    from one official, ``Well, what can we get away with?'' I
    repeat--``What can we get away with?'' That was the kind of
    conversation that was going on.
        On behalf of the 227,000 men and women who work hard every
    day in this industry, I can assure you we take issue with these
    irresponsible and contrived attacks on our products. We agree,
    obesity is a serious issue and have taken steps to provide
    consumers with the options and information they need to make
    the appropriate choices. We also have a history of supporting
    programs and initiatives which promote physical activity and
    healthy lifestyles.
        A simplistic approach of targeting one industry for a
    complicated issue like obesity simply will not work, and
    taxpayer funded ads attacking our products is unacceptable. For
    this reason, we wholeheartedly support Congressman DesJarlais'
    bill Protecting Foods and Beverages from Government Attack Act
    that would stop these ads from running. H.R. 3848 would not
    stop other prevention efforts, if that is how Congress chooses
    to spend taxpayer money, but it would stop these inappropriate
    ads that unfairly target a vibrant industry and in an effort to
    suppress sales which will kill jobs.
        We thank you for your time and attention and we appreciate
    the opportunity to participate in this morning's hearing.
        Thank you.
        [Prepared statement of Mr. Bedell follows:]

        [GRAPHIC] [TIFF OMITTED] T5304.019

        [GRAPHIC] [TIFF OMITTED] T5304.020

        [GRAPHIC] [TIFF OMITTED] T5304.021

        Chairman Issa. Thank you. I will ask a few brief questions.
        One of them, Mr. Bedell, I think the product in front of
    you says Zero on it. Does that tell me the amount of calories?
        Mr. Bedell. That is exactly right, Chairman.
        [Laughter.]
        Chairman Issa. So is it not true that in the beverage
    industry roughly half of your sales of soft drinks in fact are
    zero calorie or near zero calorie beverages?
        Mr. Bedell. It is getting very close to that, yes.
        Chairman Issa. And next to it, I notice that you have a
    container of water. Coca-Cola is also in the water business,
    are they not?
        Mr. Bedell. That is correct, Dasani water.
        Chairman Issa. So let us see, you can buy water, you can
    buy no calorie or you can buy calorie sodas and it is your
    fault if people get fat. That is the theory of government.
        Mr. Bedell. You summed it up very well.
        Chairman Issa. These are the people that brought us a
    convention in Las Vegas.
        Mr. Bedell. Yes, yes. We believe the consumer has a choice
    and therefore we make products available for those consumers to
    have a choice. We find even locally where we have pulled out of
    schools, the folks that have really suffered are all the
    sports, the band, all the different functions that used to get
    that money from the vending.
        Chairman Issa. Just on a personal note, I am a little heavy
    and I drink diet sodas. My wife is light and she does not like
    sugar-free, so she drinks the sugary ones. I am not sure the
    correlation is not reverse in my case. I think it is the no
    calorie that has been hurting my diet, but that is a separate
    point.
        Mr. Bedell. Well, we appreciate both of you.
        Chairman Issa. Mr. Cocanougher, do you have any credit
    default swaps?
        Mr. Cocanougher. No, we do not.
        Chairman Issa. International banking activities including
    complex instruments all over the world?
        Mr. Cocanougher. We send some wires out, but no lending or
    deposits, no.
        Chairman Issa. So what part of the crisis in 2008 did you
    participate in as a bank?
        Mr. Cocanougher. We had the word ``bank'' on the name of
    our building.
        Chairman Issa. So in fact, Dodd-Frank regulated you without
    an actual tragedy that you participated in or were subject to.
        Mr. Cocanougher. I would agree with that, yes.
        Chairman Issa. Well, do not feel bad. In Washington, we
    closed Pennsylvania Avenue because an airplane landed on the
    south side of the White House. It is the same kind of thinking
    that, you know, any tragedy, any emergency is a good excuse to
    do something you wanted to do anyway. Not that I have an
    opinion on that.
        [Laughter.]
        Chairman Issa. Let me go through one round. I was a
    manufacturer for a number of years. Mr. Bedell, Coca-Cola, I
    believe you would be an ISO 9002 for your quality and safety
    standards, your company observes a set of internal safety and
    quality standards and it includes how you do your bottling, the
    whole quality circle, how you deal with defects and so on. Now
    you do not get that from the government, do you?
        Mr. Bedell. No.
        Chairman Issa. So the whole question of quality, how you
    treat your customers globally, Coca-Cola worldwide, is in fact
    voluntary standards with you paying for people who not only
    help you learn how to do it, but come in and do the evaluation
    and they pass or fail your facilities for whether you meet
    these high global standards, is that right?
        Mr. Bedell. Yes.
        Chairman Issa. Mr. Faulkner, similar?
        Mr. Faulkner. Yes. We are actually ISO certified. When we
    were accredited, we were one of the smallest in the country
    because we only had six people at that point.
        Chairman Issa. So you go through this whole process of
    globally accepted standards, ones that are rigorous, ones that
    you actually pay to go through. Just one kind of a question for
    all of you, do they come in and fine you if you do not meet the
    standard on a test?
        Mr. Faulkner. No, it is a cooperative, supportive
    educational activity.
        Chairman Issa. But you can flunk.
        Mr. Faulkner. Absolutely.
        Chairman Issa. And if you come up with a major defect in
    some part of your quality or some sort of a problem related to
    a set of standards that the world has bought into and improve
    every year, what happens?
        Mr. Faulkner. We would be warned on it to fix it and we
    would be given a very specific amount of time in which to fix
    it. We would be re-audited or held accountable for having done
    so. And if we did not, we would be decertified.
        Chairman Issa. Mr. Payne, similar situation in your
    experience in business?
        Mr. Payne. Yes. We are not ISO certified, we are ISO
    compliant and we comply with Sigma and a lot of our customers
    force us to, but same kind of thing.
        Chairman Issa. And your customers rely on that,
    particularly when you are ISO or other standards. So do you
    advertise it?
        Mr. Payne. Uh-huh.
        Chairman Issa. It is important to you and in fact, you pay
    to make sure that your company does it. And we could add, of
    course, the Better Business Bureau and other organizations like
    that. Should we take back to Washington that in fact
    Washington's problem is we do not think like the very entities
    that mostly ensure quality and delivery and predictability, and
    that if government regulators--and I think you said this in
    your opening statement very well--government regulators need to
    in fact go to ISO 9000 type training, find out what it is like
    to actually come with a set of standards, test to those
    standards and if you fail those standards, be part of the
    remediation of those standards.
        Mr. Faulkner. Correct.
        Chairman Issa. You would all agree that that is what I
    should take back?
        Mr. Bedell. Yes. We have very high standards for quality
    for our brands. And with ISO, all that does is add cost.
        Chairman Issa. Well, thank you very much. As a former
    businessman, I wanted to hear that things had not changed in my
    12 years in government.
        Mr. DesJarlais.
        Mr. DesJarlais. Thank you, Mr. Chairman.
        With all due respect to our prior panel, this is the kind
    of thing that people need to hear. I think listening to each
    and every one of you, there was a chilling tale of how the
    federal bureaucracy can over-burden businesses. And we can just
    go down the line. Mr. Faulkner, the ``Let's Make a Deal,'' you
    pay this fine now and we will let you off easy or we can do it
    the hard way. That unfortunately is not a story that I have
    only heard once. I have heard any number of people with MSHA,
    OSHA and other regulatory agencies tell that same tale of being
    strong-armed, basically you cooperate and we can make this less
    painful on you. And that is clearly no way to create jobs and
    businesses.
        And Mr. Payne, basically what your company is facing is
    saying we have all these employees that have been with us for
    an awful long time, a lot of them are like family, they are
    happy here, but yet we are going to have to turn them away when
    it comes to providing healthcare, one of the things people look
    to. In essence, you are going to say that the government, you
    know, not necessarily can do a better job providing healthcare,
    but they are going to have to turn to the government. And it
    kind of makes me wonder about the healthcare law intent, when
    we were told that if you like your insurance, you can keep it.
    Clearly companies like yours show that it is just not feasible
    from a cost standpoint to continue to pay for health insurance
    rather than just pay the fines that the government asks you to
    pay. And we will get back to that.
        Mr. Cocanougher, you are asked to police people and anyone
    sitting in the room is sitting here thinking about their habits
    being investigated by people in the bank that are hired to just
    watch whether or not your cash expenditures or the way you
    write checks is inappropriate. That ought to make everyone just
    wonder a little bit about where this government is heading in
    terms of our personal rights and freedoms.
        And Mr. Bedell, first of all, thanks for the kind words
    even though I am drinking a competitor over here.
        Chairman Issa. You did not have to point that out.
        Mr. Bedell. We will get you fixed, for sure.
        [Laughter.]
        Mr. DesJarlais. How demoralized do your workers feel when
    this current administration puts out stimulus money in the name
    of job creation and then your workers see ads on TV attacking
    the very product that they produce and count on for their
    livelihood?
        Mr. Bedell. It is outrageous, it is very demoralizing. It
    is just wrong.
        Mr. DesJarlais. And these are FDA approved products. You
    are a leader in putting the facts out there and people being
    responsible, helping schools educate on physical activity,
    clearly labeling your products but yet taxpayers, and the very
    workers that pay taxes for your company are paying taxes for
    ads to attack their own job.
        Mr. Bedell. That is exactly right.
        Mr. DesJarlais. Okay. Well, clearly that is not right.
        And Mr. Payne, it sounds like when 2014 rolls around, you
    do not have a good option when it comes to the healthcare law.
    You know, I had the pleasure of visiting you down in
    Fayetteville and a great bunch of folks there and I know you
    want their healthcare to continue. But you do not have a good
    option, do you, with this current law?
        Mr. Payne. No, we really do not. There is not a good
    option, we are in the middle size that it just hits us wrong.
        Mr. DesJarlais. And it kind of shows a failure in planning
    because a small company is labeled as one with 50 employees or
    less and a large company is 500 employees or more. But under
    this law, you are kind of stuck in between and there was not
    really a provision or a thought out plan for that.
        Mr. Payne. You are exactly right.
        Mr. DesJarlais. So you can either pay a $3000 penalty for a
    higher number or a $2000 penalty for the 50 or less, but either
    way, it is cheaper for you to turn these people back to the
    federal exchanges.
        Mr. Payne. Unfortunately that is right.
        Mr. DesJarlais. Mr. Faulkner, just--I mean if you want to
    elaborate a little bit more, how does that feel to have a
    regulatory agency come in and levy a fine that makes absolutely
    no sense. You go out and clearly do the right thing. How does
    that make you feel about our federal government?
        Mr. Faulkner. Certainly not that it is by and for and of
    the people. We, in 37 years of manufacturing over at the plant,
    have never had a workers comp claim. We are hellions on safety
    and for them to come in and treat us as if we are either
    ignorant or malicious or that we do not care about safety. We
    are small enough that we cannot afford not to be intensely
    concerned about safety because any accident, any situation is
    too expensive for us to shoulder. Prevention is what keeps us
    in business. And they come in and have us doing things or
    threaten to force us to do things that honestly make no sense.
    You know, put up railings in places where people never go and
    are not allowed to go. Sprinkle buildings that were built to
    code that were not needed to be sprinkled. Any one of a number
    of things, but it clearly shows that they are out of touch and
    really that their motivation is less about safety and is more
    about parasitic department survival.
        Mr. DesJarlais. And I know my time has expired, but Mr.
    Cocanougher----
        Chairman Issa. But go ahead anyway.
        Mr. DesJarlais. Thank you, Mr. Chairman. If you will yield
    an additional 30 seconds.
        I had some community bankers say an interesting comment to
    me as well as home healthcare companies, that if the government
    would just leave the status quo alone, we can deal with it. But
    the changes occur so rapidly in terms of compliance, you are
    constantly having to hire new people. It is almost like we have
    been beaten down to the point that we will just accept what we
    have now if they just will not change it any further.
        Have you had a similar experience?
        Mr. Cocanougher. I think you are correct there. And as we
    shared earlier today, we have a lot of banks now that are doing
    merger and acquisitions and it is not merger and acquisitions
    because of capital, because of bad loans or otherwise. They are
    merging because they cannot afford the compliance departments
    they have and by merging two groups to get to a certain size,
    they can afford to be in business. So what you wind up with is
    less banks, probably eliminating departments within the merger
    of those banks, and making less employees.
        But yes, if we could just have some certainty about the
    rules that are there and interpret them the same from one
    meeting to the next, it would make a great deal of difference.
    Right now, whenever you have an examiner come in, they
    interpret a rule differently than the one that came in before
    that interpreted it differently than the one that came before
    that. And it is very difficult to hit that moving target.
        Mr. DesJarlais. Thank you, Mr. Chairman, for your generous
    extension of time and I yield back.
        Chairman Issa. I thank the gentleman. I thank you for
    bringing us here to Tennessee.
        Mrs. Blackburn.
        Mrs. Blackburn. Thank you.
        We are so appreciative that each of you would take your
    time to be here and to talk with us, because you are doing this
    on your own dime. And we appreciate that you are investing in
    that, I think it shows why so many of us believe that the men
    and women who are participating in the free enterprise sector
    every day get up, go to work, create these jobs, they are a big
    part of the answer. They are not the problem.
        Congressman DesJarlais mentioned some of the listening
    sessions that he has done. We have also followed that format in
    our congressional district and spent the past two years holding
    listening sessions with our job creators that are out there,
    large and small.
        Last week, I was over in Arkansas with one of our
    colleagues and in Charleston, South Carolina with another of
    our colleagues doing similar job creating, and I have got to
    tell you, we hear these stories everywhere we go--the cost of
    compliance, the cost of uncertainty, the cost of the over-reach
    of federal regulations. So I thank you for adding to what is
    becoming volumes of information from our job creators about
    what is wrong with the federal government structure right now.
        Mr. Faulkner, I have got to tell you, I love your idea of
    mandating change on the agencies. I do think that that is the
    way to go and I think that is one thing we need to do.
        Mr. Cocanougher, I want to come with you, I want to be sure
    that my note I made is correct. You have got two full time
    employees that are dedicating to looking at suspicious activity
    and then you estimate that 10 percent of every day of your
    other employees is spent gathering information or filling out
    paperwork and----
        Mr. Cocanougher. I would say that is correct.
        Mrs. Blackburn. So you have got three-quarters of an hour--
    three-quarters of your workday if you have got an eight-hour
    workday, that would be about three-quarters of an hour that is
    spent with nothing but doing compliance.
        Mr. Cocanougher. My wife would tell you that she would
    yearn for me to have an eight-hour day, but yes, 10 percent
    would be correct.
        Mrs. Blackburn. All right, that is what I wanted to verify.
        Mr. Payne, welcome, I am glad to see a Texan back in
    Tennessee. You all would not be in existence if not for us.
        [Laughter.]
        Mr. Payne. Glad to be here.
        Mrs. Blackburn. So I just want to remind you of that good
    fact and I say that lovingly.
        Chairman Issa. Now if they had only treated Davy Crockett
    as kindly when he left.
        [Laughter.]
        Mrs. Blackburn. Right. We could all benefit by listening to
    some Davy Crockett, reading some of those remarks that he made.
        But being married to a Fort Worth, Texan now for I guess 38
    years is how long we have been married, I appreciate and I love
    that pioneer spirit that all you Texans bring to bear.
        I appreciate what you are saying about you are into cut and
    survive right now. And we want to see you move to grow and
    expand. And you talked specifically about the healthcare law.
    Now I want you to articulate for me, kind of go through just a
    brief summary what your steps would be if this goes into
    existence and you feel like it is going to legislate you out of
    business. What are you going to have to do, because you are now
    at 450 employees, with 11 plant locations. We like that we have
    got one of those here. If it goes into effect, what do you fear
    would happen to Conner Industries within a couple of years?
        Mr. Payne. Well, there are several things that could
    happen. You know, we are working on our budgets to try to see
    where money could come from and what our options are. Obviously
    one of the options is to cancel all the policies and pay the
    penalty. What we fear there is there is not enough capital
    retention from profits after the penalties to keep our
    covenants alive in the banks. You have to make money to be able
    to sustain financing. And today, we do not have a financing
    problem.
        You know, one thing that we are looking at is everybody in
    the company taking a little bit of percentage of the cost which
    would hit a lot of our key people. You average it out and
    everybody takes a certain amount of the hit. That is one option
    we have got.
        The other option is we tend to try to add new locations
    about every other year and that is what we have done, that is
    where our 11 locations have come from. So we always have one to
    two, maybe even three that we call expansion locations that are
    in growing modes and it takes several years to develop those
    markets to where they can actually be self-sustaining and
    profitable. And we may have to take some of those down, which
    would also result in overhead cutbacks in Forth Worth, maybe
    sell off some individual locations. The model will be
    different. I cannot tell you exactly what it looks like, none
    of them are very good alternatives.
        You know, to answer your question, there is a lot of
    variables that could go in there and none of them are really
    very good options.
        Mrs. Blackburn. Thank you. My time has expired, I yield
    back.
        Chairman Issa. Thank you.
        Mrs. Black, we have saved the best for last. The floor is
    yours.
        Mrs. Black. Thank you, Mr. Chairman.
        The stories are great. I was just writing down as you were
    telling the stories. Mr. Faulkner was talking about OSHA and
    what they are doing to impact his business and his lack of
    ability to be able to grow because of all the things you have
    to do to comply with.
        Then I hear Mr. Payne talk about Obamacare.
        Mr. Cocanougher, you talked about the Dodd-Frank Act and in
    particular SAR. And as I read your testimony here, I wrote
    ``crazy'' out beside it because I thought I cannot believe that
    we are actually doing this. We are, the government--I do not
    want to say us here on this panel, but it is good to know what
    you are dealing with so we can go back and make a difference.
        And then Mr. Bedell, you talk about us using our own
    taxpayer dollars, the dollars that you are paying and your
    company is paying, to actually come back and lobby against
    yourself--just crazy again. I guess crazy is the word here that
    is the word of the day when we hear these stories.
        I want to go back, Mr. Faulkner, to what you said about
    this would be so much more effective if it were an education
    process that really helps you as job creators to do your job
    better. If they came in with the mentality and we flip that
    mentality from it trying to penalize you for something to
    trying to help you do it better. So I am going to take that
    back with me because I think as we take a look--obviously we
    need to have agencies where there is oversight, where we are
    making sure everyone is abiding by the rules. But if we change
    the perspective on that from being education from being
    penalties, I think we would be doing a benefit both to society
    and also to you as job creators.
        And then, Mr. Cocanougher, I think it was you that said
    about the interpretation of the rules. So obviously when those
    rules were written, unlike here at the state level where rules
    always come back to the governing body to be looked at and made
    sure that they are abiding by whatever the intent was, we do
    not do that at the federal government. So if there is a way
    that we can get more involved in making sure that the rules are
    the rules that reach the intent of whatever the legislation
    was, I would say that Chairman Issa and his committee comes the
    closest to doing that. But it is not done on a regular basis.
        I use this term of the Barney Fife syndrome. I think all
    the things you have talked about are the kinds of things that
    as Barney Fife shot himself in the foot, that we are shooting
    ourselves in the foot right here in the United States. We are
    either driving you out of business, as Mr. Payne talked about,
    or we are driving people offshore because they do not have to
    abide by these same crazy regulations if they go offshore.
        So what we are hearing the President say this last week or
    so is that the private sector is doing fine, and I would just
    like to----
        Chairman Issa. Just fine.
        Mrs. Black. Just fine. The private sector is doing just
    fine. I would like each of you to talk about how you feel that
    statement either applies--how you agreed with or did not agree
    with that statement.
        Mr. Faulkner.
        Mr. Faulkner. I would say that we are doing fine in spite
    of the burdens that are being put on us. And it makes me
    excited to think if we had some of these shackles taken off,
    some of the burdens taken off, how much better we could do and
    what a restoration to America as the leading economic engine of
    the globe could be.
        Mrs. Black. Mr. Payne.
        Mr. Payne. Well, one thing about the downturn in the
    market, it did force companies, and ours is one of them, to
    look internally and restructure ourselves into a more
    profitable and efficient company. And we have done that. We are
    in good shape. The uncertainties of Obamacare is something that
    to us really is a cloud hanging there and we do not know really
    what it is going to do. We also share a lot of the same things
    that some of the other guys--OSHA and a few of these others--
    are giving us problems. So we deal with that. But the killer is
    the big one for us.
        Mr. Faulkner. Can I just say that it is really a testimony
    to the American worker and the spirit that in spite of all of
    this craziness, we are buckling up under it and trying to work.
        Mrs. Black. Mr. Cocanougher.
        Mr. Cocanougher. I would like to know what the bar was for
    doing fine. Like you said, compared to what? I subscribe and
    read on a daily basis three to four economists a day and I am
    not sure I see that in the numbers they produce. When you have
    got negative production, you have unemployment going up and not
    down, and I do not think that 8.2 is a real number. I think it
    is probably closer to 12 to 13 percent unemployment. I do not
    see how that is fine. I would say a lot of times when people
    say how are you doing, it is fine. Well, fine is not really a
    good answer.
        [Laughter.]
        Mrs. Black. Mr. Bedell.
        Mr. Bedell. I think Mr. Cocanougher just summed it up, but
    we need the federal government to back out and get out of the
    way so we can take care of business. And that would be a big,
    big change that would be very positive.
        Mrs. Black. Thank you and I yield back my time.
        Chairman Issa. I want to thank all of you for your
    testimony today and I want to take a privilege of the chair
    first to thank the audience for your participation quietly
    throughout these proceedings.
        And I think I would like to close by paraphrasing Ronald
    Reagan who I understand told the story one time about the
    stagecoach that flipped over. And the crew that came to find
    the stagecoach down in the gully realized that there was a
    whimpering and it was a dog from the stagecoach. And it was
    very badly damaged and nearly dead and the person took out his
    revolver and put it out of its misery.
        Then he went on and realized that there was another noise
    and it was sadly a horse and had two broken legs and there was
    nothing they could do, so he put it out of its misery.
        Then, thank goodness, he found the stagecoach driver, he
    was trapped and they got him out, he had a broken leg and they
    asked him how he was and he said, ``just fine.''
        [Laughter.]
        Chairman Issa. You know, the American spirit is we always
    say we are doing just fine, particularly if it will keep us
    from being shot.
        Thank you, we stand adjourned.
        [Whereupon, at 11:25 a.m., the Committee was adjourned.]