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





   CAUGHT UP IN RED TAPE: THE IMPACT OF FEDERAL REGULATIONS ON SMALL 
                       BUSINESSES AND CONTRACTORS

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

                                HEARING

                               before the

               SUBCOMMITTEE ON CONTRACTING AND WORKFORCE

                                 OF THE

                      COMMITTEE ON SMALL BUSINESS
                             UNITED STATES
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             SECOND SESSION

                               __________

                              HEARING HELD
                             JUNE 14, 2012

                               __________



[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



            Small Business Committee Document Number 112-072
              Available via the GPO Website: www.fdsys.gov

                                _____

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                   HOUSE COMMITTEE ON SMALL BUSINESS

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

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














                            C O N T E N T S

                              ----------                              

                           OPENING STATEMENT

                                                                   Page
Hon. Mick Mulvaney...............................................     1

                               WITNESSES

Colonel Charles O'Cain, USAF, Ret., Owner, Owl Business 
  Consulting, LLC, Rock Hill, SC.................................     4
Mr. Doug Meyer-Cuno, President, Carolina Ingredients, Rock Hill, 
  SC.............................................................    10
Mr. Monty Felix, CEO, Alaglas Pools, Saint Matthews, SC..........    16
Curwood Chappell.................................................    23
Jeff Carrington..................................................    23
Ken Speirs.......................................................    25
Warren White.....................................................    27

                                APPENDIX

Prepared Statements:
    Colonel Charles O'Cain, USAF, Ret., Owner, Owl Business 
      Consulting, LLC, Rock Hill, SC.............................    31
    Mr. Doug Meyer-Cuno, President, Carolina Ingredients, Rock 
      Hill, SC...................................................    41
    Mr. Monty Felix, CEO, Alaglas Pools, Saint Matthews, SC......    32

 
   CAUGHT UP IN RED TAPE: THE IMPACT OF FEDERAL REGULATIONS ON SMALL 
                       BUSINESSES AND CONTRACTORS

                              ----------                              


                        THURSDAY, JUNE 14, 2012

                  House of Representatives,
         Subcommittee on Contracting and Workforce,
                               Committee on Small Business,
                                                    Washington, DC.
    The Subcommittee met, pursuant to call, at 10:05 a.m., in 
the Rock Hill City Council Chambers, 155 Johnston Street, Rock 
Hill, South Carolina, Hon. Mick Mulvaney (Chairman of the 
Subcommittee) presiding.
    Present: Representative Mulvaney.
    Chairman Mulvaney. Good morning. I am going to call this 
hearing to order. Thank you all for being here. I am going to 
deal with a couple of housekeeping matters first.
    First, I want to tell you why we are here and thank you all 
for coming. A lot of folks do not realize, this is a formal and 
official Congressional hearing. This has the same scope and the 
same gravity that it would if we were doing this in the 
Longworth House Office Building in Washington, D.C. It is just 
that as the Chairman of a Subcommittee, I have the ability to 
do this anywhere that I like. We have done one of these 
hearings in Los Angeles, California, we have done one of these 
hearings in Sumter, South Carolina. And I think it is a 
tremendous tool to allow us to go outside of Washington, D.C. 
and actually get input from real folks and from real people 
about real world experiences and how the law relates to them.
    So today, before we begin, I want to thank everybody for 
being here, especially the witnesses. I appreciate their 
willingness to be here. I do have a request, gentlemen, that 
when you present your testimony, if you would do it, please, 
from the podium behind you, because there is a microphone 
there. We did not have three microphones for you up front.
    The way it is going to work today, folks, because this is 
part of the formal Congressional Record, is that you are going 
to hear me read an introduction. You are also going to hear me 
read some questions when the gentlemen are finished. Each of 
the gentlemen will have as much time as they like to tell us 
about the reasons that we are here, which is to try and look at 
the ways that government impacts their business when it comes 
to regulatory and health insurance issues. So with that, I will 
begin with my formal introduction and my statement and we will 
go to you gentlemen and we will take questions and stuff after 
that.
    The House Small Business Committee has kept a particular 
focus on federal regulations and policies that are adding to 
the assortment of uncertainties confronting small business, 
particularly when those uncertainties add to our nation's 
stubbornly high unemployment rate.
    We have held numerous hearings in Congress related to 
various regulations and have heard continuously that the entire 
regulatory process is flawed and that it often punishes job 
creators and stifles economic growth. Even President Obama 
launched an effort to evaluate regulations that create 
unnecessary burdens. The President has issued an Executive 
Order mandating that agencies do more than the bare minimum 
required to ensure that stakeholders have an opportunity to 
communicate their views on agency regulatory actions. 
Unfortunately, the regulatory agencies under his administration 
have gone in the exact opposite direction from time to time.
    On October 24 of last year, Gallop released a poll that 
outlined small business owners' most pressing concerns, and 
according to this poll, small business owners are most likely 
to say that complying with government regulations is the most 
important problem facing them today. That is more than taxes 
and more than the overall economy. The Gallop poll is mirrored 
by numerous trade association surveys, such as the one 
conducted by the United States Chamber of Commerce in March of 
2012. That Chamber study found that almost half of small 
business owners said regulation is a greater threat to their 
business than taxation and litigation combined. Similarly, a 
poll conducted by the National Federation of Independent 
Business found that 63 percent of respondents believe the rules 
issued by the federal government have done more to hurt small 
business and 74 percent believe that the federal government 
should focus on creating jobs instead of issuing new rules and 
regulations. The message is clear--small businesses need 
Washington to stay out of the way.
    Small business owners face unique challenges in navigating 
federal regulations. According to the study, ``The Impact of 
Regulatory Costs on Small Firms,'' published by the SBA's 
Office of Advocacy in September of 2010, small businesses face 
an annual regulatory cost of over $10,500 per employee, which 
is 36 percent higher than the per employee regulatory cost 
facing large firms. It is oftentimes more expensive for small 
firms to implement regulatory rules and to abide by regulations 
than it is for large businesses.
    And while regulations certainly have benefits, they also 
have costs that are barriers to entry, distort markets, and 
divert scarce capital away from job creation. Small businesses 
simply do not have the resources to navigate the ever-
increasing maze of federal regulations.
    Take the new healthcare law for example. Between now and 
full implementation in 2018, 46 new provisions of that 
healthcare law will need to be implemented. This is on top of 
the 46 that have already been implemented over the past two 
years. The sheer number of things to track and comply with has 
gotten to be so confusing for small mom and pop shops 
struggling to get by in tough economic times, that many of them 
have simply given up. It all goes back to the question, why is 
Washington making things harder for small business and not 
easier.
    EPA, another federal agency that has consistently drawn the 
ire of the small business community, has proposed rules to 
regulate greenhouse gases, the proposed utility maximum 
achievable control technology rule, and the potential 
regulation of coal ash. All have the capacity to increase the 
cost disproportionately on small businesses. Each of these 
rules on their own and in combination could directly and 
indirectly lead to substantially higher energy costs and 
reductions in employment.
    Direct costs incurred by small businesses when complying 
with regulations present a significant problem, but it is not 
just direct costs that hinder growth. Dodd-Frank is an 
excellent example of how indirect costs can hurt small 
businesses as well. While very few of the 500 rulemakings 
required by Dodd-Frank will apply to small business, these new 
rules will have the potential to hit them where it hurts them 
the most, their access to capital. In the last few years, 
lending to small firms has plummeted to record lows. The 
stricter regulatory environment created by Dodd-Frank and the 
new Consumer Financial Protection Bureau combined with the 
uncertainty brought by many of the law's main provisions could 
very well be the reason why we have seen such weak growth in 
small business lending.
    Unfortunately, these are but a few of the regulatory 
burdens facing America's small business owners. Washington must 
do a better job of helping small firms grow to become 
tomorrow's big businesses.
    I look forward to listening to the testimony from each of 
the gentlemen today and hope you can help me and this Committee 
identify these regulatory barriers and discuss options that are 
available to us. Again, I welcome you.
    And what we will do is I will read a brief introduction for 
the record for each of you gentlemen, and then we will start 
with you, Colonel O'Cain, and move down the table and take your 
testimony. Please take as much time as you like. If we were in 
Washington, we would be limited to five minutes, but the nice 
thing about doing these hearings here is that we have got as 
much time as you like. So please do not feel rushed at any 
time.
    I know you have all submitted written testimony, which will 
be part of the record. Feel free to go beyond that in your 
verbal testimony. Again, what we are trying to do here today is 
take the story, take the real world stories of what happens 
when small businesses try and deal with what Washington gives 
them, and take those stories back to Washington to try and see 
if we cannot improve things.
    The introductions. Our first witness today is retired 
United States Air Force Colonel Charles O'Cain. He spent 30 
years as an acquisition executive on active duty and in the 
Reserves working in various capacities from base level to the 
Pentagon. He has also worked for 25 years in the private sector 
as a contracts executive for Texas Instruments Defense Group 
and for Raytheon. For the past five years, he has been the 
owner of Owl Business Advisors, helping small and medium sized 
businesses conduct business with federal, state, county, and 
city governments as a consultant.
    Thank you again, Colonel, for being here.
    Next will be Douglas Meyer-Cuno. Mr. Meyer-Cuno founded 
Carolina Ingredients in July of 1990 with a vision of creating 
a customer-service driven and value-added distribution company. 
After 10 years, Carolina Ingredients built a blending facility 
which allowed the company to create even more value for its 
customer base. And over the past two decades, the company has 
evolved into a well-known regional blending manufacturer with 
sales throughout the United States. Mr. Meyer-Cuno has been 
actively involved in managing the sales department but now 
dedicates the majority of his time to the company's vision and 
planning. Today, the company proudly employs 37 people and is 
located right here in Rock Hill. Thanks, Mr. Meyer-Cuno, for 
your time as well.
    Rounding out the panel is Mr. Monty Felix, owner and CEO of 
the Alaglas Pools in Saint Matthews, South Carolina. He is the 
immediate past president of the American Composite 
Manufacturers Association, which represents composite 
manufacturers across a wide variety of industries, including 
aerospace, automotive, architecture, custom molding, marine, 
recreation and transportation industries. Thank you again for 
making the trip up the road from Saint Matthews, Mr. Felix.
    So with that, Colonel, we will begin with you. I understand 
you are going to talk to us a little bit today about the 
difficulties that sometimes businesses face when contracting 
with the federal government, something very near and dear to my 
heart. Again, if you would not mind, perhaps moving to the 
podium while you speak, that would be extraordinarily helpful.

 STATEMENTS OF COLONEL CHARLES O'CAIN, USAF, RET., OWNER, OWL 
   BUSINESS CONSULTING, LLC, ROCK HILL, SOUTH CAROLINA; DOUG 
 MEYER-CUNO, PRESIDENT, CAROLINA INGREDIENTS, ROCK HILL, SOUTH 
CAROLINA; AND MONTY FELIX, CEO, ALAGLAS POOLS, SAINT MATTHEWS, 
                         SOUTH CAROLINA

              STATEMENT OF COLONEL CHARLES O'CAIN

    Colonel O'Cain. Good morning, Mr. Mulvaney and everyone 
else who is attending the hearing.
    Maybe I should start by explaining the difference between a 
large business and a small business. A large business, all 
these problems that Mr. Mulvaney has alluded to regarding 
regulations are not a problem for large business. They are a 
cost, but not a problem, because in each one of those areas 
where a regulation has to be complied with, they simply have a 
vice president or senior vice president or director with an 
army of people who take care of all that. They make all the 
right submissions and they do not get in any kind of trouble 
with the government, because they have the resources to be able 
to do that.
    But mom and pop, they do not have these vast resources to 
call to help them navigate their way through these shark-
infested waters. It is daunting enough that a number of small 
businesses will not even try to do business with the government 
because they see that it is too complicated, too complicated. 
And then there are other small businesses who want to do 
business with the government and they attempt to do business 
with the government. Because resources are vital to them, 
financial resources, they generally try themselves. So they 
will go online and search websites and read this site and that 
site and what-have-you. And normally after a few weeks, they 
are more confused than when they started. They have no idea 
where to start to begin doing business with the government, and 
if they think they have begun the process, they have no idea 
when they are done. How do you know when you are done. How many 
certifications does it take before you can actually submit a 
bid and negotiate a contract with the government.
    This is what I do now as a consultant. As Mr. Mulvaney 
pointed out, I have considerable experience on both sides of 
the negotiating table, both on the government side and the 
private sector side. I worked for large businesses--Texas 
Instruments and Raytheon are huge billion dollar businesses. 
And so, you know, we did not have problems with the 
regulations, we just had a vice president that took care of all 
that for us and we went on about doing our business.
    What I do to help small businesses be in a position to do 
business with the government is I guide them through the 
process. I know what it takes. There are about 15 things that 
you have to do in order to be able to do business with the 
government, unless you want to do also business with GSA, which 
adds another four or five. But the way the process is set up, 
you cannot start with step six because you need--in step six, 
you need the certificate you got from step five to go to step 
six. And so when businesses try to work their way through the 
process, they find something and say, look, I need to do this 
in order to be able to do business with the government. So they 
try to go do it. Halfway through the form, they find out there 
is a code that they do not have. They have no idea how to get 
that code, there is no step, there is no note out to the side 
that this code comes from, you know, step five. And so on and 
so forth. So you have to go step one through step X in order to 
be able to do business with the government.
    Most small businesses understand the reason that some of 
this is difficult. I think all of us would understand that. 
Would you like your government to do business with terrorist 
organizations or convicted felons? Or how would your like your 
taxpayers' dollar spent by businesses that have a long history 
of providing terrible goods and services?
    Part of the process that a small business goes through is 
to vet those out, is to get the non-players out of the way so 
that the legitimate, sound, honest, hard-working small business 
organizations can do business with the government. So the small 
businesses do not argue that yeah, this is necessary, some of 
this is necessary in order to ferret out the non-players, but 
there are other things that enter into a small business' 
decision to do business with the government. There are a lot of 
products and services where they are required to be done by 
U.S. firms. A lot of small businesses get their base products, 
their raw materials overseas because a lot of it comes from 
overseas. And so someone has to advise them that you cannot get 
your material from Taiwan any more, you are going to have to 
get it within the United States in order to do business with 
the government. The good thing is that everybody has to do 
that. Your competitors also have to get their raw materials 
from the United States and not outside.
    There are certain countries that you cannot do business 
with. Cannot do business with North Korea--not sure why you 
would want to, but you cannot. Iran is also a country that you 
cannot do business in, and there is a list of them, they are 
all listed. You just have to know where to go find them, you 
know. Everything you need to do in order to be able to sell 
goods and services to the government is online somewhere. And 
the problem is that small businesses do not know where to go to 
start and they do not know when they are finished with all the 
processes that are necessary in order to do business with the 
government.
    There is what is called a CAGE code, it is an 
identification code that without that, you cannot do business 
with anybody. Well, how do you get that? How do you know you 
need that? And then how do you go get it? Well, that is like 
step four, so you have got to have gone through one, two and 
three before you can get to a CAGE code which comes 
electronically from the government. Back in the old days, it 
was all done by paper and this process could easily take a year 
and a half or two years in order to be able to do business with 
the government. The good news is that the government has all of 
these regulations and requirements online, it is just a matter 
of finding them and knowing what step to go through, the order 
to go through in order to be able to do business with the 
government.
    I do not have solutions for all the problems that Mr. 
Mulvaney brought up, with regulations and that sort of thing, 
but again, a lot of these regulations are good regulations. 
OSHA, you know, do you want to have a safe work environment. I 
have gone into clients and gone into their warehouse and just 
walking around, looked up and seen a heavy item up on the top 
shelf just teetering up there waiting on a thunderstorm to send 
that crashing down on somebody's head. And as I walk through, 
now I am an OSHA rep--not really, but I am trying to help them 
stay clear of violations that when the OSHA rep comes in they 
are going to find. These make sense. I say you are going to 
have to move that box back because it is going to fall on 
somebody and kill them and if the OSHA guy comes in here, he 
will shut you down. And so a lot of these have practical 
reasons for being there, you know.
    The government gets over-zealous though, you know, and 
there's this reason and that reason and the other reason and 
what-have-you. Unfortunately, I do not have the answers to all 
of that--I do not. What I do have answers to is how can we make 
it easier for small businesses to be able to do business with 
the government, to be able to submit proposals, submit bids, go 
in and negotiate contracts. That I can do. The good news is 
that it is easy to do in that there is a light at the end of 
the tunnel, the solution is there and it is a matter of 
implementing that. I am not a computer whiz, but I can sit down 
with a computer whiz and knock this thing out in a short period 
of time. So what you would have then maybe is a flood of small 
businesses coming in trying to do business with the government 
and now they are learning about OSHA and healthcare and all the 
other stuff.
    But the way it is now, they do not have to worry about 
that, because they never can get to the table. What I can do is 
bring them to the table. And that is my expertise.
    All the other regulations, I am sorry, I do not have 
answers to them.
    Chairman Mulvaney. Colonel, let me interrupt you and ask 
you a question because you have hit on some of the key items.
    Thank you, by the way, for mentioning the fact that 
taxpayers do not want the government dealing with terrorists 
and felons and folks who have a reputation for really shoddy 
materials and there is a public interest in making sure that 
folks that are dealing with the government are following all 
the OSHA regulations, for example. I think it is important to 
remember that we are not here today, there is no movement in 
Washington to get rid of those types of regulations. There are 
some that all of us accept actually are helpful to the process 
and also protect the taxpayers in the long run.
    However, at the other end of the extreme, I am reminded of 
the hearing that we conducted in Sumter and in Sumter, there 
was a $103 million government contract to build the new Third 
Army Headquarters at Shaw Air Force Base. Third Army moved from 
Fort McPherson in Atlanta up to Sumter, and they did so with a 
$103 million contract. We found out as a result of the hearing 
down in Sumter that less than $250,000 of that money actually 
went to small local businesses. And when we asked why, we heard 
a lot of what you just talked about, which is it was simply too 
hard for folks to get qualified. You mentioned that there are 
15 steps plus another four if you are GSA. You did not talk 
about the additional 10 steps if you are trying to be an 8A 
minority owned business or something like that.
    Colonel O'Cain. That is actually in there. That is part of 
the 15 steps because with a client, I asked them, I said, you 
know, you are a man, but does your wife own this business or 
own 51 percent or does your wife work in the business and could 
you convert to being an 8A contractor and that sort of thing. 
So part of those 15--I cover a lot of that with them to give 
them the best advantage. But yeah, that is part of----
    Chairman Mulvaney. If you and I sat down with that 15-step 
list and I said, Colonel, help me streamline this, what would 
be the first place you would look at to maybe either combine a 
couple of steps, skip a couple of steps, what are the 
opportunities you have got to make that easier?
    Colonel O'Cain. Well, actually, Mr. Mulvaney, I can step 
someone through the 15 steps in about two weeks, and that is 
submission time and receipt time for the various codes and all. 
All those codes have a reason in the government, there are 
reasons for those codes that go to the efficient operation of 
an organization as large as the United States government. So to 
combine those steps, it would take someone smarter than me to 
go do that.
    The point is, if those steps are there, how can you get 
through them as quickly as possible. That I can go do. It is 
like how do you do away with OSHA.
    Chairman Mulvaney. You and I were talking beforehand, 
before the hearing, about what it used to be like before the 
internet and how the internet actually has created the 
opportunity to try and improve things that used to be done by 
mail back and forth, which I think was much longer. We also 
talked about the fact that there is so much information 
available on the internet that it is sometimes difficult to 
navigate.
    Could you talk about what the advantages or disadvantages 
or the online system are?
    Colonel O'Cain. Yes. First of all, that is a vast 
improvement. When I was a second lieutenant, I was telling Mr. 
Mulvaney, someone would submit a written form and the checker 
of the form would get down to box three and there is an error, 
so they would mail it back to them and there is mail time, you 
know, a week, 10 days, whatever. And then when the small 
business gets a chance, they would get the form at night and 
would go through and correct the error in box three and 
resubmit the form. And then the checker would get all the way 
down to maybe, you know, box eight and find an error and mail 
it back to them, and so on and so forth, and a year and a half 
later, you know, they finally are able to do business with the 
government.
    All of that can be done in two weeks now, can be done in 
two weeks if you know where to go and you know what the boxes 
mean--two weeks. So we have gone from a year and a half to two 
weeks. So I see that as a vast improvement. The problem is is 
that there is no place out there on the internet that will take 
a small business and say here are the 15 things you need to go 
do with little notes out to the side, you know, click on this 
and we will tell you what this step is.
    Chairman Mulvaney. Have you tried the SBA website for that?
    Colonel O'Cain. Have I tried what?
    Chairman Mulvaney. Is there an SBA--Small Business 
Administration--website?
    Colonel O'Cain. Oh, yes, and a lot of the stuff is in 
there. In fact, a lot of the codes and the things and what you 
have to do is in there. But you have to know which little tab 
to go to to click on to work on step two and so on and so 
forth.
    The point is is that somewhere there ought to be some key 
phrases like ``Doing business with the government'' or ``How to 
do business with the government'' or ``Government business'' or 
something that will take you to a table and say, you know, if 
you want to just do business with the local base--Army, Navy, 
Air Force, Marine base--here are the 15 things you need to go 
do and here is the order that you need to go do them in, 
because you need a code from step one to go to step two and the 
code from step two to go to step three and so on and so forth. 
And when you get through, you will be able to do business with 
the government.
    If you want to do business with GSA also, then here are the 
four or five other steps that you need to go through. And this 
is why they are there. One of the steps with GSA is you have to 
take a course, you have to take an online course that will take 
an average person several hours to go complete. And the reason 
for that is that GSA--their base is so big, they do business 
with the entire federal government, most state, county and city 
governments are able to order some things from GSA. And so in 
order to be able to do business with GSA, they do not have time 
to call up every small business that does not know what they 
are doing and say you cannot do that. And so what they do is 
they require anyone who wants to do business with GSA to take 
this course and you have to successfully complete that course 
and get a certification that you have finished that before you 
can go on to the other three steps. That is not bad.
    Chairman Mulvaney. We just did an entire hearing last week 
on the GSA schedules and the process by which you can get your 
materials on the schedule. It was scintillating, I can assure 
you.
    Colonel O'Cain. Yeah.
    Chairman Mulvaney. I am going to ask you one last question 
and then I am going to ask Mr. Meyer-Cuno to step up.
    Colonel O'Cain. Okay.
    Chairman Mulvaney. I am going to ask all of today's folks 
the same question, which is one of the things that we are 
charged with in Washington is trying to prioritize. And with 
the limited amount of time between now and the end of the year 
and the election, I was really stunned by the Gallop poll 
numbers, the ones that said that small businesses considered 
regulation to be their biggest concern, above taxation and 
litigation. And my initial reaction to that was that wait a 
second, but we spend all of our time on taxation in Washington, 
D.C. and if we fix taxation, we'll fix small business and so 
forth. But then I thought back to my days owning and running a 
restaurant, while the tax code was certainly something that I 
paid attention to, I did not actually worry about the tax code 
until after I started making money. And litigation, I felt like 
I had a handle on it, if I did things right, that I knew were 
right, I was fairly convinced I was not too worried about being 
sued over something. But I lived in constant fear of forgetting 
to check a box on a piece of paper some place that would 
subject me to some type of fine or fee or penalty from the 
federal government.
    So I will just ask you, Colonel, if you think--are the 
results of that Gallop poll consistent with what you have seen 
with your customers?
    Colonel O'Cain. Yes, it is. And you know, there are two 
types of small businesses, one of them is already doing 
business with the government and they have had some problems 
somewhere for something; and then the other one is the ones who 
are afraid to do business with the government because of all 
the horror stories they have heard and they have gone into the 
internet and hit a brick wall and have no idea, you know, how 
to proceed forward in order to do business with the government.
    The thing is most reasonable people and small business 
owners, if they ever get the chance to get in there, they can 
figure a lot of that out. Okay? Depending on the type of 
business, you mentioned restaurant, you know, obviously you are 
going to be inspected to make sure it is sanitary. Is that bad, 
you know, that people do not get diseases from eating in your 
restaurant? I do not think that is bad, you know. Most 
restaurants are cleaner than my wife's kitchen, because it has 
to be, you know. But, you know, those are not necessarily bad, 
but somebody starting a restaurant needs to know that there are 
going to be inspectors coming around and these are the kinds of 
things they are going to look for. They are not going to 
inspect it like it is your home kitchen, they are going to 
inspect it far beyond that. You know, crawling underneath the 
stove to see if they can find a little crumb of bread or 
whatever, you know, and all these count against you.
    So yes, regulations can be daunting and that sort of thing. 
There are places where a small business can go to get help. 
Right here in town, Winthrop University has mentors or 
something like that.
    Chairman Mulvaney. The Small Business Development Center.
    Colonel O'Cain. Exactly. And these people have various 
levels of experience in different kinds of business and that 
sort of thing. And sometimes you can go there and maybe get a 
question answered or that sort of thing. Or you can hire 
someone like me.
    Chairman Mulvaney. Colonel, thank you very much. We may 
have some follow-up questions at the end, but I will ask Mr. 
Meyer-Cuno to step up now and tell us a little bit about----
    Colonel O'Cain. Thank you very much.
    Chairman Mulvaney. Thank you, Colonel.
    Mr. Meyer-Cuno, you are going to talk today a little bit 
about your business and how it is going to deal with the new 
healthcare law.

                  STATEMENT OF DOUG MEYER-CUNO

    Mr. Meyer-Cuno. First of all, thank you, Chairman Mulvaney 
for inviting me today.
    So a lot of what you have heard I am going to repeat but 
try to give you a story. First of all, I am not a governmental 
policy wonk and I am not an expert on public healthcare. 
However, I am a businessman and I know a few things about 
managing a company, creating jobs and perhaps most importantly 
keeping my employees employed.
    So when I was asked to testify on the impact of the Patient 
Protection and Affordable Care Act, otherwise and 
affectionately known as Obamacare, I thought I could provide a 
business perspective.
    First, and you mentioned this earlier, I respect the 
government's role in prudent legislation that provides a 
template for businesses to function, pay taxes, and establish 
laws which create the boundaries for our citizens. We need a 
balance of laws and regulations and taxes. We have to have 
that, it creates long-term sustainability. So I am not 
advocating we do not need that kind of scenario.
    So I am going to give you a little bit about my story. 
Carolina Ingredients was started in 1990 as a food ingredient 
distribution company out of my home. The first 10 years of 
business, we grew to 12 employees--not very many. Then we 
created additional value by adding a spice and seasoning 
manufacturing plant. Fast forward two decades to 2010, we built 
the first LEED certified seasoning manufacturing company in the 
country, here in Rock Hill. That was at the end of 2009. We 
employed 21 people at that time. Now we employ 37 people. So 
why do I share this with you? Well, I humbly submit our company 
is an example of the American dream.
    I would like to talk a little bit about the country's core 
culture because I think we are getting away from that and it 
goes to the legislation. Our model that this country was 
founded on over the last 200 years was based on 
entrepreneurship, based on self-reliance, independency, 
creativity and individual accountability. The first 200 years 
of this country's success, this phenomenal success we have had, 
is based on these core cultures. And there are many others, but 
that conversation is not for today.
    It is no secret that the regulations our governments have 
in place today are much different and far exceed what existed 
in 1776, not even to mention 1976. And frankly, that is not a 
bad thing. We talked about that earlier, we need regulations in 
all aspects of our lives. Balance must be created to ensure 
long-term sustainability. However, the Obamacare swings the 
pendulum to the extreme and destroys the balance. And that is 
what I would like to talk about.
    So I mentioned, I am a small businessman. It was a slow 
transition, it emulates the success of many small businesses. 
You mentioned this earlier, Chairman Mulvaney, according to the 
Small Business Administration, small businesses employ 59.7 
million workers, with large corporations employing 60 million, 
so it is about 50/50. Out of that, the small business community 
supplies 43 percent of high tech work force. That includes your 
scientists, your engineers, your computer programmers. We also 
hire a large percentage of the non-skilled workforce. So 
overall, from 1993 to 2009, we supply 65 percent of all jobs in 
the private sector.
    Well, why is this important? Only 30 out of 100 companies 
that are created today will survive their first two years. Out 
of the remaining 30, half will survive the first five years and 
only five will make it to their tenth birthday. Of those five 
companies, only a quarter will make it to their 15th birthday. 
So the reality is, two percent of the corporations will meet or 
exceed their 20th birthday. So let us take it back a little, 70 
out of 100 companies that are created today will not see their 
second birthday two years from now, and only two percent will 
be around in 20 years.
    So we have this Obamacare. The legislation is over 2000 
pages and to be precise, it is 2074. For all of the Senators 
and Congressmen, I respectfully suggest or say, really? Are you 
serious? Do we really need a healthcare program or a bill that 
is 2000 pages? And can frankly anybody tell me what is in it, 
accurately? It just cannot be done. It is a quagmire.
    So my question would be what are the long-term costs to the 
citizens and to the government? And who knows? Here is what I 
do know. All government regulations cost small business time, 
money, and manpower--without a doubt. The more time you 
allocate towards compliance, the less time you have to create 
jobs, manage our businesses, and compete in the global market. 
Regulations are costly. We talked about this too. For small 
businesses with less than 20 employees, regulations cost 
$10,500, a little bit more than that, per employee. And you are 
right, large corporations, it is less than that. So for young 
corporations or small corporations, it is 36 percent more than 
it would cost a large organization.
    That does not even include Obamacare here. Now in 
Obamacare, there are multiple regulations that have nothing to 
do with healthcare. There are items like the tanning tax, the 
1099 reporting forms, the Cadillac tax, the employer mandates, 
the individual rebates. Oh, by the way, if you survive all 
those regulations, we have a bonus, it is called the healthcare 
insurance tax, just cannot get enough of those. In the end, the 
legislation is evasive, it is punitive and overwhelming to the 
business community.
    Ever heard of death by a thousand cuts? This is the type of 
things that are death by a thousand cuts. My best guess, 
Carolina Ingredients' healthcare cost will increase between 100 
and 150 percent. These are annual healthcare costs today of 
$125,000 will eventually range between $200,000 and $300,000. 
That is based on a payroll of about 51 people, because we are 
growing. It is based on the healthcare tax of $500 per person, 
the Cadillac tax of 40 percent, Medicare payroll tax, employer 
mandates.
    With such cumbersome regulations and costs, I predict many 
small businesses will default to the government managed 
healthcare insurance plan. They do not want to be subjected to 
penalties and they do not want to be subjected to mandates. In 
truth, we do not know the real costs because we do not know 
what type of healthcare plan is going to be the benchmark that 
the government sets to compare to the private sector. That is 
not established yet. So in reality, the potential cost will 
continue to escalate and we really have no idea what the cost 
will be. And this frankly is not the model that our country was 
built on.
    The unknown. We cannot predict our future. And if we cannot 
predict our future, the cost to employ hard-working Americans 
becomes a guessing game. Already the CBO projects the 
healthcare law will now cost $1.8 trillion, which is twice what 
was predicted by them two years ago. Okay? To date, the current 
administration is unable to articulate the cause of this 
increase. Where is the accountability? As the years progress, 
does anybody truly believe the cost will stop or decline? No, 
it will not.
    Back to the penalties. There is a serious concern the 
employer and the individual mandates will be so intrusive, 
companies will defer to government healthcare plans as to avoid 
potential penalties. Frankly, we would rather spend our time 
building businesses, not tackling insurance mandates. I thought 
we were a partnership. You, the government, create the rules, 
the laws, the regulations that are specific, reasonable, and 
understandable. They are not meant to be punitive, they are not 
meant to destroy the backbone of America's small businesses. In 
return, we take calculated risks. We hire people and build 
businesses that are profitable and we pay taxes on those 
profits. And I realize in today's political environment, we 
have the have-nots and haves apparently, according to President 
Obama. I know that using the word profits is a dirty word and 
we should not murmur such a phrase. But the truth of the matter 
is this, without profits, companies do not survive. Without 
companies, employees are not hired. No employees, no tax base; 
no tax base, no money to fund legislative policies. This is 
fact, no doubt about it. You can follow world history, no 
government created a sustainable society by the government 
creating jobs and then becoming a global economic model to 
emulate. I might remind you of countries like Cuba, Russia, the 
entire Soviet Bloc countries, North Korea, and even China until 
the last 25 years.
    So what is the moral of this? The moral is do not cook the 
golden goose. If you regulate us to death, surely you will 
suffocate us all. At best, Obamacare will weaken our 
entrepreneur fortitude, thus minimize the country's 
sustainability as the world's greatest economic engine--and we 
are the greatest economic engine. At worst, we will become a 
society dependent upon the government to make our decisions 
that they think are in our best interest, much like countries I 
mentioned above. This is not the model our country was founded 
on and it has not been the model we followed for 200 years.
    Or perhaps our politicians think they know what is best and 
then we will fall under what history demonstrates happens to 
all governments, eventually they all fail under this 
philosophy--that is a fact. Do I want Obamacare to fuel the 
government's desire to mandate me and our business through 
unaccountable regulations? No, thank you.
    I will take my two percent chance of creating a company and 
surviving 20 years over our government regulating me to death. 
Historically speaking, the odds are on my side.
    Thank you, sir.
    Chairman Mulvaney. Thank you, Mr. Meyer-Cuno. Let me ask 
you a couple of questions specifically about the healthcare 
bill. There is a part of the bill that has gotten some 
attention. It is the 35 percent tax credit for employers' 
health insurance costs if they meet certain criteria. According 
to a study the GAO just did, there were four million small 
businesses that qualified for that program but only 170,000 
took advantage of that. Some said they did not know about it, 
some said they knew about it but it was too hard for them to 
qualify for it or do the paperwork for it, others said it was 
simply not worth it in terms of the amount of money.
    Let me ask you a question. Were you aware of the tax credit 
program that was part of the healthcare bill?
    Mr. Meyer-Cuno. We are not, we were not aware of it. And 
probably the reason would be, again, we have 37 employees. My 
controller is our HR person, we only have so much time in the 
day. For us to labor through such a maze would be very 
complicated and at this time, we do not have the manpower to do 
it. So we just simply do not know.
    Chairman Mulvaney. And no offense intended to Colonel 
O'Cain, who I understand runs a business doing this, but one of 
the options would have been to hire somebody to look into that, 
but that would have had a cost that you would have to factor 
into the overall profitability of the operation, right?
    Mr. Meyer-Cuno. That is correct. But not only that, you do 
not know what you do not know. So if you do not know it exists, 
you cannot go hire somebody to find something that you do not 
know is out there.
    Chairman Mulvaney. Colonel.
    Colonel O'Cain. Mr. Mulvaney, a number of these regulations 
exempt certain size businesses. In other words, if you have 
less than 500 employees, you are exempt; if you have less than 
100 employees, you are exempt; if you have less than 50 
employees, you are exempt.
    Chairman Mulvaney. Correct.
    Colonel O'Cain. If you have less than 10 employees, you are 
exempt. So there are varying levels of who it applies to. This 
particular part of the Obamacare, I have no idea, but it could 
be that because he has only got 37 employees, maybe he was not 
eligible for it, I do not know.
    Chairman Mulvaney. Sure. But to his point, I think you 
would have to actually do the research to find out if he's 
exempt from it in the first place.
    Colonel O'Cain. Exactly.
    Chairman Mulvaney. You know, when my family ran a small 
business, Mr. Meyer-Cuno, and I ran a business, I wanted to 
give my folks healthcare and we did for a long period of time.
    One of the reasons we asked you to be here, your company is 
in not a unique situation but in an interesting situation where 
you have got I think it is 39 employees, you have grown over 
the last couple of years from 22, you are on your way to 
getting to that magic 50 number. And you know where I am going 
with this question, which is would you take the impacts of the 
healthcare law into consideration as you go from hiring that 
49th and 50th and 51st employee. And conversely, if you had 52, 
would you take into consideration the cost benefits of going 
back down to 49 in order to get one of those exemptions that 
the Colonel talked about?
    Mr. Meyer-Cuno. The quick and easy, down and dirty answer 
is water seeks the path of least resistance. Right? So 
companies--look, we are here to make money, we are here--we are 
out working every day. We just do not have the time and the 
bandwidth to deal with all these things. So you will take the 
path of least resistance if it comes--the short answer is we 
would do what we can to minimize our healthcare costs but to 
take care of our employees the best way we can.
    Chairman Mulvaney. At the end of the day, you are going to 
do whatever makes you more profit.
    Mr. Meyer-Cuno. We are going to do what we can to be 
profitable and take care of our employees the best way we can. 
So for example, we might consider setting up a separate 
organization to take 10 employees and put it in that 
organization and call it ABC Company in order to prevent what 
you are just talking about, in order to stay away from the 50.
    Chairman Mulvaney. I remember when we ran our business, we 
would go from 50 to 52 if we thought that was the best thing 
for the company and for the shareholders. Never did we have to 
consider that growing the company might actually make us less 
money because of the impact of something like the healthcare 
bill.
    Mr. Meyer-Cuno. And on top of that, we have to go--well, if 
I grow to 52 and we have an economic downfall, a recession, 
what happens if I lay those people off? What is the healthcare 
cost to me at that point? For example, COBRA. So you have to 
take all of those into consideration. But the easiest thing we 
will do when we are running eight, nine hours a day, we are 
busy, we are going to take the path of least resistance because 
we just do not have the time or bandwidth to try to figure out 
all these answers.
    Chairman Mulvaney. One of the stories I have heard from 
small businesses and big businesses alike in South Carolina, in 
fact all over the country, is that--they hit on something you 
mentioned and something that we dealt with in my family 
business, which is that we wanted to provide our employees with 
healthcare. It is one of the things that we felt a moral 
obligation to do, especially being a family-owned business--
that may be a stronger connection. And several of them said 
that while it might be cheaper for them to discontinue 
healthcare entirely, to simply pay the fee, the fine for not 
meeting employer mandates, but they did not want to do that.
    Then I asked them, I said well what if your competition 
does not feel the same moral compulsion to provide that 
healthcare program and your competition thus acquires a 
competitive advantage by dumping their employees onto the 
public exchanges. And obviously that changed the character. 
What are your thoughts on that?
    Mr. Meyer-Cuno. I would first like to say our employees 
have full coverage. We used to pay 100 percent of their 
coverage until a year or two ago and they pay--last year, they 
paid 85 percent--we paid 85 percent, so they cover 15 percent. 
First time ever. We have a program called Target Care, which is 
an independent company that actually comes in once a month and 
meets with every single employee and reviews their statistics. 
Once a year, we do a complete blood work on them at our cost, 
we do it at our cost. And they meet with them and go over their 
blood pressure, their BMI, cholesterol, potential for diabetes. 
The reason why I bring that all up is because we feel compelled 
to take care of our customer. At the end of the day--I mean our 
employees, sorry. At the end of the day, we have to compete. 
And if we have all of that and if we take care of our employees 
at the end and our competitors are not, eventually we will have 
to compete. If we have to drop the coverage, we will have to 
compete.
    So, you know, we do not want to do that. We do not want to 
not take care of our employees and we want to offer healthcare. 
We just do not feel that the government should be frankly in 
our shorts doing it. Let the markets take care of themselves 
and frankly maybe it should go strictly to the individual.
    Chairman Mulvaney. Let me ask you one more question. You 
mentioned the fact that because of the rising cost you had to 
switch from 100 percent coverage to 85 percent.
    Mr. Meyer-Cuno. Right.
    Chairman Mulvaney. I am no longer a small business, I had 
to sell my business, so I do not employ anybody any more. We 
have all been told that once the Affordable Healthcare Act 
passed, that the cost of providing healthcare would go down. 
What has been your experience the last 18 months since that 
bill has passed?
    Mr. Meyer-Cuno. It has not gone down. I think our increase 
last year was just a tad over five percent and in order to 
achieve that--and we use Blue Cross-Blue Shield--we offer an 
HSA program and another program which is----
    Chairman Mulvaney. HSA is healthcare savings account?
    Mr. Meyer-Cuno. Savings account. So we offer that program 
and then we offer a standard full program. But we changed the 
dynamics by saying, okay, if you, the employee do not meet five 
of these characteristics, your BMI, your cholesterol levels, 
your heart rate levels, other things, if you do not meet that, 
then we pay 75 percent; if you meet three, then we pay 85 
percent; if you meet four, we are going to pay 90 percent. So 
there is an incentive program for our employees to stay healthy 
and we cover more of their insurance. But if they do not want 
to--they are assets, employees are assets and we want to take 
very good care of our employees. But if they do not take care 
of themselves, it is just like a machine that breaks down. If 
they are unhealthy, it is a cost to us.
    But at the end of the day, in order to keep at that five 
percent increase, that is what we had to do. But we do 
incentivize our employees on a positive side, not a punitive 
side, to stay healthy and then we will--you know, long term, 
that helps us.
    Chairman Mulvaney. Mr. Meyer-Cuno, thanks very much for 
your testimony today. If you stick around, we might have some 
questions at the end.
    Mr. Felix.
    And by the way, I am going to do something--one of the 
advantages that we have in doing these field hearings that we 
do not have in Washington, D.C. is we have a lot more 
flexibility over the hearing, and I thank everybody. I see a 
lot of unfamiliar faces, I imagine there are a lot of other 
small business people here. When Mr. Felix is finished with his 
testimony and I ask him a couple of questions, it is my 
intention to go ahead and open the microphone up to anybody 
else who wants tell what their business is going through, to 
tell their experiences so far, so that we have a chance to get 
as much information as we can today before we close the 
hearing.
    So, with that, Mr. Felix, please proceed.

                    STATEMENT OF MONTY FELIX

    Mr. Felix. Chairman Mulvaney, thank you for the opportunity 
to speak today. My wife and I bought Alaglas Pools in 1999. 
Some of you may know where it is, it is right off I-26 as you 
go from Columbia to Charleston. The business was started in 
1987.
    Prior to that I was President and Chief Operating Officer 
of a local company here in Fort Mill, CCC, the garbage company. 
And prior to that, I was President and COO of a power 
distribution company up in Richmond. So I have had kind of a 
broader sense in terms of business experience.
    We bought it in 1999 and we grew it ten times up until 
about 2007, 2007 was our best year and then we came into 2008--
we are a very seasonal business, so I pretty well track the 
bell curve. We came into May, business was half what it was 
before. We went to the bank and said hey, we have got some real 
problems here and of course in September 2008, everything 
tanked. My wife and I liquidated all of our personal assets to 
keep the company alive and over the course of the succeeding 
three years, we lost two-thirds of our revenue and 80 percent 
of our people. It was a matter of survival.
    I also served for seven years and was appointed by the 
previous Governor of the State of South Carolina as Chairman of 
the South Carolina Small Business Regulatory Review Committee 
which is patterned after the federal RFA. And previous to that, 
I was also appointed by the previous Governor for a one-year 
stint as the Deputy State Director for the Department of Social 
Services. I had all the operations in the state, about 3500 
people. So I have been on both sides of the aisle here relative 
to agencies and regulations and then on the business side.
    And I currently serve as past president of ACMA and 
continue to sit on their board. And I am a retired United 
States Marine Corps Colonel. I had to put that in when I saw 
the Colonel's tag over there. Add some dignity to this.
    Colonel O'Cain. Semper Fi.
    Mr. Felix. Semper Fi.
    I have some prepared statements and then I have got some 
additional statements that I would like to share.
    As an owner of a small company, I depend on the federal 
government to regulate industry based on valid and transparent 
reviews of the scientific, economic, and other relevant facts. 
Unfortunately, recent regulations and other actions by EPA and 
the HHS are not based on valid assessment, but appear to be 
driven by policy decisions that hide the real facts.
    For example, in April of 2011, the National Academy of 
Sciences released a major peer review of EPA's Integrated Risk 
Information System, commonly known as IRIS. The NAS was very 
unhappy that EPA had failed to implement many longstanding NAS 
recommendations aimed at improving the scientific quality of 
EPA's decisions. EPA's IRIS program can have profound impacts 
on our economy. As just one example, municipal drinking water 
system managers are very concerned that recent EPA risk levels 
will bankrupt city budgets, without any health benefit. In my 
written comments, I include a summary of the potential impacts 
of EPA's IRIS program.
    Congress also recently ordered an NAS peer review of the 
HHS Report on Carcinogens, commonly known as the RoC, to 
address similar concerns about scientific quality. My own 
company is dealing with the fallout from an RoC assessment that 
was mismanaged by the HHS staff and ignores the best science 
and the many international experts who concluded this chemical 
is safe--talking about styrene. I also provide a written 
summary of the problems with this RoC assessment in my handout. 
Americans are being misinformed about health risks and good 
manufacturing jobs and innovation will continue to move to 
other countries.
    On April 23rd, the Small Business Committee held a joint 
hearing with the House Science Committee to look into the HHS 
Report on Carcinogens. Business owners at this hearing 
testified that they are having trouble with increases in 
insurance costs and employee turnover as a result of biased and 
incorrect HHS assessments. And scientific experts testified 
that HHS fails to employ the modern valid assessment methods 
long recommended by the NAS. And I ask the Subcommittee to 
refer to the record for the April 23rd hearing for more 
information.
    Biased, policy-driven analysis will also lead to increased 
electricity costs for manufacturers in South Carolina and 
across the country, which will also send jobs offshore. EPA's 
Utility MACT rule justifies a requirement for utilities to 
install very expensive control equipment by pointing to claimed 
health benefits. Yet according to expert testimony before a 
February 8th hearing of the Energy and Commerce Committee, EPA 
based its benefits estimate on a small number of cherry-picked, 
non-representative and flawed studies, and double counted 
emission reductions already achieved under other rules. I 
encourage the Subcommittee to refer to the record for the 
February 8th hearing for information. As a result of the bad 
analysis, EPA grossly over-estimated the rule's benefits.
    When President Obama first took office, he made a 
commitment to the use of sound science and sound analysis. 
However, it seems this administration believes that an analysis 
is sound as long as it supports this pro-regulation agenda.
    I strongly encourage the Small Business Committee to 
continue its efforts to promote business viability, innovation, 
and job growth by holding the administration to the President's 
promises to base regulatory and other decisions on sound, fair, 
and transparent analysis of the relevant facts.
    Couple of things. When I was Chairman--I was Chairman of 
the South Carolina Small Business Regulatory Review Committee 
for seven years. That Committee, five appointed by the 
Governor, three by the Senate Pro Tem and three by the Speaker, 
all business people. The purpose: to look at every single 
proposed South Carolina agency regulation that comes out, to 
ascertain whether or not there could be a potential for an 
adverse economic impact on small business. And we did that for 
seven years. And by and large, this is a very small-business 
friendly state. It may be 50/50 in people, but 90 percent of 
the businesses in this state are small businesses.
    What did we do when we ran across a situation with an 
agency? And this gets to your last question, I am going to hit 
it right here. What can be done? There are a couple of things 
that can be done. When we had a situation with an agency that 
created or had a proposed agency regulation that we felt could 
have an adverse business effect on small business, we required 
that agency to do an economic impact analysis and a regulatory 
flexibility analysis. And there was a series of things they had 
to go back to, they had to look at what is the market we are 
talking about in small business. Agencies do not do that. I was 
in that agency of DSS for a year. Business is business, there 
is no differentiation between a small business and a big 
business.
    In the Regulatory Flexibility Act that was passed by the 
Governor in 2004, it actually lays this out, it's law in this 
state. And there is also an interesting part of that law that 
says if a small business is--if there is a notice of violation 
to a small business, that small business can rectify that in 30 
days and the agency has the authority to issue no fine. There 
is one, sir, that you can do.
    Another one is reporting. I take chemicals, I take resins 
and catalysts and fiberglass, and I make stuff. And as a result 
of that, I have to report to EPA under Title 5, which is a 
certification. But every month I have to report to SC DHEC, you 
know, exactly my emissions and what-have-you, et cetera, et 
cetera. And I am a one-man guy too, you know, death by a 
thousand cuts is a beautiful way to say it because if something 
gets done, it is me. Yet I have to report every month. Well, 
look, if you take my total emissions on a yearly basis and you 
double them, I will not even be in the .01 percent of the total 
emissions in the state. So where am I going? There should be 
different reporting standards for big and small companies. I 
should only have to report on an annual basis. Big guys, you 
know, if you are five percent or more, or two percent or more, 
in terms of emissions, then your reporting standard should be 
more credible because if you screw up in a month because of 
your volume, you are going to have an adverse impact. But small 
business can be dealt with differently.
    Those are two concrete ways.
    Tax credits versus revenue. I love this one. I get a call 
from Department of Commerce. Monty, if you hire 10 people, we 
will give you a tax credit. I said I do not need a tax credit, 
I need somebody to buy a swimming pool. You know, it amazes me 
how bureaucrats have this misunderstanding that everything 
happens below the line. Okay? It does not. Nothing happens 
until somebody sells something. When we sell a swimming pool 
and we sell a bunch of them, then I will go out and I will hire 
somebody to go build more pools. But I can tell you right now, 
sir, that going forward, and all the small business owners I 
know, we are holding onto our cash and we are not hiring 
anybody unless it is absolutely essential. And a tax credit is 
nice, but if you are not making money, what is a tax credit? It 
is a loss carry forward, it means nothing to me, but I still 
have to make that guy happy.
    I think in my closing comments here, it really comes down 
to a couple of things. Mr. Meyer-Cuno mentioned it. I think we 
have evolved to a point in our country where we have to take a 
real hard look, are we going to be a society of self-reliant 
people or a society of government-reliant? And until we answer 
that question, we cannot get a handle on regulations because if 
we continue to drift towards government reliance, then there 
are going to be more and more regulations because if we are 
government reliant, then there is the acceptance of the 
philosophy that government has to be involved in everything. 
But that is where this balance has to come from, there has to 
be a balance.
    And one last comment when it comes to EPA regulatory and 
what-have-you. There is always a balance--as businessmen, there 
is always a balance between, as I see it, safety concerns and 
what I will call operational practicality. The health insurance 
thing was a great example, right? In my market, when I go to 
hire people, and we went from 95 to 12 and now we are back to 
17, healthcare is not an issue in hiring. I might want to give 
it, but why should I? I am not being penalized for it, I am not 
losing people to other companies because everybody is out there 
just scrambling for a job. So I am not saying it is not 
important, and there will come a time in the next two, three, 
four years, as we continue to grow back where it will become 
important and then I will have to take a hard look at it.
    But I think that is the fundamental issue, sir, relative to 
regulations. And that issue is if you are government-reliant--
if you believe in government reliance, then your bureaucracy 
will always look for rules and regulations to maximize complete 
safety, let us say, at whatever cost. And that is not healthy 
for the United States and that is not healthy for big or small 
companies, and to be quite honest with you, we need to get back 
to a self-reliant philosophy. Once we begin to do that, I think 
you are going to see businesses flourish. And like I said, you 
know, it really comes down to, when people start buying 
swimming pools, that is a good thing and I can start hiring 
people.
    Thank you.
    Chairman Mulvaney. Mr. Felix, thank you for that. I have 
got a couple of questions all over the board and I think I know 
the answer to this one, but I want to just be clear.
    You said that you and many other folks you know in small 
business are not investing their capital and not hiring people 
right now. And like I said, I think I know the answer, but tell 
me why.
    Mr. Felix. Uncertainty. I mean what is going to happen with 
the Bush tax cuts? My gosh, you know, if those are not renewed, 
there is going to be a huge tax bill. Why am I going to take 
working capital, cash, and go hire somebody or put it in a 
piece of capital equipment if I am going to be faced with a 
huge--I am a Sub S, everything flows over to my 1040. You know, 
according to our President, I am a super-millionaire. And this 
is what is going to happen. My belief is that people are going 
to hoard cash. If you do not believe small companies, look at 
big companies, everybody is looking around the corner. They 
want to see stability and I think that is the key issue. Until 
there is a comfortable feeling on my part and others where I 
believe that I can invest a dollar either into a human asset or 
a fixed asset, knowing that the dollar of investment is going 
to return to me something and I will not have to go back and 
take that dollar away a year from now, until we get back to 
there, my belief is that we are going to hoard cash.
    Chairman Mulvaney. I will tell you one of my experiences, 
one of the things that you do not--there is no analog to, there 
is nothing to compare it to in the whole world, is firing 
somebody. I have had to do it before, and it is one of the 
least enjoyable things I think I have ever done in my entire 
life. And unless you have had to do it before, I do not think 
people realize how you might be slow to hire somebody if you 
really are afraid that you might have to lay them off. It is 
easy to fire somebody if they goof off, that is not what I am 
talking about. I am talking about laying off people because 
business has taken a downturn. That is an extraordinarily 
difficult thing, because to a certain extent, you have to admit 
your own failings as a leader, as a business owner. I am sorry, 
I was not good enough at what I did to keep you here and I have 
to let you go. That is something that until you have to do it, 
you do not realize how difficult it is and wanting to avoid 
that and be extraordinarily cautious in hiring people, 
especially when you talk about--you know, it is uncertainty.
    Folks think that means uncertainty in the market. 
Uncertainty is part of the marketplace. Whether or not I can 
find the customers or you can find the customers, that is the 
uncertainty that we are made to deal with. It is the 
uncertainty to talk about healthcare and tax rates and 
government regulation. That is the type of uncertainty that I 
think you are talking about and that I experienced when I was a 
small business. It is not the uncertainties of the market, it 
is not whether or not we can make a product that folks will 
want to buy and will buy. That is what we are programmed to 
deal with as businesspeople. It is the other stuff that made me 
pull my hair out.
    You mentioned something that got my attention early on, on 
a different topic, about how the Report on Carcinogens--and I 
am assuming now we are talking about styrene in particular----
    Mr. Felix. Yes, sir.
    Chairman Mulvaney [continuing]. Would have an impact on 
municipal water services. Tell me about that. Am I making that 
linkage correctly or are those two separate topics?
    Mr. Felix. The implication of any additional regulation has 
a financial impact and that is the implication on city budgets.
    Chairman Mulvaney. But you specifically mentioned water; 
why is that?
    Mr. Felix. Because with enhanced regulations relative to 
water purification, the city or the county government is going 
to have to go buy additional capital equipment and it is going 
to take cash and money.
    Just like in my business, in my business when I deal with 
styrene, if I am a big company and I do more than 100 tons a 
year, I have to put a thermal oxidizer out there. That is a 
five or six million dollar non-value-added cap ex that I have 
to put in that draws down cash but I have no value from that.
    Chairman Mulvaney. Mr. Felix, you just mentioned something 
that I think a lot of folks are not familiar with. Tell me the 
difference between a non-value-added capital expenditure and a 
value-added capital expenditure.
    Mr. Felix. Fair question. I am a manufacturer of swimming 
pools, build swimming pools. As my business grows, I need 
another spray unit, because I have got more--I need to add 
capacity because I have got more business. So I go out and I 
spend 25 grand and I buy a spray unit, and that is a value-add. 
Why? Because when I use that, I build more pools and when I 
build more pools, I sell more pools, I make more money.
    What is a non-value-added? Let us say--by the way, I was 
involved with the EPA in setting the MACT standard for our 
particular industry, and it took us about seven years to work 
through that. But what is a non-value-added expenditure? Let us 
say, for instance, the EPA came out and said, Monty, you are a 
small business, but you know, you spray this and you spray that 
and there is some styrene here, and you are going to have to--
we are going to require you to go spend $2.3 million to put in 
a thermal oxidizer, because we do not want styrene anywhere. So 
in order for you to have your Title 5, you are going to have to 
make that capital expenditure. Well, first of all, I am a small 
business, I am a private company. I cannot go to the capital 
markets, I cannot go issue stock. If I want money, I have got 
to go to a bank and sign a note. So getting capital is 
exceedingly difficult for a small business. Number two, let us 
say I get it and I put that $2.3 million thermal oxidizer in. 
It provides no value. Does it help me build more pools? No. It 
costs me cash, yeah, but it is non-value-added. The value-
added, to me, is something that I buy that provides for me 
capacity, let us say, to do more pools so I can sell. Non-
value-added is a requirement, a regulatory requirement, which 
in many cases is nothing more than a regulatory tax, that 
requires me, in order to stay in business, to buy this thing 
and it provides no value add in terms of my capacity.
    Chairman Mulvaney. Who ultimately pays for the price of 
that particular piece of non-value-added capital expenditure?
    Mr. Felix. Sir, you know and I know, the customers. But 
then again, what happens if you have a company out there that 
is under the radar and they are making swimming pools but they 
are not being regulated because they are small or they choose 
not to comply with the law. Now their cost structure is less 
than mine; I cannot compete.
    You see, that is the problem. I think that there needs to 
be some sensible regulations that do not inhibit what I call 
the operational practicalities of running a business and being 
successful. And what has happened now is that practicality has 
been overshadowed by too many regulations.
    Chairman Mulvaney. You mentioned utility MACT and I want to 
talk about that for a second. MACT, by the way, is an acronym, 
M-A-C-T, and there are actually several of these initiatives 
going through Washington right now. I am more familiar with 
boiler MACT and cement MACT. Again, maximum achievable control 
technology. And what it really means, especially in the boiler 
circumstance, for example, the federal government is trying to 
regulate a standard that cannot yet be hit. The technology does 
not exist yet to achieve the containment or the control 
technology that the standard requires. And the impact here 
locally, where we have large wood and paper products 
industries; for example, Resolute Paper, Chesterwood Products, 
boiler MACT is a big deal for those kinds of folks.
    We talk about cement MACT. I remember the discussions in 
Congress about cement MACT which was going to do the same thing 
for the cement industry and someone opined that we would not be 
able to make cement in this country any more if this rule went 
into place and one of the responses from the proponents of the 
cement MACT rule was that was okay, there was plenty of 
capacity in Mexico, where they do not have those types of 
rules. I was stunned by that admission.
    Let me ask you, Mr. Felix, about the impact of utility MACT 
on consumers and businesses in South Carolina if it goes in 
place.
    Mr. Felix. The utility MACT?
    Chairman Mulvaney. Yes, sir.
    Mr. Felix. I'm not familiar with the utility MACT. I am 
familiar with----
    Chairman Mulvaney. I am sorry, I must have asked----
    Mr. Felix. Must be the other guy. In my industry, because 
we use resins, it is regulated and there is a MACT for that, 
maximum achievable control technology for that. And again, what 
it is is one huge algorithm that says if you do X, Y, Z, then 
you cannot do A, B, C. And if you are going to do A, B, C you 
have to go by this and what-have-you. So I imagine--and I am 
only guessing--that any MACT is going to be some regulatory 
effort to control emissions or flow or something like that. But 
I am not familiar with that one.
    Chairman Mulvaney. I appreciate it and it was one of the 
other witnesses, who actually was not here today. So thank you 
and my apologies.
    Mr. Felix, thanks very much.
    Mr. Felix. Thank you.
    Chairman Mulvaney. At this point, I am going to open the 
podium up to anybody else who wants to come up and ask a 
question of the panel or of me or anybody else who has had an 
experience that they want to share. This is a public hearing 
and if you want to take the opportunity to tell us what is 
happening with your business, please do.
    There is a gentleman in the back who I recognize, a young 
man.

                 STATEMENT OF CURWOOD CHAPPELL

    Mr. Chappell. Do I need to come up to the mic?
    Chairman Mulvaney. No, sir. You are blessed with a voice 
that carries, Mr. Chappell.
    Mr. Chappell. Thank you, Mr. Congressman and the panel here 
and the people that are asking the questions. Where I come at, 
talk is cheap, it takes money to buy land. You have got to 
start somewhere, we have gotten too much control.
    You know who I am. Mr. Mick, I want to take a minute to say 
that I have done this in the county, with the help of 
councilmen. We can cut out a lot of red tape for small 
businesses with our bureau, we want a bureau. We are going to 
try to get one for small business. We cut the red tape and we 
have got small business, convenience stores and other things 
and paint shops and so, so, so, so and repair shops. We cut our 
county regulations down to get that. You have got to do the 
same thing in Washington. Do not let me give you advice, but 
let me make statements. I am no authority on the subject, but I 
am opinionated on most. [Laughter.]
    I appreciate what you are doing and we started back here 
and we just killed a couple of bills that was damaging to our 
people and our business and we are going to probably kill some 
more and promote what you are promoting. I admire your spunk in 
that and I appreciate you very much, and come back to see us 
sometime.
    Chairman Mulvaney. Thank you, Councilman.
    Anyone else? Yes, sir.
    And if you could give your name for the record, please. The 
first gentleman was Curwood Chappell, who everybody here except 
the court reporter knows. [Laughter.]
    She is not from here, Curwood.

                  STATEMENT OF JEFF CARRINGTON

    Mr. Carrington. Thank you, Mr. Chairman, I appreciate this 
opportunity. My name is Jeff Carrington, I am the president of 
a startup company here in South Carolina. The organization is 
Crown Sea Brands, LLC, we are former combat Marines who have 
formed a service-disabled owned company.
    Colonel O'Cain. Semper Fi.
    Mr. Carrington. Semper Fi, Colonel.
    We have a few others in the audience here, it is a secret 
society. But my purpose today--I will make it brief, with the 
Chairman's indulgence and the other attendees' indulgence, I 
want to flip the coin slightly and tell you a little bit about 
a case of under-regulation. And it specifically relates to--and 
let me start first by expressing my gratitude and appreciation 
for Mr. Mulvaney's work on H. 3893--is that correct, sir?
    Chairman Mulvaney. We do not track them by the number. I 
apologize.
    Mr. Carrington. The STAR Act.
    Chairman Mulvaney. Yes, sir, thank you.
    Mr. Carrington. Your bill, which apparently I think the 
long title was the Subcontracting Transparency and 
Responsibility Act, do I have that right?
    Chairman Mulvaney. I think it is Reliability.
    Mr. Carrington. Well, Title 2 specifically relates to 
enforcement of the regulations--and this is my point--that are 
written into the Code concerning subcontractors, to promote the 
utilization of subcontracting capacity by major federal 
contractors. There is a whole string of legislation, U.S. Code 
stuff and SBA rules and regs and executive orders, and it all 
cuts to the idea of promoting opportunities for veterans and 
service-disabled veterans.
    We are obviously in that latter category and we have formed 
this company really under the understanding that the 
opportunity is valid and challenging but rewarding. I am really 
a serial entrepreneur, this is my fourth startup. Just a 
stipulation for the record. I do not need really a handout, we 
are really looking for a handup. My last company was an 
acquisition by Berkshire Hathaway, so I know the rules of 
business, I know the survivability issues that Mr. Meyer-Cuno 
talked about, the mine field of growing a business, getting it 
on the board and, ultimately in my case, getting Berkshire 
Hathaway to buy my little company. It sounds grandiose, it is 
probably the smallest acquisition they ever did.
    So I am not here looking for really a handout, we are 
really looking for a handup. And let me be specific. The large 
contractors--we are in the agricultural products and food area. 
The large contractors that supply DoD, particularly, four to 
five billion dollar annual expenditure, are organized, it is 
almost an oligopoly and it is done so for valid reasons, 
because of concentration and streamlining and cost-saving. I 
understand that, I am perfectly okay with that. But built into 
the regs that are supposed to stimulate opportunities for 
service-disabled veterans are explicit requirements where there 
are subcontracting opportunities that, I think the magic phrase 
is ``maximum practicable opportunity,'' exists or should be 
created to benefit service-disabled veteran-owned companies, if 
we just focus on my specific category for a moment--maximum 
practicable opportunity.
    Well, I have been out there for two years, I have done 
everything that I think ought to be required to do the due 
diligence, to make the rounds, to meet the people, to assert 
our bona fides in terms of our products, our qualifications, 
all of that, if you will just accept that on faith for the time 
being is in order, and I can tell you, and here is my bottom 
line, that the major contractors out there, I will name names--
U.S. Foods would be one, Sysco another, Sodexo another, SoPakCo 
another, the big South Carolina based company, are paying 
virtually no attention to those rules and regs.
    I will get back to my conclusion and why I appreciate your 
legislation so much, your bill. The Title 2 of that Act is 
exactly what is required. This is the point about flipping the 
coin and the under-regulation versus non-regulation. These 
major contractors are not being held to account for providing 
maximum practicable opportunity for service-disabled veterans.
    I am a big guy and I can take the hard knocks, I am a 
former Marine, but what really sticks in my craw is I am a two-
time Vietnam veteran, I spent the better part of two years over 
there, that homecoming was less than good, but we dealt with 
it. And now, fast forward and we have the opposite situation 
where there is all this encouragement and sentiment and 
positive rhetoric about helping veterans and it is almost like 
Alice in Wonderland. It is deja vu all over again because I am 
being killed with kindness. I am being encouraged that there 
are these opportunities and the reality on the ground is those 
opportunities are really----
    Chairman Mulvaney. Mr. Carrington, I appreciate that. I do 
not mean to cut you off, but I do want to point out, and you 
did not know this, that that Act actually came out of the 
hearing that we had in Sumter. That is why these things are so 
inherently valuable to us as lawmakers, because we went down to 
Sumter and talked to some of the local businesses down there, 
and they told us exactly what you just said, many of them 
veteran-owned. You can imagine in Sumter, a large retired 
veteran population.
    Mr. Carrington. Yes.
    Chairman Mulvaney. And they said look, we do not mind not 
getting the bids. We do not mind submitting our bid and getting 
beat, that is what we do as business people, sometimes you win, 
sometimes you lose. What we do not like is the fact that we 
never get a chance.
    Mr. Carrington. Amen.
    Chairman Mulvaney. And what was happening is that large 
businesses were--on their contracts with the government were 
formulating the contracts, manipulating the contracts in such a 
fashion to where small businesses could not get them. For 
example, the contract for concrete was ten times as large as 
any local concrete company could provide. So by manipulating 
that contract, the large contractor was able to effectively cut 
out the local businesses. And that is what gave rise to the 
STAR Act, which we would not have known about if we had not 
done that hearing.
    Mr. Carrington, I appreciate you being here.
    Mr. Carrington. I appreciate the opportunity.
    Chairman Mulvaney. No, I appreciate you doing this.
    Anybody else before we wrap up? The gentleman in the back 
and then the gentleman in the front.
    Yes, sir. And I am sorry, was there a young lady behind? 
No? Okay, all right.
    Yes, sir, and if you could tell us who you are.

                    STATEMENT OF KEN SPEIRS

    Mr. Speirs. My name is Ken Speirs, I am a general 
contractor here in Rock Hill. I apologize, I have been out 
working today, so I am not properly dressed for this. But I 
wanted to come in and speak. We actually spoke when you were 
running for election.
    Being a contractor in this area, a small contractor, we 
have really been hit hard. A couple of things, talking about 
regulation, I will give you one quick thing that you can think 
about and everybody here will really understand part of what we 
are facing.
    DHEC regulated us several years ago. I have been doing this 
work for over 30 years. You can do a septic tank anywhere for 
$3000 to $3500. That same septic tank now is an engineered 
system which has gone up a minimum--minimum--$18,000-$19,000.
    Chairman Mulvaney. Eighteen thousand or hundred?
    Mr. Speirs. Eighteen thousand. And we are putting one in 
now at a school that may run into $35,000, for a school that 
has less than 50 systems for an engineered drip system. So the 
government is regulating us to death.
    When the economy hit, the federal government gave the banks 
big piles of money to bail them out. What did the banks do? 
They turned around to people like me that had credit scores of 
800 and better, and said we are going to cut your line of 
credits out. At the time I was doing metal buildings. Well, for 
those that do not build metal buildings, you order the metal 
building, you put a deposit down. When the building is 
delivered, you give them a check on site for the building in 
full before they unstrap and unload the building. So we live on 
credit. We live on credit from the banks and the banks came in 
and cut our credit, cut our credit cards, not because we were 
late, it is because we, quote, were contractors.
    At the same time, for years I have bought properties, 
different properties, slipped them, rent them, do different 
things to them, sell them, a lot of bank foreclosure properties 
and things like that. Used to be you could go in and do these 
properties, some of them, within 20 days you could do them, 
regulate them out, sign them, do a good job. That same work 
that was taking us two months, some of it takes you two years 
because of regulations. The banks are not working with us.
    So they come to me, and this has happened, and they come to 
me and they say, Mr. Speirs, I would like to upfit this 
building, $150,000-$200,000 upfit. Well, everybody says okay, 
that is no big deal. The people cannot get the loans to do the 
work. It is not because they have bad credit, it is not because 
they are a startup business. It is they cannot get the loans.
    Rock Hill has a great thing for small businesses, they try, 
York County has a small business association, South Carolina 
has. But the problem is if the banks are not willing to work 
with them, then the people cannot get the money, then that 
comes down to me, it comes down to your larger general 
contractors and we cannot get the work. And what happens, and 
what has happened around here is I am a small general 
contractor, I do not do million dollar type things. But the 
million dollar jobs are not out there now. Your big jobs are 
not there, they are not going, so what happens when those 
contractors do not have work, they come down the line.
    Chairman Mulvaney. Mr. Speirs, before you move on, I want 
to pick your brain on a specific. Oftentimes, it helps us to 
have a specific example, as opposed to general concepts.
    Tell me one thing that changed about septic tanks that 
drove that cost up from $3000-$3500 to $20,000.
    Mr. Speirs. I will be glad to give you one. I am working 
with a school now with Dennis Gooch out on Board Road. There is 
a field beside him that has cows in it, the cows do their 
business on top of the ground. Years ago, he had a septic 
system put in there and what you would do is you would dig this 
system out, depending on the soil type, on an average you would 
dig it out and put two foot of rock or two foot of fill, some 
parts of South Carolina use tires. You would put drain pipe in, 
level it out, put your rock, your grass--not grass but straw-- 
on top of it and cover it up.
    Now that same system, they are coming up with an engineered 
system, you pump it out into a tank that pumps it through a 
filter that pumps it through another system that pumps it to 
another system versus draining out in the ground like we did 
here for years and years. You actually run it through a 
filtering system and it is what they call a grid system, and a 
lot of these systems will only do up to 450 gallons a day. So 
they have come in with a system and come in with these 
companies that said you will use these systems, you have no 
options.
    So where the average person would say okay, I am going to 
spend $3000-$4000 on a system, now they have to have this new 
engineered system and they cannot come in and dig it out and 
bring red dirt in or whatever, bring rock in and do it. So now, 
they are like, I cannot do this.
    Chairman Mulvaney. Mr. Speirs, I appreciate that. What we 
will do in my office is try and figure out--oftentimes even 
though that is a DHEC issue, oftentimes it is actually driven 
by federal regulation. So we will try and figure out if that is 
something that the federal government is mandating that DHEC is 
simply implementing, and see if we can look at it from that 
perspective. So I appreciate that input.
    Anything else?
    Mr. Speirs. If the people from your office--I would make 
this invite, if I can do this, I would like to bring you out to 
the one project that we are looking at and let somebody in your 
office look at the system and see exactly how silly I think 
this is. If somebody in your office would be willing to meet 
with us, I will be willing to leave a card and I would be 
willing----
    Chairman Mulvaney. Actually I would like to do that myself. 
We used to build septic systems, it would be interesting to see 
how they work today. So if you want to give your name to the 
gentleman in the back, we can do that.
    Thank you, Mr. Speirs, I appreciate it.
    Chairman Mulvaney. The gentleman up front.

                   STATEMENT OF WARREN WHITE

    Mr. White. Good morning, my name is Warren White, and I am 
the Chief Operating Officer of a company called Komet USA. We 
are a wholly owned subsidiary of Gebr. Brasseler, which is a 
large German manufacturer of dental and medical cutting tools.
    I will give you a good example of what we do. We are 
actually the people who make the tools that dentists cut your 
teeth with. We are the largest in the world.
    Chairman Mulvaney. Does this make you a popular person?
    Mr. White. Absolutely. [Laughter.]
    Makes everybody look great, those smiles look really good.
    I am going to give you a little company history before we 
get to our problem. Our owner started our company in 1923 with 
two brothers, so it was the Brasseler brothers. They took their 
mother's sewing machine, retooled it, put it in the garage and 
actually started making little cutting tools out of steel in 
the garage, and the one brother was, we will say the 
manufacturer, the other two brothers were the sales people. 
They put their goods in a wheelbarrow and they sold them door 
to door in Dusseldorf and became a pretty big regional 
manufacturer in Germany. It grew and grew and became the number 
one manufacturer of cutting tools in Germany.
    Well, in 1939, things changed a little bit. They became 
manufacturer of dental rotary instruments for the German Army, 
which made them very productive. However, in 1944, the American 
Air Force had relocation plans for them. They went over the top 
and bought them out and they actually had to move to a small 
village and Lemgo, Germany is right now where our headquarters 
is. We employ about 1000 people there and we manufacture 
everything from the smallest cutting tool to the largest 
cutting tools or blades that an orthopedic surgeon would use or 
an ENT surgeon would use or oral surgeon, dentist, for example.
    In 2005, we moved here to Rock Hill and we employ about 100 
people now in various positions, primarily sales and marketing 
and we are now one of the leaders in sales of rotary 
instruments in the United States and we are definitely a 
worldwide leader, market leader, in rotary instruments. So 
there is the background.
    Here is the problem. We are becoming competitively 
disadvantaged to our competitors because of a federal agency 
and that federal agency is the FDA. The FDA is holding import 
packages as we send our inventory to the United States--and by 
the way, we ship directly to our end user from Germany FedEx 
every day. We send 500, 250 to 500 packages every day to our 
end user, whether it is in San Francisco, whether it is in 
Dallas, Texas, these packages are going there. And when they 
get hung up by the FDA, a two-day delivery is quickly a ten-day 
delivery and that ten-day delivery puts us at a tremendous 
competitive disadvantage to our competitors.
    This situation changed from one day to the next. One day 
the switch was turned from a two-day delivery, to a five to 
ten-day delivery.
    Chairman Mulvaney. Mr. White, what was the justification 
for the delay?
    Mr. White. Mr. Mulvaney, we have been in contact with FedEx 
who is our agent in this, with the FDA and we have had no 
answer, none, except we have inadequate amount of staff. Well, 
I could accept an inadequate amount of staff if it happened 
over a period of time, but from one day to the next when the 
light turns on and off, somebody--they cannot explain that to 
me. It is too fast. Business does not happen that way. Business 
is an evolution, not a light switch. Something happened in 
their system.
    And by the way, this is not happening just to Komet, this 
is happening to the dental industry from China, the implant 
business. By the way, people probably do not realize this, but 
about 30 percent of prosthetic work, that is the teeth that are 
coming in like if you need a crown, that is coming from China 
now, that is not coming from the U.S.
    And so companies in China actually ship that product one-
day air, two-day air, back to the United States and it goes 
into your mouth as an American product, which frankly, I am not 
very proud of that. But it goes back to the simple fact that 
our government is in our way and that the FDA is a tremendous 
competitive disadvantage to Komet and to my other colleagues in 
the dental industry.
    And I appeal to you to somehow loosen this up. This is 
unbelievably restrictive to us. I have sent Mr. O'Neal a number 
of correspondence, I have sent you some and we have talked 
personally about this. This issue is not going to end until 
somebody puts their foot in it. And I appeal to you to take 
care of that, because we are a contributing entity in South 
Carolina, we have choices of a lot of states that we could move 
to, but people like Kelly and Mr. Chappell, I mean we have got 
a great community here, but if we are going to be profitable 
and if we are going to stay profitable, we have to get the 
government out of our business.
    One other point that I think is important. I know Mr. 
Meyer-Cuno said something about--quite a bit actually about the 
healthcare. I do not know if everybody realizes that starting 
next year, your dental costs--I can only speak for dental and 
medical--because of President Obama, the price of dental 
instruments, medical instruments, will go up at least two 
percent because everything that is coming over now will have an 
additional two percent tax on every dental instrument, medical 
instrument that is sold in the United States, just as a premium 
for this wonderful healthcare act that they have passed into 
law.
    Chairman Mulvaney. Thank you, Mr. White. I appreciate you 
taking the time to let us know. And my staff is telling me that 
they have spoken to you and we will talk to you further on your 
specific issue after the meeting.
    Mr. White. I appreciate that. Thank you very much, and I 
enjoyed today's meeting, I think it was very fruitful for me.
    Chairman Mulvaney. This gives me an opportunity to mention 
the medical device tax, which the House passed a bill on last 
week that would actually repeal that medical device tax which 
is part of the healthcare bill.
    Thank you to everybody for coming. We will go ahead and 
read a statement for the record as we close.
    Before we end, I want to state that I do not feel that all 
regulations are bad. Regulations are necessary and could be 
beneficial to society, as several of our witnesses today 
acknowledged. They protect our food supply, ensure that drugs 
work and to keep financial markets transparent. But they also 
have costs by erecting barriers to entry, distorting markets, 
diverting scarce capital. What we were talking about today are 
regulations that go above and beyond just serving the public 
interest and disproportionately hinder small businesses in a 
multitude of ways.
    Responsive regulations require agencies to balance the 
intended benefits against the economic costs of the rules that 
they impose. Historically, federal agencies appear to have been 
much better at uncovering the benefits of the regulations than 
they are at calculating the costs of those.
    Of course, this makes selecting the appropriate balance 
needed to protect the public much more difficult, but 
particularly since most businesses subject to regulation are 
small and therefore not always capable of making their concerns 
known.
    It is a very important issue to me and that folks I know in 
both parties are very passionate about and we will continue to 
work on back in Washington. Small businesses are in fact the 
foundation of our economy.
    You heard one of our witnesses talk about the fact that 
half the people in the nation work in small businesses. 
Actually in South Carolina, it is closer to 80 percent. And the 
large majority of our new jobs created every single month 
nationwide are in small businesses.
    I want to thank each of you gentlemen for coming up today. 
I want to thank everybody for participating, especially those 
of you who came from long distances. There is a formal 
opportunity that I have and other members will have. By the 
way, other members will have the opportunity to read the 
transcript and to submit questions for the record, statements 
for the record, and so forth. So just because I am the only 
member of Congress who is here does not mean that I am the only 
member of Congress, number one, that is interested in this; and 
that, number two, will participate in this hearing, albeit 
after the fact. So with that, I will ask for the record that we 
have five days to submit additional questions.
    Unless there is anything else, I thank everybody for 
participating and we will call this hearing of the Small 
Business Committee to an adjournment.
    Thank you.
    [Whereupon, at 11:45 a.m., the Subcommittee was adjourned.]
    

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