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







    HIGH FUEL PRICES: THE IMPACT ON ILLINOIS SMALL BUSINESS AND JOB 
                                CREATION

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

                                HEARING

                               before the

                    SUBCOMMITTEE ON ECONOMIC GROWTH,
                         TAX AND CAPITAL ACCESS

                                 OF THE

                      COMMITTEE ON SMALL BUSINESS
                             UNITED STATES
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             SECOND SESSION

                               __________

                              HEARING HELD
                             JUNE 25, 2012

                               __________





[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



            Small Business Committee Document Number 112-074
              Available via the GPO Website: www.fdsys.gov

                                _____

                  U.S. GOVERNMENT PRINTING OFFICE

76-481                    WASHINGTON : 2012
-----------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Printing 
Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; DC 
area (202) 512-1800 Fax: (202) 512-2104  Mail: Stop IDCC, Washington, DC 
20402-0001










                   HOUSE COMMITTEE ON SMALL BUSINESS

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

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



















                            C O N T E N T S

                              ----------                              

                           OPENING STATEMENT

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

                               WITNESSES

James Zuber, Owner, Jc3 Trucking, Inc., Newton, IL...............     2
Phil Kerr, President, Home Medical Express, Inc., Elmhurst, IL...     4
Larry Smith, General Manager, Lurvey Landscape Supply, Des 
  Plaines, IL....................................................     6
Richard B. Sade, Vice-President, S&S Hinge Company, Bloomingdale, 
  IL.............................................................     8

                                APPENDIX

Prepared Statements:
    Larry Smith, General Manager, Lurvey Landscape Supply, Des 
      Plaines, IL................................................    16
    Phil Kerr, President, Home Medical Express, Inc., Elmhurst, 
      IL.........................................................    19
    James Zuber, Owner, Jc3 Trucking, Inc., Newton, IL...........    23
    Richard B. Sade, Vice-President, S&S Hinge Company, 
      Bloomingdale, IL...........................................    34
Questions for the Record:
    None.
Answers for the Record:
    None.
Additional Materials for the Record:
    None.

 
   HIGH FUEL PRICES: THE IMPACT ON ILLINOIS SMALL BUSINESSES AND JOB 
                                CREATION

                              ----------                              


                         MONDAY, JUNE 25, 2012

              House of Representatives,    
           Subcommittee on Economic Growth,
                            Tax and Capital Access,
                               Committee on Small Business,
                                                    Washington, DC.
    The Subcommittee met, pursuant to call, at 10:10 a.m., in 
Hoffman Estates Village Hall, 1900 Hassell Road, Hoffman 
Estates, Illinois, Hon. Joe Walsh (chairman of the 
Subcommittee) presiding.
    Present: Representative Walsh.
    Chairman Walsh. Good morning, everyone.
    Am I on? There, I am on.
    Thank you for joining us.
    Boy, that is on, isn't it?
    The Small Business Committee, Subcommittee on Economic 
Growth and Capital Access, is now and will come to order.
    I want to thank the witnesses for appearing today and for 
agreeing to testify on an issue that is so important to small 
businesses and consumers, high fuel prices.
    Few things have such broad effects on consumers, the 
economy and small businesses as high fuel prices. While fuel 
prices have moderated somewhat from their recent highs, the 
price of a gallon of regular gasoline and diesel fuel is still 
29 percent and 28 percent higher than two years ago. Overall, 
Americans are paying 93 percent more for gasoline than when 
President Obama took office in January of 2009.
    The price of gasoline often determines where and when 
consumers will shop, what it costs a small business to deliver 
products and services, and the cost of purchasing materials and 
other inputs necessary for business operations.
    When consumers have less money to spend and small 
businesses are forced to shift resources to fuel purchases, or 
pay higher prices for inputs, weak economic growth and anemic 
job creation are often the results. High fuel prices also 
increase economic uncertainty for both small businesses and 
their consumers.
    Small businesses have repeatedly testified before this 
Committee about their need for certainty in order to grow their 
businesses and create jobs. Last year, I chaired a Subcommittee 
field hearing just like this in Woodstock, Illinois. At that 
hearing, a number of small businesses testified about how 
uncertainties created by policy actions in Washington inhibit 
their ability to grow and operate their businesses. These 
uncertainties can include new Federal regulations, Federal 
mandates on employers, and the direction of tax and spending 
policies.
    In addition to your views on the effects of high fuel 
prices on small businesses, the Committee will certainly be 
interested in learning how these additional uncertainties 
affect you as well.
    Other Subcommittee members may have opening statements. 
They will be submitted for the record.
    Let me take a moment, witnesses, and explain our terribly 
complicated timing system for each of you. You will have 5 
minutes. The light will start out as green. When you have 1 
minute remaining, the light will turn yellow. Try to stick to 
your 5 minutes. If you go over, we will be flexible. Do the 
best you can.
    I would like to introduce, in no particular order, our 
witnesses and give them each 5 minutes to testify. We will 
begin with James Zuber, a lifelong resident of Illinois, with 
more than 25 years experience in the commercial trucking 
industry. During those 25 years of operation, Mr. Zuber has 
logged over 3 million miles without an at-fault accident.
    He is testifying today on behalf of the Owner-Operator 
Independent Drivers Association.
    Mr. Zuber, you may deliver your testimony.

 STATEMENTS OF JAMES ZUBER, OWNER, Jc3 TRUCKING, INC., NEWTON, 
  ILLINOIS; PHIL KERR, PRESIDENT, HOME MEDICAL EXPRESS, INC., 
   ELMHURST, ILLINOIS; LARRY SMITH, GENERAL MANAGER, LURVEY 
LANDSCAPE SUPPLY, DES PLAINES, ILLINOIS; AND RICHARD SADE, VICE 
      PRESIDENT, S&S HINGE COMPANY, BLOOMINGDALE, ILLINOIS

                    STATEMENT OF JAMES ZUBER

    Mr. Zuber. Thank you. Good morning. My name is James Zuber. 
I am from Newton, Illinois, and I have been a professional 
truck driver for over 25 years.
    Chairman Walsh. Did you press that? Why don't you move it a 
little closer to you?
    Mr. Zuber. One way or the other. There, okay.
    Good morning. My name is James Zuber. I am from Newton, 
Illinois, and I have been a professional truck driver for over 
25 years. I own my truck and haul construction goods and 
general cargo while leased to a motor carrier. I am here on 
behalf of the Owner-Operator Independent Drivers Association, 
commonly known as OOIDA. OOIDA's approximately 150,000 members 
are small business truckers from all 50 states.
    The majority of trucking in this country is small business. 
Ninety-three percent of our nation's motor carriers own 20 or 
fewer trucks. My testimony will focus on the impact that energy 
prices have on small business truckers. These impacts are very 
real, especially when you consider them alongside the cost of 
regulations coming out of agencies like DOT and EPA.
    While today's diesel prices are around 17 cents below last 
year, they are still very much on the high side. The fuel 
prices are still subject to short-term price spikes, which are 
devastating to small business truckers.
    To give you a perspective, last year I drove 122,000 miles 
at $3.90 a gallon. My fuel costs were just under $80,000. When 
the price of a gallon of diesel increases by a nickel, my 
annual costs increase by $1,000. Trucking is a hyper-
competitive business, and each of us operates on extremely thin 
margins. So any cost increase, especially those related to fuel 
or regulatory mandates, has an impact. An extra dollar spent on 
fuel means fewer dollars available to put back into my 
business.
    Countless truckers have felt the pain of high fuel prices 
on their businesses and have had to put off buying new 
equipment, or worse. For me, this hits home when I need to pay 
for work on my truck and face higher prices for parts, labor, 
or even something as basic as tires, all without an increase in 
pay.
    Further, for many truckers, business and family incomes are 
basically one and the same. Money isn't available to put 
towards the basic necessities like payments, like mortgage 
payments and medical expenses. And just as prices for repairs 
on the truck increase with high fuel prices, so do prices for 
household expenses like gas and food.
    OOIDA has long supported an approach to energy policy that 
combines increased domestic energy production with efforts 
including greater marketing transparency, increase in focus on 
natural gas as a future energy source, and passing a new 
highway bill. In the past, the U.S. production has served as a 
relief valve, helping to mitigate price spikes. However, the 
strength of relief has been decreased as regulatory roadblocks 
have reduced domestic production on Federal lands and waters. 
Impeding domestic production with red tape is something 
truckers find very difficult to understand. Resources are 
available here at home.
    Like most truckers, fuel is my largest annual operating 
expense. Trust me when I tell you, no government agency is more 
motivated than I am to make certain I am running my vehicles as 
efficient as possible. I do not need regulations telling me how 
to operate efficiently or forcing me to buy a truck that places 
some prescribed government efficiency standard ahead of what I 
need for my business.
    Unfortunately, that is what has just happened with the 
EPA's new first-ever fuel efficiency rule for heavy-duty 
trucks. The regulations impose technologies that work for 
certain types of trucking operations on every one of our 
nation's trucking companies. It will add an additional $6,200 
to the price of a new truck despite the older truck that I use 
today operates more efficiently than many of the trucks that 
are coming off the assembly line.
    EPA is not the only agency driving up costs for truckers. 
The Department of Transportation's proposed rule requiring 
electronic on-board recorders, electronic stability control and 
speed limiters is using the veil of improved highway safety to 
one-size-fits-all regulatory mandates across the industry. 
These not only add significant costs to small business 
truckers, but also they will make a sizeable change to the 
industry, all with negative impacts to truckers who already 
have economic incentives to drive safely.
    Further, one only has to look at significant improvement 
across the trucking industry over the past decade to question 
why such costly mandates are needed. The trucking industry 
faces significant economic and regulatory pressures on small 
business truckers like myself, especially impacted by the high 
fuel price spikes and costly mandates. Congress and the 
administration need to work to improve the domestic energy 
while resisting the urge to impose new mandates solely for the 
sake of imposing mandates.
    Mr. Chairman, I thank you for the opportunity to testify, 
and I look forward to answering any questions.
    Chairman Walsh. Mr. Zuber, thank you. Thank you very much.
    I am now going to turn to Phil Kerr, our next witness from 
Elmhurst, Illinois. He is President of Home Medical Express, 
Inc., a small business home health services provider. Since its 
inception more than 6 years ago, Mr. Kerr's business has served 
more than 70,000 patients. He currently serves more than 7,000 
patients across 10 counties in Illinois.
    Mr. Kerr, you may deliver your testimony, and thanks for 
coming.

                     STATEMENT OF PHIL KERR

    Mr. Kerr. Thank you, Congressman Walsh and Ranking Member 
Schrader and members of the Small Business Subcommittee on 
Economic Growth, Tax and Capital Access, for the opportunity to 
provide testimony today on high fuel prices and the impact they 
have on small businesses.
    As you mentioned, my name is Phil Kerr, and I am the 
President of Home Medical Express. We are located in Elmhurst, 
and we are a proud member of the American Association of 
Homecare.
    Essentially, we are a provider of home oxygen therapy 
services, home nutrition therapy services, therapy for 
obstructive sleep apnea, and everything from hospital beds to 
wheelchairs. On a daily basis, we send about 23 people out in 
the field each day to distribute products and services from 
medical technicians to respiratory therapists and registered 
dieticians.
    The American Association of Homecare is a trade 
association, a national trade association for all the 
providers, equipment manufacturers and other organizations of 
the homecare community.
    I guess it was recently published that every $10 rise in 
the price of a barrel of oil translates to a 25-cent increase 
in gas prices, which tears more than $25 billion from our 
economy yearly. As a small business owner, I can tell you 
firsthand how it affects my business.
    For our particular industry, it particularly has an impact 
on us. In other industries, a company will actually pass along 
additional costs to their customers. In our particular 
industry, we are dealing largely with Medicare and Medicaid, 
Blue Cross and other private insurance companies. About 75 
percent of our business is dealing with the government with 
Medicare and Medicaid patients, and those patients we get a 
fixed payment for the services that we provide regardless of 
the costs that we have. So any cost that comes along, we are 
not able to pass that cost on to the actual customers.
    The fact of the matter is that over the last 6 years, since 
we opened our business through the government regulations 
regarding medical equipment, there has actually been a 33 
percent reduction in fees as it is, while fuel costs have gone 
up.
    I have been in the field for 32 years. My two partners and 
I started our business in 2006, as you mentioned. We started 
from scratch with no employees in 2006, and last year we 
finished with a little over $8 million in revenues, and we 
currently have 80 employees.
    As you mentioned, we service over 50,000 patients and 7,000 
active. We service about a 60-mile radius from the Elmhurst 
area. As I mentioned, 70 percent of the patients are Medicare 
and Medicaid, and our costs essentially get fixed.
    Fuel costs now represent 3 percent of our revenues, the 
cost of our revenues, which is up 1 percent over the last 2 
years. By itself, that may not seem like a lot of money. For 
our business, though, that has taken us from $126,000 in fuel 
costs in 2009 to this past year we surpassed or are at about 
$250,000. A $120,000 increase is significant. Our business 
during that time grew 43 percent, but our fuel costs grew 95 
percent, so more than double the pace.
    As I said earlier, other industries can pass that on. We 
are not able to pass those costs on.
    One alternative that we have been forced to look at in 
providing services to the patients that we provide is having to 
drop-ship certain services. We are required by our insurance 
companies to provide the services to the patients in their 
home, deliver to the patients in their home. Certain items like 
tube-feeding therapy, people who drink things like Ensure at 
home for tube-feeding purposes, weigh about 13 pounds per box. 
Some patients get 10 boxes of those per month. We deliver those 
today inside their house. We bring it inside to their family 
room, their kitchen, pantry, what have you. Our costs to go to 
each house are about $50 per visit.
    We can go through drop shipping and get down to about $37 
per visit, but the implications of that are that 60 percent of 
these cases, as I mentioned earlier, are Medicare. We are going 
to have to bring products that weigh up to 130 pounds--if FedEx 
or UPS brings them, they bring it to the doorstep. They don't 
bring them inside. That will force consumers to actually bring 
those products inside themselves.
    High gas prices have compounded a problem that home medical 
group providers have had with a new government program known as 
competitive bidding. This program is competitive in name only. 
In fact, in Round 1 of competitive bidding, 87 percent of the 
companies in the first nine states were eliminated from the 
marketplace.
    It is a program that was poorly conceived, fundamentally 
flawed. It is now exhibiting many serious breakdowns that are 
predictable based upon its failure to recognize and account for 
the true nature of the way home medical equipment is provided 
to Medicare beneficiaries. These breakdowns have been evident 
since the start in 2007.
    Round 2 of competitive bidding started this year. In March, 
we had to submit our bids for those things. We will find out 
later this year. The biggest problem that we have is that we 
were forced to provide a bid for four years. So that means that 
any increase in fuel prices over the next four years, no matter 
what they are, are built into the price we have had to commit 
to today. So it has made it very difficult for us.
    We have included more detailed information about the 
problems with the bidding program in our testimony. Business 
closures and employee reductions have significantly impacted 
the industry.
    In conclusion, I would like to thank you again for the 
opportunity to provide the testimony today. I regard this as an 
important issue and look forward to the Subcommittee to protect 
patients' access to homecare, as well as small businesses that 
provide the equipment that they need.
    Chairman Walsh. Thank you. Thanks.
    Our third witness is Larry Smith. He is General Manager of 
Lurvey Landscape Supply Company, located in Des Plaines. Lurvey 
is a diversified wholesale supply distribution business with 35 
full-time employees and as many as 125 temporary seasonal 
employees.
    Mr. Smith, welcome. You have the mic.

                    STATEMENT OF LARRY SMITH

    Mr. Smith. Chairman Walsh, distinguished members of the 
Subcommittee, and guests, thank you for the opportunity to 
testify today on how high fuel prices and price uncertainty 
affect my company and my industry.
    I am Larry Smith of Lurvey Landscape Supply in Des Plaines. 
My company distributes a wide range of products used by 
landscapers, builders, and homeowners, from all types of green 
goods to paving materials to nonstructural stone building 
veneers to accessory products. All of the products we 
distribute are purchased from others.
    We employ 35 people year-round and 120-plus during peak 
seasons. We actively participate in our national association, 
the American Nursery and Landscape Association, and its state 
partner, the Illinois Green Industry Association, as well as 
other trade organizations related to the products we 
distribute.
    Our company is part of the vertically integrated nursery 
and landscape industry, often referred to as the green 
industry. All but a few of the very largest businesses in the 
industry are classified as small businesses. Most are family 
owned and operated, and many are multi-generational.
    The plant production part of the business is considered 
agriculture, and in production value, its crops are valued at 
$16.7 billion at farm gate. Nationally, the industry 
contributes over $175 billion in economic output and sustains 
1.95 million full- and part-time jobs.
    Here in the Land of Lincoln, the most recent numbers show 
that the green industry has an impact of $5.2 billion on the 
Illinois economy, employs 200,000 people full- and part-time, 
and generates $1.9 billion in payroll.
    Our company currently operates three locations in the 
Chicago area, serving about 1,200 landscape and construction 
businesses, as well as retailing to homeowners from our Des 
Plaines location. During a busy spring day, our wholesale 
locations will produce over 600 invoices. Lurvey Landscape 
Supply owns three 20-foot flatbed straight trucks and two small 
dump trucks for local deliveries of from a few miles to 150 
miles or more. We can do well over 20 deliveries a day to the 
local market.
    For the first time in our history, we have begun adding a 
fuel surcharge to our own local deliveries just to try to 
recoup some of the added expenses of high fuel prices.
    The Great Recession has hit our industry hard, given the 
fact that residential construction, commercial property 
development and municipal investments in green infrastructure 
all declined sharply as the economy took a sharp turn for the 
worse. The ensuing credit crunch further destabilized 
businesses in our industry.
    So against this backdrop, record high fuel prices and price 
volatility have added insult to injury. I would like to list a 
few of the impacts all of this has had on our business and many 
in the green industry.
    Our customers need a stable price for products for extended 
periods of time in order to bid on work that is often six 
months to a year away. Fuel surcharges have ranged this spring 
from 15 percent to as high as 37 percent. In real numbers, a 
load from Pennsylvania this spring cost $925, and the fuel 
surcharge was $351.50 extra. Locally, we pay $310 for a load of 
concrete pavers, with an additional $62 in fuel surcharges. 
These surcharges were not part of the cost a few short years 
ago. This equates to significant increases in cost.
    With that in mind, can we ask the growers that we buy 
plants from to absorb those costs when other economic 
conditions have forced their profit margins to near zero 
percent? Or can we absorb those costs?
    Our net margins are less than half of pre-recession 
numbers, and a significant portion of the reduction is due 
directly to high fuel costs. That impacts our ability to 
reinvest in our business by updating or replacing delivery 
vehicles, and our employees by increasing wages or adding staff 
where and when it is needed.
    These increased costs also impact how our suppliers operate 
and their ability to invest in employees and equipment.
    Before the recession, prices were determined yearly for 
much of our inventory based on product cost without a 
significant weight placed on freight costs. Current practice 
requires us to weigh freight costs heavily in our pricing 
equations. This has caused us to significantly reduce the 
inventory we carry and necessitated quoting prices on a per-job 
basis, which in turn increases lead times and creates 
frustration and inefficiencies on the job if product can't 
arrive on time.
    So while I am far more expert in running a business than I 
am in telling this Committee exactly how to take the knife edge 
off high fuel prices and price volatility, which leads to 
business uncertainty, I can speak to the troubling impacts we 
have faced. I do believe we as a nation must roll up our 
sleeves and get to work on any and every strategy to develop 
both traditional and non-traditional energy sources. There is 
no question that recent high fuel prices and price uncertainty 
have dramatically impacted our profit margins and our ability 
to take risks investing in new employees and equipment. We 
would welcome the actions that bring some relief.
    Thank you again for this opportunity to testify.
    Chairman Walsh. Thank you, Mr. Smith.
    Our final witness is Richard Sade. Richard is Vice 
President of S&S Hinge Company, located in Bloomingdale, 
Illinois. S&S Hinge has been in operation for more than 80 
years manufacturing specialized hinges used in a variety of 
applications.
    Thank you for being here. You have the floor.

                   STATEMENT OF RICHARD SADE

    Mr. Sade. Chairman Walsh, members of the Committee, thank 
you for the opportunity to testify before you today on this 
most important issue that impacts manufacturers of all sizes, 
especially small businesses like ours.
    My name is Richard Sade, as you indicated, Vice President 
of S&S Hinge, based in Bloomingdale, Illinois, a third-
generation continuous hinge manufacturer about 27 miles 
northwest of downtown Chicago. We manufacture parts for 
industries and products, including tool storage, marine, 
electrical, attic stairs, fixtures, emergency vehicles, and 
industrial distribution.
    S&S Hinge is a family-owned business with 38 employees, and 
we are now looking to expand our business by increasing our 
exports and developing new products and technologies.
    Like all Americans, at S&S we have felt the pain at the 
pump, not just when we want to take our families on summer 
vacations, but the pain is greatest on small businesses. Fuel 
impacts our company in several ways, the obvious one being our 
sales team stops at the gas station before visiting customers. 
We also have seen increases in the price we pay for raw 
materials through transportation and other surcharges. In some 
cases, our increased fuel costs are built into the sales price 
we provide to our customers, but even when we are successful in 
recovering some of these costs, it still makes our products 
more expensive on the global market and makes us less 
attractive to exports and new customers.
    As a small business, we often are trapped between much 
larger customers who may not anticipate a price increase on raw 
materials, and suppliers who are also seeing increasing costs. 
A challenge we face is our suppliers typically add a surcharge 
based on the weight and how much steel we buy, not on how many 
miles they travel to deliver goods to us, and steel is very 
heavy, obviously, as we all know.
    Obviously, as we try to grow our business and add 
employees, the amount of steel we buy will increase along the 
way, which comes with higher fuel surcharges. We must factor 
these surcharges in when deciding whether or not to explore new 
business opportunities and if we can afford to purchase raw 
materials we need to make more parts for our customers.
    S&S Hinge has already seen a 20 percent increase in fuel 
costs over the last year. Our employees, including our sales 
team, traveled respectively 475,000 miles a year in 2011. As we 
try to sustain and grow our business, this creates a Catch-22 
for us. While we know the cost to make money, a 20 percent 
increase in fuel surcharges is significant for a small business 
like ours trying to grow and add jobs.
    In part, as a result of these increases in fuel costs, our 
sales team is traveling less and relying more on the Internet 
to pursue new business opportunities. We know we must adapt to 
changing times, as any business. However, we seek to grow our 
company and add jobs. We cannot afford to miss new 
opportunities because of the increase in fuel costs.
    Prior to joining S&S, I worked for several Fortune 400 
companies, and while they also are dealing with significant 
fuel costs, economies of scale show how much more that increase 
can impact a small business in Illinois. A 20 percent increase 
in our transportation costs is an additional 28 percent annual 
increase in fuel use for our overall production costs in oils 
and lubricants. In any other industry like ours, where profit 
margins are low, single digits, any increase to cost puts a 
significant disadvantage to our bottom line.
    A lack of a comprehensive energy policy also further puts 
American manufacturers at a global disadvantage, especially 
small businesses like S&S. Our business has taken advantage of 
tax credits and incentives in the past, such as the one-time 
ComEd Smart Idea program for our plant lighting, which gave us 
a one-time savings of $12,760.
    As with anything in life, one size does not fit all. But 
this is certain, the U.S. must become more self-reliant on fuel 
sources. This will improve the market sustainability and help 
small businesses plan for the future.
    To support manufacturers, the government should explore 
domestic options available that will mean real fuel cost 
reductions. Especially in an election year, politics can trump 
good policy, and manufacturers cannot afford politicians 
playing politics with their lives and their livelihoods. 
Federal programs intended to foster new energy-efficient 
technologies are often directed at large manufacturers and lack 
a small business requirement. The government should work with 
the private sector to authorize and support investments in 
domestic energy sources and alternative fuels.
    Thank you for the opportunity to present my testimony 
today. Small businesses are the backbone of this country, and 
manufacturers are the driver of the recovering economy. But 
manufacturing can't drive us to better times without a fuel 
policy that makes sense for small businesses like ours. I look 
forward to continuing to work with you on this most important 
issue in the future and answering any questions you may have.
    Chairman Walsh. Thank you. Thank you.
    Politicians playing politics? That doesn't happen. Come on.
    Thank you, everybody.
    First, a thank-you to all of you in the audience. You know, 
if we were in Washington right now, this is what you would be 
doing. Virtually every committee in Washington holds hearings 
darn near every week or every other week. Every now and then, 
committees and the subcommittees, like this Subcommittee that I 
chair, were able to go into the field to bring witnesses from 
real life in front of us so we can listen to them, and this is 
a way for you all to actually come see a hearing because you 
can't get to Washington every week or two, and that's a good 
thing.
    So thank you all for coming. Let me ask some questions of 
our witnesses, and I want to thank you each for taking some 
time.
    You said it. You are the backbone of this country, small 
businesses, small businesses, small businesses. You are the job 
creators. You are the ones that eventually will get this 
economy back up on its feet. We in Washington tend to make life 
too difficult for you, and we have really done that over the 
course of the last three or four years.
    And it is not just the uncertainty coming out of 
Washington. Uncertainty is a problem, but very certain over-
regulations are a problem as well. So I hear you and I 
empathize with you, and I will tell you, when I am out a lot 
doing town halls or talking to folks out there, there is a real 
``big against small'' feeling in this country. Big businesses, 
big banks seem to be doing just fine. Small businesses, 
community banks, are struggling.
    When it comes to this issue in particular, high fuel 
prices, big businesses can take advantage of sophisticated 
financial tools to try to leverage or hedge against rising fuel 
prices. I don't think our small businesses have the same 
ability. So big businesses have tools that they can use to try 
to combat these.
    What do you all do? If you can't use fancy derivatives and 
hedge against rising fuel prices, what strategies do you use to 
try to combat high fuel prices?
    And that is for all of you. Does anybody have a short, 
quick, interesting answer?
    Mr. Sade. Yes. I would like to answer that, Joe. It really 
is, as I testified, a Catch-22 because, for an example, for us 
to hedge on surcharges, we will go buy more raw materials--for 
example, trucking. We will get a truckload of steel versus a 
half a truck, which I have to go borrow money to do that.
    Chairman Walsh. Yes.
    Mr. Sade. And the lending in this country for small 
businesses is terrible. So we are constantly chasing that tail 
of trying to balance our business, working with the banks, and 
then adjusting for these fuel prices, because a lot of my 
customers are big corporations, and I have contracts with them. 
I can't raise prices. I can't pass that through on a yearly 
contract. Therefore, we eat it, and we can't continue to do 
that. We just--you know, the margins aren't there.
    Chairman Walsh. Mr. Kerr, because of your unique client 
base----
    Mr. Kerr. For us, the additional costs that we had, what it 
ended up meaning for us was although we grew 80 employees over 
this 5-year period, there are five to ten more people we could 
have hired that could have had health insurance who would have 
purchased more vehicles. Down the road, it has forced us to 
hold back on some of those investments. As a result, what could 
have been even greater employee growth was stymied.
    Chairman Walsh. Mr. Zuber, Mr. Smith, again, you are not a 
big old sophisticated corporation. That's a good thing. They 
can hedge and do different things. What sort of tools do you 
all have to try to combat and leverage against this?
    Mr. Zuber. The only option I have is I am a one-truck 
operation leased to a carrier, and all I can do is work on the 
truck myself instead of having it worked on. I try to cut costs 
like that. I work on my truck to turn it more fuel efficient.
    Chairman Walsh. And if you have to work on that truck 
yourself, what does that take you away from?
    Mr. Zuber. It takes me away from my family life, and my 
wife gives up, my kids give up. Health insurance is hard to 
come by, that you can use. I mean, yes, it is very hard, 
especially the family life and the extra added work that I put 
into it, and then the compensation is not there.
    Chairman Walsh. Mr. Smith.
    Mr. Smith. Lower margins, reduced labor don't pay raises.
    Chairman Walsh. Yes. It has to give somewhere.
    We mentioned how fuel prices have increased roughly 93 
percent since President Obama got elected. They have begun to 
come down a bit. Are we still on the high end?
    Mr. Zuber. Yes, they are.
    Chairman Walsh. Don't you love it when I ask easy 
questions?
    Mr. Zuber. Was that rhetorical?
    Chairman Walsh. Well, that was whatever you want to call 
it.
    We are still up there, aren't we?
    Mr. Zuber. Yes, we are, very high. I think we need to 
depend more on domestic drilling. I think we need to cut some 
regulatory red tape to try to get more domestic drilling, and 
not only rely on oil and diesel but maybe in the small, the in-
town communities, like the landscapers that deliver, don't 
force it on them. I don't want any mandates. But use maybe 
natural compressed gas. They are getting a lot of those around 
the area, but they are starting to put them in. They are not 
able to be used over the road very well for a lot of drivers, 
but cut it that way, and cut the regulatory red tape to build 
refineries, invest some of our money off the domestic oil that 
we capture to invest in alternate fuels, and try to get the 
price down, become self-reliant again in this country.
    Chairman Walsh. You will never work in Washington. You are 
making much too much sense.
    Gentlemen, $3.60, $3.70, $3.80 a gallon, this is still 
hugely difficult for your companies, your businesses?
    Mr. Sade. It is not only difficult just from the fuel, but 
you have got to understand, any time there is this fluctuation 
with a barrel of oil, it affects our production costs because 
we use oils in our manufacturing process, and that is the other 
part of the equation that affects small businesses like mine, 
that we use oils and lubricants and cleaning solutions and that 
type of thing.
    When oil gets to $100 a barrel, we see significant 
increases, 50 percent sometimes, in just oils that we use in 
production, lubricants.
    Chairman Walsh. Mr. Smith, historically for you, this is 
high end right now, this is on the high end?
    Mr. Smith. Yes. We are currently, I think this week, the 
fuel surcharge for one of the companies that we deal with a lot 
is 15 percent. So that is still, that is $150 on a $1,000 load. 
That money comes out of somebody's pocket, and generally 
speaking it can't come out of our customers' pockets because 
they don't have any more money to pull out of their pockets.
    Chairman Walsh. Maybe I didn't hear you right. Did you 
testify that this is the first time ever you've had to put a 
fuel surcharge on your deliveries?
    Mr. Smith. This is the first time that we have done it as a 
company for our own local deliveries that we do with our 
trucks.
    Chairman Walsh. Okay. Mr. Zuber, answer me one question 
about the trucking industry in general. Has it become more 
consolidated? Is it tough for the one, two, three, four truck 
shops to make a go of it? What's happening to the smaller, 
smaller, smaller companies in the trucking industry?
    Mr. Zuber. Well, it is very tough for even the 100-truck 
operations. The problem is the fuel surcharge is not able to be 
passed on, and the operators eat it, and the problem is we are 
giving tax breaks, grants to the bigger companies that have the 
legal departments to swoop in and grab those grants that we 
know nothing about.
    Chairman Walsh. What is--educate me--a 100-truck operation? 
Is that considered small? Medium?
    Mr. Zuber. That is small.
    Chairman Walsh. That is small. Okay.
    Mr. Zuber. Yes. But, you know, we just do not have the--if 
we pass it on, we pass it on to everybody in this room. We have 
to pass it on to the consumers. They can't afford it. We can't 
afford it. But with the breaks that they are getting, they are 
not only getting breaks with grants and stuff like that. I pay 
a certain price for a gallon of diesel, whatever is on the sign 
out there. They may get 20 to 30 cents off of that as a big 
corporation. Tires are the same way, so on and so on, 
everything they use. They get such big breaks, it is hard for 
us to compete as owner-operators.
    Chairman Walsh. And we hear that across industry.
    Mr. Zuber. Could I say one more thing?
    Chairman Walsh. Oh, you have got the mic.
    Mr. Zuber. It is funny. I started in the early 80's as a 
truck driver. I made almost--I actually took home more money. 
But back then, you could buy diesel for 89 cents a gallon. 
Today it is $3.90. I made 95 cents to $1.00 a mile back then. I 
make an average of $1.02 a mile, plus fuel.
    Chairman Walsh. Wow.
    Mr. Zuber. It doesn't come out. It is hard to raise three 
kids, a wife, and be happy.
    Chairman Walsh. Wow, wow.
    Mr. Kerr, again, you are unique at this table because of 
what you do and who you are working with. Seventy-some percent, 
as you said, is Medicare and Medicaid. Is it true that home 
health care and ambulances are the last health professions 
still making house calls?
    Mr. Kerr. Largely, that is true. I mean, there are still 
small physician groups that do that, but they are the exception 
rather than the rule.
    Chairman Walsh. And home health care has experienced 
Medicaid reimbursement cuts?
    Mr. Kerr. Medicaid and Medicare.
    Chairman Walsh. Medicare?
    Mr. Kerr. Medicare has been significant, and this 
competitive bidding that I spoke about, just to take a minute 
or so on that subject. Right now, there are approximately 35 
million people in the United States that have Medicare. The 
Obamacare plan is going to take that number to about 70 million 
people on those government rolls. The costs associated with 
this program of competitive bidding where in the first nine 
cities they eliminated 87 percent of the competition--and, by 
the way, that 87 percent that was eliminated were small 
businesses----
    Chairman Walsh. Right.
    Mr. Kerr. If you take that going forward, it seems counter-
intuitive. You are going to take double the demand, and you 
have reduced the supply by 87 percent. So your area that you 
live in, McHenry, we service that area from our place. So in 
metropolitan Chicago, there are about 100 companies that do 
what my company does. Take that down to 13, and it exacerbates 
the fuel situation. We now have to drive--we have broadened the 
geographic density, and we now end up having to drive farther 
to provide those services. So the amount of fuel that we are 
going to consume becomes grossly inefficient.
    Chairman Walsh. Now, health care and Obamacare will 
probably be a fairly interesting topic this week. But with 
these Medicare cuts, and with these rising fuel costs, in your 
mind, what is this going to do to folks' access to health care, 
especially home health care?
    Mr. Kerr. Well, certainly a lot of the extra services that 
personal service companies provide are going to be diminished, 
like one of the examples I talked about. We are just going to 
have to eliminate any possibility of being customer or senior 
citizen friendly. If the option is to go out of business or 
stay in business and reduce some of those services, that is 
another rhetorical question I suppose.
    Chairman Walsh. Oh, we are full of them.
    Mr. Kerr. Right.
    Chairman Walsh. Isn't it fascinating to everyone this 
pattern here of big versus small? You can almost go down every 
industry, and big businesses and big corporations generally 
have capital, generally are sitting on capital. Generally, 
government tends to create rules to take care of them, and it 
is the smaller businesses that take the hit.
    A couple of general questions for everybody, and then we 
will call it a morning.
    Actually, Mr. S&S Hinge, I want to ask you one quick 
specific. Do you compete against foreign imports?
    Mr. Sade. Yes.
    Chairman Walsh. Okay. What are fuel prices, how are they 
helping you in this competitive environment, or hurting you? 
Try to just take 30 seconds.
    Mr. Sade. One of the issues is that, as you well know--you 
have been to my plant. Over the years we have tried to, what we 
call, China-proof ourselves with technology and innovation. 
However, the big-box guys do buy quite a bit of hardware from 
Asia. The good news there is that some of this is coming back 
to the States, and when it comes to manufacturing, because of 
the higher transportation costs and fuel costs, I can't go and 
sell my product in China anymore just for the fact of shipping 
it there outweighs the cost of manufacturing costs. So 
exporting has become more difficult. But again, on the flip 
side, we are seeing more activity come back.
    Chairman Walsh. Two quick general questions, and then we 
will wrap. The price of gas at the pump has moderated a bit the 
last couple of months. Demand for gas is down. I mean, 
Americans are hurting. So on the demand side, there is not as 
much demand. We are not driving around as much. The economy is 
struggling out there. Folks are struggling.
    Give me your quick take right now on where you see things 
in this country economically. Let's start here and go down the 
row quickly.
    Mr. Zuber. Where are we at now?
    Chairman Walsh. Yes, where are we at right now.
    Mr. Zuber. We are at a point where jobs are being lost. If 
there are no consumers to buy my products--well, not my 
products but the products I haul, that means less loads for my 
truck to haul. That means more trucks trying to haul the same 
load. The prices are going down. The fuel is still up. You 
know, only so many can live on that top tier when you have got 
the bottom tier working and supporting the top tier. If we 
don't do something, I look for it to crumble.
    Chairman Walsh. Mr. Kerr, what do you think? You are out 
there. Where do you think we are at economically right now?
    Mr. Kerr. I think it is kind of the--you are familiar with 
Atlas Shrugged? It is much like that. The idea of innovation 
kind of goes by the wayside. People that were formerly in 
businesses where you had very thin margins to begin with, 
margins continue to erode. There becomes no more motivation to 
be involved in that business. In Atlas Shrugged, people just 
start disappearing, and I think we will see that, at least in 
that microcosm.
    Chairman Walsh. Mr. Smith, where are we at right now 
economically?
    Mr. Smith. We are still on the bottom and treading water. I 
see glimpses of hope, and then they go away just as quickly as 
they show up.
    Chairman Walsh. Yes. Where are we at right now?
    Mr. Sade. Oh, boy, good question.
    Chairman Walsh. Thirty seconds.
    Mr. Sade. Washington has got us stifled. The economy is 
just--you know, the leadership and what is going on. As you 
well know, I am very much active in some other politics, and I 
think that there are trillions of dollars on the sidelines. 
Everybody is waiting to see what happens, obviously, with the 
election, and regulation has been killing us. So it is very, 
very slow.
    Chairman Walsh. Okay, last quick question, bullet answers. 
Anything you advise me to do? Let's pretend that I can take to 
Washington, when I go back tomorrow, and we will turn it into 
law. When it comes to high fuel prices, what is one thing you 
would like to see your government do to improve the situation? 
One thing. Start with Mr. Zuber.
    Mr. Zuber. Cut the regulatory red tape and start becoming 
more dependent on our own oil and resources in this country.
    Chairman Walsh. Mr. Kerr.
    Mr. Kerr. Increase supply in whatever way that we can do 
that, whether that is additional drilling or what have you.
    Chairman Walsh. Additional drilling.
    Mr. Smith.
    Mr. Smith. Same thing, additional drilling, more supply.
    Chairman Walsh. Mr. Sade.
    Mr. Sade. Approve the pipeline.
    Chairman Walsh. Approve the pipeline. You did that in three 
words.
    Thank you. Thank you all. My closing thought is we are 
treading water right now. We are barely treading water. Things 
out there are so much worse than people in Washington realize. 
Our unemployment rate is not 8.2 percent. It is higher than 
that. Every quarter we have adjusted our growth numbers down. 
It is difficult to say we are even limping along. We are--you 
used Atlas Shrugged. The metaphor, and I think it is an apt 
one, the metaphor I use is, look, this is the most innovative, 
entrepreneurial, go-get-'em, energetic country that men and 
women have ever created, and right now it is like Gulliver's 
Travels. It is like we are laying down on our back, this great 
American engine and this great American economy, and we are all 
tied up. We are all tied up by all these regulations, by all 
this red tape, by all these taxes, by all this new big health 
care thing that was thrown on us, and the American ingenuity 
can't get up. It is like we are on our backs, and this isn't 
rocket science.
    We try to complicate things in Washington all the time. You 
create jobs. All you want Washington to do, I think, is lay 
down some simple rules and then get out of the way and let you 
do your thing. Unfortunately, that is not at all what we, what 
Washington has done the last three to four years.
    As I say every time I am with you all, with small business 
heads, my first and only instinct is to apologize. I think, Mr. 
Zuber, Mr. Kerr, Mr. Smith, Mr. Sade, I apologize for 
Washington because you all have a target on your back. For some 
reason this administration, for some reason too much of 
Washington wants to just go at you and make your lives 
miserable, and for that I apologize.
    I want to thank you all for being here today. If it were up 
to me, I would hold 10 field hearings for every hearing we hold 
in Washington. We would get people out of Washington, coming 
out here in this great country talking to people as well, so 
that folks who don't ordinarily get to Washington can listen. 
But we learn more when we listen to you and hear from you.
    So thank you all for coming. You have, I believe, provided 
great insight into this issue of high fuel prices. Your written 
testimony will go to the committee and we will study and 
continue to work on the things that you all are concerned 
about.
    I ask unanimous consent that members of this committee have 
5 legislative days to submit statements and supporting 
materials for the record.
    Hearing no objection, so ordered.
    Chairman Walsh. Without objection, then, this hearing is 
now adjourned. Thank you for coming.
    [Whereupon, at 11 a.m., the Subcommittee was adjourned.]


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

