[Senate Hearing 117-243]
[From the U.S. Government Publishing Office]





                                                        S. Hrg. 117-243
 
                        THE SUPPLY CHAIN CRISIS
               AND THE IMPLICATIONS FOR SMALL BUSINESSES

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

                                HEARING

                               BEFORE THE

                      COMMITTEE ON SMALL BUSINESS
                          AND ENTREPRENEURSHIP

                                 of the

                          UNITED STATES SENATE

                    ONE HUNDRED SEVENTEENTH CONGRESS

                             SECOND SESSION

                               __________

                             MARCH 30, 2022

                               __________

    Printed for the Committee on Small Business and Entrepreneurship
    
    
    
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        Available via the World Wide Web: http://www.govinfo.gov
        
        
        
                           ______                       


             U.S. GOVERNMENT PUBLISHING OFFICE 
47-362PDF           WASHINGTON : 2022 
        
        
        
        
        
        
        
            COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP

                    ONE HUNDRED SEVENTEENTH CONGRESS

                              ----------                              
                 BENJAMIN L. CARDIN, Maryland, Chairman
                  RAND PAUL, Kentucky, Ranking Member
MARIA CANTWELL, Washington           MARCO RUBIO, Florida
JEANNE SHAHEEN, New Hampshire        JAMES E. RISCH, Idaho
EDWARD J. MARKEY, Massachusetts      TIM SCOTT, South Carolina
CORY A. BOOKER, New Jersey           JONI ERNST, Iowa
CHRISTOPHER A. COONS, Delaware       JAMES M. INHOFE, Oklahoma
MAZIE HIRONO, Hawaii                 TODD YOUNG, Indiana
TAMMY DUCKWORTH, Illinois            JOHN KENNEDY, Louisiana
JACKY ROSEN, Nevada                  JOSH HAWLEY, Missouri
JOHN HICKENLOOPER, Colorado          ROGER MARSHALL, Kansas
                 Sean Moore, Democratic Staff Director
              William Henderson, Republican Staff Director
              
                            C O N T E N T S

                              ----------                              

                           Opening Statements

                                                                   Page

Cardin, Hon. Benjamin L., Chairman, a U.S. Senator from Maryland.     1
Paul, Hon. Rand, Ranking Member, a U.S. Senator from Kentucky....     3

                               Witnesses

Kumar, Ms. Cheetie, Chef/Owner, Garland, Raleigh, NC.............     5
Lam, Mr. Jason, Owner/Manager/Chef/Waiter/Dishwasher/Toilet 
  Scrubber, Sake Thai and Sushi Bar, Stafford, VA................    12
Kota, Dr. Sridhar, Executive Director, MForesight: Alliance for 
  Manufacturing Foresight, University of Michigan, Ann Arbor, MI.    17
Griffith, Mr. Joel, Research Fellow, The Heritage Foundation, 
  Washington, DC.................................................    26

          Alphabetical Listing and Appendix Material Submitted

Cardin, Hon. Benjamin L.
    Opening statement............................................     1
Cato Institute
    Statement dated March 29, 2022...............................    48
Griffith, Mr. Joel
    Testimony....................................................    26
    Prepared statement...........................................    28
    Responses to questions submitted by Senators Risch, Inhofe, 
      and Young..................................................    66
Kota, Dr. Sridhar
    Testimony....................................................    17
    Prepared statement...........................................    20
    Responses to questions submitted by Senators Hirono, Coons, 
      and Young..................................................    58
Kumar, Ms. Cheetie
    Testimony....................................................     5
    Prepared statement...........................................     8
    Responses to questions submitted by Senator Hirono...........    54
Lam, Mr. Jason
    Testimony....................................................    12
    Prepared statement...........................................    15
    Response to question submitted by Senator Inhofe.............    57
Paul, Hon. Rand
    Opening statement............................................     3


                    THE SUPPLY CHAIN CRISIS AND THE

                   IMPLICATIONS FOR SMALL BUSINESSES

                              ----------                              


                       WEDNESDAY, MARCH 30, 2022

                      United States Senate,
                        Committee on Small Business
                                      and Entrepreneurship,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 1:46 p.m., via 
WebEx in Room 215, Dirksen Senate Office Building, Hon. 
Benjamin L. Cardin, Chairman of the Committee, presiding.
    Present: Senators Cardin, Cantwell, Shaheen, Hirono, 
Hickenlooper, Paul, Rubio, Risch, Scott, Ernst, Young, and 
Hawley.

OPENING STATEMENT OF HON. BENJAMIN L. CARDIN, CHAIRMAN, A U.S. 
                     SENATOR FROM MARYLAND

    Chairman Cardin. The Small Business Committee will come to 
order. Let me just alert everyone that the floor schedule is a 
little bit up in the air. We were supposed to have started the 
third vote of the morning 15 minutes ago, and we are still on 
the first vote of the morning, so--and it is my understanding 
we might have to have the Vice President on the floor, which 
could cause a little more of a delay, so we are going to try to 
keep the hearing moving forward.
    There is an all-Senators classified briefing on Ukraine I 
think at 3:00 this afternoon, so we are going to do our best to 
keep the hearing moving forward.
    I also just want to acknowledge, earlier today, I was with 
Vice President Harris on an announcement that she made in 
regards to a partnership with the Greater Washington Committee 
that deals with this region in regards to opening up 
opportunities for minority businesses and minority 
entrepreneurship. It was a very healthy discussion, and the 
Administration announced changes in the 7(a) Community 
Advantage program, which I strongly support, extending the 
pilot program and expanding its reach. So there was some good 
news today.
    Onward to today's hearing, let me welcome all of our 
witnesses. Today's hearing will examine how the prolonged 
disruption in the global supply chain has affected American 
small businesses as well as the role that small manufacturers 
can play in our efforts to build more resilient supply chains 
and reshore production of some of our most critical products 
and technologies.
    Based on my conversations with Maryland small business 
owners in recent months, supply chain disruptions are currently 
their biggest challenge. I was proud to host Spencer Jones, who 
owns Chick and Ruth's Delly, iconic restaurant in Annapolis, as 
one of my guests for President Biden's State of the Union 
Address earlier this month. When I spoke to Spencer after the 
speech, he said that the supply chain disruptions, along with 
rising inflation, are the two biggest issues facing his 
business.
    As we begin this hearing, it is important for us to 
remember that the inflation we are experiencing and the supply 
chain disruptions are linked. When factories close, when 
products sit in shipping containers and ports, when production 
capacity decreases due to sick employees, and when products 
take longer to get from warehouse to store, prices go up. This 
problem is affecting all sectors of our economy.
    A recent survey conducted by the U.S. Chamber of Commerce 
and MetLife found that 6 out of every 10 small businesses 
surveyed have experienced a supply chain disruption in the past 
year and have had to alter their supply chains. Half of the 
respondents reported that disruptions made it difficult to keep 
up with demand, and I think we have all heard from our 
constituents about the difficulty in finding products on the 
shelf.
    I was very pleased to hear President Biden announce during 
the State of the Union that rebuilding America's domestic 
production capacity is central to his Administration's plan to 
fight inflation and reduce our reliance on foreign supply 
chains. I am even more pleased that this priority was reflected 
in the fiscal year 2023 budget request. Rebuilding our domestic 
manufacturing sector, which has been decimated by decades of 
offshoring by large corporations will require a whole of 
government strategy, and it will require an investment in our 
small manufacturers who will be key to our long-term 
resilience.
    One of our witnesses, Dr. Sridhar Kota, is the founding 
Executive Director of MForesight: Alliance for Manufacturing 
Foresight, where he leads efforts to accelerate innovation and 
make the U.S. manufacturing sector more competitive globally.
    Dr. Kota, I am looking forward to hearing your thoughts on 
how Congress and the Small Business Administration can support 
small manufacturers and innovators.
    I applaud the Biden administration for proposing an 
increase in the authorized lending capacity of the 7(a) and 504 
loan programs as well as the Small Business Investment 
Companies programs. These three programs are critical to 
getting capital into the hands of small manufacturers so they 
can grow and increase their production capacity.
    One of the consequences of offshoring our manufacturing 
capacity is that small businesses in the manufacturing sector 
need more support to access the amount and types of capital 
they need to grow. The 504 program, which is the program most 
utilized by small manufacturers to finance large equipment and 
facility purchases, hit its lending authority in September of 
last year and is on track to break a record number of loans 
again this year. Increasing lending capacity of 504, 7(a), and 
SBIC programs will meet an immediate need for small 
manufacturers looking to expand.
    I am also pleased that the SBA's leadership understands the 
role they must play in this effort and they have focused on 
increasing collaboration within the Agency to improve its 
services to small manufacturers.
    While we take steps to make these long-term investments, we 
must remember that the current state of our supply chain, from 
manufacturing to food service industries, was decades in the 
making, so we will not be able to rebuild our domestic capacity 
overnight.
    So for restaurant owners like Mr. Jones and two of our 
witnesses today, Ms. Cheetie Kumar and Mr. Jason Lam, they need 
immediate relief. I remain gravely disappointed that the 
omnibus spending package passed by Congress earlier this month 
did not include additional assistance for restaurants and other 
hard-hit small businesses.
    For the last two years of the pandemic, nearly all 
restaurants have been under great strain as they struggle to 
keep staff and adapt to the new variants while facing increased 
prices due to supply chain disruptions and inflation, and those 
have been the restaurants that are fortunate to have survived 
the pandemic. Thousands have closed their doors for good.
    More than 100,000 restaurants received grants from the 
Restaurant Revitalization Fund that have helped them keep their 
doors open, but more than 180,000 restaurants that submitted 
applications--they were in line--have not received the funding. 
This is a matter of fairness. It was just the luck of where 
they were in line that they were unable to get the funds. This 
happened when we had the Paycheck Protection Program, and we 
replenished the funds without much controversy. We need to do 
the same for the restaurants.
    Had Congress not acted quickly to replenish the Paycheck 
Protection Program when it ran out of money weeks after it 
opened in April 2020, the program would today be remembered as 
a half-measure. Instead, we extended the emergency aid needed 
to meet the crisis we face, and that is exactly what we must do 
again.
    As we discuss our long-term effort to strengthen our 
domestic supply chain and manufacturing sector today, I want us 
to keep in mind that there are still hundreds of thousands of 
restaurants and other hard-hit small businesses that require 
immediate relief. We can, and must, address both of these 
issues.
    With that, let me recognize the distinguished Ranking 
Member, Senator Paul.

   OPENING STATEMENT OF HON. RAND PAUL, A U.S. SENATOR FROM 
                            KENTUCKY

    Senator Paul. Is the supply chain crisis a result of the 
nature of capitalism or the malignant nurture of big 
government? The answer should be obvious. The hallmark of 
capitalism is that economic freedom always allows supply and 
demand to intersect in virtually seamless fashion.
    A trip to Walmart illustrates how advanced technology sends 
digital information from the checkout register to the suppliers 
across the country, and the shelves are never bare, that is, 
until big government inserted its maligned presence in the form 
of COVID lockdowns. Retail stores were shuttered. Mask mandates 
and vaccine passports discouraged in-person shopping. 
Regulations that discouraged trucking, combined with increased 
demand for online shopping, exploded trucking needs.
    Government borrowed nearly $6 trillion. And, the money 
supply, as measured by the M2, peaked at 27 percent last year, 
a historic high, and has averaged 15 percent growth in the 
money supply for the past three years. The ensuing inflation, 
caused by this government expansion of the money supply, 
cascades unevenly through the economy, adding to supply chain 
issues as businesses must quickly recalculate the rising costs 
of an inflationary era.
    If one is truly interested in what is causing the supply 
chain crisis, you must first acknowledge that government 
interfered in virtually every step of the economic production 
cycle. Government intervention caused this mess. COVID may have 
changed some behaviors, but the vast amount of the supply chain 
interference came from government lockdowns. The truth is this; 
government policies are what pushed us over the edge.
    As COVID spread, petty tyrants and power-hungry bureaucrats 
criminalized in-person commerce and locked Americans in their 
homes. As a result, we lost more than individuals. We lost our 
freedoms, our liberties, our vibrant, small-town Main Street 
businesses, our children's growth and learning. For two years, 
our lives were held captive, and so-called health experts told 
whomever deigned to speak out that they were killing Grandma, 
but you were not supposed to notice because the government 
would simply send you a $1,200 check.
    When the lockdowns ended, individuals who saved their 
COVID-related cash distributed through 2020 were free to go 
shopping, and demand began to rise. Nobody should have been 
surprised. Americans were emerging from government-directed 
isolation for the first time in the better part of a year and 
wanted to purchase goods.
    Instead of recognizing this trend, Congress threw gas on 
the fire. They extended unemployment payments unnecessarily, 
keeping workers at home. They sanctioned another round of so 
called stimulus checks and, all told, spent another $2 trillion 
in new deficit-financed spending.
    Meanwhile, California ports, America's largest, have long 
been among the most inefficient in the world. Extreme demand, 
driven by government spending throughout the pandemic, 
overwhelmed them. Ships carrying goods destined for American 
stores were left offshore. California laws banning diesel 
engines older than 2011 and laws limiting independent 
contractors combined to exacerbate the problem.
    Anyone interested, truly interested, in fixing this supply 
chain fiasco should look to the one economic system that has 
created more wealth and more prosperity and lifted more people 
out of poverty than any other, capitalism.
    Chairman Cardin. Thank you very much. We will now go to our 
witnesses. Let me introduce two, and then I will turn to 
Senator Paul to introduce the two other witnesses.
    First, let me introduce--and the way I introduce will be 
the order in which you will present your testimony. Ms. Cheetie 
Kumar is the chef and co-owner of the restaurant, Garland, in 
Raleigh, North Carolina. At eight years old, she immigrated to 
the United States with her family from India, settling in the 
Bronx, New York. Later on, she moved to North Carolina where 
she now calls home.
    Her cuisine is an interpretation of local ingredients made 
through the lens of someone who grew up in India, New York, and 
the South. She is also the owner of the music venue, Kings, and 
its adjoining cocktail bar, Neptunes Parlour.
    I cannot wait to visit North Carolina and taste that food. 
Sounds very delicious and an incredible mixture.
    Mr. Sridhar Kota is the founding director of MForesight: 
Alliance for Manufacturing Foresight, a federally funded 
national consortium focused on accelerating technology 
innovation to enhance U.S. manufacturing competitiveness. He is 
an emeritus professor of mechanical engineering at the 
University of Michigan, where he served for 34 years.
    In response to the COVID-19 crisis in 2020, he founded 
Inspire Rx, LLC, that invented and manufactures negative 
pressure devices to treat COVID-19 patients and protect health 
care workers.
    Between 2009 and 2012, Professor Kota served as the 
Assistant Director for Advanced Manufacturing at the White 
House Office of Science and Technology Policy. He played an 
instrumental role in establishing the National Manufacturing 
Innovation Institute.
    Senator Paul. We are pleased to have Jason Lam with us 
today. He is, in his own words, the owner, manager, chef, 
waiter, dishwasher, and toilet scrubber for his restaurant, 
which I love the fact that he is proud that he does everything 
there. The restaurant's name is Sake Thai and Sushi Bar in 
Stafford, Virginia. He opened his restaurant in 2011 and has 
worked in over a dozen restaurants since he was eight years 
old. As his current title suggests, he has worked every job the 
restaurant industry has to offer.
    Mr. Lam brings a wealth of experience to this Committee 
regarding the real day-to-day experiences of operating a 
restaurant during COVID as well as the problems small 
businesses face navigating the supply chain issues we are here 
to discuss.
    Our other witness is Joel Griffith. Joel is a research 
fellow for the Institute for Economic Freedom and Opportunity 
at the Heritage Foundation. Previously, he worked as a 
researcher for a former member of the Wall Street Journal 
Editorial Board and served as Deputy Research Director at the 
National Association of Counties. He most recently was the 
Director of the Center for State Fiscal Reform at the American 
Legislative Exchange Council.
    Chairman Cardin. To the witnesses, your full statements 
will be made part of our record. You may proceed. Try to keep 
your comments to five minutes, so we have time for questioning. 
And we will start with Ms. Kumar.

    STATEMENT OF CHEETIE KUMAR, CHEF AND CO-OWNER, GARLAND, 
                          RALEIGH, NC

    Ms. Kumar. Thank you, Chairman Cardin, Ranking Member Paul, 
and members of the Committee. Thank you for inviting me today 
to talk about the supply chain in the restaurant industry and 
how this Committee and Congress can help.
    I am the chef and co-owner of Garland in Raleigh, North 
Carolina, as you mentioned. We have a music venue and cocktail 
bar all in the same building. I am a self-taught chef who 
studied recipes and worked in restaurants while touring across 
the U.S. as a guitar player alongside my husband and business 
partner, Paul Siler.
    Let me start by thanking this Committee and especially 
Chairman Cardin for all the support you have shown independent 
restaurants throughout this pandemic. You have given some of us 
a lifeline to survive in the Restaurant Revitalization Fund, 
the RRF, and we are eternally grateful. I would be remiss if I 
testified before this Committee and did not advocate for 
refilling that fund to take care of the 177,000 restaurants who 
applied and did not receive a grant. They desperately need 
help, and the Congress would ensure the success of a generation 
of independent restaurants by providing the money to fund all 
the outstanding grant applications.
    One hundred thousand restaurants have already closed 
permanently. Many of my friends and colleagues are hanging on 
by a desperate thread and have taken on crushing personal debts 
that will be with them for a lifetime, and they are fighting 
against joining the growing list of closures. More than 80 
percent of restaurants who did not receive the RRF report that 
they are on the verge of permanent closure.
    I am proud and grateful to be here representing the 
hundreds of thousands of independent restaurants across the 
country and their millions of employees today to talk about 
supply chain. Make no mistake, when we talk in general terms 
about the supply chain, what we are really talking about is the 
rising cost that results from a broken or damaged chain.
    My restaurant adapts to supply chain issues every day, and 
we always have. It is our skill set. We look for seasonable 
produce. We look for cuts of meat with great flavor and 
potential to be featured in dishes that do not cost a lot. So 
as long as they can remain affordable, we can serve them.
    As a great example is flank steak. You know, it used to be 
a less expensive cut of meat, and so it was on a lot of 
restaurant menus, and for a time we could afford to put it on 
our menus. It is a long, flat, thin, boneless cut. It is 
delicious. It is easy to cook. But like most cuts of beef, 
there are only two flank steaks per cow, one on each side. With 
limited supply and increased demand, prices increase to the 
point once people discovered them, and then the price goes up. 
So it does not make sense for us to put it on our menu with 
margins being so close, so we make changes. We are skilled at 
pivoting.
    When hundreds of thousands of restaurants closed or 
severely limited capacity, at the beginning of the COVID-19 
pandemic, it created a giant gap in the supply chain. Millions 
of dollars' worth of food was spoiled or thrown away. In the 
best circumstances, restaurants like mine donated food to those 
who really needed it. In the worst circumstances, commodity 
farmers and ranchers were forced to destroy or euthanize their 
crops and animals. With each surge of the virus and change in 
consumer demand, the supply chain has struggled to keep pace 
with the market, with inconsistencies as the only predictable 
characteristic.
    At Garland, we source our food and supplies locally as 
often as possible. When we shut down in March 2020, I watched 
my suppliers suffer, too, and these are farmers and purveyors 
that we know by name. Overnight, they lost hundreds of 
thousands of dollars in sales, and the recovery has not been 
easy for them either. For instance, my seafood supplier, local 
seafood in Raleigh, goes to the coast and brings fresh catch 
into town every week, twice a week. They lost most of their 
wholesale customers in the matter of a few days when the 
pandemic began.
    As restaurants had uneven recovery--I returned to capacity 
and operations in March, but say my neighbor cannot do it until 
June--locals faced a challenge of prioritizing restaurants as 
their customer base while still serving their direct-to-
consumer market. We have seen a lot of small farmers and 
purveyors simply close because so many restaurants have closed 
or because as a variant rages through our community restaurants 
have had completely unpredictable revenue and volume of sale, 
which directly impacts these producers.
    I was lucky enough to receive an RRF grant, and I am 
eternally grateful for that. As a result, as I am struggling to 
deal with supply chain disruptions, but I am able to do so in 
the same way that I was pre-pandemic. But those who are not as 
fortunate are compounding their pandemic problems with supply 
chain issues.
    Again, thank you for holding this very important hearing, 
and I look forward to working with you on refilling the RRF and 
on issues like farm policy, food security, fishery issues, and 
labor in the coming weeks and months.
    [The prepared statement of Ms. Kumar follows:]
    
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    Chairman Cardin. Ms. Kumar, thank you very much for your 
testimony.
    We will now hear from Dr. Kota.
    [Pause.]
    Chairman Cardin. I have been told that the order should be 
as it is on the table. So, Mr. Lam, you will go next.

     STATEMENT OF JASON LAM, OWNER, MANAGER, CHEF, WAITER, 
   DISHWASHER, AND TOILET SCRUBBER, SAKE THAI AND SUSHI BAR, 
                       FREDERICKSBURG, VA

    Mr. Lam. Chairman Cardin, Ranking Member Paul, members of 
this Committee, thank you for having me.
    My name is Jason Lam. I am 34. I own a restaurant in 
Stafford. It is about an hour south from here, actually.
    And like Ms. Kumar, I actually started in the restaurant 
business when I was eight years old. I learned how to answer 
the phone, work the registers, slide credit cards over carbon 
paper, if you remember that. Credit card machines were not a 
thing back then. I learned how to stack cardboard and Styrofoam 
boxes into bags, like little Legos, making sure they were 
perfect, how to stack plates on a dishwasher rack, even went to 
college, and then I still worked in a restaurant after classes.
    My repertoire expanded. I learned how to cut, slice, dice, 
chop, fricassee, chiffonade, julienne, a bunch of fancy terms 
you will find in a French cookbook. And even when I stepped 
away and I thought I would make my own way in life and I would 
become a contractor to support our military, I worked my day 
job, and I still went to the restaurant, often working from 8 
to 4 and then 5 to 11.
    I know the meaning of hard work and what it means to 
sacrifice for your restaurant and do everything you can to make 
sure it succeeds. I worked as a manager, an accountant, 
managing inventory. I mean, just name it. I have done 
everything that there can be done in the restaurant industry.
    At the start of the pandemic, I remember it was a Tuesday. 
I was driving on 95 going to work when we got the announcement 
restaurants had to cease. I called my employees while I was in 
the car, and I told them, I do not know what we are going to 
do, but none of you can come to work today, and we closed.
    In April, we lost over $30,000. The costs, it was insane. I 
threw out--like Ms. Kumar said, we threw out inventory. We 
threw out food. We threw out a lot. And I had to come up with 
$30,000 out of my own pocket to pay my employees, to pay my 
rent, the bills.
    In May, it got a little better, but I still lost over 
$10,000.
    In June, I finally saw a little bit of a breakeven point.
    In July and so forth, it got better.
    Then in October 2020, we decided that we would open back up 
for socially distanced spacing, and we went to 50 percent 
capacity, and we opened back up for dine-in even though 
carryout still made the bulk of our sales.
    As the pandemic restrictions have lifted in the past year 
and a half, two years, our volume is crazy. It has gone up 15 
to 20 percent what it used to be before in 2019. And as all 
this volume has come up, we need more stuff, we need more 
inventory, we need to be able to keep up with this demand for 
all these customers who are coming in through my door that want 
to eat and want to get carryout or dine-in.
    My restaurant's name is Sake, but over half of the sake on 
my menu is unavailable due to supply chain issues here, at 
home, and abroad. I have been told that there is a glass issue 
in Japan and they cannot bottle the stuff, and we cannot get 
it, and I know that that is specific to my genre of food 
because I am a Japanese and Thai restaurant. And I know it is 
not entirely fair to say, oh, tuna has gotten more expensive, 
which it has. It has gotten from $15.99 to $20 a pound. That is 
a 25 percent increase in 16 days in this month alone. That is 
crazy.
    So let us go and talk about something that other 
restaurants would use, like Ms. Kumar herself. Zucchini has 
gone from $12.50 a case to $21 a case. That is a 68 percent 
increase in 17 days alone in this month.
    Brown paper takeout bags. I cannot just hand my customers 
boxes and tell them, no, you should bring it out to your car 
yourself. That has gone from 14.5 cents apiece to 22 cents 
apiece. That is a 66 percent increase.
    Chicken. Chicken used to be $1.97 a pound. Now it is $3.10 
a pound. Now that has gone up 64 percent, and that is in 21 
days in this month alone.
    Vendors used to be able to work with us restaurant owners. 
They used to be able to tell us, ``Hey, look, there is going to 
be a price increase soon. It is coming. You should probably 
order more so you can keep par with your inventory.''
    They cannot do that anymore. They tell me the day before, 
``Oh, yes, your tuna, it was $17 a pound last week; it is $20 a 
pound this week.''
    There is no amount, no amount, of planning that can 
compensate for that.
    I am sure you know that restaurant margins are notoriously 
thin. Notoriously thin. They go anywhere from 3 to 8 percent. 
And when you have items on your menu and in your inventory that 
jump 50, 60, 70 percent, how am I supposed to succeed? It is 
increasingly easier to fail.
    Now I say all this knowing that starting a business is my 
choice. It is inherently risky and especially the restaurant 
industry. Most do not make it past two or three. But I have 
been in this business long enough to know that you should never 
take a good day, a good week, a good year for granted, but the 
current climate is making it very difficult for businesses like 
mine to succeed.
    As I mentioned earlier, our volume has increased, but we 
cannot continue to serve our clientele without more inventory, 
and the supply chain issue is killing us. It is frustrating to 
serve customers and tell them, here is the list of things we 
cannot sell you today, or, yes, our prices have gone up again, 
for the third time in the past six months. It is incredibly 
frustrating, but they understand, for the clients who know us. 
But what about the new customers? That does not make for a very 
good first impression.
    Fixing the supply issues at the core will help all 
businesses, not just mine. Drycleaners, salons, tutoring 
centers, whatever you want to name. But throwing money at the 
challenges we face, like the RRF, is like putting a Band-Aid on 
a wound that needs stitches. It will stop the bleeding, but it 
does not fix the issue. You are still going to bleed out in the 
end.
    I did not apply for RRF funds. Spending billions of 
taxpayer dollars is not the answer. Giving grants to these 
restaurants is not the answer. I want you to look my kids in 
the face and tell them that they are not going to be 
responsible for paying that back. They will. I cannot do it.
    I can fail or succeed in owning my business just fine on my 
own. The real help I need is things that I cannot control. The 
supply chain, there is nothing I can do about that. So what I 
want the Federal Government to do for me is to fix that 
problem.
    Thank you for your time and attention.
    [The prepared statement of Mr. Lam follows:]
    
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    Chairman Cardin. Thank you very much, Mr. Lam, for your 
testimony.
    We will now hear from Dr. Kota.

     STATEMENT OF SRIDHAR KOTA, Ph.D., EXECUTIVE DIRECTOR, 
MFORESIGHT: ALLIANCE FOR MANUFACTURING FORESIGHT, UNIVERSITY OF 
                    MICHIGAN, ANN ARBOR, MI

    Mr. Kota. Chairman Cardin, Ranking Member Paul, 
distinguished Committee members, thank you for the opportunity 
to appear before you today to discuss the supply chain crisis 
and how to be better prepared for the next crisis. My comments 
are based on my over 30 years' experience as a professor at a 
university, but I also worked 20 years as a founder and CEO of 
a small engineering firm and in addition to the work I have 
done for the last seven years or so through this think tank, 
MForesight.
    So I would like to focus on small manufacturers, who are 
the economic engines for our local communities, as you know, 
and backbone to the entire manufacturing sector. Challenges 
facing all manufacturers, large and small, are broad, deep, and 
systemic.
    The supply chain crisis has its roots in gradual erosion of 
our manufacturing sector over four decades as we steadily 
offshored manufacturing to low-wage countries. That strategy 
has worked and continues to work very well for private sector 
companies that remain focused on short-term profits. For too 
many companies, manufacturing could be done cheaper abroad, 
avoiding capital costs and operational expenses of building and 
running factories. By offshoring manufacturing, we eroded our 
manufacturing know-how, infrastructure, machinery, and 
engineering skills, all of them are collectively called 
``industrial commons'' or what we used to call ``American 
ingenuity.'' We may still be the most inventive country in the 
world but not the most innovative, at least in hardware.
    We also eroded our military preparedness with growing 
dependence on other countries for critical military components 
and systems.
    More recently, we all realized suddenly we did not have the 
masks and ventilators when we so desperately needed them. In 
fact, I had a frustrating experience with this company I 
started for COVID-19 patients wherein I co-invented a device 
for preventing virus transmission while treating COVID 
patients, but I was trying to find U.S.-based manufacturers of 
electric motors. After several months of trying everywhere, 
finally I reluctantly entertained some proposals from China. 
And by the way, they were fantastic technically and incredible 
pricing and delivery options, very enticing. But I remained 
focused on trying to find somebody here, and fortunately I was 
able to find a manufacturer ultimately in Kentucky, which was 
great.
    But that story I just described is nothing new. This kind 
of lack of domestic producers is very common in almost every 
manufacturing sector for over two decades. So reestablishing 
supply chains is difficult. It is not about bringing back the 
jobs we lost. It should be about how to establish industries of 
the future, how to rebuild our foundational capabilities that 
are critical to our national security as well as economic 
health and energy security.
    Yes, it is the Federal Government's role, not the role of 
the private sector, to secure and advance our national 
interests. A good example of that is the current bipartisan 
efforts in strengthening our domestic manufacturing of 
semiconductors and electric vehicles.
    Likewise, we need to have a whole-of-government approach 
with a national strategy for other critical sectors by 
investing, not just spending without any metrics. We need 
metrics that define what to do, not how to do it.
    And for those products that are best produced elsewhere, we 
should consider nearshoring to countries, friendly countries, 
nearby rather than bringing them across oceans.
    And small manufacturers are the backbone. If the backbone 
is strong, the large manufacturers will come.
    And small manufacturers are similar constrained in 
resources to make investments in R&D and upgrading their 
equipment, and they routinely face even more challenges in 
attracting and retaining a skilled workforce. And SBA can help 
in meaningful ways, and I outlined some of them in my written 
testimony. Current and pending legislation in creating Regional 
Innovation Hubs, the new Technology Directorate for NSF, and a 
new Manufacturing Office in SBA, these are all very encouraging 
signs.
    However, if these programs, like every other Federal 
program and agency, act in silos, the results will be mediocre 
at best. For instance, the SBA Manufacturing Office can play an 
effective role in helping entrepreneurs and small manufacturers 
advance technologies developed by other agencies to initiate 
pilot production here in the U.S.
    Rather than continue to fund programs that have not yielded 
desirable results in decades, government needs to launch a 
series of listening tours across the Nation to understand the 
real-world challenges faced by small manufacturers and 
entrepreneurs. MForesight did just that in 2018, and I outlined 
some of those insights in my testimony.
    Shortage of skilled workforce, raw materials, components, 
these are all intertwined, and no single Federal agency can 
truly fix the supply chain crisis by itself, and SBA is no 
exception. We already have numerous well-established, well-
funded Federal agencies and institutions, but each is focused 
on its own mission, understandably. It is like having a great 
team of players but we do not have a coach.
    We need a coach to win. We need a strategy. We need to 
connect the dots. We need a new entity in Federal Government 
whose sole focus is to strengthen U.S. manufacturing 
competitiveness and to ensure what is invented here is 
manufactured here.
    It sounds like ``industrial policy,'' a term derided for 
decades. Yet, oil and gas, telecommunications, aerospace, they 
all benefited from a successful industrial policy we enjoyed 
for nearly a century. Even if we pretend it is not, whatever 
you want to call it, we should replicate that policy boldly to 
other sectors that are critical to national interests, to 
create a stronger, wealthier nation that is better prepared to 
confront the next crisis and to finally get a return on 
investment of taxpayer dollars.
    I will end with a quote attributed to Churchill. ``We can 
always count on Americans to do the right thing after they have 
exhausted all other options.''
    Now is the time. We have had two Sputnik moments, COVID-19 
and China 2025.
    Thanks again for giving me the opportunity to share my 
thoughts.
    [The prepared statement of Mr. Kota follows:]
    
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    Chairman Cardin. Thank you very much for your testimony.
    We will now hear from Mr. Griffith.

    STATEMENT OF JOEL GRIFFITH, RESEARCH FELLOW, FINANCIAL 
 REGULATIONS, INSTITUTE FOR ECONOMIC FREEDOM AND OPPORTUNITY, 
            THE HERITAGE FOUNDATION, WASHINGTON, DC

    Mr. Griffith. Chair Cardin and Ranking Member Paul, members 
of the Senate Committee, my name is Joel Griffith. I am a 
research fellow at the Heritage Foundation. These views are my 
own.
    Supply chain issues continue to empty shelves, bottleneck 
production, and delay deliveries. The mismatch between supply 
and deficit-driven demand also contributes to the steepest rise 
in prices in 40 years.
    The Biden administration has falsely insisted that these 
problems are transitory while blaming the pandemic, 
scapegoating businesses trying to fix the problems, and now 
even blaming the war in Ukraine. Meanwhile, this Administration 
refuses to acknowledge the primary culprits. That would be the 
ill-advised COVID restrictions that throttled production, the 
ill-targeted government transfer payments and diminished 
childcare options that shrank the workforce, the opposition by 
organized labor to common-sense port operations in California 
and New Jersey, new environmental regulations targeting diesel 
semi-trucks in California, and record government spending 
financed by the Federal Reserve.
    In short, government reduced supply and stoked demand the 
past 2 years. This is a recipe for both shortages and higher 
prices.
    The primary factor behind the supply chain issues are the 
ill-advised COVID restrictions. The pandemic itself did not 
shutdown the world. Government lockdowns and oppressive 
restrictions shut down large parts of the world. Erratic, 
unpredictable, arbitrary decisions by government bureaucrats 
made planning even for the short term nearly impossible. 
Politicians pushed millions of families and businesses off an 
economic cliff while blaming the pandemic.
    Government policies also created the unprecedented labor 
shortage in the United States, with an employment gap of nearly 
5 million workers presently. This directly contributes to 
supply chain issues. Of course, early in the pandemic, 
government restrictions on businesses resulted in mass layoffs 
as schools in many parts of the Nation closed their doors for 
much of the year and many of those formerly working in the 
childcare industry left. This made employment difficult for 
many parents.
    But then compounded with that were generous Federal 
unemployment bonuses in terms of payout and duration. These 
payouts acted as a powerful disincentive to returning to work 
even as the economy reopened, especially when combined with 
multiple Federal stimulus checks. Many people delayed their 
return to the workforce even after benefits ended, instead, 
choosing to live off the stockpiled government cash. Private 
vaccine mandates and the Federal threatened mandate pushed 
others out of the labor force.
    In short, misguided government policies shrank the number 
of people willing or able to work. Now businesses across nearly 
every sector in this country are desperate for workers and have 
expanded their pay and benefit packages. The number of unfilled 
jobs remains at record levels. Nearly half of business owners 
are unable to fill open positions, more than double the 
historical average.
    Domestic government policies are compounding the global 
shipping problems in this country. California specifically 
matters because California receives nearly half of all 
containers coming into the United States. Yet, in the midst of 
the pandemic and the supply chain crises, California continued 
a phase-out of older diesel trucks.
    Furthermore, organized labor in California continues to 
resist modernization in favor of inefficient modes of operation 
and, in fact, refused to fully expand their hours to alleviate 
the shipping backlog. The unions even secured a provision in 
the bipartisan infrastructure package that would prevent any 
funds from going toward automation.
    It should be no surprise that California ports are among 
the least efficient on the planet. After sitting up to weeks on 
boats off the coast of California, containers of goods can wait 
weeks longer for the select few trucks and truckers that 
California's environmental and labor laws actually allow into 
the State. From there, those items are transported to 
California's border where those goods are transferred once 
again to other trucks that can, at last, distribute those goods 
to the rest of the country. These restrictions add time and 
hassle and back up the supply chain even further, raising the 
cost of goods themselves.
    Last, while government has hampered the supply of goods and 
services, a tsunami of government spending financed by the 
Federal Reserve contributed to a rise in demand, including 
future demand, as households stockpiled income from both wages 
and government COVID-19 relief checks. The Federal Government 
has used the Federal Reserve as a piggybank, selling trillions 
of dollars of debt for newly printed money that then floods 
into the economy, driving inflation while bribing resources and 
workers away from businesses that desperately need them. The 
Central Bank more than doubled its balance sheet from just $4 
trillion in March 2020 to nearly $9 trillion today as our 
overall M1 money supply jumped nearly five-fold, from $4.3 
trillion to $21 trillion.
    In conclusion, misguided COVID-19 restrictions combined 
with a Central Bank-financed government borrowing and spending 
spree set in motion the economic turmoil, skyrocketing 
inflation, and supply chain havoc that Americans are 
experiencing. Proposals for yet more government spending, more 
labor regulations, and more attacks on energy production, 
combined with the massive tax hikes in the latest budget 
package, risk further shocks. A full recovery, including a 
functioning supply chain, requires a full reopening across the 
world and an unleashing of our fossil fuel energy resources 
here at home.
    Thank you.
    [The prepared statement of Mr. Griffith follows:]
    
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]    
      
    Chairman Cardin. Mr. Griffith, thank you for your 
testimony.
    I thank all four of you for your testimony.
    We will now go to five minute rounds. First, I really 
appreciate Ms. Kumar and Mr. Lam, two restauranteurs, one using 
the government programs, the other not using the government 
programs, both coming together at this hearing, raising the 
issue of supply chain. I think that is helpful for us to have 
that.
    I want to just go back to the beginning of the COVID-19, 
when we got together particularly on this Committee under, at 
that time, Chairman Rubio--we had Senator Collins and Senator 
Shaheen and myself--in order to try to deal with the fact that 
small businesses are the growth engine of America. We need to 
keep them going during a pandemic. We know they do not have the 
resiliency. What can we do in order to keep small businesses 
afloat, to keep our economy from going into a deep recession?
    And we came together with near unanimous actions in the 
House and Senate, signed by President Trump and later by 
President Biden. The centerpiece of that was the Paycheck 
Protection Program. The purpose of that was, pretty simply, to 
keep employees employed by small businesses, which have a 
challenge finding workers under any scenario, but if they were 
to lay off their workers they would collect unemployment 
insurance. It did not seem to make a lot of sense. Let us try 
to keep it going so we can keep the small businesses going. And 
it was successful.
    We then expanded the EIDL program, the Economic Injury 
Disaster Loan program, because we knew there would be a great 
need for low-interest loans, and it was widely used for the 
very smallest of the small businesses, a very modest grant up 
to $10,000.
    And then later we added specific sector relief for those 
industries that were basically ordered to be closed by 
government, restaurants being a prime example.
    Now, quite frankly, we did not envision that every small 
business would need this help. So, Mr. Lam, I applaud you for 
making your decision. I do not know a lot about your business, 
but in the restaurant field, if it is a business that can do a 
robust carryout, it can do very well during a pandemic when 
people are eating at home.
    So we could not define that in the legislation we adopted. 
Otherwise, we would have hamstrung its use. But if you are a 
restaurant that is in an area where there is not a lot of 
opportunities for outdoor dining and you really have to be in a 
confined space, you were out of luck.
    So we did expect small business owners to exercise 
discretion. We were very disappointed by some small businesses 
that chose to use the PPP program that did not really have an 
economic need.
    So the bottom line was the program, in its totality, 
worked. Why do I say that? Because our economy got through the 
worst of the pandemic without going through a major recession.
    And we have problems today. You identified them, and I 
agree. High prices.
    So I want ask both of you because you both seem to agree on 
the need on the supply chain challenges. It seems to me that it 
is not only a price issue. It is also an availability issue so 
that you can carry out what your restaurant is famous for and 
be able to use a product. So tell us just how deep is this 
problem today and what type of relief do you need in order to 
be able to do your business in regards to having a reliable 
supply of reasonably priced or competitively priced products?
    I will start with Ms. Kumar.
    Ms. Kumar. Thank you for that. You know, for me, like I 
said, I am pretty used to pivoting and finding different 
suppliers for different things because we work so closely with 
farmers, but one thing I cannot get from farmers is fryer oil. 
I used to pay $35 a box for non-GMO canola oil because, you 
know, we like the healthier option. I have paid up to $120 for 
the same box of fryer oil, and now it has sort of settled at 
$85, if it is available. I have had to go from canola to 
sunflower to mixed blends and what not.
    You know, I cannot operate a restaurant without oil. We 
have to cook with oil. So you know, that is an example of 
something that I cannot really come up with a creative solution 
for. I just have to sustain the increase in price, and if it 
was not for the restaurant grant I would not have been able to 
do that. And before that, the PPP I utilized for keeping my 
staff employed and being able to, you know, pay them fair 
wages.
    So it is a combination of things, I think. You know, there 
is not one single solution.
    A restaurant like mine is a fine dining establishment, and 
takeout is not something that we normally relied on. That is 
just not our business model. So you know, not all restaurants 
are created the same, and we all have different needs and 
strengths and abilities to pivot. But there is a blanket 
consistent problem, I think, that we are all facing, and I 
think you know, economic injury is not the same across the 
board.
    But for those restaurants that qualify for the grant are 
restaurants that suffered a lot of loss, and that is something 
that you do have to prove before you qualify for it. So you 
know, it is great that somebody Mr. Lam is able to operate at a 
profit in June or July 2020, but that was not the case for us 
and for hundreds of thousands of other restaurants in this 
country.
    Chairman Cardin. Mr. Lam?
    Mr. Lam. How do I say this? I am not insensitive to the 
struggles of restaurants. My family has had 17. I have had--we 
have had 6 successes, 11 failures. When I say failures, I mean 
we sold the restaurant at a loss. There was a recession. My 
stepfather actually had to declare bankruptcy. We owed so many 
people so much money.
    I know what desperation feels like. I know what it tastes 
like. I have never forgotten that.
    But I am sure that Ms. Kumar and her family, much as the 
same as my family, we came here because America promised a fair 
shot. We started our businesses, I am guessing, for the reason, 
the pursuit of happiness, one of our inalienable rights. It did 
not promise us success. That is upon us.
    Now I understand that the issues we face today are largely 
out of our control. So if you are asking me, what can the 
government do, fix the supply chain issue.
    I understand what she says when she means that oil has gone 
up. I am seeing the exact same prices. She is not lying. It is 
just very difficult to deal with these kinds of price hikes.
    So as I said in my testimony, I am perfectly capable of 
failing and succeeding and taking care of my business on my own 
however I see fit, but the government can help me by 
stabilizing these prices. That is how it can help.
    Chairman Cardin. Thank you. I want to try to keep to the 
five minutes so every member can have a chance before we have 
to adjourn at 3:00.
    Senator Paul.
    Senator Paul. Jason, thank you for your testimony. I am 
amazed by your story and your work ethic. We have a country 
right now where 38 percent of the people who can work choose 
not to work. So it is great to hear, you know, how hard you 
have worked in all facets of the restaurant business and how, 
you know, you really believe in the American Dream.
    I understand you have a couple of guests here. I wonder if 
you would like to introduce your guests.
    Mr. Lam. Yes. It is my daughter and my son right behind me, 
Paige [phonetic] and Colin [phonetic]. They are in high school 
and middle school.
    Senator Paul. And I guess I had one general question. How 
did you get your work ethic? Did it just happen? Were you born 
that way? Did you get it from your parents?
    Mr. Lam. Grandparents, uncles, and parents, my family.
    Senator Paul. Do you think it is important that kids work?
    Mr. Lam. Oh, I put them to work in my restaurant. Oh, trust 
me, I am teaching them how to pack orders and wash dishes.
    Senator Paul. Good. I think the commonality--and I think, 
you know, I said in my statement, you know, this is nature or 
nurture. Is this just some sort of accident that sort of 
happened? You hear from people, and they say, oh, the supply 
chain. It is just like it mysteriously came out of nowhere, or 
COVID caused it. No. It was our reaction to it.
    You know, in the beginning, it was that we would not let 
you open up. So you did better with takeout than your 
counterpart, but government forced her to lose business because 
government closed her down.
    We should be asking the question whether or not any of the 
things we did, the so-called mitigation, putting stickers on 
the floor--can you imagine the millions of dollars we spent on 
these idiotic stickers? Did we save anybody's lives? Did we 
change the course of the disease? A million people died with 
what we did. I am not positive any of these things changed the 
course of the disease at all other than immunity. We now have 
immunity. Ninety-five percent of us have immunity from either 
the vaccine or having had the disease.
    But we need to know what the cause of this was. Otherwise, 
we are going to do this again. We are going to get another flu. 
We are going to get another pandemic. We are going to get 
another maybe worse virus the next time.
    But when you describe the rising prices, they are twofold. 
Either your supplier is under quarantine from the government, 
shutting your supplier down, reducing the supply to elevate the 
price, or it is part of generalized inflation.
    But it is also part of this bigger thing, something for 
nothing. People think, oh, well, there is no penalty to the PPP 
program. Everybody got lots of money. We kept everybody open. 
Or, everybody got unemployment checks. Well, the penalty is 
this; it destroys work ethic in people. But also, we are 
finding the penalty now is generalized inflation, and that is 
part of your problem in trying to figure out.
    And you are right. It is beyond your control, but it is 
making your job, which is already a difficult job, predicting 
and running a restaurant, so much more difficult.
    So I understand this, but I am not sure everybody does. And 
there is not agreement yet on both sides of the aisle what 
causes inflation. Basically, deficit spending, printing up the 
money, now the money is worth less. And that is what we have is 
this generalized inflation.
    They said it was going to be transitory, and yet the 
Federal Reserve Chairman, yesterday, said transitory is now 
three years. I predict it is going to get worse before it gets 
better.
    But it comes from the notion of something for nothing, 
which gets back to the whole idea of work ethic. So while I am 
incredibly proud of your work ethic, we need to be proud of the 
idea and understand the idea that there is no free lunch. There 
is nothing for free really. And when we offer people things for 
free, ultimately there is a penalty, and that is the penalty we 
are paying now.
    Mr. Griffith, I think it is perplexing to people when they 
look on TV, even to myself. You look on TV, and you see just 
the ships lined up off the coast of Long Beach and Los Angeles. 
One thing that you mentioned and others have mentioned--and I 
did not really realize this, but if you could go into any more 
detail--is that I guess most ports in the world work 24 hours a 
day. They have shift work.
    My brother grew up doing shift work at Dow Chemical. All 
the plants, I thought, did shift work. You do not have to work 
24 hours. You work shifts, either of 8 or 12 hours, and then 
someone else comes on. It is not like inhumane, but it is the 
way we get things done.
    But tell us a little bit more about what goes on in Long 
Beach, why there is not 24-hour--you know, why they have not 
adapted, you know, to all those ships sitting out there. How 
could we possibly just look at all those ships and leave them 
there?
    Mr. Griffith. Thank you, Senator Paul. One interesting data 
point coming out of the past year is the year-over-year number 
of containers coming in to Long Beach-Los Angeles were 
virtually unchanged, and yet this backlog continued. And this 
was twofold. A lot of these social distancing restrictions, 
capacity restrictions, actually were perpetuated both in Long 
Beach and also in New Jersey. They refused to lift those in a 
timely manner. And instead of going ahead and expanding those 
operations to the 7 days a week and 24 hours a day, the unions 
there, the organized labor bosses, were incredibly resistant to 
going ahead and expanding those hours to actually alleviate the 
problem.
    And then when we saw the infrastructure package that passed 
in a bipartisan fashion in Congress, some of those resources 
could have gone to helping them modernize and become more 
efficient, and the union groups balked again. And that is a big 
part of the reason why that backlog continues now off the coast 
of California.
    Senator Paul. Thank you.
    I guess I am in charge now. Senator Shaheen.
    Senator Shaheen [presiding]. No. Actually, Senator Cardin 
asked me if I would take over while he went and voted, but I 
want to thank all of our witnesses for being here.
    And, Dr. Kota, I would like to begin with you because you 
said I thought very persuasively in your opening remarks about 
the importance of the role of government to help invest in 
innovation, to help encourage innovation, that we need if we 
are going to be successful with manufacturing and technological 
development.
    One of the programs that I think has been very important in 
encouraging innovation is the SBIR/STTR program, and I 
understand your firm received the Tibbetts Awards in 2015 
through the SBIR program. Can you talk about what you were able 
to do as the result of getting that SBIR grant that you might 
not have been able to do without that kind of support?
    Mr. Kota. Yes. Thank you, Senator. So we have this firm it 
is more than 20 years now old--and this technology we developed 
for morphing aircraft wings in flight because it has been known 
for a long time to save fuel but also reduce noise, and there 
are many other benefits. But stuff like that, you know, the 
private sector businesses do not fund because it takes many 
years of building and testing prototypes and all. So none of 
that would have happened had it been not for SBIR.
    It started as a phase one SBIR contract, and that led to 
several successes where thanks to U.S. Air Force, SBIR program, 
and beyond, that were able to demonstrate it on actual flight 
tests and now we are implementing on military aircraft, which 
is all a good thing. So none of that would have happened 
without the SBIR program.
    I had a few other SBIRs as well through other agencies. So 
I think that is one of the really good tools in or tool box, 
SBIR program, and I hope you all strengthen that program in 
many ways. And I testified earlier on ways we could--I had 
several years of experience working on SBIR programs with 
various agencies. So I certainly hope that you continue to 
strengthen it, and I can elaborate more on ways we can 
strengthen it.
    Senator Shaheen. Well, before I ask you to do that, as you 
know, you are probably aware that those programs are going to 
expire in September of this year, and so that would--if we do 
not reauthorize them, that would eliminate that support that 
encourages the kind of innovation that you are talking about. 
Do you have thoughts about what we could do to strengthen the 
program?
    Mr. Kota. First of all, I hope it will continue to grow.
    Senator Shaheen. Me, too.
    Mr. Kota. I do not know the details about any of that, but 
I hope it continues to grow. And there are ways we can 
strengthen it in terms of--you know, I do not want to get too 
much into the weeds, but you know, even--you know, with startup 
entrepreneurs, they have different sets of needs. It is not the 
tax breaks they need. It is actually having some funding to 
file patents, so the patent expenses should be included, on one 
hand.
    On the other hand, the other one is the different agencies 
have different ways of running this program. Some do much 
better than others. There is a way----
    Senator Shaheen. Yes, that is absolutely correct.
    Mr. Kota. And there is definitely a way we can, you know, 
make it uniform and minimize, make it like a 1040EZ for an SBIR 
form, so to speak.
    And the other thing you could do is actually if you think--
if you go back and look at the data about how many SBIR phase 
twos that were successful and did not go anywhere because there 
was no follow-on funding. There is a phase three program. It 
has its own challenges.
    But having said, there are ways to make sure that we just 
do not drop the ball. We need to have a strategy what to do 
with our own good ideas so that ideas turn into products made 
in this country. So there are other programs like the Rapid 
Innovation Fund in Department of Defense as an example. Those 
are the kinds of things we need to put in place so then we know 
how to take a success and take it to the next step. That is 
something that we need to connect the dots.
    Senator Shaheen. Thank you.
    Ms. Kumar, you talked about the importance of the 
Restaurant Revitalization Fund, which I am a big supporter of 
and hope that we can get that funded in a way that we address 
the applications that are still in the queue. But obviously, 
there are long-term challenges that restaurants and the 
hospitality industry face that are not going to be addressed 
just by that program.
    As you talked about adapting to address the changing 
markets and to respond to COVID, are there other things, other 
lessons that you learned, that you think are translatable to 
other restaurants and small businesses that we should be taking 
away from what we have just experienced?
    Ms. Kumar. Absolutely. I think restaurants like mine have 
tried so many different things over the pandemic, and we have 
walked away with a lot of lessons. One is, you know, how to pay 
our employees more, how to make sure that they not only have an 
entry-level job but they can stay with us and build a career, a 
very respectable and well-paying career in hospitality.
    But more so, there was a period in the beginning of the 
pandemic where we were able to, you know, participate in 
feeding the hungry, and there were grants available to do 
packaged meals for folks in need, children who were not in 
school and needed school lunches.
    And there are continuing to be more programs that are 
developing out of former nonprofits that would just do sort of 
a little bit more elitist fundraising for hunger causes but now 
are figuring out ways that--you know, lessons that we learned 
during the pandemic of how to bridge the gap between, you know, 
a restaurant that has to charge a certain price point to serve 
its guests but then also be able to keep people, give them more 
hours, give our staff more hours, but--and also feed people who 
are food-insecure, which unfortunately is a very high number, 
especially among children in North Carolina.
    So those items in particular are very inspiring to me, and 
I think that there are very real ways that we can push our 
industry forward and take care of our staff and take care of 
our communities, which is something that I think our industry 
has always been very proud to do.
    Senator Shaheen. Thank you very much.
    Senator Rubio.
    Senator Rubio. Thank you. Thank you all for coming in 
today. Let me start with Dr. Kota. It is great to see you 
again. You were here with us in 2019 for a reauthorization 
hearing.
    And you know, there was a recent study of 150 MIT 
manufacturing startups over the past decade, and it found that 
70 percent of them scaled in China and none of them in the 
United States. I guess my question is--you know, I think you 
have alluded to this already--how common is it to see 
offshoring or international transfer of a product or IP that is 
developed using U.S. taxpayer funds?
    Mr. Kota. It is over many, many years I have seen that 
happen. I am not talking about the intellectual property theft 
part. That is a big issue to be addressed. That is leaving that 
aside.
    Willingly giving our IP--unwillingly giving away our IP to 
other countries, particularly to China. Why China? Because what 
happens is when you even look at comments about SBIR you have--
the typical scenario is a professor or a company spends like 5, 
10 years working on a program with one of the Federal agencies, 
gets 10, 15, 20 million dollars in funding, and does the 
research, and then finally a little nugget of a great idea that 
comes out that is worthwhile scaling that has a promising 
future. Then once you do that, that agency, that particular 
program, they have nothing to do with it. You are done with it. 
You are on your own, and there is nowhere to go to.
    So there is no--innovation is about--you know, it is like 
what do you call it? The relay race. You hand the baton to the 
next and take it all the way.
    So what happens is many people I personally know and heard 
stories of and read about, they get frustrated. There is no way 
to know. Here is a great idea. It is already tested. Now what 
do we do? I need some money to scale it and test it in a wind 
tunnel or whatever.
    This is when the phone rings, at least the phone used to 
ring, or an e-mail comes from China, particularly because they 
are doing everything they can to do what is good for them. And 
so they offer all kinds of incentives for you to go there. So 
there are lots of researchers being tapped in that way. The 
technology that we spent millions of dollars developing goes 
over there, the best ideas, and that is where the scaling is 
done.
    And the MIT is a great--that 150 manufacturing startup 
study, that is a great example. It happens all the time.
    Senator Rubio. Mr. Lam, I wanted to ask you because your 
story in particular is one I think resonates with a lot of 
people. If you could just describe both--on the labor shortage 
side, what is it that people say, or what is the rationale 
people use, or what is your sort of real-life understanding of 
why it has been so hard to get people to come into the labor 
force and do this job?
    And secondly, and more important I think to this overall 
discussion, is when product--when the prices of your supplies 
and/or labor go up, I am not sure people fully appreciate that 
at some point the numbers have to work. You cannot charge less 
for something than what it takes for you to bring it. You 
cannot do it at cost. You have got to make some profit, or you 
will not be a business for long.
    If you could describe the mechanics of the labor shortage, 
why you think people are not working or what they say, and the 
second piece is what happens when the price of labor and the 
products goes up, how you have to price that through to the 
extent you can.
    Mr. Lam. So from just personal experience, on the onset of 
pandemic, obviously everyone started getting unemployment 
checks, and then I tried--after we opened back up for dine-in 
around mid-October, I called everyone back as part of my duty 
to extend and invite them back to get their jobs. I never said 
they were laid off. I never said they were fired. At any 
opportunity, they could come back, at any time. And 
resoundingly, my staff all said, ``No, because I was getting 
paid more to sit at home collecting my unemployment check than 
I would be coming into work.'' That is separate.
    So now I am still hiring. I am still short-staffed. I still 
need people, front of house mostly--servers, busboys, 
hostesses, whatever. And I am willing to pay anywhere from 15 
to 20 dollars an hour. And these kids and these people are 
saying, increasingly, ``No. I actually do not want to do that. 
I actually want to like work in the kitchen. I do not want 
face-to-face interaction with people. I just want to work in 
the kitchen,'' which makes no sense to me.
    I am willing to give you a job paying you good money, and 
you can become a manager. You can become just--you have to 
start at the bottom, and I am willing to give you an 
opportunity to do so. They do not want it, and no one is really 
applying for it. No one is really interested in doing that.
    Second part, the supply and the inventory. You are right. I 
have had to increase my prices, like I said in my opening 
testimony, three times in the past six months alone.
    Part of the reason why I think the EIDL and these grants 
and programs is a bad idea is because I have my invoices. I 
have all of them here. I can show you real, tangible numbers of 
how much money I am paying.
    As Ms. Kumar alluded to earlier, oil has gone up like 
crazy, and chicken, vegetables, very, very simple items, which 
in and of itself is innocuous when you see price increases like 
this.
    But when I am selling one plate of chicken teriyaki, let us 
say, the chicken has gone up. The bell peppers has gone up. The 
mushrooms in it has gone up. The onions has gone up. The box I 
am putting it in has gone up. The bag that I am putting the box 
in has gone up. The price that I have to pay for the online 
services I have to pay for has gone up. The propane has gone 
up. Everything. The pay that I have to pay my employees has 
gone up.
    I cannot continue to sell this one plate of chicken 
teriyaki for the exact same price as I did in 2019. It used to 
be $12.50. I am selling it for $15 now. That price is 
reflective of what I have to deal with and the supply chain 
issues that I see on a day-to-day basis.
    Now, the programs. Let us say I can get $10,000 from this 
EIDL program. You can do the math on these invoices. That 
$10,000 is going to last me exactly one month. Let us say I get 
$100,000. Great. I can skimp along for another 10 months.
    What I need, what restaurants across the board need, is 
more stability and going back to the prices that it was in 
2019, 2018, where it was actually affordable and competitive to 
be able to do business.
    I am not an economics professor or a fellow or a student, 
but I think the way it works is that prices go up, you charge 
people more, and it is just an ever growing fire that feeds on 
itself and makes it worse.
    Ms. Kumar. Can I add something to that real quick?
    Chairman Cardin [presiding]. I am afraid I cannot because 
we are running short on time because of a briefing we have on 
Ukraine. So let me give Senator Hirono a chance.
    Senator Hirono. Thank you very much. I was sitting here 
listening to all of you testifying, and thank you very much for 
being here. What I do understand is that this is not a simple 
situation because for a long time manufacturing in our country 
was outsourced to other countries providing cheap labor. Isn't 
that a true statement, Mr. Kota or Professor?
    Mr. Kota. Yes.
    Senator Hirono. And I emphasize the words ``cheap labor.'' 
We in our country, in America, got used to getting our goods 
cheaper because it was made through cheap labor in other 
countries, and now that we are all focused on making it in 
America we are not necessarily willing to pay the prices that 
we need to pay. And you cannot blame workers because why should 
we exploit cheap labor in order to get cheap goods. I do not 
think that is where I want our country to be.
    So I do not know how--Mr. Lam, you said you would like 
things to be the way it used to be, where costs were lower, et 
cetera, but I do not know how you achieve that really.
    Dr. Kota, I am sorry. Are you ``Dr. Kota'' or ``Mr. Kota''?
    Mr. Kota. Mr. Kota is good enough.
    Senator Hirono. So how do we get back to that? Is that 
really not where we are heading, that we are going to go back 
to some kind of situation where we continue to basically use 
cheap labor in other countries to get us the goods that we 
need? Is that what we are needing to do?
    Mr. Kota. No, not--no. It started out that way back in the 
late 1970s and early 1980s, but the point is we are no longer 
going to China necessarily for cheap labor. China is well past 
that.
    On the other hand, think about countries like Germany, 
Japan, and South Korea. They have a very strong advanced 
manufacturing and a very strong manufacturing innovation 
ecosystem. Wages in Germany are 40, at least 40, percent higher 
than here. In Japan and South Korea, they have high wages. They 
have higher taxes. Their energy costs are significantly higher. 
Their regulations are just as strict.
    And their automation is significant, three to six times 
more automated than we are here, and yet, they have a strong 
manufacturing base because their private sector companies have 
longer-term goals. They have--they care about stakeholders, not 
just shareholders.
    In fact, they are investing here in, our manufacturing 
facilities in this country. You know, from Siemens to Toyota, 
they have been around for a long time, and Honda and other 
companies, BMW. They are investing here, and we are rushing 
over there to other countries.
    So I think it has to do with two things. One is our large 
corporations have, you know, these quarterly shareholder 
profits that have taken over for 40 years, and that seems to be 
working just fine for them, and I do not think it will change. 
COVID-19 or something else, that is not going to change it. 
They are going to go to a different country now.
    But we need to think about how to build our capacity to 
innovate, and that means we need to invest in small 
manufacturers, I say, because when we invest in small 
manufacturers then the big guys will come.
    Senator Hirono. I think you noted in your testimony how we 
can encourage the small- and medium-size manufacturers through 
grant programs and you laid out an array of suggestions based 
on some of the discussions that you have been having across the 
country with small manufacturers as to what would meet their 
needs, and I think that those are some suggestions that we 
should incorporate.
    And recently, the President announced a new Manufacturing 
Office at SBA. I think you noted that that program could really 
facilitate the support for medium and small manufacturers. Can 
you expound a little bit how you think that an entity like this 
could provide the kind of support that we are talking about?
    Mr. Kota. Absolutely. I think that is a very encouraging 
sign, to have this, because SBA has focused mostly and broadly 
on businesses at large, not so much manufacturing. But now with 
the Manufacturing Office, it is very encouraging.
    How they can support is, again, connecting the dots and 
looking at what--you know, we are investing so much in other 
agencies, and they are investing in so many technologies. What 
happens is just like I described before. When the technology is 
proven, then there is nowhere to go. This is where, instead of 
nowhere to go after the technology is proven, SBA can play a 
critical role in leveraging other technologies developed by 
other agencies and then nurturing the technology and then 
putting the pieces together so that we can do at least pilot 
production, start the pilot production here, so they can work 
with it, whether it is a new Technology Directorate at NSF or 
even existing offices, existing Federal agencies.
    So, yes, we need that. I was talking about having a coach, 
having somebody, you know, looking across and connecting the 
dots. And I think that would be a very--it would be very, very 
it will have a great multiplier effect in terms of what SBA can 
do in that way.
    Senator Hirono. If I could mention, Mr. Chairman, you 
obviously have a familiarity with SBA programs that are 
successful. Yes?
    Mr. Kota. Yes, yes, I am very familiar with the SBIR 
program.
    Senator Hirono. Yes.
    Mr. Kota. Because of personal experience for over 25 years.
    Senator Hirono. STTR/SBIR, I very much support.
    I was going to ask, Mr. Chairman, if he could provide us a 
list of those programs. I do acknowledge that you say that a 
lot of these programs are in their silos. They need to be 
talking to each other, but--you know, it would be--I would like 
to know which of the SBA programs actually help small 
businesses and manufacturers, if you could maybe help us with a 
list so we can continue to provide support for these programs 
that actually work.
    Thank you, Mr. Chairman.
    Chairman Cardin. Senator Hirono, thank you. I know Senator 
Shaheen also asked about the SBIR/STTR programs. We have a 
challenge because they have to be reauthorized, so we have a 
time problem getting that done. The Administration is aware of 
that. So we are going to be working on that this year to make 
sure that program is extended.
    Ms. Kumar, you wanted to respond?
    Ms. Kumar. Well, Ms. Hirono kind of touched on it. I was 
going to say that, you know, supply chain issues and pricing is 
not just a domestic issue. We rely so heavily on the global 
market for even food and canola oil and things like that. So it 
is not just something that the government can just magically 
fix when, you know, China is in lockdown and different 
countries have different waves at different times. It is a 
complicated issue, and it is not something that anybody can 
wave a magic wand over.
    Chairman Cardin. You are exactly right. The supply chain 
challenges could be eased considerably if we had domestic 
source, and manufacturing is a good example. How do we preserve 
manufacturing for supply chain and technology and innovation 
and job growth in America? And to me, the key there is what do 
we do encourage small manufacturing companies because that is 
where the growth will take place.
    But the entire supply chain, really much depends upon 
domestic sourcing as much as possible so that we are not 
subject to international interruptions, whether it is because 
of autocratic governments, because of war, because of 
transportation issues, energy issues, et cetera. So we have a 
bill that has passed both the House and Senate--it is now 
heading toward conference--the Competition Bill that deals with 
a lot of these supply chain challenges but more on the larger 
scenes.
    We have to make sure that we have supply chains so your 
restaurants can get a predictable--I like, Mr. Lam, when you 
said predictability. That is a critically important part of 
your business, to know how you can plan your business for the 
next year, let alone your challenge whether you do it for the 
next week right now because of the changes. How do you invest 
in decisionmaking if you do not know what the supply chain is 
going to be and the pricing of that is going to be?
    So the more we can do this domestically, the more we can 
protect our own sources, the better off we are going to be.
    Dr. Kota, I think your comments are right on target about 
manufacturing and incentives for smaller companies.
    Several of our colleagues were here, but because of the 
briefing that I mentioned earlier for all Senators on Ukraine 
they had to leave. I know Senator Risch is going to be asking 
some questions for the record. I saw that we had Senator 
Hickenlooper here; Senator Ernst was here. I believe Senator 
Hawley was here by WebEx. So we have had other members that 
have been here, but unfortunately could not stay because of the 
briefing.
    Let me thank you all for your testimony. The record will 
stay open for two weeks, and if members have questions we would 
ask that you try to respond in a prompt way.
    With that, with the Committee thanks, the Committee will 
stand adjourned.
    [Whereupon, at 3:04 p.m., the Committee was adjourned.]

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