[House Hearing, 118 Congress]
[From the U.S. Government Publishing Office]
MAIN STREET REALITIES: EXAMINING THE
CURRENT ECONOMIC LANDSCAPE IN AMERICA
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HEARING
BEFORE THE
COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTEENTH CONGRESS
SECOND SESSION
__________
HEARING HELD
JULY 10, 2024
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[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Small Business Committee Document Number 118-055
Available via the GPO Website: www.govinfo.gov
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U.S. GOVERNMENT PUBLISHING OFFICE
56-137 WASHINGTON : 2024
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HOUSE COMMITTEE ON SMALL BUSINESS
ROGER WILLIAMS, Texas, Chairman
BLAINE LUETKEMEYER, Missouri
PETE STAUBER, Minnesota
DAN MEUSER, Pennsylvania
BETH VAN DUYNE, Texas
MARIA SALAZAR, Florida
TRACEY MANN, Kansas
JAKE ELLZEY, Texas
MARC MOLINARO, New York
MARK ALFORD, Missouri
ELI CRANE, Arizona
AARON BEAN, Florida
WESLEY HUNT, Texas
NICK LALOTA, New York
CELESTE MALOY, Utah
NYDIA VELAZQUEZ, New York, Ranking Member
JARED GOLDEN, Maine
DEAN PHILLIPS, Minnesota
GREG LANDSMAN, Ohio
MARIE GLUESENKAMP PEREZ, Washington
SHRI THANEDAR, Michigan
MORGAN MCGARVEY, Kentucky
HILLARY SCHOLTEN, Michigan
JUDY CHU, California
SHARICE DAVIDS, Kansas
CHRIS PAPPAS, New Hampshire
Ben Johnson, Majority Staff Director
Melissa Jung, Minority Staff Director
C O N T E N T S
OPENING STATEMENTS
Page
Hon. Roger Williams.............................................. 1
Hon. Judy Chu.................................................... 2
WITNESSES
Ms. Hazel Davis, Vice President, Compliance Manager & Corporate
Responsibility Officer, Jefferson Bank, San Antonio, TX........ 5
Mr. Steve Martinez, President, Tradewinds General Contracting,
Inc., Boise, ID................................................ 7
Mr. James D. Ewing, Jr., Chairman & Chief Executive Officer, COE
Distributing, Smock, PA........................................ 8
Mr. Tom McCarthy, Vice President & Co-Founder, Motiv Space
Systems, Pasadena, CA.......................................... 10
APPENDIX
Prepared Statements:
Ms. Hazel Davis, Vice President, Compliance Manager &
Corporate Responsibility Officer, Jefferson Bank, San
Antonio, TX................................................ 35
Mr. Steve Martinez, President, Tradewinds General
Contracting, Inc., Boise, ID, with supporting documents.... 40
Mr. James D. Ewing, Jr., Chairman & Chief Executive Officer,
COE Distributing, Smock, PA................................ 52
Mr. Tom McCarthy, Vice President & Co-Founder, Motiv Space
Systems, Pasadena, CA...................................... 55
Questions for the Record:
None.
Answers for the Record:
None.
Additional Material for the Record:
Associated Builders and Contractors (ABC).................... 57
MAIN STREET REALITIES: EXAMINING THE CURRENT ECONOMIC LANDSCAPE IN
AMERICA
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WEDNESDAY, JULY 10, 2024
House of Representatives,
Committee on Small Business,
Washington, DC.
The Committee met, pursuant to call, at 10:00 a.m., in Room
2360, Rayburn House Office Building, Hon. Roger Williams
[chairman of the Committee] presiding.
Present: Representatives Williams, Luetkemeyer, Stauber,
Meuser, Van Duyne, Molinaro, Bean, LaLota, Maloy, Landsman,
McGarvey, Gluesenkamp Perez, Scholten, Thanedar, Chu, and
Davids.
Chairman WILLIAMS. Before we get started, I would like to
recognize myself. If you will rise, we will say the prayer and
the pledge.
Heavenly father, God of all people, thank you for allowing
us to meet today and the [inaudible.] to share great thanks for
our great country. Thank you for being with all of us the best
day of our lives. In your name we pray. Amen.
Join me in the pledge. I pledge allegiance to the Flag of
the United States of America, and to the Republic for which it
stands, one nation, under God, indivisible, with liberty and
justice for all.
Good morning to everybody and I now call the Committee on
Small Business to order. I am authorized to declare recess of
Committee at any time.
I now recognize myself for my opening statement and I want
to welcome today's hearing all of you again for being here,
where we will be focusing on the current economic realities
impacting Main Street America. These types of hearing are
especially important to our Committee because we get the chance
to hear directly from our small businesses back home.
First, I want to thank our witnesses for being here today.
I know all of you have traveled a long way, some as far as
Texas, to share your stories with us and everyone here greatly
appreciates it.
This Committee serves as the voice for Main Street America
in Washington. Each and every day, we strive to learn more
about the current state of small business from the people who
know it best, our nation's job creators. There is no doubt that
in the first half of 2024, they have experienced many ups and
downs. I hold the opinion of starting a small business is the
definition of the American Dream. Part of what makes America so
special is it is a place where anyone from any background can
take a risk, bet on themselves and bring a new service or
product to the marketplace.
Our economy is dependent upon small businesses. And it is
our job here in Washington to ensure that they have a fighting
chance. Unfortunately, many small businesses are dealing with a
variety of challenges, many of which are the result of a bad
policy decisions.
Main Street America has been getting bombarded with
regulations that are causing small business firms to play
defense. Just look at the numbers. Since President Biden took
office, his administration has instituted new rules that are
estimated to cost over $1.6 trillion. Every dollar spent on
additional compliance staff could have been used to bolster
their core operations, and every hour dedicated to reading and
understanding the new regulations that have been used to
discover new growth and opportunities. And worst of all, when a
business owner fears expensive new mandates just beyond the
horizon they hold up hiring that extra employee, or buying that
new piece of equipment.
America's entrepreneurs have had to confront historic
challenges, the COVID-19 pandemic, out-of-control inflation,
broken supply chains, high interest rates and labor shortages
is making it hard to find quality employees. But as small
businesses have done countless times before, they have endured.
Those of us here in Washington must fight back against these
policies which have been strangling America's job creators.
As we listen to the state of small business in America, we
salute the entrepreneurs who continue to fight and give
selflessly back to their communities. This committee is here to
help them and make life a little bit easier and we mean that,
we really do.
I am excited to have all of you here with us today. And I
am very much looking forward to today's hearing.
With that, I will yield for opening remarks. Congressman
Chu, please.
Ms. CHU. Thank you, Mr. Chair, for this important
opportunity to discuss the realities of our economy and hear
from those who do incredible work directly in the communities
we represent. Hearings like this allows us to take stock of how
our efforts in Congress effect those on main street.
Four years ago, small businesses had to navigate an
unprecedented array of challenges stemming from the COVID-19
pandemic from public health shutdowns to supply chain
disruptions, labor shortages and rising costs. Yet, despite
these obstacles, small businesses have demonstrated
extraordinary resilience.
Obstacles remain, but our strong economic headline numbers
clearly show slowing inflation, low unemployment and sustained
growth. Looking around there is much to be proud of. We have
seen a remarkable surge in small business creation since 2020,
reversing decades of decline. It has become clear this isn't
just an anomaly due to the pandemic, it is a trend that is
continuing, even today, 4 years later. This terrible small
business boon shows that so many Americans still have hope for
the future and trust that we are moving in the right direction.
The ripples of the current startup boom will reverberate
for decades, delivering wealth creation for families,
opportunities for its workers, and economic development for
communities across the country.
This is especially significant because many who have
historically been underrepresented in the business community,
including women and minority business owners, are the ones who
disproportionately power this small business boom, and reap the
broad benefits delivered when we build the economy from the
bottom up and the middle out.
The resilience in our economy continues to overcome
headwinds, primarily because of investments made by the
Democratic Congress and the Biden-Harris administration over
the past several years. This transformational fiscal policy
started with the American Rescue Plan, which played a critical
role in stabilizing our economy during the pandemic. By
extending support to small businesses and providing direct
stimulus to American families we kept millions of businesses
afloat, all while providing relief to the unemployed and
cutting child poverty in half through the expanded Child Tax
Credit.
This was complemented by historic bipartisan legislation
when we passed the Infrastructure Investment and Jobs Act and
the CHIPS and Science Act--two landmark laws that are providing
long-term investments to strengthen our supply chains, rebuild
our country's road and bridges, and lay the foundation for a
more resilient and inclusive economy. These investments are
supporting the growth and the flourishing of small firms and
new startups.
Finally, Democrats and the Biden Harris administration pass
the Inflation Reduction Act which included the largest ever
investment in fighting climate change and provisions to further
incentivize domestic manufacturing and lower cost for
everything from healthcare to electricity.
While there is no doubt these laws will provide a boost for
small firms into the foreseeable future, there is still much
more to be done.
Access to capital remains a challenge, and the high cost of
borrowing poses a long-term threat to small businesses. In this
high interest rate environment, SBA's capital access programs
are especially important for connecting small businesses to
affordable financing.
Additionally, the government can continue to do more to
incentivize innovation from reversing disastrous provisions of
the Tax Cuts and Jobs Act to extending our core SBA programs,
including SBIR and STTR.
Finally, investments in families will continue to
strengthen small businesses, whether it is the expanded Child
Tax Credit or continued investment in childcare, these actions
can help build a more sustainable and resilient business
environment, while delivering for American families. It is
crucial that we continue to support these business through
thoughtful legislation.
While the accomplishments of Democrats in Congress and the
Biden-Harris administration have provided a strong foundation,
we must continue to build on this progress, ensuring that small
businesses can thrive in a stable and supportive economic
environment.
Thank you, and I look forward to our discussion today. And
I yield back.
Chairman WILLIAMS. The gentlelady yields back.
And I will now introduce our witnesses. Our first witness
here with us today is Ms. Hazel Davis. Ms. Davis is the vice
president, compliance manager and corporate responsibility
officer for Jefferson Bank, located in San Antonio, Texas. Ms.
Davis joined Jefferson Bank in 2013 as vice president of fair
lending and CRA officer before transitioning to her current
position because of her regulatory compliance expertise. Prior
to joining Jefferson Bank she was compliance officer at Frost
Bank and Hilltop Bank. Ms. Davis currently serves as a Board
Member of the Texas Bankers Association and recently served as
the president of Financial Women in Texas. Ms. Davis attended
Chadron.
Ms. DAVIS. Chadron.
Chairman WILLIAMS. Chadron State College where she earned
her Bachelor of Arts degree in business administration and
accounting, then attended the Graduate School of Banking at the
University of Wisconsin in Madison. I want to thank you for
being with us today and I am looking forward to today's
important conversation.
Our next witness here with us today is Mr. Steve Martinez.
Mr. Martinez is the president of Tradewinds and General
Contracting, Incorporated located in Boise, Ohio. Founded by
his parents in 1980 Tradewinds and General Contracting has
always been a part of Mr. Martinez's life, whether it was
completing a small task as a kid, up to framing houses in
college.
After graduating from college, Mr. Martinez began working
for the business full-time, becoming president after 6 years
with the company. Mr. Martinez has won numerous awards,
including builder of the year multiple times from both local
and State building associations, and has received recognition
from the National Association of Home Builders. Mr. Martinez
graduated from Boise State University, home of the Broncos,
right, with a bachelor of business administration. I want to
thank you for being here today and I look forward to our
conversation.
Our next witness here with us today is J.D. Ewing. Mr.
Ewing is the Chairman and CEO of COE Distributing, located in
Smock, Pennsylvania. COE Distributing is the largest wholesale
office furniture distributor in the U.S. and the Caribbean. Mr.
Ewing took over the business when he was just 19 years old, and
as the sole employee of the company becoming the third-
generation owner, now with over 100 employees spread out across
three States, the company has been consistently recognized
among them fastest-growing private companies in America. In
addition to serving as a Board Member for the Community
Foundation of Fayette County, Mr. Ewing serves on the National
Association of Wholesalers' Institute for Distribution
Excellence as Chairman of the Board. Mr. Ewing graduated from
Penn State University where he studied business. Thank you for
joining with us today and look forward to our conversation.
And I now recognize the Ranking Member Chu to introduce the
last witness appearing before us today.
Ms. CHU. Thank you, Mr. Chair. I am so honored to introduce
our final witness today, my constituent, Tom McCarthy, the co-
founder and vice president of business development at Motiv
Space Systems, which is located in Pasadena, of course, in my
district. Tom spent 11 years at NASA's JPL, also in my
district. And he is an electronics engineer designing motion
control systems for rovers and robotic systems for extreme
environments. He then spent 4 years as the director of business
development at the Missile Defense Agency before cofounding
Motiv in 2024.
Motiv was founded on the belief that space-based robotic
systems could be produced more efficiently and with a higher
level of quality by a small business and they were quickly
proven right. They earned and successfully executed a range of
contracts at NASA, including designing the robotic arm used on
the Mars 2020 Perseverance Rover. They are also the recipients
of several SBIR awards from the SBA and are using that
investment to innovate the next generation of space
exploration.
Thank you for joining us, Mr. McCarthy.
Chairman WILLIAMS. And again, thank you all for being here
today. And before recognizing the witnesses, I would like to
remind them that oral testimony is restricted to 5 minutes in
length. That is a big number for us, we want to stick with
that.
If you see the light turn red in front of you, that means
your 5 minutes is up. And you should conclude your remarks
immediately. And if you keep going, you are going to hear this.
That means stop, okay? And so with that in mind, I now
recognize Ms. Davis for her 5-minute opening remarks.
STATEMENTS OF HAZEL DAVIS, VICE PRESIDENT, COMPLIANCE MANAGER &
CORPORATE RESPONSIBILITY OFFICER, JEFFERSON BANK, ON BEHALF OF
TEXAS BANKERS' ASSOCIATION; STEVE MARTINEZ, PRESIDENT,
TRADEWINDS GENERAL CONTRACTING, INC., ON BEHALF OF NATIONAL
ASSOCIATION OF HOME BUILDERS OF THE UNITED STATES; JAMES D.
EWING, JR., CHAIRMAN & CEO, COE DISTRIBUTING, ON BEHALF OF
JMJS, INC AND COE DISTRIBUTING; AND TOM MCCARTHY, VP, CO-
FOUNDER, MOTIV SPACE SYSTEMS, ON BEHALF OF MOTIV SPACE SYSTEMS.
STATEMENT OF HAZEL DAVIS
Ms. DAVIS. Thank you, Chairman Williams, distinguished
Members of the Committee, my name is Hazel Davis, I am vice
president, compliance manager and corporate responsibility
officer for Jefferson Bank, a cornerstone of the San Antonio
community since 1946. With assets totaling approximately $3
billion, we serve the dynamic and growing region of San
Antonio-Austin, which encompasses 4.8 million people. We
specialize in commercial lending and consumer mortgages.
San Antonio, a city where 64 percent of residents are
Hispanic, thrives on the entrepreneurial spirit of 34,000 small
businesses and 145,000 sole proprietorships. These businesses
are the lifeblood of our economy, facing challenges such as
workforce shortages, rising costs of materials, and housing
affordability constraints. And yet, despite these hurdles, we
continue to see robust demand for credit, although higher
interest rates have impacted some of our price sensitive
customers.
As a compliance officer and advocate for the community I
have witnessed firsthand the profound impact that economic
shifts and regulatory measures have on access to credit. Today,
I am before you not only as a representative of a small
business, but also as a voice for the Texas Bankers Association
which represents 375 banks across our State, employing over
218,000 individuals. Community banks like ours play a pivotal
role in supporting small businesses. We understand the local
landscape intimately, offering personalized service and
flexible terms that larger institutions often cannot.
Our commitment goes beyond transactions, it is about
fostering relationships and ensuring our borrowers succeed.
This approach not only drives economic growth, but also,
strengthens the social fabric of our communities. In my opinion
financial literacy remains a significant barrier for aspiring
entrepreneurs. In my experience many start with personal funds
before seeking formal credit, often unaware of the long-term
ramifications if not utilized appropriately.
As a fair lending officer, I have reviewed numerous loan
applications where a lack of financial acumen has proven
detrimental. Community banks are dedicated to bridging gaps
through education and targeted support programs, ensuring that
all entrepreneurs have the tools required to succeed.
The Community Reinvestment Act is instrumental in our
efforts emphasizing the importance of equitable and fair access
to credit. Proposed revisions must strengthen, not dilute,
support for underserved communities and foster small business
growth.
In San Antonio, historical disinvestment in specific areas
has left lasting scars, breeding mistrust of traditional
financial institutions and minority communities.
Through proactive engagement and targeted investments, we
work tirelessly to rebuild trust and forge lasting
partnerships. However, escalating regulatory burdens and
compliance costs threaten our ability to continue these efforts
as every dollar devoted to regulatory compliance is a dollar
less reinvested into our community businesses.
In conclusion, I urge the committee to consider the
unintended consequences of regulatory actions on small
businesses by fostering a regulatory environment that supports
fair lending access, as well as small businesses, such as my
institution, and recognizing the unique needs of commercial
lending and promoting financial literacy. Together, we can pave
the way for vibrant small business ecosystems to continue to
grow.
Thank you for the opportunity to testify today. I am
committed, along with you, to enabling, rather than hindering,
the success of small businesses across our great nation.
Chairman WILLIAMS. Let me just say one thing to all of you,
you are going to see Members move in and out, it has no effect
on your testimony or anything, we have other hearings they will
go to and come back, so that is the reason you may see that.
Next, I want to recognize Mr. Martinez for his 5-minute
opening remarks.
STATEMENT OF STEVE MARTINEZ
Mr. MARTINEZ. Thank you, Chair. Chairman Williams and
distinguished Members of the Committee, thank you for the
opportunity to testify on the current economic landscape in
America. Housing is, by far, the largest single expense for the
American household. And rising costs are putting the nation in
an ever-worsening situation.
A 2024 report by Harvard's Joint Center for Housing Studies
found that record high 22.4 million Americans are paying more
than 30 percent of their income on rent. And more than 12
million are paying more than half of their incomes.
A newly released housing affordability index by NAHB shows
that in the first quarter of 2024, 38 percent of a typical
family's income was needed to make a mortgage payment on a
medium-priced single-family home. Shelter inflation and rent
and ownership cost is still rising well above a 5 percent rate
driven, in large part, by a nationwide shortage of about 1.5
million housing units. The only way to tame inflation and ease
the nation's housing affordability crisis is to build more
homes.
In order to increase the inventory of a single-family home
and multifamily housing we must remove more barriers;
regulatory barriers, labor barriers and supply chain barriers,
that are preventing home builders from increasing housing
production.
Regulatory barriers, which include complying with building
codes make up nearly 25 percent of the cost of a single-family
home, and more than 40 percent of an apartment home. Without
adequate review or consideration of how it will affect home
buyers or renters, HUD and USDA recently issued a mandate that
will require all HUD and USDA financed housing to be built to
the 2021 energy code. This will do little to curb overall
energy use, but will worsen the housing affordability crisis
and hurt the nation's most vulnerable house hunters and
renters. It will also compel more buyers and renters to stay in
their much older, less-efficient homes.
More concerningly, the Federal Housing Finance Agency is
considering applying similar standards to those adopted by HUD
and USDA for homes financed by Fannie and Freddie, which
provides 72 percent of the financing for new home purchases.
This would set a de facto national energy code severely
disrupting new home construction, increasing the housing supply
shortage and negatively impacting affordability. The adoption
of this 2021 energy code can add $31,000 to every new home. In
my home State of Idaho, every $1,000 that you raise the price
of a house, 800 households are priced out of the market. All
regulations should be designed with small business and their
consumers in mind, and should consider the true real-world cost
of these regulations.
Labor barriers are also contributing to the housing
affordability crisis through higher home-building costs, and
construction delays. In the construction industry a shortage of
skilled labor means that we can expect almost 400,000 open jobs
in any given month. And NAHB research suggests that we will
need 2.2 million workers in the next 3 years to meet existing
home-building demand.
This places upward cost pressures on existing home prices
and rents and pushes the dream of homeownership out of reach
for potential homeowners. Policymakers at all levels of
government can help by supporting full funding for building and
construction trades education including the DOL's Job Corps
program.
Since the pandemic, the cost of materials has surged 38
percent. Building materials, supply-chain barriers, are harming
housing affordability as the cost of lumber, steel, aluminum
and other imported materials and equipment increased price
volatility and drive up housing costs. Of particular concern,
currently, is the price of the availability of distribution
transformers. Since February of to 2020 the price of
distribution transformers is up 72 percent and NAHB's members
report that wait times for transformers range from 12 to 36
months.
One of my recent condo projects was facing a potential
delay of 18 months because we couldn't get the right
transformer. We were forced to modify the product at a cost of
an additional $60,000 on just six condos. These added costs are
pricing local Idahoans out of the dream of homeownership.
Congress must help ease supply chain barriers by investing
in the domestic production of sorely needed distribution
transformers. The current economic landscape for the home
building industry is challenging without question. It is a
generational policy challenge that we can solve. We must solve
it. And it begins with continually removing barriers to
increase housing production.
Thank you again for this opportunity. And I look forward to
your questions.
Chairman WILLIAMS. Thank you.
I now recognize Mr. Ewing for his 5-minute opening remarks.
STATEMENT OF JAMES D. EWING, JR.
Mr. EWING. Thank you, Chairman Williams, Ranking Member
Chu, and Members of the Committee, good morning. Thank you for
the opportunity to testify at today's hearing on state of the
small business economy. My name is J.D. Ewing, Chairman and CEO
of COE distributing, a national office furnishings, wholesale
distributor and contract manufacturer based in Fayette County,
Pennsylvania. COE Distributing is a family-owned business, it
has operated since 1947 when my grandmother started the
business in a basement of a tavern out of the necessity to
support her two sons. I am the third-generation owner of COE
Distributing after taking over the business at age 19 in 1989.
At that time, I was COE's only employee.
Through an enormous amount of hard work and dedication from
a number of dedicated and talented team members, COE has grown
to over 120 employees with distributions centers in Charlotte,
North Carolina; Houston, Texas; and southwest Pennsylvania;
where our corporate headquarters are located.
At COE, we have cultivated and continuously strived to grow
a robust culture, which is fundamental in the success of our
and any small business. We take immense pride in fostering an
inclusive environment or input from all team members at every
level of the organization. It is not only encouraged, but
actively sought. We are also proud to provide our team members
with extensive benefits and career development programs,
including health and retirement benefits, formal profit
sharing, 401(k) plans, quarterly cash bonuses and personal
benefits, such as financial workshops and volunteer paid time
off.
In addition, we are the official engagement partner of the
Pittsburgh Penguins, and hold monthly peer-to-peer recognition
program awarding a game worn Penguins helmet to the employee
who embodies COE's core values of customer service, respect,
teamwork, quality, safety, innovation and transparency. This
and other employee engagement focus efforts allow our unique
workplace culture to grow stronger every day.
Today, we see many challenges in the economy, including
rising costs and supply chain disruptions, looming tax
increases on small businesses and compliance costs with new
regulations. Although the country has recovered from the
pandemic, many of these same supply chain challenges we face
then are beginning to reemerge today. Major ports are again
beginning to see severe backlogs due to congestion and delays.
The disruption in the Red Sea and the Suez Canal due to
terrorist activity has had a material impact on shipping costs
delivery time, adding up to 4 weeks to some shipping lanes.
This disruption has led to substantial increase in the cost of
shipping containers, with the average cost of the shipping
container increasing over three times in the past 90 days
alone.
In April, a container from Asia to the U.S. was
approximately $2,500. By July, now the cost is over $8,000 and
expected to rise to over $10,000 in the coming months because
of the peak season that we are now entering. Many home
furnishing retailers have already implemented ocean freight
related surcharges to their goods reminiscent of the COVID
supply chain consequences.
While small businesses like mine are already seeing the
impact of the supply chain disruption, it will soon impact the
entire economy as it did 2 years ago. In addition to rising
costs, small businesses are also seeing their near-term
challenge of potential tax increases. The 2017 tax reform
reduced taxes for small businesses through the reduction in tax
rates and the creation of the 199A small business deduction.
This tax cut helped us reinvest in our workers by giving us
more resources to hire, raising wages and provide benefits and
training as well as devoting more resources toward expanded the
business and contributing to our local communities. Not only
does this looming expiration of these tax reforms threaten our
ability to continue reinvesting the workers in the communities,
but it also makes it more challenging to compete with large
businesses, especially in attracting and retaining talent given
today's job market.
A longer-term tax challenge for family-owned businesses
like mine is planning for the death tax, which makes businesses
vulnerable by acquisition by large corporation or foreign
entities and often forces family-owned businesses to liquidate
a portion of the business or the entire business to pay this
death tax.
Small businesses are also disproportionately hit by
regulatory requirements. As a small-business owner, the time
and cost to keep current on these issues is overly burdensome
from the time and resource standpoint. While regulations are
inevitably a cost of doing business, we must ensure together
that all businesses are not unduly impacted by red tape and
disproportionate cost.
Thank you again for the opportunity to testify today, Small
Business Committee. I hope my insights on the economy are
helpful and I look forward to your questions.
Chairman WILLIAMS. Thank you very much.
I now recognize Mr. McCarthy for his 5-minute opening
remarks.
STATEMENT OF TOM MCCARTHY
Mr. MCCARTHY. Good morning, Chairman Williams, Ranking
Member Chu, and distinguished Members of the Committee. Thank
you for the opportunity to testify in this hearing about the
current economic landscape in America.
I appreciate the opportunities that allow a small business
like mine to participate in a setting like this in our Nation's
Capital. Special thank you to Congresswoman Judy Chu who has
worked tirelessly to support us and thousands of small
businesses achieve success and thrive in today's economy.
My name is Tom McCarthy, I am a cofounder and the vice
president of business development for Motiv Space Systems
located in Pasadena, California. We support the civil national
security and commercial space sectors by enabling
maneuverability in complex environments primarily in space.
Over the past 10 years, our company has grown from a team
of three people to almost 80 employees just last year. In
preparation for this hearing, I looked at our subcontractor
list and the results were pretty remarkable. Throughout our
history, Motiv has utilized almost 800 suppliers across 42
States and four countries. Small businesses have a larger
economic impact than most people realize. We started the
company because we believed that we could develop and build
space-based robotic systems more efficiently, with a higher
level of quality and capability than our competitors in a
globally competitive aerospace market.
And we were right, we successfully won and have executed
multiple NASA contracts for a range of missions including a
robotic arm and science camera systems on the Mars 2020
Perseverance Rover. From our beginning, innovation has been
crucial for thriving in the highly competitive aerospace
environment. Our company's long-term health relies on
consistently incorporating new technology for our mission
partners, this means continuously expanding our research and
development.
I would like to discuss a few topics related to small
business in the United States, and our relationships with
various government partners today. With regard to the small
business innovative research programs we have developed a chart
that shows how SBIR contracts have been fundamental to
innovating our technology. I think that may be how we got
invited today. But the key here is we don't live off the
revenue of SBIR contracts. We convert those SBIR investments
into seeds to grow new commercial products and close technology
gaps for our partners to enable new and exciting scientific
missions continuing the pulse of scientific discovery.
We have won a total of 18 Phase I and Phase II SBIR awards,
and leverage those awards into eight commercialized program
awards. And then historically, that has amounted to about 25
percent of our revenue over the course of business.
As you look at the SBIR reauthorization next year, I would
encourage you to absolutely keep this vital program alive. Talk
with the small businesses in your community who leverage these
programs, and then engage with those who are not aware of them.
With regard to consistent predictable budgets, many of our
customers are dependent on federal budgets and the effects of
budget delays to those customers amplified within the small
business community. Over the last decade, I believe every
single fiscal year started off under a continuing resolution.
CRs only delay programs and forces our partners to make
premature decisions, much like we saw with the Mars Sample
Return Campaign. The aerospace industry has faced worsening
supply chain disruptions and rising prices due to recent
events. And on top of that, the cost and lead time for raw
materials have doubled, and our suppliers have had to
significantly increase their prices and that ripples through or
community as well.
With regard to the research and development tax credit, I
would also like to raise the importance of the R&D tax credit
that has expired. It is extremely important for a small
business like mine that operates on tight budgets. I have heard
the discussions in press related to Fortune 500 companies but
rarely from the small business perspective. Let me be clear:
The R&D tax credit allowed us to reinvest into further R&D and
other business operations to encourage innovation, and allows
you to tackle more ambitious projects. Investing in R&D allows
small technology businesses to develop new products and improve
existing ones, helping us stay competitive in the global
market.
In conclusion, small businesses are leading contributors to
the economic success of this country. We cannot take this
lightly and must consider all the tools in the toolbox when it
comes to incentivizing the backbone of this great nation which
are our small businesses.
Again, thank you for inviting Motiv to participate in this
hearing, and to discuss how our small businesses is literally
allowing our nation to do things out of this world while
bringing jobs and economic prosperity to our hometown. I look
forward to today's dialog and answering any questions you may
have. Thank you.
Chairman WILLIAMS. The gentleman yields back. And those are
great testimonies. We will get started now and I recognize
myself for 5 minutes.
This Committee has routinely heard from small business
owners that Bidenomics has not been working for Main Street
America. As we have seen the cost of capital increase in this
high interest rate environment, small businesses have become
increasingly reliant on credit cards which carry high interest
rates, and traditional bank loans to finance their operations.
I am very concerned that we are approaching a cliff with
this mounting credit card debt piling up, but that is a
conversation for another day. However, it is not just interest
rates that are increasing the cost of borrowing, regulations
add significant costs to financial institutions, which are
ultimately passed along to their customers.
Ms. Davis, first question, you previously served as
compliance officer to your bank and are very aware of the
impact that regulations have on the price of various financial
products. So can you tell us how increased compliance burdens
are negatively affecting the access to capital in your
community? And which customers are most impacted by this
increased cost?
Ms. DAVIS. Thank you, Chair. Yes, related to compliance
costs, as I said in my statement, every dollar spent takes away
from an investment in the community either through a loan, or
through direct capital program investments to improve those LMI
individuals lives specifically related to the increase in
costs. It overhead costs the same amount to originate a $5,000
loan versus a $100,000 loan, but the cost ratio of what has had
to be implemented is less proportional to the smaller-dollar
loans. So it tends to affect our low- and moderate-income
borrowers the most, because they are those that are looking for
the smaller-dollar business loans.
Chairman WILLIAMS. The recent report projected that the
housing industry will need an additional 500,000 workers
annually to meet the demands of the market. This is an
unfortunate reality for many industries across the country.
When I served as Secretary of State of Texas, I was charged
with overseeing the infrastructure projects in the State. And
eventually we had to delay a bunch of these projects we had
planned because we couldn't find enough qualified welders to do
the work.
With this large infrastructure project to brand new homes,
delays in work have drained local economy. So Mr. Martinez, how
has a lack of skilled workers impacted your business?
Mr. MARTINEZ. Absolutely, thank you, Mr. Chair. We
continue--Idaho is a small State, and so, we compete with labor
from States like California, Washington and Oregon. We aren't
able to find the labor that we need to complete our projects.
And when we do, I feel like we are overpaying for the quality
of work that we are getting. We do high-end residential and so
in order to find the qualified worker that we need to do the
project that we are talking about, we either have delays in
time, we have delays in quality, we have a delay in trying to
get somebody at a market rate that we feel is appropriate. And
we continue to work with our--the Job Corps, we continue to
work the Pell grants, we are working with the high schools. We
are trying to find a way to funnel kids into our industry in a
way that provides an incredible opportunity for them. It is a
shorter route.
In Idaho, our Governor worked on lowering the requirements
to get a journeyman's license because we can't--we just don't
have enough bodies and the barriers to entry are so high that
we are continually working on making it easier, fast-tracking,
trying to get these kids in our industry.
Chairman WILLIAMS. That is good.
Mr. Ewing, the story of your family-owned business really
hits home for me. I have been in the car business for over 52
years, still am. And I took my father's business over, now my
daughters are third generation, and they are currently running
its operations back in Texas. It is real rewarding--as it is--
as rewarding as it has been to keep this business in the
family, it comes with many unique challenges. So my question is
to you, can you talk about some of the issues that your
businesses faced, much like mine, as it has transitioned from
generation to generation?
Mr. EWING. Thank you, Mr. Chair. Our business, thankfully,
did not have a transition challenge. I have been running it for
35 years. My dad's still around, but he's not involved in the
business. The challenge that we have in the business today, I
touched on the rising costs, particularly in the supply chain,
and you get a 3- to 4x increase in the cost of moving product
that you need for inventory or product that you need to build
houses; that is a very difficult situation to react to and pass
the costs along, particularly as a small business.
That is the biggest challenge that we have today in my
opinion, reining in costs and trying to understand how we can
react to them appropriately and not overburden our customers at
the same time.
Chairman WILLIAMS. That is a big deal. You just can't pass
everything on to the customer.
Mr. EWING. No, sir.
Chairman WILLIAMS.--because if it rolls back on business.
So with that in mind, I now recognize the Ranking Member
for 5 minutes for her questions.
Ms. CHU. Mr. McCarthy, thank you for being here today to
share your experience as a high-tech small business. I was so
impressed when I visited your facility last year and was able
to see how remarkable Motiv's success and growth has been over
the past decade.
Can you tell us more about Motiv's story, how you came to
find success in Pasadena and build a customer base nationwide?
And also, I was able to see your robotic arm, why was that so
innovative allowed for the Mars Perseverance Rover to survive
the harsh weather conditions on Mars.
And also, actually can you address this issue, we talk a
lot about space, but do space programs help us here on Earth?
Space programs have routinely returned some of the most
advanced technology on the market to consumers. So can you talk
about the next generation of products that will be coming from
these small businesses to us?
Mr. MCCARTHY. Thank you, yes. So I think in terms of
Motiv's success, I think the primary function that has made
Motiv successful in building up and surviving and thriving over
the last decade is really staying true to a particular common
thread. For us, it is the robotics, it is the motion control
and having the skilled expertise and constant workforce labor
development in order to deliver that to our customer. We have
to differentiate, we have to invest in ourselves constantly, we
have to develop new technologies. We are creators and inventors
all in a small building or a couple of buildings.
And so, that is important to us. And maintaining that
energy, staying hungry and pushing and engaging with our
customer base is the value proposition. And it makes us good
partners to those groups. And so, I think that is primarily key
to our success.
So, some of these programs that I talked about in my
testimony or the predictable budgets for our customers and
making sure that those are operating on a certain cadence allow
us not to engage in disruption, allows us to keep working in
those arenas.
Ms. CHU. And again, why was your robotic arm for the Mars
Perseverance Rover so innovative that it allowed to you survive
on Mars?
Mr. MCCARTHY. And what is really interesting about the
things that we worked on, we look at the landscape of what NASA
or other government agencies want to do in space, and what we
try to do is we try to predict from a technological position.
We try to understand and anticipate what they are going to
need, and that is where our investments go, is to hone those
skills and then apply them and test them and validate them so
that the reliability and quality is high and the customer is
going to get a good solid product that they know is going to
work year in and year out. And fortunately we have had that
success on the programs that we supported in the Mars'
activities and that has been very rewarding for us.
You asked another question, I think, which was related to
how does space benefit the rest of us? Space, it is
interesting, sometimes we feel very disconnected to what
happens in space, but the reality is we use it every day. It is
part of our GPS activities, most of the functions on your phone
have some origins or some biproduct that feeds into its utility
through a space capability. Our weather predicting comes from
space, our early warning systems from solar activity that could
disrupt networks, power stations, distribution centers and that
kind of thing come from space observation. So space, whether it
is pursued for science or it is pursued for economic benefit,
commerce, utility is really valuable. And it is easy to
overlook because we are often doing things very terrestrially,
if you will, but it is a huge contributor to the success of
our----
Ms. CHU. And let me follow up on SBIR itself because you
have a remarkable 18 contracts with SBIR, which of course is
the program administered by the SBA. How do SBIR grants
represent an opportunity for the American taxpayers and the
federal government to see a return on their investment with
these small businesses? And also, it was only reauthorized for
3 years in 2022. When it comes around next year, should we
consider a long-term extension or even permanency?
Mr. MCCARTHY. So, I will answer the back half of that
first, yes, please. I think long-term extension and permanency
of that program is extremely valuable. I think it is something
that for businesses that are in the high-tech arenas and are
looking to serve different government agencies and help them
close technical gaps, it is extremely valuable. Sometimes gaps
exist in conceptual mission or technology development. And it
is really that distilled talent that resides within America's
small business force that sometimes is able to execute those
functions, and that then makes future missions, future
technologies, future capabilities viable.
So I think that SBIR program has shown its worth by those
investments turning into the things that we see on a daily
basis.
Ms. CHU. Thank you. I yield back.
Chairman WILLIAMS. The gentlelady yields back. I now
recognize Representative Luetkemeyer from the great State of
Missouri for 5 minutes.
Mr. LUETKEMEYER. Thank you, Mr. Chairman.
My questions today will be with regards to tax cuts and
regulations, you know. I think the tax cuts of 2017 showed that
leaving money in people's pockets, leaving money in business'
pockets so they can reinvest it as they see fit, whether it is
to expand your lines, to go expand your business, pay
employees, buy more product whatever it is seems to work and
generated a revolution in entrepreneurship during the 16, 17,
18, 19, 20-year cycle, where suddenly it went from more
employees than jobs to over $1 million--a million more jobs
than employees in just a short period of time.
So Ms. Davis, quite frankly as a former banker, you have
got the toughest job at the became as a compliance officer. I
empathize with you. You have a tough job, especially with the
rules and regulations pouring out of Washington and the cost of
complying with those. My question today is with regard to the
tax cuts, you see it every day with the businesses that you
finance in the bank. Have you seen those businesses take those
dollars and reinvest them or do you see them sticking in their
pocket and running off and vacationing with those things?
Ms. DAVIS. Most small businesses are members of their
communities. So they are going to take those dollars that they
have been able to accumulate and reinvest not only to grow
their businesses, but also in their employees. A lot of them
small businesses provide additional services, volunteer hours.
Small businesses really are the lifeblood of all of our
communities. And so, when they have dollars available they can
expand their businesses.
Mr. LUETKEMEYER. You have to remember too, those are their
dollars, not the government dollars.
Mr. Martinez, the other three of you have lived the
American Dream. You started from basically nothing and built
your companies. I admire you beyond what you know. Tell me
whenever you got the tax cuts in 2017 what did you do with
those dollars? How did it affect your business?
Mr. MARTINEZ. Absolutely, thank you, Representative.
Our business relies on debt. We have to procure debt in
order to do more projects. And so, we were able to--and with
that debt comes investment that we have to make, it comes with
dollars that we have to come up with from a downpayment
perspective.
So when we are doing lots, when we are doing a subdivision,
when we are doing an apartment project, we have to come up with
that additional money. And that was more money in our pocket to
continue to grow the economy in our local market. It allowed
us, it fast-tracked us an opportunity to be able to do projects
that we had on the shelf that had been moth-balled waiting on
funds to come in. And so it absolutely projected our company
forward in those years after that.
Chairman WILLIAMS. Mr. Ewing, same question to you, how
does the tax cuts affect you? And I would argue that since the
pandemic, it actually is underpinning the growth of our economy
by allowing businesses to keep their own money and then
reinvest as you see fit. How did the tax cut affect you and
your business? And how are you managing those dollars today?
Mr. EWING. Thank you for the question. You mentioned that
the reinvestment into our team members through raising wages,
additional training, creating a better environment for them is
really where we focused. Our business is also built on
inventory and having product on the shelves so we were able to
expand the amount of inventory that we had in our facilities
and our distribution centers and therefore we could react to
the market and our clients quicker. So it was really about
reinvesting into the company mainly with the people.
Mr. LUETKEMEYER. Mr. McCarthy, you talked about the
research and development tax credit, that is a huge deal for
small business especially, and especially in your situation
where you are doing a lot of research and development. The
continuation of that is going to be very, very important, you
know, we had tax cut, this 2017 tax cut is coming up for
renewal next year. It is a really, really big deal that we make
sure that happens. Can you talk about the impact on that?
Mr. MCCARTHY. Yeah, absolutely. So just like my colleagues
here said the reinvestment is critical to success. In the past
when those credits have been available, we have been able to
put that into our facilities, put that into capital equipment,
put that into capability. And those become again
differentiating tools for us going forward and allow us to grow
our company, train workforce, or, again, plan for the future.
So we try to develop a roadmap on how to better serve our
customer base and that is a constant activity. And so those
give us one more tool just like other programs to help us
execute.
Mr. LUETKEMEYER. Thank you very much.
Mr. Martinez, I think you talked about the 2021 energy code
that is very difficult to comply with. I have got a limited
amount of time, can you just, very quickly, give us a little
brief problem that you have there?
Mr. MARTINEZ. Yes. My concern is in my very limited time.
The State of Idaho has done their own energy code that makes
sense for Idaho. Through the negotiated rule-making process, we
had the opportunity to take things out that don't make sense
and add things that do make sense. With the national
standardization of code, we are now I feel like taking States
rights away on their ability to make changes on the energy
code.
Mr. LUETKEMEYER. Thank you very much. My time has expired.
With that, I yield.
Chairman WILLIAMS. The gentleman yields back.
I now recognize Representative Scholten from the great
State of Michigan for 5 minutes.
Ms. SCHOLTEN. Thanks so much, Mr. Chair. And thank you to
our witnesses for coming here today and for all of your
incredibly valuable testimony. So proud of the small business
footprint in my district, actually 99 percent of businesses in
the State of Michigan are classified as small, if you can
believe that. When I speak with businesses in my district,
rising costs are the biggest concern that they have. Many of
them say supply-chain bottlenecks concentrated market power as
a primary cause.
My first question is for Mr. McCarthy. In your testimony,
you emphasized how important it is to ensure small businesses
can compete with larger companies, agree. In addition to
funding mechanisms such as R&D Tax credit, are there other ways
Congress can encourage competition to keep prices low
throughout the supply chain?
Mr. MCCARTHY. I think one thing that we have seen that has
been difficult is that coming out of COVID with the supply-
chain issues we saw that buying power changed dramatically,
speaking to our particular supply-chain semiconductor industry.
What we started getting from the sellers of semiconductors
was different requirements on how much you could buy, prices
went way up, lead times got excessively long, and then in some
cases, there was no guarantee of the price that you were
actually being quoted as being the final price. I have never
seen that before in my life, my entire career where there is an
unstable price basis. And so, I think something needs to be
looked at there. I don't know if that is all COVID-related or
just a global economic situation, but that really hurts the
buying power for small businesses that are trying to be
innovative and are trying to compete against a variety of
entities.
Ms. SCHOLTEN. Thank you, that is really helpful.
Another top concern among small business owners in west
Michigan is the need for skilled labor. Some small-business
owners tell me they have had to reduce hours and service
because of the labor shortages they face. Our country has had
low unemployment for several years now, a low unemployment rate
for several years now. Usually is a very good thing, right? But
we know that our small businesses are looking for the workers
that they need. This has benefited our economy in some ways.
However, unique circumstances brought on by the pandemic have
meant that small businesses are now trying to grow without a
workforce that can meet the demand that they have.
The next question is for Mr. Martinez. Are there additional
factors that you see that are contributing to the labor
shortages and actions that we specifically in Congress can take
to meet those needs?
Mr. MARTINEZ. Yes, absolutely. So as we are facing a
shortage of labor, the Job Corps funding, the $1.2 billion Job
Corps funding got cut this year. We were jumping up and down
saying, We are trying to train our workforce and you cut Job
Corps funding. It did get reinstated fortunately and it did get
reallocated for next year, but you have to remember through Job
Corps, through Pell grants, we have to be able to fund these
programs that are funneling kids into the trades. They are not
even just kids, people that retraining our military, those that
have been in the correctional system. We really are trying to
retrain a group of people. I would say the last part of this is
not everybody is made for college, and we keep pushing that
narrative. And we are finally getting kids that are saying I
can go for 2 years, I can work the whole time I am doing that 2
years, make money and come out with a trade or a skill set. But
now, you have got to convince their parents that they are not
going to college. And I think that is the next hurdle that we
have to jump. So I think we have a cultural shift that needs to
be made at the national level.
Ms. SCHOLTEN. I couldn't agree with you more. I have got a
great bill, The Honoring Vocational Education Act, many of my
colleagues here are cosponsors. It is a bipartisan bill, and it
actually changes the way the United States Census tracts what
constitutes higher education. Currently, you only get to check
that box if you completed a 4-year college degree. I know the
vocational centers around my district. I go in and I see how
these auto mechanics are trained. That is higher education. I
couldn't do that work. So I completely hear you. I think more
than, you know, funding which we absolutely need, there has to
be a cultural shift around this in the United States. And I
think it comes and starts by honoring, you know, all different
types of education as being higher education. So one very small
thing we are trying to do here, but I appreciate you bringing
that up. Thank you.
I yield back.
Chairman WILLIAMS. The gentlelady yields back. I now
recognize Representative Van Duyne from the great State of
Texas for 5 minutes.
Ms. VAN DUYNE. Thank you very much, Mr. Chairman.
I continue to hear countless stories about how this
administration has hampered the ability of small businesses to
grow due to its reckless spending and taxing and
overregulating. Throughout President Biden's administration,
federal agencies have finalized, get this, 996 new regulations.
It costs about $1.7 trillion to American businesses. Listening
to small businesses in my district, that is a cost they can't
absorb. It must be passed down to the consumer. And this isn't
so these companies or these company owners can get rich, but it
is just to be able to survive in a burdensome regulatory
environment. Now this is part of the reason why earlier this
year this Committee passed my bill, the Small Business
Regulatory Reduction Act. And this bill requires that the Small
Business Administration ensure for each fiscal year that the
cost of small businesses at the administration's rulemaking is
not greater than zero, which also requires the SBA to issue a
report on any regulations issued by other federal agencies that
impact small businesses. That is the role of the SBA, to
actually be a champion of small businesses. And I look forward
to seeing this bill move forward and to working to ensure that
Congress reins in on the power of out of control, regulatory
glutton executive branch. And I also look forward to continuing
to work with this Committee to strengthen small businesses
across the country. I appreciate all of the witnesses being
here this morning.
Along with serving on this Committee, I also serve on the
Ways and Means Committee which has established 10 tax teams in
April to study key tax provisions from the 2017 Trump tax cuts
set to expire in 2025, and to identify legislative solutions
that will protect Americans from President Biden's multi
trillion-dollar tax increase.
I am going to ask--basically I will go ahead and start with
you, Ms. Davis. Can you tell me how the uncertainty in the tax
world impacts your planning for the future?
Ms. DAVIS. Uncertainty in the tax world, specifically I
can't answer that. From a regulatory perspective what I can
tell you is that when small businesses don't have additional
capital available, they are unable to support their
communities. Providing tax credits and relief to small
businesses allows them to thrive as well as our financial
institution as a small business.
Ms. VAN DUYNE. Appreciate that.
Mr. Martinez.
Mr. MARTINEZ. Yeah, thank you. I think as we all know on
this Committee, business doesn't do well with uncertainty. And
so we start to horde cash when we feel that we have got a wave
of regulation coming along.
The State of Idaho, Governor Little enacted a bill that for
every one piece of regulation, two had to be stricken from the
legislature. In doing so in the year of post-COVID we had a
record surplus of $2 billion. Now that might not sound like a
lot of money for some States where the Police Department's
budget might be $2 billion, but in a State of 1.5 million
people a $2 billion surplus is a huge number. And I think we
are seeing the effects of some States taking that anti-
regulation or deregulation stance. And Idaho has, by far,
become the most deregulated or unregulated State. Some may
argue that is a good thing and some argue that is a bad thing.
But we have seen the consequence of that with a 99.2 percent
small business community there was explosive growth in Idaho.
Ms. VAN DUYNE. Can you also, Mr. Martinez, I wanted to
expand on this, in 2022 I hosted a program called the Texas 24
Works, and it brought together high school and middle school
counselors. We took them around the district and we them there
can be great careers that can be had where you are making six
figures without a college degree. Can you talk about how the
career in the technical education, vocational training and
apprenticeships can play a great role in addressing our labor
shortage?
Mr. MARTINEZ. Absolutely, thank you. We have partnered with
the high schools as well. We brought in high schools through
the Home Builder Institute that does receive funds from Job
Corps, it has created a curriculum to bring kids into the
trades. We started bringing them in. We have what we call the
Parade to Homes for Pets, where they are building dog houses
and they are engaging them. They are excited to work with their
hands. It has essentially replaced shop that got cut out of the
school program so long ago. And it is incredible as we meet
with the youth, the excitement they have, the pride of doing
something with their hands. So it is just getting the hook in
and engaging them. And they see the potential for the growth is
great so----
Ms. VAN DUYNE. In the 20 seconds I have got left, Mr.
Ewing, would you like to expand on any of the questions that I
have asked?
Mr. EWING. Just reinforcing the uncertainty creates a
hoarding of cash and resources, which doesn't allow us to
invest in our employees and the business. So that uncertainty
is a challenge.
Ms. VAN DUYNE. Thank you very much.
I yield back.
Chairman WILLIAMS. The gentlelady yields back.
I now recognize Representative McGarvey from the great
State of Kentucky for 5 minutes.
Mr. MCGARVEY. Thank you, Mr. Chairman.
Mr. McCarthy, we will start with you today. Talking about
the SBIR program that is known as America's Seed Fund, not only
is it a vital program for research and development, but it also
awards small businesses like yours with access to the federal
government as a partner. The federal government must fulfill
its purpose and invest in our communities, our constituents,
and their ideas. Mr. McCarthy, your company has received both
Phase I and Phase II SBIR awards. But Phase III is especially
important because it encompasses two of the sort of primary
objectives in the program, the commercialization transition of
technologies. Have you had any trouble transitioning from Phase
II of the program into Phase III?
Mr. MCCARTHY. So actually we have been awarded a couple of
Phase III programs. And in my testimony, I referred to Phase I
and II, because those are the allocated funds, whereas the
phase three is the programmatic funds, the customer funding
that utilizes that connection from the Phase I's and II's, the
success from there, and then bridges the gap to development,
the execution, the production of the technology into regular
use case.
So we have had some success there and, I think, to your
point, it has helped us develop that relationship stronger
within the federal agencies in terms of those who want to
utilize that technology. So I think that has been very
successful.
Mr. MCGARVEY. Is there anything else helpful that we could
do in these types of instances, like a centralized database for
all the projects in Phase III that eligible agencies could use
to shop for their needs?
Mr. MCCARTHY. That is an interesting idea. I think
socializing that is a good thing.
I usually find that there is always a reeducation, even
with customers, making sure that everybody is communicating
about what the benefits are of the program. People who haven't
used it before, haven't utilized it, even as a monitor of the
program, they may be somewhat unfamiliar.
So I think any time there is more opportunity for education
and awareness, I think those are wins.
Mr. MCGARVEY. Thank you very much.
I am going to switch topics here a little bit. Going to Mr.
Martinez.
I appreciate all your comments today. I enjoyed your
written testimony as well. And obviously agree that we should
all continue working to lower costs.
I really like what you said about promoting careers in the
skilled trades to address the labor shortage. This is something
that we have worked on in multiple Committees here.
And I love the line in there where you say, ``America
should have a choice in securing safe, decent, and affordable
housing.'' And I think that that is something, affordable
housing, I think we are ready for a Marshall Plan of affordable
housing, not just in my community, but in this country.
What I want to go to for a second, though, is in your
written testimony you said that ``increased regulations,
especially energy building code requirements, are making it
harder and harder for home builders and multifamily developers
to build housing that is attainable and affordable for American
families.''
But when I went to your website--which is amazing. The
homes are incredible on there. If you guys haven't checked out
this website, it has absolutely stunningly beautiful homes.
You have advertised an incredible commitment to
sustainability. In fact, it says on your website that, quote,
``Commitment to sustainability is woven into every aspect of
our construction process.'' Quote, ``We strive to minimize our
environmental impact while maximizing energy efficiency and
incorporating ecofriendly materials that set the standard for
sustainable luxury living.'' And, quote, ``We are leading the
way in sustainable luxury home construction.''
And so this is not going to--I don't want this--this is not
a ``gotcha'' question. It is really a question.
When we have these--you complain about the regulations, but
then obviously are building homes, I am guessing, because
people want those. It makes having that home cheaper and more
affordable.
How do we square that with the opposition then to the
regulations that are encouraging that efficiency for every
American who does deserve and want to have a home?
Mr. MARTINEZ. I actually really appreciate this question,
because I get it asked at the legislature all the time at the
State level, because nothing I build is affordable or cheap.
And I am always, always, always advocating on the first-time
home buyer.
What we don't understand is, if we don't have a first-time
home buyer who is then able to sell their home and increase
their wealth to become a second-time home buyer and a third-
time home buyer, eventually I lose clients.
So, selfishly, I am trying to advocate on behalf of just
getting people into a home initially who then will turn into
customers down the road.
But I also--I was a first-time--we all were first-time home
buyers in this room. And there is a difference of a mandate and
giving people the choice.
My clients can afford to choose some of those things. They
are willing to pay for those things. But if you have somebody
that is trying to get into their home for the first time--and
it is death by a thousand cuts.
It is not just the energy code. The energy code is a low-
hanging fruit. But it is every jurisdiction, from the local to
the State to the national, that ends up blowing that budget out
of whack to where people can't afford their home.
Mr. MCGARVEY. We are out of time. I would love to ask you
more questions about this, particularly for first-time home
buyers. As competing Committee schedules go up here, I have a
bill up in another Committee. But I really appreciate your
testimony.
Mr. Chairman, I yield back.
Chairman WILLIAMS. The gentleman yields back.
I now recognize Representative Maloy from the great State
of Utah for 5 minutes.
Ms. MALOY. Mr. Martinez, I was going to ask you something
along the same lines, so let's just continue.
You said that a de facto national energy code sets pricing
households out of the market.
I represent Utah's Second District, and Idaho's Number One
being just north of Utah. So we have a lot of the same housing
issues and affordability issues.
If an energy code isn't mandated by the federal government,
do you have faith that the State of Idaho can figure out how to
build homes that are right for Idahoans?
Mr. MARTINEZ. Yes, thank you for that.
I think when you talk the body of codes, it is not a
federal code. It is actually a private group that puts these
codes. There is an energy code, the residential code, the
commercial code, the remodel code.
And so understanding kind of how this body puts it
together, as you can imagine, lots of special interests: ``You
can only get to this level of insulation value by using my
product. So I am advocating special interest on my product.''
Versus the State of Idaho, which is also in the same
climate zone as Boston, Massachusetts, doesn't quite make sense
on some of the things. It is 108 degrees today in Boise. I
think probably really similar.
Ms. MALOY. But it is a dry heat.
Mr. MARTINEZ. Yeah.
But the point is, is that we are involving the
professionals. So we are sitting around the table with the
building officials, with the State officials, with the
builders, with the remodelers, and we are coming to a consensus
of what makes the most sense.
So I absolutely believe that as a State we can regulate
ourselves better, because we are looking at all of the pieces.
We don't have our blinders on of what gets us the max amount of
energy efficiency. We are looking at: How do we even get people
in these homes to begin with? What are easy upgrades down the
road? What are things we can't upgrade down the road?
Ms. MALOY. I agree. I admire your dedication to
sustainability. I think sustainability is a great goal. I don't
think the federal government needs to mandate it for home
builders or States to figure out how to do sustainability.
Go ahead.
Mr. MARTINEZ. Real quick. I think the federal government's
regard is in life safety. So I am not against building code and
the things that progress building code for life safety. I have
got a great relationship with the fire officials, with building
officials. I think energy is a separate concept and an idea.
And I agree with you there.
Ms. MALOY. Thank you.
Ms. Davis, you talked about self-funded entrepreneurs in
your testimony and how making small loans and large loans cost
the same amount but it ends up being more burdensome to the
small loans.
I have good relationships with the regional banks in Utah,
and one of the things they have expressed concerns about to me
is that they don't always recommend federal small business
programs. They specialize in main street businesses. They are
investing in their communities.
But the programs that we are in charge of that are supposed
to help small businesses have so much red tape and such an
upfront cost and barriers to entry that they don't always
recommend them to the same businesses that they are designed to
help.
What has your experience been with that?
Ms. DAVIS. Thank you. That is a great point.
To many of our customers, it is more expensive to go
through SBA loan programs and other federal programs because
there is so much red tape.
Our experience is that we are able to meet those needs
better, faster, cheaper. And we don't have prepayment
penalties. You can pick up the phone and you can call someone
directly. You don't have to go through specific
representatives.
Ms. MALOY. Yeah. Thank you. That squares with what I am
hearing from folks in Utah. And that is something that we as a
Committee need to be aware of and be addressing that. We can
design programs, but if they don't work for the people they are
designed for, we are wasting our time and the taxpayers' money.
Mr. Martinez, I want to come back to you for a second.
You are talking about skilled labor and working with high
schools. And I know not everybody needs college, but over the
last couple of generations I think college has become the way
people get into the workforce, the way they find jobs.
How are you finding laborers for your industry?
Mr. MARTINEZ. Yeah. I think the Band-Aid to the fix is
immigration. Immigration through the visa program. The work
visa is definitely a Band-Aid. And I think that is one,
unfortunately, that just doesn't get enough attention.
Really it is identifying now this youth group that again
wouldn't really go down the college route. In fact, I just
talked to a guy the other day that is trying to--he has got all
8,000 of his hours to become a journeyman for HVAC and just
hasn't finished his schooling.
Ms. MALOY. Yeah.
Mr. MARTINEZ. So they are putting in the time, but the
requirement from the schooling perspective is so hard that it
is a barrier to the entry.
Ms. MALOY. Yeah. I worry about main street businesses that
have labor needs, and people are willing to do it, but they
don't have a mechanism for connecting with each other.
Mr. Ewing, I had questions for you, but I am out of time.
Thanks for being here.
Mr. Chairman, I yield back.
Chairman WILLIAMS. The gentlewoman yields back.
I now recognize Representative Thanedar from the great
State of Michigan for 5 minutes.
Mr. THANEDAR. Thank you, Chairman Williams. Thank you for
this hearing. And I appreciate all of our witnesses here.
I want to start with SBIR.
When I started a small technology business way back in
1990, one of the things that I did was I came across the SBIR
proposals, request for proposals.
And I was excited. There were so many opportunities,
innovative opportunities for me. As a Ph.D. scientist, I was
excited to see and be able to solve some of those problems.
And so I wrote my first Phase I grant myself, but I
realized the odds were so high back then. I don't know what
they are today. Back then I was told that there is a 1 in 25
chance of me winning a Phase I SBIR grant, Phase I.
Is that true today, or is it better, worse?
Mr. MCCARTHY. It is definitely competitive. I think that
what we see in our area is maybe it is closer to 20; 20 percent
chance of success is pretty typical.
But I think it goes to the competitiveness and in the value
proposition and so forth and answering the call, understanding
the fit of your technologies or the science you are trying to
secure and understand research.
So I think it would be great if that program could be
expanded, that would be amazing, so we could offer more
opportunity, because I am sure there are plenty of excellent
proposals that are submitted but aren't funded just due to the
limitation of what the pool is.
Mr. THANEDAR. Yeah.
Mr. MCCARTHY. But it definitely is competitive.
Mr. THANEDAR. Let me stop you there.
So what I noticed again was the competitiveness of it. And
so in 3 years we will be--in 2025 we will have to reconsider in
terms of renewing this.
And I see no downside to not only renewing this program,
but making it permanent, because it is the small businesses
that are responsible for most of the innovation in technology.
And these innovations are something that is needed.
And I was later on able to get other similar grants. And
while I was still running my technology business, I got my last
patent on electric batteries in 2016.
And after that I said I want to go help others, other small
businesses, because the small businesses in Michigan--Michigan
is one of the most innovative States in the country.
And our small businesses are--one, they do not know about
many of the SBA programs, including don't know much about the
SBIR. It is really a best kept secret. It is not marketed. It
is not talked about. So many innovative companies do not know
that.
Secondly, there are not enough grants available.
And thirdly, there seems to be a huge shortage of highly
skilled engineers, scientists that small businesses could hire.
And I would like any of you to comment on this.
But this is stifling innovation in America. This is hurting
America's ability to stay on the forefront of innovation and
discoveries.
And what can small business do in terms of promoting
innovation, helping, getting this skilled workforce?
Often we have skilled workforce Ph.D.s, engineers who are
highly skilled in American universities, who can't just get a
work visa to stay in this country and continue to help American
businesses, to help our innovation.
I want to just kind of get some idea on, some of you, on
what we could do to improve America's position in innovation.
Mr. MCCARTHY. Well, just quickly.
I think for us from a small business perspective, I mean we
have to make ourselves attractive to that workforce as well.
So it is a really a two-way street. We have to develop
ourselves, invest in ourselves in order to make that happen.
And I think that is a critical element of operating to improve
the workforce and meet those challenges head on that you
brought out.
Mr. THANEDAR. Thank you.
I am out of time, so I yield back.
Chairman WILLIAMS. The gentleman yields back.
I now recognize Representative Stauber from the great State
of Minnesota for 5 minutes.
Mr. STAUBER. Thank you, Mr. Chair.
Since President Biden took office, as we have heard, over
900 new regulations have been passed, costing nearly $440
billion and climbing. And it has added more than 236 million
paperwork hours to American small businesses.
Over the next decade compliance with Biden's regulations
will cost Americans more than 1.5 trillion.
Regulations such as these are unacceptable and often take
funding away from growth opportunities for your businesses.
Further, businesses should not need teams of compliance
officers just to be able to compete in the marketplace. The
costs alone are enough to force many of these small businesses
to close, further harming our economy. We must and can do
better for the small businesses in our communities.
Mr. Martinez, how big is your company's regulatory
compliance division?
Mr. MARTINEZ. You are talking to it. So I would be
compliance, I would be HR, I would be legal. We have four
employees, period.
And so to your point, I read a great book called, ``Buy
Back Your Time.'' And reading through that, is the highest and
best use of my time figuring out compliance? Is the highest and
best use of my time figuring out regulatory burdens? Or should
I be out selling homes and building communities?
And so I love the fact that you keyed in on that because
for a small business, we have been kind of a mom-and-pop
business for 44 years. You are talking to every one of those
silos here at this table.
Mr. STAUBER. And how does the avalanche of regulations
coming out of Washington make your job more difficult?
Mr. MARTINEZ. I can tell you that because we are talking
energy codes, because we are talking building codes, when we
get a new wholesale set of codes, it is a six to eight hundred
page document that we have to peruse through oftentimes in our
truck as we are trying to figure out a code change.
And that is just on the building code side of things. When
you add OSHA, when you add EPA, when you add Army Corps of
Engineers, I mean, the list goes on and on.
Mr. STAUBER. Local planning and zoning.
Mr. MARTINEZ. Yeah. Not to mention the anti-growth
sentiment that we are getting now because of the amount of
growth.
And so we are fighting it on all fronts. And,
unfortunately, it is just making the problem worse.
Mr. STAUBER. And so reference the 2021 International Energy
Conservation Code that is coming without amendment. What impact
will these changes have on your business, and how might they
impact potential home buyers?
Mr. MARTINEZ. Yeah, we already have a pricing problem. I
mean, we have already priced in Boise the local buyer. And I am
born and raised--I am one of the few that is born and raised in
my hometown. But we are pricing the local buyer out of the
market.
And I think when a regulatory agency comes out and says,
well, it is only $200 here, and it is only $300, they don't
realize the total impact. Going from our current energy code to
the 2021 code will be almost $30,000 for Idahoans. And that is
a number I can't stomach.
Mr. STAUBER. I mean, the median income in the district that
I represent is a little over $55,000. It is unbelievable when
this comes down on you.
Ms. Davis, what effect does increased regulations have on
inflation?
Ms. DAVIS. Well, I can speak directly to the costs that
have to be passed to borrowers. You asked the size of the
compliance departments. We have four full-time compliance
people just to read the regs. We have one full-time person just
to deal with the data collection efforts on CRA and HMDA. We
will definitely have to add to staff with 1071. We have got two
full-time CRA individuals; more than that on the BSA side. And
then, of course, we have to invest in systems. So all the
frontline individuals are part of our compliance team too.
Mr. STAUBER. It is just amazing the number of people you
just mentioned you have to hire to keep up with these rules and
regulations that are just crushing small businesses across
America.
Ms. DAVIS. Correct. It is part of our overhead, and we have
had to pass that down in origination charges.
Mr. STAUBER. Yeah.
Mr. Ewing, I am very happy that you are bringing your best
employees to the Pittsburgh Penguins games. Minnesota is the
State of hockey. And when I heard you testify, I said that is
awesome. So I appreciate that.
Listen, I am almost out of time. I want to ask every one of
you the question: Has Bidenomics and inflation affected your
business?
Mr. Martinez, your business?
Mr. EWING. Inflation absolutely.
Mr. MCCARTHY. Inflation.
Mr. STAUBER. So here is the issue. There is not one person
that has come in front of this Committee that has said, ``We
want more regulations. Please put more regulations on them.''
Every single Member that I have asked, witness at a hearing,
``No more. We are done. We can't handle it.''
I am a small business owner for 31 years. We sold our
business. It is unbelievable, unacceptable what this
administration is doing to you all.
Mr. Chair, I yield back.
Chairman WILLIAMS. The gentleman yields back.
I now recognize Representative Gluesenkamp Perez for 5
minutes from the great State of Washington.
Ms. GLUESENKAMP PEREZ. Thank you, Mr. Chairman.
And thank you to all of our witnesses for being here today.
Mr. Martinez, I wanted to talk with you a little bit about
housing. I appreciate your perspective on the economic
landscape for small businesses, including contracting companies
like your own.
We have also talked in this Committee about how we feel the
lack of affordable housing can actually be a barrier to small
businesses being able to hire and retain quality employees.
Someone isn't going to move to a new town for a job if there is
no place to live. So this is especially a challenge in
incentivizing business development in rural communities.
I agree with you completely that we need to boost the
housing supply to address this issue of housing affordability.
And this means in some cases tackling--in many cases--tackling
burdensome local zoning regulations, shoring up the supply
chain for materials, and promoting careers in the skilled
trades so there is ample labor.
But I also wanted to talk about regulations. In November,
the Consumer Product Safety Commission proposed a rule that
would mandate finger detention technology on all consumer and
commercial table saws, which sounds like it made for good
reading.
But the reality is there is just one company that owns the
monopoly on that patent technology, and effectively enforcing
that would have been a government-mandated monopoly.
Your organization commented on the proposed rule that the
cost of table saws has more than doubled, small manufacturers
may be forced to exit the market, and businesses may be unable
to operate.
I believe that if the Commission had had somebody who has
worked in construction on the body, they would know that if you
raise the cost of a table saw by $400, people are just going to
put a circ saw on a sheet of plywood, and more people are going
to end up hurt.
So that is why I introduced a bill to help maintain access
to lower-cost table saws and prevent the proposed rule from
leading to a monopoly on table saws with that kind of
technology.
So my question, Mr. Martinez. Do you believe it would be
helpful to have people in the decisionmaking room who have
hands-on-the-ground knowledge about the potential impacts of
rulemaking like this.
Mr. MARTINEZ. Yes, Representative. I really appreciate that
question.
One, you have got way more common sense than a lot of the
jurisdictions that we work with. We get excluded out of
conversations all the time about growth, about safety, about
the things that directly affect us.
I was at a summit a couple weeks ago, and even the members
in that summit, they were activists, they were academics, they
had never worked in our industry, and yet were proposing laws
and regulations and rules that I just kept scratching my head.
I am a framer. I was telling my team the other day when we
were talking about the table saw issue, I know ways around all
of that safety. I am worried that we are going to use a SKIL
saw as a table saw to get around that.
So it is very similar on the energy code side again where
you have got one company that provides that product. They are
the ones advocating on it. They go, advocate on behalf of that.
So I appreciate the commonsense approach to that. We should
always be at the table on anything housing.
Ms. GLUESENKAMP PEREZ. Yeah. Board tables, table saws,
whatever it is, we need to be there, you know.
Mr. MARTINEZ. Absolutely.
Ms. GLUESENKAMP PEREZ. I also recently visited a
transformer distributor in my district, and we talked about
their concerns about the implementation of DOE's recently
finalized rule regarding efficiency standards for transformers.
I know this is a particularly salient issue in your
industry due to the significant delays and high costs for
transformers that you have outlined in your testimony as a
barrier in the supply chain.
Could you elaborate on this and speak about what you think
should be done to ease supply chain challenges for transformers
and other building materials? What other checkpoints are you
seeing?
Mr. MARTINEZ. Yeah, absolutely.
So you can't just do--just to define transformers for a
minute, because it is not the movie--but when you do a
transformer on a project, that is what brings power to your
project, power to your home, power to a subdivision.
It was a very ill-timed rule in that we already had a
shortage on a product, and then we were going to make it more
energy efficient, which just made the supply chain side a
bigger problem.
So we were able to defeat the efficiency standard of DOE,
but we still have a shortage. And it is not the transformer
itself, it is the alloy and the components that go into it.
But it continues to be a huge challenge. It is just the
challenge of the day. Lumber was the challenge of the day 3
years ago. And coming from a lumber State, you have probably
heard that a lot.
And so transformers just happen to be that, the issue of
the day that we are really trying to solve. And there is such a
cost impact to getting them. And kind of to your point, I don't
even know what I am going to pay for them. I will put money
down, just get it here, I need it, I can't do my project
without it.
Ms. GLUESENKAMP PEREZ. Yeah, and we are not going to
electrify without them either.
Thank you very much. Thank you all for your testimony.
I yield back.
Chairman WILLIAMS. The gentlelady yields back.
I now recognize Representative Molinaro from New York for 5
minutes.
Mr. MOLINARO. Thank you, Mr. Chairman. I appreciate that.
I appreciate you all being here.
And I do appreciate my colleague's common sense. In fact,
we often, even this week, get ridiculed for having to draft
legislation to preserve the rights of American citizens to buy
their own home appliances as if that isn't the most significant
issue facing Americans.
And here we are faced with bureaucrats establishing rules
and regulations that make it difficult to purchase a table saw
or a dishwasher or a refrigerator.
And it is often those faceless bureaucrats that establish
policy that, frankly, make it so damn expensive for all of you.
And then, of course, those costs either get passed down to your
customers, our constituents, or you fold up your tent and stop
working. And that to me is the great crisis that is facing main
street.
Mr. McCarthy, you had offered earlier that it was good to
have small businesses at the table and the voice of small
businesses being heard in tax policy, what have you. I do want
to credit this Committee in a bipartisan way under the
Chairman's leadership. We give voice to small businesses every
week.
The problem is that small businesses often might make it to
a White House roundtable, but they are not the ones at the
table, as Mr. Martinez has offered, and you all have kind of
referenced in your testimony, they are not the ones at the
table when it comes to policymaking.
Yesterday, the Transportation and Infrastructure Committee
held a hearing on new emission standards in California that
California acknowledges would have an $86 billion disruption to
supply chain and then went on to suggest that that would have
nominal impact to American customers, whether they are buying
food products or construction material.
Mr. Martinez, I wanted to return to you and give you an
opportunity to kind of expand on some of the regulatory
burdens.
You summed it up pretty well. You are all of the silos in
your business. We know that in small businesses that is the
case. For you it is a burden.
At times, it would be great if Washington or the federal
government didn't have so many silos. In fact, it would be nice
if one entity knew more about other challenges so we wouldn't
have this regulatory regime that creates such a crisis.
The Biden administration consistently has ignored the voice
of small businesses. We can pretend that sounds partisan, but
it is not. Consistently, small businesses have been burdened
with regulation because the left hand not only doesn't know
what the right hand is doing, sometimes the left hand doesn't
even know there is a right hand. And so what the EPA says might
contradict with the Department of Labor, might contradict with
some local zoning practice.
This administration finalized in 2023 alone more than $451
billion in final rules--imagine that--$451 billion in new costs
because of regulations established in 2023 requiring 286
million paperwork hours. I can't even fathom calculating that.
I introduced the POST IT Act. Why? Because it would force
the federal government to simplify regulations and require
access transparency, small businesses having access to those
regulations.
Mr. Martinez, in a real world sense just talk a little bit
about how providing greater transparency might at the very
least provide some benefit to your business, but also perhaps
hold the federal government a bit more accountable.
Mr. MARTINEZ. Yeah, absolutely. Thank you, Representative.
Really knowing the basis for a rule, knowing why we are
doing this, like what is the end goal in this rule. Is it to
save money? Is it to save lives? Tell us what it is.
You had the EPA that had a waters of the U.S. standard. It
was being challenged in the Supreme Court. And yet they still
moved forward, the EPA kept moving forward with their rule,
knowing that they stood on very--and it was an Idaho case. Of
course, I was a little sensitive to it.
But that Sackett case reversed the waters of the U.S. rule,
and yet the EPA kept moving forward. And we as a small business
who deal with the EPA and Army Corps, one or the other, kept
saying this standard stopped, like let's wait till the Supreme
Court rules, because we are going to just go right back and
start all over again.
Mr. MOLINARO. I am glad you brought that up, because
actually there are Members like me from New York. I have spent
my entire life trying to preserve watersheds, wetlands in the
Hudson River Estuary. And the fact that that particular
determination by EPA, by rolling it back, some of my colleagues
on the other side of the aisle suggest that somehow we are not
interested in protecting water.
That couldn't be further from the truth. We have
environmental standards, federal and state environmental
standards that provided those protections. The EPA overstepped.
I am going to run out of time because of my own fault. But,
Ms. Davis, I recall some years ago in the 1980s when my parents
were thrilled that they finally got a mortgage at under 11
percent.
Can you talk about what the highest rate of inflation in
the last 40 years has meant to lenders?
Ms. DAVIS. Well, for starters, the rates have been up. When
I was in banking school, the Capstone Project provided this
scenario that could never possibly happen to ensure that
bankers were prepared. And, yet, we have see it rapidly
increasing rates. And it surpassed even that.
Mr. MOLINARO. Thank you, Ms. Davis. I apologize. That was
my fault.
Mr. Chairman, I yield back.
Chairman WILLIAMS. The gentleman yields back.
I now recognize Representative Bean from the great State of
Florida for 5 minutes.
Mr. BEAN. Thank you very much, Mr. Chairman. A very good
morning to you.
Good morning, Small Business Committee.
And to our all-star panel, welcome to your Nation's
Capital, and thank you for your testimony. You will always
remember this day, the day you testified before Congress.
There is no hiding it anymore: Bidenomics is not working
for America, for main street. And your testimony today really
is in sync with the business owners of northeast Florida, in
Clay County, in Jacksonville, that are just struggling with
curveball and fastball and just an environment that makes it
extremely difficult.
In a perfect world, it is extremely difficult to run a
small business. But when government is just throwing things in
your way left and right, I know it is a struggle.
We have had dozens of people sit in the same chairs that
you are sitting in right now. All--many--have testified that
they have never--they have been in business a long time. They
have never seen the regulatory environment, the new regulations
come down more than right now.
Ms. Davis, would you agree with that? This is the most
regulated environment we have ever seen? It is breaking the
backs of small business? Would you agree with that statement?
Ms. DAVIS. I would agree with that.
Mr. BEAN. Very good.
Mr. Martinez, jump in. Tell us.
Mr. MARTINEZ. Yes. And I lived through a once-in-a-lifetime
financial meltdown of 2008 to 2012 that I thought, okay, now I
am good, I am back to being in business. And I do feel like we
are in an environment now that is harder than it was in that
financial meltdown.
Mr. BEAN. I am going to put you down a yes, because you
agree with that, for sure.
Mr. MARTINEZ. A long way around it.
Mr. BEAN. No, no, I am with you.
Mr. Ewing, welcome. Glad to have you here.
What say you? Is it the most regulated? Is the federal
government just throwing things at you left and right that you
have never seen before?
Mr. EWING. For our business, I can't speak to that
directly. But any time the federal government or any government
adds cost of doing business to the business, it takes away from
the employees and our ability to treat them better.
And that trickles down. And I think that is one of the
effects that aren't recognized on regulatory burdens.
Additional costs of running a business is--it is going to
affect a business, but it is also going to affect the tens,
dozens, hundreds of employees of those businesses which impact
main street even further.
Mr. BEAN. It sounds like a yes to me. So thank you very
much.
Mr. McCarthy, I haven't forgot about you. What say you?
Trying to get to Mars, but it is hard to do so when the federal
government throws all these monkey wrenches in the spaceship.
What say you? Is it being overregulated right now?
Mr. EWING. I think there are a couple of things that have
impacted us. I mean, as we mentioned before, inflation has.
Definitely, we feel that. We feel that. That is our buying
power.
Mr. BEAN. But you don't have to--do you have to have a
circular saw or a stove to get to Mars?
Mr. MCCARTHY. No. No. I don't--correct. I don't have the
same situation there.
But I will say something that is important that is coming
on that does affect us, is there are standards associated with
NIST and security and so forth.
And those are things that for small businesses to start up
with those compliances and so forth, that is something that is
a new activity, a new burden for us. But I am not saying that
it is not important.
Mr. BEAN. No. I got you.
Mr. EWING. But those are--those are things--those are----
Mr. BEAN. So it is a challenging environment, and I will
take that as a very strong maybe from you.
Mr. MCCARTHY. A very strong maybe.
Mr. BEAN. Ms. Davis, I was a banker too. You have the
heartbeat of main street, and hopefully every small business.
Get to know your banker or a banker that can help you navigate
the tough environment.
What are you seeing? What are you seeing right now at the
bank? What are your customers doing to try to keep up with
regulations and a rising interest rate?
Ms. DAVIS. Well, I think many of them are trying to cut
costs. They are trying to figure out ways to continue to move
forward.
Again, we have demand for credit, but that liquidity is
such a big deal.
Mr. BEAN. It is. It is tough.
Mr. Martinez, what would you say if you could talk directly
to the Chairman of the K-12 Subcommittee on Education on how do
we pivot to a more society focused on teaching kids a skill?
What would you say to that Chairman? How do we do it? What
should you advise Congress? How do we have a new conversation?
Mr. MARTINEZ. I say reengage the industry. You walked away
from the industry a while ago. It is time to come back. And
doing that, there are plenty of programs, there are plenty of
funds now. Like, there is no reason they can't be doing this.
Mr. BEAN. Very good. You just told the Chairman. I am the
Chairman of that Committee.
Mr. MARTINEZ. Oh.
Mr. BEAN. We have had multiple Subcommittee--you did a
great job by the way.
Mr. MARTINEZ. You are supposed to let me know.
Mr. BEAN. You did a great job. That is a little curveball
here we can throw you to. But listen, thank you. You did a
great job.
And we are having that conversation. We welcome input, and
we are going to have to do it together. And I think it is
changing. I think kids are realizing, ``I can make more money
without going into this debt''--which is a whole nother topic
altogether.
Look at me, ran out of time. But I am grateful for each of
your coming. Thanks for your testimony today.
Mr. Chairman, I yield back.
Chairman WILLIAMS. The gentleman yields back.
And I now recognize Representative Meuser from the great
State of Pennsylvania for 5 minutes.
Mr. MEUSER. Yes, thank you, Mr. Chairman.
Thank you to all of you. My apologies for being late. I had
an earlier Committee. And as my colleague just said, good luck
following that.
Thank you, Representative Bean.
So I am a small business person as well for well over 20
years, helped grow a small business into what eventually became
a large business. What is being faced today is really
burdensome, to say the least, to put it in the nicest way
possible. And, boy, oh, boy, we hope to correct that come next
year.
But from energy, we in northeast Pennsylvania call it gas
backwards energy policy, taxes, regulations, crime, interest
rates, inflation. The regulations that seem endless. I start
listing them here. It is a long list, from the beneficial
ownership rule to 1071 coming out of the CFPB.
So I will start with you, Mr. Ewing. And you are from
Fayette County?
Mr. EWING. Correct.
Mr. MEUSER. Great. Well, that is a beautiful spot in the
world.
Mr. EWING. That it is.
Mr. MEUSER. I will be heading that way at the end of the
week. But anyway--or in our great Commonwealth of Pennsylvania.
So you mentioned--well, first off, the sunsetting of the
Tax Cuts and Jobs Act, R&D tax credits, potentially the 199(A)
small business deduction, which has been stated by President
Biden, doing away with that, all the tax relief that occurred.
So how do you all feel about that, Mr. Ewing?
Mr. EWING. Well, the 199(A) is going to eliminate a lot of
investment that small businesses are able to make, and that is
a problem. And we can't--we talked about it earlier. Not being
able to plan to invest in your business, you start to pull
back. Innovation is squashed a bit.
And for us, as I mentioned earlier in testimony, the
investment into our people is really what is going to be
challenging if the cost of doing business rises substantially
because tax cuts go away.
Mr. MEUSER. That is devastating. I hear from my friends who
own small businesses and my constituents, and all devastating.
So I read your OSHA officer issue, and in my district--and
I have a conference call with them on Friday with OSHA--they
seem to have this new walk-around rule where they stopped on a
construction site the other day, just small putting up
Sheetrock for people, and the ladder was over 15 feet high. And
they said it wasn't secure enough.
So after 4 hours of interrogation and permits and getting
their licensing, they informed--they wrote them a warning and
stated that the fine will be anywhere from zero dollars to
$14,500. Unbelievable. Walk-around. So-called walk-around by
OSHA. So we are going to have a little conversation there.
Tell us a little bit more about your interlude with the
OSHA officer.
Mr. EWING. It was in our Charlotte facility. And it was--I
don't know that it was a walk-around, but it was an unexpected
visit. And the officer identified what they believed to be a
problem with stability of product on racking. All our racking
was installed according to code. But this officer, who we found
out much later in the process--this was a 6-month ongoing
process--was new and very aggressive and wanted to put a name
in the local agency for themselves.
Mr. MEUSER. Right, mount on the wall. Right.
Mr. EWING. Yeah.
Mr. MEUSER. Allow me to move on. I appreciate that.
Ms. Davis, do you think that the CFPB's 1071 rule will harm
or help your ability to serve your customers?
Ms. DAVIS. It will absolutely harm it.
Mr. MEUSER. Can you elaborate?
Ms. DAVIS. Plain and simple.
As part of my testimony, we are able to meet the small
business needs by being effective and fast and efficient. That
added cost that we are going to have to tack on for all those
data collection points is going to hinder the expediency of our
lending efforts.
In addition, for every compliance officer that we have to
hire to manage those data points and the examination
ramifications, that is one fewer banker that we have out in the
community serving our customers' needs.
Mr. MEUSER. Mr. Martinez, has there been anything done over
the last three and a half years that has been a positive
development? I know inflation, everything else. Is there any
policy? And we are going to work on this. Believe me. That is
why most of us are in Congress, to be advocates for small
business.
Mr. Chairman, I have run out of time. But maybe we could
talk afterwards. I appreciate it. I yield back.
Chairman WILLIAMS. The gentleman yields back.
I would like to thank our witnesses today for your
testimony. It has been a great hearing. I think you have seen,
unlike you see in many other hearings, we do have a lot of
bipartisan agreement on where we need to take main street. And
I want to thank you all for being here.
Without objection, Members have five legislative days to
submit additional materials and written questions for the
witnesses to the Chair, which will be forwarded to the
witnesses. So I ask the witnesses to please respond promptly if
that happens.
And if there is no further business, without objection the
Committee is adjourned. Thank you.
[Whereupon, at 11:42 a.m., the Subcommittee was adjourned.]
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