Griffith Testimony
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- Congressional materials
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- Griffith Testimony
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- 2022-03-30
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- Griffith Testimony
Summary
Written testimony of Joel Griffith, a Research Fellow in Financial Regulations at The Heritage Foundation, before the United States Senate Committee on Small Business and Entrepreneurship on March 30, 2022, titled "The Supply Chain Crisis and the Implications for Small Businesses." The testimony argues that COVID-19 restrictions, government spending financed by the Federal Reserve, and labor-force effects of unemployment benefits and school closures are the main causes of supply chain disruption and rising prices. It cites 10.6 million unfilled jobs in November 2021 against 6.9 million unemployed workers, and a National Federation of Independent Business survey finding 48 percent of business owners unable to fill open positions against a 22 percent historical average. It also criticises California port and labor policies and the Merchant Marine Act of 1920.
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The Supply Chain Crisis and the Implications for Small Businesses
Testimony before
U.S. Senate Committee on Small Business and Entrepreneurship
United States Senate
March 30, 2022
Joel Griffith
Research Fellow, Financial Regulations
The Heritage Foundation
Chair Cardin, Ranking Member Paul, Members driven demand contributes to the steepest rise
of the Senate Committee on Small Business and in prices in 40 years-- from the grocery store,
Entrepreneurship. to housing, to the gas pump. The supply chain
crisis has been exacerbated by this
My name is Joel Griffith. I am a Research administration's "war on energy," including
Fellow in Financial Regulations at The Heritage shuttering pipelines,1 closing off swathes of the
Foundation. The views I express in this nation to drilling, 2 and even threatening oil
testimony are my own and should not be executives with prison for providing the
construed as representing any official position gasoline American business and families
of The Heritage Foundation. depend on.3
Introduction The Biden administration has falsely insisted
these problems are transitory while blaming the
Supply chain issues in conjunction with rising pandemic and scapegoating the businesses
prices continue to yield empty shelves,
production bottlenecks, and delivery delays.
The mismatch between supply and deficit-
1 David Blackmon, “Why Biden’s Killing Of Keystone XL Was An 3 Katelyn Caralle, “'We should put them in jail!' Joe Biden wants to
Energy Security Blunder,” Forbes, March 10, 2022, prosecute fossil fuel executives for environmental damage—but
https://www.forbes.com/sites/davidblackmon/2022/03/10/why- doesn't mention son Hunter who helped run Ukrainian natural gas
bidens-killing-of-keystone-xl-was-a-big-energy- giant,” Daily Mail, December 30, 2019,
blunder/?sh=13b0bf4f13fd (accessed March 29, 2022). https://www.dailymail.co.uk/news/article-7837265/We-jail-Biden-
2 Lisa Friedman, “Biden Administration Halts New Drilling in Legal wants-prosecute-fossil-fuel-executives-environment-damage.html
Fight Over Climate Costs,” The New York Times, February 22, 2022, (accessed March 29, 2022).
https://www.nytimes.com/2022/02/20/climate/carbon-biden-
drilling-climate.html (accessed March 29, 2022).
trying to fix the problems4—and now the war government lockdowns shut down large parts
in Ukraine.5 of the world. Companies were forced by
governments to abide by oppressive
In recent months, prominent media restrictions, driving many out of business.
commentators and various media outlets have Erratic, unpredictable, arbitrary decisions by
taken up this false attack on the very people government bureaucrats made planning even
suffering from the bad decisions being made in for the short-term nearly impossible. Onerous
Washington. Meanwhile, the administration distancing and capacity restrictions on
refuses to acknowledge the primary culprits: processing plants crippled production.
ill-advised COVID restrictions here and across
the world that throttled production and Bad government policy set in motion the
shipping, flooded record government spending economic turmoil, skyrocketing inflation, and
financed by the Federal Reserve that stoked supply chain havoc Americans are
demand, and labor force suppression from experiencing, and new government policies
poorly targeted government transfer payments, continue to worsen the crisis.
shuttered schools, and diminished childcare
options. Exacerbating the problem— As evidenced by the disparate economic
particularly in California--are organized labor performance in states, those that reopened
groups refusing to embrace common sense port society quickly or refused to impose shutdowns
operations adjustments and a continued slew of from the start enjoyed a much better economic
environmental regulations slashing the number environment. The Federal Reserve State
of available trucks. Coincident Indexes—an approximation of state
GDP—vividly illustrates how variant the
Proposals for yet more government spending, economic recovery is based on states. 7 This
labor regulations such as the PRO Act, harsh index suggests economic output at the end of
environmental regulations on energy 2020 was actually greater than pre-pandemic in
production, and massive tax hikes on eight states which did not endure crushing,
businesses risk further shocks. Artificially long-lasting shutdowns, such as Florida and
stoking demand while crippling production is a South Dakota. This contrasts starkly with states
recipe for both shortages and higher prices. such as Hawaii, Michigan, Rhode Island, and
Massachusetts which remain more than 10%
The primary factor behind the supply chain smaller than pre-pandemic. Overall, by the end
issues are the ill-advised COVID restrictions of 2020, the 10 states with the fewest
here and abroad.6 restrictions in place 8 averaged 4.7 percent
unemployment—while the 10 states with the
Contrary to conventional wisdom, the most restrictions averaged 7.1 percent
pandemic itself did not ‘shut down the world,’ unemployment. 9 Los Angeles suffered from
4 In particular, this New York Times piece laid the blame for the state 6 Peter St. Onge, “Blame Government, Not COVID-19, for Supply
of the economy, the labor shortage, supply chain problems and Chain Collapse,” The Heritage Foundation, October 18, 2021,
inflation not on irresponsible policy choices in Washington, but at https://www.heritage.org/transportation/commentary/blame-
the feet of hardworking Americans trying to support their families. government-not-covid-19-supply-chain-collapse (accessed March 29,
Neil Irwin, “Who’s to Blame for Rising Prices?,” The New York Times, 2022).
November 16, 2021, 7 Federal Reserve Bank of Philadelphia, State Coincident Indexes,
https://www.nytimes.com/2021/11/16/briefing/inflation-biden- https://www.philadelphiafed.org/-/media/frbp/assets/surveys-and-
approval.html (accessed March 29, 2022). data/coincident/coincident-revised.xls (accessed March 29, 2022).
8Adam McCann, “States with the Fewest Coronavirus Restrictions,”
5 The Heritage Foundation, Fact-Checking the Media’s False and WalletHub, January 26, 2021, https://wallethub.com/edu/states-
Misleading Claims Blaming Americans for Rising Prices, Supply Chain coronavirus-restrictions/73818 (accessed March 29, 2022).
Crisis, November 18, 2021, https://www.heritage.org/press/fact- 9U.S. Department of Labor, Bureau of Labor Statistics, Local Area
checking-the-medias-false-and-misleading-claims-blaming- Unemployment Statistics Data Series, December 2020,
americans-rising-prices-supply (accessed March 29, 2022).
2
11.1% unemployment and NYC 8.6%--cities about 4.7 million workers—is contributing
where draconian restrictions and an army of to supply-chain issues and rising prices.11 12
compliance officers continued to push tens of
thousands of businesses out of business. 10 Early in the pandemic, governments forced
Meanwhile, unemployment in numerous many businesses to shutter completely or
communities in Alabama, Idaho, Iowa, dramatically reduce operations. Many of these
Nebraska, South Dakota, and Utah was close to employees hardly ‘elected’ to stop working.
3% or less by the end of 2020. Instead, their jobs disappeared due to
governments criminalizing their employment.
Politicians who advocated for shutdowns and Meanwhile, schools in many parts of the nation
pervasive economic restrictions pushed closed their doors for much—if not all—of the
millions of those who are unemployed or academic year or imposed spontaneous,
financially underwater off an economic cliff, unpredictable interruptions. This made
while blaming the pandemic for the millions employment difficult for many parents. In
slipping “through the cracks.” addition, many of those formerly working in
the childcare industry left. Generous federal
Record amounts of government spending unemployment bonuses13 combined with state
financed by the Federal Reserve also unemployment benefits resulted in the majority
contribute to the supply chain problem. of unemployed Americans earning more off the
job than on the job—acting as a powerful
While governments hampered the supply of disincentive to returning to work, especially
goods and services, a tsunami of government when combined with multiple federal stimulus
spending contributed to the rise in demand— checks. This specifically impacted warehouse,
including future demand as households retail, and the hospitality sectors. Private
stockpiled income from both wages and vaccine mandates and a threatened federal
government COVID-19 relief checks. Without mandate pushed others out of the labor force.
a doubt, Federal Reserve policy is contributing In short, misguided government policies
to the very large burst of inflation. The federal
government has used the Fed as a piggy-back,
“selling” trillions in debt for newly ‘printed’
money that then floods into the economy,
driving inflation while bribing resources and
workers away from businesses that desperately
needed them.
The unprecedented labor shortage in the
United States—with an employment gap of
https://www.bls.gov/web/laus/laumstrk.htm (accessed March 29, December 8, 2021, https://www.heritage.org/jobs-and-
2022). labor/report/what-happening-unprecedented-us-labor-market.
10U U.S. Bureau of Labor Statistics, Unemployment Rate in Los 12 Rachel Greszler, Joel Griffith, Elizabeth Hanke, Tori Smith, and
Angeles-Long Beach-Anaheim, CA (MSA) [LOSA106URN], retrieved Katie Tubb, “Inflation: Policymakers Should Stop Driving It and Start
from FRED, Federal Reserve Bank of St. Louis; Fighting It,” Special Report No. 252, The Heritage Foundation,
https://fred.stlouisfed.org/series/LOSA106URN , (accessed March January 20, 2022,
29, 2022). U.S. Bureau of Labor Statistics, Unemployment Rate in https://www.heritage.org/sites/default/files/2022-02/SR252.pdf
New York-Newark-Jersey City, NY-NJ-PA (MSA) [NEWY636URN], (accessed March 29, 2022).
retrieved from FRED, Federal Reserve Bank of St. Louis; 13 Rachel Greszler. “9 Reasons Why Federal Unemployment Bonus
https://fred.stlouisfed.org/series/NEWY636URN , (accessed March Subsidies Need to Go,” The Heritage Foundation, June 10, 2021,
29, 2022). https://www.heritage.org/jobs-and-labor/commentary/9-reasons-
11 Rachel Greszler, “What Is Happening in This Unprecedented U.S. why-federal-unemployment-bonus-subsidies-need-go (accessed
Labor Market,” Heritage Foundation Backgrounder No. 3677, March 29, 2022).
3
shrank the number of people willing or able to Federal and state policies, especially in
work.14 15 16 California, compounded global shipping
problems.20
As a result of so many dropping out of the labor
market, the availability of workers is incredibly California matters because it receives nearly
tight. Businesses across nearly every industry half of all containers coming into the United
in the United States are desperate for workers States. Yet, in the midst of the pandemic and
and have expanded their pay and benefit supply chain crisis, California continued a
packages. The number of unfilled jobs remains phase-out of older diesel trucks. Organized
at record levels, with 10.6 million unfilled jobs labor in California continued to resist
in November 2021— more than 1.5 jobs modernization in favor of inefficient modes of
available for each of the 6.9 million operation while refusing to fully expand their
unemployed workers.17 hours to alleviate the backlog. With such high
labor costs (roughly three times the national
The National Federation of Independent average for port workers) and the union’s
Business (NFIB) reports that 48 percent of unwillingness to operate on a 24/7 schedule
business owners were unable to fill open similar to all other major ports in the world, it
positions in November—more than double the would make sense to increase automation, but
22 percent historical average. 18 Accordingly, the union has fought hard against that—
businesses are increasing compensation, and including securing a provision in the bipartisan
therefore their costs. According to NFIB, 44 infrastructure package to prevent any funds
percent of business owners reported raising from going toward automation.21
compensation in November (a 48-year record
high), and 32 percent plan to raise Consequently, in the World Bank efficiency
compensation in the next three months (a rankings,22 the California ports were among the
record high).19 least efficient on earth—behind even those of
Mombasa, Kenya, and Dar es Salaam,
Tanzania.23
14 Rachel Greszler, “More Bad Policies and Government Spending November 29, 2021, https://assets.nfib.com/nfibcom/2021-Nov-
Will Worsen Labor Shortage,” The Heritage Foundation, October 13, Jobs-Report-FINAL.pdf (accessed date March 29 2022).
2021 https://www.heritage.org/jobs-and-labor/commentary/more- 19 Unfilled job openings total 11.3 million—more than 1.8 jobs for
bad-policies-and-government-spending-will-worsen-labor-shortage every unemployed worker.
(accessed March 29, 2022). 20
Rachel Greszler, Joel Griffith, Elizabeth Hanke, Tori Smith, and
15
Rachel Greszler, “Why has employment been so slow to recover?,” Katie Tubb, “Inflation: Policymakers Should Stop Driving It and Start
The Washington Times, March 9, 2022, Fighting It,” Special Report No. 252, The Heritage Foundation,
https://www.washingtontimes.com/news/2022/mar/9/why-has- January 20, 2022,
employment-been-so-slow-recover/ (accessed March 29, 2022). https://www.heritage.org/sites/default/files/2022-02/SR252.pdf
16 5 percent of unvaccinated adults surveyed said they would leave
(accessed March 29, 2022).
their jobs if their employers required them to get a vaccine or get 21 Eric Boehm, “America’s Ports Need More Robots, but the $1
tested weekly. Considering that the unauthorized Occupational Trillion Infrastructure Bill Won’t Fund Automation,” Reason,
Safety and Health Administration (OSHA) mandate would apply to an November 9, 2021, https://reason.com/2021/11/09/americas-ports-
estimated 84 million workers, this could require employers to fire— need-more-robots-but-the-1-trillion-infrastructure-bill-wont-fund-
and attempt to replace—up to 4.2 million workers. Liz Hamel et al., port-automation/ (accessed March 29, 2022).
“KFF COVID-19 Vaccine Monitor: October 2021,” Kaiser Family 22 “The World Bank and IHS Markit Container Port Performance
Foundation, October 28, 2021, https://www.kff.org/coronavirus- Index 2020 Report,” World Bank Group and IHIS Markit, (2021),
covid-19/poll-finding/kff-covid-19-vaccine-monitor-october-2021/ https://ihsmarkit.com/Info/0521/container-port-performance-index-
(accessed March 29, 2022). 2020.html (accessed December 16, 2021).
17 News release, “Job Openings and Labor Turnover—November 23 Lisa Baertlein, “California Ports, Key to U.S. Supply Chain, Among
2021,” BLS, December 8, 2021, World’s Least Efficient, Ranking Shows,” Reuters, October 20, 2021,
https://www.bls.gov/news.release/archives/jolts_01042022.pdf https://www.reuters.com/world/us/california-ports-key-us-supply-
(accessed March 29, 2022). chain-among-worlds-least-efficient-2021-10-20/ (accessed January
18 NFIB, “Labor Market Challenges Breaks 48-Year Record as Biggest
10, 2022).
Issue Impacting Small Businesses,” November survey through
4
After sitting up to weeks on boats, containers particular, the Merchant Marine Act of 1920,
of goods can wait weeks longer for the select commonly referred to as the Jones Act,
few trucks and truckers that California’s mandates that any goods shipped by water
environmental and labor laws allow into the between two points in the United States must
state, only to be transported to California’s be transported on a U.S.-built, U.S.-flagged
border where the remaining 70 percent of vessel with a crew that is at least 75 percent
trucks in the United States are free to come and American. 25 This law drives up shipping
transfer the goods across the rest of the country. costs 26 on average by 270 percent 27 as this
All this adds time and hassle, backing up the regulation excludes 99.8 percent of the world’s
supply chain further, and raising the costs of shipping capacity from transport between
the goods themselves.24 states. 2829 The sheer cost of interstate water
transport due to the Jones Act often makes it
Labor costs and bottlenecks could increase more affordable to ship goods from Asia than
further if the Teamsters’ Union President between states. For example, in October 2021,
James P. Hoffa convinces the Biden millions of pounds of Alaskan seafood were
Administration to change the definition being blocked from coming into the United
of employee so that businesses cannot hire States via Canada due to the Jones Act.30
independent truckers to transport their goods
but must instead make do with the much What can be done:
smaller supply of expensive unionized Congress and the Biden administration should
truckers. get the federal government out of the way by
cutting red tape, by stepping away from
Long-standing government policies that limit massive tax-and-spending legislation that
how goods can be transported have exacerbated seeks to micromanage the economy, and by
port delays, largely occurring at the adjacent saying “no” to unions and activists who want
Ports of Los Angeles and Long Beach. In to cripple our economy.31
24 Rachel Greszler, “California’s ‘Pro-Worker’ Law Is Killing Jobs Left Service, “A 2011 study by the U.S. Maritime Administration (MARAD)
and Right,” The Daily Signal, January 8, 2020, found that in 2010, the average operating cost of a U.S.-flag ship was
https://www.heritage.org/jobs-and-labor/commentary/californias- 2.7 times greater than a foreign-flag ship, but MARAD estimates that
pro-worker-law-killing-jobs-left-and-right . this cost differential has since increased.”
25 Nicolas Loris, Brian Slattery, and Bryan Riley, “Sink the Jones Act: 28 InfoMaritime, “World Merchant Fleet and Top 15 Shipowning
Restoring America’s Competitive Advantage in Maritime-Related Countries (2021*) Data,” August, 22, 2021,
Industries,” Heritage Foundation Backgrounder No. 2886, May 22, http://infomaritime.eu/index.php/2021/08/22/top-15-shipowning-
2014, https://www.heritage.org/government- countries/ (accessed December 13, 2021).
regulation/report/sink-the-jones-act-restoring-americas-
competitive-advantage-maritime . 29 Colin Grabow, “The Progressive Case for Jones Act Reform,” Cato
26 Federal Reserve Bank of New York, “Report on the Institute, September 7, 2021,
Competitiveness of Puerto Rico’s Economy,” June 29, 2012, https://www.cato.org/study/progressive-case-jones-act-
https://www.newyorkfed.org reform#failed-law (accessed December 10, 2021). The cost of a U.S.-
/medialibrary/media/regional/PuertoRico/report.pdf (accessed built ship is “four to five times more costly than those constructed
December 9, 2021). For example, according to a Federal Reserve abroad,” according to Colin Grabow, policy analyst at the Cato
Bank of New York report, the cost of shipping a 20-foot container Institute, and “the shipyards that build these vessels are so
from the East Coast to Puerto Rico is about double the cost of uncompetitive that few commercial ships are actually built.”
shipping to nearby islands that are not subject to the Jones Act
30 Editorial, “A Jones Act Fish Story, Chapter 2,” Wall Street Journal,
27 U.S. Department of Transportation, Maritime Administration, October 3, 2021, https://www.wsj.com/articles/a-jones-act-fish-
Comparison of U.S. and Foreign-Flag Operating Costs, September story-chapter-two-alaska-shipping-bayside-canada-11633030744
2011, https://www (accessed December 7, 2021).
.maritime.dot.gov/sites/marad.dot.gov/files/docs/resources/3651/c
omparisonofusandforeignflagoperatingcosts.pdf (accessed January 31 Peter St. Onge, “Why Biden’s Infrastructure Bill Will Likely
10, 2022), quoted in John Frittelli, “Shipping Under the Jones Act: Only Worsen Supply Chain Crisis,” The Heritage Foundation,
Legislative and Regulatory Background,” Congressional Research November 17, 2021, https://www.heritage.org/budget-and-
Service Report for Congress, updated November 21, 2019, spending/commentary/why-bidens-infrastructure-bill-will-
https://crsreports.congress.gov/product/pdf/R/R45725 (accessed likely-only-worsen-supply-chain (accessed March 29, 2022).
December 9, 2021). According to the Congressional Research
5
Remove welfare work disincentives
Acknowledge the misguided nature of such as monthly child payments
the COVID-19 restrictions enacted by detached from work. End COVID-19
national, state, and local governments benefits policies that discourage work
against people freely creating, working, by the able-bodied.
shopping, and engaging. Eliminate Section 232 tariffs on steel
Repeal the Jones Act. The Jones Act and aluminum imports. Eliminate
drives up shipping costs, makes it more tariffs on manufactured goods imports
difficult to transport goods that are including cars, trucks, and parts.
important to the food sector, and Eliminate Section 301 tariffs and
impedes access to affordable domestic antidumping and countervailing duties
energy. This is particularly noticeable on chassis so truckers can raise
in states such as California, where very capacity.
limited pipeline infrastructure means
California’s gasoline must be
transported from refineries to demand A full recovery—including a functioning
centers by way of expensive and supply chain-- requires a full reopening across
artificially scarce ships and crews. the world and an unleashing of our fossil fuel
energy resources here at home—a stark
Do not force workers into unions.
contrast to printing more fiat currency,
Enable more flexible contract work by
government borrowing, and government
using a common law basis for
spending programs.
independent contractor status. Abandon
legislation and regulations that restrict
work such as California’s AB5 law and
the similar federal PRO Act.
*******************
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The top five corporate givers provided The Heritage Foundation with 3.0% of its 2017 income. The Heritage
Foundation’s books are audited annually by the national accounting firm of RSM US, LLP.
Members of The Heritage Foundation staff testify as individuals discussing their own independent research. The
views expressed are their own and do not reflect an institutional position for The Heritage Foundation or its board
of trustees.
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