Competition and the Small Business Landscape: Fair Competition and a Level Playing Field (House Small Business Committee hearing, March 1, 2022)

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Transcript of the House Committee on Small Business hearing Competition and the Small Business Landscape: Fair Competition and a Level Playing Field, convened March 1, 2022 during the 117th Congress, Second Session, published as Small Business Committee Document Number 117-046 (GPO 46-930). Chairwoman Nydia Velázquez and Ranking Member Blaine Luetkemeyer delivered opening statements. Witnesses were Dr. Douglas Holtz-Eakin of the American Action Forum, Dr. Diana L. Moss of the American Antitrust Institute, Dr. Carl Shapiro of the University of California, Berkeley, and Barry Lynn of the Open Markets Institute, with appendix submissions from ACT/The App Association, the Center for American Entrepreneurship and the Center for Progressive Reform.

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“Competition and the Small Business Landscape: Fair Competition and a Level Playing Field (House Small Business Committee hearing, March 1, 2022).” Original at www.govinfo.gov. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/competition-and-the-small-business-landscape-fair-competition-and-a-le-49aa59ee61/, SHA-256 5fe2e6ed45d8d7d057b1908cfcec54d7aaf4342d29e43e894bf2705e1d4757b8.

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COMPETITION AND THE SMALL BUSINESS
LANDSCAPE: FAIR COMPETITION AND A LEVEL
PLAYING FIELD

HEARING
BEFORE THE

COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTEENTH CONGRESS
SECOND SESSION

HEARING HELD
MARCH 1, 2022

Small Business Committee Document Number 117–046
Available via the GPO Website: www.govinfo.gov
COMPETITION AND THE SMALL BUSINESS LANDSCAPE: FAIR
COMPETITION AND A LEVEL PLAYING FIELD
COMPETITION AND THE SMALL BUSINESS
LANDSCAPE: FAIR COMPETITION AND A LEVEL
PLAYING FIELD

HEARING
BEFORE THE

COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTEENTH CONGRESS
SECOND SESSION

HEARING HELD
MARCH 1, 2022

Small Business Committee Document Number 117–046
Available via the GPO Website: www.govinfo.gov

U.S. GOVERNMENT PUBLISHING OFFICE
46–930 WASHINGTON : 2022
HOUSE COMMITTEE ON SMALL BUSINESS
NYDIA VELÁZQUEZ, New York, Chairwoman
JARED GOLDEN, Maine
JASON CROW, Colorado
SHARICE DAVIDS, Kansas
KWEISI MFUME, Maryland
DEAN PHILLIPS, Minnesota
MARIE NEWMAN, Illinois
CAROLYN BOURDEAUX, Georgia
TROY CARTER, Louisiana
JUDY CHU, California
DWIGHT EVANS, Pennsylvania
ANTONIO DELGADO, New York
CHRISSY HOULAHAN, Pennsylvania
ANDY KIM, New Jersey
ANGIE CRAIG, Minnesota
BLAINE LUETKEMEYER, Missouri, Ranking Member
ROGER WILLIAMS, Texas
JIM HAGEDORN, Minnesota
PETE STAUBER, Minnesota
DAN MEUSER, Pennsylvania
CLAUDIA TENNEY, New York
ANDREW GARBARINO, New York
YOUNG KIM, California
BETH VAN DUYNE, Texas
BYRON DONALDS, Florida
MARIA SALAZAR, Florida
SCOTT FITZGERALD, Wisconsin

MELISSA JUNG, Majority Staff Director
ELLEN HARRINGTON, Majority Deputy Staff Director
DAVID PLANNING, Staff Director

(II)
CONTENTS
OPENING STATEMENTS
Page
Hon. Nydia Velázquez ............................................................................................. 1
Hon. Blaine Luetkemeyer ....................................................................................... 1

WITNESSES
Dr. Douglas Holtz-Eakin, President, American Action Forum, Washington,
DC .......................................................................................................................... 8
Dr. Diana L. Moss, President, American Antitrust Institute, Washington,
DC .......................................................................................................................... 9
Dr. Carl Shapiro, Distinguished Professor of the Graduate School at the
University of California at Berkeley, University of California, Berkeley,
Berkeley, CA ......................................................................................................... 11
Mr. Barry Lynn, Executive Director, Open Markets Institute, Washington,
DC .......................................................................................................................... 13

APPENDIX
Prepared Statements:
Dr. Douglas Holtz-Eakin, President, American Action Forum, Wash-
ington, DC ..................................................................................................... 36
Dr. Diana L. Moss, President, American Antitrust Institute, Washington,
DC .................................................................................................................. 46
Dr. Carl Shapiro, Distinguished Professor of the Graduate School at
the University of California at Berkeley, University of California,
Berkeley, Berkeley, CA ................................................................................. 52
Mr. Barry Lynn, Executive Director, Open Markets Institute, Wash-
ington, DC ..................................................................................................... 71
Questions for the Record:
None.
Answers for the Record:
None.
Additional Material for the Record:
ACT/The App Association ................................................................................ 92
Center for American Entrepreneurship .......................................................... 99
CPR - Center for Progressive Reform ............................................................. 105
Digitally Driven: 2021 ...................................................................................... 209
Engine ............................................................................................................... 254
Bettina Hein Testimony ................................................................................... 282
NBER Working Paper Series ........................................................................... 288
Public Citizen .................................................................................................... 324
SBE - Small Business & Entrepreneurship Council ..................................... 327
SCL - Society of Composers & Lyricists ......................................................... 331
South Carolina Small Business Chamber of Commerce and American
Sustainable Business Network Statement .................................................. 334

(III)
COMPETITION AND THE SMALL BUSINESS
LANDSCAPE: FAIR COMPETITION AND A
LEVEL PLAYING FIELD

TUESDAY, MARCH 1, 2022

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 and via Zoom, Hon. Nydia
Velázquez [Chairwoman of the Committee] presiding.
Present: Representatives Velázquez, Golden, Davids, Phillips,
Newman, Bourdeaux, Carter, Delgado, Houlahan, Kim of New Jer-
sey, Craig, Luetkemeyer, Williams, Stauber, Meuser, Tenney,
Garbarino, Young Kim of California, Van Duyne, Donalds, and
Fitzgerald.
Chairwoman VELÁZQUEZ. Good morning. I call this hearing to
order.
Without objection, the Chair is authorized to declare a recess at
any time.
Before we get started, I would like to take a moment to recognize
the passing of our colleague, Congressman Jim Hagedorn, the
Ranking Member of the Subcommittee on Underserved, Agricul-
tural, and Rural Business Development. He served on this Com-
mittee beginning in 2019 when he was first elected to Congress and
over the years established himself as a productive Committee
Member and a staunch supporter of small businesses. Even during
his courageous battle with cancer, Mr. Hagedorn remained active
on the Committee and never stopped advocating for the people and
entrepreneurs of southern Minnesota. I respected his commitment
to serving America’s small employers and I was proud to work with
him on several bipartisan initiatives. At this time, my thoughts are
with his wife, family, friends, staff, and everyone else that knew
him. I would like to take a brief moment of silence in his honor.
I know that many on the Committee had the opportunity to work
with and get to know Congressman Hagedorn, so I would like to
recognize them to say a few words. First, I would like to recognize
the Ranking Member, Mr. Luetkemeyer.
Mr. LUETKEMEYER. Thank you, Madam Chair, for your kind
words about our friend and colleague, James Hagedorn.
Jim dedicated his life to public service. He was a strong Chris-
tian and worked tirelessly on behalf of his constituents. As a rep-
resentative from Minnesota’s First District and our Ranking Mem-
ber of the Subcommittee on Underserved, Agricultural, and Rural
(1)
2

Business Development, he was a champion for both the small busi-
ness and agricultural community. In this Committee, Jim led legis-
lation to improve resources for small businesses, advocated for
rural entrepreneurs, and always upheld constitutional values. We
know that his work to uplift small businesses in rural communities
will be remembered for years to come.
Dealing with a long battle with cancer, he never lost his opti-
mism, sense of humor, and diligent work ethic. We will greatly
miss his presence on this Committee and in Congress. His genuine
kindness and uplifting spirit are rare.
In reading the kind words shared about Jim after he passed, it
was said, and I quote, ‘‘It is hard to imagine someone more pas-
sionate about serving the people of southern Minnesota than Jim.’’
He was a great man and patriot, and our thoughts and prayers are
with his family, friends and staff.
Thank you, Madam Chair. I would like to yield now to the gen-
tleman from Minnesota, Mr. Stauber, to share a few words for his
colleague from his home state.
Mr. STAUBER. Well, thank you very much, Ranking Member
Luetkemeyer, and Madam Chair, for those kind words. I think that
Jim gave it all he had and he loved nothing more than serving the
First District of Minnesota. He loved his small farmers and he
loved his small business. And he came to Congress with passion.
He and I came in together, and he came with passion. He came
with integrity. And I think for those of you who do not know, I
think that we had a GOP Small Business Conference led by Rank-
ing Member Luetkemeyer. It was about 2-1/2, maybe 3 months ago.
Jim Hagedorn brought his father there to that morning breakfast.
And do you remember how proud he was to introduce his father,
Tom Hagedorn, a former Member of Congress? And you could just
see father and son, they were just beaming with pride. And Jim
was fighting the cancer for the second time. And having been close
to Jim, I can say he never once complained about what he was
going through. He battled it with courage. He had faith.
Unshakeable faith. And do you all remember just, it was 3 weeks
ago that he passed a bipartisan piece of legislature out of this Com-
mittee. And it was on Zoom. Unfortunately, we could not be here
but this is who he was. And very proud of his home state of Min-
nesota. And I am just proud to have been a colleague of his. I
learned a lot from Jim. His passion. And today, Roger Williams and
I, we made the command decision to put his nameplate up here.
He is with us in spirit today. And I wrote on the paper in front
of his name tag, Madam Chair, ‘‘fiscal responsibility,’’ because Jim
Hagedorn loved his fiscal responsibility and I see my good friend
Mr. Phillips down there. I know he will have some good things to
say, too. But, you know, it is unfortunate that it takes something
like this to bring us together but we can do better in Congress. And
Jim wanted it better. His family, his father, and he gave it all he
had for this country and we are going to miss him deeply. Rest in
peace, Jim Hagedorn.
And I yield back.
Chairwoman VELÁZQUEZ. Thank you, Mr. Stauber. The gen-
tleman yields back.
3

Now I recognize the gentleman from Minnesota, Mr. Phillips, for
a brief statement.
Mr. PHILLIPS. Thank you, Madam Chair. And thank you to my
friend, Pete Stauber, for the wonderful words about Jim.
Just a quick story because it is not one I have told much, but
in 2019, Jim wanted to bring his nephew to the White House
Christmas party. And wanted also to go with his wife, Jennifer
Carnahan. And they needed an extra ticket. So, I volunteered
mine. Little did I know that meant I also had to go with them to
the White House Christmas party that year. So, Jennifer, his wife,
Jim, and I, and Jim’s nephew went to the White House Christmas
party. And it was one of the more memorable evenings of my ten-
ure in Congress to see Jim beaming with pride about bringing his
nephew, his nephew’s extraordinary experience, and just the simple
humanity that my friend Pete just referred to. We are not Demo-
crats and Republicans; we are Americans. Jim was a gentleman.
We did not always agree, of course. He had a wry sense of humor.
He did care about southern Minnesota, this country. He per-
severed. You would never know he was fighting for his life his en-
tire term in Congress. In fact, I think just about a week before he
passed away, he declared his run for 2022.
He will be missed. And I just hope we use his memory as a bless-
ing and as an inspiration to all of us to look beyond our party la-
bels and get good work done and in the spirit of fiscal responsi-
bility, humanity, and decency. May his memory be for a blessing.
Thank you.
Chairwoman VELÁZQUEZ. Thank you, Mr. Phillips. And thank
you for all the kind words. He will be missed.
Now, turning to our hearing, I would like to begin by noting
some important requirements. Standing House and Committee
rules will continue to apply during hybrid proceedings. All Mem-
bers are reminded that they are expected to adhere to these rules,
including decorum.
House regulations require Members to be visible through a video
connection throughout the proceeding, so please keep your cameras
on. Also, please remember to remain muted until you are recog-
nized to minimize background noise.
In the event a Member encounters technical issues that prevent
them from being recognized for their questioning, I will move to the
next available Member of the same party and I will recognize that
Member at the next appropriate time slot provided they have re-
turned to the proceeding.
For those Members physically present in the Committee room
today, in accordance with the attending physicians most recent
guidance, masks are optional and no longer required.
Now let’s get into the hearing.
For generations, achieving the American dream and starting a
business have gone hand in hand. Millions of Americans have uti-
lized entrepreneurship to support their communities and create
better lives for their families.
Business owners may start small, but the goal is almost always
to grow the enterprise, reach more customers, and hire more em-
ployees. As these firms evolve, they build up the American economy
and produce numerous benefits for our society. These entre-
4

preneurs are the bedrock of our economy, accounting for nearly 90
percent of all private-sector employers and generating roughly two-
thirds of all new jobs. However, too often, we take our entrepre-
neurial ecosystem for granted.
The ability of entrepreneurs to start and grow a business is
predicated on the existence of a level playing field between large
corporations and their small peers. Competition is the precondition
that allows small businesses to thrive.
In fact, this idea of competition underpins the entire American
economy. More competition leads to lower prices, higher quality
goods and services, greater variety, and innovation that moves our
country forward.
Unfortunately, longstanding trends indicate that our economy is
becoming less competitive. Today, in over 75 percent of industries,
there is more corporate concentration, which has given large com-
panies more market power than they had 20 years ago. From high-
tech startups to family farms, small firms across nearly every in-
dustry are struggling under the weight of outsized corporate power.
As consolidation has increased, small business creation has suf-
fered. Aside from the uptick in new business registrations from
2020 and 2021, the share of small firms entering the market had
been declining since the early 1980s. In 1982, new firms con-
stituted 38 percent of all businesses but that fell to only 29 percent
in 2018.
The pandemic ignited a wave of small business creation, with
new business applications reaching record highs in 2021. This is
encouraging, but at the same time, we must ask if these businesses
have a fair opportunity to develop without being crushed by their
corporate competitors.
The federal government has a long tradition of creating rules and
regulations that minimize anti-competitive behavior dating back to
the 1800s. One of the primary means of protecting competition is
enforcing antitrust laws. These laws help establish the free market
rules, seeking to root out anti-competitive practices, like mergers
and acquisitions. However, antitrust laws are just one tool at the
government’s disposal. Enforcement of intellectual property, labor,
and consumer protection laws are also critical to rooting out anti-
competitive practices.
So today, I want to survey the current competitive landscape and
discuss what is needed to ensure a level playing field for small
businesses and entrepreneurs. When small businesses have a
chance to compete, they can achieve great things and provide tre-
mendous benefits for our country. That is why it is important to
assess the current environment to see how larger businesses are in
some cases helping to facilitate market competition and in others
tipping the scales against it.
The Biden administration understands this dynamic. Last July,
the president issued an executive order directing government agen-
cies to examine ways to increase competition to benefit consumers,
workers, farmers, and small businesses. The order also established
a White House Competition Council to monitor the rising power of
large corporations in the economy.
5

I hope that this hearing allows us to build off these actions and
discuss more ways we can ensure a handful of dominant players
are not stifling the growth of small businesses.
I would now like to yield to the Ranking Member, Mr. Luetke-
meyer, for his opening statement.
Mr. LUETKEMEYER. Thank you, Madam Chair. And also,
thank you for the opportunity to honor the memory of Mr.
Hagedorn this morning. I would also like to thank you for holding
the hearing today.
As we all know, later this evening, President Biden will deliver
his first State of the Union Address. It has been roughly 400 days
since President Biden has taken office and I think we need to also
take a look at the state of small business. In my view, when we
do, we see it is in a crisis. Small businesses are being crushed by
soaring prices as they face the highest inflation rates in 40 years.
I have heard from contractors that are unable to bid on jobs be-
cause the cost of construction materials continues to skyrocket into
the unknown. Restaurant owners have limited their menus and
shortened their serving hours as the high price of food and labor
challenges their bottom line. And just last month, this Committee
heard from an entrepreneur who was forced to narrow his scope of
business due to the climbing prices at the gas pump.
Next, our job creators need workers. As we pass Help Wanted
signs on the doors across main street, it is clear small businesses
cannot compete with the government to get their employees back
to work. Unprecedented government stimulus payments have led to
10.9 million job openings in this country, and despite historic num-
bers of small business owners raising compensation, nearly half of
small businesses cannot find workers.
Another problem is that of the supply chain disruptions that are
leading to lost revenue. Ninety percent of small businesses have
been affected by supply chain disruptions according to NFIB. As
consumer demand climbs, our nation is plagued by backlogs at the
ports and truck driver shortages. The supply chain bottlenecks
have resulted in the scarcity of key materials, project delays, and
new challenges for business owners to serve their customers.
Also, crime is devasting small businesses. Smash and grab crime
waves are damaging main street storefronts, leaving small busi-
ness owners to pick up the pieces. Looting not only leads to broken
windows and stolen goods, but small businesses have also been
forced to halt operations and even face increases in insurance pre-
miums.
Another problem is that of the regulations that are hamstringing
recovery and progress. With all these headwinds, the last thing
small businesses need is more regulations. According to the Amer-
ican Action Forum, the Biden administration capped off its first
full year in office with more than $200 billion in regulatory costs
and 131 million hours in new annual paperwork.
These challenges placed businesses at a competitive disadvan-
tage as they lack the staff, ability to absorb costs, pricing flexi-
bility, long-term contracts, and purchasing power. Although innova-
tive and nimble, small businesses, entrepreneurs, and startups
often operate on very thin margins.
6

Just as concerning, this administration continues to put small
businesses on the back burner. As Members of the Committee, it
is our job to advocate for small businesses and conduct oversight.
Secretary Yellen continues to ignore the law, this Committee,
and small businesses. She is now over 310 days past the April 26th
deadline and law for her to testify before this Committee. If a small
business owner was late on his legal responsibility, I am confident
the IRS would not exercise this level of leniency and allowances.
This is another example of the administration’s rules for thee but
not for me.
This Committee has been fortunate enough to hear testimony
from SBA Administrator Guzman. However, Members of this Com-
mittee deserve responses to questions submitted for the record 9
months ago and throughout this Congress regarding important pro-
grams that service our small business constituents.
The current economic climate for small businesses in response to
the Biden administration are inexcusable. Main street creates ap-
proximately two-thirds of all new jobs and is key to our nation’s re-
covery from the pandemic. However, the Job Creators Network
Survey found only 7 percent of small businesses have fully recov-
ered from the pandemic. It is clear, endless government spending
in Washington and constantly changing mandates are not working
for small businesses. We must champion pro-growth policies of
lower taxes and deregulatory actions that allow small businesses to
operate independently.
In short, the multitude of challenges facing the nation’s job cre-
ators put them at a competitive disadvantage. The state of the
small business economy must improve. I look forward to hearing
from our witnesses today on how we can restore the small business
economy and decrease barriers to competition for small businesses.
With that, Madam Chair, I yield back.
Chairwoman VELÁZQUEZ. Thank you, Mr. Luetkemeyer. The
gentleman yields back.
I would like to take a moment to explain how this hearing will
proceed. Each witness will have 5 minutes to provide a statement,
and each Committee Member will have 5 minutes for questions.
Please ensure that your microphone is on when you begin speaking
and that you return to mute when finished.
With that, I would like to introduce our witnesses.
Our first witness is Dr. Diana Moss, President of the American
Antitrust Institute. Dr. Moss has an in-depth understanding of
antitrust issues with an expertise in digital technology, electricity,
petroleum, food and agriculture, airlines, telecommunications, and
healthcare. She is also adjunct faculty in the Department of Eco-
nomics at the University of Colorado at Boulder. Thank you for
joining us today, Dr. Moss.
Our next witness is Dr. Carl Shapiro, distinguished professor at
the University of California-Berkeley. Dr. Shapiro has served on
the President’s Council of Economic Advisors and was the Deputy
Assistant Attorney General for Economics at the Antitrust Division
of the U.S. Department of Justice. He holds a Ph.D. in Economics
from MIT and he has written extensively on competition policy and
antitrust economics. We appreciate you joining us today, Dr. Sha-
piro.
7

Our third witness is Mr. Barry Lynn, Executive Director of the
Open Market Institute. Over the past 2 decades, Mr. Lynn has
made significant contributions to our understanding of how monop-
olies threaten democracy, individual liberties, security, and pros-
perity. He has authored three books and written extensively on
antitrust and fair competition. He was previously the Executive
Editor of Global Business Magazine and a correspondent for the
Associated Press.
Thank you, Mr. Lynn, for being here today.
Now, I will yield to the Ranking Member to introduce our final
witness.
Mr. LUETKEMEYER. Thank you, Madam Chair.
Our next witness is Dr. Douglas Holtz-Eakin. Dr. Holtz-Eakin is
the president of the American Action Forum and one of the most
important economic thinkers in our country. He has served on the
Council of Economic Advisors multiple times, first serving as a sen-
ior staff economist from 1989 to 1990, and then again as a chief
economist from 2000 to 2001. Dr. Holtz-Eakin also served as a
sixth director of the Congressional Budget Office. He served in this
nonpartisan capacity from 2003 to 2005. Additionally, Dr. Holtz-
Eakin was appointed to serve as a commissioner of the Financial
Crisis Inquiry Commission in 2009. Dr. Holtz-Eakin, welcome to
the Committee. It is a pleasure to have you here in person this
morning. Given the current economic conditions facing small busi-
nesses, the stakes could not be higher for our nation and we hope
to discuss many of these topics with you today. I am looking for-
ward to this morning’s conversation and hearing from all our wit-
nesses.
And with that, Ms. Madam Chair, I yield back.
Chairwoman VELÁZQUEZ. The gentleman yields back. Thank
you all for joining today.
Dr. Moss, you are recognized for 5 minutes.
Ms. MOSS. Thank you, Chairwoman Velázquez, and Members of
the Committee. It is an honor to be here today to lend the Amer-
ican Antitrust Institute’s perspective to the issue of competition
and——
Chairwoman VELÁZQUEZ. Dr. Moss, you are muted.
Ms. MOSS. Can you hear me? You can hear me? Okay, let me
continue.
My testimony will focus on four important topics that are rel-
evant to today’s hearing. They relate specifically to how high con-
centration and the emergence of dominant firms——
Chairwoman VELÁZQUEZ. Okay, Dr. Moss, let’s go to the next
witness. We cannot hear you well.
Mr. LUETKEMEYER. Dr. Holtz-Eakin, you may be the only one
we get to hear this morning.
Mr. HOLTZ-EAKIN. That is the advantage of being here.
Mr. LUETKEMEYER. That is okay; right?
Chairwoman VELÁZQUEZ. Okay, so we are going to start with
Dr. Holtz-Eakin until we fix the technical difficulty.
You are welcome, sir.
8
STATEMENTS OF DOUGLAS HOLTZ-EAKIN, PRESIDENT, AMER-
ICAN ACTION FORUM; DIANA L. MOSS, PRESIDENT, AMER-
ICAN ANTITRUST INSTITUTE; CARL SHAPIRO, DISTIN-
GUISHED PROFESSOR OF THE GRADUATE SCHOOL AT THE
UNIVERSITY OF CALIFORNIA AT BERKELEY; BARRY LYNN,
EXECUTIVE DIRECTOR, OPEN MARKETS INSTITUTE

STATEMENT OF DOUGLAS HOLTZ-EAKIN
Mr. HOLTZ-EAKIN. Thank you, Chairwoman Velázquez and
Ranking Member Luetkemeyer, Members of the Committee. It is a
privilege to be here today to discuss this important topic. And I will
make a couple of points and then I look forward to answering your
questions.
To begin, I do not need to remind this Committee of the impor-
tance of small businesses in the American economy. A lot of the
discussion, the public discussion today is about big firms, and you
hear a lot about them, but the reality is that small businesses are
the heart of the American economy. There are over 32 million
small businesses. Well over 95 percent of all businesses are small
businesses. They have 60 million employees, which is nearly half
of all employees in the United States. And in 2019, part of the pan-
demic, small businesses created 1.6 million new jobs, which is over
80 percent of the new job creation in that year. They are central
to growth in the U.S. economy. They will be central to the recovery
from the pandemic recession. And they are spread throughout the
economy. I have tabled my written testimony which shows every
sector is populated by small businesses. They are a pervasive phe-
nomenon.
The other important aspect of small businesses is the dynamics.
As the Chairwoman mentioned in her remarks, we have lots of new
startups every year. And indeed, coming out of the pandemic in
2021, we have 5.4 million applications for new businesses. That is
up 53 percent over prior applications before the pandemic. But if
history is any guide, roughly 50 percent of them will fail in the
first 5 years. And that process of entry, growth, sometimes failure,
leads to the fact that in every sector of the economy, small and
large businesses exist side by side. And that is the norm, not the
exception. In the economy as a whole, 62 percent of firms are under
5 employees, 89 are under 20, 99.6 are under 500 employees. So,
there is a lot of small businesses out there. And only a very tiny
fraction, less than 1 percent, are large employers of over 5,000 em-
ployees. And so, the discussion that is dominated by these larger
firms I think is misplaced if we want to understand the best for
the future of the economy.
Now, to my eye, the best single thing this Committee and Con-
gress as a whole can do to promote fair competition is to support
the continued entry of new businesses. To apply the competitive
pressures that you mentioned in your opening statement, Chair-
woman. That is the thing that will discipline large firms the best,
has the least potential for unintended consequences. Good competi-
tive pressures have few of those. Will provide American households
with value for their money, variety and innovation, and is exactly
what the economy needs.
9

Now, if one looks at the National Federation of Independent
Business Surveys of Small Businesses, one of the things that be-
comes real clear is that on a regular basis they complain about the
cost of regulation and it is one of the biggest barriers for small
businesses. And so, one thing to keep an eye on is the increasing
cost of the regulatory state as a great barrier to entry, and thus,
a great protector of large incumbents. And anything that can be
done to keep that regulatory barrier to a minimum would be impor-
tant.
During the 8 years of the Obama administration, that adminis-
tration finalized a major regulation, something that cost more than
$100 million to comply with, at an average rate of 1.1 per day
every day for 8 years. A total self reported—these are their num-
bers—regulatory burden of $890 billion. That is a $100 billion
stealth tax increase every year and I think one of the reasons we
saw diminished entry rates over that period. That growth and reg-
ulatory state stopped for several years. But as the Ranking Mem-
ber mentioned, in the first year of the Biden administration, we
saw over $200 billion of regulatory costs. That is the largest first
year number of any administration we have tracked. I would be
concerned about that.
The second thing is, at this moment, what small businesses are
most concerned about, the number one thing in the surgery is infla-
tion. And the inflation that the United States has has a component
which is due to supply chain difficulties and which many nations
share. We hear this a lot. Europe saw inflation rise about a per-
centage point a quarter during 2021. It went from basically 0 to 4
percent. But the U.S. has a unique inflation problem, a jump that
is the third largest in the post-war history, and it contains not just
those supply chain components but also excessive demand from, in
particular, the American Rescue Plan, a $1.9 trillion stimulus at a
time when the economy is growing at 6.5 percent. History shows
that if you overstimulate an economy that is growing rapidly, you
will create inflation. And we have created a very big inflation prob-
lem in the United States. I expect that it will be difficult to tame.
Current circumstances, the tragic invasion of Ukraine, will exac-
erbate commodity and energy prices that will add to the persist-
ence. Workers are demanding higher wages, and inflation expecta-
tions have gone from 3 to nearly 6 percent in one year. That is the
recipe for more durable inflation that will be much harder to fight.
So, this is an environment that is very tough for small businesses.
Fighting inflation and keeping regulatory burdens low are two im-
portant steps to help in their future. Thank you.
Chairwoman VELÁZQUEZ. Thank you.
Now let’s try this again. Dr. Moss, you are recognized for 5 min-
utes.
STATEMENT OF DIANA L. MOSS
Ms. MOSS. Thank you, Chairwoman Velázquez and Members of
the Committee. It is an honor to be here today to lend the Amer-
ican Antitrust Institute’s perspective to the issue of competition
and small business.
My testimony will focus on four important topics that are rel-
evant to today’s hearing. They relate specifically to how high con-
10

centration and the emergence of dominant firms and oligopolies af-
fect small business and entrepreneurship.
First, small business is an integral part of the U.S. economy. It
accounts for a significant portion of all new jobs and economic ac-
tivity, driving innovative and competitiveness, but there are indica-
tors that small business may be in decline. From 1998 to 2014, the
small business share of GDP fell and the portion of real GDP ac-
counted for why small business slowed relative to large business.
This translates to hundreds of billions of dollars that would oth-
erwise deliver benefits from small business in terms of innovation,
economic development in smaller communities, and injecting com-
petitive discipline and resiliency into our markets.
Second, there is evidence that decades of weak antitrust enforce-
ment has adversely affected the competitive process where small
business is particularly exposed. Economic research identifies the
role of increasing concentration and potentially driving up prices,
slowing rates of firm entry, increasing gaps in wage and wealth in-
equality, and higher returns for only the largest firms. This era
was born of conservative ideology that gave too much weight to the
risk that antitrust enforcement would chill competition and less
weight to the risk that consolidation and anticompetitive conduct
would harm it. This has put competition, our markets, and the
democratic principles that support them at risk. The exercise of
market power harms virtually all market participants. It hurts con-
sumers through higher prices, lower equality, and less innovation.
Producers are squeezed through lower prices paid for their prod-
ucts and services, and smaller businesses are harmed through
higher costs, barriers to market entry, and the threat of retaliation.
Third, horizontal and vertical integration can create and rein-
force high concentration that disrupts the role of small business.
Mergers can increase a dominant firm’s ability and incentive to cut
off smaller rivals’ access to critical inputs or distribution or to en-
gage in predatory behavior. This was a concern for small craft
brewers in the merger of AB InBev and SAB Miller. It is also a
concern in beef processing where Members of the domestic packer
cartel, which is vertically integrated now into cattle supply have in-
centives to force out smaller, independent ranchers. The court also
noted that in the merger of AT&T and Time Warner consolidation
would frustrate innovation from smaller firms with innovative,
over-the-top models for delivering content. And in the FTC’s pend-
ing monopolization case against Facebook, the effect of exclu-
sionary conduct on smaller rivals plays a central role.
Finally, legislators and policymakers should consider the impor-
tance of a public policy approach to competition to promote the role
of small business in the economy. This would tap into multiple
tools in the competition policy toolkit, including stronger antitrust
enforcement and pursuing mergers, cartels, and strategic conduct
that neutralizes smaller rivals, but it also includes antitrust role
in policing the abuse of intellectual property and deceptive prac-
tices that are designed to squeeze out smaller rivals.
However, it is important to recognize that antitrust enforcement
may not focus on certain things that are priorities for small busi-
ness. For example, antitrust is concerned with harm to competition
and the competitive process, not independent competitors. Enforc-
11

ers may challenge acquisitions of smaller rivals who seek to be ac-
quired and maximize their acquisition prices under the venture-
capital backed startup model.
The same is true of noncompete clauses, which may be disfavored
by antitrust enforcement but used by small business to protect
trade secrets.
Finally, some antitrust remedies put small business in a very dif-
ficult position. For example, conduct remedies are enforceable only
if smaller firms that are the target of anticompetitive behavior
complain to enforcers. These firms often fear retaliation from domi-
nant firms and are therefore reluctant to step forward.
These complementarities and tensions highlight the importance
of promoting strong antitrust enforcement to do what it was de-
signed to do, not to task it with solving all problems. Antitrust
should work together with other policies to support and promote
small businesses. These include labor law, intellectual property
law, consumer protection law, procurement practices, and others.
Thank you very much, and I look forward to your questions.
Chairwoman VELÁZQUEZ. Thank you, Dr. Moss.
Now we recognize Dr. Shapiro for 5 minutes.
STATEMENT OF CARL SHAPIRO
Mr. SHAPIRO. Good morning. Thank you for inviting me to tes-
tify in front of you today. I hope to provide you with a unique and
valuable perspective based on my experience as a professor who
has been studying competition policy for over 40 years, as someone
who served twice as a chief economist in the Antitrust Division at
the Department of Justice, and as an economic expert witness who
has testified numerous times in federal court on behalf of the gov-
ernment in important antitrust cases.
I would like to emphasize three main points. First, I encourage
this Committee to reaffirm that the goal of the antitrust laws is to
promote and protect competition throughout the American econ-
omy. This will benefit small businesses but applies throughout the
entire economy.
Second, I offer specific recommendations for how Congress can
reinvigorate antitrust enforcement, correcting errors made by the
courts in recent decades.
Third, if this Committee would like to further assist small busi-
nesses that are facing powerful competition from larger firms,
many policies other than antitrust are available and should be
used.
There is an active debate today about what the goals of antitrust
should be. My answer to that is simple. Antitrust should be about
promoting and protecting competition. Full stop. We have learned
over many years that competition delivers enormous benefits to our
society, fueling economic growth, innovation, and rising standards
of living.
However, competition is messy. Competition can be rough and
tumble, and competition can feel deeply unfair when one loses. We
all say we like competition, but who really welcomes a formidable
rival in any domain, be it love, sports, or business?
Nonetheless, promoting competition does not mean shielding any
businesses from the buffing winds of legitimate rivalry. Not large
12

firms with outsized political influence, nor small firms struggling
to compete against larger ones with lower costs.
My written testimony describes a positive program for strength-
ening our antitrust laws to better promote and protect competition
in the 21st century economy. The basic idea is to shift the law by
establishing a number of rebuttable presumptions in favor of anti-
trust plaintiffs. My written testimony has a number of examples,
and my attached paper has more, but here are two. If a dominant
firm requires its customers to deal with it exclusively, that pre-
sumptively violates the Sherman Act. Or, if a dominant firm ac-
quires a significant actual or potential rival, that presumptive vio-
lates the Clayton Act.
The changes I recommend would help protect small businesses
from predatory and exclusionary conduct by dominant firms. The
changes I recommend also would help protect small businesses
from anticompetitive mergers. I have been in favor of strength-
ening merger enforcement for at least 25 years. As an example, I
testified a few years ago on behalf of Steves Doors, a 150-year-old
family firm based in San Antonio, Texas, that manufactures doors
used in homes. Steves Doors successfully challenged a merger be-
tween two of the leading suppliers of door skins, a critical input
into the manufacturer of doors. That merger threatened to drive
Steves Doors and other small door manufacturers out of business.
Antitrust law also could be modernized to give small businesses
more latitude to cooperate in order to compete more effectively
against larger firms. In particular, Congress could establish a pre-
sumption that when a group of small businesses cooperate to better
serve their customers by replicating what their larger rivals can do
internally, that cooperation does not violate the Sherman Act.
Finally, let me address those whose calls for stronger antitrust
enforcement are motivated by concerns about the political power of
large corporations. I very much share those concerns. Very much.
We urgently need campaign finance reform, including greater
transparency regarding money in politics to control the excessive
political power of large corporations, not to mention billionaires.
But asking antitrust to solve these political problems is very like-
ly to be counterproductive. The antitrust enforcement agencies are
ill-suited to tackle issues beyond competition. Indeed, the core mis-
sion of antitrust, to promote competition, could easily be under-
mined if we ask antitrust to solve problems unrelated to competi-
tion. For example, asking the Department of Justice to block merg-
ers that enhance political power as distinct from economic power
would necessarily politicize antitrust enforcement, which strikes
me as extremely dangerous and unwise.
Fortunately, antitrust is just one arrow in the quiver of available
policies to assist small businesses. For example, in the meat pack-
ing industry, the Biden administration is pursuing a number of
policies to expand independent processing capacity and to combat
abuses by large meat packers and processors, in part by updating
rules under the 1921 Packers and Stockyard Act. As another exam-
ple, financial service regulators could adjust their rules in favor of
community banks if preserving more community banks is judged to
be in the public interest.
Thank you very much. I look forward to taking your questions.
13

Chairwoman VELÁZQUEZ. Thank you, Dr. Shapiro.
Now we recognize Mr. Lynn for 5 minutes.
STATEMENT OF BARRY LYNN
Mr. LYNN. Chairwoman Velázquez, Ranking Member Luetke-
meyer, thank you for inviting me to speak. I am Barry Lynn and
I direct the Open Markets Institute.
Today, I am going to make three simple points. First, independ-
ence is essential to American democracy. The declaration is not
simply about independence of nation from nation. It was also about
the independence of person from person. And from the first, Ameri-
cans understood such independence required the liberty to work
one’s own land, ideas, labor, and business free from interference by
people with more power.
This vision was based on the idea that only someone fully inde-
pendent can be trusted in political debate and that, to be fully in
control of one’s own mind and one’s own voice requires being in
control of one’s own means.
Second, antimonopoly is the foundation of independent business.
From the first, the American people fought to make laws and rules
to protect the property of the individual, including independent
businesses, from all predation. This meant engineering open mar-
kets where every individual is free to succeed based on their own
efforts. This meant regulating corporations to ensure they are used
to serve people, not to exploit them. We see this in the Constitution
with its system of checks and balances. We see it in the Northwest
Ordinance, America’s first law, that blueprint for the society Amer-
icans wanted to build. That careful plan to outlaw slavery. To di-
vide land into family-sized plots. To ban predatory corporations. To
provide free education to all. The result was the American system
of liberty.
After the Civil War, the network technologies of railroad and
telegraph upset traditional balances and forced Americans to make
new laws to regulate private power—the Interstate Congress Act,
the Sherman Antitrust Act. Just as was true of the Declaration and
Constitution, these laws aim to protect the independence of small
business. As Senator Sherman put it, defending the bill that bears
his name, ‘‘It is the right of every man to work, labor, and produce
in any lawful vocation. This is industrial liberty and lies at the
foundation of the equality of all rights and privileges.’’
Buttressed in the 20th century by the Clayton Act, FTC Act,
Glass-Steagall, Robinson-Patman, and other acts of Congress, this
updated system of liberty worked.
In 1980, the United States was home to many giant industrial
corporations—IBM, Boeing, General Electric, General Motors—that
made America the most powerful nation on earth. Yet, 2 centuries
after the founding, most retail, farming, services, light manufac-
turing and publishing remained family enterprises. And this liberty
to be one’s own boss was now claimed by every Member of our soci-
ety no matter the color of their skin, gender, religion, or sexual ori-
entation.
Third, the consumer welfare ideology has been a catastrophe for
American democracy. In 1981, President Reagan introduced a new
political economic goal. No longer was the need to protect liberty
14

and democracy. The aim now was to deliver more stuff. To this
end, his administration reinterpreted the laws Americans had put
in place to protect independent business. They twisted the laws to
promote efficiency instead. Until President Biden, every adminis-
tration since Reagan has followed this lead.
The result was social and political revolution. The expropriation
of the businesses of millions of families, the erection of futile con-
trol over the family businesses that remain. Today, under the rule
of Amazon, Google, Facebook, Uber, millions of Americans most en-
ergetic and creative citizens are forced day after day to borrow
from the company bank, to buy from the company store, to pay tax
to the company treasury, to heed the company’s command. In
America today, there is no fair competition. There is no level play-
ing field.
In 1913, President Wilson defined tyranny as, ‘‘the conduct of our
affairs and the shaping of our legislation in the interest of special
bodies of capital and those who organize their use.’’ By that defini-
tion, the American people today live under a tyranny of corporate
monopoly, and America’s entrepreneurs are among the first to feel
the boot.
This hearing demonstrates that Congress has awakened to the
crisis. We look forward to working with you all to rebuild American
entrepreneurship and American democracy.
Chairwoman VELÁZQUEZ. Thank you, Mr. Lynn.
I will begin by recognizing myself for 5 minutes.
Dr. Moss, how do we ensure that small firms can compete in to-
day’s economy given the massive consumer demand for quick and
simple delivery of products and services from large, dominant
firms?
Ms. MOSS. Thank you for the question, Chairwoman.
It is really a central question to public policy surrounding the
promotion of small business and the U.S. economy. And I would as-
sert, as I do in my testimony and in my remarks, that a strong sys-
tem of antitrust enforcement is very, very important to that.
We have a lot of small business. I talk to small businesses every
day in their calls to the American Antitrust Institute, their strug-
gles, the restraints that they face, the intimidation and the harass-
ment they face by larger firms, including and protecting small busi-
ness is part of our economy, not only increases diversity and our
supply chains; it increases their stability and their resiliency.
The COVID-19 pandemic very much is evidence of the failure of
that to have occurred. So strong antitrust enforcement, but also
other policy tools that can support and assist small business are
extremely important.
Chairwoman VELÁZQUEZ. Thank you.
Ms. MOSS. To think about and to work in complementary ways.
Chairwoman VELÁZQUEZ. Thank you. Amazon holds about 50
percent or more of the U.S. online retail market. Due to Amazon’s
market power, are there other firms out there that can compete
with Amazon? How can we create a level playing field for these
other firms?
Ms. MOSS. So I think the question of Amazon and their
ecommerce platform is really central to the debates that we are
having over digital technology. I would take a slightly different
15

view of Amazon and my hope was that this view would have been
injected far earlier into the public debate about Amazon. It is not
so much about dominance of the online market, which does contain
myriad actors. It is really about dominance in a very important
part of the supply chain which is the logistics part of the supply
chain. So, a monopoly over picking, packing, sorting, and tracking,
if you will, has given Amazon an ability and an incentive to use
its dominance there to engage in conduct that forecloses small ri-
vals. My hope would be that private enforcement would step for-
ward to think about framing cases and that public enforcers would
do as well.
Chairwoman VELÁZQUEZ. Dr. Moss, can you explain to us how
Amazon’s self-preferencing practices have hurt small businesses?
Ms. MOSS. Sure. So going to the logistics part of the supply
chain, again, the use of the Amazon Prime system absolutely cre-
ates incentives to preference Amazon’s affiliated businesses, their
preferred businesses in terms of whether they show up in the con-
sumers’ buy box at the end of a transaction. Absolutely. Amazon’s
incentives to replicate successful products and services on its
website are another way for Amazon to see enhanced incentives to
disadvantaged smaller businesses. This part of the supply chain is
a very specific market and really deserves to be looked at very,
very carefully so that Amazon cannot leverage its monopoly to the
disadvantage of small businesses. Again, that hinges on strong
antitrust enforcement.
Chairwoman VELÁZQUEZ. Thank you, Dr. Moss.
We have seen increased levels of concentration across markets
with small and medium-sized businesses sometimes being subject
to discriminatory terms and conditions.
Mr. Lynn, is the Robinson-Patman Act equipped to deal with the
reality of today’s economy? Or does Congress need to take steps to
strengthen the law to protect small employers?
Mr. LYNN. Chairwoman Velázquez, that is a very important
question and the answer is no. Right now, the Robinson-Patman
Act is not prepared, is not fit for purpose, for protecting America’s
independent businesses as it was originally created. The problem
is that it has been severely eroded by court decisions over the
years. It has also been severely eroded by sort of a lack of use by
the recent administrations.
It is important to understand that there are many other ways to
achieve the same ends, and we need to be using these other ap-
proaches to achieving these same ends, you know, a much more ag-
gressive use of antidiscrimination law in every aspect, in every
way. But we can, and we should be working to sort of restore the
original purpose of the Robinson-Patman and the original power of
the Robinson-Patman Act.
Chairwoman VELÁZQUEZ. Thank you, Mr. Lynn.
My time has expired.
Now I recognize the gentleman, Mr. Luetkemeyer, Ranking
Member, for 5 minutes.
Mr. LUETKEMEYER. Thank you, Madam Chair.
Dr. Holtz-Eakin, in your written testimony you have a statement
that says, ‘‘To diagnose the roots of inflation is to identify the ap-
propriate policy response.’’ That is a pretty salient comment. If we
16

could identify the roots of the problem, we can fix the problem be-
cause we should be able to find solutions for that.
So along that line, you know, we had the discussion before with
regards to what makes up the problem of inflation within this
country right now. We have talked about energy before. Regula-
tions, I would argue. The money supply problem as you mentioned
in your testimony, and also the supply chain/workforce problem. I
think that is the four biggest ones. I would assume you agree with
that, or is there another one with that or are those the four
biggies?
Mr. HOLTZ-EAKIN. The excessive stimulus early in 2021 as
well.
Mr. LUETKEMEYER. Okay. Well, I thought that was money
supply. That is where I would throw that underneath there. Too
much money in the system. Okay.
I would like for you to quantify that if you would. We have
talked about this before and you thought energy could make up as
much as 40 to 50 percent of the inflation that is being caused
today. Could you break down the percentage you think of inflation
is caused by energy, regulations, access to money supply and sup-
ply chain workforce problems? I realize it is a ballpark but it would
give us an idea of the immensity of the problem in each one of
these categories.
Mr. HOLTZ-EAKIN. So there is a crude way to do it which is in
my testimony, is to imagine that the globe suffers from common en-
ergy problems, common pandemic-induced workforce problems,
common supply chain interruptions. And so, take European con-
sumer price inflation. It goes up at a percentage point a quarter
through 2021. That is about 0 to 4 percent. The U.S., the moment
the American Rescue Plan is passed in the face of also very, very
accommodative monetary policy, gets not a percentage point in-
crease but three. Almost three. Three times bigger. So that is the
excessive money supply stimulus part of it compared to the rest.
And then I would say you have roughly equal amounts in the
workforce and energy components. So that is going to give you
something that looks like 2 percentage points or so of inflation.
And there is the baseline regulatory inflexibility which comes with
the accumulation of regulatory costs. So, I think you really can do
some crude breakdowns. But the real issue is to go in the other di-
rection. Stop creating inflationary pressures. So do not do any more
stimulus. Do not do any more monetary accommodation. Be careful
with the regulatory burden. And allow greater supply of energy.
That is the best that Congress can think about.
Mr. LUETKEMEYER. Okay. Thank you.
In your testimony and written testimony, you also talk about
some different, like the Administrative Procedures Act, the Regu-
latory Flexibility Act, things that Congress should be looking at to
minimize the impact on small businesses, as well as being able to
help small businesses as we watchdog some of the stuff that we are
doing. So as a leader on the Republican side here of the Small
Business Committee, this got my attention because this is some-
thing we at Congress should be looking at and doing, and I really
appreciate you highlighting that. So, I want to kind of go through
17

that a little bit but I am running out of time. Hopefully, my col-
leagues will follow up on this.
The one I want to start out with is Regulatory Flexibility Act, be-
cause that technically is what, you know, the agency is supposed
to look at the rules and regulations and their impact on small busi-
ness and it does not seem like they are doing that or we are not
doing it. Or is it too weak a law? Do we need to enforce it? Do we
need to do something different? What would you suggest we do to
make that particular act actually work?
Mr. HOLTZ-EAKIN. So first, let me just stipulate, because it is
often misunderstood. I am not opposed to all regulation. There is
much necessary regulation. But it should be done as well as pos-
sible. It should be done best practice, least cost. And the Regu-
latory Flexibility Act is an attempt to keep the costs from being too
onerous, particularly on small businesses. It is not working. So, you
can try other methods.
The Trump administration essentially stopped the growth of reg-
ulatory costs by imposing regulatory budgets on the agencies. They
gave them a number. Said you cannot do any more than that. The
numbers were all zero and negative and had a very big impact. So,
Congress could statutorily impose constraints on the regulatory
state and say, okay, we need these regulations. Let’s find savings
elsewhere to offset those costs, keep the burden low. That way you
are constantly cleaning out the regulatory overhead. That is vir-
tuous. You have an attempt to do regs at least cost. There is no
particular incentive to do regs at least cost now. And you will have
less interference in the economy and still get the regulatory out-
comes that you want. Congress can have a strong statutory re-
quirement that they do that.
Mr. LUETKEMEYER. My time is just about up here. I would
just like to have a general comment here with regards to some of
the other folks testifying this morning were talking about basically
having a level playing field for small businesses to be able to com-
pete on. That the big guys have got an advantage. So, I guess the
question becomes, and I hope we have some follow-up with regards
to my colleagues here this morning, are the rules and regulations
skewed for the big guys? Do we need to change that? Have they
got too much? Not enough? Are the rules and regulations the cost
of compliance as Dr. Holtz-Eakin has talked about here in his testi-
mony of $200 billion in 1 year, is that so oppressive that it is tak-
ing away the ability of small businesses to compete? I think those
are things we need to continue to discuss.
And with that, Madam Chair, I yield back.
Chairwoman VELÁZQUEZ. The gentleman yields back.
Now we recognize the gentlelady from Kansas, Chairwoman of
the Subcommittee on Economic Growth, Tax, and Capital Access,
Ms. Davids, for 5 minutes.
Ms. DAVIDS. Good morning. Well, first of all, thank you, Chair-
woman Velázquez and Ranking Member Luetkemeyer for holding
the hearing that we are having today.
I represent the Kansas Third District and entrepreneurship is
based into the DNA of our community. And we are definitely proud
of our small business community. I think what we are hearing now
demonstrates that it is undeniable that the economic environment
18

for small businesses has gotten more difficult. And that was exac-
erbated by the pandemic.
Small business’s share of the GDP has been falling steadily since
the 1980s and we have certainly seen increased rates of consolida-
tion and concentration across various industries. And with small
businesses being an essential piece of our economy, I am glad that
we are getting the time to discuss how our current antitrust laws
need to be operating to ensure the competitiveness of our economy.
I was hoping to ask my first question here to Dr. Moss. We have
seen this concentration in something like three-quarters of the U.S.
industries over the past 20 years, so I was hoping you could take
a moment to explain what that means both for consumers and then
for the small businesses that are trying to get into these various
industries.
Ms. MOSS. Thank you for the question, Congresswoman. I am
very happy to answer that.
There have been many studies of rising concentration at the sec-
toral level, at the industry level. The challenge for antitrust en-
forcement is to do the research, the empirical research that shows
that increases in concentration have resulted in what we call anti-
trust markets, which are much smaller and narrower for the pur-
poses of evaluating antitrust claims. More generally speaking, we
have seen increases in concentration across the board. In airlines,
we now have a merger on deck that will increase concentration
even more. We have seen it in healthcare, pharmacy benefit man-
agers. We have seen it in hospital systems. We see it in food and
agriculture. We have essentially cartels of packers and chicken
growers and processors. I am sorry, not chicken growers but chick-
en processors. That is a real problem. These are all very consumer-
facing products and services. So, consumers see it through higher
prices, lower quality.
But in these bottleneck supply chains where we see the mid-
stream portion really dominated by just a few firms, market power
is exercised going up the supply chain. So, they depress prices to
producers and a lot of these producers are small businesses. So,
they are squeezed on the top end by getting lower prices for their
products. And consumers are squeezed on the back end by paying
higher prices. These supply chains are very unstable and they lack
diversity that small business is really important historically has
served a very important function in promoting. That must be re-
stored through some combination of policy tools to protect this real-
ly vital element of our economy.
Ms. DAVIDS. Thank you, Dr. Moss.
Can you, and maybe this is not a good way to ask this, but can
you give us like a sense of the industries? You kind of did this a
little bit with airlines and then a couple of other things, but can
you give us a sense of the maybe most impactful concentrations
that we have seen?
Ms. MOSS. Yeah. So, I mean, there is a number of examples we
could cite to. Let’s go to medical supplies and medical devices, for
example. Very famous antitrust case, Becton Dickinson—I am
sorry, Retractable Technologies, Inc. v. Becton Dickinson. Small
market player. Came to market with a really superior technology,
a retractable syringe, up against a dominant player. And really, in
19

litigation for years. Forced out of the market. Forced to assume a
much smaller market share through an innovative product than
they would have if there had been more competition in that mar-
ket. That has a direct effect on small business, and erecting bar-
riers to entry and incentives for other small businesses to form. We
are also seeing it, as I said, in other parts of the healthcare supply
chain. Take agricultural biotechnology. There are a lot of digital
farming startups that are out there. Digital farming is the wave of
the future in agriculture. Again, very consumer facing. Unfortu-
nately, a lot of this stuff flies below the antitrust radar, and part
of it is a result of this fear factor that smaller firms really are
afraid to step forward to complain to enforcers and so the problem
goes unnoticed.
Ms. DAVIDS. Thank you for that.
I do have a bill, The Supplies Act that might help us with some
of that and I would love to talk to you more about that offline.
Thank you, Madam Chair, and I yield back.
Chairwoman VELÁZQUEZ. The gentlelady yields back.
Now we recognize the vice Ranking Member of the Committee,
Mr. Williams from Texas for 5 minutes.
Mr. WILLIAMS. Thank you, Madam Chairwoman and Ranking
Member Luetkemeyer.
Main street businesses are the backbone of our communities, and
I am proud to be a main street small business owner for 51 years.
And I can tell you this, after hearing some of this testimony, profits
are good. The government does not create competition; the private
sector does. That is just a basic thing that we have. And from rural
to urban America, small businesses provide critical competition are
an essential source of jobs as we have already heard. Unfortu-
nately, small business owners continue to be burdened by excessive
federal regulations and that is really your competition is the fed-
eral government, and often lack the resources to comply with the
latest rules. And big government is not the answer; big government
is the problem.
So, Dr. Holtz-Eakin, the American Action Forum recently re-
ported that the last year alone, the Biden administration addressed
the small business owners nearly $201 billion in new regulatory
costs and I have also seen numbers of, what, it is 130 some odd
million manhours to comply with that. And so, while that figure is
astonishing, it further draws attention to how main street Amer-
ican could not possibly be equipped or staffed to closely track these
changes to regulatory compliance.
So, my question is, can you compare these high regulatory costs
for any other recent time period in our history? And how are small
business owners, like me, of convenience stores or gas stations,
supposed to be able to handle compliance costs that come with
these more heavy burdened regulations?
Mr. HOLTZ-EAKIN. So thank you for the question. First, I want
to just say that these are not our numbers. We keep track of all
the rulemaking in the federal government and the agencies report
their estimate of the costs it will take the private sector to comply
with the rulemaking and that is the burden cost and the hours of
paperwork that are generated by that rulemaking. We simply keep
track of them by agency in total, by legislation. And the $200 bil-
20

lion in burden costs is the largest single number for the first year
of any administration going back to 2005, which is where our data
begin. As I mentioned in my opening remarks, the Obama adminis-
tration was an extraordinary explosion of regulatory costs, over
$100 billion a year for 8 straight years. This would exceed that.
And I have deep concerns that a big part of the sluggish recovery
from the Great Recession and the reduced entry of new firms in
that period was due to the regulatory burdens that we were seeing
coming out of Washington.
Mr. WILLIAMS. Well, and we know it costs jobs. Small busi-
nesses cannot take that so they cut jobs. And banks are a good ex-
ample hiring more compliance officers and loan officers filters down
to small business. So, when we talk to small business owners in
Texas where I am from, they are most concerned about how they
will have to alter their business operations to manage soaring
prices and compensate for inflation that has reached record highs
since the early 1980s. And the National Federation of Independent
Business reported that more than 60 percent of small business
owners across America were forced to raise prices to keep up with
the Biden administration’s policies that are driving inflation and
supply chain. And there are a lot of businesses quite frankly as we
all know cannot raise their prices. They are stuck even more. So,
all while the Biden administration Democrats continue to dismiss
this inflation is transitory, one of the famous statements of all
time, turning their back on any real solutions to right the ship. So
again, my question is, as an economist, you know the negative im-
pacts inflation has on small businesses. What steps should the
Biden administration and Congress be taking to get this growing
inflation under control?
Mr. HOLTZ-EAKIN. Well, step number one is no more harm.
And so no more stimulus-style legislation. In particular, the Build
Back Better Act had all the structure of upfront spending and
backloaded pay-fors that a stimulus bill would have so that would
be a misstep at this point. So do not do that. Number two, do not
complicate the mission of the Federal Reserve. It has mandates for
full employment and price stability. That is a hard enough job in
this environment. They do not need mandates for inequality or for
climate change or other things that the administration might de-
sire but that should not be their job. Number three, add no new
costs. So, the regulatory burden is the thing most directly control-
lable. Keep those regulatory burdens to a minimum certainly, this
year and next year when inflation will continue to persist. I think
there is little doubt about that. And I do not know how much of
a quick U-turn we can do on energy but global energy prices are
going to be stressed for the foreseeable future due to the recovery
around the globe but now the invasion of Ukraine by Russia. So
those are all very important aspects of the inflation problem. Right
now, commodity inflation is running at about 20 percent. It will be
higher going forward. And that is a supply chain pressure that is
going to go straight through to consumer prices. It will not dimin-
ish overnight.
Mr. WILLIAMS. And as a small business owner myself, one that
deals in inventory is auto industry, it is not going to change in the
21

next several years. Bottom line is maybe we need to cut taxes
again.
Thank you for being here today, and I yield my time back.
Chairwoman VELÁZQUEZ. The gentleman yields back.
Now we recognize the gentlelady from Illinois, Ms. Newman, for
5 minutes.
Ms. NEWMAN. Thank you, Madam Chair, and thank you, Rank-
ing Member for having this great meeting and hearing from our
guests. Thank you to our guests this morning.
I, first, Madam Chair, I am going to, on behalf of the Authors
Guild and Society of Composers and Lyricists, I would like to sub-
mit their following testimony for the record. One of the things that
they are looking to find solutions for is leveling the playing field
through independent artists and entertainment companies. So,
these independent workers in the creative economy often go unseen
as larger companies monetize their work. So please accept testi-
mony on their behalf.
Chairwoman VELÁZQUEZ. Without objection, so ordered.
Ms. NEWMAN. Thank you. And then I have a couple of ques-
tions. I will go to Dr. Holtz-Eakin first.
So, I am just curious, can you share the formula by which you
use the 2 percent of the inflation attribution, how you cane to that
regarding the American Rescue Plan?
Mr. HOLTZ-EAKIN. My estimate, based on looking at the dif-
ference between European consumer price inflation and U.S. con-
sumer price inflation over the course of 2020-2021, sorry. From
January of 2021 to this January, consumer price inflation went
from 1.4 percent to 7.5 percent in the United States. It went from
0 to 4 in Europe. So, it is about half.
Ms. NEWMAN. Okay. I am not sure I agree with it but thank
you for explaining.
So, my next question is for Dr. Moss. We heard from Dr. Holtz-
Eakin that reduction in interest rate hikes are a good way to curb
inflation. I am just curious to get another thought on that. As an
economist, can you respond to the impact these strategies might
have on small firms, small businesses, and consumers? Thank you.
Ms. MOSS. Thank you for the question. Certainly, inflationary
pressures are topline news at this stage in the pandemic. I think
treating inflation deserves very careful attention. There are numer-
ous policy tools to deal with inflation. There is monetary policy.
There is fiscal policy. Exchange rates, reserve requirements at the
Fed. There is a big toolkit involved here.
As far as small business is concerned, certainly higher interest
rates would be directly felt by small business as they seek to take
loans, to expand, or to build out their businesses. Debt require-
ments if they are to be used as a tool would also affect small busi-
ness. So, when you come up with sort of a macroeconomic policy
approach to dealing with inflation, I think you have to get to the
genuine sources of the problem. But given the importance of small
business, I think it is really important to figure out how small busi-
nesses are going to be affected by various types of policy tools and
what they need most at this stage in this contraction and coming
out of the pandemic, which will have lasting effects for many years
to come. It will not be over at the end of the pandemic itself.
22

Ms. NEWMAN. Thank you, Dr. Moss. I have one more question
to follow up for you. So, the Biden administration has taken a lot
of really strong steps to increase competition. Can you describe the
benefits these steps will have in lowering prices and creating a
level playing field for small business?
Ms. MOSS. Sure. So, the executive order that the Biden adminis-
tration put out really takes a whole of government approach to
looking at competition problems. It recognizes the very different
tools and prongs of competition policy more generally and that in-
cludes sector regulation. It includes labor law, intellectual property
issues, consumer protection issues. And it recognizes antitrust en-
forcement. Very much a toolkit kind of approach. And to increase
coordination and cooperation across federal agencies as they at-
tempt to really build a strong competition policy.
This is fundamentally the right approach, I believe. Imple-
menting it, of course, the devil is in the details. We have seen sev-
eral initiatives come out. USDA, for example, is doing quite a bit
of work on that. Department of Transportation on airline alliances
and the like. So, increasing coordination and cooperation to develop
coherent competition policy, but most important, having these tools
work together. Antitrust and sector regulation, for example, should
work together in a complementary way to bootstrap each other, not
to create conflicts where small business or the competitive process
is sort of in the cross-hairs of tensions.
Ms. NEWMAN. Well, thank you for the answer. I certainly agree
with the complementary and supplementary working together idea
very much so. So, thank you, and I yield back.
Chairwoman VELÁZQUEZ. The gentlelady yields back.
Now we recognize the gentleman from Minnesota, Mr. Stauber,
for 5 minutes.
Mr. STAUBER. Thank you, Madam Chair, and Ranking Member
Luetkemeyer, for holding this. And thank you to all the witnesses.
I appreciate that.
Dr. Holtz-Eakin, you had just mentioned that the Obama admin-
istration brought in $100 billion of punishing regulatory burdens
on small businesses for 8 straight years. Is that what I heard you
say?
Mr. HOLTZ-EAKIN. That is correct.
Mr. STAUBER. And in your testimony, in the first year, in the
very first year of this administration, in a pandemic, this adminis-
tration brought $201 billion of punishing regulations on small busi-
ness; is that what you said?
Mr. HOLTZ-EAKIN. That is correct.
Mr. STAUBER. You know, I think we need more people that
have signed the front of the checks in small businesses.
Mr. Williams, I have only been a small business owner for 31
years, so you have got 20 years on me. This is unbelievable. You
know, my colleagues on the other side of the isle, they said they
want to break up big companies and advocate for small businesses.
Two hundred billion dollars in year 1 of this administration.
We always talk about small businesses are the engine of our
economy. They are the mom and pop shops that struggle every day.
And to hear some of the witnesses talk about, well, these regula-
tions are good. They do this or do that. I think government ought
23

to get out of the way and let small businesses flourish under those
prudent regulations that you talked about, Doctor. Reasonable pru-
dent, not redundant burdensome that punishes those small busi-
ness owners that just want to live the American dream and employ
people. This is really frustrating for me to hear this.
To that end, Dr. Holtz-Eakin, in the America Competes Act, how
are those provisions? How are they furthering harming small busi-
nesses? Can you give us a couple of examples?
Mr. HOLTZ-EAKIN. The America Competes is in many ways,
well, it is, industrial policy. The stated intent is to improve the
U.S. competitive position, especially versus China. And there are
places where there are broad public goods and rules and basic re-
search and innovation that makes sense. But there is some $50 bil-
lion in there to build semiconductor plants which the private sector
can build semiconductor plants, and if they are not in China, they
do not have to be in the U.S. They have to be somewhere so they
have diversification of the supply chain. I have no idea why they
would move money that was in the Senate bill targeted towards
the National Science Foundation and give it to the Department of
Commerce to fix supply chains. The Department of Commerce does
not have a supply chain. Every American business has their own
supply chain. They have every incentive to fix it. And so, I have
no idea what that will be other than tilting the playing field to
those who have access to the Department of Commerce to get a
subsidy. And so, I am deeply concerned about those kinds of provi-
sions.
Mr. STAUBER. Do those kinds of provisions help or harm small
businesses?
Mr. HOLTZ-EAKIN. They are not helpful. Small businesses may
not yet have started and they are going to now have to enter
against someone who has got some help from the Department of
Commerce. It is not leveling the playing field.
Mr. STAUBER. So that is getting involved in competing?
Mr. HOLTZ-EAKIN. Yeah.
Mr. STAUBER. You know, to my colleagues on both sides of the
aisle on this Committee, we have a responsibility to make sure
small businesses across America succeed. My guess is if this keeps
up, we are not only going to have $200 billion of punishing burden-
some regulations from this administration in year 1; the same
thing is going to happen in year 2. How can we do this to our small
businesses? They are the engine of our economy. It is the American
dream.
When my brothers and I opened up our small sporting goods
store in June 1990 and dished out what we had in the bank to open
up a small business, and to have this type of regulation, we have
an opportunity, Madam Chair, Ranking Member Luetkemeyer, on
the Small Business Committee, to make sure that our small busi-
nesses flourish in this country. We need these regulations, the re-
duction in the regulations, not adding $200 billion a year. This is
very frustrating.
And this is a challenge for this Committee. Madam Chair, Rank-
ing Member Luetkemeyer, this is a challenge to stop those burden-
some regulations.
Madam Chair, I yield back.
24

Chairwoman VELÁZQUEZ. The gentleman’s time is expired. I
invite the gentleman to support legislation when it comes to cut-
ting taxes where small businesses are not an afterthought like it
happened before.
Now we recognize the gentleman from Louisiana, Mr. Carter for
5 minutes.
Mr. CARTER. Madam Chair and Ranking Member, thank you
very much for the opportunity.
My question is for Mr. Lynn. Mr. Lynn, we know that the presi-
dent signed an executive order calling for a government-wide ap-
proach to increased competition for small businesses. Can you
share with me what that really means? Because as you can hear
the frustration from some of our Members, we continue to hear the
pain of our small businesses that we know are the backbone of our
economy. Yet, we continue to see small businesses die on the vine,
if you will, because they do not have access to resources or because
they oftentimes as subs have to wait so long to be paid by a major-
ity firm. These are things that we have talked about for many
years and it is frustrating that here we are in 2022 and we con-
tinue to hear the same kind of concerns from small businesses that
we all acknowledge are critically important to our economy. In
plain language, tell me, what are we doing and what can we do?
Mr. LYNN. That is a great question, Mr. Congressman. The
Biden administration has taken a radically new approach to com-
petition policy compared to any presidency over the last 40 years.
This includes two things. It includes putting much stronger enforc-
ers into the Federal Trade Commission and into the Department
of Justice Antitrust Division. And it includes, as you mentioned,
taking this whole government approach to competition policy. To-
gether what we see is a radical change in how we are going to en-
force the law through the agencies and it is also an approach in
which we are going to use every part of the administration to
achieve specific ends. Every business person across America right
now, every small business, every independent business, including
those who own car dealerships should appreciate what the Biden
administration is doing to protect you from predatory actors such
as Google, Facebook, and Amazon. And also, to create a level play-
ing field in which your ability to sort of use your own tools, your
own skills, your own minds to provide better services and goods
will be rewarded.
Mr. CARTER. But with all due respect, a part of the problem is
small businesses often do not have the requisite tools. They do not
always have the requisite skills. Small businesses often need a lit-
tle bit more help to level the playing field and create opportunity.
What are we doing? What can we do to level that playing field?
And with no disrespect to the car dealerships, I would like to dig
a little bit deeper and talk about the truly small businesses. Those
who do not have consultants, lawyers, and accountants to help
them wade through regulations. What are we doing for the mom-
pop, the small drug store, the small sandwich shop or restaurant
or barber or beauty shop, people that are struggling but they em-
ploy people and they collect sales taxes for police and fire but they
need help?
25

Mr. LYNN. Yeah, that is a great question as well. Traditionally,
in the United States, we have provided, one, a fair field so that
people can compete without predation. But we have also made sure
that people have the capital they need. That they have the skills
that they need. This is a role that government has fulfilled for 200
years in this country. This is not something new. It is not some-
thing that The New Deal created. It goes back to the founding of
this country. And when people talk about the idea that people cre-
ate competition, yeah, they do. But what they do, they create com-
petition by using government to make it possible for them to suc-
ceed. And so, as we go forward, we should be looking at new ways
to provide the kinds of funding that small businesses, truly small
businesses, the kind of credit they need to succeed.
Mr. CARTER. I am sorry to cut you off. I have got about 45 sec-
onds and I want you to, if you could, zero in on access to capital.
Because many small businesses fail because they do not have
enough capital to sustain themselves when they are starting a new
business. Small businesses fail because they do not have that tech-
nical expertise and capital. Is there a program and how are you ad-
dressing those issues for small businesses?
Mr. LYNN. It has been a disaster over the last 40 years. This
country used to be set up to provide capital to anyone who really
needed it. We had community banks. We regulated our commercial
banks. We ensured that if you needed capital, you could find it
someplace and get it at a reasonable price. You did not have to pay
predatory prices. So, we have a number of ways in which we can
actually deal with this right now but we have got to get studying
what we did for 200 years in this country and not what we did for
the last 40 years because that has been choking off credit to our
needy small businesses.
Chairwoman VELÁZQUEZ. The gentleman’s time has expired.
Now we recognize——
Mr. CARTER. Madam Chair, thank you. I yield.
Chairwoman VELÁZQUEZ. We recognize the gentleman from
Pennsylvania, Ranking Member of the Subcommittee on Economic
Growth, Tax, and Capital Access, Mr. Meuser for 5 minutes.
Mr. MEUSER. Thank you, Madam Chair. Thank you, too, Rank-
ing Member Luetkemeyer.
It is certainly a somber day here in the Small Business Com-
mittee on a number of fronts, but seeing our friend’s nameplate
and him not behind it is very, very sad. Jim told it like it was. Tell-
ing the truth was always the only option because our country’s na-
tional security and economy is truly at stake. So, let’s get into this.
In my district, you know, all this idea that the biggest problem
small business has is big business, in my district, with the excep-
tion of big tech, and I was in business for 25 years and I served
as revenue secretary for the Commonwealth for 4 years, so I saw
all the taxable incomes and who was doing what and so forth. With
the exception of big tech these days and online retailers, and defi-
nitely Amazon, big government is not the problem. Or excuse me,
big business is not the problem for small business. It is big govern-
ment.
So, let’s unpack this a little bit. Let’s talk about it. Dr. Holtz-
Eakin, so in the BBB, our friends who passed it, thought it was a
26

wonderful idea to tack on a 3.8 percent surtax on investment in-
come for pass-throughs. Was that good for small business?
Mr. HOLTZ-EAKIN. No. And before I expand on that I will just
point out that if you look at the NFIB Monthly Survey of Small
Businesses, that never is competing with large business mentioned
as their biggest problem. That is mentioned by 1 percent of people.
Mr. MEUSER. Precisely. Precisely. And my me search reflects
your research throughout all of my district and I visit my small
businesses regularly.
Let’s try to do a little bit of——
Mr. HOLTZ-EAKIN. So the surtax——
Mr. MEUSER. Go ahead.
Mr. HOLTZ-EAKIN.—just remember that more than half of all
business income is taxed on individual income tax returns. It is not
taxed on C corporations.
Mr. MEUSER. Precisely.
Mr. HOLTZ-EAKIN. So that is where you are going to hit small
businesses.
Mr. MEUSER. Right. And under 400K in income. It is hurting
their taxable income for a small business and then some.
Would making the Trump tax cuts permanent be good for small
business?
Mr. HOLTZ-EAKIN. Yes. The uncertainty is a bad idea.
Mr. MEUSER. Predictability, keeping it where it is, they know
where they are going to be the following year. Because as we well
know, a tax is nothing more than added cost. And if we think it
is a great idea to make cost of our businesses, large and small,
higher than it is worldwide, well, then you know, somebody is
going to have to dispute gravity for me because it simply does not
work that way. And, of course, profits lead to more investment in
your company, lead to higher taxable incomes, which in fact, lead
to higher revenues in the coffers of our Treasury.
So are heavier regulations good for small business?
Mr. HOLTZ-EAKIN. No.
Mr. MEUSER. Dr. Holtz-Eakin?
Mr. HOLTZ-EAKIN. No. I mean, there are——
Mr. MEUSER. Two hundred 10 billion dollars added this year,
that is not something that small business is benefitting by?
Mr. HOLTZ-EAKIN. So there are benefits to regulation. They
had better be bigger than $210 billion. So, I have some questions
about that.
Mr. MEUSER. Very often government’s intent is a far cry from
what the end results are because it is ridiculous to think that the
regulations of 14 months ago somehow are so much better today at
a cost of $210 billion that are helping somebody, it is not helping
anyone but a bunch of bureaucrats work on forcing it.
So is government spending, heavy government spending, trillions
of dollars in government spending a cause or an inhibitor of infla-
tion?
Mr. HOLTZ-EAKIN. It is one of the causes of the U.S.——
Mr. MEUSER. One of the causes of inflation.
Is inflation good for small business?
Mr. HOLTZ-EAKIN. No.
27

Mr. MEUSER. No. Inflation is not good for small business. It
robs small business and it leads to higher interest rates. Are higher
interest rates good for small business?
Mr. HOLTZ-EAKIN. No.
Mr. MEUSER. Okay. We are the Small Business Committee. We
are supposed to be advocates for small business. These policies are
not exactly advocating for small business, would you not agree?
Mr. HOLTZ-EAKIN. They are not good for the business commu-
nity as a whole.
Mr. MEUSER. No. So how about workforce? Is government com-
peting, providing benefits to workforce and making workforce less
available? Is that good for small business?
Mr. HOLTZ-EAKIN. We have a very big workforce problem in
the United States right now and it is in part due to the policies
of the CARES Act and some successors. It is also due to a failure
to have an effective public health mission against the pandemic
which has harmed labor supply in both the number of people and
how much they can work.
Mr. MEUSER. Big government meddling. No question.
Is higher gasoline prices good for small business?
Mr. HOLTZ-EAKIN. No.
Mr. MEUSER. Spikes in gasoline prices is an assault on our do-
mestic energy industry, which in my district contains many, many
small businesses, suppliers, providers. Is that assault that is taking
place on our domestic energy, let alone the national security issues,
is that good for small business?
Mr. HOLTZ-EAKIN. That was one of the success stories of the
post-Great Recession recovery was——
Mr. MEUSER. Absolutely. Particularly in Pennsylvania.
Mr. HOLTZ-EAKIN. Yeah.
Mr. MEUSER. So I think we should let small business be the
most competitive in the world and let large business be competitive
as well and focus on the things that we actually can control which
are government regulations and taxation.
I yield back.
Chairwoman VELÁZQUEZ. The gentleman yields back.
Now we recognize the gentleman from New York, Mr. Garbarino,
for 5 minutes.
Mr. GARBARINO. Thank you, Madam Chair.
I have a couple of questions for Dr. Holtz-Eakin.
You just heard a couple of my colleagues mention $210 billion,
$200 billion in regulatory costs. But I do not think people under-
stand, you know, what that means in only a year. Can you explain?
Can you just go a little further into, you know, we have seen $210
billion in additional regulatory costs. Can you talk about what we
have seen in previous administrations and why that $210 billion is
so big?
Mr. HOLTZ-EAKIN. So what we do is we keep track of all the
regulatory costs as reported by the agencies themselves, and we
simply total them by agency. And in this case, for the federal gov-
ernment as a whole. We do not have compete records of the Bush
administration, so I cannot comment on that. The Obama adminis-
tration, as I mentioned, had about $895 billion of regulatory costs
over the 8 years of its time in office. The Trump adminsitratino
28

had, I forget the exact number, a modest double-digit increase,
under $20 billion over its 4 years. And now the Biden administra-
tion, we have 1 year of data. It is $200 billion in the first year.
Mr. GARBARINO. What was the Obama number again over 8
years?
Mr. HOLTZ-EAKIN. Eight hundred ninety-five billion dollars in
new costs.
Mr. GARBARINO. So $895 billion in new costs over 8 years.
Mr. HOLTZ-EAKIN. Yes.
Mr. GARBARINO. That is a little over 100. Twenty billion over
4 years for President Trump.
Mr. HOLTZ-EAKIN. Yes.
Mr. GARBARINO. And we are seeing $200 billion in 1 year alone
under this current administration in regulatory costs. Prior to com-
ing to Congress, I was a private practice attorney in New York
which had high regulatory costs but my colleagues from New York
are on this call also so they can also comment on the regulations
coming out of New York. And we saw businesses leaving the state
in droves because of these regulatory costs. I just know, I mean,
can you talk about what these $200 billion in 1 year, what that will
do to small businesses?
Mr. HOLTZ-EAKIN. We see some examples historically of what
high regulatory costs do. So, for example, the Sarbanes-Oxley Law
was intended to control big businesses and their accounting prac-
tices in the aftermath of the Enron and WorldCom scandals. That
was a legitimate concern and public purpose. But it is extremely
costly to comply with Sarbanes-Oxley. And as a result, we have
seen the number of initial public offerings cut in half since the
2000s. That means that small businesses starting up are less likely
to be able to pay off their venture investors by going public. They
are going to have to be bought by somebody or have some other
method of getting the money. So that hurts small business
startups. There is no question about it. And it is from the regu-
latory costs of compliance with a well-intended public law.
Mr. GARBARINO. I appreciate those answers, Doctor.
When I talk to small businesses in my district, it is not just
about high regulations, more regulations, and how tough it is to do
business. But I am really starting to hear a lot about inflation. And
my question specifically for you is, are the inflation levels that we
are seeing here in the U.S. unique or is this something that is
being experienced all over the world?
Mr. HOLTZ-EAKIN. There has been a rise in inflation globally
but the levels in the United States and the increase in 2021 of in-
flation is unique to the United States. So, the headline number is
7.5 percent for consumer price inflation. If you look at the bundle
of food, energy, and shelter, which is 50 percent of the typical fam-
ily’s budget, that went from 1.4 to 8.1 percent during the course of
2021. So, it is the sharpest rise on the globe.
Mr. GARBARINO. So what does that do to us as a country in
competitiveness?
Mr. HOLTZ-EAKIN. Inflation is bad news from every dimension.
And this will hurt our ability to compete with other countries.
Mr. GARBARINO. Two hundred and 10 billion dollars in regula-
tion costs. Highest inflation compared to other countries in 1 year.
29

I think we are definitely going the wrong way, especially in how
we can help small business.
I appreciate your testimony today, your answering the questions.
Thank you very much for being here.
And Chairwoman, I yield back.
Chairwoman VELÁZQUEZ. The gentleman yields back.
Now we recognize the gentlelady from California, Ranking Mem-
ber of the Subcommittee on Innovation, Entrepreneurship, and
Workforce Development, Ms. Young Kim, for 5 minutes.
Ms. YOUNG KIM. Can you hear me? All right.
So, I want to thank our Chair and Ranking Member. And I really
want to thank you so much for opening our hearing today in honor
of our colleague, Congressman Jim Hagedorn. I thought that was
very special to give a special tribute for him. I also want to thank
our witnesses for joining us.
I think we can all agree that we all want fair competition and
a level playing field for our small businesses which are the back-
bone of our economy.
The reality is that most small businesses in my district are not
raising the antitrust laws being discussed here. They are com-
plaining about the labor shortages, higher prices, and increasing
red tape to establish and expand their small businesses. While con-
solidation of businesses can destruct markets in certain industries,
the Committee should be more focused on how the federal govern-
ment can negatively impact competition and small business success
through more regulations, higher taxes, and ill-timed fiscal expan-
sionary policies.
So let me ask this question to Mr. Holtz-Eakin. On February 10,
the Department of Labor reported that the CPI registered a 40-
year high of 7.5 percent when measured year over year. So, can you
describe how legislation that increases spending like the American
Rescue Plan has contributed to higher costs for small businesses
and families?
Mr. HOLTZ-EAKIN. Certainly. What we saw was an economy
that in the first quarter of 2021 grew at 6.5 percent. That was how
fast it was growing when the American Rescue Plan was passed.
As you know, trillions of dollars were sent out in checks to state
and local governments and other government spending. That pro-
duced for goods and services is broadly defined. And in the classic
case of too much money chasing too few goods, we have seen prices
rise beginning then and throughout 2021. This got exacerbated by
some worldwide conditions, a pandemic. Also, worldwide increases
in commodity prices and energy prices so that we now have pro-
ducer price inflation that is running about 10 percent that leads to
even further consumer price inflation in the future.
Ms. YOUNG KIM. Do you think we lack more coordination in
our fiscal and monetary policies?
Mr. HOLTZ-EAKIN. That was an example of extremely loose fis-
cal and monetary policies simultaneously. Those generally produce
more demand. Demand was not the problem in the pandemic. The
problem was the virus and the inability of people to go out and con-
duct their economic affairs. Income rose throughout the pandemic.
Wealth rose throughout the pandemic. There was no need for such
excessive stimulus to demand which was already well in place.
30

Ms. YOUNG KIM. Thank you.
You know, we have discussed the decline of entrepreneurship in
the last several decades. And in your written testimony, you stated
between 1975 and 2011, an average of 183 new banks were char-
tered annually. However, between 2012 and 2019, that number
dropped to just four. Only four banks were chartered in 7 years.
So clearly, regulations are choking capital and credit access for en-
trepreneurs with less banks being chartered. Can you elaborate on
how regulatory barriers are curtaining access to capital for small
businesses and entrepreneurs?
Mr. HOLTZ-EAKIN. I think this example almost speaks for
itself. The best discipline you can have for large banks that fail to
serve different aspects of communities of color or geographic areas
is to have new entrants who are willing to do that business to
make money. But, the regulatory apparatus that came with Dodd-
Frank is extremely expensive. Hard for a new bank to set up and
comply. And we have seen very little entry as a result. So, we are
not getting the discipline that comes from new entrants providing
innovative services and products to underserved markets. And that
is the most consistent route to success in the U.S.
Ms. YOUNG KIM. In the remaining time, I want to ask you for
your opinion. What are the long-term repercussions for our econ-
omy for families and small businesses if the inflation continues to
outpace nominal wages and income?
Mr. HOLTZ-EAKIN. We have seen long periods of inflation in
the past in the United States. In the late 1960s, the government
ran the economy very, very hot for 24 straight quarters and we got
sustained high inflation in the 1970s and into the early 1980s. It
was taken out of the economy only by a deep and very painful re-
cession. And so, what you see in that period is sustained high infla-
tion, sustained high unemployment, poor productivity growth, a
failure to grow adequately as a nation, standards of living not ris-
ing. And the ‘‘solution’’ being a deep recession that harms everyone
in America. That is not a future we want.
Chairwoman VELÁZQUEZ. Time has expired.
Now we recognize the gentlelady from Texas, Ms. Van Duyne, for
5 minutes.
Ms. VAN DUYNE. Thank you very much, Chairwoman
Velázquez and Ranking Member Luetkemeyer.
If the last 2 years have taught us anything through a global pan-
demic, supply chain troubles, and a rough labor market, our small
businesses are the first to feel the dire consequences of economic
difficulty. Yet, as large companies have tapped into their vast re-
sources to ease supply chain issues and quickly have raised prices
to counter high labor costs, our smallest employers do not have
those options. As I have said many times before, our entrepreneurs
do not want more handouts from the federal government. What
they want is a fair opportunity to start and grow their businesses
without government interference, something this administration
has failed to provide.
Recently, the Small Business Administrator joined me for a
roundtable with small business owners from across the district and
they all repeatedly brought up the same issue. Their margins are
being destroyed by the skyrocketing energy costs directly caused by
31

this administration’s push to rely on foreign oil supplies, even
amidst a global conflict. There is no doubt that our small busi-
nesses are continuing to struggle to compete with big companies.
We need to stop the frivolous spending and antigrowth policies cre-
ated by this administration.
I appreciate all the witnesses being with us today and I apolo-
gize. You have been under the wire a lot today. You have answered
the majority of questions. The first time that you and I met I was
really impressed when I asked the question about regulatory re-
form, regulations, the cost of regulations for all of us, but especially
for small businesses. You gave me some very direct answers and
solutions to those questions. Can you kind of explain what you ex-
plained to me at that time?
Mr. HOLTZ-EAKIN. Certainly. It is certainly within the purview
of the Congress to place more constraints on the regulatory state
in the rulemaking activities in every agency. The Regulatory Flexi-
bility Act was intended to make sure that unnecessary regulations
and excessively burdensome regulations went away. That does not
happen. There is no genuine lookback to answer the question, if
this regulation was once a good idea, is it still a good idea? So, you
can do that. You can——
Ms. VAN DUYNE. Would you do that by like setting like a sun-
set provision on regulations?
Mr. HOLTZ-EAKIN. HHS did a preliminary rulemaking on a
sunset where everyone of its own rules had to be examined. And
if it was deemed to be unnecessary or not working it was going to
go away. That just got repealed by the Biden administration. That
is the only attempt to do that that I have seen in recent history.
So, you could put that in as a statutory requirement and enforce
it. You could put regulatory budgets in. That was the Trump ad-
ministration administrative approach. You could make that a stat-
utory approach.
Ms. VAN DUYNE. What was that?
Mr. HOLTZ-EAKIN. Regulatory budgets. At the Department of
Interior, you get a number. You could do that.
Ms. VAN DUYNE. But expand on what that means.
Mr. HOLTZ-EAKIN. What it says is that if you are an agency
and you have a regulatory budget of say $20 billion and you have
a rulemaking that is going to cost $40 billion, you have to find a
way to reduce other regulatory burdens by $20 billion because you
have a budget for increased costs to be imposed on the private sec-
tor. That gives all sorts of good incentives. You do the original rule-
making as cheaply as possible. Forty has to be the cheapest pos-
sible way to get that done. And then you are also always reviewing
old regulations to see if you do not need them so you can find your
$20 billion dollars in savers. And the stabs are permanently
incentivized to keep track of what the old ones are doing and what
they cost so that you can have a saver in hand when you need to
pay for something. It is the same phenomenon we see with pay-for
regulations in the Congress for budgetary purposes. You have to
have a way to go pay for a piece of legislation. You have to know
what other pieces will provide those savings. So those are good in-
centives to instill into agencies. They do not exist at all right now.
There are no incentives now.
32

Ms. VAN DUYNE. That is an easy statutory fix.
Mr. HOLTZ-EAKIN. It is an easy thing to pass and then you will
have to build the culture to enforce it.
Ms. VAN DUYNE. But actually having built it in, look, I used
to work for HUD. I understand how difficult it is within the bowels
of our bureaucratic beast, how difficult it is. But if that is the regu-
lations that they have to follow, if that is the budgetary, it is a lot
easier to get things done, I guess to create the sense of policies that
we are talking about.
Mr. HOLTZ-EAKIN. Heavily anecdotal evidence from talking
with permanent staff and agencies during the Trump administra-
tion, but they certainly began to get the game which is, okay, we
are not going to have any flexibility so we need to have ways to
save money with rulemakings. Here is a couple we will put in our
back pocket for when the top floor calls down and says we need
something.
Ms. VAN DUYNE. And that would save money not only for the
federal government, but then it would also relieve a lot of the regu-
latory red tape and burdens on small businesses.
Mr. HOLTZ-EAKIN. These costs are not federal budget cuts.
These are costs imposed exclusively on the private sector and that
is where the savings will accrue.
Ms. VAN DUYNE. Excellent. Thank you.
Chairwoman VELÁZQUEZ. The gentlelady’s time has expired.
Now we recognize the gentlelady from New York, Ms. Tenney, for
5 minutes.
Ms. TENNEY. Thank you, Madam Chairwoman.
I, too, would like to join with my colleagues in recognizing and
remembering Jim Hagedorn, Representative, who was just a great
friend, great Member of the Committee, and my condolences to
him, to his family, and to his friends. It is tough in the Committee
without him.
But I wanted to say thanks again to the Chairwoman and the
Ranking Member for holding this meeting today. And thanks to our
witnesses for appearing before the Committee. This hearing will
hopefully play an important role in the lively debate that we have
across the nation and the future of antitrust in the United States.
In recent decades, increased corporate concentration, lagging dy-
namism, and lacking competitiveness prior to the COVID-19 pan-
demic, historically low rates of firm formation, and death point to
the need for improvement. As the House Small Business Com-
mittee, we have an important role to play in investigating and
highlighting the impacts of market concentration and antitrust
measures of America’s firms. In the Antitrust Law, a one dimen-
sional emphasis on consumer prices or the consumer welfare stand-
ard is most certainly come at the cost of the interests of American
producers and our national industry capacity. The key to getting
the antitrust question right is to strike the proper balance between
prioritizing low-cost goods for consumers, fair competition for U.S.
producers, and the need for a self-sufficient national economy that
can sustain stable, well-paying jobs, and provide for the common
welfare during times of crisis.
In addition, the consumer welfare standard is not always the
most applicable lens through which to evaluate antitrust matters.
33

Take for example the digital economy where products are often free
to users, such as the case of meta platforms known as Facebook.
Another example is Amazon which offers cheap goods to American
households supported by subsidies from its web services for which
the government is a major customer. In this example, American
producers, including many small businesses like my own, are un-
dercut by inexpensive, sometimes dangerous, counterfeit foreign
goods while consumers receive lower prices. In this example it is
obviously insufficient to look only at what consumers pay.
Small businesses are not only important because they are small
but because they are often flexible and have great growth potential.
In addition, they have connections to their communities and work-
ers in ways that larger firms cannot replicate. We saw many exam-
ples during the pandemic. Policymakers must therefore be cautious
of taking actions and passing laws that will make it more difficult
for these small businesses to grow, hire more people, and benefit
from the economies of scale, which can make work higher paying
and contribute to technological growth.
On the other hand, lax enforcement of antitrust laws are in ac-
tion in the face of serious market concentration also harms the
ability of these smaller firms to form and grow. Antitrust measures
can be a powerful tool. They must also be used judiciously and ap-
plied in ways that are not subjective. Instead, I would like to focus
more on dynamism, innovation, and the ability to let small busi-
nesses grow. As a small business owner, I know that many of my
customers that rely on their newspaper were negatively impacted
by the onslaught of Walmart and big box stores.
So, I want to just take my first question and direct it to Dr.
Holtz-Eakin. And some of the Members on the Committee have
said that the market concentration has been the primary reason for
rising costs and the rates if inflation. And I think my colleagues
and I witnessed some of the things the Democrats have taken ad-
vantage of during the pandemic last year and the year before is to
flood the economy with endless cash. To me, this seems to be far
more likely an explanation for the crushing inflation Americans are
experiencing. Is that something that you would agree with, Mr.
Holtz-Eakin? Or Dr. Holtz-Eakin? I feel like it is the huge cash
that is actually creating a lot of this problem as the primary rea-
son. What would you say to that?
Mr. HOLTZ-EAKIN. I would agree with you, Congresswoman.
On the issue of somehow concentration being the source of econ-
omy-wide inflation, there simply are no data that show across the
board increases in concentration that would be a plausible expla-
nation for the sharp rising prices across every sector and across all
geography. So, the cash is a much more plausible candidate.
Ms. VAN DUYNE. What do you think that we should do in Con-
gress to deal with this potential problem with anti-competitiveness
and concentration? What would you do? What do you think we
could do now other than, obviously to me, lowering regulations, less
taxes would help our small business but what else do you rec-
ommend that we can do as a Small Business Committee?
Mr. HOLTZ-EAKIN. Well, I would be happy to give you a longer
answer for the record since time has expired.
Ms. VAN DUYNE. Okay.
34

Mr. HOLTZ-EAKIN. But certainly, I think the focus should be on
ease of entry and the dynamism you focused on.
Ms. VAN DUYNE. Thank you very much.
I yield back.
Chairwoman VELÁZQUEZ. The gentlelady yields back.
Now we recognize the gentleman from Wisconsin, Mr. Fitzgerald,
for 5 minutes.
Mr. FITZGERALD. Thank you, Madam Chair. And I also wanted
to thank you for your recognition of Congressman Hagedorn. Great
guy and we are all going to miss him very, very much.
A question for Mr. Eakin. There has been a lot of discussion here
today and we have spoken in the past about this assumption that
big is bad and that the concentration is inherently harmful to com-
petition. However, I think kind of the jury is out. And as we move
through a new phase of America’s post-COVID economy, it is prob-
ably settled that economics of scale yield efficiencies; right? And I
am just wondering what your thoughts are on that. And I know it
is a broad question but would love to hear your take on that.
Mr. HOLTZ-EAKIN. Well, thank you. Certainly, I do not think
anyone should somehow say vigorous enforcement of antitrust is a
bad idea. It is a good idea and there are reasons for this. But ask-
ing the right question and taking a disciplined approach to the
analysis is very important. And I think the consumer welfare
standard has provided tremendous discipline to the analysis of
competition policy. It does not matter if you are big or small. The
question is whether you are good or bad for Americans. And so,
concentrating the analysis to make sure that you follow all the way
through to the American household and the consumer is a very im-
portant part of this. The reason the United States has relied on
private enterprise in competitive markets to deliver goods and serv-
ices is that it has been the most effective way and has led us to
be the largest, strongest economy on this globe. Having an anti-
trust approach that mirrors that is a perfectly sensible idea and I
think we should continue to do that.
I am concerned about some of these other approaches. There are
these pieces of legislation, in the Senate, for example, that target
platforms and app stores and they single out those bigger than
$600 billion. Why is that the right number? Why is that big and
$500 billion is not big? What happens when you do that? Does it
help small businesses? Well, if it inhibits their ability to acquire
small businesses who cannot do an IPO and where that sale is how
they pay off their venture investors, they are going to hurt small
business. They are going to hurt that environment. I think there
are some legitimate concerns about the privacy and national secu-
rity implications of those proposed legislation. There is a Chamber
of Commerce report on it.
So, I guess what I am concerned about is the unintended con-
sequences of taking an ad hoc approach to doing competition pol-
icy—writing legislation, targeting a few American firms, some
which you can name by name, and people do. Let’s have a set of
principles that make some sense and will support the capacity of
every firm to succeed if it does good business.
Mr. FITZGERALD. Very good. And if I could just follow that up
really quickly. I was also a Member of the Judiciary Committee.
35

What we have seen is that the FTC and to some extent even DOJ,
I mean, these mergers have kind of ground to a halt. And that is
kind of a strange message that is being sent to the private sector
and I would also say that as a result of that, many of these small
businesses that oftentimes find themselves in a position where they
have to liquidate after first struggling for some period of time, the
best way is to be acquired or some type of merger with a smaller
entity and at the end of the day it is kind of a win-win for every-
body. And I do not think we should ever take that off the table.
I am wondering if you had a comment on that.
Mr. HOLTZ-EAKIN. Well, for me, I have never felt that it is the
government’s job to dictate business models. Firms can acquire new
divisions. They can do capital investments, build new divisions.
They can configure themselves as they see fit. What matters is
their conduct in the marketplace and whether it is harmful to the
American household. And that should be the focus, not how busi-
nesses choose to configure themselves and making decisions in ad-
vance about what is and is not an appropriate business model. I
do not think the government should be in that business.
Mr. FITZGERALD. Thank you, Madam Chair. And I will yield
back.
Chairwoman VELÁZQUEZ. The gentleman yields back.
Thank you again to all of our witnesses for your testimony today.
Creating an environment where American small businesses can
compete and thrive is one of the Committee’s top priorities. So, we
must ask ourselves, what type of economy do we want to foster for
American entrepreneurs? One where small businesses have the
chance to develop and reach their full potential. I think we can all
agree we want to create a nurturing environment for our nation’s
small firms. As always, I look forward to working with my col-
leagues on both sides of the aisle to pursue policies that help level
the playing field for American small businesses.
Without objection, Members have 5 legislative days to submit
statements and supporting materials for the record.
If there is no further business to come before the Committee,
without objection, we are adjourned. Thank you all.
[Whereupon, at 11:56 a.m., the committee was adjourned.]
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