Entrepreneurship in the New Economy (House Small Business Committee hearing, November 3, 2021)
Summary
Transcript of the House Committee on Small Business hearing Entrepreneurship in the New Economy, on November 3, 2021, published as Small Business Committee Document Number 117–039. Chairwoman Nydia Velázquez and Ranking Member Blaine Luetkemeyer gave opening statements. Witnesses were Ellie Diop of Eliza Revella Consulting Services in Los Angeles, Andrew Fogaty of the 36Squared Business Incubator in Chicago, Stephanie E. DeVane of the National Urban League, and Raymond Keating of the Small Business & Entrepreneurship Council. The appendix adds an Airbnb report and material from the Kauffman Foundation. The committee met at 10:03 a.m.
Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used
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“Entrepreneurship in the New Economy (House Small Business Committee hearing, November 3, 2021).”
Original at www.govinfo.gov. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/entrepreneurship-in-the-new-economy-house-small-business-committee-hea-721034d6b7/
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ENTREPRENEURSHIP IN THE NEW ECONOMY
HEARING
BEFORE THE
COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTEENTH CONGRESS
FIRST SESSION
HEARING HELD
NOVEMBER 3, 2021
Small Business Committee Document Number 117–039
Available via the GPO Website: www.govinfo.gov
U.S. GOVERNMENT PUBLISHING OFFICE
45–954 WASHINGTON : 2022
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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)
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CONTENTS
OPENING STATEMENTS
Page
Hon. Nydia Velázquez ............................................................................................. 1
Hon. Blaine Luetkemeyer ....................................................................................... 3
WITNESSES
Ms. Ellie Diop, Chief Executive Officer, Eliza Revella Consulting Services,
Los Angeles, CA ................................................................................................... 6
Mr. Andrew Fogaty, Executive Director, 36Squared Business Incubator, Chi-
cago, IL .................................................................................................................. 8
Ms. Stephanie E. DeVane, Vice President of Entrepreneurship & Business
Development, National Urban League, New York, NY .................................... 9
Mr. Raymond Keating, Chief Economist, Small Business & Entrepreneurship
Council (SBE Council), Vienna, VA .................................................................... 11
APPENDIX
Prepared Statements:
Ms. Ellie Diop, Chief Executive Officer, Eliza Revella Consulting Services,
Los Angeles, CA ............................................................................................ 39
Mr. Andrew Fogaty, Executive Director, 36Squared Business Incubator,
Chicago, IL .................................................................................................... 42
Ms. Stephanie E. DeVane, Vice President of Entrepreneurship & Busi-
ness Development, National Urban League, New York, NY ..................... 44
Mr. Raymond Keating, Chief Economist, Small Business & Entrepreneur-
ship Council (SBE Council), Vienna, VA .................................................... 50
Questions for the Record:
None.
Answers for the Record:
None.
Additional Material for the Record:
Airbnb Report ................................................................................................... 68
Kauffman Foundation ...................................................................................... 94
(III)
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ENTREPRENEURSHIP IN THE NEW ECONOMY
WEDNESDAY, NOVEMBER 3, 2021
HOUSE OF REPRESENTATIVES,
COMMITTEE ON SMALL BUSINESS,
Washington, DC.
The Committee met, pursuant to call, at 10:03 a.m., in Room
2360, Rayburn House Office Building, Hon. Nydia M. Velázquez
[chairwoman of the Committee] presiding.
Present: Representatives Velázquez, Golden, Crow, Davids, Phil-
lips, Newman, Chu, Evans, Delgado, Houlahan, Andy Kim, Craig,
Luetkemeyer, Williams, Stauber, Meuser, Tenney, Garbarino,
Young Kim, Van Duyne, and Salazar.
Chairwoman VELÁZQUEZ. Good morning. I call this hearing to
order.
Without objection, the Chair is authorized to declare a recess at
any time.
I would like to begin by noting some important requirements.
Standing House and Committee rules and practice will continue to
apply during hybrid proceedings.
All Members are reminded that they are expected to adhere to
these standing rules, including decorum. House regulations require
Members to be visible through a video connection throughout the
proceedings, so please keep your cameras on.
Also, remember to remain muted until you are recognized to min-
imize background noise. If you have to participate in another pro-
ceeding, please exit this one and log back in later.
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 will recognize that
Member at the next appropriate time slot provided they have re-
turned to the proceeding.
For those Members and staff physically present in the committee
room today, in accordance with the Attending Physician’s most re-
cent guidance, all Members and staff who attend this hybrid hear-
ing in person will be required to wear masks in the hearing room.
Furthermore, all Members and staff who have not been fully vac-
cinated must also maintain six-foot social distancing from others.
With that said, Members will be allowed to briefly remove their
masks if they have been recognized to speak.
With that, let me start my opening statement.
Since the 1980s, America has largely been in a slump when it
comes to new business formation. This fact rarely generates head-
lines or garners attention in the media, but its implications are se-
vere.
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New businesses make up the foundation of our economy. Entre-
preneurs that launch enterprises and products are the catalysts for
American innovation.
The statistics paint a startling picture of the state of our coun-
try’s entrepreneurial environment over the past four decades.
In 1980, 12 percent of employers were new businesses. By 2018,
this figure had dropped to 8 percent. In 1982, 38 percent of all
businesses were new firms, compared to just 29 percent in 2018.
In 2018, larger corporations were doing quite well, but small
firms were exiting the market at a higher rate than they were
being started.
This was the state of American startups in March of 2020 when
the pandemic began to intensify. As COVID spread and businesses
closed, our country was staring down an unprecedented economic
crisis.
Using the Great Recession and its aftermath as a guide, experts
predicted that the pandemic would continue to drop the rate of
business startups to new lows. Despite the dire forecast, American
entrepreneurship didn’t crater during the pandemic—it flourished.
In 2020, Americans filed paperwork to start 4.3 million new busi-
nesses. This figure represents a 24-percent increase from 2019, and
by far, the highest number over the past 15 years.
Many of these businesses didn’t look like traditional small firms.
As the pandemic drove commerce online, these new enterprises
were primarily concentrated in the nonstore, online retail sector.
The entrepreneurs starting these new businesses also reflected
the diversity of the American population in the 21st century. Black
and Hispanic communities led the way in launching new compa-
nies.
Young entrepreneurs dealt with the tough job market by pivoting
toward entrepreneurship to develop businesses and products to
serve their communities.
No one factor fully account for this entrepreneurship boom. Lay-
offs, a favorable credit market, and federal stimulus efforts all
helped lay the ground work for this record rise in new businesses.
So today I hope that this hearing allows us to better understand
this entrepreneurial revival and apply those lessons moving for-
ward. The pandemic disrupted many areas of American life, not
least of which being the nature of work.
The challenges facing this new generation of entrepreneurs
aren’t identical to the problems of the pre-pandemic economy. We
must work to understand these new challenges and find ways Con-
gress can better support them in the post-pandemic world.
It is also vital that we grasp why entrepreneurship flourished
during COVID and what can we do to sustain that increase in the
future. COVID closed countless small businesses and left many
others on the brink of disaster.
Yet, at the same time, it is possible the pandemic set in motion
a revitalization of American entrepreneurship. Today I look for-
ward to hearing from our witnesses about the journey that led
them to start a business and how this committee can support them
and others like them in the future.
I now would like to yield to the Ranking Member, Mr. Luetke-
meyer, for his opening statement.
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Mr. LUETKEMEYER. Thank you, Madam Chair, and good
morning. We meet today for a hearing on entrepreneurship in the
new economy. Regrettably as we have all witnessed over the past
year, the outlook for our nation’s entrepreneurs is dismal.
Small businesses, small business owners, entrepreneurs, and
startups are known to be resilient and skillful, easily adapting to
changing conditions. They are fast and can adjust to meet the
needs of their customers. They can pivot with speed and capture
market share.
These small business attributes, along with vigilant risk-taking
and investing, are key ingredients to a growing economy.
The COVID pandemic, coupled with Biden and the Democrats’
failed economic policies have brought severe economic challenges to
main street USA. Entrepreneurs across the country, from both
coasts to the middle of the country, face incredible obstacles.
This fall economic growth ground to a halt as all businesses con-
fronted by severe supply chain disruptions, ongoing labor short-
ages, skyrocketing inflation, higher costs of nearly everything, and
threats of tax increases from the Democrats.
To follow, an overreaching vaccine mandate has been proposed
with very limited information.
Small business owners and the entrepreneurs require clear and
concise rules and information to make business decisions. Uncer-
tainty can’t be part of their business model. Unknown next steps
bring their planning to a complete halt.
With each of these issues coming to the forefront, let’s review
them. We can begin with supply chain disruptions and higher
costs. Small businesses, which operate on thin margins, have been
shocked by recent supply chain failures.
NFIB September Economic Trends survey found 90 percent of
small businesses have been affected by these disruptions, and near-
ly half of all small businesses experience product delays from their
suppliers.
With empty shelves continuing to be a common sight in our local
communities, the fourth quarter and the holiday season could be a
rough stretch for the nation’s job creators.
At the same time, demand for goods has increased, pushing
prices even higher.
Labor. Across all industries, labor shortages have hindered the
ability of companies to get products made, shipped, unpacked, and
transported. Once the products and goods have arrived, the busi-
nesses often do not have a full staff ready to meet and greet cus-
tomers.
The Biden administration’s worker shortage means that employ-
ers now have 10.4 million job openings. Let me repeat that: 10.4
million job openings, and no one willing to fill them. NFIB found
51 percent of small businesses have unfilled job openings, a stag-
gering and record number.
In addition, employers are facing record numbers of workers
quitting their jobs. And, according to the Federal Reserve, the pan-
demic has resulted in a record 3 million early retirements.
This is a dreadful situation as we head into what should be the
busiest time of the year for businesses: the holiday season.
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Inflation. Despite the Biden administration’s denials, it is very
clear that inflation is no longer temporary or transitory. In Octo-
ber, the Department of Labor reported that the Consumer Price
Index, one trusted measure of inflation, is now at a 13-year high
of 5.4 percent.
Even the Federal Reserve Chairman, who has insisted for
months that inflation is transitory, recently admitted that inflation
is expected to remain high well into next year. Overall, inflation
means higher prices for small businesses, along with higher prices
for their customers.
Tax increases. Could there be a worse time to threaten entre-
preneurs and small firms with tax increases? In February, Presi-
dent Biden said the U.S. had lost more than 400,000 businesses
since the pandemic began, and many more were at risk.
Yet the Biden administration and congressional Democrats have
proposed a huge number of tax increases to fund their massive
spending programs. We are not sure, however, which tax increases
are still on the table, although it seems to be changing by the
minute. But surely the last thing small businesses need coming out
of a pandemic are tax increases.
Employer vaccine mandates. In September, President Biden an-
nounced that his administration is developing a regulation that
would require all private sector employers employed by a business
with a hundred or more employees to be vaccinated or submit to
weekly testing.
According to the Society of Human Resource Management, 89
percent of employers fear at least some of their employees will quit
as a result. The uncertainty surrounding these rules is putting the
brakes on small businesses as they try to get back on their feet and
serve their communities.
A labor shortage crisis, accompanied by an employer vaccine
mandate, are a grave threat to American small business prosperity.
How much more can small businesses withstand? Taken alone,
each of these policies is devastating, but taken together, their im-
pact is likely to have serious, long-term consequences for entrepre-
neurship.
Madam Chairwoman, we should be enacting policies that will
empower entrepreneurs. Attentive risk-taking and investing are
what will grow our economy. However, entrepreneurs are facing an
economic storm that is preventing this progress.
I appreciate our witnesses being with us today. I look forward to
the testimony.
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 wit-
ness today is Ms. Ellie Diop, CEO of Ellie Talks Money. Ms. Diop
was laid off from her corporate job months before the pandemic.
After submitting over 50 job applications, Ms. Diop capitalized on
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her $1,200 stimulus check and entrepreneurial spirit to create her
business.
Ellie Talks Money is an online coaching and consulting service
for aspiring and established business owners that was able to build
a net worth of over a million dollars in less than 1 year.
Welcome, Ms. Diop.
I would like to yield to Ms. Newman to introduce our second wit-
ness.
Ms. NEWMAN. Thank you, Madam Chair and Ranking Member.
I am proud to introduce Mr. Andrew Fogaty, a resident of the great
State of Illinois and from my district. He currently serves as both
the director of the Illinois Small Business Development Center at
the Greater Southwest Development Corporation and as executive
director of the 36Squared Business Incubator, both in Chicago.
In addition, he serves as a mentor with the Gallery Incubator in
Evanston, Illinois.
For over 12 years, Andrew has led local economic development
initiatives, help launch nearly 70 companies, served as an adviser
to more than 300 others, and facilitated more than $40 million in
funding for his clients.
In 2017, he founded an all-abilities business incubator in the
36Squared building on the Chicago southwest side and was se-
lected at the 2020 State Star by the Illinois Small Business Devel-
opment Center Network.
I just have to tell you on a personal note that Andrew is quite
amazing, and we are so proud to have him in our district. But it
is a pleasure to welcome Mr. Fogaty to speak today.
Thank you, Chairwoman, and I yield back.
Chairwoman VELÁZQUEZ. The gentlelady yields back.
Our third witness is Ms. Stephanie DeVane, the Vice President
of entrepreneurship and business development at the National
Urban League. The National Urban League is a historic civil rights
organization dedicated to economic empowerment of historically
underserved urban communities.
As the Vice President of entrepreneurship and business develop-
ment, Ms. DeVane manages, oversees, and advocates on behalf of
12 entrepreneurship centers located in key affiliates. In this capac-
ity, her division supports these affiliate small business programs
through capacity building and programming sub grants and by pro-
viding them with training and technical assistance.
Welcome, Ms. DeVane.
I would now like to yield to the Ranking Member, Mr. Luetke-
meyer, to introduce our final witness.
Mr. LUETKEMEYER. Thank you, Madam Chair.
Our next witness is Raymond J. Keating. Mr. Keating is a chief
economist with the Small Business and Entrepreneurship Council,
or SBE. He writes and speaks on a wide range of issues impacting
the entrepreneurship sector of the economy.
His areas of expertise include taxation, monetary policy, federal,
state, and local budgets, regulation, and economics. He has written
hundreds of articles with pieces published in The Washington Post,
Wall Street Journal, Boston Globe, Chicago Tribune, and Investor’s
Business Daily.
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Mr. Keating holds an M.A. in economics from New York Univer-
sity and an MBA in banking and finance from Hofstra University,
and a B.S. in business administration and economics from St. Jo-
seph’s College.
I want to thank all the witnesses for joining us today.
And, with that, Madam Chair, I yield back.
Chairwoman VELÁZQUEZ. Thank you, Mr. Luetkemeyer.
Thank you all for being here today.
Ms. Diop, you are recognized for 5 minutes.
STATEMENTS OF ELLIE DIOP, CHIEF EXECUTIVE OFFICER,
ELIZA REVELLA CONSULTING SERVICES, LOS ANGELES, CA;
ANDREW FOGATY, EXECUTIVE DIRECTOR, 36SQUARED BUSI-
NESS INCUBATOR, CHICAGO, IL; STEPHANIE E. DEVANE,
VICE PRESIDENT OF ENTREPRENEURSHIP & BUSINESS DE-
VELOPMENT, NATIONAL URBAN LEAGUE, NEW YORK, NY;
AND RAYMOND KEATING, CHIEF ECONOMIST, SMALL BUSI-
NESS & ENTREPRENEURSHIP COUNCIL (SBE COUNCIL) VI-
ENNA, VA.
STATEMENT OF ELLIE DIOP
Ms. DIOP. Thank you. Good morning, Members of the Small
Business Committee—oh, there we go. Sounds a lot better. Good
morning, Members of the Small Business Committee. I am very
grateful to be here. My name is Ellie Diop, and I am CEO and
founder of Eliza Revella Consulting Services, also known as Ellie
Talks Money. I have a business coaching and consulting company
that I started in the pandemic.
So my path and journey to entrepreneurship is not like many
others. I am also a mother of four, and as you mentioned in intro-
ducing me, I wanted to get another job after being laid off before
the pandemic began. And I did apply feverishly to several jobs, over
53 in fact.
And my experience is one in corporate America. I have served as
director of sales for over 3 years, but I was not able to find employ-
ment. And so, when the stimulus checks, when I knew that they
were coming, I began to make a plan on starting a business with
that small—what I was looking at as a capital investment.
And I conducted market research and really analyzed what did
other businesses need at this time, what—where are businesses
struggling, you know, and I did this market research by leveraging
social media.
And so I came to the determination that other small businesses
really needed assistance in sales, which is something I was very
good at. They needed assistance in finding funding, something I
also knew how to do.
And so, when I received the stimulus check, I put it to use and
purchased things like a website, a domain, a new phone, a ring
light, all things that I knew I would be able to use to build a brand
and build a following online.
And so, with consistency, dedication, and posting content on so-
cial media about three to five times per day, in 10 months, I was
able to net $1.3 million. And that is sheerly by having the access
to entrepreneurship.
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So I share with my clients all of the time, and as their coach,
I am giving them the tools and strategies that they need to scale
their own businesses by leveraging what we have, which is the
internet and social media.
And, because I started this with, you know, $1,200, I am always
reminding them that you don’t need a large sum of money or a
large capital investment in order to make a lot of money in your
business. It is just about utilizing the right strategies. It is about
staying committed. It is about staying dedicated and leveraging
what we have available to us.
So now I am very grateful that the business has grown, and I
have been able to employ, myself, five people. It is a very, you
know, amazing turn of events, being that it was so challenging for
me to find a job. Now I am in a position where I can actually create
jobs.
And my goal for 2022 is to increase our staff to 10, hopefully, and
to continue from there, but definitely where the biggest success in
this entire accomplishment truly is, is just that I have been able
to show and inspire people, over 300,000 people, that if I can do
this, so can you.
You know, a lot of—there is a misconception that entrepreneur-
ship, or the ability to start a business, is one that begins with a
silver spoon in someone’s mouth. But I think that my journey has
been able to show people that, regardless of where you are starting
with, even as, you know, a mother, just coming out of a divorce,
single mother trying to find a job, you can actually take the cir-
cumstance that you are given and completely change the narrative
and change the scenario.
So we live in a time where entrepreneurship is truly more acces-
sible than ever, and given the right tools, small business owners
can absolutely repeat what I have been able to do.
Now, you don’t need to have money to pay for advertising. You
don’t need to always have a lot of connections. You need to have
grit. You need to have resilience. You need to have dedication and
commitment to what product you want to sell.
And now, with platforms like social media—Instagram,
Facebook, Twitter—all platforms that I have leveraged, you are
able to go directly to your audience and make the sale.
We don’t have to go through all of these complicated channels,
which actually gives small businesses a higher opportunity to
thrive and survive than we may have had 4 or 5 or 6 years ago.
So I am very grateful to be able to share my experience and my
success and entrepreneurship with you all and thank you.
Chairwoman VELÁZQUEZ. Thank you, Ms. Diop for that inspir-
ing story, it is really rewarding to know that there is a role for the
federal government to play, particularly by empowering women like
yourself.
Now I will recognize Mr. Fogaty for 5 minutes.
Mr. Fogaty, please unmute yourself.
Mr. FOGATY. I was afraid that would happen. Good morning,
Chairwoman Velázquez——
Chairwoman VELÁZQUEZ. We cannot hear you, Mr. Fogaty.
Mr. FOGATY. Really? I am unmuted. Can you hear me now?
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Chairwoman VELÁZQUEZ. Mr. Fogaty, we are going to correct
the technical issues, and now we will recognize Ms. DeVane.
Ms. DEVANE. Chairwoman Velázquez, Ranking Member——
Chairwoman VELÁZQUEZ. Ms. DeVane, please unmute yourself.
Ms. DEVANE. I am also unmuted.
Chairwoman VELÁZQUEZ. The problem is here.
Mr. FOGATY. I should say I can hear Ms. DeVane.
Ms. DEVANE. And I can hear Mr. Fogaty.
Chairwoman VELÁZQUEZ. We are going to take a brief recess
until HRS address the issue.
[Recess.]
Chairwoman VELÁZQUEZ. This hearing is called to order.
Now we recognize Mr. Fogaty for 5 minutes.
STATEMENT OF ANDREW FOGATY
Mr. FOGATY. Thank you very much and good morning, Chair-
woman Velázquez, and distinguished Members of the Committee.
Again, my name is Andrew Fogaty. I am with the 36Squared Busi-
ness Incubator in Chicago.
I also oversee two of the Illinois Small Business Development
Center locations, one at 36Squared and one at the Greater South-
west Development Corporation. Both locations are also part of the
City of Chicago’s Neighborhood Business Development Center Pro-
gram.
What this means is that myself and my colleagues, both across
the city and the State, provide business assistance, training, and
advising to area residents at no charge.
I want to thank Congress for inviting me to participate in this
hearing and also for the quick action that was taken last year with
programs like the Economic Injury Disaster Loan, Paycheck Protec-
tion Program, and CARES Act funding.
Given that this was the first time that an unforeseen disaster af-
fected virtually every business in the country at the same time, I
think that the actions of Congress and the SBA were key to avert-
ing what could have been a much more serious crisis.
These programs continue to help save businesses across the
country, so again thank you for that.
That being said, the small business landscape has changed, and
serious challenges remain. The subject today is ‘‘Entrepreneurship
in the New Economy,’’ and my testimony will focus on four main
areas: access to capital, reducing the digital divide, manufacturing,
and working with underserved communities.
Access to capital for small businesses, and especially startups, re-
mains a challenge. In fact, if a business needs a small loan of $10-
or $20,000, I am only aware of one bank in Chicago, CIBC, that
actively markets programs to meet that need.
There are, of course, also some nonprofit lending options. How-
ever, these are typically at a higher interest rate and less desirable
than a bank loan.
I would like to see more banks offering micro lending and startup
funding, and I would like to see the reporting process for lenders
streamlined to make small business lending more attractive.
It is my understanding that there is legislation now that may—
on the books right now—that may significantly increase reporting
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9
requirements in all small business loan applications, and I am con-
cerned that this may negatively impact my clients.
Access to capital is key to supporting entrepreneurship in the
new economy.
Next, I would like to address computer literacy. The digital di-
vide is real, especially in underserved communities. Today, com-
puter literacy and basic business training are as key to an entre-
preneur’s success as being able to read or write was 20 years ago.
We need to do better with this by making basic computer skills
training and business assistance programs widely available across
the country.
In fact, when CARES Act funding ends next fall, many small
business development programs across the country will actually see
a decrease in capacity, and this is a concern.
Next, I would like to address manufacturing. Last year’s dif-
ficulty in obtaining vital PPE supplies and this year’s supply chain
issues demonstrate a clear need to support our domestic manufac-
turing capabilities.
Certainly a simplification of the federal procurement process
would be a start.
And, finally, I would like to discuss the underserved population.
Here on Chicago’s south side, we have a diverse and vibrant small
business community, including a significant number of immigrant
business owners who hold ITINs instead of Social Security num-
bers. Currently these business owners are shut out of most SBA
lending programs.
I certainly don’t presume to jump into the immigration debate.
However, if a business seeks to expand, buy equipment, a building,
or create jobs, I would like to be able to present the same options
to all my clients.
Perhaps the most disadvantaged of the underserved populations
are the disabled people. Advances in technology and making small
business ownership—are making small business ownership a much
more viable option for our disabled population.
This is a trend that is only going to increase in the coming years.
I would like to see more of an effort made to include these entre-
preneurs into the wider business development world.
Thank you again for having me, and I look forward to your ques-
tions.
Ms. VELÁZQUEZ. Thank you, Mr. Fogaty.
Ms. DeVane, you are recognized for 5 minutes.
STATEMENT OF STEPHANIE E. DEVANE
Ms. DEVANE. Chairwoman Velázquez, Ranking Member Luetke-
meyer, and Members of the House Committee on Small Business,
thank you for the opportunity to testify at today’s hearing titled
‘‘Entrepreneurship in the New Economy.’’
My name is Stephanie DeVane, and I am the Vice President of
Entrepreneurship and Business Development at the National
Urban League. I bring you greetings on behalf of Marc Morial, our
president and CEO.
The National Urban League is a historic civil rights community-
based organization dedicated to economic empowerment and the
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10
guarantee of civil rights for African Americans and other under-
served communities in America.
We are a national nonprofit intermediary and provide direct,
comprehensive services that improve the lives of nearly 2 million
people each year. We are a network of 91 Urban League affiliates
and the District of Columbia.
In my role, I manage, oversee, and advocate on behalf of 12
Urban League Entrepreneurship Centers, which provide manage-
ment, counseling, mentoring, and training services for entre-
preneurs looking to start, grow, or scale their business.
While the typical client of the Entrepreneurship Center program
is a low- to moderate-income African-American woman with an ex-
isting business, our centers also serve Caucasian, Hispanic, Asian-
American entrepreneurs.
In 2020, our centers helped approximately 23,928 participants
secure $108.6 million in financing and contract opportunities, as
well as save or create 714 full- or part-time jobs through our coun-
seling and training services.
The COVID-19 pandemic and resulting economic disruption has
disproportionately impacted minority businesses and also exacer-
bated existing structural inequities in small business lending.
In April 2021, a Federal Reserve survey found that minority-
owned businesses were simultaneously hardest hit by pandemic-re-
lated closures and were only half as likely as White-owned firms
to receive the necessary Paycheck Protection Program small busi-
ness relief funding they needed to pay their workers and stay
afloat.
For minority-owned business, the racial wealth gap and implicit
bias have made securing access to capital exceedingly difficult.
During the pandemic, our entrepreneurship centers conducted
training, workshops, and counseling sessions through digital and
telephonic means with clients. We hosted webinars to guide entre-
preneurs experiencing cash flow issues through the disaster loan
application process and provided links to resources to help entre-
preneurs develop disaster recovery plans.
From June 1, 2020, through May 31st of this year, with support
from a CARES Act MBDA award, our centers helped 11,250 busi-
nesses secure $137.6 million in financing and contract opportuni-
ties, as well as save or create 1,174 full- and part-time jobs, with
over 15,800 hours of counseling and over 33,000 hours of training.
Specifically, our services were directed at providing COVID relief
to minority businesses lacking access to capital or with inadequate
financial management practices and less flexible operating models.
We also received support through the PepsiCo Foundation to run
our Black Restaurant Accelerator Program which is helping keep
the doors of small businesses and food-and-beverage industries
open.
One of the program’s beneficiaries is Beaucoup Eats, a New Orle-
ans neighborhood eatery that provides full-service catering and
meal prep services. Here is what owner Keisha Reed had to say
about the program: ‘‘The grant from PepsiCo allowed us to pur-
chase three tents, which meant we could serve at least 50 people,
and overhead costs were lowered. Given the current 72-hour test
and vaccine card mandate for inside eating and the inside reduc-
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11
tion, we were only able to accommodate 6 to 10 people on the in-
side at any given time. Without the assistance of the grant, we
wouldn’t be able to generate the revenue needed to stay in business
during this ongoing pandemic.’’
I also note that the National Urban League was just awarded a
$5 million Small Business Administration Community Navigator
Award, which will allow us, through 25 Urban League affiliates, to
reduce barriers for minority-owned businesses through critical sup-
port and resources.
Last year, Black-owned businesses saw a surge in sales cor-
responding to the rise of the Black Lives Matter movement. How-
ever, as public support for it began to stagnate, business owners
saw sales level off.
In the new economy, Black-owned small businesses continue to
experience lower paths returning to pre-pandemic employment lev-
els and face a more uncertain future recovery relative to their
peers.
Many Black-owned businesses continue to lack access to capital
needed to fully recover due to implicit bias and the legacy of rac-
ism.
To ensure a full economic return for minority-owned businesses
in this new economy, we urge Congress to enact civil rights protec-
tions and guardrails that will reduce any racial disparities in ac-
cess in capital, while increasing access to prime government con-
tract opportunities, mentorship, minority incubator support, and
technical skills training.
Please see my submitted testimony for more detailed rec-
ommendations.
On behalf of the National Urban League, thank you for the op-
portunity to testify. I look forward to your questions.
Ms. VELÁZQUEZ. Thank you, Ms. DeVane.
Now we recognize Mr. Keating for 5 minutes.
STATEMENT OF RAYMOND KEATING
Mr. KEATING. Chairwoman Velázquez, Ranking Member
Luetkemeyer, Members of the Committee, thank you for hosting
this important hearing.
My name is Raymond Keating. I am chief economist with the
Small Business and Entrepreneurship Council. For more than 26
years, SBE Council has worked to strengthen and improve the eco-
system for startups and small business growth.
As you all know, entrepreneurs take on risks and uncertainty in
order to innovate, introduce new products and services, and find
better ways to do things. And, by doing so, they boost productivity,
enhance competition and choice, fuel economic growth, and create
new jobs.
Indeed, entrepreneurs, along with the investors who are essential
for funding startups and business growth, are central to the eco-
nomic income and employment growth we all want to see happen.
For our economy, in my written testimony, I look to key indica-
tors on where we stand right now. By the second quarter of 2021,
entrepreneurs, investors, businesses, and workers had worked to
get the economy back to where it was pre-pandemic.
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However, we still face the task of getting back to where we
should be, given the lost growth, and then maintaining strong
growth thereafter.
Unfortunately, 2 percent real GDP growth, which is where we
stood in the third quarter, is anemic under normal circumstances.
At 2 percent growth, U.S. economic underperformance will be ex-
tended far into the future.
We need to do much better, and that will depend significantly on
the state of entrepreneurship.
So I go on to look at various measures of entrepreneurship in my
testimony. It is clear that entrepreneurship was lagging well before
the pandemic. It suffered when COVID hit, and it has struggled to
come back in many ways.
But hope can be found in the trend in new business applications.
After suffering big declines when the pandemic first struck, the
number of business applications quickly skyrocketed beyond where
they had been prior to the pandemic and have remained at ele-
vated levels.
The historical relationship between such applications and actual
business formations indicates that they are, again, as reason for
hope. Although, it must be noted that a pandemic economy is un-
charted waters.
At the same time, the expansion of what many call the gig econ-
omy would support this data, as would more people positively con-
sidering entrepreneurship due to their pandemic experiences, as we
have heard here already.
As for challenges for entrepreneurs, there are many, some being
evergreens and others specific to our current situation. For exam-
ple, a key evergreen, again, is financing. We have heard people talk
about that already.
As businesses reach various stages, though, angel investors and
venture capitalists, for example, become vital for providing the
funds to fuel innovation and growth.
And regarding our current situation—again, in my written testi-
mony, I explore the labor shortages, supply chain challenges, and
inflation—these are all quite real and quite significant issues, cre-
ating problems, risks, and uncertainties.
Of course, there are also expanding opportunities for entre-
preneurs. I highlight two areas in my written testimony. The first
is technology. Whether generating new products, improving and en-
hancing production, and/or expanding distribution, technological
advancements in areas like computer, digital, and broadband tech-
nologies, for example, have served to expand opportunities for en-
trepreneurs.
Social media, again, as we have heard, for instance, has served
to help create and transform businesses.
A second major area of expanding opportunities for entre-
preneurs is the international marketplace. Technology advance-
ments coupled with economic growth abroad have opened doors in
the international arena for entrepreneurs.
Keep in mind that some 95 percent of the world’s consumers are
outside the United States, and as the data show, international
markets are not the near exclusive domain of large businesses, as
many assume.
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Finally, in this, getting the public policy mix right is always crit-
ical for our economy and for entrepreneurship, but getting it right
becomes even more critical as we struggle to emerge from a pan-
demic economy.
I just offer what I call a pro-entrepreneur policy framework in
my testimony: Avoiding tax increases and providing substantive
and permanent tax relief that enhance incentives for starting up,
building, and investing in businesses.
Emphasizing regulatory relief, not imposing additional regu-
latory burdens. If anyone understands the cost of regulation, it
would be small business owners, especially as those costs mount
with more and more regulations imposed, you know, regulation
after regulation.
Advancing free trade is critical. Reducing—meaning, you know,
reducing government-imposed cost on trade such as tariffs is pro-
growth, and the U.S. really needs to reclaim its global leadership
role on trade.
Also, implementing a constructive immigration policy agenda
that expands avenues of immigration for those who wish to con-
tribute by working and starting businesses, while enhancing secu-
rity, of course, to keep out terrorists and others who would do us
harm.
That is a pro-entrepreneur framework that we put forward.
Thank you again for your invitation to be part of this hearing
today, and I look forward to any questions.
Ms. VELÁZQUEZ. Thank you, and thank you to all our wit-
nesses. We really appreciate all you have shared with us today.
I will begin by recognizing myself for 5 minutes, and I would like
to address my first question to Ms. DeVane.
As Americans quit their jobs in record numbers, women are lead-
ing the change in what is known as the great resignation. Ms.
DeVane, what shift in the labor force occurred during the pandemic
to make women more likely to launch a small business?
Ms. DEVANE. Thank you for that question, Chairwoman
Velázquez. My experience, through our entrepreneurship center, is
that many of the women that started businesses during the pan-
demic had been laid off from their jobs, similar to Ellie, who told
her story.
Many of these women business owners had decided at that point
to start their own business. Some of them were passion projects.
Some of them were built out of necessity. But many of the business
owners that we saw were women, and they were using that oppor-
tunity to start businesses.
They use and utilized our centers, which had technical assistance
services, counseling and mentoring and training services to start
businesses.
In addition to that, many of them saw opportunities through
grant programs that the National Urban Leagues and other organi-
zations made available that were specifically for women-owned
businesses to start and grow their businesses.
In addition to that, there were grants available for minority
women-owned businesses to help undergird some of the training
that we were providing to them.
Ms. VELÁZQUEZ. Thank you for that answer.
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Ms. Diop, what advice do you have for others that are consid-
ering starting a business during times of uncertainty?
Ms. DIOP. Thank you, Chairwoman Velázquez, for that question.
I would definitely advise women who want to start businesses in
a time of uncertainty, or any time, to utilize the resources that
they have available to them to the fullest extent.
And that may be monetary, but also I would advise them to uti-
lize the resources within themselves. Many times we don’t realize
that the experience we have gained in jobs or in life can directly
lend to success in business.
And I know for myself, everything that I have put into my coach-
ing and consulting business are skills and experience that I have
gained throughout corporate America and just throughout college
and all of the experience that I have.
So I think that is a number one thing is to—I always teach my
clients to make a list of everything you know how to do, your expe-
riences, your knowledge, your skills, and pull a business from that
list. That way you are more guaranteed to succeed because you are
naturally working within something you already know how to do
rather than venturing off into a business that you think you should
start based on what, you know——
Ms. VELÁZQUEZ. Thank you. Thank you for that answer.
Mr. Fogaty, during the pandemic, many businesses have strug-
gled to adapt to the changing nature of work and have faced chal-
lenges with supply chain issues, access to capital, and employee re-
tention. Can you please describe your role at the 36Squared Incu-
bator and how a $1 billion investment in incubators in the Build
Back Better Act will help create more entrepreneurs?
Mr. FOGATY. Certainly. Well, I certainly agree with the testi-
mony of the previous witnesses.
What we do is provide assistance and support, not only through
the SBDCs; I also have colleagues in the ITCs, International Trade
Centers. This is a network of professionals who, at no charge, will
help manufacturers and facilitate their exports, as Mr. Keating al-
luded to.
We also have what is known—I also have colleagues who are
what is known PTACs, Procurement Technical Assistance Centers,
and these are available across the country, as are SBDCs and
ITCs. The PTACs will facilitate and assist entrepreneurs with get-
ting government contracting.
We are also in—the city of Chicago has Neighborhood Business
Development Centers. So my point is there is a lot of free assist-
ance out there. We don’t have all the answers, but we have a num-
ber of resources so that we can find the answers.
And I think it is important to support small business develop-
ment centers, entrepreneurship centers, incubators, as they reach
out and try and guide entrepreneurs and small businesses through
this time.
Ms. VELÁZQUEZ. Thank you.
Mr. Keating, I just ran out of time. Maybe if we go into a second
round, I will be able to ask you a question. Thank you very much.
Now I recognize Mr. Williams, Vice Ranking Member of the Com-
mittee, for 5 minutes.
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Mr. WILLIAMS. Thank you, Madam Chairwoman, and I want to
thank our Ranking Member too, and witnesses for being here
today.
Every American can see that our country is facing one of the
worst supply chain stories in history. I see it firsthand. I am a car
dealer—I have been for 51 years—employ hundreds of people, and
I can tell you, it is serious.
And U.S. ports are struggling to unload deliveries, and inventory
is just sitting on container ships in the middle of the ocean.
Families are preparing for the most expensive Thanksgiving
meal ever, and we are told that by the administration, and worry
if Christmas gifts will even be available.
This supply chain crisis has become a substantial issue for small
businesses across the country, forcing business owners to make
operational adjustments in order to compensate for the lack of in-
ventory and revenue.
So, Mr. Keating, what are small businesses who operate on fixed
margins to do when they don’t have a product to sell or can’t afford
to pay their workers, and what do you think the long-term effects
of these supply chain disruptions will have on our economy?
Mr. KEATING. Well, I agree with you a hundred percent, and
in terms of small businesses owners, they are being impacted more
so than large firms just because they operate on such thin margins.
You know, the long-term issue—listen, in the short term, this is
going to be an issue that we need government to not impose addi-
tional burdens, like I mentioned in my testimony—taxes, regula-
tions, things like that—provide relief where they can, and then the
private sector is going to work through this.
It is going to be very painful. It has already been very painful.
And then the question is how—you know, long-term effect. The
long-term effect is going to be determined by how many businesses
survive these issues and these problems. We have already seen
what the pandemic has done.
I mean, various surveys, you know, either we have lost hundreds
of thousands or even millions of small businesses during the pan-
demic. So now we have got this additional issue of working through
trying to get back to where we were at least. And the long-term
impact is going to be, again, how many small businesses have we
lost.
Again, I take some hope in those business application numbers,
where you see people think—at the very least, they are thinking
about entrepreneurship as an option, and that is what we are going
to need going forward.
Mr. WILLIAMS. Perfect. Let’s talk about inflation. It is still on
the rise, and hardworking Americans are paying more for food, gas,
and other utilities. And a recent report by the Department of Labor
showed that inflation has spiked to 5.3 percent, a record high in
13 years.
So, meanwhile, Democrats continue their push to inject over $3
trillion of new federal spending into the economy and threatening
to worsen inflation for months or years to come.
So the Biden administration refuses to acknowledge the risk of
hyperinflation. They argue that proposed spending packages are
fully paid for and will have no impact on inflation.
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So, again quickly, Mr. Keating, in your testimony, you state that
the inflation numbers are undeniable, and can you talk briefly
about the current impact on inflation, whether you think it is tran-
sitory like the Federal Reserve argues?
Mr. KEATING. Yeah. I always get concerned when the Fed,
whose primary responsibility is stable prices, kind of pooh-poohs
what is going on with inflation. So I am not quite clear how long
this is going to last. I don’t think any of us are, and that is part
of the problem, right?
Inflation comes with uncertainty, there is volatility, all of the
issues that, you know, higher interest rates, all of these problems.
So the issue—going forward, I wish I heard more from the Fed,
that, hey, listen, we are taking this inflation issue very seriously,
and perhaps we are going to start to rein in these historically un-
precedented loose monetary policies that we have been running
really since the summer of 2008. I think that would be a great
step.
And then also, on the fiscal side of things, you know, inflation
is all about too much money chasing too few goods. I like the idea
of incentivizing the production of more goods. So, if we could have
pro-growth fiscal policies, meaning tax, regulatory, trade policies,
combined with some monetary restraint, that is how we got out of
this mess in the 1980s when we had stagflation, and that is how
we are going to get out of the mess today.
Mr. WILLIAMS. Okay. Quickly, in the time I have remaining, in
your opinion, what are the impacts of higher taxes and increased
government regulations on small businesses, particularly on the
heels of the COVID-19 setbacks? Higher taxes do nothing but hurt
business. We need to cut taxes. So, quickly, how do you feel about
that?
Mr. KEATING. Well, you are right on. Listen, higher taxes al-
ways come with costs for negatives to the economy, negatives for
small business. And then, when you are thinking about doing it as
we struggle to get out of a pandemic economy, I am bewildered by
that. This is the worst possible time to be imposing higher taxes
and more regulatory burdens.
And, without a doubt, you can talk about targeting at this in-
come level or that income level; ultimately, everybody gets hurt
and largely because investors get hit. That means less capital for
entrepreneurs, and we need entrepreneurs, again, to drive innova-
tion, economic growth, and job creation.
Mr. WILLIAMS. Thank you, Madam Chairman, I yield my time
back.
Ms. VELÁZQUEZ. The gentleman yields back, and now we recog-
nize the gentlelady from Kansas, Ms. Davids, Chairwoman of the
Subcommittee on Economic Growth, Tax, and Capital Access, for 5
minutes.
Ms. DAVIDS. Thank you, Chairwoman, and I am excited about
this hearing today. You know, America’s small businesses and
small business owners, entrepreneurs, have really faced enormous
and unprecedented challenges over the last year and a half because
of COVID, and we have heard about that during this time from our
witnesses.
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And we also heard that, against all odds, we are seeing Ameri-
cans start new businesses. Even in 2020, 4.3 million new busi-
nesses were started, and that is the highest number of new busi-
nesses over the last 15 years.
So, while we have unprecedented difficulties, we are also seeing
unexpected and inspiring startup and unexpected and inspiring
startups surge. It is, I think, a testament to the entrepreneurial
spirit that we have got in this country, and I am glad we are tak-
ing the time to understand that today.
And so my first question, Ms. Diop—is that the—okay—I wanted
to ask you about, you know, in your written testimony, you men-
tioned that you became an entrepreneur because you had to. And
I think that is something that a lot of folks face, but I am curious,
of the things that you were able to navigate, can you share with
us a little bit about the challenges that you didn’t see coming, and,
you know, what were those?
Ms. DIOP. Thank you so much, Ms. Davids.
Certainly there were challenges that I ended up facing which I
couldn’t have anticipated, and I would say the largest one is learn-
ing how to go from a one-woman, or person, business to then dele-
gating and expanding it.
I, as I mentioned in my testimony, started my business out of ne-
cessity. Because I couldn’t find a job but I had children, I needed
to take what I knew how to do and turn it into a business that
could then serve others.
Where the shift happened and where the first challenge really
came is, okay, now how do I take this and make it something that
is not only about me but then can create a space for other people
who either need a job or further need support in their own busi-
nesses.
So scaling is a huge part of entrepreneurship, a huge part of run-
ning a small business, and can be the largest challenge, but I was
able to navigate that through research, support, and trial and
error.
Ms. DAVIDS. Thank you. And I am—the idea of scaling and kind
of those almost, like, back-office type of skills, you know, the
Kauffman Foundation, which is based in the Kansas City area—
the Kansas Third is on the Kansas side of the Kansas City metro
area—and the Kauffman Foundation has done a lot of research,
and they talk about accounting and legal advice. And I am curious
about how that is one of the biggest obstacles. I am curious how
you handled—like, you mentioned research. Like what kind of
steps did you take to address that?
Ms. DIOP. Absolutely. So I did ask a lot of questions. I am very
grateful that, in my time running this business, I have been able
to make connections. And so a lot of clients who would book me for
a call would actually be in the field of—the legal field, or perhaps
they were in the field of finance.
And so, in exchange for me helping them to gain clarity on how
to scale their own businesses, I was then able to ask them, well,
since you are in the financial field, what should I do? You know,
since you are in the legal field, what steps can I be taking to really
expand this so that it is not just my small business but something
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that can really grow and walk on its own legs? So that was a key
element of my research.
And then, as well, I am from Los Angeles, California, so I looked
up small business development programs and centers near me
where I could go and ask questions: How do I navigate this next
step? I have done this much so far by myself, but I know that I
need further support.
So those types of programs, such as the one you mentioned in
Kansas, are so very needed. I really did mine the scrappy way by
just, you know, researching and figuring it out. But, when people
can have access to information that provides them with that nec-
essary infrastructure support, it really strengthens their ability to
be a long-term, lasting business.
Ms. DAVIDS. Thank you for that. And I think, you know, from
your description about how you got into being an entrepreneur and
also from Ms. DeVane, you know, the work that they are doing,
and now as a community navigator—community navigator grantee,
it sounds like one of the things that we need to do is try to make
sure that our resources, from the federal perspective, are available
and known to everyone.
With that, I will yield back. Thank you, Madam Chair.
Ms. VELÁZQUEZ. The gentlelady yields back.
Now we recognize the Ranking Member, Mr. Luetkemeyer.
Mr. LUETKEMEYER. [Inaudible.]
Ms. VELÁZQUEZ. The gentleman from Pennsylvania, Ranking
Member of the Subcommittee on Economic Growth, Tax, and Cap-
ital Access, Mr. Meuser, is recognized.
Mr. MEUSER. Thank you, Chairwoman Velázquez, and thank
you to our Republican leader, Mr. Luetkemeyer, and thank you
very much to our witnesses, and thank you, Ms. Diop for being
here with us, and to all on virtual.
Clearly, the last 19 months have been very challenging for small
business. Even though I am a Member of Congress, I have been ex-
periencing it from my past life, as well as just working with the
constituents and helping them through, navigating through the
COVID crisis, from PPP to shutdowns to you name it.
Ms. Diop, your story was compelling, amazing. Congratulations.
I want to ask you a couple questions about that, but first I am
going to just go to Mr. Keating.
Mr. Keating, as small businesses, entrepreneurs, as you have
mentioned a couple of times, have dealt with cost of goods, short-
ages, all kinds of cost increases, inflation, wage increases, which we
all like, but when they come so suddenly and creates the shortages,
as well as the added unexpected expenses—government is not in
the business of creating jobs.
Government’s role is to create the best environment possible for
the private sector to create those jobs. So, in light of the many
issues that exist—workforce, I mentioned them, inflation, cost of
good increases, supply chain problems, pending OSHA mandates—
how has government done in helping or worsening small busi-
nesses’ challenges, Mr. Keating?
Mr. KEATING. Yeah. Unfortunately, I would like to say we were
doing better than we are. When you look at all the signals that en-
trepreneurs, small businesses, investors, are getting from Wash-
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ington, it has been, you know, what taxes are we going to increase;
let’s look at all sorts of new regulatory initiatives. And they span
across from labor to antitrust and everything in between.
You know, we still haven’t unwound tariffs that were imposed.
So, you know, there is not much going on, on the trade front to be
able to expand opportunities.
So bottom line is, you know, the overarching signals are not posi-
tive from the federal government, I would argue, in terms of poli-
cies for small businesses.
Mr. MEUSER. Okay. So perhaps reversing some of those, keep-
ing taxes competitive so goods made in Asia are not more competi-
tive, regulations that do affect supply chain, that is what we
should—in your view——
Mr. KEATING. Absolutely. Absolutely. Regulatory reform, in a
positive sense, would be great. I mean, imagine if the business
community, including entrepreneurs and small businesses, were
hearing from Washington that, hey, we are going to start
sunsetting regulations so that we can assess each one if it makes
sense going forward, right?
How about we have more input from Congress, rather than leav-
ing it all to appointees and bureaucrats, right, having Congress ac-
tually approve each rule and regulation. So those types of reforms
would be a big plus, I think.
Mr. MEUSER. All right, thanks a lot.
So, Ms. Diop, you are based in Los Angeles? Well, again, con-
gratulations, your determination, hard work, probably a lot of
smart work as well, a tremendous amount of thinking and probably
loss of sleep, but really, really great American business story.
So taxes in L.A. and federal taxes, I am not going to ask you
what you pay in taxes—it is your business—but I would guess it
is somewhere in the neighborhood of about 40 percent. Do you
think that that is helpful to your business or—so just talk about
that a little bit.
Would raising those taxes affect you? Would you prefer them to
stay where they are? Would you like to see them lowered a little
bit? How would that help your small business?
Ms. DIOP. Yes. Thank you so much for your question, Mr.
Meuser.
Taxes are definitely a challenge, and the biggest wake-up call in
this entrepreneurship journey that I have had.
I think that, you know, taxes as a new business owner can be
navigated more thoroughly with proper education and with proper
support. I think one thing that is lacking is taxes are almost like
a smack in the face when you start a business. There isn’t any, you
know, preparation to help a small business owner know what they
need to expect in terms of the magnitude of what the tax rate can
be and how to fully prepare for it.
I do think that, as small business owners, you know, lower taxes
can certainly help because of the fact that we are already operating
on margins that, you know, we have to pay other employees, we
have to, you know, pay for other startup capital, depending on
what type of business that you are in. I——
Mr. MEUSER. I am sorry. I am out of time.
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But, Madam Chair, I would just like to ask, perhaps Ms. Diop
can provide us with what you would like to see us do to help your
clients and to help you. So maybe we can do that even in a second
round or maybe you could just send us an email on that.
Ms. DIOP. Okay.
Mr. MEUSER. I yield back, Madam Chair. Thank you.
Ms. DIOP. Thank you.
Chairwoman VELÁZQUEZ. The gentleman yields back.
The gentlelady from Illinois, Ms. Newman, is recognized for 5
minutes.
Ms. NEWMAN. Thank you, Madam Chair.
I just have a quick question for Mr. Fogaty and then for Ms.
Diop.
So, Andrew, first of all, good to see you. Can you share a little
bit of what you think would be the number one most powerful
thing that Congress can do to help incubators, particularly with en-
trepreneurs of color and entrepreneurs with disabilities? If you
could nail a number one down that Congress could do to provide
incubators specifically and then providing—or providing and em-
powering more incubators, what would that be?
Mr. FOGATY. Well, support, of course, in the financial sense for
incubators, and I would also—for disadvantaged entrepreneurs, es-
pecially the severely disadvantaged entrepreneurs that I deal with,
with blind people, severe disabilities, I would like to see some sort
of a grant program. Right now, I have a chef who is blind. I would
love to see her be able to get a space at O’Hare. She has—she had
a restaurant and, fortunately, closed it just before the pandemic—
it was a great time to close a restaurant—so that she could start
a family, but she is getting ready to get back into it. She would do
well at a place like O’Hare or Midway, but the cost of getting into
one of those spaces is really prohibitive for a disabled entrepreneur.
So, you know, certain segments of our entrepreneurship world do
need grants and startup support, and we should also encourage the
lenders, the banks, perhaps through the CRA program, to support
both incubators and the entrepreneurs themselves.
Ms. NEWMAN. Thank you very much.
And then, Ms. Diop, so, first of all, congratulations. Amazing. So,
if you think back to when you were first starting, what do you
think would have been the number one thing that would have
helped you with what you are calling the surprise around taxes?
And so I was in exactly your shoes 17 years ago, and I was, like,
wow, that is interesting.
Now, as we all know, that, once you identify your deductions
properly, legally, and ethically and all of those things, your taxes
come down greatly. And then, when you choose a tax category, it
is a breeze then. And, actually, it is much better to be a small busi-
ness than a big business. And, as you know, moving forward, your
rate will likely stay the same or lower based on the Build Back
Better plan, so I just wanted to clarify that for the record.
That said, what would be the number one thing maybe in terms
of, you know, small business literacy on the ledger side or whatever
that would have been, gosh, it would have been good to know that?
Mr. DOHERTY. Yes. Thank you so much, Ms. Newman, for your
question. I would definitely say that what would have been helpful
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at the very beginning is perhaps when small businesses go to reg-
ister for their business, and they are in that initial phase of becom-
ing official, you know, any type of documentation or any type—
maybe a letter or just something that can really assist them with
understanding, okay, now that you have registered a business, here
are the most common deductions for the category you have chosen,
for the industry that you have chosen. Here are ways that you
should be tracking those deductions. Here are resources maybe
near you or resources online that can help you to start practicing
tracking your deductions and proper accounting measures. Because
once I got a handle on my taxes and the expenses, I then imme-
diately had to start coaching other business owners on the proper
ways to track their own expenses and track their income because,
truly, they had no idea. And if you don’t set aside a certain amount
of money, then you are slapped with a very large tax bill that then
can really set you way back, and you almost feel like you are start-
ing your business from the beginning if you are not fully prepared.
So I definitely think measures like that would be very helpful
and can further educate business owners even before they start the
business on, hey, here is everything you need to be ready for. Yes,
it is great, but also make sure that you know what to do when it
comes to paying your taxes and when it comes to doing it the legal
and ethical way.
Ms. NEWMAN. Well stated, and thank you. Great idea. So thank
you for your time.
And I yield back, Chairwoman.
Chairwoman VELÁZQUEZ. The gentlelady yields back.
The gentleman from Minnesota, Mr. Stauber, is recognized for 5
minutes.
Mr. STAUBER. Thank you very much, Madam Chair.
You know, the COVID shutdowns were devastating to commu-
nities and the American economy. By the end of 2020, government
lockdowns eased, businesses began to reopen, and our economy
started to rebound. Things were on the up, and businesses had
great optimism, but the Democrats marched forward with their
first partisan spending spree, the American Rescue Plan, a $1.9
trillion package, despite the nation’s positive recovery trends. This
was the beginning of the many crises we are facing today.
First, the cost of the American Rescue Plan has caused immense
inflation. Gasoline is up 42.1 percent. Electricity is up 5.2 percent.
Transportation is up almost 5 percent. And all these costs mean
less money for our small business owners to take home to their
families, who, by the way, are having to pay 12.6 percent more for
meat, 12.6 percent more for eggs, and 11.9 percent more for their
children’s footwear.
Second, the American Rescue Plan continued to pay people more
money not to work. Now, U.S. employers are still struggling to fill
more than 10.4 million job openings. Labor shortages for truck
drivers, dock workers, warehouse employees, no wonder there are
issues with our supply chain.
So here we are in the middle of a crisis. Prices of goods continue
to skyrocket right before the holidays. Shelves are empty. A real
look at what the Biden agenda has gotten the American people so
far, and, yet, the Democrats say let’s spend more, trillions more.
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And how will we pay for it? How are we going to pay for that? Oh,
that IS right. Taxes again on small businesses. That is wrong. I
simply do not understand how my Democratic colleagues can con-
vince themselves that they are doing good work on behalf of the
American people.
With that, I would like to use the remainder of my time to turn
to the testimony of our witnesses, and I thank you all for being
here today.
Mr. Keating, do you know how many small businesses are orga-
nized as subchapter C corporations or passthrough businesses?
Mr. KEATING. Actually, most businesses are passthrough busi-
nesses, S corps, LLCs, sole proprietorships and so on, so that is the
bulk of—it is—over 90 percent, I believe, off the top of my head,
are non-C corps.
Mr. STAUBER. Okay. So close to 90 percent. So can you speak
to how an increase in the corporate tax rate and a limitation on
section 199A deduction will harm these businesses?
Mr. KEATING. Well, there are a couple things, real quick, about
the corporate tax. First off, there is this misnomer going around
that most C corps are large businesses. And, again, when you
break down the numbers, most C corps are small businesses, small
and midsize companies. So, when you are talking about an increase
in the corporate income tax rate, you are talking about an increase
directly on many small businesses. And then, obviously, any kind
of tax increase on C corps are going to affect their universe, their
network of businesses as well, which obviously covers non-C corps
that serve those businesses, that work with those businesses and
work with their employees.
Mr. STAUBER. Well, thank you very much.
I think, Madam Chair, Ranking Member Luetkemeyer, I appre-
ciate you holding this hearing. And, you know, we have always
talked about small businesses are the engine of our economy. They
are the engine of main street. And we continue to tax them and
put devastating policies, not allowing them to succeed. We need to
protect small businesses and ensure they are the engine of our
economy.
And I yield back.
Chairwoman VELÁZQUEZ. The gentleman yields back.
The gentlelady from California, Ms. Chu, is recognized for 5 min-
utes.
Ms. CHU. Ms. Diop, I was so inspired to hear your story, and as
a Representative of Los Angeles area congressional district, I was
especially inspired. You faced obstacles that could have defeated so
many people, having been rejected from job interviews 53 times,
but you used your creativity and determination to use that $1,200
stimulus check that we sent out to start your own business.
And I was thrilled to hear that, because of your success, you
hired 5 people and are planning to hire 10 more—5 more for 10
people total.
So, Ms. Diop, in April, I reintroduced my legislation, H.R. 2680,
the PROGRESS Act, which would support the smallest of busi-
nesses, those without any employees, by helping them expand and
incentivize third-party investment. This legislation will create a re-
fundable payroll tax for non-employer firms that hire their first
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full-time employee and also an investment credit to encourage
third-party capital investment into non-employer firms. Non-em-
ployer firms are much more likely to be owned by women and fe-
male entrepreneurs on average and start out with roughly half the
capital as male entrepreneurs; hence, the legislation.
So can you talk about policies to level the playing field by having
such incentives for first-time employees as well as third-party in-
vestments could help entrepreneurs like you?
Ms. DIOP. Absolutely, and thank you so much for your question,
Representative Chu. I would definitely agree that incentives to
level the playing field, to use your words, and assisting new busi-
ness owners, as well as new women business owners, can certainly
be helpful because especially those of us who are new entre-
preneurs that are mothers, we have an entirely different set of
challenges to face when it comes to starting a business. So any
measures and incentives that could alleviate some of those to, for
example, in my case, give me access to—I had the $1,200 but any
other programs that provide grants or simply just access to re-
sources to further assist in starting a business in that way is cer-
tainly helpful.
Ms. CHU. Okay. Thank you for that.
Mr. Fogaty, thank you for your testimony. I am glad that you
mentioned that many small businesses struggle to access affordable
loans for smaller amounts in the private market, even some non-
profit lenders. In fact, you say that the access to capital is a chal-
lenge. And, of course, also some nonprofit lender options exist but
that they are typically at a higher interest rate and are less desir-
able than a bank loan.
So that is why I have been working for years to authorize the
Community Advantage Loan Program, which provides SBA backed
7(a) loans to this exact subset of small businesses, those who can-
not qualify for an affordable loan from a commercial bank or tradi-
tional 7(a) lender but need financing that is under $250,000. So I
am so pleased that the current Build Back Better framework does
include $275 million in funding for the Community Advantage Pro-
gram.
So can you elaborate on this gap in the lending market for small-
er dollar loans and what that means for small business borrowers?
And can you discuss how SBA programs like Community Advan-
tage, which leverages a government subsidy to offer favorable rates
to borrowers, can play in filling the gap?
Mr. FOGATY. Sure. The SBA loan programs, all of them, includ-
ing the Community Advantage, are key to small business growth,
and I am all for them, and they should certainly be supported. It
is certainly good legislation although, as I did say before, in Chi-
cago, especially on the southwest side, we have a number of ITIN
holders who cannot access most of those loan programs.
Every small business, every startup, when they are looking for
small loans, $20-, $30-, $40,000, it is really not worth the bank’s
while, in my opinion, to make those loans happen. So I would like
to see some way of incentivizing the banks, streamlining the re-
porting procedures, helping us as the business advisors make these
loans available to small businesses because there is that gap from
the small amount of startup funding when you get going, and then,
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when you are ready to expand, hire employees, you are not looking
for a million dollar loan. You are—many of my clients are looking
for $20-, $30,000, and there are just not a lot of choices out there.
Thank you for your question.
Ms. CHU. Thank you. I yield back.
Chairwoman VELÁZQUEZ. The gentlelady yields back.
Now we recognize the gentlelady from New York, Ms. Tenney, for
5 minutes.
Ms. TENNEY. Thank you, Chair Velázquez and Ranking Mem-
ber Luetkemeyer, for holding this minute. I am a small business
owner in New York. Our business is celebrating its 75th year. It
is a very difficult landscape in New York, high taxes, a lot of frus-
tration obviously with the employment situation now, but 95 per-
cent of the businesses and the people in my district actually got a
tax cut from the Tax Cuts and Jobs Act. Only the wealthiest actu-
ally received a tax increase under the last plan. It was a breather
for us to finally get some relief to reinvest in our communities, re-
invest in our business from, you know, the heavy tax burden that
is put on us by New York State.
But my question and my concern is that 60-plus or more percent-
age of these new jobs always come from the small business commu-
nity like ours.
We would love to expand and grow, and we know that venture
capital is really important. But one of the things that, in being the
heart of the industrial revolution started in my district when the
Erie Canal was started, is the loss of a lot of these manufacturing
jobs, a lot of jobs where—a lot of the manufacturing sector where
we have a lot of investment, but we need long-term solutions, and
we have long horizons that we need to meet which we are going
to stay in there for a longer period of time.
So we also provide a lot of jobs for people who don’t necessarily
have to be skilled initially, but we want to put the training in. We
take advantage of that if we can. And that is why, you know, one
of the initiatives I put through is the American Innovation and
Manufacturing Act, which would—and I am grateful for the bipar-
tisan sponsorship of this bill—which would give innovation to small
manufacturers and give them the flexible capital that they need. So
this is really—you know, we think this is a first step.
But I wanted to ask, first, Mr. Fogaty, because I know this is a
huge issue. It is a huge issue for my company. We are small. We
only have 70 employees. But what is—how important is it to sup-
port domestic manufacturing and that we need to streamline the
reporting regulations? You alluded to it in investing in small busi-
ness, but specifically dealing with, you know, the ability to thrive
in a State like New York where we have such heavy regulation?
Mr. FOGATY. Yeah. No manufacturer likes regulation, and they
have been having a very, very tough time of it. I would also—when
I talked about streamlining, I think that the manufacturers that I
work with would like to see some simplification, some streamlining
of the procurement process. The Systems Award Management sys-
tem, SAM, which is the federal government system for enrolling to
get federal contracts, last year, I had a couple of manufacturers
pivot pretty quickly from what they were doing to making PPE.
And this is a time when the masks were, you know, in great de-
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mand. And they were able to pivot quickly, but they were not able
to sell to the government in an expedited way.
And some of the systems, as I said, the SAM system. I have
helped a couple of blind entrepreneurs navigate the SAM system,
and it is—you know, I don’t want to be overly critical, but it is cer-
tainly in need of an update.
Ms. TENNEY. We got some of that criticism as well, you know.
Good intentions, but in practice, it was hard for a lot of our entre-
preneurs to really access it.
Mr. FOGATY. Yeah. Absolutely. And, again, we really, really
need to—I am sorry.
Ms. TENNEY. Go ahead. No. Go ahead.
Mr. FOGATY. I was going to say we really need to support do-
mestic manufacturing, American manufacturing through things
like on-the-job training programs so that we can bring a job seeker
in and the manufacturer, the employer does not have to look to
somebody who already has these skills. There is an incentive so
they can train them.
Ms. TENNEY. Yeah. We have invested heavily in that with our
business as well. Thank you.
Mr. Keating, you said in your testimony that the recovery from
the pandemic slowed dramatically in the third quarter of this year,
fiscal year 2021, and that real GDP grew at a mere 2 percent in
the third quarter. You said this was largely because of the con-
sumer pullback. Why do you think consumers lost confidence in the
recovery, and what steps can we do to restore confidence? Really
quickly because I only have 20 seconds left.
Mr. KEATING. I would suggest consumers—it was also business
investment pulled back. I think the signals again from Washington
were very troubling. In your State, I am one of the people that just
left. I moved to Florida from New York. I grew up there. The tax
and regulatory burden is a mess. That is what you have to deal
with to get things right in New York, and good luck. But, yeah,
those signals from Washington, I think, had a real effect.
Listen. I said for the longest time, and I know I am probably
talking too much, but after we experienced the bounce-back, my
question has always been, what are we going to do then on the pol-
icy front to make sure that we accelerate economic growth going
forward? And what we are seeing right now is not the answer.
Ms. TENNEY. Thank you. I really appreciate that.
Chairwoman VELÁZQUEZ. The gentlelady’s time has expired.
Now we recognize Mr. Evans from Pennsylvania for 5 minutes.
Mr. EVANS. Thank you, Madam Chair.
Ms. DeVane, it is great to have you here. And, in my younger
years before I became a Pennsylvania State legislator, I worked as
a job developer at the Urban League in Philadelphia. I have seen
tremendous work that your organization does to advance economic
opportunity for Black Americans and for those in underserved com-
munities.
Despite the toll the pandemic has taken on the economy here,
there has been some silver linings. Last year, Americans filed pa-
perwork to start 4.3 million new businesses. This is a 24-percent
increase from 2019. This 24-percent surge in entrepreneurship was
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largely concentrated in Black and Hispanic communities with high
median income.
Ms. DeVane, this is my question to you: What factors do you
think contribute to this increase in Black and Hispanic ownership
businesses?
Ms. DEVANE. Thank you very much for the question, Represent-
ative Evans. And, of course, once an Urban Leaguer, always an
Urban Leaguer. It is great to see you.
I think a couple of things have contributed to that. One is that
many people were laid off from their jobs and needed, quite frank-
ly, to find employment and took to entrepreneurship as an oppor-
tunity to gain some economic freedom and independence.
I think a number of other entrepreneurs came about because
they wanted to start their passion projects. They turned their side
hustles into businesses because the environment was right to do so.
There were grants available from private companies. There were
government grants available. There were PPP loans available for
those who could get them. I think, for many business owners, this
was an opportune time to delve into the workforce.
Mr. EVANS. Ms. DeVane, the National Urban League website
states the number one challenge facing 80 percent of small busi-
ness owners is lack of capital and cash flow. Has this changed dur-
ing the pandemic, and if so, how?
Ms. DEVANE. Yeah. We saw our business owners tremendously
affected by the pandemic. Most of them were already struggling be-
forehand. We have talked about that a little bit. They didn’t have
the back office, the fiscal systems, the operational systems, the
strategic management in place, and so, when the pandemic hit, it
was just exacerbated. And I think many of these businesses strug-
gled and shuttered their doors.
I think the ticket for many of these business owners is the tech-
nical assistance provided. Capital is sorely needed, and we have
talked about that. But capital always has to be undergirded by
coaching, by training and development. You don’t know what you
don’t know, as Ellie found out with the tax situation. So I think
for us, the National Urban League, our affiliate network through
our entrepreneurship centers have been providing the knowledge
and the tools and the skills that folks need to very develop those
operational systems, put fiscal management practices in place, and
to help people to strategize to grow their businesses and to avoid
this type of situation as they learn to pivot during crises.
Mr. EVANS. Ms. DeVane, many small businesses fail after just
a few years. Can you tell us what Congress can do to ensure many
of the businesses that started during the pandemic, especially mi-
nority businesses, continue to grow and provide jobs and opportuni-
ties in their communities?
Ms. DEVANE. Absolutely. I think that what those businesses
need—obviously, capital is always sorely needed, but in addition to
that, it is the technical assistance. I think that this SBA commu-
nity navigator program is a great example of what government can
do. This program will help to use trusted advisors, such as the
Urban League affiliates, to go out into communities where business
owners don’t have access to these tools, don’t understand what is
available to them through the government, and we can go out and
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talk about the resources that are available and drive people to the
SBA and to other organizations that can provide the skills that
they need to grow these businesses. We really need technical as-
sistance. We really need incubation programs that help people to
develop and scale and grow their businesses, and we need capital.
Mr. EVANS. I think I have a few more seconds left.
My home city of Philadelphia had a poverty rate of 24.5 percent
in 2020 with two-thirds of those at poverty being Black or His-
panic. How do we better reach Black and Hispanic entrepreneurs
in communities with lower median income?
Ms. DEVANE. We used trusted advisors like our Urban League
affiliates. We live and we work in those communities. We know
those communities. We provide wraparound services, not just en-
trepreneurship, through our Urban League affiliates. And those are
the folks that know business owners in those communities, those
are the ones that are trusted by the business owners, and those are
the ones that need to be going out like we are doing through our
Urban League affiliates, evangelizing, providing services, technical
assistance, and capital to those business owners. And I think that
is the ticket.
Mr. EVANS. Thank you.
I yield back the balance of my time, Madam Chair. Thank you.
Chairwoman VELÁZQUEZ. The gentleman yields back.
The gentlelady from California, Ms. Young Kim, Ranking Mem-
ber of the Subcommittee on Innovation, Entrepreneurship, and
Workforce Development, is recognized for 5 minutes.
Ms. YOUNG KIM. Thank you, Chairwoman.
I would like to go right into questioning Mr. Keating.
Can you elaborate on how continual lackluster job growth, like
we saw this past September, this incentivizes individuals from es-
tablishing their own small business?
Mr. KEATING. I am sorry. The lack of job growth; is that what
you are saying?
Ms. YOUNG KIM. Yeah. The lack of job growth.
Mr. KEATING. Yeah. I think what we have heard here is abso-
lutely correct. When you look at entrepreneurship, there are dif-
ferent types of entrepreneurs, right. Some dive into the waters;
others get pushed. And what we saw during the pandemic is, I
think, a combination of people being pushed, right. I put in my tes-
timony, Walt Disney once said, when you can’t get a job, you start
your own business, right, and that is what we have seen here.
But, also, I think the fact that people have experienced more
independent work or independence, and I think that has them
thinking about being their own—you know, owning their own busi-
ness, looking towards entrepreneurship. I think, in a very tough
time, those are some of the positives that hopefully are going to
come out of this.
Ms. YOUNG KIM. If we are not hitting the mark with expected
growth on GDP, how does that affect business confidence in the
medium to long term?
Mr. KEATING. Yeah. Well, there is uncertainty now, right, and
we saw the bounce-back, the snap-back, and we were pleased about
that, even with all the problems, supply chains and labor short-
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ages, and all of a sudden, we see GDP kind of put the brakes on
at 2 percent here.
Now, there are a whole host of issues, I think, that are in the
mix, including the Delta variant and so on and so on, but this just
raises more questions. That is not good for business. It is going to
raise more questions with investors, right, because we saw a part
of the story on GDP was the slowdown of business investment.
Business investment is critical now, and it is critical for future
growth. So that just adds more uncertainty into the equation, and
that has me concerned.
Ms. YOUNG KIM. Yeah. You know, I represent southern Cali-
fornia, and my home State of California has one of the highest un-
employment rates in the country, and unemployment claims keep
raising. I mean, it keeps going up, not decreasing. It is a concern
for us from the big State of California.
But, Mr. Keating, in your written testimony, you noted a MetLife
U.S. Chamber survey indicating 44 percent of small businesses are
finding it harder to fill the open positions. Can you tell us if you
have found a correlation between small businesses not having
available workers and the decline in the labor force? Why do you
think we are seeing a decrease in labor force participation?
Mr. KEATING. Yeah. That is—you know, when you look at that
unemployment number, I always tell people, go deeper when you
look at the unemployment rate because right now, we saw an im-
provement in the unemployment rate. Like, hey, wow, that is great,
right, but part of that improvement was people leaving the labor
force again.
Now, with the pandemic, everybody should be coming back, right,
so this is—again, it is an issue that has been around really since
the 2008 recession. Why have people not come back to the labor
force to the degree that they should? Some people say it is age, but
when you zero in on the work, you know, working age, 25 to 54,
we are still not back to where we should be, so that has me very
concerned.
I am hoping that these business application numbers maybe
point to people becoming entrepreneurs. That would be a net posi-
tive. But I am not quite sure what the answer is. There are a
whole host of things, I think, culturally, economically that are in
the mix here. And, again, that is something that I think we need
to wrestle with and really delve into.
Ms. YOUNG KIM. Something we need to continue to think about
and worry about, you know. One more question to you, Mr.
Keating. Some parts of California are experiencing some of the
highest average gas prices ever. In some parts where I am in
southern California, L.A., Orange County, they have hit a 13-year
high. Some place I saw close to $6 per gallon. Can you speak of
how supply chain bottlenecks and even the threat of higher taxes
can impact entrepreneurial behavior?
Mr. KEATING. Yeah, all those things. I mean, when you are
talking about gas prices, right, that is fundamental to everybody,
right, including small business owners. So, you know, California
does have to deal with its own regulatory issues and tax issues.
There is a reason why, even when gas prices are low, you guys still
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tend to be among the highest. So I think part of it is a California
issue.
Ms. YOUNG KIM. Yeah——
Mr. KEATING. But then, obviously, nationally, we are all deal-
ing with the bottlenecks and the shortcomings and so on. So, again,
I think it is a question of, yes, the private sector has got to work
through this, but we have got to make sure that government allows
private and doesn’t get in the way of doing that.
Ms. YOUNG KIM. Thank you very, very much.
I am happy to yield back the balance of my time.
Chairwoman VELÁZQUEZ. The gentlelady yields back.
Now we recognize the gentleman from Minnesota, Mr. Phillips,
Chairman of the Subcommittee on Oversight, Investigation, and
Regulations.
Mr. PHILLIPS. Thank you, Madam Chair.
Greetings, colleagues, and great gratitude to our witnesses for
being with us today.
We all know the pandemic is wreaked havoc on our small busi-
ness ecosystem, both in the U.S. and around the world. The recent
surge in entrepreneurial activity, however, is really a welcome sil-
ver lining, I think we would all agree. They represent seeds of opti-
mism, if you will. Now, we, Democrats and Republicans on this
committee, have to do everything we can to water those seeds and
ensure new businesses have access to the resources and mentorship
and assistance necessary for them to keep their doors open and
generate economic success.
And, you know, I think it is fair to say that all of us on this com-
mittee want to see Americans become self-sufficient. But too many
people who have dreams, entrepreneurial dreams and ideas, still
can’t access capital, mentorship, counsel, and assistance. I hope we
can unite around this.
And my first question is to you, Ms. DeVane. And I think it is
fair to say that human beings tend to seek out others who share
similarities. It is part of the human condition. It is also a phe-
nomenon that, in my estimation, can adversely affect already un-
derserved communities. A lot of the credited investors are a dis-
proportionate number, of course, in America are older, White, and
male, frankly, like me, and they tend to invest in entrepreneurs
who share similar backgrounds. And you have noted in your testi-
mony that this contributes to the very disparities we are talking
about between White and minority-owned business owners and
their abilities to access capital and counsel. So if you might just de-
tail for us policies that you think can directly address that issue
and help underserved communities with entrepreneurial dreams
and ideas gain access to credit and other federal resources.
Ms. DEVANE. Certainly. Thank you for the question, Represent-
ative Phillips. I think that one of the things that needs to be ad-
dressed—and we have done this at the National Urban League.
When the PPP program first came out and a lot of the Black-owned
and other minority-owned businesses didn’t have access, we worked
with the government to make sure that minority depository institu-
tions and CDFI, community-based and community mission-driven
institutions played a role and had access to those programs so that
they could provide those businesses with capital. Those are busi-
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nesses that operate in underserved communities. They are trusted
by those communities. Having support and the government sup-
porting those types of financial institutions is certainly a ticket.
Also, ensuring that SBA lenders, many who our business owners
did not have relationships with, have access to and are incentivized
to work with those small businesses and also to certainly provide
small dollar loans with low interest rates that are accessible and
reasonable for small businesses is something that the National
Urban League is very interested in making sure that our business
owners have access to.
Mr. PHILLIPS. Great.
If I could go a little further upstream, my friend and colleague
Representative Van Duyne from Texas and I were speaking the
other day about business day. I remember business day in my
school, elementary school, where we learned to start a little organi-
zation, whether it is selling lemonade or a service or printing T-
shirts, whatever you have. What do you think of that notion of try-
ing to establish entrepreneurial education as part of the public cur-
ricula around the country so we can teach kids who don’t have en-
trepreneurial models in their households or communities often, at
least the underpinnings of business and try to encourage a more
self-sufficient entrepreneurial generation? What do you think of
that notion?
Ms. DEVANE. That is a great question, and we are huge sup-
porters of that notion. In fact, we—you know, I live in New Ro-
chelle, a little bit upstate of New York City, and our high school
has an entrepreneurship program. And I am starting to see many
of those, and we are fully supportive of those types of programs.
It is never too early for a child to have an option not to go into
the workforce but to be financially independent through owning
their own business. And our Urban League affiliates are very suc-
cessful, many of them, with youth entrepreneurship programs
down in the elementary and the high school level.
As a matter of fact, our Los Angeles Urban League recently over
the summer held a small business camp for youth entrepreneurs,
and one of our entrepreneurs was extremely successful, just got
$10,000 through another organization pitching her business. And
so, we are very much in support of youth entrepreneurship. It is
never too early.
Mr. PHILLIPS. Great. Since I only have 15 seconds left, if the
three other witnesses would just raise your hand if you like that
idea of trying to inspire business days and entrepreneurship edu-
cation. Good. I like that. We don’t see too much unanimity these
days. Thank you all.
I yield back my time and am grateful to all of you for being with
us.
Chairwoman VELÁZQUEZ. The gentleman yields back.
The gentlelady from Texas, Ms. Van Duyne, Ranking Member of
the Subcommittee on Oversight, Investigations, and Regulations is
now recognized.
Ms. VAN DUYNE. Thank you very much, Ms. Chairwoman, and
I appreciate Congressman or Chairman Phillips, your shoutout.
Yeah. We have—it is amazing when you talk to each other how
much you actually do have in common. And I appreciate your last
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question and everybody agreeing on it. When you actually try to
find common ground, you can find it. So I appreciate that very
much and all of you being with us today.
Over the past 2 years, small businesses have struggled to survive
in this new economy, as my colleagues on the other side have
termed it. Now, as we look around, the environment our small
businesses and entrepreneurs are living in is dismal. Every eco-
nomic report we see falls short. GDP growth has slowed to 2 per-
cent. If you take into account what folks had, it is actually zero
percent that we have seen. Inflation has hit record levels, raising
prices for all Americans, and labor is in short supply.
At a time when small businesses need to focus on keeping their
shelves stocked, they must begin planning for the higher taxes and
increased regulations that come within the two historic new spend-
ing bills that some progressive Democrats are rushing to pass.
If we want to retain our uniquely American entrepreneurial spir-
it, the government shouldn’t be paying people to stay more at home
and to work and trying to regulate American businesses out of ex-
istence. Instead, we should be pushing for lower taxes and lower
barriers to entry for entrepreneurs.
Mr. Keating, I really appreciate your comments here today. A re-
cent World Economic Forum report pointed out that supply chain
barriers are hard to overcome for small businesses due to the sig-
nificant capital investments needed. You know, we have seen Tar-
get, Walmart, others are able to figure it out. They have got other
avenues that small businesses simply don’t. So, in your view, how
do regulations impact small business supply chains and their abil-
ity to adjust compared with larger firms?
Mr. KEATING. Well, by definition, greater regulation is going to
make you less innovative, less—there is less agility there to re-
spond as needed, so that is a big part of the supply chain chal-
lenges.
Now, on the positive side, to go positive for a moment, one of the
things about small businesses is that they are more agile, right, so
they can work to find ways to perhaps meet, you know, the needs
of their customers where bigger businesses might be a little slower.
I am not denying your point. Your point is spot on in terms of the
Walmarts and Amazons and so on, but the great thing about being
a small business owner and entrepreneur is that you have that
ability to pivot, and we have seen that in this pandemic.
So the challenges are there. More regulation does not help. It
hinders it. But being an entrepreneur in and of itself allows you
to kind of do some things that a larger business can’t.
Ms. VAN DUYNE. We just left—it is ironic because I just left.
I am on the Transportation and Infrastructure committee as well,
and we just had a focus on supply chain issues. We had folks there
with trucking, with shipping logistics, and just talking about some
of the barriers that government has actually put in their way of
being able to be more productive, more efficient, and it is actually
hurting the supply chain.
One of the things that they discussed was the vaccine mandates.
And, obviously, we are in a different moment laborwise. So we
spoke with businesses of all sizes, and a common concern is the up-
coming vaccine mandate that is being imposed by the Biden admin-
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istration. How do you think this mandate will affect small busi-
nesses?
Mr. KEATING. Well, that is the question, isn’t it? And that is
part of the problem is that we don’t know. You know, our organiza-
tion is—we say we are pro-vaccine, antimandate. Businesses are
pretty good at figuring out their own situation and maybe how they
might have to deal with certain employees in a certain way, right.
When government steps in and does the mandate thing, that
doesn’t—you know, you don’t have that ability to now deal with
your particular situation and be able to deal with your particular
employees. The flexibility is needed, I think, for small business
owners in a big way.
Ms. VAN DUYNE. I mean, the concern was—and I think you
know our Transportation Secretary, Pete Buttigieg, was very cal-
lous in his response. The items in question are not simply Christ-
mas gifts or toys. I mean, we are talking about liquid oxygen. We
are talking about seeds and fertilizer to be able to put food into the
ground for crops. We are talking——
Mr. KEATING. Pharmaceuticals. I mean——
Ms. VAN DUYNE. Pharmaceuticals, you know, things to be able
to keep people’s homes warm that don’t live on the main grid. Can
you explain to me some of these logistics concerns are moving for-
ward, and if you have, in the next 18 seconds, any kind of federal
regulations that you think are impeding our progress?
Mr. KEATING. Oh, my goodness. Off the top of my head, I can’t
give you an exact regulation, but I think the key point that I would
like to make is all of those industries you mentioned and every sin-
gle other one are overwhelmingly populated by small businesses.
So it is very important for lawmakers to understand that, whether
you are talking about trucking, pharmaceuticals, all the way down
the line, every one of those is about small businesses. The numbers
are there. I mean, I can provide more data if you want, or you can
go to our——
Chairwoman VELÁZQUEZ. Time has expired.
Mr. KEATING. Sorry.
Chairwoman VELÁZQUEZ. The gentlelady from Pennsylvania,
Ms. Houlahan, is recognized for 5 minutes.
Ms. HOULAHAN. Thank you, Madam Chair.
And thank you very much to all of you all for coming and joining
us today.
My questions are going to be focused on ESG or environmental,
social, and governance ideas, which I think are something that has
gained a lot of traction over the past 15 or so years and across the
nation. And, especially within my Commonwealth of Pennsylvania,
business incubators have been serving as an important part to help
startups and individual entrepreneurs scale their businesses, and
they provide a range of services, as we have talked about, from
legal advice to venture capital funding.
But studies have shown and the pandemic has borne out that
companies that have a strong environmental and social governance
aspect or criteria to them have outperformed companies that did
not during this very critical time. And, in fact, this initiative was
started on the heels of 2007 and 2008’s financial meltdown.
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And so, as the cofounder, along with Representative Phillips, of
the Stakeholder Capitalism Caucus and as an entrepreneur myself
who has built a lot of CSR ESG companies, I really acutely and
personally understand the importance of ESG as a model for inves-
tors to evaluate companies, for employees to decide which ones to
work for, for communities to embrace these kinds of companies, for
all of the different stakeholders who are involved in these small
business enterprises to be able to understand what a good company
looks like.
So, starting with Mr. Keating, if I could, could I ask you to speak
to any efforts that the incubator is acting on to encourage this kind
of model for small businesses? And, if it is, can you discuss why
this model is important during the midst of a pandemic or, frankly,
at any point in time? And if the incubator does not encourage ESG
criteria, can you explain why not?
Mr. KEATING. I am not an expert in this area at all. The only
thing I will say generally, as an economist, that I think it is great
that we have all sorts of different business models out there. And,
ultimately, consumer sovereignty, consumers in the end decide
what works and what doesn’t in the marketplace, and we will see
that with these types of companies and other more traditional or
innovative business models.
Ms. HOULAHAN. I think it is beyond the consumer. I think it
is also investors. I think it is also employees. I think it is kind of
the entire ecosystem, the entire stakeholder ecosystem that makes
the determination. And, as I mentioned, this kind of a company has
really—I hesitate to say flourished because I don’t think many of
us have flourished during this difficult time, but I think they have
proved more resilient than any other kind of corporation or struc-
ture.
So I would like to throw that open to anybody else on the panel.
Ms. Diop, perhaps if you have any input in that, whether or not
you are aware of these kinds of ideas and whether or not you are
embracing of them.
Ms. DIOP. Thank you so much for your question, Ms. Houlahan.
Certainly, it is not my area of expertise, but I am from Los Ange-
les, California, and environmental measures are very important to
us out there and me personally. So I definitely think that access
to more information about these types of programs so that small
business owners or aspiring business owners could implement them
into their business model would certainly be helpful. It would cer-
tainly be something that could even increase the awareness of
these types of programs so that more people could participate.
Ms. HOULAHAN. Thank you.
Does anyone else on the panel have any input into this question
before I move on?
Mr. FOGATY. Yeah. This is Andrew. I would just like to say I
agree with the points that have been made. Most of our entre-
preneurs, especially the younger ones, are very sensitive to climate
change and the challenges that they create. One of my client com-
panies, Omni Ecosystems, was started by Molly Meyer. She has de-
veloped a low weight soil. This is a little bit out of my league, the
science stuff, but it is a low weight soil so that now rooftop gardens
or urban farms are much more viable options because they don’t—
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it is lightweight soil, and it retains moisture. So, yeah, absolutely
climate change and being aware of the ecological impact is very im-
portant among——
Ms. HOULAHAN. Thank you, sir. And, as a point of clarification,
although the E, obviously, in the ESG is for environmental, the S
and the G are for social and governance as well, and they have ev-
erything as well to do with how a company is structured, whether
or not all employees or some employees are included in things like
equity decisions or whether the board is inclusive, those kinds of
things, as well as making sure that we are thinking about the
whole impact that a business has and that there aren’t
externalities that are passed on to other organizations.
And, with that, I will yield back my time. I really appreciate you
guys and the opportunity to speak to you.
Chairwoman VELÁZQUEZ. The gentlelady yields back.
Now we recognize the gentleman from New York, Mr. Garbarino,
for 5 minutes.
Mr. GARBARINO. Thank you, Madam Chair, and to the Ranking
Member for hosting this hearing today, and thank you to the wit-
nesses for being here.
Mr. Fogaty, I have a question for you. You assist small busi-
nesses, business owners with business planning, market research,
and financing. In the current economic turmoil of labor shortages,
price spikes, supply chain disruptions, and inflation, what advice
are you giving them?
Mr. FOGATY. Well, it very much depends on what type of busi-
ness that I am dealing with. Over the past 18 months or so, we
have been very much focused on keeping—on having businesses
survive, so things like EIDL and the Paycheck Protection Program
and that type of thing. Startup funding is—and we are kind of re-
peating ourselves here, but startup funding is very much a chal-
lenge. I am sure the other guests on the panel would agree, and
small business funding to grow, small loans below $50,000, are also
very difficult to come by.
So, as far as what I would—I would say that, for Congress, I
would like to find some way, I would hope you would find some
way of incentivizing banks to lend more to startups and in smaller
amounts, and that is what I am really hoping. But, yeah, for the
past 18 months, it has been a lot of work with government pro-
grams to make sure that the companies survive.
Mr. GARBARINO. Okay. And then I imagine anybody dealing
with getting companies to survive, a lot of businesses prepandemic
did not have an online presence, and it was, I guess, for a lot of
them to survive, they had to convert to at least having some sort
of online presence.
I am the Ranking Member on the Homeland Security Cybersecu-
rity Committee as well, you know, and we have seen, especially in
the past couple years, a lot of ransomware attacks, almost 50 per-
cent of them, are targeted at small businesses in a small amount,
but, you know, it is a small amount in the grand scheme of things
but not to a small business, who has to pay a couple thousand dol-
lars for a ransom.
What are you—or any of the other witnesses on the panel
today—what are you saying to clients or prospective clients or
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small business owners on how to deal with this issue because a lot
of people don’t understand cybersecurity? It is not at the top of
their list when they are starting a business.
Mr. FOGATY. The Illinois Small Business Development Centers,
of which we are a part, we do host cybersecurity experts who have
the—where they will come and speak to the small businesses. And,
actually, the gallery incubator in Evanston where I am a volunteer
mentor, they are—one of the founders is very savvy in the cyberse-
curity realm. So, yeah, I can’t agree with you more. Cybersecurity
is key. And certainly an online presence is absolutely vital to any
small business.
Mr. GARBARINO. And anybody else can jump in, but I would
think most new people who start a business now realize they have
to have an online business, but I guess some of the small busi-
nesses that have been around for a while, it is something they
never had to do before. I don’t know if Mr. Keating or Ms. DeVane
or Ms. Diop want to join in, you know. What are you seeing with
current small businesses, and how are they doing making this
change?
Ms. DEVANE. Sure. I would definitely add that you are a hun-
dred percent on point. One of the things that we saw with our
small businesses, many of our businesses are more mature in age
and more traditional and really aren’t savvy or were not savvy with
social media and with technological changes. So, it was a real eye
opener for them, and we really had to help them transition into the
digital world. Some of that was by necessity because everything
had to be Zoom, and nothing was in person, and everybody has
phones.
But the thing is that we really had to take the type to train them
with those tools, branding, marketing your business in a world that
is virtual, and social media was very important. And the other
thing is through the CARES Act funding that we had, we ran
about seven different webinars and workshops for businesses to
help them with COVID, and one of those was on cybersecurity. We
still provide access to that through all of our affiliates and online
through the National Urban League’s website, so folks can go in
any time and look at that information.
Mr. KEATING. If I could add, what is fascinating is some of the
survey results that we have had in terms of the impact that this
technology, social media, has had on starting up a business. You
know, one of the results, we saw that 80 percent of people said that
they were able to start up their business because of the affordable
nature of online advertising. So it is not just—obviously, it is help-
ing existing businesses, but it is also boosting startups, which is a
very exciting aspect of this.
Mr. GARBARINO. I appreciate that. And I believe I am out of
time, so I yield back.
Chairwoman VELÁZQUEZ. The gentleman yields back.
Now we recognize the gentlelady from Florida, Ms. Salazar, for
5 minutes.
Ms. SALAZAR. Thank you, Chairman Velázquez and Ranking
Member Luetkemeyer, for holding this important hearing.
This comes at a pivotal time for countless small business owners
and their families nationwide. And I wanted to thank all the guests
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that have been here and exposing their testimony, specifically, Mr.
Raymond Keating. You were mentioning how constructive pro-im-
migration policy agenda would be good for the economy, and I com-
pletely agree, so I wanted to ask you, what are the major changes
to the immigration system that you think we should be imple-
menting in this country directly to improve the small business com-
munity space?
Mr. KEATING. Well, I think that, number one, it is important
to understand that foreign-born individuals have a much higher
rate of entrepreneurship than native born. And that shouldn’t sur-
prise us because, you know, it is pretty risky to move from one
country to another.
Having said that, I think some sort of entrepreneurial visa, right,
is critical. Why aren’t we offering this and attracting entrepreneurs
from around the world to the United States? There is no downside.
I can’t figure out any kind of downside, so I think that is step one.
And then, obviously, step two is just getting more—our immigra-
tion policy more in tune with labor needs, you know. Right now,
we are coming out of the pandemic, but not too far down the road,
we are going to have additional problems in terms of working age
population and so on, and at the other lower end of skills and the
upper end of skills. So I think immigration can help us with that
issue in a big way, but the entrepreneurship aspect is critical.
Ms. SALAZAR. And, when you are talking about labor, you are
talking about basically merit-based visas. What would be the ideal
scenario, according to you?
Mr. KEATING. Yeah. Well, I think that merit-based, the idea
that this is what I want to do, I can do—what I can contribute to
the United States as—you know, whether it is high-tech visas or,
again, at the lower end of the skill level. So I think it is—we just
have to be more cognizant of the realities in our economy. I mean,
listen. I am an economist, so I like to—I would love our immigra-
tion policy to be focused more on economics than some of the poli-
tics that we hear being tossed about. And I think, when you look
at the economics of immigration, listen. Every poll of economists al-
ways—they always come out lopsided that immigration is a net
economic plus for our country. And it can be in all sorts of ways,
whether it is lower skilled workers, as I said, high skilled or entre-
preneurs.
Ms. SALAZAR. So why do you think that we have not been able
to pay attention to what the marketplace is saying? You say that
you are an economist. How do you interpret?
Mr. KEATING. Well, I think—again—yeah. I think the—I think
it is politics overruling economics, unfortunately. I think—listen.
We also—we have history. We are an entrepreneurial nation. We
are a pro-immigration nation. We are a nation of immigrants; it is
true. But we have also had our battles along the way where we
have not been, at various times, you know, exactly friendly towards
immigrants. So I think, to the extent that we can talk about how
immigrant workers, for example, new immigrants coming to this
country are willing to work, they are complementary to the people
that are already here.
So, for the most part, overwhelmingly—I mean, it is not even
close—they are not taking jobs from somebody else. They are add-
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ing to the economy. And that is the part, I think, that we econo-
mists fall down on, right. We have to tell people that additional
producers, additional consumers, and additional entrepreneurs all
lead to economic growth. It is not a case that the pie is only so big,
and we are going to divvy it up. So I think it is talking more about
growth and how immigration can help.
Ms. SALAZAR. And, finally, in the last minute that I have, I
wanted to go back to the line that you said, that some people be-
lieve that new immigrants or newcomers are going to be taking
jobs away from Americans. Why isn’t that true?
Mr. KEATING. Because, as I said, they—what you see in the re-
search and, you know, in terms of economics straightforward is
that they come in and largely are doing work that other people
aren’t doing. Either they don’t want to do it, or we don’t have
enough people doing it. So, again, in filling those needs, those va-
cancies, that is how we say they are complementary workers. So,
therefore, they are helping other people to be more productive. So
it is a good news thing for everybody. But sometimes you would
never understand—well, oftentimes, you don’t understand that, lis-
tening to the politics of it.
So, again, I think if we can get back to understanding the role
that immigrants have in the workforce and their role in entrepre-
neurship, I think we can make some great headway in getting to
a more constructive immigration policy.
Ms. SALAZAR. So I like this complementary workers.
Mr. KEATING. Yes. That is what they do, yeah.
Ms. SALAZAR. Very good. Well, sir, thank you for explaining
that to us. So you are telling me that it is up to us, the public serv-
ants, the people that have been elected, the politicians, to learn
and to explain to the rest of the American population that the im-
migrants are coming to give, not to take away?
Mr. KEATING. Absolutely. And, to the extent that we have polit-
ical leaders that can do that, that is a huge plus to talk about,
again, being a welcoming society and talking about how this is pro-
growth, and it is good for everybody.
Ms. SALAZAR. Thank you.
I yield back.
Chairwoman VELÁZQUEZ. The gentlelady yields back.
Thank you so very much to all the witnesses.
Mr. Keating, I didn’t have time to ask you a question, but I real-
ly appreciate your answers to Ms. Salazar regarding immigration.
I think this is a part of a discussion that needs to happen among
Members of Congress and that we approach this issue with the
honesty that it requires.
With that, I want to thank all of the witnesses for being here
today. Your testimony is proof that, even in the darkest of times,
the spirit of America’s entrepreneurs shines bright. The post-pan-
demic economy presents many opportunities and challenges for
small business owners. As the voice of small businesses in Wash-
ington, we must work as a committee to support these new busi-
ness owners and help their firms flourish. These new businesses
will be critical as we work towards full economic recovery and fu-
ture growth. I look forward to working with Committee Members
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to ensure that small businesses have the resources they need to
navigate this changing economy.
I ask unanimous consent that the article and report by the
Kauffman Foundation entitled ‘‘America’s New Business Plan’’ is
submitted for the record.
With that, I will ask unanimous consent that Members have 5
legislative days to submit statements and supporting materials for
the record.
Without objection, so ordered.
If there is no further business to come before the committee, we
are adjourned. Thank you.
[Whereupon, at 12:06 p.m., the committee was adjourned.]
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APPENDIX
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Æ
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File and source
- File
- CHRG-117hhrg45954.pdf
- Size
- 52,012,863 bytes
- SHA-256
- 2837869ee42403c3b46fecaebea44c3117de1a24119a383c40c398e3bbd8c30b
- Our copy
- CHRG-117hhrg45954.pdf
- Original
- www.govinfo.gov