Main Street Realities: Examining the Current Economic Landscape in America (House Small Business Committee hearing, July 10, 2024)

Summary

Transcript of a July 10, 2024 House Small Business Committee hearing, Small Business Committee Document Number 118-055, on economic conditions for small businesses. Chairman Roger Williams presided from 10:00 a.m. to 11:42 a.m., and Judy Chu gave the minority opening statement. Witnesses were Hazel Davis of Jefferson Bank in San Antonio, Steve Martinez of Tradewinds General Contracting, Inc. in Boise, James D. Ewing, Jr. of COE Distributing and Tom McCarthy of Motiv Space Systems in Pasadena. The appendix adds a letter from Associated Builders and Contractors.

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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  MAIN STREET REALITIES: EXAMINING THE
CURRENT ECONOMIC LANDSCAPE IN AMERICA


                      HEARING
                           BEFORE THE


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


                         HEARING HELD
                          JULY 10, 2024




         Small Business Committee Document Number 118–055
           Available via the GPO Website: www.govinfo.gov




                U.S. GOVERNMENT PUBLISHING OFFICE
56–137                  WASHINGTON : 2024
HOUSE COMMITTEE ON SMALL BUSINESS
    ROGER WILLIAMS, Texas, Chairman
     BLAINE LUETKEMEYER, Missouri
         PETE STAUBER, Minnesota
        DAN MEUSER, Pennsylvania
         BETH VAN DUYNE, Texas
          MARIA SALAZAR, Florida
          TRACEY MANN, Kansas
            JAKE ELLZEY, Texas
        MARC MOLINARO, New York
          MARK ALFORD, Missouri
            ELI CRANE, Arizona
           AARON BEAN, Florida
           WESLEY HUNT, Texas
          NICK LALOTA, New York
          CELESTE MALOY, Utah
NYDIA VELÁZQUEZ, New York, Ranking Member
          JARED GOLDEN, Maine
        DEAN PHILLIPS, Minnesota
          GREG LANDSMAN, Ohio
 MARIE GLUESENKAMP PEREZ, Washington
        SHRI THANEDAR, Michigan
      MORGAN MCGARVEY, Kentucky
       HILLARY SCHOLTEN, Michigan
           JUDY CHU, California
         SHARICE DAVIDS, Kansas
      CHRIS PAPPAS, New Hampshire

     BEN JOHNSON, Majority Staff Director
     MELISSA JUNG, Minority Staff Director




                      (II)
                                                 CONTENTS
                                              OPENING STATEMENTS
                                                                                                                                  Page
Hon. Roger Williams ................................................................................................                1
Hon. Judy Chu .........................................................................................................             2

                                                         WITNESSES
Ms. Hazel Davis, Vice President, Compliance Manager & Corporate Responsi-
 bility Officer, Jefferson Bank, San Antonio, TX ................................................                                   5
Mr. Steve Martinez, President, Tradewinds General Contracting, Inc., Boise,
 ID ...........................................................................................................................     7
Mr. James D. Ewing, Jr., Chairman & Chief Executive Officer, COE Distrib-
 uting, Smock, PA ..................................................................................................                8
Mr. Tom McCarthy, Vice President & Co-Founder, Motiv Space Systems,
 Pasadena, CA .......................................................................................................              10

                                                          APPENDIX
Prepared Statements:
    Ms. Hazel Davis, Vice President, Compliance Manager & Corporate Re-
      sponsibility Officer, Jefferson Bank, San Antonio, TX ..............................                                         35
    Mr. Steve Martinez, President, Tradewinds General Contracting, Inc.,
      Boise, ID, with supporting documents ........................................................                                40
    Mr. James D. Ewing, Jr., Chairman & Chief Executive Officer, COE
      Distributing, Smock, PA ...............................................................................                      52
    Mr. Tom McCarthy, Vice President & Co-Founder, Motiv Space Systems,
      Pasadena, CA ................................................................................................                55
Questions for the Record:
    None.
Answers for the Record:
    None.
Additional Material for the Record:
    Associated Builders and Contractors (ABC) ...................................................                                  57




                                                                 (III)
MAIN STREET REALITIES: EXAMINING THE
 CURRENT   ECONOMIC    LANDSCAPE  IN
 AMERICA

                   WEDNESDAY, JULY 10, 2024

                         HOUSE OF REPRESENTATIVES,
                      COMMITTEE ON SMALL BUSINESS,
                                                  Washington, DC.
   The Committee met, pursuant to call, at 10:00 a.m., in Room
2360, Rayburn House Office Building, Hon. Roger Williams [chair-
man of the Committee] presiding.
   Present: Representatives Williams, Luetkemeyer, Stauber,
Meuser, Van Duyne, Molinaro, Bean, LaLota, Maloy, Landsman,
McGarvey, Gluesenkamp Perez, Scholten, Thanedar, Chu, and Da-
vids.
   Chairman WILLIAMS. Before we get started, I would like to rec-
ognize myself. If you will rise, we will say the prayer and the
pledge.
   Heavenly father, God of all people, thank you for allowing us to
meet today and the [inaudible.] to share great thanks for our great
country. Thank you for being with all of us the best day of our
lives. In your name we pray. Amen.
   Join me in the pledge. I pledge allegiance to the Flag of the
United States of America, and to the Republic for which it stands,
one nation, under God, indivisible, with liberty and justice for all.
   Good morning to everybody and I now call the Committee on
Small Business to order. I am authorized to declare recess of Com-
mittee at any time.
   I now recognize myself for my opening statement and I want to
welcome today’s hearing all of you again for being here, where we
will be focusing on the current economic realities impacting Main
Street America. These types of hearing are especially important to
our Committee because we get the chance to hear directly from our
small businesses back home.
   First, I want to thank our witnesses for being here today. I know
all of you have traveled a long way, some as far as Texas, to share
your stories with us and everyone here greatly appreciates it.
   This Committee serves as the voice for Main Street America in
Washington. Each and every day, we strive to learn more about the
current state of small business from the people who know it best,
our nation’s job creators. There is no doubt that in the first half
of 2024, they have experienced many ups and downs. I hold the
opinion of starting a small business is the definition of the Amer-
ican Dream. Part of what makes America so special is it is a place
                                 (1)
                                 2

where anyone from any background can take a risk, bet on them-
selves and bring a new service or product to the marketplace.
   Our economy is dependent upon small businesses. And it is our
job here in Washington to ensure that they have a fighting chance.
Unfortunately, many small businesses are dealing with a variety of
challenges, many of which are the result of a bad policy decisions.
   Main Street America has been getting bombarded with regula-
tions that are causing small business firms to play defense. Just
look at the numbers. Since President Biden took office, his admin-
istration has instituted new rules that are estimated to cost over
$1.6 trillion. Every dollar spent on additional compliance staff
could have been used to bolster their core operations, and every
hour dedicated to reading and understanding the new regulations
that have been used to discover new growth and opportunities. And
worst of all, when a business owner fears expensive new mandates
just beyond the horizon they hold up hiring that extra employee,
or buying that new piece of equipment.
   America’s entrepreneurs have had to confront historic challenges,
the COVID-19 pandemic, out-of-control inflation, broken supply
chains, high interest rates and labor shortages is making it hard
to find quality employees. But as small businesses have done
countless times before, they have endured. Those of us here in
Washington must fight back against these policies which have been
strangling America’s job creators.
   As we listen to the state of small business in America, we salute
the entrepreneurs who continue to fight and give selflessly back to
their communities. This committee is here to help them and make
life a little bit easier and we mean that, we really do.
   I am excited to have all of you here with us today. And I am very
much looking forward to today’s hearing.
   With that, I will yield for opening remarks. Congressman Chu,
please.
   Ms. CHU. Thank you, Mr. Chair, for this important opportunity
to discuss the realities of our economy and hear from those who do
incredible work directly in the communities we represent. Hearings
like this allows us to take stock of how our efforts in Congress ef-
fect those on main street.
   Four years ago, small businesses had to navigate an unprece-
dented array of challenges stemming from the COVID-19 pandemic
from public health shutdowns to supply chain disruptions, labor
shortages and rising costs. Yet, despite these obstacles, small busi-
nesses have demonstrated extraordinary resilience.
   Obstacles remain, but our strong economic headline numbers
clearly show slowing inflation, low unemployment and sustained
growth. Looking around there is much to be proud of. We have
seen a remarkable surge in small business creation since 2020, re-
versing decades of decline. It has become clear this isn’t just an
anomaly due to the pandemic, it is a trend that is continuing, even
today, 4 years later. This terrible small business boon shows that
so many Americans still have hope for the future and trust that we
are moving in the right direction.
   The ripples of the current startup boom will reverberate for dec-
ades, delivering wealth creation for families, opportunities for its
                                  3

workers, and economic development for communities across the
country.
    This is especially significant because many who have historically
been underrepresented in the business community, including
women and minority business owners, are the ones who dispropor-
tionately power this small business boom, and reap the broad bene-
fits delivered when we build the economy from the bottom up and
the middle out.
    The resilience in our economy continues to overcome headwinds,
primarily because of investments made by the Democratic Congress
and the Biden-Harris administration over the past several years.
This transformational fiscal policy started with the American Res-
cue Plan, which played a critical role in stabilizing our economy
during the pandemic. By extending support to small businesses and
providing direct stimulus to American families we kept millions of
businesses afloat, all while providing relief to the unemployed and
cutting child poverty in half through the expanded Child Tax Cred-
it.
    This was complemented by historic bipartisan legislation when
we passed the Infrastructure Investment and Jobs Act and the
CHIPS and Science Act—two landmark laws that are providing
long-term investments to strengthen our supply chains, rebuild our
country’s road and bridges, and lay the foundation for a more resil-
ient and inclusive economy. These investments are supporting the
growth and the flourishing of small firms and new startups.
    Finally, Democrats and the Biden Harris administration pass the
Inflation Reduction Act which included the largest ever investment
in fighting climate change and provisions to further incentivize do-
mestic manufacturing and lower cost for everything from
healthcare to electricity.
    While there is no doubt these laws will provide a boost for small
firms into the foreseeable future, there is still much more to be
done.
    Access to capital remains a challenge, and the high cost of bor-
rowing poses a long-term threat to small businesses. In this high
interest rate environment, SBA’s capital access programs are espe-
cially important for connecting small businesses to affordable fi-
nancing.
    Additionally, the government can continue to do more to
incentivize innovation from reversing disastrous provisions of the
Tax Cuts and Jobs Act to extending our core SBA programs, in-
cluding SBIR and STTR.
    Finally, investments in families will continue to strengthen small
businesses, whether it is the expanded Child Tax Credit or contin-
ued investment in childcare, these actions can help build a more
sustainable and resilient business environment, while delivering
for American families. It is crucial that we continue to support
these business through thoughtful legislation.
    While the accomplishments of Democrats in Congress and the
Biden-Harris administration have provided a strong foundation, we
must continue to build on this progress, ensuring that small busi-
nesses can thrive in a stable and supportive economic environment.
    Thank you, and I look forward to our discussion today. And I
yield back.
                                 4

   Chairman WILLIAMS. The gentlelady yields back.
   And I will now introduce our witnesses. Our first witness here
with us today is Ms. Hazel Davis. Ms. Davis is the vice president,
compliance manager and corporate responsibility officer for Jeffer-
son Bank, located in San Antonio, Texas. Ms. Davis joined Jeffer-
son Bank in 2013 as vice president of fair lending and CRA officer
before transitioning to her current position because of her regu-
latory compliance expertise. Prior to joining Jefferson Bank she
was compliance officer at Frost Bank and Hilltop Bank. Ms. Davis
currently serves as a Board Member of the Texas Bankers Associa-
tion and recently served as the president of Financial Women in
Texas. Ms. Davis attended Chadron.
   Ms. DAVIS. Chadron.
   Chairman WILLIAMS. Chadron State College where she earned
her Bachelor of Arts degree in business administration and ac-
counting, then attended the Graduate School of Banking at the
University of Wisconsin in Madison. I want to thank you for being
with us today and I am looking forward to today’s important con-
versation.
   Our next witness here with us today is Mr. Steve Martinez. Mr.
Martinez is the president of Tradewinds and General Contracting,
Incorporated located in Boise, Ohio. Founded by his parents in
1980 Tradewinds and General Contracting has always been a part
of Mr. Martinez’s life, whether it was completing a small task as
a kid, up to framing houses in college.
   After graduating from college, Mr. Martinez began working for
the business full-time, becoming president after 6 years with the
company. Mr. Martinez has won numerous awards, including build-
er of the year multiple times from both local and State building as-
sociations, and has received recognition from the National Associa-
tion of Home Builders. Mr. Martinez graduated from Boise State
University, home of the Broncos, right, with a bachelor of business
administration. I want to thank you for being here today and I look
forward to our conversation.
   Our next witness here with us today is J.D. Ewing. Mr. Ewing
is the Chairman and CEO of COE Distributing, located in Smock,
Pennsylvania. COE Distributing is the largest wholesale office fur-
niture distributor in the U.S. and the Caribbean. Mr. Ewing took
over the business when he was just 19 years old, and as the sole
employee of the company becoming the third-generation owner,
now with over 100 employees spread out across three States, the
company has been consistently recognized among them fastest-
growing private companies in America. In addition to serving as a
Board Member for the Community Foundation of Fayette County,
Mr. Ewing serves on the National Association of Wholesalers’ Insti-
tute for Distribution Excellence as Chairman of the Board. Mr.
Ewing graduated from Penn State University where he studied
business. Thank you for joining with us today and look forward to
our conversation.
   And I now recognize the Ranking Member Chu to introduce the
last witness appearing before us today.
   Ms. CHU. Thank you, Mr. Chair. I am so honored to introduce
our final witness today, my constituent, Tom McCarthy, the co-
founder and vice president of business development at Motiv Space
                                 5

Systems, which is located in Pasadena, of course, in my district.
Tom spent 11 years at NASA’s JPL, also in my district. And he is
an electronics engineer designing motion control systems for rovers
and robotic systems for extreme environments. He then spent 4
years as the director of business development at the Missile De-
fense Agency before cofounding Motiv in 2024.
   Motiv was founded on the belief that space-based robotic systems
could be produced more efficiently and with a higher level of qual-
ity by a small business and they were quickly proven right. They
earned and successfully executed a range of contracts at NASA, in-
cluding designing the robotic arm used on the Mars 2020 Persever-
ance Rover. They are also the recipients of several SBIR awards
from the SBA and are using that investment to innovate the next
generation of space exploration.
   Thank you for joining us, Mr. McCarthy.
   Chairman WILLIAMS. And again, thank you all for being here
today. And before recognizing the witnesses, I would like to remind
them that oral testimony is restricted to 5 minutes in length. That
is a big number for us, we want to stick with that.
   If you see the light turn red in front of you, that means your 5
minutes is up. And you should conclude your remarks immediately.
And if you keep going, you are going to hear this. That means stop,
okay? And so with that in mind, I now recognize Ms. Davis for her
5-minute opening remarks.

STATEMENTS OF HAZEL DAVIS, VICE PRESIDENT, COMPLI-
 ANCE MANAGER & CORPORATE RESPONSIBILITY OFFICER,
 JEFFERSON BANK, ON BEHALF OF TEXAS BANKERS’ ASSO-
 CIATION; STEVE MARTINEZ, PRESIDENT, TRADEWINDS GEN-
 ERAL CONTRACTING, INC., ON BEHALF OF NATIONAL ASSO-
 CIATION OF HOME BUILDERS OF THE UNITED STATES;
 JAMES D. EWING, JR., CHAIRMAN & CEO, COE DISTRIB-
 UTING, ON BEHALF OF JMJS, INC AND COE DISTRIBUTING;
 AND TOM MCCARTHY, VP, CO-FOUNDER, MOTIV SPACE SYS-
 TEMS, ON BEHALF OF MOTIV SPACE SYSTEMS.

                 STATEMENT OF HAZEL DAVIS
   Ms. DAVIS. Thank you, Chairman Williams, distinguished Mem-
bers of the Committee, my name is Hazel Davis, I am vice presi-
dent, compliance manager and corporate responsibility officer for
Jefferson Bank, a cornerstone of the San Antonio community since
1946. With assets totaling approximately $3 billion, we serve the
dynamic and growing region of San Antonio-Austin, which encom-
passes 4.8 million people. We specialize in commercial lending and
consumer mortgages.
   San Antonio, a city where 64 percent of residents are Hispanic,
thrives on the entrepreneurial spirit of 34,000 small businesses and
145,000 sole proprietorships. These businesses are the lifeblood of
our economy, facing challenges such as workforce shortages, rising
costs of materials, and housing affordability constraints. And yet,
despite these hurdles, we continue to see robust demand for credit,
although higher interest rates have impacted some of our price sen-
sitive customers.
                                  6

   As a compliance officer and advocate for the community I have
witnessed firsthand the profound impact that economic shifts and
regulatory measures have on access to credit. Today, I am before
you not only as a representative of a small business, but also as
a voice for the Texas Bankers Association which represents 375
banks across our State, employing over 218,000 individuals. Com-
munity banks like ours play a pivotal role in supporting small busi-
nesses. We understand the local landscape intimately, offering per-
sonalized service and flexible terms that larger institutions often
cannot.
   Our commitment goes beyond transactions, it is about fostering
relationships and ensuring our borrowers succeed. This approach
not only drives economic growth, but also, strengthens the social
fabric of our communities. In my opinion financial literacy remains
a significant barrier for aspiring entrepreneurs. In my experience
many start with personal funds before seeking formal credit, often
unaware of the long-term ramifications if not utilized appro-
priately.
   As a fair lending officer, I have reviewed numerous loan applica-
tions where a lack of financial acumen has proven detrimental.
Community banks are dedicated to bridging gaps through edu-
cation and targeted support programs, ensuring that all entre-
preneurs have the tools required to succeed.
   The Community Reinvestment Act is instrumental in our efforts
emphasizing the importance of equitable and fair access to credit.
Proposed revisions must strengthen, not dilute, support for under-
served communities and foster small business growth.
   In San Antonio, historical disinvestment in specific areas has left
lasting scars, breeding mistrust of traditional financial institutions
and minority communities.
   Through proactive engagement and targeted investments, we
work tirelessly to rebuild trust and forge lasting partnerships.
However, escalating regulatory burdens and compliance costs
threaten our ability to continue these efforts as every dollar de-
voted to regulatory compliance is a dollar less reinvested into our
community businesses.
   In conclusion, I urge the committee to consider the unintended
consequences of regulatory actions on small businesses by fostering
a regulatory environment that supports fair lending access, as well
as small businesses, such as my institution, and recognizing the
unique needs of commercial lending and promoting financial lit-
eracy. Together, we can pave the way for vibrant small business
ecosystems to continue to grow.
   Thank you for the opportunity to testify today. I am committed,
along with you, to enabling, rather than hindering, the success of
small businesses across our great nation.
   Chairman WILLIAMS. Let me just say one thing to all of you,
you are going to see Members move in and out, it has no effect on
your testimony or anything, we have other hearings they will go to
and come back, so that is the reason you may see that.
   Next, I want to recognize Mr. Martinez for his 5-minute opening
remarks.
                                  7
                STATEMENT OF STEVE MARTINEZ
   Mr. MARTINEZ. Thank you, Chair. Chairman Williams and dis-
tinguished Members of the Committee, thank you for the oppor-
tunity to testify on the current economic landscape in America.
Housing is, by far, the largest single expense for the American
household. And rising costs are putting the nation in an ever-wors-
ening situation.
   A 2024 report by Harvard’s Joint Center for Housing Studies
found that record high 22.4 million Americans are paying more
than 30 percent of their income on rent. And more than 12 million
are paying more than half of their incomes.
   A newly released housing affordability index by NAHB shows
that in the first quarter of 2024, 38 percent of a typical family’s in-
come was needed to make a mortgage payment on a medium-priced
single-family home. Shelter inflation and rent and ownership cost
is still rising well above a 5 percent rate driven, in large part, by
a nationwide shortage of about 1.5 million housing units. The only
way to tame inflation and ease the nation’s housing affordability
crisis is to build more homes.
   In order to increase the inventory of a single-family home and
multifamily housing we must remove more barriers; regulatory
barriers, labor barriers and supply chain barriers, that are pre-
venting home builders from increasing housing production.
   Regulatory barriers, which include complying with building codes
make up nearly 25 percent of the cost of a single-family home, and
more than 40 percent of an apartment home. Without adequate re-
view or consideration of how it will affect home buyers or renters,
HUD and USDA recently issued a mandate that will require all
HUD and USDA financed housing to be built to the 2021 energy
code. This will do little to curb overall energy use, but will worsen
the housing affordability crisis and hurt the nation’s most vulner-
able house hunters and renters. It will also compel more buyers
and renters to stay in their much older, less-efficient homes.
   More concerningly, the Federal Housing Finance Agency is con-
sidering applying similar standards to those adopted by HUD and
USDA for homes financed by Fannie and Freddie, which provides
72 percent of the financing for new home purchases. This would set
a de facto national energy code severely disrupting new home con-
struction, increasing the housing supply shortage and negatively
impacting affordability. The adoption of this 2021 energy code can
add $31,000 to every new home. In my home State of Idaho, every
$1,000 that you raise the price of a house, 800 households are
priced out of the market. All regulations should be designed with
small business and their consumers in mind, and should consider
the true real-world cost of these regulations.
   Labor barriers are also contributing to the housing affordability
crisis through higher home-building costs, and construction delays.
In the construction industry a shortage of skilled labor means that
we can expect almost 400,000 open jobs in any given month. And
NAHB research suggests that we will need 2.2 million workers in
the next 3 years to meet existing home-building demand.
   This places upward cost pressures on existing home prices and
rents and pushes the dream of homeownership out of reach for po-
tential homeowners. Policymakers at all levels of government can
                                 8

help by supporting full funding for building and construction trades
education including the DOL’s Job Corps program.
   Since the pandemic, the cost of materials has surged 38 percent.
Building materials, supply-chain barriers, are harming housing af-
fordability as the cost of lumber, steel, aluminum and other im-
ported materials and equipment increased price volatility and drive
up housing costs. Of particular concern, currently, is the price of
the availability of distribution transformers. Since February of to
2020 the price of distribution transformers is up 72 percent and
NAHB’s members report that wait times for transformers range
from 12 to 36 months.
   One of my recent condo projects was facing a potential delay of
18 months because we couldn’t get the right transformer. We were
forced to modify the product at a cost of an additional $60,000 on
just six condos. These added costs are pricing local Idahoans out
of the dream of homeownership.
   Congress must help ease supply chain barriers by investing in
the domestic production of sorely needed distribution transformers.
The current economic landscape for the home building industry is
challenging without question. It is a generational policy challenge
that we can solve. We must solve it. And it begins with continually
removing barriers to increase housing production.
   Thank you again for this opportunity. And I look forward to your
questions.
   Chairman WILLIAMS. Thank you.
   I now recognize Mr. Ewing for his 5-minute opening remarks.

             STATEMENT OF JAMES D. EWING, JR.
   Mr. EWING. Thank you, Chairman Williams, Ranking Member
Chu, and Members of the Committee, good morning. Thank you for
the opportunity to testify at today’s hearing on state of the small
business economy. My name is J.D. Ewing, Chairman and CEO of
COE distributing, a national office furnishings, wholesale dis-
tributor and contract manufacturer based in Fayette County, Penn-
sylvania. COE Distributing is a family-owned business, it has oper-
ated since 1947 when my grandmother started the business in a
basement of a tavern out of the necessity to support her two sons.
I am the third-generation owner of COE Distributing after taking
over the business at age 19 in 1989. At that time, I was COE’s only
employee.
   Through an enormous amount of hard work and dedication from
a number of dedicated and talented team members, COE has
grown to over 120 employees with distributions centers in Char-
lotte, North Carolina; Houston, Texas; and southwest Pennsyl-
vania; where our corporate headquarters are located.
   At COE, we have cultivated and continuously strived to grow a
robust culture, which is fundamental in the success of our and any
small business. We take immense pride in fostering an inclusive
environment or input from all team members at every level of the
organization. It is not only encouraged, but actively sought. We are
also proud to provide our team members with extensive benefits
and career development programs, including health and retirement
benefits, formal profit sharing, 401(k) plans, quarterly cash bo-
                                 9

nuses and personal benefits, such as financial workshops and vol-
unteer paid time off.
  In addition, we are the official engagement partner of the Pitts-
burgh Penguins, and hold monthly peer-to-peer recognition pro-
gram awarding a game worn Penguins helmet to the employee who
embodies COE’s core values of customer service, respect, teamwork,
quality, safety, innovation and transparency. This and other em-
ployee engagement focus efforts allow our unique workplace culture
to grow stronger every day.
  Today, we see many challenges in the economy, including rising
costs and supply chain disruptions, looming tax increases on small
businesses and compliance costs with new regulations. Although
the country has recovered from the pandemic, many of these same
supply chain challenges we face then are beginning to reemerge
today. Major ports are again beginning to see severe backlogs due
to congestion and delays. The disruption in the Red Sea and the
Suez Canal due to terrorist activity has had a material impact on
shipping costs delivery time, adding up to 4 weeks to some ship-
ping lanes. This disruption has led to substantial increase in the
cost of shipping containers, with the average cost of the shipping
container increasing over three times in the past 90 days alone.
  In April, a container from Asia to the U.S. was approximately
$2,500. By July, now the cost is over $8,000 and expected to rise
to over $10,000 in the coming months because of the peak season
that we are now entering. Many home furnishing retailers have al-
ready implemented ocean freight related surcharges to their goods
reminiscent of the COVID supply chain consequences.
  While small businesses like mine are already seeing the impact
of the supply chain disruption, it will soon impact the entire econ-
omy as it did 2 years ago. In addition to rising costs, small busi-
nesses are also seeing their near-term challenge of potential tax in-
creases. The 2017 tax reform reduced taxes for small businesses
through the reduction in tax rates and the creation of the 199A
small business deduction.
  This tax cut helped us reinvest in our workers by giving us more
resources to hire, raising wages and provide benefits and training
as well as devoting more resources toward expanded the business
and contributing to our local communities. Not only does this loom-
ing expiration of these tax reforms threaten our ability to continue
reinvesting the workers in the communities, but it also makes it
more challenging to compete with large businesses, especially in at-
tracting and retaining talent given today’s job market.
  A longer-term tax challenge for family-owned businesses like
mine is planning for the death tax, which makes businesses vulner-
able by acquisition by large corporation or foreign entities and
often forces family-owned businesses to liquidate a portion of the
business or the entire business to pay this death tax.
  Small businesses are also disproportionately hit by regulatory re-
quirements. As a small-business owner, the time and cost to keep
current on these issues is overly burdensome from the time and re-
source standpoint. While regulations are inevitably a cost of doing
business, we must ensure together that all businesses are not un-
duly impacted by red tape and disproportionate cost.
                                 10

  Thank you again for the opportunity to testify today, Small Busi-
ness Committee. I hope my insights on the economy are helpful
and I look forward to your questions.
  Chairman WILLIAMS. Thank you very much.
  I now recognize Mr. McCarthy for his 5-minute opening remarks.

                STATEMENT OF TOM MCCARTHY
   Mr. MCCARTHY. Good morning, Chairman Williams, Ranking
Member Chu, and distinguished Members of the Committee. Thank
you for the opportunity to testify in this hearing about the current
economic landscape in America.
   I appreciate the opportunities that allow a small business like
mine to participate in a setting like this in our Nation’s Capital.
Special thank you to Congresswoman Judy Chu who has worked
tirelessly to support us and thousands of small businesses achieve
success and thrive in today’s economy.
   My name is Tom McCarthy, I am a cofounder and the vice presi-
dent of business development for Motiv Space Systems located in
Pasadena, California. We support the civil national security and
commercial space sectors by enabling maneuverability in complex
environments primarily in space.
   Over the past 10 years, our company has grown from a team of
three people to almost 80 employees just last year. In preparation
for this hearing, I looked at our subcontractor list and the results
were pretty remarkable. Throughout our history, Motiv has utilized
almost 800 suppliers across 42 States and four countries. Small
businesses have a larger economic impact than most people realize.
We started the company because we believed that we could develop
and build space-based robotic systems more efficiently, with a high-
er level of quality and capability than our competitors in a globally
competitive aerospace market.
   And we were right, we successfully won and have executed mul-
tiple NASA contracts for a range of missions including a robotic
arm and science camera systems on the Mars 2020 Perseverance
Rover. From our beginning, innovation has been crucial for thriving
in the highly competitive aerospace environment. Our company’s
long-term health relies on consistently incorporating new tech-
nology for our mission partners, this means continuously expanding
our research and development.
   I would like to discuss a few topics related to small business in
the United States, and our relationships with various government
partners today. With regard to the small business innovative re-
search programs we have developed a chart that shows how SBIR
contracts have been fundamental to innovating our technology. I
think that may be how we got invited today. But the key here is
we don’t live off the revenue of SBIR contracts. We convert those
SBIR investments into seeds to grow new commercial products and
close technology gaps for our partners to enable new and exciting
scientific missions continuing the pulse of scientific discovery.
   We have won a total of 18 Phase I and Phase II SBIR awards,
and leverage those awards into eight commercialized program
awards. And then historically, that has amounted to about 25 per-
cent of our revenue over the course of business.
                                 11

   As you look at the SBIR reauthorization next year, I would en-
courage you to absolutely keep this vital program alive. Talk with
the small businesses in your community who leverage these pro-
grams, and then engage with those who are not aware of them.
   With regard to consistent predictable budgets, many of our cus-
tomers are dependent on federal budgets and the effects of budget
delays to those customers amplified within the small business com-
munity. Over the last decade, I believe every single fiscal year
started off under a continuing resolution. CRs only delay programs
and forces our partners to make premature decisions, much like we
saw with the Mars Sample Return Campaign. The aerospace indus-
try has faced worsening supply chain disruptions and rising prices
due to recent events. And on top of that, the cost and lead time for
raw materials have doubled, and our suppliers have had to signifi-
cantly increase their prices and that ripples through or community
as well.
   With regard to the research and development tax credit, I would
also like to raise the importance of the R&D tax credit that has ex-
pired. It is extremely important for a small business like mine that
operates on tight budgets. I have heard the discussions in press re-
lated to Fortune 500 companies but rarely from the small business
perspective. Let me be clear: The R&D tax credit allowed us to re-
invest into further R&D and other business operations to encour-
age innovation, and allows you to tackle more ambitious projects.
Investing in R&D allows small technology businesses to develop
new products and improve existing ones, helping us stay competi-
tive in the global market.
   In conclusion, small businesses are leading contributors to the
economic success of this country. We cannot take this lightly and
must consider all the tools in the toolbox when it comes to
incentivizing the backbone of this great nation which are our small
businesses.
   Again, thank you for inviting Motiv to participate in this hear-
ing, and to discuss how our small businesses is literally allowing
our nation to do things out of this world while bringing jobs and
economic prosperity to our hometown. I look forward to today’s dia-
log and answering any questions you may have. Thank you.
   Chairman WILLIAMS. The gentleman yields back. And those are
great testimonies. We will get started now and I recognize myself
for 5 minutes.
   This Committee has routinely heard from small business owners
that Bidenomics has not been working for Main Street America. As
we have seen the cost of capital increase in this high interest rate
environment, small businesses have become increasingly reliant on
credit cards which carry high interest rates, and traditional bank
loans to finance their operations.
   I am very concerned that we are approaching a cliff with this
mounting credit card debt piling up, but that is a conversation for
another day. However, it is not just interest rates that are increas-
ing the cost of borrowing, regulations add significant costs to finan-
cial institutions, which are ultimately passed along to their cus-
tomers.
   Ms. Davis, first question, you previously served as compliance of-
ficer to your bank and are very aware of the impact that regula-
                                 12

tions have on the price of various financial products. So can you
tell us how increased compliance burdens are negatively affecting
the access to capital in your community? And which customers are
most impacted by this increased cost?
   Ms. DAVIS. Thank you, Chair. Yes, related to compliance costs,
as I said in my statement, every dollar spent takes away from an
investment in the community either through a loan, or through di-
rect capital program investments to improve those LMI individuals
lives specifically related to the increase in costs. It overhead costs
the same amount to originate a $5,000 loan versus a $100,000 loan,
but the cost ratio of what has had to be implemented is less propor-
tional to the smaller-dollar loans. So it tends to affect our low- and
moderate-income borrowers the most, because they are those that
are looking for the smaller-dollar business loans.
   Chairman WILLIAMS. The recent report projected that the hous-
ing industry will need an additional 500,000 workers annually to
meet the demands of the market. This is an unfortunate reality for
many industries across the country. When I served as Secretary of
State of Texas, I was charged with overseeing the infrastructure
projects in the State. And eventually we had to delay a bunch of
these projects we had planned because we couldn’t find enough
qualified welders to do the work.
   With this large infrastructure project to brand new homes, delays
in work have drained local economy. So Mr. Martinez, how has a
lack of skilled workers impacted your business?
   Mr. MARTINEZ. Absolutely, thank you, Mr. Chair. We con-
tinue—Idaho is a small State, and so, we compete with labor from
States like California, Washington and Oregon. We aren’t able to
find the labor that we need to complete our projects. And when we
do, I feel like we are overpaying for the quality of work that we
are getting. We do high-end residential and so in order to find the
qualified worker that we need to do the project that we are talking
about, we either have delays in time, we have delays in quality, we
have a delay in trying to get somebody at a market rate that we
feel is appropriate. And we continue to work with our—the Job
Corps, we continue to work the Pell grants, we are working with
the high schools. We are trying to find a way to funnel kids into
our industry in a way that provides an incredible opportunity for
them. It is a shorter route.
   In Idaho, our Governor worked on lowering the requirements to
get a journeyman’s license because we can’t—we just don’t have
enough bodies and the barriers to entry are so high that we are
continually working on making it easier, fast-tracking, trying to get
these kids in our industry.
   Chairman WILLIAMS. That is good.
   Mr. Ewing, the story of your family-owned business really hits
home for me. I have been in the car business for over 52 years, still
am. And I took my father’s business over, now my daughters are
third generation, and they are currently running its operations
back in Texas. It is real rewarding—as it is—as rewarding as it
has been to keep this business in the family, it comes with many
unique challenges. So my question is to you, can you talk about
some of the issues that your businesses faced, much like mine, as
it has transitioned from generation to generation?
                                 13

   Mr. EWING. Thank you, Mr. Chair. Our business, thankfully,
did not have a transition challenge. I have been running it for 35
years. My dad’s still around, but he’s not involved in the business.
The challenge that we have in the business today, I touched on the
rising costs, particularly in the supply chain, and you get a 3- to
4x increase in the cost of moving product that you need for inven-
tory or product that you need to build houses; that is a very dif-
ficult situation to react to and pass the costs along, particularly as
a small business.
   That is the biggest challenge that we have today in my opinion,
reining in costs and trying to understand how we can react to them
appropriately and not overburden our customers at the same time.
   Chairman WILLIAMS. That is a big deal. You just can’t pass ev-
erything on to the customer.
   Mr. EWING. No, sir.
   Chairman WILLIAMS.—because if it rolls back on business.
   So with that in mind, I now recognize the Ranking Member for
5 minutes for her questions.
   Ms. CHU. Mr. McCarthy, thank you for being here today to
share your experience as a high-tech small business. I was so im-
pressed when I visited your facility last year and was able to see
how remarkable Motiv’s success and growth has been over the past
decade.
   Can you tell us more about Motiv’s story, how you came to find
success in Pasadena and build a customer base nationwide? And
also, I was able to see your robotic arm, why was that so innovative
allowed for the Mars Perseverance Rover to survive the harsh
weather conditions on Mars.
   And also, actually can you address this issue, we talk a lot about
space, but do space programs help us here on Earth? Space pro-
grams have routinely returned some of the most advanced tech-
nology on the market to consumers. So can you talk about the next
generation of products that will be coming from these small busi-
nesses to us?
   Mr. MCCARTHY. Thank you, yes. So I think in terms of Motiv’s
success, I think the primary function that has made Motiv success-
ful in building up and surviving and thriving over the last decade
is really staying true to a particular common thread. For us, it is
the robotics, it is the motion control and having the skilled exper-
tise and constant workforce labor development in order to deliver
that to our customer. We have to differentiate, we have to invest
in ourselves constantly, we have to develop new technologies. We
are creators and inventors all in a small building or a couple of
buildings.
   And so, that is important to us. And maintaining that energy,
staying hungry and pushing and engaging with our customer base
is the value proposition. And it makes us good partners to those
groups. And so, I think that is primarily key to our success.
   So, some of these programs that I talked about in my testimony
or the predictable budgets for our customers and making sure that
those are operating on a certain cadence allow us not to engage in
disruption, allows us to keep working in those arenas.
                                 14

   Ms. CHU. And again, why was your robotic arm for the Mars
Perseverance Rover so innovative that it allowed to you survive on
Mars?
   Mr. MCCARTHY. And what is really interesting about the things
that we worked on, we look at the landscape of what NASA or
other government agencies want to do in space, and what we try
to do is we try to predict from a technological position. We try to
understand and anticipate what they are going to need, and that
is where our investments go, is to hone those skills and then apply
them and test them and validate them so that the reliability and
quality is high and the customer is going to get a good solid prod-
uct that they know is going to work year in and year out. And for-
tunately we have had that success on the programs that we sup-
ported in the Mars’ activities and that has been very rewarding for
us.
   You asked another question, I think, which was related to how
does space benefit the rest of us? Space, it is interesting, sometimes
we feel very disconnected to what happens in space, but the reality
is we use it every day. It is part of our GPS activities, most of the
functions on your phone have some origins or some biproduct that
feeds into its utility through a space capability. Our weather pre-
dicting comes from space, our early warning systems from solar ac-
tivity that could disrupt networks, power stations, distribution cen-
ters and that kind of thing come from space observation. So space,
whether it is pursued for science or it is pursued for economic ben-
efit, commerce, utility is really valuable. And it is easy to overlook
because we are often doing things very terrestrially, if you will, but
it is a huge contributor to the success of our——
   Ms. CHU. And let me follow up on SBIR itself because you have
a remarkable 18 contracts with SBIR, which of course is the pro-
gram administered by the SBA. How do SBIR grants represent an
opportunity for the American taxpayers and the federal govern-
ment to see a return on their investment with these small busi-
nesses? And also, it was only reauthorized for 3 years in 2022.
When it comes around next year, should we consider a long-term
extension or even permanency?
   Mr. MCCARTHY. So, I will answer the back half of that first,
yes, please. I think long-term extension and permanency of that
program is extremely valuable. I think it is something that for
businesses that are in the high-tech arenas and are looking to
serve different government agencies and help them close technical
gaps, it is extremely valuable. Sometimes gaps exist in conceptual
mission or technology development. And it is really that distilled
talent that resides within America’s small business force that
sometimes is able to execute those functions, and that then makes
future missions, future technologies, future capabilities viable.
   So I think that SBIR program has shown its worth by those in-
vestments turning into the things that we see on a daily basis.
   Ms. CHU. Thank you. I yield back.
   Chairman WILLIAMS. The gentlelady yields back. I now recog-
nize Representative Luetkemeyer from the great State of Missouri
for 5 minutes.
   Mr. LUETKEMEYER. Thank you, Mr. Chairman.
                                15

   My questions today will be with regards to tax cuts and regula-
tions, you know. I think the tax cuts of 2017 showed that leaving
money in people’s pockets, leaving money in business’ pockets so
they can reinvest it as they see fit, whether it is to expand your
lines, to go expand your business, pay employees, buy more product
whatever it is seems to work and generated a revolution in entre-
preneurship during the 16, 17, 18, 19, 20-year cycle, where sud-
denly it went from more employees than jobs to over $1 million—
a million more jobs than employees in just a short period of time.
   So Ms. Davis, quite frankly as a former banker, you have got the
toughest job at the became as a compliance officer. I empathize
with you. You have a tough job, especially with the rules and regu-
lations pouring out of Washington and the cost of complying with
those. My question today is with regard to the tax cuts, you see it
every day with the businesses that you finance in the bank. Have
you seen those businesses take those dollars and reinvest them or
do you see them sticking in their pocket and running off and vaca-
tioning with those things?
   Ms. DAVIS. Most small businesses are members of their commu-
nities. So they are going to take those dollars that they have been
able to accumulate and reinvest not only to grow their businesses,
but also in their employees. A lot of them small businesses provide
additional services, volunteer hours. Small businesses really are
the lifeblood of all of our communities. And so, when they have dol-
lars available they can expand their businesses.
   Mr. LUETKEMEYER. You have to remember too, those are their
dollars, not the government dollars.
   Mr. Martinez, the other three of you have lived the American
Dream. You started from basically nothing and built your compa-
nies. I admire you beyond what you know. Tell me whenever you
got the tax cuts in 2017 what did you do with those dollars? How
did it affect your business?
   Mr. MARTINEZ. Absolutely, thank you, Representative.
   Our business relies on debt. We have to procure debt in order to
do more projects. And so, we were able to—and with that debt
comes investment that we have to make, it comes with dollars that
we have to come up with from a downpayment perspective.
   So when we are doing lots, when we are doing a subdivision,
when we are doing an apartment project, we have to come up with
that additional money. And that was more money in our pocket to
continue to grow the economy in our local market. It allowed us,
it fast-tracked us an opportunity to be able to do projects that we
had on the shelf that had been moth-balled waiting on funds to
come in. And so it absolutely projected our company forward in
those years after that.
   Chairman WILLIAMS. Mr. Ewing, same question to you, how
does the tax cuts affect you? And I would argue that since the pan-
demic, it actually is underpinning the growth of our economy by al-
lowing businesses to keep their own money and then reinvest as
you see fit. How did the tax cut affect you and your business? And
how are you managing those dollars today?
   Mr. EWING. Thank you for the question. You mentioned that the
reinvestment into our team members through raising wages, addi-
tional training, creating a better environment for them is really
                                  16

where we focused. Our business is also built on inventory and hav-
ing product on the shelves so we were able to expand the amount
of inventory that we had in our facilities and our distribution cen-
ters and therefore we could react to the market and our clients
quicker. So it was really about reinvesting into the company main-
ly with the people.
   Mr. LUETKEMEYER. Mr. McCarthy, you talked about the re-
search and development tax credit, that is a huge deal for small
business especially, and especially in your situation where you are
doing a lot of research and development. The continuation of that
is going to be very, very important, you know, we had tax cut, this
2017 tax cut is coming up for renewal next year. It is a really, real-
ly big deal that we make sure that happens. Can you talk about
the impact on that?
   Mr. MCCARTHY. Yeah, absolutely. So just like my colleagues
here said the reinvestment is critical to success. In the past when
those credits have been available, we have been able to put that
into our facilities, put that into capital equipment, put that into ca-
pability. And those become again differentiating tools for us going
forward and allow us to grow our company, train workforce, or,
again, plan for the future.
   So we try to develop a roadmap on how to better serve our cus-
tomer base and that is a constant activity. And so those give us one
more tool just like other programs to help us execute.
   Mr. LUETKEMEYER. Thank you very much.
   Mr. Martinez, I think you talked about the 2021 energy code that
is very difficult to comply with. I have got a limited amount of
time, can you just, very quickly, give us a little brief problem that
you have there?
   Mr. MARTINEZ. Yes. My concern is in my very limited time. The
State of Idaho has done their own energy code that makes sense
for Idaho. Through the negotiated rule-making process, we had the
opportunity to take things out that don’t make sense and add
things that do make sense. With the national standardization of
code, we are now I feel like taking States rights away on their abil-
ity to make changes on the energy code.
   Mr. LUETKEMEYER. Thank you very much. My time has ex-
pired. With that, I yield.
   Chairman WILLIAMS. The gentleman yields back.
   I now recognize Representative Scholten from the great State of
Michigan for 5 minutes.
   Ms. SCHOLTEN. Thanks so much, Mr. Chair. And thank you to
our witnesses for coming here today and for all of your incredibly
valuable testimony. So proud of the small business footprint in my
district, actually 99 percent of businesses in the State of Michigan
are classified as small, if you can believe that. When I speak with
businesses in my district, rising costs are the biggest concern that
they have. Many of them say supply-chain bottlenecks concentrated
market power as a primary cause.
   My first question is for Mr. McCarthy. In your testimony, you
emphasized how important it is to ensure small businesses can
compete with larger companies, agree. In addition to funding mech-
anisms such as R&D Tax credit, are there other ways Congress can
                                 17

encourage competition to keep prices low throughout the supply
chain?
   Mr. MCCARTHY. I think one thing that we have seen that has
been difficult is that coming out of COVID with the supply-chain
issues we saw that buying power changed dramatically, speaking
to our particular supply-chain semiconductor industry.
   What we started getting from the sellers of semiconductors was
different requirements on how much you could buy, prices went
way up, lead times got excessively long, and then in some cases,
there was no guarantee of the price that you were actually being
quoted as being the final price. I have never seen that before in my
life, my entire career where there is an unstable price basis. And
so, I think something needs to be looked at there. I don’t know if
that is all COVID-related or just a global economic situation, but
that really hurts the buying power for small businesses that are
trying to be innovative and are trying to compete against a variety
of entities.
   Ms. SCHOLTEN. Thank you, that is really helpful.
   Another top concern among small business owners in west Michi-
gan is the need for skilled labor. Some small-business owners tell
me they have had to reduce hours and service because of the labor
shortages they face. Our country has had low unemployment for
several years now, a low unemployment rate for several years now.
Usually is a very good thing, right? But we know that our small
businesses are looking for the workers that they need. This has
benefited our economy in some ways. However, unique cir-
cumstances brought on by the pandemic have meant that small
businesses are now trying to grow without a workforce that can
meet the demand that they have.
   The next question is for Mr. Martinez. Are there additional fac-
tors that you see that are contributing to the labor shortages and
actions that we specifically in Congress can take to meet those
needs?
   Mr. MARTINEZ. Yes, absolutely. So as we are facing a shortage
of labor, the Job Corps funding, the $1.2 billion Job Corps funding
got cut this year. We were jumping up and down saying, We are
trying to train our workforce and you cut Job Corps funding. It did
get reinstated fortunately and it did get reallocated for next year,
but you have to remember through Job Corps, through Pell grants,
we have to be able to fund these programs that are funneling kids
into the trades. They are not even just kids, people that retraining
our military, those that have been in the correctional system. We
really are trying to retrain a group of people. I would say the last
part of this is not everybody is made for college, and we keep push-
ing that narrative. And we are finally getting kids that are saying
I can go for 2 years, I can work the whole time I am doing that
2 years, make money and come out with a trade or a skill set. But
now, you have got to convince their parents that they are not going
to college. And I think that is the next hurdle that we have to
jump. So I think we have a cultural shift that needs to be made
at the national level.
   Ms. SCHOLTEN. I couldn’t agree with you more. I have got a
great bill, The Honoring Vocational Education Act, many of my col-
leagues here are cosponsors. It is a bipartisan bill, and it actually
                                  18

changes the way the United States Census tracts what constitutes
higher education. Currently, you only get to check that box if you
completed a 4-year college degree. I know the vocational centers
around my district. I go in and I see how these auto mechanics are
trained. That is higher education. I couldn’t do that work. So I com-
pletely hear you. I think more than, you know, funding which we
absolutely need, there has to be a cultural shift around this in the
United States. And I think it comes and starts by honoring, you
know, all different types of education as being higher education. So
one very small thing we are trying to do here, but I appreciate you
bringing that up. Thank you.
   I yield back.
   Chairman WILLIAMS. The gentlelady yields back. I now recog-
nize Representative Van Duyne from the great State of Texas for
5 minutes.
   Ms. VAN DUYNE. Thank you very much, Mr. Chairman.
   I continue to hear countless stories about how this administra-
tion has hampered the ability of small businesses to grow due to
its reckless spending and taxing and overregulating. Throughout
President Biden’s administration, federal agencies have finalized,
get this, 996 new regulations. It costs about $1.7 trillion to Amer-
ican businesses. Listening to small businesses in my district, that
is a cost they can’t absorb. It must be passed down to the con-
sumer. And this isn’t so these companies or these company owners
can get rich, but it is just to be able to survive in a burdensome
regulatory environment. Now this is part of the reason why earlier
this year this Committee passed my bill, the Small Business Regu-
latory Reduction Act. And this bill requires that the Small Busi-
ness Administration ensure for each fiscal year that the cost of
small businesses at the administration’s rulemaking is not greater
than zero, which also requires the SBA to issue a report on any
regulations issued by other federal agencies that impact small busi-
nesses. That is the role of the SBA, to actually be a champion of
small businesses. And I look forward to seeing this bill move for-
ward and to working to ensure that Congress reins in on the power
of out of control, regulatory glutton executive branch. And I also
look forward to continuing to work with this Committee to
strengthen small businesses across the country. I appreciate all of
the witnesses being here this morning.
   Along with serving on this Committee, I also serve on the Ways
and Means Committee which has established 10 tax teams in April
to study key tax provisions from the 2017 Trump tax cuts set to
expire in 2025, and to identify legislative solutions that will protect
Americans from President Biden’s multi trillion-dollar tax increase.
   I am going to ask—basically I will go ahead and start with you,
Ms. Davis. Can you tell me how the uncertainty in the tax world
impacts your planning for the future?
   Ms. DAVIS. Uncertainty in the tax world, specifically I can’t an-
swer that. From a regulatory perspective what I can tell you is that
when small businesses don’t have additional capital available, they
are unable to support their communities. Providing tax credits and
relief to small businesses allows them to thrive as well as our fi-
nancial institution as a small business.
   Ms. VAN DUYNE. Appreciate that.
                                 19

   Mr. Martinez.
   Mr. MARTINEZ. Yeah, thank you. I think as we all know on this
Committee, business doesn’t do well with uncertainty. And so we
start to horde cash when we feel that we have got a wave of regula-
tion coming along.
   The State of Idaho, Governor Little enacted a bill that for every
one piece of regulation, two had to be stricken from the legislature.
In doing so in the year of post-COVID we had a record surplus of
$2 billion. Now that might not sound like a lot of money for some
States where the Police Department’s budget might be $2 billion,
but in a State of 1.5 million people a $2 billion surplus is a huge
number. And I think we are seeing the effects of some States tak-
ing that anti-regulation or deregulation stance. And Idaho has, by
far, become the most deregulated or unregulated State. Some may
argue that is a good thing and some argue that is a bad thing. But
we have seen the consequence of that with a 99.2 percent small
business community there was explosive growth in Idaho.
   Ms. VAN DUYNE. Can you also, Mr. Martinez, I wanted to ex-
pand on this, in 2022 I hosted a program called the Texas 24
Works, and it brought together high school and middle school coun-
selors. We took them around the district and we them there can
be great careers that can be had where you are making six figures
without a college degree. Can you talk about how the career in the
technical education, vocational training and apprenticeships can
play a great role in addressing our labor shortage?
   Mr. MARTINEZ. Absolutely, thank you. We have partnered with
the high schools as well. We brought in high schools through the
Home Builder Institute that does receive funds from Job Corps, it
has created a curriculum to bring kids into the trades. We started
bringing them in. We have what we call the Parade to Homes for
Pets, where they are building dog houses and they are engaging
them. They are excited to work with their hands. It has essentially
replaced shop that got cut out of the school program so long ago.
And it is incredible as we meet with the youth, the excitement they
have, the pride of doing something with their hands. So it is just
getting the hook in and engaging them. And they see the potential
for the growth is great so——
   Ms. VAN DUYNE. In the 20 seconds I have got left, Mr. Ewing,
would you like to expand on any of the questions that I have
asked?
   Mr. EWING. Just reinforcing the uncertainty creates a hoarding
of cash and resources, which doesn’t allow us to invest in our em-
ployees and the business. So that uncertainty is a challenge.
   Ms. VAN DUYNE. Thank you very much.
   I yield back.
   Chairman WILLIAMS. The gentlelady yields back.
   I now recognize Representative McGarvey from the great State
of Kentucky for 5 minutes.
   Mr. MCGARVEY. Thank you, Mr. Chairman.
   Mr. McCarthy, we will start with you today. Talking about the
SBIR program that is known as America’s Seed Fund, not only is
it a vital program for research and development, but it also awards
small businesses like yours with access to the federal government
as a partner. The federal government must fulfill its purpose and
                                 20

invest in our communities, our constituents, and their ideas. Mr.
McCarthy, your company has received both Phase I and Phase II
SBIR awards. But Phase III is especially important because it en-
compasses two of the sort of primary objectives in the program, the
commercialization transition of technologies. Have you had any
trouble transitioning from Phase II of the program into Phase III?
   Mr. MCCARTHY. So actually we have been awarded a couple of
Phase III programs. And in my testimony, I referred to Phase I and
II, because those are the allocated funds, whereas the phase three
is the programmatic funds, the customer funding that utilizes that
connection from the Phase I’s and II’s, the success from there, and
then bridges the gap to development, the execution, the production
of the technology into regular use case.
   So we have had some success there and, I think, to your point,
it has helped us develop that relationship stronger within the fed-
eral agencies in terms of those who want to utilize that technology.
So I think that has been very successful.
   Mr. MCGARVEY. Is there anything else helpful that we could do
in these types of instances, like a centralized database for all the
projects in Phase III that eligible agencies could use to shop for
their needs?
   Mr. MCCARTHY. That is an interesting idea. I think socializing
that is a good thing.
   I usually find that there is always a reeducation, even with cus-
tomers, making sure that everybody is communicating about what
the benefits are of the program. People who haven’t used it before,
haven’t utilized it, even as a monitor of the program, they may be
somewhat unfamiliar.
   So I think any time there is more opportunity for education and
awareness, I think those are wins.
   Mr. MCGARVEY. Thank you very much.
   I am going to switch topics here a little bit. Going to Mr. Mar-
tinez.
   I appreciate all your comments today. I enjoyed your written tes-
timony as well. And obviously agree that we should all continue
working to lower costs.
   I really like what you said about promoting careers in the skilled
trades to address the labor shortage. This is something that we
have worked on in multiple Committees here.
   And I love the line in there where you say, ‘‘America should have
a choice in securing safe, decent, and affordable housing.’’ And I
think that that is something, affordable housing, I think we are
ready for a Marshall Plan of affordable housing, not just in my
community, but in this country.
   What I want to go to for a second, though, is in your written tes-
timony you said that ‘‘increased regulations, especially energy
building code requirements, are making it harder and harder for
home builders and multifamily developers to build housing that is
attainable and affordable for American families.’’
   But when I went to your website—which is amazing. The homes
are incredible on there. If you guys haven’t checked out this
website, it has absolutely stunningly beautiful homes.
   You have advertised an incredible commitment to sustainability.
In fact, it says on your website that, quote, ‘‘Commitment to sus-
                                  21

tainability is woven into every aspect of our construction process.’’
Quote, ‘‘We strive to minimize our environmental impact while
maximizing energy efficiency and incorporating ecofriendly mate-
rials that set the standard for sustainable luxury living.’’ And,
quote, ‘‘We are leading the way in sustainable luxury home con-
struction.’’
   And so this is not going to—I don’t want this—this is not a
‘‘gotcha’’ question. It is really a question.
   When we have these—you complain about the regulations, but
then obviously are building homes, I am guessing, because people
want those. It makes having that home cheaper and more afford-
able.
   How do we square that with the opposition then to the regula-
tions that are encouraging that efficiency for every American who
does deserve and want to have a home?
   Mr. MARTINEZ. I actually really appreciate this question, be-
cause I get it asked at the legislature all the time at the State
level, because nothing I build is affordable or cheap. And I am al-
ways, always, always advocating on the first-time home buyer.
   What we don’t understand is, if we don’t have a first-time home
buyer who is then able to sell their home and increase their wealth
to become a second-time home buyer and a third-time home buyer,
eventually I lose clients.
   So, selfishly, I am trying to advocate on behalf of just getting
people into a home initially who then will turn into customers
down the road.
   But I also—I was a first-time—we all were first-time home buy-
ers in this room. And there is a difference of a mandate and giving
people the choice.
   My clients can afford to choose some of those things. They are
willing to pay for those things. But if you have somebody that is
trying to get into their home for the first time—and it is death by
a thousand cuts.
   It is not just the energy code. The energy code is a low-hanging
fruit. But it is every jurisdiction, from the local to the State to the
national, that ends up blowing that budget out of whack to where
people can’t afford their home.
   Mr. MCGARVEY. We are out of time. I would love to ask you
more questions about this, particularly for first-time home buyers.
As competing Committee schedules go up here, I have a bill up in
another Committee. But I really appreciate your testimony.
   Mr. Chairman, I yield back.
   Chairman WILLIAMS. The gentleman yields back.
   I now recognize Representative Maloy from the great State of
Utah for 5 minutes.
   Ms. MALOY. Mr. Martinez, I was going to ask you something
along the same lines, so let’s just continue.
   You said that a de facto national energy code sets pricing house-
holds out of the market.
   I represent Utah’s Second District, and Idaho’s Number One
being just north of Utah. So we have a lot of the same housing
issues and affordability issues.
                                 22

   If an energy code isn’t mandated by the federal government, do
you have faith that the State of Idaho can figure out how to build
homes that are right for Idahoans?
   Mr. MARTINEZ. Yes, thank you for that.
   I think when you talk the body of codes, it is not a federal code.
It is actually a private group that puts these codes. There is an en-
ergy code, the residential code, the commercial code, the remodel
code.
   And so understanding kind of how this body puts it together, as
you can imagine, lots of special interests: ‘‘You can only get to this
level of insulation value by using my product. So I am advocating
special interest on my product.’’
   Versus the State of Idaho, which is also in the same climate zone
as Boston, Massachusetts, doesn’t quite make sense on some of the
things. It is 108 degrees today in Boise. I think probably really
similar.
   Ms. MALOY. But it is a dry heat.
   Mr. MARTINEZ. Yeah.
   But the point is, is that we are involving the professionals. So
we are sitting around the table with the building officials, with the
State officials, with the builders, with the remodelers, and we are
coming to a consensus of what makes the most sense.
   So I absolutely believe that as a State we can regulate ourselves
better, because we are looking at all of the pieces. We don’t have
our blinders on of what gets us the max amount of energy effi-
ciency. We are looking at: How do we even get people in these
homes to begin with? What are easy upgrades down the road?
What are things we can’t upgrade down the road?
   Ms. MALOY. I agree. I admire your dedication to sustainability.
I think sustainability is a great goal. I don’t think the federal gov-
ernment needs to mandate it for home builders or States to figure
out how to do sustainability.
   Go ahead.
   Mr. MARTINEZ. Real quick. I think the federal government’s re-
gard is in life safety. So I am not against building code and the
things that progress building code for life safety. I have got a great
relationship with the fire officials, with building officials. I think
energy is a separate concept and an idea. And I agree with you
there.
   Ms. MALOY. Thank you.
   Ms. Davis, you talked about self-funded entrepreneurs in your
testimony and how making small loans and large loans cost the
same amount but it ends up being more burdensome to the small
loans.
   I have good relationships with the regional banks in Utah, and
one of the things they have expressed concerns about to me is that
they don’t always recommend federal small business programs.
They specialize in main street businesses. They are investing in
their communities.
   But the programs that we are in charge of that are supposed to
help small businesses have so much red tape and such an upfront
cost and barriers to entry that they don’t always recommend them
to the same businesses that they are designed to help.
   What has your experience been with that?
                                 23

  Ms. DAVIS. Thank you. That is a great point.
  To many of our customers, it is more expensive to go through
SBA loan programs and other federal programs because there is so
much red tape.
  Our experience is that we are able to meet those needs better,
faster, cheaper. And we don’t have prepayment penalties. You can
pick up the phone and you can call someone directly. You don’t
have to go through specific representatives.
  Ms. MALOY. Yeah. Thank you. That squares with what I am
hearing from folks in Utah. And that is something that we as a
Committee need to be aware of and be addressing that. We can de-
sign programs, but if they don’t work for the people they are de-
signed for, we are wasting our time and the taxpayers’ money.
  Mr. Martinez, I want to come back to you for a second.
  You are talking about skilled labor and working with high
schools. And I know not everybody needs college, but over the last
couple of generations I think college has become the way people get
into the workforce, the way they find jobs.
  How are you finding laborers for your industry?
  Mr. MARTINEZ. Yeah. I think the Band-Aid to the fix is immi-
gration. Immigration through the visa program. The work visa is
definitely a Band-Aid. And I think that is one, unfortunately, that
just doesn’t get enough attention.
  Really it is identifying now this youth group that again wouldn’t
really go down the college route. In fact, I just talked to a guy the
other day that is trying to—he has got all 8,000 of his hours to be-
come a journeyman for HVAC and just hasn’t finished his school-
ing.
  Ms. MALOY. Yeah.
  Mr. MARTINEZ. So they are putting in the time, but the re-
quirement from the schooling perspective is so hard that it is a bar-
rier to the entry.
  Ms. MALOY. Yeah. I worry about main street businesses that
have labor needs, and people are willing to do it, but they don’t
have a mechanism for connecting with each other.
  Mr. Ewing, I had questions for you, but I am out of time. Thanks
for being here.
  Mr. Chairman, I yield back.
  Chairman WILLIAMS. The gentlewoman yields back.
  I now recognize Representative Thanedar from the great State of
Michigan for 5 minutes.
  Mr. THANEDAR. Thank you, Chairman Williams. Thank you for
this hearing. And I appreciate all of our witnesses here.
  I want to start with SBIR.
  When I started a small technology business way back in 1990,
one of the things that I did was I came across the SBIR proposals,
request for proposals.
  And I was excited. There were so many opportunities, innovative
opportunities for me. As a Ph.D. scientist, I was excited to see and
be able to solve some of those problems.
  And so I wrote my first Phase I grant myself, but I realized the
odds were so high back then. I don’t know what they are today.
Back then I was told that there is a 1 in 25 chance of me winning
a Phase I SBIR grant, Phase I.
                                 24

   Is that true today, or is it better, worse?
   Mr. MCCARTHY. It is definitely competitive. I think that what
we see in our area is maybe it is closer to 20; 20 percent chance
of success is pretty typical.
   But I think it goes to the competitiveness and in the value propo-
sition and so forth and answering the call, understanding the fit
of your technologies or the science you are trying to secure and un-
derstand research.
   So I think it would be great if that program could be expanded,
that would be amazing, so we could offer more opportunity, because
I am sure there are plenty of excellent proposals that are sub-
mitted but aren’t funded just due to the limitation of what the pool
is.
   Mr. THANEDAR. Yeah.
   Mr. MCCARTHY. But it definitely is competitive.
   Mr. THANEDAR. Let me stop you there.
   So what I noticed again was the competitiveness of it. And so in
3 years we will be—in 2025 we will have to reconsider in terms of
renewing this.
   And I see no downside to not only renewing this program, but
making it permanent, because it is the small businesses that are
responsible for most of the innovation in technology. And these in-
novations are something that is needed.
   And I was later on able to get other similar grants. And while
I was still running my technology business, I got my last patent
on electric batteries in 2016.
   And after that I said I want to go help others, other small busi-
nesses, because the small businesses in Michigan—Michigan is one
of the most innovative States in the country.
   And our small businesses are—one, they do not know about
many of the SBA programs, including don’t know much about the
SBIR. It is really a best kept secret. It is not marketed. It is not
talked about. So many innovative companies do not know that.
   Secondly, there are not enough grants available.
   And thirdly, there seems to be a huge shortage of highly skilled
engineers, scientists that small businesses could hire.
   And I would like any of you to comment on this.
   But this is stifling innovation in America. This is hurting Amer-
ica’s ability to stay on the forefront of innovation and discoveries.
   And what can small business do in terms of promoting innova-
tion, helping, getting this skilled workforce?
   Often we have skilled workforce Ph.D.s, engineers who are high-
ly skilled in American universities, who can’t just get a work visa
to stay in this country and continue to help American businesses,
to help our innovation.
   I want to just kind of get some idea on, some of you, on what
we could do to improve America’s position in innovation.
   Mr. MCCARTHY. Well, just quickly.
   I think for us from a small business perspective, I mean we have
to make ourselves attractive to that workforce as well.
   So it is a really a two-way street. We have to develop ourselves,
invest in ourselves in order to make that happen. And I think that
is a critical element of operating to improve the workforce and
meet those challenges head on that you brought out.
                                 25

   Mr. THANEDAR. Thank you.
   I am out of time, so I yield back.
   Chairman WILLIAMS. The gentleman yields back.
   I now recognize Representative Stauber from the great State of
Minnesota for 5 minutes.
   Mr. STAUBER. Thank you, Mr. Chair.
   Since President Biden took office, as we have heard, over 900
new regulations have been passed, costing nearly $440 billion and
climbing. And it has added more than 236 million paperwork hours
to American small businesses.
   Over the next decade compliance with Biden’s regulations will
cost Americans more than 1.5 trillion.
   Regulations such as these are unacceptable and often take fund-
ing away from growth opportunities for your businesses.
   Further, businesses should not need teams of compliance officers
just to be able to compete in the marketplace. The costs alone are
enough to force many of these small businesses to close, further
harming our economy. We must and can do better for the small
businesses in our communities.
   Mr. Martinez, how big is your company’s regulatory compliance
division?
   Mr. MARTINEZ. You are talking to it. So I would be compliance,
I would be HR, I would be legal. We have four employees, period.
   And so to your point, I read a great book called, ‘‘Buy Back Your
Time.’’ And reading through that, is the highest and best use of my
time figuring out compliance? Is the highest and best use of my
time figuring out regulatory burdens? Or should I be out selling
homes and building communities?
   And so I love the fact that you keyed in on that because for a
small business, we have been kind of a mom-and-pop business for
44 years. You are talking to every one of those silos here at this
table.
   Mr. STAUBER. And how does the avalanche of regulations com-
ing out of Washington make your job more difficult?
   Mr. MARTINEZ. I can tell you that because we are talking en-
ergy codes, because we are talking building codes, when we get a
new wholesale set of codes, it is a six to eight hundred page docu-
ment that we have to peruse through oftentimes in our truck as we
are trying to figure out a code change.
   And that is just on the building code side of things. When you
add OSHA, when you add EPA, when you add Army Corps of Engi-
neers, I mean, the list goes on and on.
   Mr. STAUBER. Local planning and zoning.
   Mr. MARTINEZ. Yeah. Not to mention the anti-growth senti-
ment that we are getting now because of the amount of growth.
   And so we are fighting it on all fronts. And, unfortunately, it is
just making the problem worse.
   Mr. STAUBER. And so reference the 2021 International Energy
Conservation Code that is coming without amendment. What im-
pact will these changes have on your business, and how might they
impact potential home buyers?
   Mr. MARTINEZ. Yeah, we already have a pricing problem. I
mean, we have already priced in Boise the local buyer. And I am
born and raised—I am one of the few that is born and raised in
                                  26

my hometown. But we are pricing the local buyer out of the mar-
ket.
   And I think when a regulatory agency comes out and says, well,
it is only $200 here, and it is only $300, they don’t realize the total
impact. Going from our current energy code to the 2021 code will
be almost $30,000 for Idahoans. And that is a number I can’t stom-
ach.
   Mr. STAUBER. I mean, the median income in the district that
I represent is a little over $55,000. It is unbelievable when this
comes down on you.
   Ms. Davis, what effect does increased regulations have on infla-
tion?
   Ms. DAVIS. Well, I can speak directly to the costs that have to
be passed to borrowers. You asked the size of the compliance de-
partments. We have four full-time compliance people just to read
the regs. We have one full-time person just to deal with the data
collection efforts on CRA and HMDA. We will definitely have to
add to staff with 1071. We have got two full-time CRA individuals;
more than that on the BSA side. And then, of course, we have to
invest in systems. So all the frontline individuals are part of our
compliance team too.
   Mr. STAUBER. It is just amazing the number of people you just
mentioned you have to hire to keep up with these rules and regula-
tions that are just crushing small businesses across America.
   Ms. DAVIS. Correct. It is part of our overhead, and we have had
to pass that down in origination charges.
   Mr. STAUBER. Yeah.
   Mr. Ewing, I am very happy that you are bringing your best em-
ployees to the Pittsburgh Penguins games. Minnesota is the State
of hockey. And when I heard you testify, I said that is awesome.
So I appreciate that.
   Listen, I am almost out of time. I want to ask every one of you
the question: Has Bidenomics and inflation affected your business?
   Mr. Martinez, your business?
   Mr. EWING. Inflation absolutely.
   Mr. MCCARTHY. Inflation.
   Mr. STAUBER. So here is the issue. There is not one person that
has come in front of this Committee that has said, ‘‘We want more
regulations. Please put more regulations on them.’’ Every single
Member that I have asked, witness at a hearing, ‘‘No more. We are
done. We can’t handle it.’’
   I am a small business owner for 31 years. We sold our business.
It is unbelievable, unacceptable what this administration is doing
to you all.
   Mr. Chair, I yield back.
   Chairman WILLIAMS. The gentleman yields back.
   I now recognize Representative Gluesenkamp Perez for 5 min-
utes from the great State of Washington.
   Ms. GLUESENKAMP PEREZ. Thank you, Mr. Chairman.
   And thank you to all of our witnesses for being here today.
   Mr. Martinez, I wanted to talk with you a little bit about hous-
ing. I appreciate your perspective on the economic landscape for
small businesses, including contracting companies like your own.
                                 27

   We have also talked in this Committee about how we feel the
lack of affordable housing can actually be a barrier to small busi-
nesses being able to hire and retain quality employees. Someone
isn’t going to move to a new town for a job if there is no place to
live. So this is especially a challenge in incentivizing business de-
velopment in rural communities.
   I agree with you completely that we need to boost the housing
supply to address this issue of housing affordability. And this
means in some cases tackling—in many cases—tackling burden-
some local zoning regulations, shoring up the supply chain for ma-
terials, and promoting careers in the skilled trades so there is
ample labor.
   But I also wanted to talk about regulations. In November, the
Consumer Product Safety Commission proposed a rule that would
mandate finger detention technology on all consumer and commer-
cial table saws, which sounds like it made for good reading.
   But the reality is there is just one company that owns the mo-
nopoly on that patent technology, and effectively enforcing that
would have been a government-mandated monopoly.
   Your organization commented on the proposed rule that the cost
of table saws has more than doubled, small manufacturers may be
forced to exit the market, and businesses may be unable to operate.
   I believe that if the Commission had had somebody who has
worked in construction on the body, they would know that if you
raise the cost of a table saw by $400, people are just going to put
a circ saw on a sheet of plywood, and more people are going to end
up hurt.
   So that is why I introduced a bill to help maintain access to
lower-cost table saws and prevent the proposed rule from leading
to a monopoly on table saws with that kind of technology.
   So my question, Mr. Martinez. Do you believe it would be helpful
to have people in the decisionmaking room who have hands-on-the-
ground knowledge about the potential impacts of rulemaking like
this.
   Mr. MARTINEZ. Yes, Representative. I really appreciate that
question.
   One, you have got way more common sense than a lot of the ju-
risdictions that we work with. We get excluded out of conversations
all the time about growth, about safety, about the things that di-
rectly affect us.
   I was at a summit a couple weeks ago, and even the members
in that summit, they were activists, they were academics, they had
never worked in our industry, and yet were proposing laws and
regulations and rules that I just kept scratching my head.
   I am a framer. I was telling my team the other day when we
were talking about the table saw issue, I know ways around all of
that safety. I am worried that we are going to use a SKIL saw as
a table saw to get around that.
   So it is very similar on the energy code side again where you
have got one company that provides that product. They are the
ones advocating on it. They go, advocate on behalf of that.
   So I appreciate the commonsense approach to that. We should al-
ways be at the table on anything housing.
                                 28

  Ms. GLUESENKAMP PEREZ. Yeah. Board tables, table saws,
whatever it is, we need to be there, you know.
  Mr. MARTINEZ. Absolutely.
  Ms. GLUESENKAMP PEREZ. I also recently visited a trans-
former distributor in my district, and we talked about their con-
cerns about the implementation of DOE’s recently finalized rule re-
garding efficiency standards for transformers.
  I know this is a particularly salient issue in your industry due
to the significant delays and high costs for transformers that you
have outlined in your testimony as a barrier in the supply chain.
  Could you elaborate on this and speak about what you think
should be done to ease supply chain challenges for transformers
and other building materials? What other checkpoints are you see-
ing?
  Mr. MARTINEZ. Yeah, absolutely.
  So you can’t just do—just to define transformers for a minute, be-
cause it is not the movie—but when you do a transformer on a
project, that is what brings power to your project, power to your
home, power to a subdivision.
  It was a very ill-timed rule in that we already had a shortage
on a product, and then we were going to make it more energy effi-
cient, which just made the supply chain side a bigger problem.
  So we were able to defeat the efficiency standard of DOE, but we
still have a shortage. And it is not the transformer itself, it is the
alloy and the components that go into it.
  But it continues to be a huge challenge. It is just the challenge
of the day. Lumber was the challenge of the day 3 years ago. And
coming from a lumber State, you have probably heard that a lot.
  And so transformers just happen to be that, the issue of the day
that we are really trying to solve. And there is such a cost impact
to getting them. And kind of to your point, I don’t even know what
I am going to pay for them. I will put money down, just get it here,
I need it, I can’t do my project without it.
  Ms. GLUESENKAMP PEREZ. Yeah, and we are not going to
electrify without them either.
  Thank you very much. Thank you all for your testimony.
  I yield back.
  Chairman WILLIAMS. The gentlelady yields back.
  I now recognize Representative Molinaro from New York for 5
minutes.
  Mr. MOLINARO. Thank you, Mr. Chairman. I appreciate that.
  I appreciate you all being here.
  And I do appreciate my colleague’s common sense. In fact, we
often, even this week, get ridiculed for having to draft legislation
to preserve the rights of American citizens to buy their own home
appliances as if that isn’t the most significant issue facing Ameri-
cans.
  And here we are faced with bureaucrats establishing rules and
regulations that make it difficult to purchase a table saw or a dish-
washer or a refrigerator.
  And it is often those faceless bureaucrats that establish policy
that, frankly, make it so damn expensive for all of you. And then,
of course, those costs either get passed down to your customers, our
                                 29

constituents, or you fold up your tent and stop working. And that
to me is the great crisis that is facing main street.
   Mr. McCarthy, you had offered earlier that it was good to have
small businesses at the table and the voice of small businesses
being heard in tax policy, what have you. I do want to credit this
Committee in a bipartisan way under the Chairman’s leadership.
We give voice to small businesses every week.
   The problem is that small businesses often might make it to a
White House roundtable, but they are not the ones at the table, as
Mr. Martinez has offered, and you all have kind of referenced in
your testimony, they are not the ones at the table when it comes
to policymaking.
   Yesterday, the Transportation and Infrastructure Committee
held a hearing on new emission standards in California that Cali-
fornia acknowledges would have an $86 billion disruption to supply
chain and then went on to suggest that that would have nominal
impact to American customers, whether they are buying food prod-
ucts or construction material.
   Mr. Martinez, I wanted to return to you and give you an oppor-
tunity to kind of expand on some of the regulatory burdens.
   You summed it up pretty well. You are all of the silos in your
business. We know that in small businesses that is the case. For
you it is a burden.
   At times, it would be great if Washington or the federal govern-
ment didn’t have so many silos. In fact, it would be nice if one enti-
ty knew more about other challenges so we wouldn’t have this reg-
ulatory regime that creates such a crisis.
   The Biden administration consistently has ignored the voice of
small businesses. We can pretend that sounds partisan, but it is
not. Consistently, small businesses have been burdened with regu-
lation because the left hand not only doesn’t know what the right
hand is doing, sometimes the left hand doesn’t even know there is
a right hand. And so what the EPA says might contradict with the
Department of Labor, might contradict with some local zoning
practice.
   This administration finalized in 2023 alone more than $451 bil-
lion in final rules—imagine that—$451 billion in new costs because
of regulations established in 2023 requiring 286 million paperwork
hours. I can’t even fathom calculating that.
   I introduced the POST IT Act. Why? Because it would force the
federal government to simplify regulations and require access
transparency, small businesses having access to those regulations.
   Mr. Martinez, in a real world sense just talk a little bit about
how providing greater transparency might at the very least provide
some benefit to your business, but also perhaps hold the federal
government a bit more accountable.
   Mr. MARTINEZ. Yeah, absolutely. Thank you, Representative.
   Really knowing the basis for a rule, knowing why we are doing
this, like what is the end goal in this rule. Is it to save money? Is
it to save lives? Tell us what it is.
   You had the EPA that had a waters of the U.S. standard. It was
being challenged in the Supreme Court. And yet they still moved
forward, the EPA kept moving forward with their rule, knowing
                                 30

that they stood on very—and it was an Idaho case. Of course, I was
a little sensitive to it.
   But that Sackett case reversed the waters of the U.S. rule, and
yet the EPA kept moving forward. And we as a small business who
deal with the EPA and Army Corps, one or the other, kept saying
this standard stopped, like let’s wait till the Supreme Court rules,
because we are going to just go right back and start all over again.
   Mr. MOLINARO. I am glad you brought that up, because actu-
ally there are Members like me from New York. I have spent my
entire life trying to preserve watersheds, wetlands in the Hudson
River Estuary. And the fact that that particular determination by
EPA, by rolling it back, some of my colleagues on the other side
of the aisle suggest that somehow we are not interested in pro-
tecting water.
   That couldn’t be further from the truth. We have environmental
standards, federal and state environmental standards that pro-
vided those protections. The EPA overstepped.
   I am going to run out of time because of my own fault. But, Ms.
Davis, I recall some years ago in the 1980s when my parents were
thrilled that they finally got a mortgage at under 11 percent.
   Can you talk about what the highest rate of inflation in the last
40 years has meant to lenders?
   Ms. DAVIS. Well, for starters, the rates have been up. When I
was in banking school, the Capstone Project provided this scenario
that could never possibly happen to ensure that bankers were pre-
pared. And, yet, we have see it rapidly increasing rates. And it sur-
passed even that.
   Mr. MOLINARO. Thank you, Ms. Davis. I apologize. That was
my fault.
   Mr. Chairman, I yield back.
   Chairman WILLIAMS. The gentleman yields back.
   I now recognize Representative Bean from the great State of
Florida for 5 minutes.
   Mr. BEAN. Thank you very much, Mr. Chairman. A very good
morning to you.
   Good morning, Small Business Committee.
   And to our all-star panel, welcome to your Nation’s Capital, and
thank you for your testimony. You will always remember this day,
the day you testified before Congress.
   There is no hiding it anymore: Bidenomics is not working for
America, for main street. And your testimony today really is in
sync with the business owners of northeast Florida, in Clay Coun-
ty, in Jacksonville, that are just struggling with curveball and
fastball and just an environment that makes it extremely difficult.
   In a perfect world, it is extremely difficult to run a small busi-
ness. But when government is just throwing things in your way left
and right, I know it is a struggle.
   We have had dozens of people sit in the same chairs that you are
sitting in right now. All—many—have testified that they have
never—they have been in business a long time. They have never
seen the regulatory environment, the new regulations come down
more than right now.
                                 31

   Ms. Davis, would you agree with that? This is the most regulated
environment we have ever seen? It is breaking the backs of small
business? Would you agree with that statement?
   Ms. DAVIS. I would agree with that.
   Mr. BEAN. Very good.
   Mr. Martinez, jump in. Tell us.
   Mr. MARTINEZ. Yes. And I lived through a once-in-a-lifetime fi-
nancial meltdown of 2008 to 2012 that I thought, okay, now I am
good, I am back to being in business. And I do feel like we are in
an environment now that is harder than it was in that financial
meltdown.
   Mr. BEAN. I am going to put you down a yes, because you agree
with that, for sure.
   Mr. MARTINEZ. A long way around it.
   Mr. BEAN. No, no, I am with you.
   Mr. Ewing, welcome. Glad to have you here.
   What say you? Is it the most regulated? Is the federal govern-
ment just throwing things at you left and right that you have never
seen before?
   Mr. EWING. For our business, I can’t speak to that directly. But
any time the federal government or any government adds cost of
doing business to the business, it takes away from the employees
and our ability to treat them better.
   And that trickles down. And I think that is one of the effects that
aren’t recognized on regulatory burdens. Additional costs of run-
ning a business is—it is going to affect a business, but it is also
going to affect the tens, dozens, hundreds of employees of those
businesses which impact main street even further.
   Mr. BEAN. It sounds like a yes to me. So thank you very much.
   Mr. McCarthy, I haven’t forgot about you. What say you? Trying
to get to Mars, but it is hard to do so when the federal government
throws all these monkey wrenches in the spaceship. What say you?
Is it being overregulated right now?
   Mr. EWING. I think there are a couple of things that have im-
pacted us. I mean, as we mentioned before, inflation has. Defi-
nitely, we feel that. We feel that. That is our buying power.
   Mr. BEAN. But you don’t have to—do you have to have a circular
saw or a stove to get to Mars?
   Mr. MCCARTHY. No. No. I don’t—correct. I don’t have the same
situation there.
   But I will say something that is important that is coming on that
does affect us, is there are standards associated with NIST and se-
curity and so forth.
   And those are things that for small businesses to start up with
those compliances and so forth, that is something that is a new ac-
tivity, a new burden for us. But I am not saying that it is not im-
portant.
   Mr. BEAN. No. I got you.
   Mr. EWING. But those are—those are things—those are——
   Mr. BEAN. So it is a challenging environment, and I will take
that as a very strong maybe from you.
   Mr. MCCARTHY. A very strong maybe.
   Mr. BEAN. Ms. Davis, I was a banker too. You have the heart-
beat of main street, and hopefully every small business. Get to
                                 32

know your banker or a banker that can help you navigate the
tough environment.
   What are you seeing? What are you seeing right now at the
bank? What are your customers doing to try to keep up with regu-
lations and a rising interest rate?
   Ms. DAVIS. Well, I think many of them are trying to cut costs.
They are trying to figure out ways to continue to move forward.
   Again, we have demand for credit, but that liquidity is such a big
deal.
   Mr. BEAN. It is. It is tough.
   Mr. Martinez, what would you say if you could talk directly to
the Chairman of the K-12 Subcommittee on Education on how do
we pivot to a more society focused on teaching kids a skill? What
would you say to that Chairman? How do we do it? What should
you advise Congress? How do we have a new conversation?
   Mr. MARTINEZ. I say reengage the industry. You walked away
from the industry a while ago. It is time to come back. And doing
that, there are plenty of programs, there are plenty of funds now.
Like, there is no reason they can’t be doing this.
   Mr. BEAN. Very good. You just told the Chairman. I am the
Chairman of that Committee.
   Mr. MARTINEZ. Oh.
   Mr. BEAN. We have had multiple Subcommittee—you did a
great job by the way.
   Mr. MARTINEZ. You are supposed to let me know.
   Mr. BEAN. You did a great job. That is a little curveball here
we can throw you to. But listen, thank you. You did a great job.
   And we are having that conversation. We welcome input, and we
are going to have to do it together. And I think it is changing. I
think kids are realizing, ‘‘I can make more money without going
into this debt’’—which is a whole nother topic altogether.
   Look at me, ran out of time. But I am grateful for each of your
coming. Thanks for your testimony today.
   Mr. Chairman, I yield back.
   Chairman WILLIAMS. The gentleman yields back.
   And I now recognize Representative Meuser from the great State
of Pennsylvania for 5 minutes.
   Mr. MEUSER. Yes, thank you, Mr. Chairman.
   Thank you to all of you. My apologies for being late. I had an
earlier Committee. And as my colleague just said, good luck fol-
lowing that.
   Thank you, Representative Bean.
   So I am a small business person as well for well over 20 years,
helped grow a small business into what eventually became a large
business. What is being faced today is really burdensome, to say
the least, to put it in the nicest way possible. And, boy, oh, boy,
we hope to correct that come next year.
   But from energy, we in northeast Pennsylvania call it gas back-
wards energy policy, taxes, regulations, crime, interest rates, infla-
tion. The regulations that seem endless. I start listing them here.
It is a long list, from the beneficial ownership rule to 1071 coming
out of the CFPB.
   So I will start with you, Mr. Ewing. And you are from Fayette
County?
                                 33

   Mr. EWING. Correct.
   Mr. MEUSER. Great. Well, that is a beautiful spot in the world.
   Mr. EWING. That it is.
   Mr. MEUSER. I will be heading that way at the end of the week.
But anyway—or in our great Commonwealth of Pennsylvania.
   So you mentioned—well, first off, the sunsetting of the Tax Cuts
and Jobs Act, R&D tax credits, potentially the 199(A) small busi-
ness deduction, which has been stated by President Biden, doing
away with that, all the tax relief that occurred.
   So how do you all feel about that, Mr. Ewing?
   Mr. EWING. Well, the 199(A) is going to eliminate a lot of in-
vestment that small businesses are able to make, and that is a
problem. And we can’t—we talked about it earlier. Not being able
to plan to invest in your business, you start to pull back. Innova-
tion is squashed a bit.
   And for us, as I mentioned earlier in testimony, the investment
into our people is really what is going to be challenging if the cost
of doing business rises substantially because tax cuts go away.
   Mr. MEUSER. That is devastating. I hear from my friends who
own small businesses and my constituents, and all devastating.
   So I read your OSHA officer issue, and in my district—and I
have a conference call with them on Friday with OSHA—they seem
to have this new walk-around rule where they stopped on a con-
struction site the other day, just small putting up Sheetrock for
people, and the ladder was over 15 feet high. And they said it
wasn’t secure enough.
   So after 4 hours of interrogation and permits and getting their
licensing, they informed—they wrote them a warning and stated
that the fine will be anywhere from zero dollars to $14,500. Unbe-
lievable. Walk-around. So-called walk-around by OSHA. So we are
going to have a little conversation there.
   Tell us a little bit more about your interlude with the OSHA offi-
cer.
   Mr. EWING. It was in our Charlotte facility. And it was—I don’t
know that it was a walk-around, but it was an unexpected visit.
And the officer identified what they believed to be a problem with
stability of product on racking. All our racking was installed ac-
cording to code. But this officer, who we found out much later in
the process—this was a 6-month ongoing process—was new and
very aggressive and wanted to put a name in the local agency for
themselves.
   Mr. MEUSER. Right, mount on the wall. Right.
   Mr. EWING. Yeah.
   Mr. MEUSER. Allow me to move on. I appreciate that.
   Ms. Davis, do you think that the CFPB’s 1071 rule will harm or
help your ability to serve your customers?
   Ms. DAVIS. It will absolutely harm it.
   Mr. MEUSER. Can you elaborate?
   Ms. DAVIS. Plain and simple.
   As part of my testimony, we are able to meet the small business
needs by being effective and fast and efficient. That added cost that
we are going to have to tack on for all those data collection points
is going to hinder the expediency of our lending efforts.
                                34

   In addition, for every compliance officer that we have to hire to
manage those data points and the examination ramifications, that
is one fewer banker that we have out in the community serving our
customers’ needs.
   Mr. MEUSER. Mr. Martinez, has there been anything done over
the last three and a half years that has been a positive develop-
ment? I know inflation, everything else. Is there any policy? And
we are going to work on this. Believe me. That is why most of us
are in Congress, to be advocates for small business.
   Mr. Chairman, I have run out of time. But maybe we could talk
afterwards. I appreciate it. I yield back.
   Chairman WILLIAMS. The gentleman yields back.
   I would like to thank our witnesses today for your testimony. It
has been a great hearing. I think you have seen, unlike you see in
many other hearings, we do have a lot of bipartisan agreement on
where we need to take main street. And I want to thank you all
for being here.
   Without objection, Members have five legislative days to submit
additional materials and written questions for the witnesses to the
Chair, which will be forwarded to the witnesses. So I ask the wit-
nesses to please respond promptly if that happens.
   And if there is no further business, without objection the Com-
mittee is adjourned. Thank you.
   [Whereupon, at 11:42 a.m., the Subcommittee was adjourned.]
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APPENDIX
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