Prices on the Rise: Examining of Inflation on Small Businesses (House Small Business Committee hearing, June 7, 2023)

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The printed record of a House Committee on Small Business hearing, Small Business Committee Document Number 118–017, titled Prices on the Rise: Examining the Effects of Inflation on Small Businesses, held June 7, 2023 in the 118th Congress, with Chairman Roger Williams presiding from 2:01 p.m. in Room 2360 of the Rayburn House Office Building. Opening statements come from Chairman Williams and Ranking Member Nydia Velázquez. The four witnesses are Gordon Gray, Silvia Saldana Lee, Dave Zittel and Lyle J. Bivens, whose prepared statements are listed in the appendix. The contents list questions, answers and additional material for the record as none. The committee adjourned at 3:50 p.m.

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“Prices on the Rise: Examining of Inflation on Small Businesses (House Small Business Committee hearing, June 7, 2023).” Original at www.govinfo.gov. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/prices-on-the-rise-examining-of-inflation-on-small-businesses-house-sm-9c2aa11f7b/, SHA-256 9274587ea32f16d8c5db7e50b5236d61fc0f09bfa7f2a0682236147265618254.

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PRICES ON THE RISE: EXAMINING OF INFLATION
ON SMALL BUSINESSES

HEARING
BEFORE THE

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

HEARING HELD
JUNE 7, 2023

Small Business Committee Document Number 118–017
Available via the GPO Website: www.govinfo.gov

U.S. GOVERNMENT PUBLISHING OFFICE
52–423 WASHINGTON : 2023
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
NYDIA VELÁZQUEZ, New York, Ranking Member
JARED GOLDEN, Maine
KWEISI MFUME, Maryland
DEAN PHILLIPS, Minnesota
GREG LANDSMAN, Ohio
MORGAN MCGARVEY, Kentucky
MARIE GLUESENKAMP PEREZ, Washington
HILLARY SCHOLTEN, Michigan
SHRI THANEDAR, 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. Nydia Velázquez ............................................................................................. 2

WITNESSES
Mr. Gordon Gray, Vice President for Economic Policy, American Action
Forum, Washington, DC ...................................................................................... 5
Ms. Silvia Saldana Lee, Executive Vice President and Chief Lending Officer,
First Community Bank, Corpus Christi, TX ...................................................... 6
Mr. Dave Zittel, President, Amos Zittel & Sons, Inc., Eden, NY ........................ 8
Mr. Lyle J. Bivens, Chief Economist and Research Director, Policy Institute
(EPI), Washington, DC ........................................................................................ 9

APPENDIX
Prepared Statements:
Mr. Gordon Gray, Vice President for Economic Policy, American Action
Forum, Washington, DC ............................................................................... 35
Ms. Silvia Saldana Lee, Executive Vice President and Chief Lending
Officer, First Community Bank, Corpus Christi, TX ................................. 43
Mr. Dave Zittel, President, Amos Zittel & Sons, Inc., Eden, NY ................. 48
Mr. Lyle J. Bivens, Chief Economist and Research Director, Policy Insti-
tute (EPI), Washington, DC ......................................................................... 52
Questions for the Record:
None.
Answers for the Record:
None.
Additional Material for the Record:
None.

(III)
PRICES ON THE RISE: EXAMINING THE
EFFECTS OF INFLATION ON SMALL
BUSINESSES

WEDNESDAY, JUNE 7, 2023

HOUSE OF REPRESENTATIVES,
COMMITTEE ON SMALL BUSINESS,
Washington, DC.
The Committee met, pursuant to call, at 2:01 p.m., in Room
2360, Rayburn House Office Building, Hon. Roger Williams [chair-
man of the Committee] presiding.
Present: Representatives Williams, Luetkemeyer, Stauber,
Meuser, Mann, Ellzey, Molinaro, Alford, Bean, Hunt, LaLota,
Velázquez, Golden, Mfume, Phillips, Landsman, McGarvey,
Gluesenkamp, Perez, Scholten, Thanedar, Davids, and Pappas.
Chairman WILLIAMS. Good afternoon to everybody. And before
we begin, we’re going to take a moment and ask Congressman
Meuser of the great state of Pennsylvania to lead us in our opening
prayer in the Pledge of Allegiance.
Mr. MEUSER. Please stand for the Pledge of Allegiance.
Chairman WILLIAMS. I now call the Committee on Small Busi-
ness to order without objection. The Chair is authorized to declare
recess of the committee at any time. I now recognize myself for my
opening statement. I’d like to welcome everyone to today’s hearing,
where we will be examining the detrimental effects inflation has
had on main street America. I also want to thank our witnesses for
joining us today. Your time is greatly valuable and we appreciate
you being with us.
According to almost every small business economic survey, infla-
tion has been ranked as the owner’s biggest concern going
back to 2021. They have been seen utility payments increase be-
cause of skyrocketing energy prices, distributors charging more to
source materials because of supply chain disruptions, and labor
costs rising because of not being able to find qualified workers. In
all these instances, small businesses are left with 2 options pass
along these price increases to the consumer, or absorb the cost and
watch your operating profit margins shrink.
The COVID-19 pandemic started this inflationary cycle that we
are still experiencing, but we have seen it prolonged by reckless
levels of government spending. The Federal Reserve Bank of San
Francisco did a study after the passage of the partisan American
Rescue Plan that showed government spending made inflation in
the United States spike more than other developed economies. This
should not come as a surprise to anyone. There are going to be con-
(1)
2

sequences when the Government continues to stimulate the econ-
omy further than what is necessary. This has led to a prolonged
period of high prices that has forced the Federal Reserve to raise
interest rates to tamper demand.
High interest rates have led to many additional problems that
are being faced by small businesses. The cost of getting a loan has
greatly increased, and now even the average SBA loan is approach-
ing 10 percent interest. This is forcing banks to tighten their lend-
ing standards as they evaluate if it will make sense to even extend
the loan, and is forcing many business owners to delay expansion
plans because it simply is too expensive in this environment.
There are a few things that I think will stop the runaway infla-
tion problem. First, we must stop reckless government spending, as
we say. We all know this was not a transitory issue like so many
people claimed when this started in 2021. And we must get the
Government’s fiscal house in order. Second, we must stop passing
burdensome regulations when businesses are forced to hire compli-
ance officers, it is nothing but a drag on a company’s bottom line.
And a third, we must find ways to secure our supply chains and
expand our domestic manufacturing base, whether it be energy or
food supply. We must reduce our reliance on foreign influences.
In this hearing, I hope we will explore how each of your busi-
nesses and industries have been dealing with this pressing issue
that has been affecting every American for the last few years. As
the voice for main street here in Washington, the House Committee
on Small Business will be working to create an environment where
businesses can thrive and where businesses can grow. We are
eager to find solutions that will help pave the path towards success
for both now and in the future. So, I want to thank all of you again
for being here with us today, and I’m looking forward to today’s
conversation. With that, I want to yield to our distinguished Rank-
ing Member from New York, Ms. Velázquez.
Ms. VELÁZQUEZ. Thank you, Mr. Chairman. The effect of infla-
tion on small businesses is no secret. It can dig into margins and
contribute to tighter monetary conditions, limiting access to capital
and the ability to grow and expand. However, inflation is not a sin-
gle threaded issue. It is a complex dynamic of global events. The
COVID-19 pandemic, supply chain disruptions, labor shortages,
monopolistic price gouging, and geopolitical tensions have created
a perfect storm of inflationary pressures that are impacting main
street. It is a disservice to our nation’s small firms to oversimplify
this issue, as a mere consequence of federal spending. We stand in
the middle of the global pack in terms of inflation rates.
Yet our recovery from the pandemic has been unparalleled. Fis-
cal stimulus, like the Cares Act and the American Rescue Plan,
turned the deepest post World War II recession into the shortest.
Projections from Moody’s Analytics predict that without this relief
U.S. GDP would have fallen 3 times its actual rate, and we would
have experienced a double dip recession in early 2021. Today, we
now enjoy unemployment rates at 50 year lows, with GDP recov-
ering to its prerecession trend, something not seen in decades. Ac-
cording to the Federal Reserve, the entire $5 trillion worth of fiscal
stimulus deployed in response to the pandemic contributed to only
about a third of total inflation. Therefore, we must consider the
3

many other drivers of inflation to create a comprehensive policy re-
sponse, not play political games.
First, our country has a history of outsourcing and supply chain
consolidation. While this made a few shareholders a lot of money
in good times, it made us increasingly vulnerable to disruptions.
Additionally, the increasing concentration of industries over the
past 30 years enabled corporate monopolies to exploit their market
power and dramatically increase margins. Democrats focused on
enhancing our domestic productive capacity by passing the Infra-
structure Investment and Jobs Act to revitalize and bolster our
supply chains. We passed the Chips and Science Act to invest in
innovation and create resilient domestic supply chains. Finally, the
Inflation Reduction Act was enacted to lower health care and en-
ergy costs for small businesses while making the U.S. a world lead-
er in clean energy and reducing our dependence on volatile global
energy markets. Clearly, there is more to be done, but we are see-
ing encouraging signs of lower inflation, nearly cut in half from last
summer’s peak.
While the only Republican plan to fight inflation is draconian cut
to our social safety net, democrats have recognized the need to in-
vest in the future to bring long term stability to our small busi-
nesses. I thank all the witnesses for their participation and look
forward to hearing your testimony. Mr. Chairman, I yield back.
Chairman WILLIAMS. Thank you very much, and I will now in-
troduce our witnesses. Our first witness this afternoon is Mr. Gor-
don Gray. Mr. Gray is the Vice President for Economic Policy at
the American Action Forum, located in Washington, DC. Prior to
joining the American Action Forum, he was a Professional Staff
Member for the Senate Budget Committee before working for Sen-
ator Rob Portman as a Senior Policy Advisor.
Mr. Gray’s portfolio includes the federal budget, taxes, the
macronomic outlook, and general economic policy. He has testified
as an expert witness before the multiple committees in Congress on
domestic and economic issues. Mr. Gray is a graduate of Tufts Uni-
versity and has a degree in Political Science. Mr. Gray, thank you
for being here today, and we look forward to hearing from you.
Our next witness here with us today is Silvia Saldana Lee. Ms.
Lee is the Executive Vice President and Chief Lending Officer of
the First Community Bank in Corpus Christi, Texas, and she pre-
viously served a 3 year term on the Texas Bankers Association
board of Directors. Ms. Lee has worked in the banking for over 31
years and has been with First Community Bank since 2000.
In her current position, she manages all aspects of First Commu-
nity Bank’s lending portfolio, including risk selection, underwriting,
and loan production, making her uniquely qualified to discuss the
important topic at hand today. Ms. Lee is a graduate of Texas A
and M University in Kingsville, Texas, where she received her
Bachelor of Business Administration Finance. So, Ms. Lee, thank
you for being with us today, and we also look forward to your testi-
mony.
I now recognize my colleague, Mr. Molinaro from New York, the
great state of New York, to briefly introduce our third witness who
is appearing before us today.
4

Mr. MOLINARO. Thank you, Mr. Chairman. The great state of
New York is happy to welcome Mr. David Zittel. A graduate of Cor-
nell University. Mr. Zittel is president of Ammo. Zittel and Sons,
inc. In Eden, New York. The Zittels have been farming in Eden
Valley for six generations, since 1897. Producing vegetables on
about 400 acres.
The farm primarily focuses on vegetable production. To sustain
operations, the farm heavily relies on a labor force comprising over
100 seasonal workers, some of whom have dedicated more than 2
decades to working at the farm. However, rising inflation rates
have driven up prices and wages, which cut into profit margins,
making today’s hearing all the more relevant and pressing.
Given Mr. Zittel’s extensive experience and long-standing ties to
the community, his testimony provides invaluable insight into how
the current economic conditions are affecting the economic main-
stays of local communities like his and his business. Mr. Zittel,
thank you for being here today, and we look forward to hearing
from you, and I yield back.
Chairman WILLIAMS. Thank you. I now recognize the Ranking
Member, Ms. Velázquez, to introduce the minorities witness for to-
day’s hearing.
Ms. VELÁZQUEZ. Thank you, Mr. Chairman. Our final witness
today is Dr. Josh Bivens. Dr. Bivens is the Chief Economist at the
Economic Policy Institute. His areas of research include macro-
economics inequality, social insurance, public investment, and the
economics of globalization. He has been published in both peer re-
viewed journals, like the Journal of Economic Perspective, as well
as in popular print outlets like The New York Times and Wall
Street Journal. He is the author of the books Failure by Design:
The Story of America’s Broken Economy and Everybody Wins Ex-
cept Most of Us: What Economics Really Teaches Us About
Globalization. He holds a PhD in Economics from the New School
of Social Research and a BA in Economics from the University of
Maryland. Thank you, Mr. Bivens, for joining us on such short no-
tice. Your attendance is greatly appreciated. Thank you and wel-
come.
Chairman WILLIAMS. Thank you again to all of you for being
here today. So before recognizing the witnesses, I’d like to remind
them that their oral testimony is restricted to 5 minutes in length.
So if you hear this and you’re still talking, that means you’re talk-
ing too long, okay? And if you see the light turn red in front of you,
it means your 5 minutes have concluded, and you should wrap up
your testimony. So with that, I now recognize Mr. Gray for his 5
minute opening remarks.
5
STATEMENTS OF GORDON GRAY, VICE PRESIDENT FOR ECO-
NOMIC POLICY, AMERICAN ACTION FORUM; SILVIA
SALDANA LEE, EXECUTIVE VICE PRESIDENT AND CHIEL
LENDING OFFICER, FIRST COMMUNITY BANK; DAVE ZITTEL,
PRESIDENT, AMOS ZITTEL & SONS, INC.; JOSH BIVENS,
CHIEF ECONOMIST, ECONOMIC POLICY INSTITUTE
STATEMENT OF GORDON GRAY
Mr. GRAY. Chairman Rogers, Ranking Member Velázquez, and
Members of the Committee. It is a privilege to be before this com-
mittee again, to join my fellow witnesses and to discuss a matter
of National significance: inflation and its effects on the beating
heart of American commerce, Small Businesses. In my testimony,
I wish to make 3 basic observations: The United States is experi-
encing persistent inflation that is taxing America’s families and
businesses.
Policy choices have contributed to the recent rapid acceleration
in price levels. Federal policies should be oriented around reducing
inflationary pressures, and the record has been mixed at best. I’ll
briefly discuss these observations in turn. According to the U.S.
Census Bureau, the median age of the United States is about 39,
which means a little bit more than half the United States popu-
lation has never experienced inflation like what we’ve seen over the
last couple of years. Not since 1980 has the consumer price index
grown as rapidly as was observed in June of 2022, when yearly in-
flation topped 8.9 percent. Stripping out more volatile food and en-
ergy price components to isolate core price growth reveals a similar
story of rapid, historically aberrant inflation.
Notably, one can observe a significant divergence between the 2
indices around the time of the Russian invasion of Ukraine that
significantly disrupted energy markets. It is clear that event moved
food and energy prices, but the fundamental story of U.S. price
growth is not about the Russian invasion, but the laws of supply
and demand. These laws are in force, and they are taxing small
businesses and the households that support them.
Over the last 2 years, yearly price inflation has averaged about
2 percentage points higher than yearly wage growth. Wage growth
has been substantially elevated over the same period but has nev-
ertheless failed to keep pace with price growth. Put another way,
small business and households are falling behind. While inflation
is down off of the recent peak, it remains stubbornly elevated at
well above the average of recent decades and more than twice the
target rate set by the Federal Reserve. Thus, even though the U.S.
inflation outlook has improved, enduring inflation is nevertheless
a significant tax on household finance that will diminish the US
standard of living. At the current rate of 5 percent, a family with
a median income of about $71,000 is paying over $3,500 in price
growth.
Food, energy and shelter inflation, which tends to be more vola-
tile but nevertheless represents about half the average household
budget, has been more elevated and serves as a uniquely regressive
tax. It is worth acknowledging the rocky road that led us here. In
March of 2020, the COVID-19 Pandemic precipitated a historic
shuttering of the economy. The public policy response was robust,
6

with combined monetary, fiscal and administrative actions esti-
mated to be on the order of $11 trillion. Most notable was the se-
ries of bipartisan measures that were enacted in 2020. Through a
combination of public policy, effective vaccines and more than a fair
amount of grit from the American public, the nation and the econ-
omy recovered rapidly. Subsequent policy changes marked a break
from the bipartisan tradition that largely characterized the Con-
gressional response to the Pandemic.
One conspicuous example, though not the only one, is the $1.9
trillion American Rescue Plan Act. Despite a chorus of warnings
from a diverse range of economists that the act would give a mas-
sive injection of fiscal stimulus at a time when it needed, at least
the law was passed and sure enough, within 2 months, inflation
had nearly doubled before doubling again in the subsequent
months. It is important to note that while other global economies
faced rapid inflation, the United States was a conspicuous
frontrunner, subsequent to the enactment of the American Rescue
Plan. To be sure, there are economic forces at work that can and
eventually do swamp the effects of temporary legislation. Many of
these challenges are beyond the direct control of policymakers.
Accordingly, while I want to emphasize that no single policy
change is responsible for the current inflation challenge, to the ex-
tent legislation is within the direct control of policymakers, Amer-
ican Rescue Plan stands out as a significant policy error. The Fed-
eral Reserve’s rapid tightening of monetary policy and eventually
improved public comments on the likely course of monetary policy
have done and will continue to do most of the work in bringing
stubborn inflation under control. But as any household or business
relying on credit markets knows this is not costless. Congress
should therefore help the Fed by pulling in the same direction.
Congress has a somewhat uneven record since the enactment of the
American Rescue Plan. The Inflation Reduction Act, for instance,
was found to have no effect on inflation by CBO and Penn Whar-
ton. Policies such as the Chips Act and the infrastructure bill must
be balanced against the risk of additional inflationary measures.
Most recently, the Fiscal Responsibility Act could modestly reduce
inflationary pressures through deficit reduction largely deriving
from the Act’s spending caps. Thank you very much and I look for-
ward to addressing your questions.
Chairman WILLIAMS. Thank you, Ms. Saldana Lee, for her 5
minute opening remarks.
STATEMENT OF SILVIA SALDANA LEE
Ms. SALDANA LEE. Thank you, Chairman Williams, Ranking
Member Velázquez, and the Committee Members. I appreciate the
invite of being here and I pray that my testimony will be beneficial
to the objective of this meeting. As Chairman Williams mentioned,
my name is Sylvia Lee. I’m a graduate of Texas A and M Univer-
sity Kingsville with a Bachelor’s in Finance.
I have been a Texas banker for 32 years with the last 23 years
at First Committee Bank in Corpus Christi where I am the Chief
Lending Officer. Our bank has 175 employees and is a somewhat
unique factor about First Community Bank is that 73 percent of
our employees are shareholders via our Employee Stock Ownership
7

Program. Our Community Bank was founded in 1983 and now has
eleven branches with 657,000,000 in assets and growing daily. We
have a loan portfolio of 458,000,000 consisting of residential and
commercial real estate and of course, small business loans, which
are the subject of today’s hearing.
As a preparatory point, I do want to mention that almost all our
Paycheck Protection Program loans that we funded have been paid
out at our institution. They consisted of 845 loans in an aggregate
amount of 107,000,000. And I can tell you personally that these
loans contribute immensely to the ability of our local customers to
continue as growing concerns during the pandemic. In my view,
lending to small businesses and thereby allowing them to add new
customers, purchase property, buy equipment and hire more em-
ployees is frankly the most important community service we pro-
vide. Federal Reserve data confirmed that small businesses in
search of a loan look first to their Community Bank.
With respect to today’s hearing topic, namely the impact of infla-
tion on small businesses, the answer is simple and is applicable to
small and large businesses and individuals. It is hardship for all,
but for small businesses it can often be worse in that they start
with smaller margins to absorb adverse outside factors. Everyone
is familiar with the severe decline in mortgage origination volume
as the Fed’s anti-inflation strategy has driven up interest rates
nearing the 8 percent range. What is not widely appreciated, how-
ever, is that the housing industry is composed almost exclusively
of small business contractors.
At our bank, for example, we developed a great market niche in
the home construction business, but new credit applications have
slowed significantly due to less buyer demand. Recently, a longtime
bank customer who owns a small business had an increase in his
monthly loan payment of approximately $1,000 due to increased in-
terest rate. The loan has an annual adjustment and repriced. In
May 2023, the business owner commented that he would price his
goods out of the market to absorb the increased cost of his inven-
tory and increase rates. He mentioned he has increased his prices
10 percent, but would have to raise them 40 percent in order to ab-
sorb all those costs. He mentioned that he feels our government
does not want small businesses to succeed and wants only large
companies in business. It is an unfortunate perspective.
Underwriting small business loans relies primarily on debt cov-
erage ratio, which is monthly debt service in relation to historical
net income. With what has been a doubling of interest rates in just
the last twelve months, the equation is fairly straightforward in
that we are now seeing the cash flow available for debt service drop
dramatically for every type of business. This would be especially
true for a small startup business, which is probably the most crit-
ical local component for a growth economy.
As a bank with a very strong earnings and capital, we are pre-
pared to work with any of our small business borrowers encoun-
tering temporary difficulties, and all of us, whether borrowers or
lenders, hope that this unprecedented combination of excess fiscal
and monetary policy, followed by rapidly rising interest rates will
soon come to a pause.
8

The current market pressure is notwithstanding. Texas is
blessed to have a strong economy and very strong banking system.
Nevertheless, Texas has not been immune from industry consolida-
tion trends, where the number of FDIC insured banks
headquartered in our state has declined from 556 to 387 over the
last ten years. An even sadder part of this is that even among the
remaining local bank, so many have been forced to abandon impor-
tant parts of the consumer market, such as home mortgage lending
to the larger banks or nonbanks, as the case may be. Fortunately,
that has not been the case at First Community Bank. We remain
committed to home mortgage, to the home mortgage market, the
small business market and as many of the full service banking
products as make economic sense. On behalf of the banking indus-
try, I thank you for your time and the opportunity to appear before
you this afternoon.
Chairman WILLIAMS. Thank you very much. And next, I recog-
nize Mr. Zittel for his 5 minute opening remarks.
STATEMENT OF DAVE ZITTEL
Mr. ZITTEL. Thank you to the Committee on Small Business
and Chairman Roger Williams for inviting me to testify to you
today on the impact of inflation on small business like my family
farm. My name is David Zittel and my family is owned and oper-
ated Amos Zittel and Sons, a fresh market, vegetable and green-
house farm based in Eden, New York. My brother and cousin and
I are currently 4th generation and my son, the fifth generation is
now back on the farm. I’m also representing the farming and agri-
cultural community across New York and the country that works
hard to produce food and fiber for consumers across the country
and globe.
At Amosinol and Suns, we produce a wide variety of fresh vege-
tables 350 acres in western New York, including lettuce, straw-
berries, peppers, cabbage, corn, tomatoes, broccoli, eggplant, Brus-
sels sprouts, grape, tomatoes, et cetera. Approximately 95 percent
of our produce is sold through our marketing cooperative Eden Val-
ley Growers, which our farm is a proud founding Member of from
1956. This co-op is created to bring growers in the area together
to market and sell our produce. In addition, the farm is also con-
sists of greenhouse operations that produce approximately 4 million
rooted liner, geraniums and other spring annuals that are mar-
keted through brokers Nationally and retail ready container crops
sold to local garden centers. In addition, we grow over 2 million
transplants for our field grown vegetables.
The farm employs 40 to 50 individuals year round and approxi-
mately 135 employees during the peak season. Because we produce
fresh market produce, all the crops must be hand harvested and
can be very labor intensive. It also means that our business is di-
rectly impacted by market forces and we cannot wait to sell the
crop until prices increase. Farmers are price takers, not price mak-
ers. As a small family owned business, we feel the direct effects of
inflationary pressure to have seen the overall increase in the cost
of operating the farm.
While farmers have become more efficient over time and helps
overcome the lower commodity pricing, like increasing production
9

per acre, inflation can quickly take away the efficiency gains
through the pandemic and even to this day, we continue to feel the
impact of inflation. Examples of inflation and rising costs have
seen on the farm include tractor equipment parts have increased
15 percent to 30 percent. A delay in timely delivery of these things
are also adding to the supply chain issue. The consolidation of agri-
cultural industry, which has decreased available vendors to source,
also lends itself to increased prices. The cost of boxes and transpor-
tation of our vegetables is up 30 percent, with the cost of the farm
of $100,000 this year. Fertilizers and most other inputs are up 30
percent to 50 percent. Cost of feed for dairy farmers is up 25 per-
cent to 40 percent.
All of these things, unfortunately for us, are prices that we re-
ceive for our product do not cover and the cost increases since our
markets are no longer local but global, resulting in a reduce in
profits. Inflation has created a price instability and uncertainty for
our farm economy and has made many investment decisions riskier
than they would be if inflation remained low or stable. We have an
impacted in the last 2 recent historical snowfalls in 2014 and again
last November, which resulted in rebuilding greenhouse shops,
storage buildings. In both situations we had decent insurance re-
coveries, but the cost was 3 times. We will be financing another
million dollars and the rebuild for the loss from the 72-inch snow-
fall in November. Held off as long as we could in hopes that inter-
est rates would stabilize or begin to go back down. As we look to
the future of our operation, young farmers are so discouraged by
challenges that they face in making career in agriculture the ex-
pense of land, labor, fuel, energy, machinery, taxes, rules and regu-
lations the list goes on and on.
It is no secret that in New York is a high cost state in the dif-
ficult regulations and environment for our family, business and
farms. But despite all this, we are so proud that the next genera-
tion has decided to carry on the farming tradition. We know that
there will remain challenges and need to overcome, including infla-
tion, regulatory requirements and labor challenges. Like to finish
with a quote from John F. Kennedy the farmer is the only man in
our economy who buys everything at retail, sells everything at
wholesale, and pays freight both ways. Thank you.
Chairman WILLIAMS. I now recognize Mr. Bivens for his 5
minute opening remarks.
STATEMENT OF JOSH BIVENS
Mr. BIVENS. Chair Williams, Ranking Member of Velázquez and
Members of the Committee, thank you for inviting me to testify
today. My name is Josh Bivens. I’m the Chief Economist and Re-
search Director of the Economic Policy Institute. EPI is a nonprofit,
nonpartisan think tank that uses the tools of economics to identify
policies that will boost living standards of low and moderate in-
come families, particularly through their role as workers.
I’d like to make the following points about the subject of this
hearing inflation and its effect on small businesses. First, inflation
has been a key economic challenge for workers and small busi-
nesses over the past 2 years. But inflation is not the only notable
economic trend that is emerged in this time. We’ve also seen by far
10

the best labor market in a generation, particularly for low wage
workers. We’ve also seen extraordinarily fast growth in employ-
ment at small businesses and in the aggregate, and extraordinarily
fast growth in small business applications. Small business income
growth has actually performed better relative to corporate profits
since the last business cycle peak than it was doing in the 2 years
before the COVID-19 recession. All these salutary trends are the
direct result of the policy choice to fight the COVID-19 recession
with fiscal relief and recovery at scale.
Second, inflation has not simply been the result of a US Policy
mistake. Inflationary pressures have clearly been global, and it is
essentially been the inevitable result of massive shocks to the econ-
omy and the long lived but steadily dampening ripple effects. The
shocks are obvious. The Pandemic, the Russian invasion of
Ukraine, and the ripples were mostly about jockeying by different
economic actors corporations, workers, small businesses to protect
their own real incomes from these shocks. The inflationary pres-
sures, particularly the ripples, could have theoretically been re-
duced if the economy was allowed to settle into stagnation with
really high rates of unemployment for an extended period of time,
like we did after the 2008 recession. But inflation wouldn’t have
been zero even in that scenario and the collateral damage would
have been absolutely immense.
Third, the ripple effect stemming from economic actors seeking
to insulate their own incomes from price shocks meant that infla-
tion in this time around has mostly been a distributional challenge
because one person’s income is another person’s cost. Higher cost
for some has shown up as significant income gains for others that
mostly has been the business income of sellers, but particularly
corporate profits. A key question is has any small businesses been
able to draft in the corporate pricing power wake and charge high-
er prices themselves to protect their own margins? I would say the
first thing to know about this is that the small business sector is
incredibly variable and lots of what we call small businesses are
actually very rich in privileged enterprises. My guess is this privi-
leged slice of the sector has done quite well to the degree that lots
of genuine main street small businesses have been squeezed on the
input side but have been unable to pass these costs on. Maybe be-
cause their primary customers are big corporations who refuse to
pay higher prices to their suppliers. That is more a problem of un-
balanced power in markets and monopoly power generating an
unlevel playing field. We certainly should address that problem. It
is carried long run costs. It is less a problem of inflation per se in
terms of the most important input cost labor.
It is important to note that there is no generalized labor shortage
anymore relative to pre pandemic trends. Labor supply has essen-
tially fully recovered. There are smart policies we could undertake,
particularly large investments, say in Childcare, that would boost
labor supply even well above its historic highs. And I think we
should absolutely do that. But again, there is no labor shortage
today relative to pre COVID trends. Finally, the risk to small busi-
nesses from an over aggressive attack on inflation that seeks to
slow the economy with contractionary fiscal and monetary policy in
the name of tamping down inflation will sacrifice the huge gains
11

from the rapid recovery for no real need. If inflation is already nor-
malizing, and my view is inflation is already normalizing, it is not
happening fast enough for any of us.
But I would say one example showing that we do have some time
for some patience is if you look at nominal wage growth over the
past year. We’ve seen a sharp deceleration in that growth even as
unemployment has remained very low. We had many people a year
ago saying that was impossible. We were going to need 6 percent
unemployment to get nominal wage growth into a noninflationary
place. It is in a noninflationary place today, even with unemploy-
ment remaining very low. In short, as challenging as the inflation
of the past 2 years has been, it remains the case that many pro-
posed cures could do a lot more damage than normality itself. I
look forward to talking more about this issue with the committee.
Thank you so much for your time.
Chairman WILLIAMS. Thank you. And we’ll now move to the
Member questions. Under the 5 minute rule, I recognize myself for
5 minutes. There were many factors that have contributed to infla-
tion. The Pandemic destroyed supply chains, reckless government
spending overheated the economy, and businesses are having trou-
ble finding qualified workers to fill open positions. While some of
these issues are long, will take some time to get resolved, there are
certain things that can be done in the short term that could make
an immediate impact on this upward price pressure. And one of
these things that the Biden Administration could do to help small
business deal with this economic headwind is to end the regulatory
assault on the private sector. When businesses are forced to spend
more time and resources on compliance, these costs get passed
along to the consumer in the form of higher prices or increased
fees. So, Mr. Gray, my question to you. Can you discuss the regu-
latory impact the Biden Administration has had on main street,
America, as has inflation, and do you have any suggestions on how
Congress could begin to rein in some of the most damaging regula-
tions?
Mr. GRAY. Yes, sir. So I am lucky in that I work with one of
the, I think, finer regulatory shops, policy shops in DC. My col-
league Dan Gobeck tracks the self reported costs of the accumula-
tion of regulation, and he and his team has been doing this over
the years, and we have seen hundreds of billions of dollars in addi-
tional regulation. And in the present environment, when a number
of the policy approaches that this Congress and policymakers in
general have been attempting to expand supply, we later see regu-
lations tacked on that are somewhat in conflict to the notion of
supply because they restrict the businesses and workers that may
or may not participate in that given activity, and that makes the
activity more expensive, thus restricting supply. And so that is a
very real challenge at the moment.
Chairman WILLIAMS. Thank you. One of the most harmful as-
pects of inflation is what the Federal Reserve is being forced to do
to get it under control. Interest rates are rising at the fastest pace
in decades, and it is making it much more expensive for small busi-
ness to get loans or service and their debt. We’ve heard that al-
ready today. I have come across my small businesses that have
variable term loans we talked about that who are not having to pay
12

a few hundred dollars more each month in interest payments, but
it is changing their entire business, even the smallest amount it is
eating to their margins and making them unable to remain profit-
able. So, Ms. Saldana Lee, can you tell us what you’re doing on the
ground as it relates to small businesses service and their existing
debt, as well as the overall loan volume coming through your bank?
Ms. SALDANA LEE. First, the loan volume is not coming
through the bank. Our production is very low right now, and most
investors have postponed any projects that they had at any one
time. And what we’re doing is we’re actually doing outreach. Our
loan officers are reaching out to our borrowers, making sure that
they are in a good position, and if they’re not, if they’re being
stressed, if there is anything that we can do to assist them with
those stress factors. What we have seen, because we do have a
large portfolio of construction loans, our contractors and builders
and developers as well, they have limited the amount of inventory
that they have on the ground, which is not normal because they
just want the inventory to keep rolling because they’re selling one
house. And they need to have been building a house that would be
40 to 50 percent to 60 percent complete at the time of a sell of a
subject house. So that has slowed tremendously. And that end user,
the consumer, who is stressing their income as well, their debt to
income ratios have increased, making it extremely difficult for
them to qualify for a loan.
Chairman WILLIAMS. I’ve been a car dealer for over 50 years
and but also run a calf cow operation. We talked about that at my
family ranch, and you’ve talked about Mr. Zittel, you talked about
the cost of fertilizer, inability to find workers, et cetera. So, I’ve got
a little bit of time left. Let me ask you this. Can you tell us how
you’ve been dealing with the persistently high inflation and some
of the other economic headwinds that you mentioned and that
you’re feeling in the economy today?
Mr. ZITTEL. Yes, so 2 specific examples. The winter storm that
we went through that knocked down our greenhouses. I think the
first round that happened in 2014, we were able to rebuild and
take loan money out and be able to handle the inflationary effect
with the last November storm. Perfect example of where we’re not
doing what we should be doing, and that is where we’re building
infrastructure, but we’re not doing the technology tied with the in-
frastructure that we should be doing right now. So we’re basically
going at it at a limited fashion, knowing that there are things that
are there that we’d like to do but aren’t doing.
Chairman WILLIAMS. My time is up. I now recognize the Rank-
ing Member for 5 minutes of questions, Ms. Velázquez.
Ms. VELÁZQUEZ. Thank you, Mr. Chairman. Mr. Bivens, infla-
tion is a complex global phenomenon, and you stated that in your
remarks. Can you give us an overview of where America stands
compared to our peers in terms of inflation rates and recovery?
Mr. BIVENS. Yeah, I would say it is definitely the case that the
inflation acceleration of the past 2 years was global. Every single
advanced economy in the world experienced an inflation of core in-
flation relative to pre COVID trends. And I say that acceleration
is actually important. Sometimes people just look at the rate of in-
flation in, like, the US. Versus the EU, and it is higher in the US.
13

But we went into COVID with higher inflation rates in many of
these cases. So you have to look at that acceleration. The US was
first in seeing some of those outbreaks of core inflation, but we also
have peaked first and we are clearly coming down at, again, too
slow a pace, but coming down, whereas other countries are not see-
ing the retreat in core inflation. I think the really important thing
here is the inflation experience has been very common. The policy
decisions made immediately after the COVID Pandemic recession
were very different. And so that is why I think there is such a
weak linkage between any specific piece of policy we did in the in-
flation exchange.
Ms. VELÁZQUEZ. How can you explain how policies like the
ones that we passed last Congress contributed to that recovery?
Mr. BIVENS. So the US recovery is clearly there is many other
countries in the world. It is clearly at the top end in terms of fast
recoveries being experienced in the world. We’ve been much better
on that front than many countries. And I think that is just directly
the result of we were also on the leading edge of how big we went
with fiscal relief and recovery efforts, which I think were correct,
given the scale of the problem.
Ms. VELÁZQUEZ. What does that recovery mean for small busi-
ness in particular?
Mr. BIVENS. By the measures I track, small business has par-
ticipated fully in this recovery. If you look at their share of net em-
ployment gains, their share of sort of total income, they look right
on track with what they were pre COVID. So it has been a broad
based recovery that has not left small business behind in any way.
Ms. VELÁZQUEZ. Thank you. Mr Zittel, you mentioned that
consolidation in your industry has led to fewer vendors to source
goods from in your lifetime of farming. Has this been an ongoing
trend?
Mr. ZITTEL. No, I’d say when I got out of college back in the late
80s, there was expansion, more people were getting in, we had
more tractor dealerships, we had more fertilizer plants, we had
more seed companies. The consolidation has certainly happened
over the last 20 or 30 years and I’m not seeing it getting any better
going the other way. It seems like it is getting worse.
Ms. VELÁZQUEZ. Can you explain how competition in this area
can lead to lower prices?
Mr. ZITTEL. So a perfect example would be we’ve had upwards
of 5 or six seed companies and now we’re down to 2 or 3 seed com-
panies. You’re forced to go to those houses, there is less competi-
tion. Some of them don’t even carry the varieties you want. So if
you want that variety, you’ve only got a sole house to go to. They
name the price, pretty much.
Ms. VELÁZQUEZ. Thank you. Mr Bivens, you mentioned hous-
ing as a key factor of inflation. Can you discuss what Congress can
do to increase housing development, to alleviate our housing short-
age and bring prices back down to earth?
Mr. BIVENS. Yeah, I think that is an incredibly important ques-
tion. I would say to me, the key to getting house prices in check,
which is just a huge challenge for household budgets is building
more quality housing. We just have underbuilt housing for a gen-
eration. We need to build more lots of the blockages to that build-
14

ing actually happen at the state and local level. So the federal has
to do policies that complement that. I think some of the big things
the Biden administration has done that will help a lot is they sort
of plus up federal grants to state and localities that change their
zoning and regulatory laws to allow more housing to be built. I
think that is a really good thing to do. This could be even super-
charged with legislation that allocated actual money to go to states
and localities that do more building or do good things on the regu-
latory and zoning side.
Ms. VELÁZQUEZ. Thank you. Mr. Gray, recently we learned
that the producer price index has dropped to only 2.3 percent. Do
you think this is a positive development for small businesses and
may be able to give them more hope for economic conditions to sta-
bilize?
Mr. GRAY. I think to the extent that we can observe improve-
ments in the inflationary environment in general is a good thing
for households, businesses, small business in particular, and that
may be an indication of that. So I would view that favorably.
Ms. VELÁZQUEZ. Thank you. I yield back.
Chairman WILLIAMS. Thank you. Ms. Valezquez. I now recog-
nize Mr. Luektkemeyer from the great state of Missouri for 5 min-
utes.
Mr. LUETKEMEYER. Thank you, Mr. Chairman. In this com-
mittee last year, we had a number of economists come in and we
talked about the causes of inflation, and they all agreed on 4 dif-
ferent chart costs or reasons energy costs, rules and regulations,
supply chain, employee problems, and our immense money supply
that was poured in the amount of money was poured in the system.
So let’s start with Mr. Gray. The Fiscal Responsibility Act cut
the NEPA requirements down from what would be an average of
seven years to approve a project, down to either one for small
projects, 2 for larger projects. Can you give us just a quick recap
on the importance of that with regards to the cost of the projects
and effects on inflation?
Mr. GRAY. Absolutely. I haven’t studied the degree to which that
particular policy change would move development costs, because I
haven’t seen the estimate of that but directionally, that is entirely
the right way to go if the goal is to expand the supply of energy
production and thus lower the price for households and consumers.
Mr. LUETKEMEYER. Ms. Lee, having been in the banking busi-
ness myself for a few years, I know that the banking business is
extremely regulated, and you’ve been inundated with even more
regulations. So I know that when we were my brother and I had
a bank and forever loan officer, we had a higher compliance officer.
Is that kind of your experience as well?
Ms. SALDANA LEE. Well, our compliance department has
grown, and it continues to grow.
Mr. LUETKEMEYER. Does it make you any money? No, that is
a dead investment, a dead cost for you that you’ve got to overcome.
Ms. SALDANA LEE. That is correct.
Mr. LUETKEMEYER. And it is all due to more rules, more regu-
lations?
Ms. SALDANA LEE. That is correct.
15

Mr. LUETKEMEYER. And you haven’t any fewer rules and reg-
ulations over the last few years? You’ve had more, probably, have
you not?
Ms. SALDANA LEE. That is correct.
Mr. LUETKEMEYER. Thank you. Just kind of curious, too. You
mentioned the PPP program. I thank you for those comments. I
mean, this committee was one of the key folks that oversaw I was
served on Financial Service Committee, and our subcommittee
there oversaw the PPP program, helped originate it, and then we
provide the oversight here. Thank you for your comments on that
because it was a very successful program due to the banks getting
involved and using your customer law to be able to protect the in-
tegrity of that program. So we thank you for that and for thanking
your clients.
With regards to inflation, how is it affecting your small busi-
nesses that you’re financing right now? Are they struggling as a re-
sult of that? And you’re seeing increased past dues losses, busi-
nesses go out of business. What do you see as the effect of inflation
on small businesses?
Ms. SALDANA LEE. There is a variety of things. What we’re
really watching right now is any small loans that have a fixed rate.
At this point, we originate 5 one Arms or 3 one. So that means
they’re fixed for 5 years or 3 years. So they’re in that time frame.
As they start to readjust those rates, that is where the stress
comes in. We had one business owner that absolutely cannot afford
the increase in rates and other costs associated with his business,
and he is put his business up for sale. And so it is just a timing
aspect of what is going to happen in the future with our loan port-
folio and past dues and any kind of restructuring. But that is some-
thing that we’ve talked about already in our bank, is that if there
is restructuring which don’t want to get into banking too deep, but
you start restructuring, that means problem loans and then regu-
latory burdens and a lot of other work that comes along with that.
Mr. LUETKEMEYER. Thank you for that. Mr. Zittel, you are in
a very difficult business. As you said a minute ago with your Ken-
nedy quote, you’re the only group that can you have no control over
your cost, no control over sale your product, and you hope the
weather works. I always tell people that farmers are the ultimate
gamblers. Las Vegas folks are nothing compared to what farmers
are because you truly roll the dice every day. And I thank you for
what you do because you feed our country in the world. But you’ve
had a roller coaster effect with your revenues that you’re talking
about here with regards to the inflation and the Pandemic. And
now the roller coaster of all is can you talk a little bit about that,
how that is all affected you and what kind of changes you’ve made
to your organization with regards to inflation?
Mr. ZITTEL. Very briefly, the pandemic did not affect us much
because we went to work every day. Didn’t know a damn bit of dif-
ference beyond that. The inflation rate, like we said, we’re not
doing the things we should be doing because we don’t want to le-
verage our business. And I think regulation wise, our state has
been very difficult to work with as far as passing things like over-
time rate, mandatory days off and things like that.
Mr. LUETKEMEYER. Your labor costs have gone
16

Mr. ZITTEL. Our labor costs, which 50 percent of cost of doing
business for a farmer is.
Mr. LUETKEMEYER. Labor, and you have no control over that
cost. And you have no control on being able to pass that cost on
like most businesses.
Mr. ZITTEL. Exactly.
Mr. LUETKEMEYER. Thank you very much.I yield back now.
Chairman WILLIAMS. I recognize Mr. McGarvey from the great
state of Kentucky for 5 minutes.
Mr. MCGARVEY. Thank you, Mr. Chairman. Very much appre-
ciate it. Really glad we’re having this conversation today. Obvi-
ously, we are all concerned about the root causes of inflation and
how we prevent a recession in this country. I think it is important
to understand and identify those causes of inflation so that we can
best deal with it. Because, again, we can all, I think, agree that
reigning in inflation is vital to protecting consumers and small
businesses. And it is appropriate to look at those. I think it is ap-
propriate for this committee to understand how the COVID stim-
ulus programs contributed to inflation. But it is easy to Monday
morning quarterback this a little bit as well and just reminding ev-
erybody how important these programs were during the Pandemic.
As the Ranking Member noted, found that the US GDP would
have fallen by 11 percent in 2020 without fiscal stimulus, and that
is equivalent to 3 times the actual decline we saw. We did much
better here than other places in the world during this kind of dif-
ficult time between COVID and what was going on in Russia and
Ukraine. So in talking about how we combat a recession, how we
help these small businesses, looking at these stimulus programs I
think is helpful too, in understanding how they were helpful. Mr.
Zittel, you’re talking about your experience during the Pandemic.
And like so many of the great business people in my state of Ken-
tucky, you’re one of the millions of small business owners who par-
ticipated in and benefited from the PPP program. And so just tell
us your experience with that and how you used that funding to
help your business and the employees in your area.
Mr. ZITTEL. So I would say probably the best example of it is
you are correct. It was well needed and a perfect timing. And not
just because of the Pandemic, because like I said before, the Pan-
demic really didn’t change our lives a whole lot. We weren’t moving
any place anyhow. But I think one of the biggest effects is we’ve
been falling behind. Our margins have been dwindling. Our rate of
trying to stay ahead of technology and move with that curve to try
and make money has fallen behind because we haven’t had money
to work with. That was a great stimulus package, whether it was
pandemic or non pandemic, it was a breath of fresh air. But we
continue to see those regulations that keep pushing us down and
pushing us down.
I don’t know if I’ll have an opportunity, but I just want to say
it one time I did a calculation logbook 1935. If you do the calcula-
tion on labor, it is 50 times higher. If you do the calculation on a
couple of the vegetables that I did that take exact the same amount
of space as it did in 1935, you’re only talking about 15 to 18 times.
So labor costs that cost us 50 percent are rampant. So that was a
17

breath of fresh air. But will it be enough for the future? We don’t
know.
Mr. MCGARVEY. I appreciate that insight and talking more
you’re speaking more regulatory pressure than the stimulus fund-
ing and the impacts there. Going back again to some of the things
that were going on during COVID My home state of Kentucky is
using $500 million in American Rescue Plan funding for the Clean-
er Water Program to invest in water and sewer projects across the
state. I can tell you I was in the state legislature at the time. There
are Kentuckians who now have clean drinking water for the first
time because of this investment in a state like ours, sewer access
for homes, this has been a game changer for us in Kentucky. So
Mr. Bivens, looking at how this infrastructure has or Dr. Bivens,
I should say, looking at how access to clean drinking water we
have 89 million in my state that got people Internet for the first
time. We remember people going to McDonald’s parking lots during
the pandemic so that they could go to school or go to work. Can
you explain how this investment in infrastructure and local econo-
mies will benefit small businesses and the National economy in the
long term?
Mr. BIVENS. Yeah, I think it is a lot of the mechanisms you just
talked about, like small businesses, like kind of every other actor
in the economy, they need good roads to transport their product on.
They need good schools to make sure the workers coming out of
those schools are productive and provide good value. And then I
think one maybe underrated thing that is in the infrastructure bill
that was passed in 2022. A very big investment in broadband and
especially in a world if we’re going to see more remote work to ac-
tually expand the pool of people actually available to work in areas
that have been underserved by broadband before, I think that
could be a huge boon to small businesses. But basically all the
mechanisms you talked.
Mr. MCGARVEY. About, the hardest question I’ll ask you with
25 seconds left, given what we’re all trying to do, help small busi-
nesses, help consumers bring down inflation, you’re in our shoes.
What would you do to help small businesses and consumers and
bring down inflation?
Mr. BIVENS. I think the inflation bit is going to be really hard.
It is just going to require a little bit of patience and to make sure
we don’t make any mistakes going forward to help small business
generally, to me, that the biggest arrow in the quiver is antitrust
policy that levels the playing field between them and the very large
corporations.
Mr. MCGARVEY. So well done. I yield back.
Chairman WILLIAMS. Thank you. I now recognize from Penn-
sylvania Mr. Meuser for 5 minutes.
Mr. MEUSER. Well, thank you very much, Mr. Chairman. Cer-
tainly, thank you to our witnesses. It is appreciated. I spent about
25 years in small business. I talk with small businesses every day,
visit them regularly, as I should, being on this committee as well
as just being a Member of Congress. Since 70 percent of those em-
ployed are in my district are employed through small business,
you’ve been dealing with high inflation supply issues, wage disrup-
tions costs, regular costs going up, regulations. So I’d like to start
18

with the regulation costs, which aren’t really factored into well,
they’re factored into the inflation, but they’re not factored into nec-
essarily your added bottom line costs on your balance sheet.
Mr. Gray, the Biden Administration, according to your colleague
Dan Goldbeck, American Action Forum, found that the Biden ad-
ministration accumulated approximately $367,000,000,000
$367,000,000,000 in less than 30 months in regulatory costs. Can
you share with us the impact that these costs have on small busi-
nesses in what is a very fragile economic climate?
Mr. GRAY. Absolutely. So I should stipulate that those costs
come from the administration. So those aren’t our estimates. Those
are the self reported costs and they are significant. And they are
significant to small businesses because whereas a one key dif-
ference between a large firm and a small firm is just as has been
referenced elsewhere is just the capacity to absorb compliance
costs. And I know from the small business in my family, there isn’t
the capacity to go hire compliance officers. And so each time one
of these comes down, all it does is come out of out of their pocket.
Mr. MCGARVEY. Sure. All right. Thank you. I have in my dis-
trict, we have one of the largest reserves for natural gas. Natural
gas, of course, half the carbon emissions of other fossil fuels, and
yet we see a regular regulatory.
Russian assault on natural gas pipeline distribution and such.
Lately, we’re seeing where prohibitions on gas stoves, which bog-
gles the mind, right? I mean, gas stoves, you need electricity for
other stoves. Where does that electricity come from? Some don’t
think a little bit past what is right in front of us. But that being
said, would more natural gas be beneficial? Mr. Zettel, first of all,
where you are in upstate New York, you’d like to mine or gather
some of that natural gas? And I know that is hopefully down the
road for you, but what would
Mr. ZITTEL. We actually started in 1973 and started with our
first well, which was an abandoned well, and we’ve got nine wells.
But we can only go down to the Medina region, which supplies
about 30 percent of the gas for our greenhouses and our green-
house operation. If we were allowed to deep well, probably one well
would do that in all of our houses and probably half the
neighbourhood. But we are limited, but we do have gas wells. And
yes, we are very short sighted, at least in our state, to say, let’s
get rid of gas. Let’s go all electric. There has been comments on
what would have happened in that November storm, and it would
have been a lot more than 40 people die in Buffalo from freezing
to death if we would have had all electric instead of gas.
Mr. MCGARVEY. Yeah, and I’m just south of you in Pennsyl-
vania, fortunately, where we have been fracking, and it is been a
real benefit and godsend to many of our farmers and businesses,
and it is bringing in many new competitive, adding competitive ad-
vantages for businesses because of the low cost of energy. Let me
move on, Ms. Lee. The CFPB Small Business Data Collection Rule-
making, where they’re asking for, frankly, a bizarre list of personal
data on your clients. How are you doing with that?
Ms. SALDANA LEE. Well, I’m very grateful that I don’t have to
manage that part of the bank. And so, I’m not in compliance. And
we have a compliance officer in his department, and they’re work-
19

ing through all the details. It is extremely burdensome, and we’re
going to have to develop programs and systems. And it is a project
committee that has been meeting for months now, and they con-
tinue to meet until everything gets finalized.
Mr. MCGARVEY. Thank you. I appreciate all of your work for
small businesses. Mr. Bevins, how many years’ experience do you
have in the small business sector?
Mr. BIVENS. My employer is fewer than 50 people, so I work for
a small business.
Mr. MCGARVEY. Okay. I yield back.
Chairman WILLIAMS. I now recognize Ms. Gluesenkamp. Camp
Perez from Washington, the great state of Washington, for 5 min-
utes.
Ms. GLUESENKAMP PEREZ. Thank you, Mr. Chairman. Mr.
Bevins, in your testimony, you noted that one avenue for looking
at inflation is actually as a distributional issue, because what is a
cost to one person is profit to another person. In this case, higher
costs for consumers have often shown up as higher profits for some
corporations. You note that in normal times, corporate profits con-
tribute about 13 percent to prices. But since the second quarter of
2020, they have instead contributed more than a third to the
growth or more than twice as much as they normally do. Inflation
has given corporations a lot of room to pad profits and increase
margins. But that is not all corporations, right? There is a dif-
ference between my corporation with eight employees and some of
the big guys. So why is there such a difference? Why are our profits
diminishing and some others are getting so much higher? Why is
there such a difference in gouging and then the rest of us who are
just trying to get by? One thing that I hear about all the time when
I’m back at home is the impact of consolidation, particularly in AG
and in our food supply chain. I hear about the concentration of
power in the hands of a few of these distributors. Transporters has
resulted in unfair practices and higher prices for us at the grocery
store. So what efforts should be made to improve or better enforce
some of these antitrust issues? How can you discuss, can you dis-
cuss the benefits of enforcing those laws on small businesses, on
competition overall?
Mr. BIVENS. Yeah, I’d say a couple of things. Your question
about what explains why some firms have really been able to just
pass on all costs and then some, whereas other firms have been
more constrained. I think there is 2 answers. One is just partly
luck. The supply chain snarls meant that some people who had
supply on hand as supply chain shut down were just in a great po-
sition to charge whatever they needed to. The more sort of pro-
found answer is just there is lots of market power in the corporate
sector and very big corporations exert a lot of that power. What is
different this time is they have normally exerted it mostly not
against their own customers. They’ve kept inflation has been low
for like 25 years. Instead, a lot of that power has been thrown
backward against their own workers and against small businesses.
This time the shortest route to profitability was by raising prices
and lots of them took it. And that is why you saw such a sort of
huge contribution of corporate profits to inflation over those past
couple of years. And so I think whether we’re talking about the
20

long run problem or the short run problem, the answer is we need
a more level playing field between various economic actors and the
economy, between workers, between corporations and small busi-
nesses. And a key policy lever is the one you talked about, which
is more robust antitrust enforcement that doesn’t only look at prod-
uct market competition, but also looks at what is happening in the
labor market and to suppliers.
Ms. GLUESENKAMP PEREZ. Yeah, like on a very small frame.
Remember when everyone was getting their catalytic converters
stolen rampant everywhere? There was one point where there was
one catalytic converter on the entire West Coast for a year. Make
and model of a vehicle, one on the entire West Coast. And I bought
it and I paid for it and it never showed up. And turns out the deal-
erships get to pull first order off of it. And so prices went up for
everyone. And what could have been a simple fix instead was a bill
because of these inflationary issues that eviscerated people’s sav-
ings accounts. So appreciate the seriousness and the perspective
with which you all are all taking this issue. Thank you to all of our
witnesses for being here and thanks for this hearing today. I yield
back.
Chairman WILLIAMS. Yields back and now recognize Mr.
Stauber from the great state of Minnesota for 5 minutes.
Mr. STAUBER. Thank you, Mr. Chair. And I’ve said it in this
committee before, small businesses are not only the engine of our
economy, but they’re the innovators. And we’re hearing it here
today. During the COVID-19 Pandemic, our small businesses were
hit incredibly hard. Yet it was small businesses that held this econ-
omy and the entire country together. Our small businesses, just
like everyday American consumers, are being hit with inflation the
hardest, which are being worsened by the Biden administration’s
policies. Mr. Bevin, my colleague from Pennsylvania. Maybe I’ll ask
the question just bluntly. Have you ever owned a small business?
Mr. BIVENS. No.
Mr. STAUBER. No? It sounds like it. Mrs. Lee, I have a few
questions about the small business loan activity at First Commu-
nity Bank. What is the current rate on business loan that most
small businesses working with your bank would receive today?
Ms. SALDANA LEE. Approximately 10 percent.
Mr. STAUBER. And what ballpark estimate of the interest rate
that a small business would have received in January of 2020?
Ms. SALDANA LEE. Oh, goodness. Probably 5 and a quarter.
Mr. STAUBER. Almost double?
Ms. SALDANA LEE. Yes, sir.
Mr. STAUBER. What kind of trends have you seen over the past
year or so in small business loan activity? Have you seen an in-
crease in the number of businesses that are unable to keep up with
their loans or small businesses?
Ms. SALDANA LEE. Actually, what we’ve seen is just a decline
in applications because they’re in a very difficult situation in which
their profits are suffering. And as much as they would like to come
to the bank to borrow money, they know that that is going to fur-
ther their problems. And a lot of things are just services in the mo-
ment where you don’t want to do some short term lending and bor-
21

rowing for long term capital. And that is really what they’re need-
ing.
Mr. STAUBER. You had said to, I think, Mr. Luke Byer about
some of the regulators or specialized workers that follow help with
your regulations in the bank. How many of those do you employ
right now?
Ms. SALDANA LEE. Oh, goodness. When I look around the
bank, it is going to be I’m going to say at least 30 are looking at
one piece of compliance and that is more in an in depth level.
Every person in the bank has to deal with compliance.
Mr. STAUBER. So you have 30 that you’ve hired specifically for
compliance?
Ms. SALDANA LEE. Not specifically for compliance, but it is
throughout the bank where among their responsibilities is looking
at something, reviewing something, monitoring something. And in
my opinion, that is the compliance piece.
Mr. STAUBER. Thank you. Mr. Ziedel, the farming industry is
an incredibly labor intensive industry, as you described. Can you
once again share some of the challenges you are facing with re-
cruiting and retaining your employees?
Mr. ZITTEL. So recruiting during the Pandemic was difficult just
because of the process in applications, because it is Chicago, Cali-
fornia, and the consulate in Mexico. So logistically, during the Pan-
demic, it was tough. Other than that, the federal H 2 A program
is the only program to go with, again, the regulations of our state.
Because the H 2 A rate, the AW rate that they call it, is based off
of your minimum wage rate. That is one of the driving forces. So
the higher the minimum wage rate, the higher the AW rate. But
as far as retention wise, we’ve got a great track record. And I’d like
to say because we’re good employers.
Mr. STAUBER. I just known you and heard you comment here.
You’re somebody I could work for. I think you’re a straight shooter
and common sense and a good business owner.
Mr. ZITTEL. Thank you.
Mr. STAUBER. Mr. Gray, as you noted in your testimony, the
federal government has poured an excessive amount of money into
our economy over the past few years. Do you believe we would be
seeing the same level of inflation we are today if Congress and our
president did not pass excessive spending packages like the Amer-
ican Rescue Plan and the so-called Inflation Reduction Act?
Mr. GRAY. I do not.
Mr. STAUBER. Where do you think it would be at?
Mr. GRAY. I don’t want to overstate the effect, particularly a
couple of years later, and I have not done a backwards looking
analysis, but I believe we’ve seen other research that suggested it
was a positive contributor to the inflation rate.
Mr. STAUBER. My next question, and I don’t have much time
how would lowering regulatory burdens and cutting red tape help
tame inflation? You got 2 seconds.
Mr. GRAY. Increase supply. Increase.
Mr. STAUBER. There you go. Thank you. Mr. Chair back.
Chairman WILLIAMS. Thank you. I now recognize Ms. David-
son, the great state of Kansas for 5 minutes.
22

Ms. DAVIDS. Thank you, Chairman. And thank you to the Rank-
ing Member to both of you for holding this hearing today, 3 years
after the start of the COVID-19 Pandemic, Kansas families, small
businesses and workers are still dealing with high costs. Inflation
makes it harder for our small businesses to keep their doors open,
for our workers to put food on their tables. And I’ve been particu-
larly focused on making sure that our domestic supply chains meet
our country’s demand to move goods efficiently. I’ve been proud to
introduce legislation to support our small manufacturers and vote
for critical legislation like the bipartisan infrastructure law and the
major manufacturing domestic manufacturing bill that we passed
in the last session. These things are helping us get our economy
back on track. They’re helping to create good paying jobs and low-
ering prices for folks back home in Kansas. But there is clearly a
ton of work still left to be done. Mr. Bivens, I’m curious if you could
answer my first question here. I know there are some indicators
that inflation is slowing, but that it is not declining fast enough to
provide real relief to our small businesses. I’m curious if you could
share your insights on how the current supply chain disruptions
that we’re looking at are impacting the elevated prices that people
are still seeing.
Mr. BIVENS. So my sense is that the supply chain disruptions,
which were a major cause of the initial surge in inflation, are sub-
stantially better than they were years ago. The New York Federal
Reserve Bank tracks something called the global supply chain pres-
sure index. It was historically high pressure earlier. Now it is get-
ting much more normalized. And so my expectation is that that
along with hopefully some reduction in profit margins over the next
year, will start to bring down overall inflation a little faster than
what we’ve seen. But yeah, I think it is headed in the right direc-
tion. But I agree it is agonizingly slow.
Ms. DAVIDS. Yeah. And I appreciate the insights on supply
chain disruptions. Can you talk a little bit about the other factors
that are playing into the elevated prices that we’re seeing?
Mr. BIVENS. Yeah, so I think profit margins are a big part of
it. So basically, you had this enormous rise in profit margins in cor-
porations that drove at one point about 60 percent of the price in-
creases. Since then, they have been coming down, but they’ve not
anywhere near normal. And so normally at this point in a recovery,
you’d see quite a dip in profit margin. They would actually provide
some really nice disinflation that has not really happened yet. I
think it will happen. I think supply chain unsnarling will increase
some competition. People will let go some of those very high profit
margins because they’ll be forced to. I think the other thing that
is keeping inflation too high is just a lot of lagged effects that are
taking some time to get through the economy. One obvious one,
there is a range of service sector industries that are very labor in-
tensive and inflation is mostly driven by wage increases and very
early in the recovery there are some sectors like leisure and hospi-
tality that is all real scramble for workers. And you actually really
had a labor shortage. I think those are gone. I think the lagged ef-
fect of those wage normalization is going to show up in inflation.
And then the last one, everyone knows housing costs only hit offi-
cial measures of inflation with very long lag. We know in the pri-
23

vate sector housing costs really have gone down quite a bit in the
past year. It has really not shown up much at all in the CPI. It
will show up in the next six to eight months. So, I think there is
a lot of disinflations in the pipeline coming.
Ms. DAVIDS. That is really helpful. And I might follow up with
you about the housing cost lag that you were mentioning. I did
want to touch on really quickly that I have been working specifi-
cally on trying to figure out ways to help restore some of our manu-
facturing capacity and of course I want to do more manufacturing
in the Kansas Third. But I am curious, speaking of Lags and what
the timing might look like on the commitment to reshoring manu-
facturing, can you share some insights on how you think that
might stabilize or impact the price inflections and that sort of
thing?
Mr. BIVENS. My hope is we’re going to see enough disinflation
over just the next six to twelve months, that all that extra capacity
that is coming online from things like the bipartisan infrastructure
law won’t have a huge effect on this episode, but it will have an
enormous effect in the future. It basically means we’re not going
to be in this situation again. If we’re hit by a big shock 3 years
from now, it is not going to cause anywhere near the inflationary
blow up it did this time because our supply chains will be so much
more diversified and strong. So, it really is an investment in the
future. Even if it is not going to come online quick enough this time
to really shove down inflation over the next 3 months. I think it
is absolutely worth doing because of the resilience it builds into the
economy.
Ms. DAVIDS. Thank you and I’ll follow up with some of the other
questions I had. Thank you so much. I yield back.
Chairman WILLIAMS. Thank you. And now recognize Mr. Hunt
from the great’ state of Texas for 5 minutes.
Mr. HUNT. Thank you Mr. Chairman. Really appreciate it. Also
want to thank the witnesses for being here as well. Really appre-
ciate your time and efforts today. Yesterday we observed our great-
est generation’s greatest moment. D-Day brave men risked their
lives to free the world from tyranny to ensure that we don’t speak
German. Today, they waited through waste deep water in the face
of machine gunfire into a barrage of machine gunfire in order to
free the world from fascism. And more than 57,000 of these men
gave their lives 79 years ago. Yesterday, those fearless and coura-
geous soldiers, sailors, marines and airmen wanted those closest to
them to prosper in a free society. Not just then, but now and of
course for the future. Today, because of many of the policies from
this administration, we can hardly say that we’ve kept our promise
to America, the promise of freedom that our greatest generation
sacrificed for us, that we observed yesterday. The American people
are suffering under this administration. Small businesses, as you
have articulated, are feeling the sting of this administration’s ac-
tions. Inflation has remained at a record high for going on 2 years
now. Groceries and essential items have been at all time highs for
American families. Bread, eggs and the most basic staples of life
are now exorbitantly expensive for American families.
We are feeling this everyday. Fuel costs are at a halt or at all
time high heating. Our homes are at an all time high. American
24

films are struggling right now because this administration has
waged war on our oil and gas industry. As you have just articu-
lated, sir, your state is sitting on the Marcel Shale and you can’t
even get the natural resources needed to fill your home and to fuel
your farm. These are not real solutions that are being proposed
right now. Solutions like we must demand that everybody buys an
EV or we have to use solar panels. And by the way, I’m not an anti
green guy. I’m just an all hands on debt kind of guy. And we are
a country that must have redundancies. The economic and energy
priorities of this administration are flat out not sustainable. We
passed the so called Inflation Reduction Act, and we know 2 things
about this bill. According to our former Vice President Al Gore, the
IRA is a quote is a quote climate bill. He said these words and it
will cost the US at least $1.2 trillion in green subsidies instead of
cutting the continued wasteful spending, this administration is on
track as of last week to spend an additional $4 trillion over the
course of the next 18 months instead of curbing our spending to pre
COVID levels. Because last I checked, COVID is over. And for you,
sir, COVID never started. Thank you for all you’ve done for our
country. Small businesses will continue to feel this and so will the
consumer.
Under this administration has become harder to start a business
and very costly to do so. President Reagan famously said the nine
most terrifying words in the English language are, I’m from the
government and I’m here to help. We don’t want that. We want you
to be able to make your own decisions. We want to empower you.
The individual the individual small business owner is the very
backbone of this country. We must unleash American energy. We
must unleash your spirit fire and reign in the influence that we
have seen destroy this country for the past 2 years. Now, ma’am,
before I did this job, I was actually in the mortgage business. And
also, I worked for a home builder in the greater Houston area. One
thing that I found to be very interesting is for every $1,000 in-
crease in a home, you basically price out 2900 potential home buy-
ers. When we have inflation, the input goes into the slab, it goes
into the frame, it goes into the brick, it goes into the roof, it goes
into the doors, it goes into everything of the home. And that then
gets pushed down to the consumer.
So, ma’am, my question is for you. What have you seen in this
industry and how damaging has inflation been to the industry that
I work in and that you work in every single day? And in spite of
the strength of the Texas economy, how has this hurt the home
builder and the homeowner?
Ms. SALDANA LEE. I’m going to start with the homeowner we
have seen our custom home built. They have decreased by half
from about a year ago. And we track that because, again, we’re
very heavy in construction lending. We have the data to support
that. And I see it as because of the home mortgage interest rates,
families are not being able to build their dream homes. And the
other thing that I’d like to add really quickly, we had some builders
that were building custom homes and eight households in par-
ticular, homeowners in particular. Those 2 builders went out of
business during construction. I was able to talk to one of the own-
ers who was extremely disappointed, distraught, because they were
25

going to have to go out and find another builder to finish her
house. And this was like a 2 year period.
Mr. HUNT. Okay, time is up. Thank you very much, ma’am, for
your time. And thank you, sir, for feeding our country. I yield back.
Chairman WILLIAMS. I now recognize Mr. Mfume from the
great state of Maryland for 5 minutes.
Mr. MFUME. Thank you very much, Mr. Chairman. I want to
thank you and in her absence, I want to thank the Ranking Mem-
ber also, and I want to thank our witnesses. One of the interesting
things about this committee and all committees is that we don’t al-
ways agree. And fortunately, we ultimately found our way out of
disagreement, back to the facts and back to the reality and back
to the science. And I know it has been oftentimes convenient be-
cause President Biden is in the White House, to sort of paint him
as the great culprit, the great conspirator that has created a situa-
tion that we’re all definitely trying to survive under. But the fact
of the matter is Joe Biden did not create this inflation. And if we
really want to talk about inflation and administrations, the infla-
tion last year got up to what, over 6 percent?
Well, in the 1970s, following 2 back to back Republican adminis-
trations, Ronald Reagan and his successor, inflation hit 12.6 per-
cent. Now, can you imagine what that would be like today? 12.6
percent? And small businesses were screaming for help. It was so
interesting that in 1974, Gerald Ford addressed the joint session
of the Congress, and he gave this long, detailed speech about what
we as Americans can do to drive down inflation. And people lis-
tened politely. And then at the end of the speech, he pulled out a
great big button that said W-I-N. And he hung it on his lapel, and
it said it stood for Whip Inflation Now. And that he and the First
Lady and his family was going to find a way to spend less, and the
government probably needed to find a way to spend less. But all
Americans have the responsibility to, quote, Whip inflation. Now,
Bob Hope, who was a dear friend of the President at the time, went
on stage a few weeks later and gave a joke, or told a joke, saying
that since that great speech about whipping inflation at 12 percent,
whips have gone up by $0.50 in the last week. So if you live long
enough, you’ll see everything at least twice. I believe that Green-
span, Alan Greenspan, who was his economic advisor at the time,
said it was the most unbelievable demonstration of stupidity that
he had ever seen or heard.
So there is enough blame to go around to everybody. And I know
someone mentioned, I think it was the gentleman from the great
state of Texas earlier, Ronald Reagan. Well, I knew Ronald
Reagan. I served with Ronald Reagan. And Ronald Reagan said
about inflation that it is not the fault of any particular administra-
tion. It is the fault of policies that can carry over from administra-
tion to administration. So I just want us all to take a little bit of
a deep breath and remember that we’re seeing now what we saw
then only twice as devastating without as we saw then a Democrat
in the White House. So it is really not about parties. It is more
about policies, practices, principles. Trying to figure out what
works doesn’t work and throwing stuff up against the wall and re-
alizing that none of us really have an answer.
26

But there is a good idea here, there is a good idea they’re there,
and then we try to find a way to make it all work. So I just have
one question of you, Mr. Bivens. I want to go back to the fact that
inflation is slowing, but it is not reversing. However, I think that
there are some other things that are keeping prices elevated that
maybe we should talk about for a moment. You’d mentioned price
margins in respect to the gentlewoman’s question a moment ago,
but wouldn’t labor market have something to do with that?
Wouldn’t employment levels have something to do with that? And
wouldn’t the monopoly power and pressure downward on really
small businesses that operate on the real main street, wouldn’t
those also be things that sort of drive this uncontrollable beast that
we call inflation?
Mr. BIVENS. Yeah, I think all those influences go into the mix
of what generates the inflation rate. And so one of the reasons why
I’m relatively encouraged by what I’m seeing in very recent data
and inflation and think like we some patients will will help us a
lot is that we have not seen inflation lock in and become embedded
across every sector of the economy like you brought up the 1970s.
One reason why that inflation was so incredibly tough to fight
was like every sector, workers, rank and file workers, small busi-
nesses, corporate profits all saw really rapid gains in their income
growth year after year as they all tried to pass on price increases
to each other. That dynamic really hasn’t happened this time.
There is one sector corporate profits that have really increased
their share of the total. Everyone else’s income is kind of lagging
behind and actually being an anchor on inflation and trying to
bring it back down.
Mr. MFUME. Thank you very much. That is the thing we don’t
talk about that much, the corporate side of all this. Well, this gen-
tleman from Maryland yields back. Mr. Speaker, thank you for the
opportunity.
Chairman WILLIAMS. Okay, thank you. And I recognize Mr.
Phillips from the great state of Minnesota for 5 minutes.
Mr. PHILLIPS. Thank you, Mr. Chairman. Let me start with
you, Mr. Gray. You made some comments, and I concur that deficit
spending is accretive to inflation. I think it is basic economics. I
just looked at core inflation rates around the world. The most re-
cent update I see, the US is about 5.5 percent. Some countries
doing a little bit better than us, but we got Germany at 5.8 per-
cent, Italy at 6.9, Denmark, 6.1, Greece, 6.1, Spain, 6.1, Paraguay,
6.2. France, 6.3, Norway, 6.3. Ireland 6.4. European Union 6.45.
Australia, 6.6. Netherlands, 6.6. Honduras, 6.6. Peru, 6.7. United
Kingdom, 6.8, Belgium, 6.8, New Zealand, 7.3. I can keep going.
Sweden, 7.6. Chile, 8.7. Estonia, 10.8. Poland, 12.2. Pakistan, 20.
Egypt, 38. Argentina, 105. Not so bad, comparatively. Is that a fair
statement? Compared to developed countries around the world?
Compared to those large numbers, our smaller numbers are better.
Okay. And by the way, I’m the first to admit I’m really tired of
both parties being very poor fiscal managers of our economy. One
party talks about doing it a little bit more than the other, neither
are doing it. Both deserve blame. What president in our country’s
history added more to our federal debt than any other in a 4 year
term? I don’t have that off the top of my head, but I have a pretty
27

good guess. Who do you think? I would imagine it is probably not
the current one, but perhaps the last one. That is correct. Donald
Trump added $7 trillion. So all I’m getting at here is I’m tired of
this nonsense about who. But we’re all responsible for it, every sin-
gle one of us, both parties. And I simply want to focus more on so-
lutions because that is what we’re here for.
So to all of your witnesses, thank you. To our Chairman and
Ranking Member, thank you. But in terms of culture, man, I just
am tired of this throwing stones, because we’re both responsible.
With that said, I do want to talk about solutions. Some of you have
mentioned some before. I’ve been a small business owner my entire
life. I know how darn tough it is during the best of times, let alone
during inflationary times. I also, as a banker, Ms. Lee, I can imag-
ine trying to find that intersection between raising rates to cool the
economy and reduce inflation with ensuring that we have capital
access to small businesses as a challenge. Just share with me what
you think is the most important thing that we policymakers can do
now in a thoughtful manner to actually make life easier for small
business owners as it relates to inflation regulation or anything
else. Why don’t we. Start with you, Mr. Bivens.
Mr. BIVENS. I would say for small business owners, the most
important thing is enhanced antitrust agenda level.
Mr. PHILLIPS. You talk about that a little bit. You mentioned
that earlier. Be a little more specific.
Mr. BIVENS. A couple of things. I mean, one, I think we often
think about antitrust as a make sure big companies are not charg-
ing their own customers really high prices because of their privi-
leged market position. We also need to look at how they treat their
suppliers. A lot of the stories about small businesses being
squeezed are my input. Prices are rising. I have no control over
that. Then when I try to sell my stuff, often to a big corporate re-
tailer, they just tell me no. And they do not give me any sort of
extra price boost at all. I think that is a real problem and that is
an asymmetry of bargaining power that is going to hurt them even
during non inflationary times. But it is becoming really acute now.
Mr. PHILLIPS. I appreciate that. Okay. Antitrust. Got that. All
right. Ms. Lee, what can we do expeditiously to help small busi-
nesses?
Ms. SALDANA LEE. In my opinion, every Congresswoman,
every congressman needs to sit and just be in that small business
owner’s shoes. Get educated, get in depth into the real cost of each
particular different type of industry, different type of business. Be-
cause that is one of the best things about banking. We call them
deals. No deal is the same, every deal is different and every cus-
tomer is different. And that is what I feel would be beneficial be-
cause it would come back to getting educated and then forming the
policies that need to be formed.
Mr. PHILLIPS. Thank you. In fact, I do a series called on the
Job with Dean. I spend 2 to 3 hours a shift at small businesses.
I’ve done about 30 of them in my district. Most educational, in-
sightful, enlightening thing. I wish every Member of our Com-
mittee would do the same in his or her districts. Why don’t we
move to you, Mr. Zittle? I’m sorry. I’m sorry, Mr. Gray. Yeah, sorry.
Just trying to throw you off a little bit.
28

Mr. GRAY. I would just say do no harm. And this Congress has
paid good attention and discussed opportunities to increase supply
across a number of industries, and I would continue those.
Mr. PHILLIPS. Okay. And Mr. Zittel?
Mr. ZITTEL. Consistency and policy making, it doesn’t matter
whether it is state line or country or in the world. You can’t sell
coal to China. We live under the same sky and then want to be all
electric. Same thing with state to state. Policy making has to have
a concept and they got to know what they’re talking about.
Mr. PHILLIPS. Any specific policy relative to your business that
would be most helpful? You mentioned natural gas, under——
Mr. ZITTEL. Anything labor for US.
Mr. PHILLIPS. Labor——
Mr. ZITTEL. Our state and labor.
Mr. PHILLIPS. Maybe immigration reform to help increase the
supply of labor. What do you think of that?
Mr. ZITTEL. No, we’re good.
Mr. PHILLIPS. Oh, you’re good?
Mr. ZITTEL. Yeah, they work out just fine. It is our state labor.
Mr. PHILLIPS. Okay, thank you. I yield back.
Chairman WILLIAMS. Next, I recognize Mr. Alford from the
great state of Missouri for 5 minutes.
Mr. ALFORD. Thank you, Mr. Chairman. I appreciate that.
Ranking Member small businesses contribute greatly to the Amer-
ican economy, the fabric of our society, our way of life. But ramp-
ant inflation is contributing to the downfall of a lot of small busi-
nesses. It is a matter really important to me in our district. Our
district is very rural, 24 counties. We have 95,000 farms in the
state of Missouri. A lot of these are family owned. We’re losing a
lot of farms. 1000 a month in America. This is serious business.
Farmers are small business owners as well. And everyday small
business owners have to deal with the crushing effects of inflation,
higher input costs, increased labor costs.
65 percent of small businesses say they are likely or very likely
that they will permanently close if inflation continues at its current
pace. Economist Larry Summers, who served in the Obama admin-
istration, said the risk of this inflation is sizable and that he be-
lieves we will tip into a recession. Biden Harris administration has
decided to focus on woke policies. Instead of tackling inflation,
they’ve also decided to increase, not decrease, regulations, adding
to the cost of doing business. Well, folks, it is time that we and the
Small Business Committee and the House of Representatives get
down to the business, to once again allowing the greatness of our
small businesses to be unleashed and tame the Biden inflation.
My constituents are focused on 3 big things food, fuel and fer-
tilizer. The F 150 is a model of a truck. It shouldn’t be what it costs
to fill it up. But unfortunately, our farmers are dealing with these
higher input costs, driving them some out of business. President
Biden has targeted the fossil fuel industry, but he has squarely put
the crosshairs on the backs of the American people. And it is time
for this to end. Andrew bettering chairs. The Missouri Farm Bu-
reau young farmers and ranchers program. He is very concerned
about these input costs. He says, I think we’re just in a situation
where you have to hold tight and hope for the best. Hopefully there
29

is light at the end of the tunnel. Well, hopefully there is. And Mr.
Zittel, I want to start with you. Do you see light at the end of the
tunnel? And what can we tell young farmers like Andrew?
Mr. ZITTEL. Same thing I tell my son, be patient. Same thing
Andrew is saying. We’ve weathered the test of time. We’ve been
around 100 plus years. You get creative. It will never be easy, I
don’t believe I always had the dream that it would happen in my
lifetime, but I don’t think I’m going to last that long. I believe the
American farmer will become more appreciated and better com-
pensated in the future because we’re going to lose enough of them
where they’re going to become a rare enough commodity that peo-
ple will start to understand what they’re putting in their mouth.
Mr. ALFORD. We better start realizing that quickly. Our food se-
curity is our National security, as you well know. Mr. Zittel, Mr.
Gray, inflation is a burden for all Americans. It is a tax on all
Americans. I don’t care how much money you make, what your
skin color is or what pronoun you go by. It is a tax. The negative
effects of inflation are really hard felt in rural communities. As
we’ve talked about, incomes grew slower there while expenses grew
faster. It has put rural small businesses in a tough spot. Mr. Gray,
how are currently administration policies making it more chal-
lenging for rural small businesses to navigate the impacts of infla-
tion?
Mr. GRAY. I would first speak to the current inflationary envi-
ronment as I think we would all agree is complex. I would identify,
however, some policy errors that were made recently that exacer-
bated it. It certainly not the only cause and as the Members of the
Committee have already addressed, the regulatory environment is
a challenge for commerce. And I think the combination of those 2
elements are antithetical to our understanding of price discovery
which is the intersection of supply and demand. And these policies
sort of push in the wrong direction.
Mr. ALFORD. I can’t help but think have we had a different
president and a different administration? This would not be hap-
pening. The war on fossil fuels would not be happening. We would
be energy dominant and not energy dependent as we are going on
our hands and knees and begging other countries, taking oil out of
our strategic oil supply, putting it at risk on a National security
level. And I can’t help but think that fertilizer prices which are de-
pendent upon natural gas prices, that’s what makes fertilizer. We
only have 7 percent of the world’s fertilizer is made in the United
States of America because the overregulation of EPA and other
government agencies that see fit to try to shut down businesses so
we can’t have an active, growing economy, I think that is reprehen-
sible. And I think we here on the Small Business Committee are
going to make every step we can to get people back into the busi-
ness of doing business. Thank you, Mr. Chairman. I yield.
Chairman WILLIAMS. Thank you. I now recognize Ms. Scholten
from the great state of Michigan for 5 minutes.
Ms. SCHOLTEN. Thank you so much Mr. Chair and thank you
so much to the witnesses for taking time out of your busy lives
here today. I want to start by saying that inflation has been a
deeply concerning issue for individuals in my district and I am so
grateful that we’re having this hearing today.
30

As my colleague Representative Phillips said, this is an issue
that has been blown up by both parties. We need to put the politics
aside and focus on solutions which is what I hope we can do here
today. I know that I came to Congress because I was concerned
about working families like mine and the rising costs. So many
families in West Michigan work hard, pay their bills and still
struggle to make ends meet. Prices across the board are too high
and wages are too low. Inflation is slowing which is encouraging.
However, it isn’t reversing. American families and small busi-
nesses are still suffering. Mr. Bivens, in your testimony you spoke
about how inflation is the inevitable result of massive shocks to the
economy and the long lived but steadily dampening ripple effects.
You go on to list the Pandemic and the Russian invasion of
Ukraine as some of those shocks but what is keeping prices ele-
vated now that the ripple effects of these shocks have subsided?
Mr. BIVENS. So I would argue they have not fully subsided. I
think they’re really long lived and there’s also big lags between
when they actually subside and when they show up in lower infla-
tion. And so I gave the example to your colleague earlier it is wide-
ly recognized that what is actually happening in housing markets
is only reflected in official measures of inflation with up to a year
lag. I think we’ve only seen in the past month or 2 a deceleration
in the housing component of the CPI. I think that’s really reliably
going to continue over the next year because we know in the pri-
vate sector the real time data those costs have been moderating a
lot. The same story holds with a bunch of very labor intensive sec-
tors in the service industry where prices are really a function of
what’s happening to wages. Wage growth was through the roof in
the very beginning of the recovery. Everyone remembers the res-
taurant scrambled to rehire 12 percent wage increases. That’s an
old story and it’s just taking time for those to filter through. And
then the last thing is profit margins are not as high as they were
at their absolute historic peak at the beginning of 2022 but they’ve
only come down a little bit. I think if they normalize to like 2019
levels over the next year that puts a lot of disinflation on the table
as well. So I would argue the ripple effects they’re still out there
but they’re going to predictably dampen unless some, god forbid,
huge shock hits again.
Ms. SCHOLTEN. So you think it is the ripple effects that are
still contributing?
Mr. BIVENS. Yes.
Ms. SCHOLTEN. I wonder if you could talk my colleague Mr.
Phillips listed off a number of inflationary rates of other countries
and developed nations. I wonder if you can dig into that a little bit
and talk about how the United States compares to other similarly
situated countries.
Mr. BIVENS. Yeah, when I see that data the first thing I think
is it’s very clear evidence that there is just not some US specific
policy mistake that caused our inflation. It was literally every sin-
gle advanced economy in the world saw a pronounced acceleration
in inflation. Ours came a little sooner than some others but it also
peaked sooner and it’s on its way down whereas in many other
countries it is not. And if you look across the different policy
choices those countries made, they’re all over the table like some
31

did very aggressive fiscal relief and recovery like we did, which I
think was appropriate. Some really didn’t at all, but still got the
inflation. And so what I take from that data is that the US is kind
of in the middle of the pack generally as to what happened with
its inflation experience. It’s better on the recovery front, and it
really means that there is no one dumb US specific mistake that
led to this. It was a global pandemic and global war that led to
most of the inflation we’ve seen.
Ms. SCHOLTEN. Thank you. Because I only have a minute left,
I want to stick with you. In a little bit of a follow up, we talk about
how inflation needs bipartisan solutions. When you think about the
best case scenarios for recovery, can you speak to whether we are
on track to achieve this recovery scenario and what specifically in
terms of policies, especially those policies we can actually achieve
in a bipartisan manner in this Congress we can help do as legisla-
tors.
Mr. BIVENS. So I think at the moment we’re actually on a pret-
ty decent track. Everyone wishes inflation would come down much
more quickly, but I don’t wish that at the cost of having unemploy-
ment rise a lot. And so I don’t want the Fed to continue super ag-
gressive rate hikes. I think at the moment the soft landing is in
reach. That is, we have inflation come down steadily. Normalize
unemployment never really goes up. I think in terms of, like, bipar-
tisan things that can happen, I think they’re mostly on the sort of
infrastructure spending front. There are still some other things we
could do. And I would also include a big investment in childcare
that boosts labor supply. And actually I think that’s not going to
take effect in the next six months, but it really could make us
much better prepared for the next big shock that comes our way.
Ms. SCHOLTEN. Thank you. Yield back the remainder of my
seconds.
Chairman WILLIAMS. And now recognize Mr. Bean from the
great state of Florida for 5 minutes.
Mr. BEAN. A very good afternoon, Mr. Chairman. Thank you so
much. And good afternoon, panelists. I’m a rookie in more ways
than one, Mr. Chairman, as you know, and everything happens at
once. Running from committee to committee. Mr. Who’s our bank-
er? Our banker is Miss Lee. But what are we seeing out there? And
I was a banker for 13 years. What are we seeing? Are we change
because inflation I know it’s kicking everybody’s tail. What are we
doing? Are we changing lending standards? Are we looking at dif-
ferent things? What’s changed in banking now that inflation is just
kicking everybody’s tail?
Ms. SALDANA LEE. Okay, before I answer, can I ask you a
question?
Mr. BEAN. Sure, go right ahead. You’re recognized
Ms. SALDANA LEE. Why are you not a banker anymore?
Mr. BEAN. I got this Congress gig going on right now, but you
never know. You never know if it doesn’t work out.
Ms. SALDANA LEE. I thought you were going to say compliance.
Mr. BEAN. No. You never know, though. You never know. But
it’s certainly a rewarding career of helping businesses and putting
people in houses and businesses and whatnot. I know there’s great
satisfaction. But is it hard now? Is it gotten difficult?
32

Ms. SALDANA LEE. It’s gotten extremely difficult. And I men-
tioned earlier that I think that the thing that’s most difficult is a
small business that’s already suffering, and they are needing cap-
ital to continue to meet some of those increased prices. But they
don’t want to get into debt further than they might already be or
just get debt if they don’t have any already. There’s a lot of short-
term things that the bank is assisting them with, and that has
helped tremendously. But it’s almost like the paycheck to paycheck
for a consumer. That’s the way it is for business. But we’re just
going to continue to help however we can.
Mr. BEAN. Good Deal. Are you finding this is a toss-up question?
Is hiring people we’ve heard that as a recurring theme. Are you all
seeing that as well? Getting people to work for you everywhere?
Ms. SALDANA LEE. Everywhere.
Mr. BEAN. You’re seeing that, too? Anybody else? Mr. Gray.
Jump in.
Mr. GRAY. I don’t have any direct reports myself, but I know
elsewhere in my organization it’s been a struggle to find folks
Mr. BEAN. Very good.
Mr. ZITTEL. People are always surprised when I say this not an
issue. But we don’t have Americans that want to be farmers either.
So, we’re depending on the H 2 A program. Good workers, reliable
workers, happy to be with us, always come back. So far, so good.
Mr. BEAN. And with the remaining time, does anybody have
anything to say that wasn’t asked of you? Ms. Lee?
Ms. SALDANA LEE. I can’t think of anything off the top of my
head. Some of the points that I really wanted to make actually
questions were posed and I was able to field those questions.
Mr. BEAN. Very good. Mr. Gray. Anything? Any final thoughts?
Mr. GRAY. Just the observations from the Ranking Member at
the beginning are well taken, and I think we would all agree that
the response to the inflation is painful and because the Federal Re-
serve, our primary institution for controlling and moderating price
stability, has some very blunt tools. And unfortunately, we are in
a position where they are having to deploy them. And the issue is
a credit crunch.
Mr. BEAN. Got you. Mr. David?
Mr. ZITTEL. I think the American farmer does what he does be-
cause he loves it. It’s not ever going to be a get rich scheme. I al-
ways tell people I passed 3 very responsible human beings on to
the rest of the world and only one of them became a farmer. But
I hope more of them become farmers because that’s where you get
work ethic from. So don’t kill the American dream of being a farm-
er.
Mr. BEAN. Amen. Amen. Mr. Chairman, I yield back.
Chairman WILLIAMS. Thank you very much. I now recognize
Mr. Thanedar from the great state of Michigan for 5 minutes.
Mr. THANEDAR. Thank you, Mr. Chair, and I thank all of the
witnesses here. This has been a good discussion. I’m a small busi-
ness owner. I’m a serial entrepreneur, started many small busi-
nesses. And Mr. Bivens, I struggled making payroll, hiring, acquir-
ing new customers. Running a small business is tough, even
though small businesses create 70 percent of the jobs. Now looking
back in this pandemic and in current situation, it somehow seems
33

to me that larger corporations are continue to do well. They con-
tinue to command higher prices, but the small businesses continue
to struggle. They are closing down. They have felt real pain of the
current economic situation. Why is that? Why is the larger corpora-
tions able to be able to pad their profits and look robust and
healthy as ever? Why is that? Help, help me understand if you can.
Mr. BIVENS. Yeah, I think the simple answer to it is just like
different degrees of market power. A lot of the stories on the panel,
which I think are totally true, is you’ve got small businesses and
they look on the input side and they see costs rising a lot and then
somehow, they’re not able to sell their output for much higher
prices. And on the one hand that should be a puzzle. There’s infla-
tion. I thought all prices were rising. Why aren’t they just getting
it back on the output side? And it’s often the case that because
some of their customers tend to be really big corporate retailers
who have the ability to say no, don’t care about what’s happening
to your input costs. I’m holding the line on prices and I’m able to
just because I’m a big corporation and I’ve got market power that
you don’t. And so that’s why I think, like inflation or not, long run,
short run, one key issue is just to relive level that playing field and
actually do more robust antitrust enforcement so that the pain is
actually shared more. Equitably across society when you’ve got
these shocks and it just leads to more efficient outcomes when
you’ve got more competition in markets as well.
Mr. THANEDAR. Yeah. Thank you. Thank you so much. And
Mr. Gray, I represent Detroit, State of Michigan. Many of the resi-
dents in my district average typical annual household income could
be as low as $25,000, maybe as high as $45,000. So, people are
struggling and they haven’t seen, many of these families haven’t
seen the benefit of the wage increases depending on the type of
work that they do. But they are experiencing the same inflation as
everybody else, the same cost increases, the cost of grocery, the
fuel, everything else going up. Now, Federal Reserve at least looks
like indicating that they would want to pause the interest rate
hikes. Now, given the current inflation situation, what would that
do to the inflation? And do you think that the Fed is gone far
enough or they need to continue to go further?
Mr. GRAY. Thank you for the question and your observation is
absolutely correct. And this is true of every recovery, is it not? Too
often, those at the lowest end of the income distribution recover
last. However, I do think in the current recovery, we’ve actually
seen something of a break from that tradition. And we have seen,
particularly in this very tight labor market, is unemployment rates
across all demographic groups are really bouncing off historic lows.
And I view that positively within the context, though, of an infla-
tionary environment. However, in terms of the outlook on the Fed-
eral Reserve, I think there’s an argument for a pause. We have
seen rapid increase in the tightening of monetary policy. So, there’s
an argument for that at present.
Mr. THANEDAR. Okay. With 30 seconds remaining, do you be-
lieve that the Fed policy has helped us avoid a recession and likely
to end up into a soft landing?
34

Mr. GRAY. I believe that’s the hope. We’re not there yet, and so
I simply don’t know if that’s yet achievable. I am hopeful, and so
far, we haven’t landed hard.
Mr. THANEDAR. Mr. Gray, thank you. And, Mr. Chair, I’ll yield
back.
Chairman WILLIAMS. Thank you very much. And I would like
to thank our witnesses today. We’ve had almost 2 hours of a hear-
ing. It’s been great for your testimony, and I hope that when you
go back, you realize that everything in Washington is not one side
or another. I think you see on this committee, we agree to a lot of
things, which is important because we need to agree on main
street, America and so forth. So, I appreciate you being here. I ap-
preciate all my colleagues being here today. And without objection,
Members have 5 legislative days to submit additional materials
and written questions for the witnesses to the Chair, which will be
forwarded to the witnesses. I ask the witnesses to please respond
promptly if that happens. And if there’s no further business, with-
out objection, the committee is adjourned. Thank you.
[Whereupon, at 3:50 p.m., the committee was adjourned.]
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