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21–192 2016

S. HRG. 114–454 

ENCOURAGING ENTREPRENEURSHIP: GROWING 

BUSINESS, NOT BUREAUCRACY 

HEARING 

BEFORE THE

JOINT ECONOMIC COMMITTEE 

CONGRESS OF THE UNITED STATES 

ONE HUNDRED FOURTEENTH CONGRESS 

SECOND SESSION 

JULY 12, 2016 

Printed for the use of the Joint Economic Committee 

( 

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JOINT ECONOMIC COMMITTEE 

[Created pursuant to Sec. 5(a) of Public Law 304, 79th Congress] 

SENATE 

DANIEL COATS, Indiana, Chairman 

MIKE LEE, Utah 

TOM COTTON, Arkansas 

BEN SASSE, Nebraska 

TED CRUZ, Texas 

BILL CASSIDY, M.D., Louisiana 

AMY KLOBUCHAR, Minnesota 

ROBERT P. CASEY, JR., Pennsylvania 

MARTIN HEINRICH, New Mexico 

GARY C. PETERS, Michigan 

HOUSE OF REPRESENTATIVES 

PATRICK J. TIBERI, Ohio, Vice Chairman 

JUSTIN AMASH, Michigan 

ERIK PAULSEN, Minnesota 

RICHARD L. HANNA, New York 

DAVID SCHWEIKERT, Arizona 

GLENN GROTHMAN, Wisconsin 

CAROLYN B. MALONEY, New York, Ranking 

JOHN DELANEY, Maryland 

ALMA S. ADAMS, PH.D., North Carolina 

DONALD S. BEYER, JR., Virginia 

BRIAN NEALE, Executive Director 

HARRY GURAL, Democratic Staff Director 

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C O N T E N T S 

OPENING STATEMENTS OF MEMBERS

Hon. Patrick J. Tiberi, Vice Chairman, a U.S. Representative from Ohio ......... 1 

Hon. Carolyn B. Maloney, Ranking Member, a U.S. Representative from 

New York .............................................................................................................. 3 

WITNESSES

Dr. Tim Kane, Economist and Research Fellow, Hoover Institution, Stanford, 

CA .......................................................................................................................... 5 

Mr. Tom Walker, President and CEO, Rev1 Ventures, Columbus, OH .............. 7 

Mr. Jamie Richardson, Vice President, Government, Shareholder and Community Relations, White Castle System, Inc., and Chairman, Ohio Restaurant Association, Columbus, OH ................................................................... 9 

Ms. Carla Harris, Chair, National Women’s Business Council, Vice Chairman 

of Wealth Management and Senior Client Advisor, Morgan Stanley, New 

York, NY ............................................................................................................... 11 

SUBMISSIONS FOR THE RECORD

Prepared statement of Hon. Patrick J. Tiberi, Vice Chairman, a U.S. Representative from Ohio .......................................................................................... 24 

Prepared statement of Hon. Carolyn B. Maloney, Ranking Member, a U.S. 

Representative from New York ........................................................................... 24 

Prepared statement of Dr. Tim Kane .................................................................... 26 

Prepared statement of Mr. Tom Walker ................................................................ 33 

Prepared statement of Mr. Jamie Richardson ...................................................... 40 

Prepared statement of Ms. Carla Harris ............................................................... 49 

Questions for the record and responses for Ms. Carla Harris submitted by 

Rep. Carolyn B. Maloney ..................................................................................... 55 

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ENCOURAGING ENTREPRENEURSHIP: 

GROWING BUSINESS, NOT BUREAUCRACY 

TUESDAY, JULY 12, 2016 

CONGRESS OF THE UNITED STATES, JOINT ECONOMIC COMMITTEE, Washington, DC. 

The Committee met, pursuant to call, 2:01 p.m. in Room 216 of 

the Hart Senate Office Building, the Honorable Pat Tiberi, Vice 

Chairman, presiding. 

Representatives present: Tiberi, Hanna, Grothman, Maloney, 

Delaney, and Adams. 

Senators present: Klobuchar. 

Staff present: Breann Almos, Ted Boll, Doug Branch, Whitney 

Daffner, Connie Foster, Harry Gural, Colleen Healy, Karin Hope, 

Matt Kaido, Brooks Keefer, Christina King, Yana Mayayera, and 

Brian Phillips. 

OPENING STATEMENT OF HON. PATRICK J. TIBERI, VICE 

CHAIRMAN, A U.S. REPRESENTATIVE FROM OHIO 

Vice Chairman Tiberi. The hearing today will come to order. 

Good afternoon. I would first like to thank Chairman Coats for giving me the opportunity to hold this hearing, and along with his 

staff in helping to prepare for today’s hearing on the all-important 

subject of entrepreneurship and its importance to our economy. He, 

unfortunately, had another commitment this afternoon but turned 

the gavel over to me for what I expect to be a very thought-provoking conversation about how we encourage entrepreneurship. 

Entrepreneurs put ideas into action, and the businesses they create make up a major component of America’s economic job growth 

engine. Entrepreneurship also contributes to our standard of living. 

By boosting job creation, entrepreneurship drives economic growth, 

offers consumers better goods and services, and allows Americans 

to move up the economic ladder through their own innovations. 

America was once considered by far the best place for someone 

venturing out on their own. It was a place for taking a risk to build 

something new, to improve the lives of all Americans. And in 

places across the country, that is still the case, as you will hear 

from our witnesses today. 

However, our current economic recovery has been relatively slow, 

and certainly geographically uneven. In my home State of Ohio, as 

Mr. Walker will testify, Columbus has enjoyed great success in attracting new businesses and encouraging innovation. 

Other parts of the State, however, including many rural areas, 

Appalachia, have not recovered from the Recession. Overall, we 

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have seen a decline in the rates of start-up companies and an increase in the average age of companies compared to previous decades. 

It is our role as federal policymakers to foster a free market 

economy in which Americans enjoy ample opportunities for employment, and we must not forget that the private sector is the true 

driver of economic growth. Government cannot tax and regulate its 

way to American prosperity. 

Every day, entrepreneurs launch new companies and decide 

where to place their headquarters. Those who incorporate here will 

face the highest corporate rate in the developed world, while those 

who structure to pay individual tax rates will grapple with mindnumbing complexity and tax rates that have risen substantially 

during this Administration. 

Our uncompetitive tax code makes America less attractive as a 

place to do business. As if taking a risk on the success of an idea 

were not challenging enough, today’s entrepreneurs also face a series of government-imposed market barriers. These include banking 

regulations that make it harder to get financing, and harder for 

community banks to operate and make loans. 

Archaic licensing and permitting rules, and complex labor and 

health requirements, each of these requires using precious resources often to hire professionals just to help navigate through all 

of it. 

As our witness, Andrew McAfee said in a previous hearing on automation, entrepreneurs are facing an increasingly dense thicket of 

things that an employer or worker has to confront before they can 

start something up. And it looks like more and more people are 

saying I’m just not going to bother with it. 

A friend of our family in Columbus, Ohio, an Italian immigrant, 

started a family-owned business over 40 years ago. He has told me 

more than once that given the regulatory burden today that he 

faces he couldn’t start a business that he started 40 years ago. The 

mandates, the regulation, the risk-to-reward, the gap is too high. 

That is not what you like to hear from a successful entrepreneur 

today. 

We must continue to focus on ways to reduce the barriers to innovation, giving entrepreneurs the tools they need to succeed. That 

does not come from picking winners and losers with direct subsidies or carved out tax breaks. Instead, that comes from preserving competition, removing restrictions that only serve to protect established companies, and hinder startups with new ideas. 

We also need to remove barriers for those who want to invest in 

entrepreneurs and startups. My bipartisan legislation, the Investing In Opportunity Act, will make it easier to invest in areas that 

need it most: communities, rural and urban, that need help. 

Congress should boost entrepreneurship by reducing the thicket 

of bureaucracy that is strangling private initiative. It is my hope 

that here in America we can retain a strong entrepreneurial spirit 

rather than cause it to wither away. 

At this time I would like to recognize Ranking Member Maloney 

for her opening statement. 

[The prepared statement of Vice Chairman Tiberi appears in the 

Submissions for the Record on page 24.] 

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OPENING STATEMENT OF HON. CAROLYN B. MALONEY, 

RANKING MEMBER, A U.S. REPRESENTATIVE FROM NEW YORK 

Representative Maloney. Thank you. Thank you so very, very 

much, Vice Chairman Tiberi, and thank you, too, Chairman Coats 

for calling today’s hearing. And thank you to all of our panelists. 

The United States is the most creative, innovative country in the 

world. We have the world’s best research universities, its deepest 

financial markets, and we remain a magnet for the world’s talent. 

If we leverage these assets, there is no doubt American 

innovators and entrepreneurs will continue to lead the world in 

years to come. 

New businesses are the lifeblood of our economy. Some startups 

go on to become big businesses worth billions of dollars. Others 

stay small but play a vital role in helping their founders achieve 

the American Dream while creating jobs in their communities. 

However, data show that new business formation in America has 

been slowly declining for decades. One reason for this is the enormous and growing power of extremely large corporations, many of 

which have swallowed their competitors. This makes it much harder for new entrepreneurs to break into markets. 

Another reason is that the middle class, which has long fueled 

entrepreneurship in our country, has seen its economic foundation 

chipped away for decades. 

A third reason that entrepreneurs face a difficult environment is 

the fallout from the catastrophic financial crisis under George W. 

Bush. The Recession hit aspiring entrepreneurs hard. Bank lending 

and other sources of financing dried up, and new businesses had 

an even harder time finding customers. 

Fortunately there are signs that these trends have turned 

around. The U.S. recovery is the envy of the world. Since 2012, 

more businesses have opened than have closed. Bank lending to 

small businesses has ticked up, and the Jumpstart our Business 

Startups Act, signed by President Obama in 2012, is now helping 

to facilitate crowd funding. 

Last year, the Kauffmann Foundation’s Index of Growth of Entrepreneurship posted its largest year-over-year increase in a decade. These are all good signs, but it is clear that there is room for 

improvement. 

My Republican colleagues often attribute declining startup rates 

to the regulatory policies of the Obama Administration. They are 

misguided. The decline has been going on for decades under both 

Democratic and Republican presidents. In fact, President Obama 

has issued fewer regulations than President George W. Bush did 

through the same point in his presidency. 

Moreover, it is unclear whether trends in regulations and in 

startup formation are related at all. As Dr. Kane writes in his testimony, a study by economists at George Mason University found 

that industries with more regulations actually have more startup 

activity. 

In addition, a recent report by the Economic Innovation Group 

found that just 20 counties were responsible for half of the net increase in new business establishments from 2010 to 2014. 

Nine of the 20 counties with the strongest new business growth 

are in the 10 states ranked by the Mercatus Center as having the 

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most burdensome regulations. None of them are in the 10 states 

ranked as having the least burdensome regulations. 

Make no mistake, we should carefully review regulations to make 

sure that they are serving the best interests of American families. 

Surely there are regulations that could be streamlined or improved 

to reduce the impact they have on new businesses. 

The private sector, government, and academia can each play a 

role in laying the groundwork for entrepreneurship and innovation. 

In my home District in New York they are working together to 

help create Cornell Tech on Roosevelt Island. It will be a worldclass campus for applied science and engineering, bringing together 

innovators, entrepreneurs, and investors. 

Visionary projects like Cornell Tech can help serve as a catalyst 

to speed the movement of promising new discoveries from the lab 

through development and into manufacturing. These partnerships 

can also help our workforce develop the education and skills needed 

to innovate and build businesses. 

I want to close by highlighting another area of real promise: entrepreneurship among women and in communities of color. Between 2002 and 2012, the number of women-owned businesses 

grew more than two-and-a-half times faster than the national average. 

The number of businesses owned by women of color grew even 

faster than that. We need to build on this success and break down 

barriers so even more women can start and grow their own businesses. 

Again, I thank Chairman Coats and Vice Chairman Tiberi for 

holding this hearing, and I look forward to our witnesses’ testimony, and I yield back. Thank you. 

[The prepared statement of Representative Maloney appears in 

the Submissions for the Record on page 24.] 

Vice Chairman Tiberi. I would like to thank the Ranking 

Member. And I would like to introduce our panel of witnesses who 

are here today. We appreciate you being here, all four of you. 

Dr. Tim Kane is an economist and research fellow at the Hoover 

Institution at Stanford University. In addition to his research role, 

he is at the Kauffman Foundation and the Heritage Foundation. 

Dr. Kane has served twice as Senior Economist here at the Joint 

Economic Committee. Dr. Kane co-founded multiple software firms, 

and his startup enonymous.com was awarded Software Startup of 

the Year in 1999. Dr. Kane earned a Ph.D. in Economics from UC 

San Diego, and is also a graduate of the U.S. Air Force Academy. 

Welcome back, Dr. Kane. 

Mr. Tom Walker is President and CEO of Rev1 Ventures, a Columbus, Ohio, based venture development firm. Mr. Walker previously served as the CEO and President of I2E, Incorporated, an 

Oklahoma-based not-for-profit that focused on promoting entrepreneurship. He is an advisor to the National Angel Capital Association, an Adjunct Professor of Entrepreneurship at the University of 

Tulsa, and is a reviewer for the Kauffman Foundation’s E–Venturing Initiative. He holds a Bachelor’s Degree in Mechanical Engineering from the University of Oklahoma, and an M.B.A. from 

Oklahoma City University. Welcome, Mr. Walker. 

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Mr. Jamie Richardson is a Vice President of Government and 

Shareholder Relations for White Castle, a fourth-generation-run 

family-owned business. He serves on the Board of Family Enterprise USA, the National Council of Chain Restaurants, and the 

Ohio Restaurant Association where he now serves as its chairman. 

He holds an M.B.A. from Ohio Dominican University, and is a 

graduate of Siena Heights University with a Degree in Business 

Administration. Welcome, Mr. Richardson. 

And our final witness is Ms. Carla Harris. Ms. Harris was appointed by President Obama to chair the National Women’s Business Council, and also serves as Vice Chairman of Global Wealth 

Management, and is a Senior Client Advisor at Morgan Stanley. 

Ms. Harris also serves as Chair of the Morgan Stanley Foundation 

and sits on the boards of a number of nonprofits. She holds an 

M.B.A. and an Undergraduate Degree from Harvard. Thank you 

for joining us, Ms. Harris. 

So I will start from my left. We will turn to Dr. Kane as the first 

witness, followed by Mr. Walker, Mr. Richardson, and Ms. Harris. 

Dr. Kane, you are recognized for five minutes. 

Can you turn on your microphone? 

STATEMENT OF DR. TIM KANE, ECONOMIST AND RESEARCH 

FELLOW, HOOVER INSTITUTION, STANFORD, CA 

Dr. Kane. How’s that? Thank you. 

Chair Tiberi, Ranking Minority Member Maloney, and members 

of the Joint Economic Committee: 

Thank you for inviting me to testify. I am Tim Kane, a Research 

Fellow at the Hoover Institution, a nonpartisan research institute 

at Stanford University. I represent my own views. 

Entrepreneurship remains poorly understood by economic theory, 

but it is well understood by farmers, struggling small business 

owners, and idle workers with big dreams. With my time I would 

like to connect three points of data—I’m sorry, three points using 

empirical data. 

Point number one is that the U.S. economy has been experiencing a great acceleration, along with Mrs. Maloney’s point this 

has extended back half a century. Each period of recovery during 

these last 50 years has been slower than the past, a trend that 

transcends political terms of Presidents and partisan majorities 

here in Congress. 

In the first figure I show the average annualized growth rate of 

GDP and its components, and I am only counting data here for the 

expansionary periods, leaving out the recessions. This yields five 

expansions. 

Each expansion trough and peak is determined by the Business 

Cycle Dating Committee at the NBER, and of course those expansions are different lengths of time. For example, the 1980s expansion started in the first quarter of 1983, and lasted until Q–2 of 

1990, for a total of 30 quarters. The late 1970s expansion lasted 

only 19 quarters, whereas the 1990s expansion was 39 quarters 

long. 

Currently the U.S. is in the 27th quarter of expansion, which 

looks like there is another recession coming soon. Each expansion 

is slower than the one before. This was a surprise. The growth rate 

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was 4.5 percent during the late 1970s, and the same during the 

1980s expansions. 

The 1990s expansion saw a slightly slower growth rate, 3.8 percent per year, then 2.8 percent from 2002 to 2007. And in the current era, this expansion has an average GDP growth rate of 2.1 

percent per year. These are the good times. 

Now Americans can feel the slowdown, and they are looking to 

us with questions I wish I had easy answers for you. These growth 

rates count only real GDP, meaning after correcting for price inflation, and these past 50 years have been marked by a technological 

boom like nothing in human history. Food is cheaper and safer. 

Mortality is lower. Material quality of life is better in almost every 

way. Yet growth is slowing. 

A common reaction to the current slowdown among my fellow 

economists is that this is an illusion of demographics. This is incorrect. My second figure merges government data with government 

population data over the past 50 years. The average yearly growth 

rate of GDP per capita peaked at 4.15 percent per year. Now, 1.4 

percent per year. 

If this trend continues—and I am not saying it will—the U.S. 

economy will stop growing in the year 2030. I believe the trend can 

be reversed, and a rebirth of the American economy should be the 

government’s top priority. 

Point number two is that the dynamism of the U.S. economy has 

been slowing for decades. Figure 3 shows the percentage of U.S. 

firms that are startups. During the Carter Administration it was 

roughly 14 percent of U.S. companies. Today it is 8 percent. And 

this has not rebounded during the recovery years. 

With the decline in startups there has been a decline in gross job 

creation and destruction. A study I published back in 2010 found 

that in most years startups created 100 percent of all net new jobs. 

Research by John Holtwanger, Steven Davis, and other economists 

associate the dynamism slowdown with reductions in productivity, 

real wages, and employment. 

Now I should emphasize, immigrants are a vital source of entrepreneurial talent. Research shows that immigrants to the United 

States are significantly more likely to create new startups than native-born workers. 

Weak startup dynamism highlights a labor market problem. Government is discouraging entrepreneurship. It is passive, maybe unintentional, but the institutional hostility to entrepreneurs is very 

real. 

Again, I do not think this is just because of the Obama Administration; it is a trend that goes back in time. But I do think this 

is the primary cause. It is government regulation. 

Point number three: Taxes are more complex. Regulations are 

thicker. Employment law is more dangerous. More than one in 

three workers today needs a government license to work, compared 

to 1 in 20 in the 1950s. Occupational licensing not only hinders employment levels, but hinders occupational mobility. And has been 

criticized by liberals and conservatives alike, including the Obama 

Administration. 

The country is hamstrung by laws that are effectively anti-work. 

The highest marginal tax rates are not faced by CEOs and hedge 

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fund managers, but by single working mothers. It is the entrepreneur, not the corporate executive, who faces real risks. And 

until workers and entrepreneurs are given an environment that rewards work and smart risk-taking, there can be no solid recovery. 

Thank you. 

[The prepared statement of Dr. Kane appears in the Submissions 

for the Record on page 26.] 

Vice Chairman Tiberi. Thank you, Dr. Kane. Mr. Walker, you 

are recognized for five minutes. 

STATEMENT OF MR. TOM WALKER, PRESIDENT AND CEO, Rev1 

VENTURES, COLUMBUS, OH 

Mr. Walker. Chairman Tiberi, Ranking Member Maloney, and 

members of the Joint Economic Committee: 

Thank you for the opportunity to provide testimony today regarding encouraging entrepreneurship growth. My name is Tom Walker 

and I’m CEO of Rev1 Ventures located in Columbus, Ohio. 

Today I would like to visit with you about a very successful approach to creating high-growth startups in the country, and will 

target specifically Columbus, Ohio. 

Rev1 Ventures is a seed-stage investor that combines investment 

capital and strategic services to help entrepreneurs build great 

companies. We are a true public/private partnership created as a 

501C3, focused solely on that mission: How can we help highgrowth entrepreneurs create businesses in our backyard that can 

thrive for years to come? 

We know that connecting and leveraging the assets in our backyard can have a tremendous effect if you connect them to entrepreneurs, and then help them start their companies. And that has 

been our focus. 

In Columbus, we have a strong mix of assets. We have terrific 

research institutions in the Ohio State University, the nationwide 

Children’s Research Institute, Battelle Memorial Institute, and the 

Ohio Health Network, as well as a tremendous corporate base: 14 

Fortune 1000s, and then a whole host of companies a tier below 

that are just very significant. 

As the 15th largest state, Ohio benefits from a strong and growing economy. Back in 2012, the assets were strong but the startup 

economy was not. The Columbus region was not on the map for 

generating new businesses. 

If we fast-forward to 2016, in just a few years we have accomplished what some regions have taken decades or more to do, receiving national validation in that time frame. In fact, Columbus 

is ranked number one region in the country in 2016 for scaling 

startups on a per capita basis, and the fastest growing city for 

startup activity in 2015. And Columbus ranked number four in the 

U.S. for growth entrepreneurship in 2016’s overall Kaufman Index. 

Rev1 was recently named the most active venture investor in the 

Great Lakes Region between 2012 and 2015 by Pitchbook, and just 

a few weeks ago See The Inside ranked Rev1 as the number one 

investor in Ohio. 

We are on pace to generate a $2 billion economic impact to our 

region just through the startup companies that we are helping to 

launch. 

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So how did we do this? Well, the State of Ohio has had a very 

aggressive and very innovative program called ‘‘The Ohio Third 

Frontier Program.’’ And that program provides state matching dollars to the private sector for starting new seed funds for the sole 

purpose of providing services to new high-growth startups in that 

region. 

Rev1 is fortunate to be able to access those state dollars, but it 

encourages us to bring in private match to accomplish the mission 

that we work so very hard on. The centerpiece of our strategy is 

connecting those assets in our backyard that I mentioned previously. 

So how can we work to bring the successful corporate and research base to bear to help the entrepreneurs and the startup community? 

We then provide startups world-class mentoring, capital, and access to customers. We then invest in the brightest opportunities to 

attract talent and capital to our region. 

As an example, through innovation partnerships like the Ohio 

State University-Nationwide Children’s Research Institute, and 

Ohio Health, we are helping spin out more technology opportunities into the marketplace that are based on federal research dollars. So we are really starting to move the needle in commercialization in our region. 

So the Federal Government can be a catalyst for momentum in 

this area. Entrepreneurs need help. The private sector will not bear 

100 percent of the cost for a region to scale and be competitive. So 

public sector has to invest where it can be a catalyst. 

There is a dramatic gap in capital and support for startups outside a region such as Silicon Valley, New York, Boston, and Austin. 

As we have proven in Ohio through the Ohio Third Frontier Program, there are proven ways that government can be a catalyst for 

new company startups and growth by providing early stage capital 

and services that attract matching capital from angels, venture 

capitalists, and corporations. 

The Federal Government has done this before. The State Small 

Business Capital Incentives Program, SSBCI, through the Treasury 

Department, helped regions raise capital that could not otherwise 

access. SSBCI no longer exists, but it is something the Federal 

Government could explore doing again. 

If Congress were to pursue this type of program, we would suggest following best practices of states such as Ohio that use a proven stringent metrics that can show a return on investment and access to private sector dollars. 

A few final thoughts on areas of federal policy this Committee 

may wish to consider: 

The U.S. should maximize federal investment in research dollars 

to incentivize development of new businesses. The Committee 

should explore innovations based on federally funded research to 

include some portion of the scoring process focused on commercialization of technology. Continue to evaluate and make less bureaucratic the FDA approval process for medical technologies. 

These companies face a unique set of challenges in garnering federal approval through the FDA before getting their products into 

clinical trials, and ultimately to the marketplace. 

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And finally, continue to monitor the recent federal changes to the 

U.S. patent system. One of the biggest threats to entrepreneurs 

and those who invest in them is adequately protecting the intellectual property of startup companies, and also continuing to make 

the process more streamlined. 

Chairman Tiberi, and Ranking Member Maloney, and members 

of the Committee, thank you very much for your time. 

Vice Chairman Tiberi. Thank you, Mr. Walker, for your testimony. Mr. Richardson, you are recognized for five minutes. 

[The prepared statement of Mr. Walker appears in the Submissions for the Record on page 33.] 

STATEMENT OF MR. JAMES RICHARDSON, VICE PRESIDENT, 

GOVERNMENT AND SHAREHOLDER RELATIONS AT WHITE 

CASTLE SYSTEMS, INC., AND CHAIRMAN, OHIO RESTAURANT 

ASSOCIATION, COLUMBUS, OH 

Mr. Richardson. Chairman Tiberi, Ranking Member Maloney, 

distinguished members of the Committee: 

Thanks for this chance to testify today on behalf of White Castle 

and the National Restaurant Association. I am Jamie Richardson, 

Vice President of White Castle, and also Chairman of the Ohio Restaurant Association. 

As a family-owned business celebrating our 95th birthday, I 

would like to tell you today that White Castle’s growth has continued uninterrupted. I would like to tell you that, but I cannot. In 

fact, White Castle’s growth has halted. 

In 2012 when I testified before the House Oversight and Government Reform Committee on the Affordable Care Act, we had 408 

White Castle Restaurants. Today, we have 390. 

While other factors have taken a toll, it is the mounting uncertainty and the collective effect of a legislative and regulatory regime hostile to job creation that is bringing us to a standstill. We 

are not alone. 

More than one in five restaurant operators report government is 

their number one biggest challenge, a higher proportion than the 

economy. This doesn’t just discourage the risk taking needed for 

entrepreneurship, it crushes it in the cradle. 

Restaurants provide incredible careers, and we are employers-ofchoice for people looking for flexible work schedules. Despite our 

appeal, our industry runs on narrow margins, averaging just 4 to 

6 percent before taxes. We are a driving force for entrepreneurship. 

Where a favorite family recipe that becomes an inspiration for the 

next successful dining destination, and we are a driving force for 

innovation, and for preparing today’s employees for a changing 

workplace and the promise of tomorrow. 

White Castle’s founder, Billy Ingram, had two key entrepreneurial ideas that were pretty radical and risky in 1921. First, 

happy employees make happy customers. And second, we have no 

right to expect loyalty except from those to whom we are loyal. 

Ninety-five years later, these principles shape all we do, driving 

incredible employee and guest devotation. In fact, more than one 

in four of our 10,000 team members has been with us 10 years or 

more. The average tenure of our restaurant general managers is 21 

years. Yet, along with restaurants throughout the country, we face 

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debilitating regulatory barriers and burdens, and unprecedented 

economic challenges. 

I could give you dozens of examples. I’ll concentrate on just two. 

First, the Affordable Care Act requires offering full-time team 

members defined in the ACA as employees working 30 hours or 

more per week, health care coverage or face potential penalties. 

The ACA’s definition of full-time employment is 30 hours per 

week and is out of step with the traditional full-time employment 

standard of 40 hours per week. Many employees in our industry 

are already losing wages and hours due to the law’s perverse incentives, especially part-time employees who until now were those 

working below the traditional 40 hours per week. 

One of the attractive benefits for restaurant employees had been 

flexible scheduling. Employees can adjust their hours to suit their 

personal needs, and even pick up additional hours to earn extra income when desired. Part-time jobs with flexible scheduling are appealing and often critical for students, single parents, and those 

struggling to balance a wide range of commitments. 

Harmonizing the ACA definition of full-time employment with 

the traditional 40-hour-per-week standard would benefit employees 

through more hours and income. 

Secondly, the Department of Labor recently published new overtime regulations in effect this December, adding to the uncertainty, 

ever-expanding federal regulations have created over the last five 

years. 

When combined with ACA rules and regs, this is a vicious onetwo punch for employers. The overtime regulations will have a negative impact on restaurant workers everywhere now benefitting 

from the advantages of exempt status. Non-exempt employees often 

have less workplace autonomy and fewer opportunities for flexible 

work arrangements, career training and advancement than their 

exempt counterparts. 

For restaurants, the proposed minimum salary level represents 

an out-sized income for entry-level managers. The increase would 

be too large for many employers to absorb, so some employees 

would be dragged back to an hourly rate. 

This change to non-exempt status can lead to fewer opportunities 

for career advancement. Changing to non-exempt status requires 

employers and employees to watch the clock. Employees near 40 

hours in the week may need to skip additional training or other career-building opportunities because the employer isn’t able to pay 

overtime rates for that time. This squashes creativity and entrepreneurial spirit. 

Finally, the Department has given the impression salaried employees feel taken advantage of by virtue of their exempt status. In 

reality, where we live and work and raise our families, employees 

often view reclassification to non-exempt status as a demotion. Exempt status is a symbol of success and hard work. 

We are both proud and grateful for the responsibility of serving 

America’s communities, creating jobs, boosting the economy, and 

satisfying customers. Enterprising restaurants are committed to 

working with Congress to find solutions fostering job growth and 

truly benefitting our communities. 

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Thanks again for the opportunity to testify before you today, and 

I look forward to your questions. 

Vice Chairman Tiberi. Wow, four minutes and fifty-nine seconds. That’s pretty good. 

[Laughter.] 

Thank you, Mr. Richardson. Ms. Harris, you are recognized for 

five minutes. 

[The prepared statement of Mr. Richardson appears in the Submissions for the Record on page 40.] 

STATEMENT OF MS. CARLA HARRIS, CHAIR OF THE NATIONAL 

WOMEN’S BUSINESS COUNCIL, VICE CHAIRMAN OF GLOBAL 

WEALTH MANAGEMENT AND SENIOR CLIENT ADVISOR AT 

MORGAN STANLEY, NEW YORK, NY 

Ms. Harris. Vice Chair Tiberi, Ranking Member Maloney, and 

distinguished members of the Committee—oh, sorry. I’ll try that 

again. 

Vice Chair Pat Tiberi, Ranking Member Maloney, and distinguished members of the Committee, thank you for inviting me to 

speak on behalf of the National Women’s Business Council before 

the Joint Economic Committee for today’s hearing. 

My name is Carla Harris, and I am the Presidentially appointed 

Chair of the National Women’s Business Council. The Council is a 

nonpartisan federal advisory council created to serve as an independent source of advice and counsel to the U.S. Small Business 

Administration, Congress, and the White House on issues of impact 

and importance to women business owners, leaders, and entrepreneurs. 

Women-owned firms represent an important segment of the business sector. As of 2012, women-owned businesses comprised 36 percent, or nearly 10 million of the country’s privately held businesses. These firms generate over $1.4 trillion in sales and employ over 

8 million people. Between 2002 and 2012, the number of womenowned firms increased at a rate of two-and-a-half times the national average. 

Employment in women-owned firms grew at a rate of four-anda-half times that of all firms, and the growth in revenues generated 

by women-owned firms paralleled that of all firms. 

Some of the most dynamic changes since the 2007 Survey of 

Business Owners can be witnessed as already referenced for 

women of color, especially black and Latino women. For example, 

in 2007 there were about 900,000 black-owned women businesses. 

Now they stand strong at over 1.5 million, and represent almost 60 

percent of all black-owned businesses. 

Since 2007, black women-owned firms have added over 71,000 

jobs to our economy, while black men-owned firms have added almost 11,000 jobs. Latino-owned businesses increased at even greater numbers. In 2007 there were fewer than 800,000 Latina-owned 

firms. Now there are nearly 1.5 million. 

These numbers demonstrate that women-owned businesses are 

thriving, thanks to a combination of supportive initiatives and policies, and a strong entrepreneurial spirit. 

However, inequities and disparities still exist that inhibit many 

women-owned firms from reaching their full economic impact or 

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scaling effectively. All of us here today can agree that we want regulations as efficient and effective for our small businesses, including those that are women-owned, to continue to start, sustain, and 

grow as a strong force in our economy. 

We often describe our work at the National Women’s Business 

Council as divided among four pillars, which include data collection 

and analysis, access to capital, access to markets, and job creation 

and growth. 

Commonsense regulation plays a role in each and any of these 

areas. Today I specifically focus on access to capital and job creation and growth by describing how women and others stand to 

gain from full transparency in the areas of marketplace lending, as 

well as minimized or consolidated regulation in the area of occupational licensing. 

Most importantly, however, we want to acknowledge the value of 

early and frequent involvement of women business owners and all 

stakeholders in developing and refining regulation. 

Access to capital continues to be a challenge for too many 

women. NWBC’s work focuses on changing the infrastructure and 

on increasing and improving resources so more women can access 

the capital they need to start and grow their businesses. 

Per Council research, on average men start their businesses with 

nearly twice as much capital as women. Babson College has concluded that the lack of sufficient capital funding for women entrepreneurs will cost the economy nearly 6 million jobs over the next 

five years. So it is in the best interests of the economy and the 

country to understand any barriers to these firms’ success. 

Fortunately, the marketplace is responding to the challenges that 

women have faced in accessing capital in the form of both loans 

and equity investments. Thanks to great innovation in the capital 

space with crowd funding, peer-to-peer lending, micro financing, 

and more, women have greater opportunities to pursue and raise 

the capital that they need. 

Beginning with an examination of debt, it is important to understand that women business owners take traditional business loans 

far less frequently than the overall population of business owners. 

Beyond the Community Advantage Program, the SBA Micro Loan 

Program, which is the largest single source of funding for micro finance institutions in the United States, it provides direct funding 

to qualified community finance organizations who then issue the 

loans to borrowers. 

Women entrepreneurs have historically been underserved by 

lending institutions, so these programs, as well as private marketplace lenders, are stepping in with capital and technical assistance, 

enabling strong performance by these women’s businesses by increasing their available capital, included in the lower dollar values 

commonly sought by women business owners. 

With respect to equity, I would be very pleased to take any questions from the Committee on this topic, but I will move on out of 

respect for time. 

With respect to occupational certification, there are important 

reasons to require licensure. We want to assure consumers protection just as we would like qualified individuals to have a competitive edge. However, as already referenced, the costs associated with 

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obtaining a license may serve as a barrier to women starting businesses in these industries, as well as their ability to hire qualified 

employees. 

Women business owners stand to benefit from reasonable regulation that minimizes financial barriers to launching and growing enterprises. 

I thank you for the opportunity to testify, and I look forward to 

your questions. 

[The prepared statement of Ms. Harris appears in the Submissions for the Record on page 49.] 

Vice Chairman Tiberi. Thank you, Ms. Harris. 

Mr. Richardson, many adults, including myself, got their start in 

your industry. My first job was at McDonald’s. I did about everything you could imagine there. But it was a great experience because I learned life lessons, starting with showing up on time. The 

customer is always right. Personal responsibility. 

And it seems to me that one of my concerns with respect to your 

testimony regarding the cumulative regulatory burden, as you put 

it in your written testimony, is that there are, at least anecdotally, 

fewer and fewer of these entry-level jobs. When I go into a restaurant, I don’t see as many 16-year-olds working those jobs. 

And so, you know, people like me who worked when I started at 

16 at McDonald’s, and then a gas station pumping gasoline, which 

is not happening anymore either, I could save a little money for college. Without these opportunities, it seems also to me that there 

are fewer chances that that person might have a career in industry, have an opportunity to manage that restaurant, maybe someday own that restaurant. 

So we talk about social regulations that attempt to regulate our 

quality of life. As someone who has been in this industry for a 

while, my question to you would be: How do the regulations that 

you mention in your written testimony—and you specifically mention the Affordable Care Act, you mention the Department of 

Labor, NLRB—how do they hurt White Castle’s specific ability to 

hire that 16- or 17-year-old, that high school student, vs. 25 or 30 

years ago where maybe you hired more of them? 

Mr. Richardson. Thank you, Chairman Tiberi. For White Castle, as a family owned business, we have always been the heart and 

soul of the neighborhoods where we live, work, and raise our families. And so today we are a part of urban neighborhoods around the 

country. We are in 12 markets. And for us that employment opportunity we are able to provide is a path to prosperity for so many. 

I mentioned that more than one in four of our team members 

have been with us 10 years or more. Sometimes folks come in and 

want to work for a weekend, or a month or two, and they make 

it a career. 

So I think for us the biggest barrier is especially those regs that 

interfere with our ability to give people that opportunity. So for instance the Affordable Care Act and the new definition of full time 

as 30 hours really puts a barrier between us and our employees in 

terms of not allowing us to give them the hours we would want to 

be able to give them. 

Secondly, with the overtime reg, that is really tough because 

those people who want to move up—our general managers are very 

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entrepreneurial. They are involved in community. They are volunteering at the local food bank, or the local YMCA, because they 

want to be part of that fabric of community. 

So for us the tough part is to look and see the unintended consequences of regs that prevent us from hiring people in the neighborhoods where we want to provide the most employment. 

Vice Chairman Tiberi. And you have had that happen? That 

exact effect has happened? 

Mr. Richardson. We—the day the Affordable Care Act passed, 

we had 408 restaurants. Today we have 390. The math has 

changed dramatically in terms of our costs. Restaurants typically 

run on very narrow margins. White Castle, we put a lot of money 

back into retirement benefits, and health care benefits we’ve offered since 1924. We run on narrower margins, candidly. 

Our typical profit margin in a good year is 1 to 2 percent. So 

when you start to elevate costs, there are not too many pennies left 

over, a half-penny or whatever it may be. So that is the real barrier 

and pressure we feel. 

Vice Chairman Tiberi. Mr. Walker, what do you see as the 

greatest impediment to starting a new business? 

Mr. Walker. Thank you for that question. I see it twofold. It is 

access to capital and talent. And a lot of times if you have the capital, you can find the talent. And in this country, for the highgrowth startup, technology-based companies, it takes risk capital. 

So these companies are not bankable, so they can’t go to a bank 

and acquire a loan. They take either angel investment, which is investment from high-net-worth individuals, or venture capitalists. 

Well the venture capital industry is really concentrated in roughly five markets in the United States, seeing roughly more than 90 

percent of the dollars every year. So if you are in a region outside 

of one of those five cities, it is really very difficult to access the venture capital that is required. 

And we are also seeing now there are fewer venture firms today 

than there were 10 years ago, and there are more going out of business than are being created. So it is getting harder and harder for 

venture firms to raise the investment dollars to put into these 

startup companies that create jobs and high-growing companies. 

Part of that problem relates back to Sarbanes-Oxley and the constraints placed on the IPO market, because that is where startups 

get the returns back to the investors. So it is sort of a vicious cycle. 

But that is why you are seeing now across the country in more and 

more regions that cities are creating initiatives to create seed capital programs, and public/private partnerships, much like Rev1, so 

they can start those companies in a home-grown effort. 

But we still see a dramatic lack of capital to help grow these 

companies to scale. 

Vice Chairman Tiberi. So related to that, in Ohio, if you take 

our State of Ohio, Columbus clearly has had more growth in 

startups than other parts of the State, and there are clearly other 

parts of the State, Appalachian areas in eastern Ohio, cities that 

have a rich history have struggled much in recent years like 

Youngstown. In your opinion, why has that been uneven? Why is 

it more difficult to start a startup in a City like Youngstown or Appalachia vs. a city like Columbus? What’s the differentiating point? 

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Mr. Walker. Traditionally in the U.S. high growth startups create in and around urban areas. So you’re seeing a higher growth 

rate in those kinds of startup companies in larger cities. There is 

access to more resources, service providers, talent, those types of 

things. So that is one impediment. 

The other is it is difficult to find access to capital in some of 

these smaller markets. 

Vice Chairman Tiberi. Thank you. 

Ms. Maloney, you are recognized for five minutes. 

Representative Maloney. First of all I thank all of the panelists. And building on Mr. Walker’s statements, also a lot of 

startups start where there are universities where there are research dollars. And you noted in your testimony the importance of 

federal dollars for initial research to then start new industries and 

to move forward. 

I do want to note, with all of our difficulties and challenges, all 

economists have noted that after the Great Recession America 

bounded back faster than any of our competitors, our allies, or others that were hit by the Great Recession around the world. And 

part of it was because of our ability to continue to try new approaches to solve problems and move forward. 

We have created over 14.7 million new private sector jobs since 

February 2010 under President Obama. And there was a 74-month 

stretch of private sector job growth at one point, the longest in the 

history of our country. 

So there is a great deal to be proud of in our country, also. I 

would say we lead the world in many areas, and one of them is certainly in business leadership and innovation. And we certainly 

need to continue that. 

One of the biggest threats we face in that area is the cutback in 

federal funding for research. So much of what we have created has 

come from that initially. Private sector businesses can’t afford to 

invest in that necessary research. 

I was struck very much, Ms. Harris, by your statement that— 

and really some of the research that we’ve done on this Committee—that so many new businesses are founded by women, and 

particularly women of color have gone out and started new businesses. 

And I would like to ask you why you think that is? Is part of it 

the glass ceiling, that they reach the glass ceiling and there is no 

other place to go within the, quote, ‘‘establishment,’’ so they move 

out and start their own business and go forward? But we have 

done other studies that showed we are still stuck at 79 cents to the 

dollar, and that unfairness in pay then ends up in having more and 

more women in poverty in older age as their pensions are lower, 

their Social Security is lower, their savings are lower? 

One area that we worked on with Ms. Adams and Mr. Beyer, we 

did a study on how many women are on boards and found that just 

16 percent of the seats on the boards are women. And this is 

counter really to research we’ve seen actually in your firm, Morgan 

Stanley, Ms. Harris, that showed that when there is a more diverse 

board, particularly gender diversity, that the bottom line shows 

more growth and more profits. 

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Usually when business sees that something helps them grow 

their bottom line, they jump in there and make it happen. But we 

are not seeing that with women on boards, or women CEOs. The 

number of CEOs has stayed primarily the same, but the people 

change. But the growth of women on boards is nowhere near where 

it should be. And this of course then, as you said in your testimony, 

then falls over into other categories of not participating in businesses. 

And you said it carries over into investment firms. And what can 

we do, Ms. Harris, do you think, to increase the number of women 

who enter the management and are in a position to affect investment decisions? 

Ms. Harris. Yes. Thank you very much for the question. I think 

there are three things that the industry, any industry can do to increase the number of women in positions of leadership. 

The first thing is to be really intentional about it, and making 

sure that you promote those women who are qualified that are 

coming through the pipeline. And I think you need to be intentional about filling the pipeline from entry level all the way 

through, and create programs within the organizations that will 

support the women’s development throughout their careers, and 

more importantly provide them with the sponsors that are needed 

as one gets more senior. 

Because as you know, once you get to a certain level it is not just 

about the performance. You have proven the performance over a 

number of years. But it is about having the right sponsorship to 

actually get to the more senior levels. And I think you need to be 

intentional about that. 

The second thing is I think you need to have a measure of accountability. Because if you are going to have these kinds of programs, it not only flows from the top but it has to happen in the 

middle. And you need to be able to make sure that management 

is accountable for having a diverse pipeline. Because once you start 

losing people through natural reasons, natural attrition, you look 

up and then you do not have anybody to promote to the senior levels. 

And the last thing is that you need to be consistent. 

So intentionality, accountability, and consistency is what you 

need in these firms if you want to make sure that you get senior 

people to the top. And once you get senior people to the top, you 

will be able to attract even more talent that is diverse like that top 

management. 

So that is my opinion. 

Vice Chairman Tiberi. The gentlelady’s time has expired. 

Representative Maloney. My time has expired. 

Vice Chairman Tiberi. Senator Klobuchar, you are recognized 

for five minutes. 

Senator Klobuchar. Thank you very much. Thank you to all of 

you on a very important topic today. I think about our small and 

big businesses. Target actually started out in Minnesota as a dry 

goods store. Best Buy started out as a startup stereo store called 

Sound of Music—not the movie. And 3M started out way up in Duluth. So we have a lot of entrepreneurship in our State, as well as 

small businesses as small businesses. 

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So I guess the first one of you, Mr. Walker. In your testimony 

you talked about the Ohio Frontier Program, which is a state bonding program that invests in startups. I think a lot of the good ideas 

that we have seen in our State and across the country comes from 

the states. 

Could you describe that for us? 

Mr. Walker. Yes. Thank you very much for that question. The 

Ohio Frontier Program is a state program that is voted by the people. It’s a bond program, and those dollars are targeted towards the 

creation of high growth, high-tech startup businesses and creating 

the seed capital infrastructure. 

And the way it works is, nonprofit private companies such as 

Rev1 throughout the state can compete for those dollars, but you 

compete on a matching with private-sector dollars one-to-one. 

So, for example, in Columbus, we have nearly 50 corporate partners that fund our operation. And for every dollar they provide us, 

I am able to go to the Third Frontier at the state level and match 

those dollars. So for a small nonprofit like ourselves who are trying 

to start as many companies as we can, that provides ample resources for us to provide support services for those startups, as well 

as seed capital. And in fact we have utilized those dollars to become one of the most active seed investors in the Great Lakes Region. 

Senator Klobuchar. Thank you. And along those same lines, 

Ms. Harris, do you want to talk about the importance of the SBA 

Intermediate Lending Program, or any other lending program for 

businesses making less than $200,000? 

Ms. Harris. Yes. I think there—— 

Senator Klobuchar [continuing]. Less, sorry. 

Ms. Harris. Yes. There are other programs that I think should 

be supported, including peer-to-peer lending. Firms like Lending 

Club, Prosper Funding Circle. Women-focused investment firms, as 

well as crowd funding. And then lenders with new scoring methodology. 

Senator Klobuchar. Thank you. And a little different topic, and 

that is something we will be, I’m hoping, working on next year 

again, and that is immigration reform. 

People do not always think about it as an economic issue, but it 

is one in many ways. Seventy of our Fortune 500 companies are 

headed by immigrants. The figure a few years back is that 200 of 

these companies were formed by immigrants or kids of immigrants. 

Twenty-five percent of U.S. Nobel Laureates were born in other 

countries. 

Could—any of you can address this, but the importance of comprehensive immigration reform from a business innovation standpoint. Dr. Kane, you are smiling. I don’t know if that’s good or bad 

for me. 

Dr. Kane. Yes, ma’am. Well, Senator, I lead an effort at Stanford under the Hoover Institution, a journal called Peregrine, which 

promotes immigration reform. We publish five issues. We are working on a book, Assemble People Left, Right, and Center in an expert survey. So I have much more than five minutes to talk, but 

let me echo your sentiments. 

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I think high-skill immigrants are just great for the U.S. economy. 

Research shows that. And, guess what? Low-skill immigrants are 

great for the economy. I think being a nation with the Statue of 

Liberty, but the rest of the world sees is as the icon that sort of 

highlights who we are, for what’s made us great, and what’s made 

us grow strong. 

So I could get into more details, but I think the consensus is that 

policymakers should get behind immigration reform. If I can dig in 

just a little bit, I am not sure that comprehensive is seen as a good 

idea anymore, but that is seen as a way that this issue gets stuck. 

And if we could focus on where the American people want Congress 

to go, it is to stop the talk about deportations and stop the talk 

about free citizenship, to create a legal status work visa that will 

bring people out of the shadows, get them to work, allow them to 

start companies and contribute to the economy. 

Senator Klobuchar. Anyone want to add anything? 

Mr. Richardson. From a restaurant point of view, we are strong 

supporters of comprehensive immigration reform. We know that all 

you need to be successful in our business is a heart for hospitality. 

So we welcome new arrivals. 

Senator Klobuchar. Yes. 

Mr. Richardson. And if you ever want to see some fun, go to 

the National Restaurant Association’s Faces of Diversity Awards. It 

is super cool and it just shows how hard people have worked to our 

new arrivals, the impact they have on their communities, and we 

are an industry of opportunity. 

Senator Klobuchar. You should know, Mr. Richardson, that my 

home is four blocks from a White Castle, and that’s how I always 

identify it for people. I go, oh, I’m four blocks up from the White 

Castle. 

Okay, Ms. Harris, on immigration? 

Ms. Harris. Nothing to add to what’s been said. 

Senator Klobuchar. Okay. Well I am just very hopeful that we 

can take this up again. As you know, the Senate worked hard on 

this issue. I am on the Judiciary Committee, and we had both the 

Chamber and the AFL–CIO, and I once did a hearing on this Committee when Representative Brady was here, and I actually called 

Grover Norquist—you’d like this, Dr. Kane, as my witness—— 

[Laughter.] 

Because he showed how it brought the debt down processing immigration reform. Thank you all. 

Vice Chairman Tiberi. The gentlelady’s time has expired. Mr. 

Hanna is recognized for five minutes. 

Representative Hanna. Thank you very much. And thank you 

all for being here. 

The underlying theme is that there is too much regulation. I 

wonder about the law of large numbers with growth, how that 

plays into your statement, Mr. Kane. But there is a thing in Congress that passed the floor with the Republican majority called the 

Raines Act, if you’re familiar with it, that basically said any—we 

had to analyze the proposal by the Executive Branch to see that 

it was cost—if it was $100 million or more, it required further investigation, that kind of thing. 

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But for me that makes some sense, but not all sense, because in 

an effort to create a perfect outcome a lot of times we actually undo 

the very thing that we are trying to protect. And I think that is 

kind of the theme here among all of you. 

And I guess, you are an expert in this, can you give me a sense 

of how you would see that managed? Anyone? 

Dr. Kane. Sure. Just briefly, I think in some of the testimony 

I heard, and I, like the testimony of all of my fellow members here, 

testifiers, I think there was just great wisdom here. And I think 

the continuity of identifying occupational licensing as a barrier is 

one of the key regulatory barriers. 

But as much as I love venture capital, and I have received money 

from venture capitalists before, and I think banking is great, realize if we just look at historical examples going back to the country’s 

founding, we are an entrepreneurial people long before there was 

venture capital, or modern banking, and most people were entrepreneurs. 

And I think when we look at the difference between urban entrepreneurship and rural entrepreneurship, maybe it has become so 

formalized, and that you need in all 50 states you need to pay a 

fee just to exist as a small business, and I think it is just bizarre 

that not one governor has seized on that and said, you know, in 

our state, in our high school, every graduate of our high school, or 

every 11th grader, we are going to encourage them to start a business. And they are not going to have to risk lawsuits. We are going 

to make it easy for them. 

And instead they are sort of treated as the enemy of the working 

man. You know, you start a company? You must want to oppress 

people. That is sort of a backwards mindset that I think is, if I can 

say, anti-American or Un-American. 

Representative Hanna. Sure. And a lot of it is designed to protect the existing industry, right—— 

Dr. Kane. Absolutely. Absolutely. 

Representative Hanna [continuing]. Whether it is real estate, 

or something as simple as fingernails, and home braiding, and 

things like that. 

Dr. Kane. Right. 

Representative Hanna. And the caveat emptor, the buyer can 

manage that much better than the government. The problem is, as 

you suggest, it is out of control. I am from New York, and we have 

a declining population, a huge problem with competitiveness and 

an aging population. And a lot of it I think reverts back to that. 

Mr. Walker, I am interested in what you might want to say. 

Mr. Walker. Well I think you are spot on. I appreciate the question. I think there are times that we try and correct one problem, 

but we close the door on things that were working. So we think 

about the decline in the IPO market over the past 10 years and I 

think many experts point directly to Sarbanes-Oxley for those 

kinds of things. 

I think you can look at historical economic conditions such as the 

dot com bust in the early 2000s that at that time the SBA had a 

venture capital program that would help create venture firms. But 

because after the crash that program was killed in terms of an equity program. 

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So there are times when we maybe close the door on things that 

were working. 

Representative Hanna. Mr. Richardson, one quick question. The overtime rule. I think from my memory $23- to $46,000? 

You’re familiar with it, right? 

Mr. Richardson. Yes. 

Representative Hanna. Would you have been happy with $35,000? 

Mr. Richardson. You know, we submitted—— 

Representative Hanna. Do you know what I mean? 

Mr. Richardson. We actually in our written comments proposed $29,500. That would be inflationary. 

Representative Hanna. But you are okay with the premise? 

Mr. Richardson. We understand the idea there is need for adjustment as time goes on, correct. 

Representative Hanna. Thank you. Yield back. 

Vice Chairman Tiberi. Alright. Mr. Grothman. 

Representative Grothman. Two real quick questions because 

we’re voting. First of all, for any of you, just yes or no, if we went 

back and put the regulatory situation where it was in the year 

2000 after 8 years of Bill Clinton being President, does anyone 

think there will be any problems going back to the year 2000? Just 

tear up any new, more onerous regulations since then? 

Dr. Kane. Less is more, sir. 

Mr. Walker. We concur. 

Mr. Richardson. Agree. 

Representative Grothman. Okay, good. Well that will hold for 

the new president. And the next question is for Ms. Harris. I know 

we can always engage a little bit of the problem here is that, you 

know, the men have it so easy and the women have it so tough. 

I sometimes walk back from say something on the Northwest side 

of Washington—I don’t live in Washington, I don’t know whether 

you live in Washington—— 

Ms. Harris. No. 

Representative Grothman. You don’t? 

Ms. Harris. No. 

Representative Grothman. I’m going to ask you to comment, 

because I think the same thing is probably true in most urban cities. When I walk back from the Northwest side of Washington, I 

bet, say when I walk back from the White House, I may see 150 

homeless people preparing to fall asleep at 10:00 or 11:00 o’clock 

at night. And I bet out of those 150, 149 are men. 

Do you care to comment on, you know, we’ve got to do more to 

help—you know, not help the men, but could you comment on why, 

if there’s so many women living in poverty and so few men, why 

all these homeless people are men? 

Ms. Harris. Well I can’t comment on why they are men, and 

that might have to do with where you are walking in the city. 

There might be other parts of the city where you might find more 

women. So that would be a hard one for me to comment on. 

Representative Grothman. Okay. Thank you. 

Vice Chairman Tiberi. So unfortunately we have a vote going 

on, and that is why everyone has kind of left. I want to thank you 

all for testifying, and I would like to say we appreciate your time. 

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And the record will be open for five days for any Member that 

would like to submit questions for the record to any of the four of 

you. 

With that, this hearing is adjourned. Thanks, so much. 

Ms. Harris. Thank you. 

(Whereupon, at 3:00 p.m., Tuesday, July 12, 2016, the hearing 

was adjourned.) 

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SUBMISSIONS FOR THE RECORD 

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PREPARED STATEMENT OF HON. PATRICK J. TIBERI, VICE CHAIRMAN, JOINT

ECONOMIC COMMITTEE

Good afternoon. I would first like to thank Chairman Coats for giving me the opportunity to hold this hearing and, along with his staff, in helping to prepare for 

today’s hearing on the importance of entrepreneurship to our economy. He unfortunately had another commitment this afternoon but turned the gavel over to me for 

what I expect will be a thought-provoking conversation about encouraging entrepreneurship. 

Entrepreneurs put ideas into action, and the businesses they create make up a 

major component of America’s job growth engine. 

Entrepreneurship also contributes to our standard of living. By boosting job creation, entrepreneurs drive economic growth, offer consumers better goods and services, and allow Americans to move up the economic ladder through their innovations. 

America was once considered by far the best place for someone venturing out on 

their own. It was a place for taking a risk to build something new, to improve the 

lives of all Americans. And in many places across the country, that’s still the case, 

as you’ll hear from our witnesses today. 

However, our current economic recovery has been relatively slow and geographically uneven. In my home state of Ohio, as Mr. Walker will testify, Columbus has 

enjoyed great success in attracting new business and encouraging innovation. Other 

parts of the state, however, including many rural areas, have still not recovered 

from the recession. Overall, we’ve seen a decline in the rates of startup companies 

and an increase in the average age of companies compared to previous decades. 

It is our role as federal policymakers to foster a free-market economy in which 

Americans enjoy ample opportunities for employment, and we must not forget that 

the private sector is the true driver of economic growth. Government can’t tax and 

regulate its way to American prosperity. 

Every day, entrepreneurs launch new companies and decide where to place the 

headquarters. Those who incorporate here will face the highest corporate rate in the 

developed world, while those who structure to pay individual tax rates will grapple 

with mind-numbing complexity and tax rates that have risen substantially under 

this Administration. Our uncompetitive tax code makes America less attractive as 

a place to do business. 

As if taking a risk on the success of an idea were not challenging enough, today’s 

entrepreneurs also face a series of government-imposed market barriers. These include banking regulations that make it harder to get financing and harder for community banks to operate and make loans, archaic licensing and permitting rules, 

and complex labor and health care requirements. 

Each of these requires using precious resources, often to hire professionals just 

to help navigate through all of it. 

As our witness Andrew McAfee said in a previous hearing on automation, ‘‘entrepreneurs are facing an increasingly dense thicket of things that an employer or 

worker has to confront before they can start something up . . . and it looks like more 

and more people are saying, ‘I’m just not going to bother with it.’ ’’ 

A friend of mine in Columbus, Ohio, an Italian immigrant, started a family owned 

business 40 years ago, and he has told me that he wouldn’t make the same choice 

today to start his business. Given all of the government regulations and mandates, 

the risk to reward gap is too high. 

We must continue to focus on ways to reduce the barriers to innovation, giving 

entrepreneurs the tools they need to succeed. That doesn’t come from picking winners and losers with direct subsidies or carved-out tax breaks. Instead, that comes 

from preserving competition and removing restrictions that only serve to protect established companies and hinder startups with new ideas. 

We also need to remove barriers for those who want to invest in entrepreneurs 

and startups. My legislation, the Investing in Opportunity Act, will make it easier 

to invest in areas that need it most. 

Congress should boost entrepreneurship by reducing the thicket of bureaucracy 

that is strangling private initiative. It is my hope that here in America we can retain a strong entrepreneurial spirit rather than cause it to wither away. 

PREPARED STATEMENT OF CAROLYN B. MALONEY, RANKING DEMOCRAT, JOINT

ECONOMIC COMMITTEE

Thank you Vice Chairman Tiberi and thank you to Chairman Coats for calling 

today’s hearing. 

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The United States is the most creative, innovative country in the world. We have 

the world’s best research universities, its deepest financial markets and we remain 

a magnet for the world’s talent. If we leverage these assets, there is no doubt American innovators and entrepreneurs will continue to lead the world in the years 

ahead. 

New businesses are the lifeblood of our economy. Some startups go on to become 

big businesses worth billions of dollars. Others stay small, but play a vital role in 

helping their founders achieve the American Dream while creating jobs in their 

communities. 

However, data show that new business formation in America has been slowly declining for decades. 

One reason for this is the enormous and growing power of extremely large corporations, many of which have swallowed their competitors. This makes it much 

harder for new entrepreneurs to break into markets. 

Another reason is that the middle class, which has long fueled entrepreneurship 

in our country, has seen its economic foundation chipped away for decades. 

A third reason that entrepreneurs face a difficult environment is the fallout from 

the catastrophic financial crisis under President George W. Bush. The recession hit 

aspiring entrepreneurs hard. Bank lending and other sources of financing dried up. 

And new businesses had an even harder time finding customers. 

Fortunately, there are signs that these trends have turned around. The U.S. recovery is the envy of the world. Since 2012, more businesses have opened than have 

closed. Bank lending to small businesses has ticked up. 

And the Jumpstart Our Business Startups Act signed by President Obama in 

2012 is now helping to facilitate crowdfunding. 

Last year, the Kauffman Foundation’s Index of Growth Entrepreneurship posted 

its largest year-over-year increase in a decade. 

These are all good signs, but it is clear that there is room for improvement. 

My Republican colleagues often attribute declining startup rates to the regulatory 

policies of the Obama Administration. They are misguided. The decline has been 

going on for decades—under both Republican and Democratic presidents. 

In fact, President Obama has issued fewer regulations than President George W. 

Bush did through the same point in his presidency. 

Moreover, it’s unclear whether trends in regulation and in startup formation are 

related at all. As Dr. Kane writes in his testimony, a study by economists at George 

Mason University found that industries with more regulations actually have more 

startup activity. 

In addition, a recent report by the Economic Innovation Group found that just 20 

counties were responsible for half of the net increase in new business establishments from 2010 to 2014. 

Nine of the 20 counties with the strongest new business growth are in the 10 

states ranked by the Mercatus Center as having the most burdensome regulations. 

None of them are in the 10 states ranked as having the least burdensome regulations. 

Make no mistake—we should carefully review regulations to make sure that they 

are serving the best interests of American families. Surely there are regulations 

that could be streamlined or improved to reduce the impact they have on new businesses. 

The private sector, government and academia can each play a role in laying the 

groundwork for entrepreneurship and innovation. 

In my home district in New York, they are working together to help create Cornell 

Tech on Roosevelt Island. It will be a world-class campus for applied science and 

engineering, bringing together innovators, entrepreneurs and investors. 

Visionary projects like Cornell Tech can help serve as a catalyst to speed the 

movement of promising new discoveries from the lab through development and into 

manufacturing. 

These partnerships can also help our workforce develop the education and skills 

needed to innovate and build businesses. 

I want to close by highlighting another area of real promise—entrepreneurship 

among women and in communities of color. Between 2002 and 2012, the number 

of women-owned businesses grew more than two-and-a-half times faster than the 

national average. The number of businesses owned by women of color grew even 

faster than that. 

We need to build on this success and break down barriers so even more women 

can start and grow their own businesses. 

Again, I want to thank Chairman Coats and Vice Chairman Tiberi for holding 

this hearing. I look forward to our witnesses’ testimony. 

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