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[Joint House and Senate Hearing, 114 Congress]
[From the U.S. Government Publishing Office]

                                                        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

                               __________

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                        JOINT ECONOMIC COMMITTEE

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

SENATE                               HOUSE OF REPRESENTATIVES
Daniel Coats, Indiana, Chairman      Patrick J. Tiberi, Ohio, Vice 
Mike Lee, Utah                           Chairman
Tom Cotton, Arkansas                 Justin Amash, Michigan
Ben Sasse, Nebraska                  Erik Paulsen, Minnesota
Ted Cruz, Texas                      Richard L. Hanna, New York
Bill Cassidy, M.D., Louisiana        David Schweikert, Arizona
Amy Klobuchar, Minnesota             Glenn Grothman, Wisconsin
Robert P. Casey, Jr., Pennsylvania   Carolyn B. Maloney, New York, 
Martin Heinrich, New Mexico              Ranking
Gary C. Peters, Michigan             John Delaney, Maryland
                                     Alma S. Adams, Ph.D., North 
                                         Carolina
                                     Donald S. Beyer, Jr., Virginia

                    Brian Neale, Executive Director
                 Harry Gural, Democratic Staff Director

                            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

 
    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 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 mind-numbing 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.]

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 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 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.
    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 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 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 high-growth 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.
    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.
    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-of-choice 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 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 
one-two 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.
    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 
women-owned 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-and-
a-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 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 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 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 high-growth 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?
    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.
    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.
    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.
    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.
    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.
    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. 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.)

                       SUBMISSIONS FOR THE RECORD

  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.
    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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