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| <title> - STATE OF THE SMALL BUSINESS ECONOMY IN THE ERA OF COVID-19</title> | |
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| [House Hearing, 117 Congress] | |
| [From the U.S. Government Publishing Office] | |
| STATE OF THE SMALL BUSINESS ECONOMY IN | |
| THE ERA OF COVID-19 | |
| ======================================================================= | |
| HEARING | |
| BEFORE THE | |
| COMMITTEE ON SMALL BUSINESS | |
| UNITED STATES | |
| HOUSE OF REPRESENTATIVES | |
| ONE HUNDRED SEVENTEENTH CONGRESS | |
| FIRST SESSION | |
| __________ | |
| HEARING HELD | |
| FEBRUARY 4, 2021 | |
| __________ | |
| [GRAPHIC NOT AVAILABLE IN TIFF FORMAT] | |
| Small Business Committee Document Number 117-002 | |
| Available via the GPO Website: www.govinfo.gov | |
| __________ | |
| U.S. GOVERNMENT PUBLISHING OFFICE | |
| 43-321 WASHINGTON : 2020 | |
| ----------------------------------------------------------------------------------- | |
| HOUSE COMMITTEE ON SMALL BUSINESS | |
| NYDIA VELAZQUEZ, New York, Chairwoman | |
| JARED GOLDEN, Maine | |
| JASON CROW, Colorado | |
| SHARICE DAVIDS, Kansas | |
| KWEISI MFUME, Maryland | |
| DEAN PHILLIPS, Minnesota | |
| MARIE NEWMAN, Illinois | |
| CAROLYN BOURDEAUX, Georgia | |
| JUDY CHU, California | |
| DWIGHT EVANS, Pennsylvania | |
| ANTONIO DELGADO, New York | |
| CHRISSY HOULAHAN, Pennsylvania | |
| ANDY KIM, New Jersey | |
| ANGIE CRAIG, Minnesota | |
| BLAINE LUETKEMEYER, Missouri, Ranking Member | |
| ROGER WILLIAMS, Texas | |
| JIM HAGEDORN, Minnesota | |
| PETE STAUBER, Minnesota | |
| DAN MEUSER, Pennsylvania | |
| ANDREW GARBARINO, New York | |
| YOUNG KIM, California | |
| BETH VAN DUYNE, Texas | |
| BYRON DONALDS, Florida | |
| MARIA SALAZAR, Florida | |
| SCOTT FITZGERALD, Wisconsin | |
| Melissa Jung, Majority Staff Director | |
| Justin Pelletier, Majority Deputy Staff Director and Chief Counsel | |
| David Planning, Staff Director | |
| C O N T E N T S | |
| OPENING STATEMENTS | |
| Page | |
| Hon. Nydia Velazquez............................................. 1 | |
| Hon. Blaine Luetkemeyer.......................................... 3 | |
| WITNESSES | |
| Dr. Robert W. Fairlie, Professor, Department of Economics, | |
| University of California, Santa Cruz, Santa Cruz, CA........... 6 | |
| Ms. Sharon Pinder, President & CEO, Capital Region Minority | |
| Supplier Development Council, Silver Spring, MD................ 8 | |
| Mr. Stephen Schoaps, Owner, Strother Cinema, Seminole, OK........ 10 | |
| Ms. Karen Kerrigan, President & Chief Executive Officer, SBE | |
| Council, Vienna, VA............................................ 11 | |
| APPENDIX | |
| Prepared Statements: | |
| Dr. Robert W. Fairlie, Professor, Department of Economics, | |
| University of California, Santa Cruz, Santa Cruz, CA....... 48 | |
| Ms. Sharon Pinder, President & CEO, Capital Region Minority | |
| Supplier Development Council, Silver Spring, MD............ 58 | |
| Mr. Stephen Schoaps, Owner, Strother Cinema, Seminole, OK.... 65 | |
| Ms. Karen Kerrigan, President & Chief Executive Officer, SBE | |
| Council, Vienna, VA........................................ 67 | |
| Questions for the Record: | |
| None. | |
| Answers for the Record: | |
| None. | |
| Additional Material for the Record: | |
| NFIB Research Center Study................................... 76 | |
| PPP Report................................................... 123 | |
| Associated Builders and Contractors (ABC).................... 146 | |
| ACA International............................................ 149 | |
| Brookings Metropolitan Policy Program........................ 151 | |
| Engine....................................................... 157 | |
| Hispanic Business Enterprises (HBE).......................... 162 | |
| National Association of Federally-Insured Credit Unions | |
| (NAFCU).................................................... 190 | |
| STATE OF THE SMALL BUSINESS ECONOMY IN THE ERA OF COVID-19 | |
| ---------- | |
| THURSDAY, FEBRUARY 4, 2021 | |
| House of Representatives, | |
| Committee on Small Business, | |
| Washington, DC. | |
| The Committee met, pursuant to call, at 10:01 a.m., in Room | |
| 2360, Rayburn House Office Building, Hon. Nydia M. Velazquez | |
| [chairwoman of the Committee] presiding. | |
| Present: Representatives Velazquez, Golden, Crow, Davids, | |
| Mfume, Phillips, Newman, Bourdeaux, Delgado, Houlahan, Kim of | |
| New Jersey, Craig, Luetkemeyer, Donalds, Fitzgerald, Garbarino, | |
| Hagedorn, Kim of California, Meuser, Salazar, Stauber, Van | |
| Duyne, and Williams. | |
| Chairwoman VELAZQUEZ. Good morning. I call this hearing to | |
| order. I want to thank everyone for joining us today for our | |
| first hearing of the 117th Congress. I welcome all our new | |
| Small Business Committee Members, and welcome back those of you | |
| returning to the Committee from the 116th Congress. | |
| I want to make sure to note some important requirements. | |
| Let me begin by saying that standing House and Committee rules | |
| and practice will continue to apply during hybrid proceedings. | |
| All Members are reminded they are expected to adhere to these | |
| standing rules, including decorum. | |
| House regulations require Members to be visible through a | |
| video connection throughout the proceeding, so please keep your | |
| cameras on. Also, please remember to remain muted until you are | |
| recognized to minimize background noise. | |
| If you have to participate in another proceeding, please | |
| exit this one and log back in later. In the event a Member | |
| encounters technical issues that prevent them from being | |
| recognized for their questioning, I will move to the next | |
| available Member of the same party, and I will recognize that | |
| Member at the next appropriate time slot, provided they have | |
| returned to the proceeding. | |
| For those Members physically present in the Committee room | |
| today, we will also be following the health and safety guidance | |
| issued by the attending physician. | |
| This past year, COVID-19 sparked a once-in-a-lifetime | |
| crisis for American small businesses. As we meet today, | |
| entrepreneurs nationwide are holding onto their businesses for | |
| dear life. According to the research published by the Federal | |
| Reserve Bank of New York, the number of active business owners | |
| fell by 22 percent from February to April 2020, the largest | |
| drop on record. | |
| That same research showed minority owned businesses faced | |
| the worst outcome. This pandemic has hit minority owned | |
| businesses the hardest. COVID has caused a 41 percent decline | |
| in Black-owned businesses, a 32 percent decline in Latino-owned | |
| businesses, and 26 percent decline in Asian-American-owned | |
| businesses. | |
| As we start the new year, it is not clear that conditions | |
| have improved. As the virus has continued to spread, small | |
| businesses are increasingly pessimistic in their outlook for | |
| 2021. The NFIB Small Business Optimism Index declined 5.5 | |
| points in December to 95.9 percent points, a level not seen | |
| since 1973. | |
| Even more troubling is that 20 percent of firms consider | |
| themselves to be at risk or distressed. The pandemic has hit | |
| small businesses that rely on large gatherings and foot traffic | |
| especially hard. According to the New York State Restaurant | |
| Association, more than half of all restaurants in New York City | |
| are in danger of closing forever. | |
| While small businesses in hospitality, retail, travel, | |
| leisure, entertainment, and others that rely on foot traffic | |
| for revenue struggle, big businesses strive. Profits soared for | |
| large corporations like Amazon, Wal-Mart, Home Depot, Best Buy, | |
| Costco, and others, who gained market share and saw their stock | |
| prices rise accordingly. | |
| Forty-five of the fifty most valuable publicly traded U.S. | |
| companies turned a profit between April and September 2020, one | |
| of the most tumultuous economic periods in modern history. We | |
| need to be thinking about big and bold policies that provide | |
| small businesses with the resources they need to make it | |
| through this crisis and grow in the future. | |
| In December, Congress passed a bill reopening the Paycheck | |
| Protection Program, allocating new funding for EIDL advances, | |
| and creating the Shuttered Venue Grants Program. These | |
| initiatives will save jobs and help businesses stay afloat, but | |
| that relief package was only a down payment on the stimulus the | |
| small business economy needs. Small businesses are still in a | |
| crisis, and we must do more. | |
| Looking forward, we must enact bold relief measures under | |
| the Biden administration that reflect the dire reality main | |
| street firms are facing. Small businesses have made it clear | |
| they need more direct and flexible cash infusions. Throughout | |
| this pandemic, small business owners told our Committee they | |
| couldn't afford to take on additional debt during this | |
| uncertain time. | |
| Programs like the targeted EIDL advances will provide small | |
| business owners with desperately needed relief without weighing | |
| down their balance sheets. We will hear testimony today about | |
| the benefits of advances and other grants and if more funding | |
| is required. | |
| In addition to capital, small businesses also need access | |
| to customers. The U.S. Federal Government is the largest | |
| consumer globally, purchasing over $500 billion in goods and | |
| services each year. The Federal Government can play a unique | |
| role in supporting small businesses by using the Defense | |
| Production Act and Buy American policies to increase the | |
| customer base of the small businesses' economy. | |
| Our nation's recovery depends on the well-being of small | |
| businesses and their employees. These are uncertain times for | |
| American entrepreneurs, and this Committee must help lead to | |
| the other side of this crisis. Members of this Committee serve | |
| as the voice of small businesses in the House, and we must work | |
| tirelessly to support them. | |
| Today's hearing will give us a clear view of the small | |
| business economy's state and the work we need to do going | |
| forward. | |
| Ladies and gentlemen, the hard work we have been engaged in | |
| over the past 11 months on behalf of America's entrepreneurs | |
| continues to date. I am looking forward to carrying on that | |
| work in a bipartisan manner with our new Ranking Member, Mr. | |
| Blaine Luetkemeyer of Missouri. | |
| Let me be the first to welcome you back to this Committee. | |
| With that, Mr. Ranking Member, you are recognized for your | |
| opening statement. | |
| Mr. LUETKEMEYER. Thank you, Madam Chair. | |
| And, again, I look forward to working with you. I think | |
| there is a lot of common ground here where we can make a lot of | |
| progress for our great small business folks back home and | |
| across this country. | |
| Appreciate you holding this kickoff hearing. As the | |
| Committee begins the 117th Congress, there are few topics more | |
| important within our jurisdiction than examining the small | |
| business economy during this unprecedented global crisis. It is | |
| my hope that we continue to explore all facets of this | |
| significant issue in a bipartisan manner and work efficiently | |
| to support and ensure all small businesses, entrepreneurs, and | |
| innovators rebuild and return to economic independence. | |
| While this emergency period is unparalleled, we know that, | |
| prior to COVID-19, small businesses were operating at historic | |
| levels. In 2018 and 2019, optimism reached record heights for | |
| small business owners, and the unemployment rate was decreasing | |
| sharply and eventually hovered around 3.5 percent. And, if | |
| small business have confidence, they are more comfortable | |
| taking prudent risks and innovating new ideas. These are the | |
| characteristics that drive our economy forward. | |
| Our pre-COVID-19 small business environment was constructed | |
| through progrowth policies that focussed on tax reform and a | |
| vigorous deregulatory environment that allowed small businesses | |
| to reinvest their hard-earned dollars into their business' | |
| employees. Instead of concentrating on mountains of paperwork, | |
| small businesses were free to focus on their own goods, | |
| services, customers, and employees. | |
| Unfortunately, COVID-19 and accompanying protective | |
| measures struck at the core of the small business community. A | |
| once busy Main Street became dormant due to the crisis at hand | |
| and the burdensome shutdown measures instituted by State and | |
| local governments. | |
| As a response, Congress and the former administration | |
| developed tools that could deliver assistance to small | |
| businesses quickly. One program that has been especially | |
| effective is the Paycheck Protection Program, known as the PPP. | |
| According to the Small Business Administration, by the time | |
| PPP expired on August 8, 2020, it had assisted over 5 million | |
| small businesses. In total, these loans provided over 2, or-- | |
| excuse me--$525 billion to small businesses from coast to coast | |
| and assisted in saving over 50 million jobs. | |
| As the emergency period wore on, Congress worked to install | |
| the PPP with more flexibility and further enhancements. In the | |
| latest COVID-19 relief bill, signed into law in December 2020, | |
| the PPP was reauthorized with $284 billion. | |
| This second round of funding was tailored and targeted to | |
| ensure small businesses and other eligible entities that were | |
| truly impacted by COVID-19 received the relief they needed. | |
| Just last month, the PPP program was officially relaunched, and | |
| I look forward to working in a bipartisan manner to ensure that | |
| the program continues to reach small businesses across the | |
| country that were hardest hit by the pandemic. | |
| Beyond PPP, the December COVID relief bill extended the | |
| Economic Injury Disaster Loan Program and reformed the EIDL | |
| Advance Program. Additionally, it extended debt relief program | |
| for existing and new 7a, 504, and micro loans. It also created | |
| the Shuttered Venue Operators, SVO, Grant Program for venues, | |
| theatres, and museums. | |
| In total, the December COVID relief bill delivered $325 | |
| billion--targeted dollars to the Nation's smallest and hardest- | |
| hit businesses and industries. Ensuring that programs are | |
| operating effectively and efficiently remain paramount on this | |
| Committee. | |
| The best way, in my judgment, to get these businesses back | |
| on their feet is to allow them to open up. Let them get back to | |
| business. It works. In Missouri, my home State, we opened up in | |
| mid-May. For 2020, we wound up with a 5 percent increase in | |
| revenues over 2019--2019--that is right--and 2020 had more | |
| revenue coming into our State coffers than we did in 2019. We | |
| have a 4.4 percent unemployment rate today and have 200,000 | |
| open jobs in our State as a result of that. | |
| As these small businesses worked to try and create--as we | |
| work to try and create an environment for small business to | |
| rebuild, create jobs, and expand in the future--i.e., get back | |
| to work--I am concerned that this administration is taking | |
| steps to institute a regulatory environment that heavily | |
| burdens small businesses. | |
| By rescinding the commonsense administrative action that | |
| required repeal of two regulations for every one created, there | |
| is concern that heavyhanded regulations are returning. This | |
| regulatory environment combined with conversations surrounding | |
| increasing the minimum wage are warning signs for America's job | |
| creators. | |
| Our Nation's small businesses are more fragile than ever | |
| before, and additional rules and regulations are | |
| counterproductive to the recovery. These hard-working men and | |
| women are the backbone of this great Nation, and, when they | |
| succeed, so does our economy. | |
| I look forward to working with all of my colleagues to | |
| ensure our Nation's environment is rich with opportunities for | |
| growth. I would like to thank all the witnesses for joining us | |
| today, and thank you, Madam Chair. | |
| With that, I yield back. | |
| Chairwoman VELAZQUEZ. The gentleman yields back. | |
| I would like to take a moment to explain how this hearing | |
| will proceed. | |
| Each witness will have 5 minutes to provide a statement, | |
| and each Committee Member will have 5 minutes for questions. | |
| Please ensure that your microphone is on when you begin | |
| speaking and that you return to mute when finished. | |
| With that, I would like to introduce our witnesses. | |
| Our first witness today is Professor Robert Fairlie, | |
| Professor of Economics at the University of California, Santa | |
| Cruz. Professor Fairlie has testified before Congress numerous | |
| times on policy issues related to small businesses, and we are | |
| thrilled to have him before us today. | |
| Most recently, Professor Fairlie was instrumental in | |
| research regarding the impact of COVID-19 on business owners of | |
| color, which has helped guide and will continue to guide | |
| congressional policymaking. We look forward to hearing more | |
| about this important research and the implications it has on | |
| federal relief efforts. | |
| Our second witness is Ms. Sharon Pinder. Ms. Pinder is the | |
| President and CEO of the Capital Region Minority Supplier | |
| Diversity Council, a nonprofit corporation whose mission is to | |
| link corporations and government agencies with competitively | |
| viable minority business enterprises. | |
| Prior to joining the council, Ms. Pinder served for 3 years | |
| as the Director of the Mayor's Office of Minority and Women | |
| Owned Business Developments for the city of Baltimore, where | |
| she was responsible for the city's minority and women business | |
| programs. | |
| In 2014, the University of Maryland, Eastern Shore, | |
| recognized Ms. Pinder's dedication to small businesses by | |
| naming a scholarship, the Sharon Pinder Award for | |
| Entrepreneurship, in her honor. | |
| Welcome Ms. Pinder. | |
| Our third witness is Mr. Stephen Schoaps. Mr. Schoaps is | |
| the owner of Strother Cinema, a neighborhood theatre with two | |
| screens, in Seminole, Oklahoma. As with virtually all other | |
| theatres, music venues, and museums, Strother Cinema was forced | |
| to close during the pandemic. As a shuttered venue owner, he is | |
| also looking forward to seeing the newly enacted Shuttered | |
| Venue Grant Program that will be implemented by the SBA. | |
| We look forward to hearing about his experiences with these | |
| programs, especially the role that the EIDL advance played in | |
| helping keep his business afloat. | |
| Welcome, Mr. Schoaps. | |
| I would now like to yield to the Ranking Member, Mr. | |
| Luetkemeyer, to introduce our final witness. | |
| Mr. LUETKEMEYER. Thank you, Madam Chair. | |
| Our next witness is Karen Kerrigan. Ms. Kerrigan is the | |
| President and chief executive officer of the Small Business and | |
| Entrepreneurship Council, also known as SBE Council. | |
| Founded in 1994, the SBE Council advocates for small | |
| businesses, entrepreneurs, and start-ups. In addition to | |
| advocacy, SBE Council produces educational resources and | |
| significant research for our Nation's job creators. | |
| For more than two decades, Ms. Kerrigan has been a | |
| prominent voice in supporting small businesses, whether | |
| providing information on access to capital, discussing funding | |
| revenues, or leading on regulation and tax reform, Ms. Kerrigan | |
| has proven herself to be a distinguished advocate for small | |
| businesses everywhere. She is a frequent television commentator | |
| on small business growth and has participated in and led small | |
| business events at the White House and numerous Federal | |
| agencies. | |
| She is also no stranger to Capitol Hill, where she has | |
| testified before various committees before, including this one. | |
| Ms. Kerrigan is a graduate of the State University of New York | |
| in Cortland and a member of several Federal advisory boards. | |
| Ms. Kerrigan, we thank you for your smart approach and | |
| understanding of the entire small business ecosystem, | |
| especially during this time of COVID-19. Welcome back to The | |
| Committee. We look forward to your testimony. | |
| Chairwoman VELAZQUEZ. I now recognize Professor Fairlie for | |
| 5 minutes. | |
| STATEMENTS OF DR. ROBERT W. FAIRLIE, PROFESSOR, DEPARTMENT OF | |
| ECONOMICS, UNIVERSITY OF CALIFORNIA, SANTA CRUZ, SANTA CRUZ, | |
| CALIFORNIA; SHARON PINDER, PRESIDENT AND CEO, CAPITAL REGION | |
| MINORITY SUPPLIER DEVELOPMENT COUNCIL, SILVER SPRING, MARYLAND; | |
| STEPHEN SCHOAPS, OWNER, STROTHER CINEMA, SEMINOLE, OKLAHOMA; | |
| AND KAREN KERRIGAN, PRESIDENT AND CEO, SBE COUNCIL, VIENNA, | |
| VIRGINIA | |
| STATEMENT OF DR. ROBERT W. FAIRLIE | |
| Mr. FAIRLIE. Thank you, Chairwoman Velazquez, Ranking | |
| Member Luetkemeyer, and members of the Committee. It is an | |
| honor to testify before you on the state of small business | |
| economy. I am a professor of economics at the University of | |
| California, Santa Cruz, and have studied entrepreneurship, | |
| racial inequality, and small business policy for over 25 years. | |
| I have been asked to discuss the findings of my research on | |
| the impacts of the pandemic on small business owners. As you | |
| know, obtaining up to date and accurate information on the | |
| effects of the pandemic has been extremely difficult. I have | |
| spent the past 8 months compiling and analyzing data to | |
| investigate what happened to small business owners, especially | |
| minority business owners. | |
| From the middle of March to early April, most States | |
| imposed shelter-in-place restrictions that closed nonessential | |
| businesses. In my research, I found that the number of active | |
| business owners in the U.S. plummeted by 3.3 million, or 22 | |
| percent, between February and April of 2020. No other 2- or | |
| even 12-month window of time has ever shown such a large change | |
| in business activity. | |
| For comparison, from the start to the end of the Great | |
| Recession, the number of active business owners dropped by only | |
| 5 percent. African American businesses were hit the hardest, | |
| experiencing a 41 percent drop in business activity, Latinx | |
| business owner activity fell by 32 percent, and Asian business | |
| owner activity dropped by 26 percent. Unfavorable industry | |
| concentrations and the smaller scale of minority owned | |
| businesses were partly responsible. | |
| Job losses were also much higher for minority workers. | |
| Black unemployment hit a peak of 17 percent, and Latinx | |
| unemployment hit a peak of 18 percent. Although many of the | |
| closures turned out to be temporary, any month of closure | |
| reflects lost income to the owner of the business. But the | |
| owner still has to pay rent and other bills. | |
| It has been especially difficult to figure out how much | |
| small businesses lost in sales and revenues in the pandemic. | |
| Using taxable sales data from the California Department of Tax | |
| and Fee Administration, we found average losses of 17 percent | |
| in the second quarter of 2020. Normally, year-over-year growth | |
| is in the range of 3 to 4 percent. | |
| Sales losses were the largest in businesses affected by | |
| mandatory lockdowns. For example, we found that hotels lost 91 | |
| percent, restaurants lost 61 percent, and clothing stores lost | |
| 56 percent. | |
| At the same time, online sales grew by 180 percent in the | |
| second quarter of 2020. Without a strong online presence, many | |
| small businesses will not have the resources to weather a | |
| prolonged recovery. Recent Census Bureau surveys indicate that | |
| only 15 to 20 percent of small businesses have enough cash on | |
| hand to cover 3 months of operations. | |
| One of the stated goals in the CARES Act was to prioritize | |
| serving underserved markets and businesses owned by socially | |
| and economically disadvantaged individuals. Did the PPP and | |
| EIDL programs, which were the key components of the CARES Act, | |
| get distributed to minority communities? | |
| Using data on 15 million individual loans, we found that | |
| funding from these relief programs both flowed to minority | |
| communities and away from minority communities. If anything, we | |
| found a positive relationship between PPP loan receipt for | |
| business in the minority share of the population. | |
| There is some evidence, however, that the first round of | |
| funds flowed disproportionately to nonminority communities. | |
| When focusing on PPP loan amounts per employee, we also found a | |
| disproportionate flow to nonminority communities. In contrast, | |
| EIDL loans and advances in both number and amounts were | |
| provided to minority communities. | |
| In my continual work tracking how small businesses are | |
| doing in the recovery, I recently found some alarming trends. | |
| From April to October, there was constant month-to-month | |
| improvements in business activity. But, in November and | |
| December, that pattern reversed. Over those 2 months, small | |
| business activity dropped by 6 percent. | |
| The losses I have described here are especially alarming | |
| for two vulnerable groups: African Americans and Latinx. Prior | |
| to the pandemic, business ownership and revenues were already | |
| low for both groups. But, perhaps more importantly, there is a | |
| huge wealth gap. Half of Black families in the U.S. have less | |
| than $10,000 in total wealth, and half of Latinx families have | |
| less than $25,000 in total wealth. White levels of wealth are 7 | |
| to 18 times higher. Many minority business owners will simply | |
| not have the financial resources to weather prolonged closures. | |
| I would like to turn to discussing what could help move us | |
| forward. | |
| First, consumers need to feel safe again. The number one | |
| priority for helping small businesses is to get the vaccine out | |
| faster, enabling customers to go back to small businesses. | |
| Second, more financial assistance is needed for small | |
| business owners, especially during the next few months. In | |
| particular, rent relief and protection could be crucial for | |
| survival. | |
| Third, we need to slow down the extensive shift to online | |
| shopping that occurred in the pandemic and is likely to | |
| continue. Small businesses need to have more of an online | |
| presence. Aid in the form of web page assistance could be | |
| useful. Search engines could prioritize local businesses | |
| instead of online retailers and big-box stores. | |
| Fourth, the Federal Government needs to collect more data | |
| on race and their relief efforts. Demographic information was | |
| only partially and unevenly collected in the first two rounds | |
| of the PPP program, and there was much criticism for this | |
| omission. | |
| Chairwoman VELAZQUEZ. Doctor---- | |
| Mr. FAIRLIE. Additionally, collection of information---- | |
| Chairwoman VELAZQUEZ. Professor Fairlie, your time has | |
| expired, and maybe during the question-and-answer period, you | |
| will be able to expand on any point that you were not able to. | |
| Mr. FAIRLIE. Yeah, I am finished. Thank you for the | |
| opportunity to present. | |
| Chairwoman VELAZQUEZ. I now will recognize Ms. Pinder for 5 | |
| minutes. | |
| STATEMENT OF SHARON PINDER | |
| Ms. PINDER. Good morning, Madam Chairwoman Velazquez and | |
| Ranking Member Congressman Luetkemeyer and the distinguished | |
| members of the Committee of Small Business, and I certainly | |
| have to recognize my favorite Congressman, Congressman Kweisi | |
| Mfume. Thank you for your service to our country, and thank you | |
| for this opportunity to speak with you today. | |
| I am Sharon Pinder, president and CEO of the Capital Region | |
| Minority Supply Development Council and operator of two centers | |
| funded by the U.S. Department of Commerce, Minority Business | |
| Development Agency. We operate the MBDA Business Center, | |
| Washington, D.C., and the Federal Procurement Center, the only | |
| one of its kind in this country. | |
| There is an old economic adage that says, ``When America | |
| catches a cold, minority businesses catch pneumonia.'' Well, | |
| now it is worse. America has COVID-19, and both minorities and | |
| their businesses are dying at dramatic rates. Just like many | |
| minority individuals have preexisting health conditions, well, | |
| most minority businesses faced preexisting discriminatory | |
| conditions that show up in ways like access to capital, lack of | |
| access to opportunities, mentorship, et cetera. | |
| PreCOVID, there were 1.1 million minority owned businesses | |
| employing 6.3 million people, generating more than 1.8 trillion | |
| in revenue annually. Then, in 2020, the world came to a halt, | |
| and the data that we, I think, were all talking from, the | |
| National Bureau of Economic Research, looking at between | |
| February and April, African Americans experienced the largest | |
| loss. | |
| Madam Chairwoman talked about the 41 percent with African | |
| American-owned businesses, Latinx businesses, 32 percent Asian | |
| businesses, et cetera. But my organization and our sister | |
| organizations across this country live this every day, and what | |
| we know to be true is that our businesses need a lifeline. | |
| And, as we examine and reflect upon the state of minority | |
| businesses due to COVID-19, we have to factor in, layer in the | |
| social injustice piece. Black-owned businesses were especially | |
| impacted by this. | |
| Ladies and gentlemen, the failure of our minority small | |
| businesses places our country at risk why? Because minority | |
| businesses are poised to become the majority population. We | |
| need to plug up the cracks in our economic foundation and | |
| preserve our place in the future global marketplace. | |
| I can spend hours talking about issues with PPP and all | |
| those things, but I would like to spend my remaining time | |
| talking about some solutions. | |
| We ask that Congress look at some existing assets through a | |
| different lens. The Defense Production Act statute is one of | |
| the country's most powerful laws for Federal intervention in | |
| national commercial activity. Title III of the act establishes | |
| the President's authority to invest in specific industries. | |
| The idea of investment in business development would be | |
| crucial, for example, in jump-starting minority businesses in | |
| manufacturing. There could be a no-interest loan like those | |
| provided to businesses to ramp up for defense work. | |
| A quick example. In the State of Maryland, through the | |
| CARES Act, we recently implemented funds to--for COVID-19 small | |
| business relief grant and loan program. Governor Hogan | |
| allocated $5 million that was allocated or dispensed by | |
| Meridian Management Group. But the loans were from 25,000 to | |
| 150,000, 0 percent interest the first year, and 2 percent of | |
| the remaining 5 years. The remaining fund I told you was 5 | |
| million. There was $20 million on request. There is a need. | |
| There is an identifiable need. | |
| Title IV of the Defense Production Act includes a section | |
| that establishes preference for small business contractors. | |
| Showing a preference for minority businesses as a subset of | |
| small business by expanding the use of sole source programming | |
| provisions of the 8a program will put more money into those | |
| minority businesses that compete in both the Federal and | |
| private sector. | |
| Let's look at--further at existing assets. How about Buy | |
| American. We are excited about President Biden's Buy American | |
| executive order. The concept of Buy American has been around | |
| since 1933, but the executive order includes all Federal | |
| procurement now. That is huge. We hope that it will be | |
| implemented with--in a manner that is advantageous to minority | |
| businesses. | |
| With the Buy American executive order, we propose a | |
| strategy that involves OEM teaming up with foreign | |
| manufacturing companies to produce and manufacture goods and | |
| services in partnership with U.S.-based minority businesses. | |
| Such a joint venture could introduce a pathway for foreign | |
| businesses who want to move their organizations to the U.S., an | |
| avenue to do so, and at the same time provide resources and | |
| increase support to the development of minority businesses. | |
| Madam Chairwoman, minority and small businesses are in need | |
| of an economic vaccine. The Capital Region Minority Supply | |
| Development Council is a national minority supply development | |
| council and networks stand ready to support your House Small | |
| Business Committee in its work to help build small and minority | |
| businesses. | |
| My written testimony goes into or provides more detail. | |
| Again, I appreciate the opportunity to have this | |
| discussion. | |
| Chairwoman VELAZQUEZ. Thank you, Ms. Pinder. | |
| I now recognize Mr. Schoaps for 5 minutes. | |
| STATEMENT OF STEPHEN SCHOAPS | |
| Mr. SCHOAPS. Thank you, Chairwoman Velazquez, Ranking | |
| Member Luetkemeyer, and distinguished members of The Committee. | |
| My name is Steve Schoaps. My wife and I own Strother Cinema, a | |
| small, two-screen movie theatre in Seminole, Oklahoma. Seminole | |
| is a small town in rural Oklahoma that has been hard-hit by | |
| COVID-19, like many other small towns across America. | |
| We are an integral part of our community, and it has amazed | |
| me that, with everything going on in our town and across our | |
| country, people call me or talk to me everywhere I go asking if | |
| we are okay, and when are we going to open the theatre again? I | |
| guess I didn't understand how many people cared about us and | |
| the service we were providing our community. Now I do. | |
| We are hurting, like most other theatres across America, | |
| from small-town, single-screen theatres to megaplexes in the | |
| big cities. The pandemic has basically wiped out our business. | |
| According to estimates from the National Association of Theatre | |
| Owners, 75 percent of movie theatre companies will be insolvent | |
| before this spring unless they receive financial aid. Ninety- | |
| five percent have experienced revenue losses greater than 70 | |
| percent. Nationwide, 63 percent of jobs in theatres have been | |
| lost to furlough or permanent layoff. And, in Oklahoma, we have | |
| lost 45 percent of the jobs in movie theatres. | |
| It started out that people were just scared to go to the | |
| movies, but we put in place comprehensive cleaning procedures | |
| and social distancing policies that made our auditoriums and | |
| lobbies safe. But then the movies stopped coming. The film | |
| slate coming from Hollywood dried up through studio closures | |
| and the studios' reluctance to take chances with movie assets | |
| that are worth billions of dollars. | |
| Comparing our theatre's 2019 revenues to the same time | |
| period in 2020, we have seen a 92 percent reduction in revenue. | |
| We have been forced to reduce our staffing to almost nothing | |
| and have resorted to selling popcorn and concessions to go. We | |
| have even started renting out our theatre to video gamers who | |
| play on the big screens. | |
| We have been able to survive, but not without the help of | |
| the programs that Congress and the SBA have developed to help | |
| us. The most important thing that we needed to figure out was | |
| how to stay afloat without taking on too much new debt. Given | |
| the scale of our losses and the reduced film slate for 2020 and | |
| 2021, taking on more debt will impact our ability to recover. | |
| That is why businesses like ours are especially in need of and | |
| grateful for grant programs provided by Congress and the SBA, | |
| including our forgivable Paycheck Protection Program loan and | |
| the upcoming Shuttered Venue Operators Grant Program. | |
| In particular, I would like to highlight the help provided | |
| to us through the EIDL grant program, which we received as part | |
| of our EIDL loan applications. While the loan application was | |
| being evaluated, we received a $10,000 grant. We were able to | |
| use the money to pay a myriad of ongoing expenses, including | |
| rent, utility bills, workers compensation insurance, property | |
| and liability insurance, technology vendors, our security | |
| system, and property maintenance, along with many other things. | |
| These expenses have continued unabated during the pandemic | |
| and could not be deferred or suspended. Being able to stay | |
| current with our vendors also helped prevent a secondary crisis | |
| among the businesses that support our theatre, which helps | |
| ensure that they will survive the pandemic too. | |
| We were very challenged when we learned that the EIDL grant | |
| would count against our PPP forgiveness. The COVID relief bill | |
| that was passed in late December helped us again by fixing the | |
| EIDL grant issue, and that will mean a lot when we receive that | |
| money back from our bank. | |
| Small businesses are running on razor-thin margins and, for | |
| small-town theatres, surviving is what it is all about. In many | |
| towns like ours, we are one of the few entertainment options | |
| left available locally, and one of the more important communal | |
| gathering places, and that means a lot to our community. | |
| Congress' help and the help of the SBA have been an | |
| integral part of our survival this past year and will be again | |
| this year. We would love to just go back to the businesses we | |
| ran in 2019, but that is not going to happen. | |
| With social distancing, our capacity has been reduced by | |
| half. And, in other States, it is reduced even more. Movie | |
| studios will be slow to release big films this year, and their | |
| streaming services will gobble up what used to be our bread and | |
| butter. | |
| Cleaning and maintaining theatres will cost more well into | |
| the future until we get through the pandemic, and people's | |
| attitudes about large gatherings will have a damaging effect on | |
| our business. We are just trying to make the changes necessary | |
| to survive in the future. The challenges we faced in 2020 and | |
| the challenges yet to come will be daunting, but we can | |
| overcome them. We just need your help for a little while, and | |
| so far you have been there when we have needed you. | |
| Thank you for everything you have done and are doing for | |
| small businesses and, in particular, the movie theatre | |
| industry, and thank you for your time today. | |
| Chairwoman VELAZQUEZ. Thank you, Mr. Schoaps. Thank you for | |
| your willingness to share your story with us. Quite insightful | |
| and compelling. | |
| Now Ms. Kerrigan is recognized for 5 minutes. | |
| STATEMENT OF KAREN KERRIGAN | |
| Ms. KERRIGAN. Yes. Thank you. Thank you, Chairwoman | |
| Velazquez. Thank you for your invitation to participate in this | |
| important hearing today on the state of small business in an | |
| era of COVID-19. | |
| The work of the House Small Business Committee has been so | |
| vital to entrepreneurs, small business owners, and their | |
| employees over the course of the pandemic last year, and we | |
| deeply appreciate the engagement and hard work of each and | |
| every Committee member. And I welcome all the new members as | |
| well. We look forward to working with you. | |
| Chairwoman Velazquez and Ranking Member Luetkemeyer, we are | |
| very grateful for your leadership. We look forward to another | |
| round of working with you on developing and advancing solutions | |
| that will help our small businesses and entrepreneurs lead the | |
| way in digging the economy out of the significant jobs and | |
| small business hole we are facing. | |
| As you well know, America's entrepreneurial sector is more | |
| important than ever, and SBE Council is hopeful and optimistic | |
| that our Nation can rebound if policies and programs continue | |
| to provide relief and support for small businesses and to help | |
| our entrepreneurs transform and grow their businesses. | |
| Obviously the sudden onset of the pandemic, severity and | |
| long-term nature of shutdowns and restrictions, followed by | |
| continuous uncertainty about the course of the disease and when | |
| and if economic normalcy will return has shocked and deeply | |
| wounded our small business ecosystem. Countless small | |
| businesses have been lost. More will be lost, and this | |
| devastation will take some time to dig out of, particularly in | |
| certain areas of the country and in business sectors that have | |
| been hit the hardest. | |
| Yet, despite the vast hardship on Main Street, there have | |
| been innumerable stories of survival and resiliency. Many small | |
| business owners and their employees have discovered new tools, | |
| new markets, and new methods for operating in the COVID-19 | |
| economy. Moreover, there has been a surge in the number of | |
| individuals who are pursuing entrepreneurial activity according | |
| to the U.S. Census Bureau business formation data on high- | |
| propensity business applications--these are likely employers-- | |
| over 1.5 million employer applications were filed last year, | |
| which is an increase of 16 percent compared to 2019. So this is | |
| really great news. The entrepreneurial spirit is alive and | |
| well. | |
| So we really do need to be thinking about and addressing | |
| policies that will not only support existing small businesses | |
| get through the challenging months ahead and to the other side | |
| of the pandemic, but also those that encourage individuals to | |
| move forward with their intention of starting a business and | |
| being successful in that endeavor in order to breathe life into | |
| America's small business ecosystem. | |
| When I hear from small business owners directly or review | |
| their current challenges and concerns in a number of regular | |
| surveys produced by organizations and media platforms--and I | |
| have highlighted some of those in my written testimony--one | |
| message comes through very clearly. | |
| First, small business owners can't afford to withstand any | |
| new shocks or costs. And, second, more revenue capital is | |
| desperately needed. | |
| Of course many small businesses continue to struggle to pay | |
| their bills. An Alignable January 2021 Rent Poll revealed 33 | |
| percent of small business owners reported that they could not | |
| pay their rent in January. The number is higher for minority | |
| owned businesses at 48 percent. | |
| The year-end Q4 2020 MetLife U.S. Chamber survey found that | |
| half of small businesses see their operations continuing for a | |
| year or less before having to permanently shut down. | |
| Now, hopefully with the added PPP boost and other programs | |
| running smoothly, an acceleration in vaccine output and | |
| distribution, and States and localities restarting economic | |
| activity, these will all help to shift small business optimism | |
| and outlook in a positive direction--more of a positive | |
| direction than what was conveyed in the surveys in my written | |
| testimony. | |
| Small business owners may be the optimists among us, but | |
| they are exhausted. They need a period of stability and | |
| continued support, and our organization looks forward to | |
| working with all of you on common-ground areas that will help | |
| restore this sector, help it recover, and bring our economy | |
| back to robust and sustainable growth. | |
| So I look forward to our discussions and your questions and | |
| talking about what these solutions are for moving forward. | |
| Thank you so much. | |
| Chairwoman VELAZQUEZ. Thank you, Ms. Kerrigan. | |
| Now I will begin by recognizing myself for 5 minutes. | |
| Professor Fairlie, I would like to address my first | |
| question to you. | |
| Thank you so much for the type of research that you have | |
| done demonstrating the negative impact of COVID-19 on | |
| underserved businesses, particularly Black, Latino, and Asian | |
| Americans. It was that data and that type of research that | |
| validated the anecdotal stories that we were hearing from | |
| businesses that were not able to get any access to the PPP | |
| program or EIDL program given the fact that they didn't have | |
| preexisting relationships with financial institutions, and that | |
| gave the argument to us to insist---- | |
| And, by the way, former Secretary Mnuchin and the | |
| Administrator both recognized that, yes, there was a disparity | |
| when it came to underserved communities. | |
| That gave the basis for us to insist in the December relief | |
| package to set aside not only PPP for underserved community and | |
| minority businesses, but also for mission-based lenders. | |
| Has your research given you any opportunity to look at the | |
| impact that these programs and targeted relief programs have | |
| had on the businesses that we intended to help? | |
| Mr. FAIRLIE. Yes. So that is one of the things that I | |
| definitely want to start looking into. I looked the other day | |
| when I was preparing for this testimony and the data have not | |
| been released yet. So we have no information on that. | |
| Chairwoman VELAZQUEZ. Okay. Mr. Schoaps, I understand that | |
| you--but, Mr. Fairlie, is it your estimated guess that more | |
| businesses that were left behind during the first tranche of | |
| money will have a better opportunity now to access the PPP | |
| program and the EIDL program? | |
| Mr. FAIRLIE. Yes, I do think so. One of the things that I | |
| found in my research is that the EIDL program did reach | |
| minority communities, and that was promising. The first round | |
| of the PPP program did not, right? That was the one that had | |
| the problems with the established banks, as you mentioned. | |
| So I think there is just much more awareness, there is much | |
| more emphasis on fintech and also on, you know, kind of small | |
| local community banks. And I think that it will make a | |
| difference, it will help. | |
| Chairwoman VELAZQUEZ. The latest data that was provided to | |
| us by the Small Business Administration demonstrated the large | |
| number of smaller loans that were made after the second--the | |
| December relief package. | |
| Mr. Schoaps, I understand you received a few SBA relief | |
| products, including PPP, EIDL loan, and EIDL advance. Can you | |
| elaborate on the value to you and your business of receiving | |
| the EIDL advance? | |
| Mr. SCHOAPS. The EIDL advance was integral in us surviving. | |
| It came at a time that the PPP money was running out. It came | |
| at a time when we were looking, waiting to hear about our EIDL | |
| loan. And the EIDL grant program was tremendous for us. | |
| Now, we were thrown for a loop when we found out that it | |
| was going to go against our PPP forgiveness. However, that has | |
| since been corrected in the December COVID relief bill. | |
| But no, it has been integral. It helped us pay our rent, | |
| our--all the expenses that we had kind of piling up at a time | |
| when there was no revenue coming in whatsoever. | |
| Chairwoman VELAZQUEZ. How was your experience with SBA when | |
| seeking the EIDL loan and advance? | |
| Mr. SCHOAPS. Our experience with the SBA was phenomenal, to | |
| be real honest. When I filed for my PPP loan, my banker said, | |
| hey, you need to maybe consider this EIDL program. Go and fill | |
| out an application and see if you qualify, and even if you | |
| don't qualify there is a possibility you can get this grant | |
| they have. | |
| And so I went online, filled out an application, and it | |
| was--I didn't think much about it. I didn't think I had much | |
| hope of getting it. And just one day I happened to be looking | |
| at my bank account and there was $10,000 in there from the EIDL | |
| grant program. And we used that immediately to pay bills that | |
| were there. I thought it was a simple operation. We went | |
| online, filled out the application, and it was just an easy, | |
| easy situation. The SBA has been nothing but great on that | |
| program. | |
| Chairwoman VELAZQUEZ. Thank you, Mr. Schoaps. | |
| My time has expired, and I recognize the Ranking Member, | |
| Mr. Luetkemeyer, for 5 minutes. | |
| Mr. LUETKEMEYER. Thank you, Madam Chair. | |
| I would like to begin with Ms. Kerrigan. One of the things | |
| that is in the new budget bill that is being promoted by the | |
| administration is the increasing of the minimum wage. | |
| This morning, I would like to enter into the record, Madam | |
| Chair, the NFIB Research Center study, Economic effects of | |
| enacting the Raise the Wage Act on small businesses and U.S. | |
| economy. | |
| Chairwoman VELAZQUEZ. Without objection. | |
| Mr. LUETKEMEYER. The summary on the front here says it is | |
| going to cost 1.6 million jobs and have a real output loss of | |
| more than $2 trillion to our economy. And this is by the | |
| National Federation of Independent Businesses, which is that is | |
| the effect on small businesses. | |
| So, Ms. Kerrigan, my question to you is, what is your | |
| thought process on the doubling, basically the doubling of a | |
| minimum wage with regards to how small businesses are going to | |
| be affected, what kind of response they will have, especially | |
| since you mentioned in your testimony that the small businesses | |
| cannot withstand any more new shocks for costs? | |
| Ms. KERRIGAN. Thank you, Congressman. Gosh, this is going | |
| to be very, very harmful for many small businesses, | |
| particularly those who have been hardest hit by the pandemic, | |
| you know, and in those certain sectors, you know, the | |
| restaurant industry, et cetera. | |
| And you are right, I mean, right now, you know, with many | |
| small businesses being in a position where they are struggling | |
| to pay their bills, they can't pay their rent. I also noted in | |
| my written testimony that revenues starting in 2021 are down, | |
| you know, over 40 percent. Forty percent of small business | |
| owners report their revenue, you know, is down this year, even | |
| compared to last year. | |
| Mr. LUETKEMEYER. Okay. I would like to interrupt just a | |
| second here, if I could. | |
| Ms. KERRIGAN. Sure. | |
| Mr. LUETKEMEYER. What would be the response for the small | |
| business folks in order to survive? Are they going to lay off | |
| people, go to automation, just close up altogether? What, in | |
| your judgment, would you see happening along that line? | |
| Ms. KERRIGAN. All of the above. I mean, I do think there | |
| are going to be small business owners who are just--who grinded | |
| it out up to this point who are exhausted who really can't take | |
| the cost, and they will throw in the towel for sure. I mean, we | |
| are seeing that already, given a lot of the uncertainty. | |
| So, I mean, definitely, the workers' hours will be lost, | |
| jobs will be lost. I don't know how much they could pass on, | |
| you know, to--you know, to consumers and stay competitive, you | |
| know, particularly when they are competing with bigger | |
| enterprises. | |
| Mr. LUETKEMEYER. Okay. I apologize. I have got some more | |
| questions and I have got to move on here very quickly. My time | |
| is limited. | |
| Dr. Fairlie, you talk about in your testimony sales losses | |
| are largest in businesses affected by mandatory lockdowns. I | |
| will just give you some statistics very quickly here. Due to | |
| COVID lockdowns, Florida and New York, roughly the same | |
| population, 19 to 21 million each, Florida has roughly 20,000 | |
| people that died due to COVID, New York 39,000 people, and yet | |
| Florida is open and New York is not. | |
| I indicated in my opening testimony how Missouri, my own | |
| home State, opened up mid May and wound up with a positive | |
| revenue growth for the year, and we now have 4.4 percent | |
| unemployment. New York's own survey during the September- | |
| November period show that less than 1.4 percent of COVID deaths | |
| came from restaurants and bars and hair and personal care was | |
| one-tenth of 1 percent. | |
| Lockdowns are killing us, and I think your testimony here | |
| indicates that. I would like for you to elaborate on that just | |
| a little bit more, if you would, please. | |
| Mr. FAIRLIE. Well, it is one of the arguments that I have | |
| made is that if we can get the vaccine out faster, distribute | |
| it more, you know, evenly across the population and get people, | |
| customers to feel comfortable to go back, then we can open up | |
| businesses and get going again. | |
| I mean, if you are comparing New York to Florida, it is | |
| very difficult to compare the two, right? New York has very | |
| densely populated areas. It is a very expensive place to live. | |
| You have got multi-families living in the same households. So | |
| it is just much more of a vector for spreading the disease than | |
| in Florida, which is much more spread out. | |
| Mr. LUETKEMEYER. Well, we can talk about that later. | |
| But, Mr. Schoaps, very quickly with you. Good to hear that | |
| the program has worked for you. One of the things that I am | |
| concerned about is the regulators coming in and pressuring the | |
| creditors, your creditor to foreclose on people who are falling | |
| behind on their loans, on their debts, and then by doing that | |
| just decimating entire industries within the communities, | |
| costing jobs. | |
| What kind of relationship do you have with your banker and | |
| creditor? Is this something that would be concerning to you if | |
| the regulators came in and forced them to do something | |
| different? | |
| Mr. SCHOAPS. I don't really think it would. I have spent | |
| many years even before owning a small business developing my | |
| relationship with my banker. And if there was one thing I | |
| would--and I heard you talking about minorities and their | |
| relation with banks. | |
| I really think somebody needs to help mentor small business | |
| owners in developing that relationship with their bank. I have | |
| literally had my banker call me and say, look, if you have any | |
| problems or issues, you need to let us know so we can help you | |
| out. We have some other things we can do. | |
| And so I think that relationship with your bank is one of | |
| the key things, and I would really like to see more businesses | |
| build those relationships with their bankers. Of course, I am | |
| lucky. I live in a small town. A small town banker might be my | |
| neighbor. And so---- | |
| Chairwoman VELAZQUEZ. Mr. Schoaps. | |
| Mr. SCHOAPS. Yes. | |
| Chairwoman VELAZQUEZ. Thank you so much. Time has expired. | |
| Now we recognize the Chairman on the Subcommittee on | |
| Underserved, Agricultural, and Rural Business Development, Mr. | |
| Golden from Maine. | |
| Mr. GOLDEN. Thank you, Madam Chair. | |
| I wanted to direct my first question to Ms. Pinder, and | |
| then if I have some time left over we will take it from there. | |
| Ms. Pinder, I am from Maine. I live in a community, | |
| Lewiston, Maine, which is about 36,000 people. Immediately | |
| across a river dividing two communities is Auburn of about | |
| 18,000 people. So we are talking about, you know, a population | |
| of roughly 55 to 60 thousand people, perhaps not as large as | |
| many an urban area out there, but in the State of Maine this is | |
| about as urban as it gets. We are one of the more rural States | |
| that you could look at. | |
| In Lewiston, we actually have a large amount per capita of | |
| recent immigrants from Western Africa as well as over the past | |
| decade of Somali Americans, many of whom have turned to | |
| entrepreneurship and starting their own businesses, and many of | |
| their children now graduating from our schools and coming of an | |
| age where they might look to start their own businesses or take | |
| on these existing businesses. | |
| I wanted to ask, in an area like this--I know it is not as | |
| urban as Washington, D.C. or New York City or many other, you | |
| know, big urban areas, but in one like this that I have | |
| described, how might you think the Federal Government could | |
| support economic development? I know you have talked about the | |
| Defense Production Act and the Buy American executive order. | |
| Feel free to talk further about those, but if you have other | |
| ideas beyond those, we are all ears. | |
| Ms. PINDER. So, Congressman, you are asking what resources | |
| are available to provide support to some of those businesses? | |
| Is that---- | |
| Mr. GOLDEN. Absolutely. As we are thinking about the COVID | |
| response as well and the things that the Biden administration | |
| are looking at doing to support small businesses, what do you | |
| think we should be looking at on this committee? | |
| Ms. PINDER. Well, in reference to what you were talking | |
| about your constituents going into entrepreneurship, part of | |
| what they can take advantage of are some existing programs that | |
| are in place. We have a national network of--we exist all over | |
| the country, and so there is access from our MBE Centers as | |
| well as our Minority Supplier Development Council that your | |
| constituents can access as well. There are existing resources, | |
| such as PTAP and things of that nature that can do that. | |
| But at the end of the day--and the businesses I am assuming | |
| you are talking about are mostly doing startups at this | |
| particular point in time. And so as a result of that, looking | |
| at how to support that, you know, maybe there is information | |
| they can receive from SBA loans as we are talking about it, you | |
| know. Information of Pell grants to students to attend colleges | |
| and things of that nature might help. | |
| But what I was proposing, in terms of us looking at some | |
| existing assets through the Defense Production Act and things | |
| of that nature, looks at how do we then take some policies that | |
| are in place that kind of help and look at innovative kind of | |
| ways to kind of help our businesses, in terms of their growth. | |
| You know, where are the opportunities? It is all about | |
| opportunities, right? Where are some of the opportunities, | |
| whether it is in the Federal sector--we support primarily the | |
| private sector, but identifying where those opportunities are | |
| and then helping with removing the barrier to the access of | |
| capital. That is kind of what is key. | |
| Mr. GOLDEN. On that, Ms. Pinder, you might have some | |
| advice. Many of our community members who came from, many of | |
| them from Kenyan refugee camps, these are Somalia Americans, | |
| you know, many of them have issues with access to capital due | |
| to issues with lending on interest. | |
| Are you aware of other resources that are out there to help | |
| a small business family like this in accessing capital? | |
| Ms. PINDER. Yes. And what I can do, Congressman, is provide | |
| you with that, with some information after this session. I | |
| certainly can forward that information to you, because those | |
| kind of startups are really prevalent across the country, and I | |
| certainly can provide that. | |
| Mr. GOLDEN. That would be very helpful. | |
| Madam Chair, I am sure I am getting pretty close here, and | |
| I don't want to put someone in the situation of having just | |
| seconds to respond, so I will yield my time. | |
| Chairwoman VELAZQUEZ. Thank you. The gentleman yields back. | |
| Now we recognize the gentleman from Texas, Vice Ranking | |
| Member of the committee, Mr. Williams. | |
| Mr. WILLIAMS. Thank you, Chairwoman. | |
| Mr. Schoaps, you touched on the Shuttered Venue Operators | |
| Grant program in your testimony. I was proud to be the | |
| Republican lead on the Save Our Stages Act in the House, which | |
| I am sure you know is what this program is based off of. | |
| The Shuttered Venue program recognizes that businesses like | |
| yours were some of the first to close and will be the last to | |
| reopen, as COVID-19 caused some problems. Other aid programs, | |
| such as Paycheck Protection Program, do not meet the unique | |
| needs of these highly affected industries. The SBA must swiftly | |
| implement this program to deliver much-needed relief to small | |
| businesses like yours that you own. | |
| So I would say, Mr. Schoaps, I would like to give you the | |
| opportunity to speak directly to the Small Business | |
| Administration on how your business is impacted every single | |
| day this critical program is not accepting applications. | |
| Mr. SCHOAPS. Well, thank you first of all, Congressman, for | |
| supporting and sponsoring the Shuttered Venue Operators Grant. | |
| Every day that that grant application process isn't open causes | |
| consternation for everybody in the theater business especially. | |
| We are--a lot of us are closed. If we are not closed, we are | |
| running at losses, at best. | |
| And I think every day we don't have that application | |
| process open, the more worry comes into our lives about the | |
| future, whether we are going to survive or not. You know, I sit | |
| down with my wife almost every night and we say, well, how many | |
| more days do you think we can last? How many more? Are there | |
| weeks? Is it weeks or days? | |
| And I think the Shuttered Venue Operators Grant is the hope | |
| we have for the future, and I think that that is one thing that | |
| we need to get that application process open as quickly as | |
| possible. I know it is an involved thing, but---- | |
| Mr. WILLIAMS. Well, we hear you, and we are going to make | |
| some noise to get that money to you. | |
| Many Americans are under the false notion that they must go | |
| to a 4-year college to be successful and make it in America. I | |
| personally do not think this is true and believe our country | |
| would be better off if more people utilized trade schools so we | |
| could have more plumbers, contractors, welders, et cetera, in | |
| the workforce. Once a person learns a skill, they can translate | |
| that knowledge into creating their own small business. | |
| Ms. Kerrigan, what role do you see career and technical | |
| education opportunities playing to help hardworking Americans | |
| overcome the economic devastation of COVID-19? | |
| Ms. KERRIGAN. I think they are critical, I mean, absolutely | |
| critical, you know, particularly given, you know, where we see | |
| some of the growth. Actually, the bright spots are in the | |
| economy now, you know, in terms of home improvement and in | |
| terms of those other type of services that are really, you | |
| know, on the uptick, you know, versus some of the other | |
| sectors. So, obviously, there is a skills gap, and this type of | |
| training is going to be critical for these workers, moving | |
| forward. | |
| And you are right. I mean, you know, in terms of spurring | |
| entrepreneurship, you know, I think it also is very vital. I | |
| mean, it is these individuals, these new individuals that enter | |
| into these professions that actually see things in the | |
| marketplace, talk to consumers maybe that their current | |
| employer does not. So there is more competition, more vibrancy, | |
| more innovation in those industries. | |
| But yes, moving forward, vital. And I agree with you in | |
| terms of the 4-year very expensive college education not being | |
| necessary. | |
| Mr. WILLIAMS. Thank you. In other words, we have enough | |
| lawyers. Thank you. | |
| COVID-19 has caused a massive shift in consumer preference | |
| from brick-and-mortar retail stores to online shopping. This | |
| does not seem like a temporary trend. It is likely to persist | |
| long after the pandemic. Unfortunately, there are so many rural | |
| areas across the country, including my district, that do not | |
| have access to high-speed internet. | |
| This is setting these small businesses up for failure, | |
| simply because they do not have access to the necessary | |
| infrastructure to succeed. I plan on pushing for rural | |
| broadband to be in any infrastructure program that may come to | |
| the floor. | |
| So, Dr. Fairlie, in the brief time that we have, can you | |
| talk about how increasing rural broadband funding would help | |
| small businesses. | |
| Mr. FAIRLIE. Yes, I fully agree. I think anything and | |
| everything we can do to help small businesses have more of an | |
| online presence is crucial, right? I mean, you just see big box | |
| stores, you know, the online retailers have done incredibly | |
| well, right? That was talked about in the very beginning, that | |
| their revenues are up. Their stock prices are up. | |
| Small businesses, of course, are not seeing that. And that | |
| I think is, you know, everything we can do. Broadband access I | |
| think is a crucial issue, especially for rural small | |
| businesses. | |
| Mr. WILLIAMS. Thank you. I yield my time back. | |
| Chairwoman VELAZQUEZ. The gentleman yields back. | |
| The gentleman from Colorado, Mr. Jason Crow, Chairman of | |
| the Subcommittee on Innovation, Entrepreneurship, and Workforce | |
| Development, is recognized. | |
| Mr. CROW. Thank you, Chairwoman. And thank you to all the | |
| witnesses today. You are very insightful, and I appreciate you | |
| taking time. I know how busy you are doing your normal work, so | |
| we appreciate your insights. | |
| I just wanted to start by clarifying something. There was | |
| discussion earlier about the impact of minimum wage on the | |
| pandemic. And I certainly understand some of those concerns, | |
| but also, just to be clear, the Raise the Wage Act doesn't | |
| actually immediately take effect after enactment. There is a | |
| delay after enactment, and then is a gradual increase over a 5- | |
| year period. So I think we have to be very careful about how we | |
| frame this, in terms of its impact on businesses during the | |
| pandemic. So I wanted to start with that. | |
| And I represent a community where one of the biggest | |
| challenges that our small businesses face right now is that | |
| people can't actually afford to live in the community and can't | |
| actually afford to patronize the businesses and help them grow | |
| as well. So we have to I think address this with a level of | |
| sophistication and look at the multiple dynamics going on here. | |
| So, with that said, I would like to start with Ms. Pinder. | |
| Ms. Pinder, I represent one of the most diverse districts in | |
| the country. Nearly 20 percent of the residents in my district | |
| were born outside of the country, and I have over 150 languages | |
| spoken. So I am very concerned and very attuned to the issues | |
| of underserved communities and their lack of access to capital. | |
| So, as you might know, we changed the PPP program and some | |
| of these relief programs to dedicate money to CDFIs, to help | |
| drive that money to those areas of need. So I would appreciate | |
| your comments on what are still the barriers for underserved | |
| communities in accessing CDFI money and money that is allocated | |
| to try to get to those businesses in great need. | |
| Ms. PINDER. I think that the second round, there were all | |
| those problems that were identified with the first round of PPP | |
| and EIDL loans and all those kinds of things, because of the | |
| rush to get out and that kind of thing. | |
| But I think that the intentional nature of looking at how | |
| to place or push the money down to intermediary types of | |
| organizations or CDFIs was a good one, because we have to be | |
| intentional about it. There has to be organizations or | |
| resources that are, if nothing else to describe this, boots-on- | |
| the-ground kind of approaches. | |
| And understanding where those communities are--I mean, | |
| where those businesses are and being able to market and | |
| communicate the existence of the resources, because that has | |
| been one of the biggest barriers of entry for achieving this | |
| money throughout the cycle. It is where are the resources, | |
| where can I identify those resources, and then the government | |
| or private sector organizations that have taken this on being | |
| intentional about making the information known. | |
| Mr. CROW. Just to follow up on that last point, Ms. Pinder, | |
| what would be an effective way--and I know I am kind of putting | |
| you on the spot here a little bit, but what would be a really | |
| effective way to get that information, that last piece you just | |
| mentioned, get that information known and communicate what is | |
| available to some of these communities? | |
| Ms. PINDER. I think you have to meet people where they are, | |
| right? And so if you are looking to increase awareness in | |
| particular communities, what are those--the knowledge of where | |
| the CDFIs are? How do you use means to advertise that | |
| information? And whether it is through our churches or through | |
| organizations that exist in those communities, I think that is | |
| how you meet people where they are. | |
| Mr. CROW. Thank you. I appreciate that very much. | |
| Professor Fairlie, you had also touched on this in your | |
| written testimony about the changes between the first round of | |
| funds, relief funds, and the second round of funds. | |
| So the same question for you, if I may: What are some of | |
| the barriers that you have determined and seen from your | |
| research on getting CDFIs connected to those underserved | |
| communities? | |
| Mr. FAIRLIE. Well, I think that, you know, the big problem | |
| in the first round is that it was mainly established banks that | |
| were providing the funds, and those were going out to mostly | |
| nonminority businesses. | |
| And it was the second round of PPP funds that--where they | |
| really targeted, you know, trying to get this fintech into | |
| local banks, CDFIs, you know, those types of organizations that | |
| really made the big difference, right? In the research that I | |
| show, you can just see this incredible difference between this | |
| positive relationship with nonminority communities overall in | |
| the U.S., and then it switches around, totally, you know, | |
| reverses in that second round. | |
| So I think it is really important. I think that we need to | |
| be aggressive. We need to go out and talk to small business | |
| owners, you know, get that information out to them so that they | |
| know about these programs, so that they know to apply. | |
| Mr. CROW. Thank you. Madam Chair, I yield back. | |
| Chairwoman VELAZQUEZ. The gentleman yields back. | |
| The gentleman from Minnesota, Mr. Hagedorn, is recognized | |
| for 5 minutes. | |
| Mr. HAGEDORN. Thank you, Madam Chair. | |
| I would like to expound a little bit about these lockdowns | |
| that our Ranking Member, Mr. Luetkemeyer, brought up. In our | |
| State of Minnesota, our Governor, Tim Walz, has held onto | |
| emergency powers and made all sorts of arbitrary decrees, and | |
| in so doing his central government planning has really affected | |
| our small businesses. It has crushed a lot of them, put some of | |
| them out of work, out of business permanently. And you look | |
| at--some of them just didn't make sense. You had big box | |
| stores, corporate stores open, small businesses closed. | |
| And then you get into the rural areas that I represent down | |
| in southern Minnesota and you have border communities, and the | |
| Minnesotans were just across the border going to Iowa, South | |
| Dakota, or Wisconsin to purchase their goods there, go dine, | |
| and go to a bar or restaurant. And then we were hurt. | |
| Now we are trying to open back up, but the effects of these | |
| lockdowns are really hurting small businesses. You have a | |
| situation where we don't have enough labor. Part of that is | |
| because the schools are still closed throughout most of | |
| Minnesota with regulations that don't make sense. Even the CDC | |
| says it is okay to get the teachers and everybody back in | |
| school for in-person learning. That would free up the parents | |
| to be able to go out and do work again in the community, work | |
| for our small businesses. | |
| And then at some of the border communities, the employees | |
| have literally gone to neighboring States and taken full-time | |
| jobs there, knowing that those States will remain open when | |
| Minnesota's opening and closing. | |
| So I guess to Ms. Kerrigan, what are your thoughts about | |
| that? I would like to hear any other experiences that you have | |
| learned along the way and just how devastating some of these | |
| lockdown orders have been to small businesses across the | |
| country. | |
| Ms. KERRIGAN. Well, they have been very, very, very | |
| devastating, obviously. You know, from the beginning of the | |
| pandemic or very shortly thereafter, you know, we said that, | |
| yeah, this is a very difficult challenge for the country, | |
| unprecedented, but still small businesses could operate safe | |
| and smart. They had every incentive to do so. | |
| And you are right. I mean, sort of the inequities in | |
| allowing sort of the larger stores to remain open and closing | |
| the smaller stores that could have sold some of these goods | |
| that were provided by the larger stores and, in effect, herding | |
| a larger amount of customers into bigger stores, you know, | |
| didn't make sense from our members' perspective. | |
| So--and what we are seeing now, Congressman, is you do see | |
| businesses just in these locked down States, I mean, really | |
| picking up--you know, picking up and moving, moving to other | |
| States. I mean, it was the trigger for them, actually, to move | |
| to more business-friendly States, you know, to lower cost | |
| States, and to States that--you know, where there was a little | |
| bit more flexibility, you know, in terms of these policies. | |
| So I don't know if I have one simple answer for you. I | |
| mean, hopefully with the vaccines and now we are seeing the big | |
| drop in the disease. I mean, we are on a course here where | |
| economic activity can, you know, open up and get back to | |
| normal, whatever that might be, you know, the next 6 months or | |
| so. | |
| Mr. HAGEDORN. Sorry to cut you off. I want to get over to-- | |
| thank you for that. And that has been our experience with | |
| businesses and others going to neighboring States like South | |
| Dakota that have been more open. | |
| Mr. Schoaps, I have a real quick question for you. Being in | |
| the business that you are, in the movie theater business in a | |
| small community, we have communities in my district in Madelia | |
| and Kasson that have small theaters that haven't been able to | |
| reopen. | |
| In some of our rural communities, obviously, we need | |
| infrastructure for folks to be there, jobs and everything else, | |
| good, obviously, healthcare and education. But quality of life, | |
| things to do, entertainment, that is really important in a | |
| community the size of yours. I think it is what, you have about | |
| 7,000 people. And I see that. What is your thought about that? | |
| Mr. SCHOAPS. Well, I have to agree with you. I can't tell | |
| you the number of people that have come up to me and asked when | |
| we are going to open. They come knocking on our door when they | |
| see us in the theater. They want us to open. | |
| But it goes back to what you were talking about just a | |
| minute ago. As long as L.A. and New York are locked down, they | |
| represent 25 percent of the revenue that goes into movies, | |
| movie theaters in the country. And movie studios will not put | |
| out their movies, their big movies, if they know that L.A. and | |
| New York are locked down. | |
| So yes, it is quality of life. Movie theaters are a big | |
| thing in small towns, simply because it is a gathering place. | |
| It is a place where--it is a reach out to the rest of the world | |
| from a small rural community. | |
| Mr. HAGEDORN. Thank you very much. I appreciate the time. | |
| Chairwoman VELAZQUEZ. Now we recognize the gentlelady from | |
| Kansas, Ms. Davids, Chairwoman of the Subcommittee on Economic | |
| Growth, Tax, and Capital Access. | |
| Ms. DAVIDS. Thank you, Chairwoman. | |
| I am definitely cognizant of the fact that it was about a | |
| year ago that the Small Business Committee held our first | |
| hearing on how the emerging, at that time emerging pandemic | |
| might impact small business. And, obviously, so much has | |
| changed in that time. | |
| I have been honored--hold on a minute. The buzzing is | |
| happening in my office. | |
| I have been really pleased to be able to speak with a lot | |
| of small business owners in the Third District in Kansas. And, | |
| first of all, I appreciate folks taking time out of their | |
| business schedules just like you all have here today to share | |
| experiences and perspectives. | |
| And, you know, I think that what we are hearing now and | |
| what I have heard at home is that, obviously, small businesses | |
| are in a fight for their lives. And they are getting innovative | |
| and using every tool at their disposal to keep their doors open | |
| and employees paid. And there is obviously a lot of work to do, | |
| continue to do to provide the capital and resources and relief | |
| that our small businesses are going to need. | |
| You know, I know we talked about the EIDL or heard about | |
| the EIDL loan earlier. A small business owner in my district | |
| was able to apply for and receive the funds almost immediately | |
| within a day of applying. And it really saved her business, and | |
| she was able to continue to operate. So know that when these | |
| programs are working effectively, they can save jobs. They can | |
| save businesses. | |
| And I also know that some of the issues that we are facing | |
| are because we don't have the necessary funds or programs | |
| available for people to get a second drawdown on the PPP, and | |
| so we are going to continue to work on that. | |
| And then finally, I want to mention that when it comes to | |
| the supply chain and our small manufacturers and medium size | |
| manufacturers, I have introduced the SUPPLIES Act because I | |
| know that there are so many businesses, particularly in Kansas, | |
| who are eager to shift their production over to things like | |
| personal protective equipment, testing supplies, and even to | |
| help with the vaccine rollout. I know a lot of healthcare | |
| workers are still struggling to get all of those things. | |
| So I am glad to see that the American Rescue Plan includes | |
| $10 billion of funding for domestic manufacturing, for | |
| emergency medical supplies and this sort of thing. | |
| So, Ms. Pinder, I would love to hear you speak a little bit | |
| to the opportunity to utilize small businesses and particularly | |
| minority-owned businesses when it comes to the implementation | |
| of the Defense Production Act. I know you mentioned that in | |
| your testimony, and would just love to hear you talk a little | |
| bit more about that. | |
| Ms. PINDER. Thank you, Congresswoman. One of the things | |
| that I talked about is how do we then take existing assets and | |
| see how we leverage them in order to help support what you are | |
| talking about, because you are right, there is this plethora of | |
| need that is out there, and how do we identify, specifically | |
| for those businesses that are hurting the most. | |
| So traditionally, assets like the Defense Production Act | |
| and like Buy American has not really looked at or leveraged how | |
| we then translate some of that that perhaps we could leverage | |
| with, say, minority and women and small businesses. | |
| We take, for example--I talked about the title, Title 3, | |
| that the President has authority to invest in specific | |
| industries. What you talked about, people pivoting during that | |
| time, well, what if we could take something of that nature. And | |
| the goal of Title 3, for example, is expand domestic capacity | |
| for supplies, but if, indeed, that can be done and implemented | |
| in mind with supporting minority and smaller businesses. | |
| I think those are the kind of things that we need--that | |
| Congress can take a look at. It is all about implementation, | |
| right? So how do we implement it to make sure that that is | |
| indicated in those efforts. | |
| Ms. DAVIDS. Thank you, Ms. Pinder. We will probably follow | |
| up more after this. | |
| I will yield back to the Chairwoman. | |
| Chairwoman VELAZQUEZ. The gentlelady yields back. | |
| The gentleman from Minnesota, Mr. Stauber, is recognized | |
| for 5 minutes. | |
| Mr. STAUBER. Thank you, Madam Chair. | |
| And at our first meeting of this year, I do not mean to | |
| kick things off in such a negative way, but I believe this | |
| situation calls for it. | |
| Small businesses were crushed at the hands of their State | |
| and Federal Governments. Speaker Pelosi put politics ahead of | |
| our country. For months, she made her partisan wish list items | |
| a priority over the millions of Americans who were suffering. | |
| It was unacceptable. | |
| So now here we are a new Congress, and yet we have not | |
| heard any fresh ideas on how to help America's small | |
| businesses. Instead, we have the tired old ideas. One of them | |
| is known to close small businesses across this Nation. | |
| Ranking Member Luetkemeyer brought this up in his comments, | |
| the $15 minimum wage. When asked, one of the witnesses stated: | |
| Jobs will be lost, small businesses will close. | |
| President Biden's relief plan shows just how out of touch | |
| he is with the hardworking small business owners of America, | |
| and it is frustrating. It is unconscionable that a relief | |
| package took so long. Americans and small business owners | |
| everywhere deserve better. | |
| Now to our witnesses. I want to thank you all for being | |
| here today. Your testimony will provide much-needed clarity on | |
| policy proposals that can actually deliver effective targeted | |
| relief to our small business owners, who are the engine of our | |
| economy. | |
| As the government has rolled out relief programs, mistakes | |
| were clearly made. Lenders wrongly doled out PPP loans to | |
| individuals who should not have qualified. The SBA created | |
| ongoing guidance, some making loans out of compliance at a | |
| moment's notice. | |
| Ms. Kerrigan, in your opinion, where have our relief | |
| programs failed our small businesses? | |
| Ms. KERRIGAN. Well, I will start with the good news, that, | |
| you know, over the course of time there have been lessons | |
| learned. And, you know, based on this current PPP round, you | |
| know, there are many things that have been done right. | |
| But I will agree with you in terms of there was the need | |
| for speed back, you know, in the summer, where the economy had | |
| some momentum, where small businesses saw some light, you know, | |
| at the end of the tunnel, and yet Congress left town in August | |
| without acting and without extending the PPP program, where | |
| there was actually money that was left in that program. | |
| So, you know, getting small businesses that money that they | |
| needed to weather what we went through in the fall and what we | |
| are going through currently I think would have been very, very | |
| important to save a lot of small businesses, save jobs. And | |
| that is one area, you know, that I will recognize. | |
| And then just again, you know, I think there just needs to | |
| be the continuous sort of reevaluation of the program and for | |
| the SBA and for the Congress, you know, to act on | |
| recommendations I think a little bit more quickly, in terms of | |
| getting--making it more flexible, reducing complexity, and | |
| providing more certainty both for, you know, small business | |
| owners and the lenders, particularly as we move through and | |
| into the forgiveness period. | |
| So, I mean, again, I know it was a big lift, getting this | |
| money out the door. A lot of small businesses benefited. But | |
| there could have been things done along the way that could have | |
| helped a lot more small businesses, and particularly reaching | |
| those in the minority and disadvantaged communities as well. | |
| Mr. STAUBER. I appreciate those comments, and I agree with | |
| you, that need for speed. Once the investments ran out at the | |
| end of August, it was unacceptable that our small businesses | |
| across this Nation had to wait almost 4 months before the | |
| additional relief. | |
| Ms. Kerrigan, a second question: Can you identify any | |
| issues in our relief program that have made small business | |
| owners reluctant to spend money they have received or reluctant | |
| to turn to the government for aid at all in the future? | |
| Ms. KERRIGAN. You know, I think some of those issues have | |
| been resolved, in terms of, you know, some tax issues. You | |
| know, I still think there can be additional flexibility in the | |
| PPP program. | |
| You know, many business owners just don't think that | |
| program is for them, particularly as it relates to, you know, | |
| the 60/40 split, 60 percent for payroll, 40 percent for other | |
| expenses, particularly if they are in high-cost areas and have | |
| high overhead. | |
| Mr. STAUBER. Thank you. Ms. Kerrigan, my time has run out, | |
| and I appreciate all the witnesses. And I yield back. | |
| Chairwoman VELAZQUEZ. The gentleman yields back. | |
| Now we recognize the Chairman of the Subcommittee on | |
| Contracting and Infrastructure and Vice Chair of the committee, | |
| Mr. Kweisi Mfume from Maryland. | |
| Mr. MFUME. Madam Chair, thank you very much. And I | |
| appreciate the opportunity. I assume we will have an | |
| opportunity also in a second round to expand on everything that | |
| we don't get a chance to cover here, so I look forward to that. | |
| A couple of quick things. I want to thank the witnesses, | |
| all of whom I am sure have busy schedules and lifestyles, for | |
| making time available. This sort of discussion helps those of | |
| us, as lawmakers, get a sense of the divergence of thought and | |
| where some of the urgent matters are that we can apply | |
| ourselves to right away. | |
| I must admit, having served on this committee in the | |
| eighties and the nineties, that this issue that continues to | |
| come up about the minimum wage is a little perplexing to me. I | |
| appreciate the Ranking Member introducing it and the response | |
| that was given, but for me it is a little like deja vu. The | |
| answers are the same as they were many, many years ago, that it | |
| would cause job loss and, of course, businesses would be forced | |
| to close, and that would be the end of small businesses as we | |
| know them. | |
| In fact, in 1988, the Federal minimum wage was at $3.35. | |
| Today, 33 years later, it is at $7.25. So it has taken us 33 | |
| years to give Federal workers a minimum wage increase of $3.90. | |
| Thirty-three years is a long time, and in the interim, | |
| businesses did not go out of business. Cost in some instances | |
| were passed along to consumers. | |
| But the issue here is one of a lesson, and I think the | |
| lesson is that we will continue to see an increase in the | |
| efforts to try to make sure that people have a livable wage or | |
| a minimum wage that reflects where we are in society. | |
| I want to associate myself to the remarks of Mr. Crow and | |
| reiterate the fact that this is not something that takes place | |
| next week or next year. So I know we are in the middle of | |
| COVID, but it might be a little bit of a mischaracterization to | |
| use that backdrop to place this issue as if it is going to | |
| happen right away. It doesn't really completely happen until | |
| 2025. So, for the record, I just thought I would rhetorically | |
| ask myself the question, if not now, when? So when has been a | |
| long time coming. | |
| I do want to go back to Mr. Fairlie's remarks and Ms. | |
| Kerrigan's, as you have sort of given us a 30,000-foot view of | |
| what is going on as a result of the impact the pandemic has had | |
| on small businesses in general and minority businesses in | |
| particular. | |
| In just a couple of minutes, could either or both of you-- | |
| and I don't have much time--just indicate, from your | |
| perspective, when do things get better? Do they get better when | |
| we open up, or do they get better when we are able to get rid | |
| of the disease? | |
| Ms. KERRIGAN. Where I start, I think it is both. I think we | |
| can, you know, move in kind of a parallel track. And when we | |
| open up, I think that will definitely help small businesses. | |
| But certainly, the whole vaccination issue and getting rid of | |
| the disease, you know, will give consumers the confidence, you | |
| know, to go to stores and to, you know, get back to sort of, | |
| quote/unquote, normal economic activity. | |
| But, again, Congressman, I just have a lot of optimism for | |
| all these new entrepreneurs. That is the opportunity in the | |
| marketplace, based on where consumer trends are going right | |
| now. And to the extent that we can encourage those | |
| entrepreneurs to move forward to innovate and keep our economy | |
| competitive, no matter what the normal may look like, the new | |
| normal moving forward, I think is vital. | |
| Mr. MFUME. Thank you. And Professor Fairlie? | |
| Mr. FAIRLIE. I think that we need three things: One, we | |
| need to get that vaccine out. We need to get it out faster. We | |
| need to get it out evenly across the country. So there are some | |
| equity issues about that, of course. That is really important. | |
| Customers need to feel comfortable. They need to feel like | |
| they can go into a small business and not worry about getting | |
| the coronavirus. That is essential. And, of course, once that | |
| happens, we can start opening up everything, which is really | |
| important. | |
| But the third thing, though, that I would not underestimate | |
| is this kind of trend toward shopping online. People are just | |
| becoming much more accustomed to doing it. I don't think it is | |
| going to go away forever. And small businesses somehow need to | |
| have more of an online presence. | |
| And so I gave some ideas there about how search engines | |
| could prioritize small businesses in their local area instead | |
| of just the big box stores or bigger online retailers. That | |
| would be one way that we could do that. | |
| Mr. MFUME. Thank you. Thank you very much. Mr. Schoaps, I | |
| really empathize with your situation out there in the Midwest. | |
| To see a 92 percent reduction in your revenue in 1 year is sort | |
| of unfathomable, and I can only imagine what you and your wife | |
| are up against, in terms of swimming upstream. | |
| I am glad to know that the December stimulus bill, in which | |
| we did correct this whole issue of the EIDL loans, helped you | |
| to some extent, and that I look forward to President Biden's | |
| current stimulus bill---- | |
| Chairwoman VELAZQUEZ. Excuse me. | |
| Mr. MFUME.--in terms of pushing you a little further down | |
| the road in terms of your own survival. | |
| I want to underscore two things, one of which dovetails on | |
| what the professor just said. Innovation is one of the biggest | |
| enemies that many small businesses face. We saw it with the | |
| newspaper industry a couple of decades ago. We are seeing it | |
| now with movies, as it relates to Netflix and On-Demand and | |
| Pay-Per-View, which affects both television and other losses. | |
| Madam Chair, were you trying to---- | |
| Chairwoman VELAZQUEZ. Yes. Your time has expired. We are | |
| discussing with the Ranking Member in a minute if we are going | |
| to go to a second round, and then you will have an opportunity | |
| to have Mr. Schoaps answer your question. | |
| Mr. MFUME. Thank you very much. Actually, it is he and Ms. | |
| Pinder. So I will await the decision of the Chair and the | |
| Ranking Member. | |
| Chairwoman VELAZQUEZ. Thank you. | |
| The gentleman from Pennsylvania, Mr. Meuser, is recognized | |
| for 5 minutes. | |
| Mr. MEUSER. Thank you very much, Madam Chair. | |
| Thank you to the witnesses. I appreciate your being here | |
| with us. The PPP, the Paycheck Protection plan, was very much | |
| of a success. Nationwide, there were 5.5 million, | |
| approximately, small businesses received loans. $557 billion in | |
| forgivable loans were issued, with an average of approximately | |
| $100,000. So that was really the sweet spot. That was the | |
| intent. In Pennsylvania, my home State, it was very much the | |
| same sort of metrics, 200,000 loans for $22 billion, so about | |
| $110,000 per business. | |
| The EIDL loans were also very successful, the Economic | |
| Injury Disaster Loan, particularly in Pennsylvania. The SBA | |
| worked extremely hand in hand with me and with us. 3.6 million | |
| loans for $200 billion, which works out to be about $6,000 | |
| each, which, again, was right on the mark. | |
| Nevertheless, that is about a trillion dollars. And with | |
| another $3 trillion that was put into the economy, that is $4 | |
| trillion thus far over the past year. And yet, one in four | |
| small businesses still predicts they are going to go out of | |
| business within the next 6 months, and most of them are | |
| restaurants. So it is almost that there is almost no amount of | |
| money that is going to buoy and allow small businesses to | |
| survive except the free marketplace itself. | |
| So, Ms. Kerrigan, I will start with you, please. You know, | |
| there is some talk here about business planning and how somehow | |
| government is supposed to provide innovative ideas. Anybody who | |
| has been in the private sector for more than we will say a year | |
| knows that that is ridiculous. Entrepreneurs figure those | |
| things out on their own. | |
| What government does is create a competitive business | |
| environment for small business and large business to do their | |
| thing and be competitive and deliver the best products and | |
| services at the lowest prices. | |
| Nevertheless, Ms. Kerrigan, I would like to ask you about | |
| access of capital outside of all of the forgivable loans and | |
| all and the additional that we are going to provide. I am not | |
| sure there is--in fact, I am sure there is no alternative to a | |
| safe and smart opening that is driven by the entrepreneurs and | |
| the small businesses themselves, where their ideas are applied, | |
| to assure that their customers and their staff are safe, yet | |
| they stay open. | |
| And I would like to get your comment on that, Ms. Kerrigan | |
| and Mr. Schoaps. Am I saying it right? Mr. Schoaps. | |
| But first just a quick answer on access to capital. Do you | |
| have any suggestions for us as to what we should be looking for | |
| outside of the EIDL and the PPP and standard lines of credit | |
| that banks have or that businesses have? | |
| Ms. KERRIGAN. Well, you know, one of the areas that we have | |
| been very involved with since the Obama administration is the | |
| whole area of investment crowdfunding. And we are beginning to | |
| see a big surge in that. Obviously, investment crowdfunding was | |
| made legal. It took 4 long years, you know, for the rules to be | |
| written on that. | |
| But now I see this huge surge in investment crowdfunding I | |
| think which is really great. It is truly democratizing access | |
| to capital. Minority-/women-owned businesses are tapping into | |
| this capital. And what I think the beauty of it is is it | |
| leverages local capital and local investors. | |
| And there are new rules now at the SEC that are going to | |
| lift the limit from $1 million to $5 million and some other | |
| things that will strengthen equity crowdfunding. | |
| I think we could work with some tax credits there. I mean, | |
| the U.K. has, with investment crowdfunding, put together | |
| actually a fund where if an individual raises, you know, up to | |
| $250,000 or more--I forget what the actual cap is--that through | |
| a fund the government will match that, that it will have to be | |
| paid back. | |
| So I think what we need to start looking at is ways that we | |
| can, on the capital formation front, tie the capital and, you | |
| know, leveraging what I think is a lot of capital out there. | |
| And investment crowdfunding is the way to do that, one of the | |
| ways to do that. | |
| Mr. MEUSER. Thank you. I would love to follow up with you, | |
| if I can, afterwards and discuss that further. | |
| Quickly, Mr. Schoaps, I have very little time, what would a | |
| $15 minimum wage do to your business right now? | |
| Mr. SCHOAPS. It would, as most small businesses, it is | |
| going to hurt somewhat. It is not going to force us to close. | |
| It will force us maybe to raise prices, to look at ways and | |
| cutting back in other areas. It is not going to close us, but | |
| it will put some more hardships on us. | |
| But at the same time, I would--we hire mostly entry-level | |
| students, the young people. I would like to see some kind of | |
| maybe a minimum--some tier of minimum wage that addressed that | |
| kind of entry-level position. | |
| Mr. MEUSER. Thank you very much. I am out of time. Madam | |
| Chair, I yield back. Thank you very much. | |
| Chairwoman VELAZQUEZ. The gentleman's time has expired. | |
| Now we recognize the gentleman from Minnesota, Mr. | |
| Phillips, Chairman of the Subcommittee on Oversight, | |
| Investigations, and Regulations. | |
| Mr. PHILLIPS. Thank you, Madam Chair. Greetings to my | |
| colleagues and to our witnesses. | |
| I want to address a couple things quickly that a couple | |
| colleagues have brought up, starting with the fact that | |
| Governors around our country, both Democrats and Republicans | |
| who imposed lockdowns did so to save American lives, in the | |
| absence of a strong Federal response or even support or | |
| guidelines. | |
| I know how economically painful it was. I can attest to it | |
| firsthand. But I simply ask my colleagues and remind all of us | |
| it is incumbent on us in this committee to now help small | |
| businesses recover. So I invite everybody to invest our time | |
| and energy in repair and revert rather than regression. | |
| Relative to the $15 minimum wage which has come up a number | |
| of times today, I own a chain of small coffee shops. And we pay | |
| a $15 minimum wage, not because we have to, but because I want | |
| to. I know the implications, how it helps employees and how | |
| challenging it is for owners. | |
| But I think it is fair to say that we all, Democrats and | |
| Republicans, share the same objective. We want more prosperity | |
| for everybody, especially those who work hard and are trying to | |
| make ends meet. | |
| I think we should balance these minimum wage increases with | |
| the EITC, earned income tax credit, so we don't reduce | |
| employment, we don't further hurt businesses, especially in | |
| rural areas. And I invite my colleagues, anybody who is | |
| interested, to speak with me about that, because I want to work | |
| together. | |
| Now, the numbers and stories we have heard today from our | |
| witnesses are staggering and painful, to say the least. We know | |
| that businesses that survive the crisis are going to have to | |
| adapt in a post-COVID world and with higher relative costs and | |
| with less working capital than ever. | |
| We know how many small businesses entered the crisis with | |
| low financial resilience. About a third were either operating | |
| at a loss before COVID or breaking even. So we know it is going | |
| to only get worse over the coming weeks and months before it | |
| gets better. | |
| So, as briefly as possible, I want to ask each of our | |
| witnesses to simply share with me and our committee how we on | |
| the Small Business Committee can most impact small business | |
| recovery moving forward, particularly for businesses in rural | |
| areas, minority-owned firms and women-owned firms. | |
| Perhaps we can start with you, Mr. Fairlie. What is the | |
| best way? Where do you want to see us focused? | |
| Mr. FAIRLIE. I think the best way is to really promote | |
| trying to get the vaccine out, right? I think that that is the | |
| key. That is going to make customers feel comfortable going | |
| back into small businesses. And, as I mentioned before, the | |
| online presence part I think is crucial. | |
| Mr. PHILLIPS. Thank you. Ms. Pinder. | |
| Ms. PINDER. I believe that capitalization is I think the | |
| most important thing that can be done. And so I talked about | |
| no-interest loans, zero-interest loans, being cognizant of the | |
| need versus the demand of it. And providing capitalization I | |
| think is the greatest thing that can happen. | |
| Mr. PHILLIPS. And, Ms. Pinder, do you believe existing | |
| programs, either amplified or in their current form, are | |
| enough, or do you think it is incumbent on us to consider new | |
| programs? | |
| Ms. PINDER. I think it is incumbent upon you to consider | |
| new programs and look at existing programs to see how you can | |
| leverage it there. Like the Defense Production Act, you know, | |
| how do you do investments? Just new ways and innovative ways of | |
| how we make investments in businesses that are pivoting, | |
| businesses that are trying to survive, but, you know, bringing | |
| them to the table and understanding it is not a cookie-cutter | |
| approach, but how do we approach that need, based on industry | |
| or based on whatever that need may be. | |
| Mr. PHILLIPS. I appreciate it. Thank you. | |
| Ms. Kerrigan. | |
| Ms. KERRIGAN. Well, access to capital I think is vital. And | |
| I agree if we could supercharge and work with the existing | |
| framework of programs, whether it is SBA loans or with | |
| investment crowdfunding and the platforms that exist there, I | |
| think it would be really important to do so. | |
| Look, technology is so important, and making sure that the | |
| SBA resources in the programs are really focusing on | |
| technology. And we are going to move into a 5G world, right? So | |
| things are going to change again, and our businesses are going | |
| to have to pivot and adapt again. There are a lot of | |
| opportunities out there. | |
| And lastly, you are right, access to broadband, that has | |
| been one of our top issues. If you don't have access to | |
| broadband, you don't have access to the tools or opportunity. | |
| So that I think is a very important piece to focus on. | |
| Mr. PHILLIPS. And one more quick question, Ms. Kerrigan: | |
| Are you familiar with any countries, any nations around the | |
| world that support their small business kind of ecoculture, if | |
| you will, in ways that we can learn from? | |
| Ms. KERRIGAN. Well, I think there is a lot on the microloan | |
| front. I mean, certainly over in the U.K. they are--you know, | |
| how they are supercharging investment crowdfunding there, both | |
| through the tax credit and also a match program, I think is | |
| something we can learn from. It has been highly, highly | |
| successful. | |
| So we have a regulatory framework there. You know, they | |
| have this great program. I think if we can look at that and | |
| perhaps emulate that or least to explore it, I think it would | |
| be really important, particularly during the recovery period. | |
| And the fact that, you know, we are going to have to | |
| leverage private sector capital, you know, we are going to have | |
| to do that in order to get through this--to move to full | |
| recovery. | |
| Mr. PHILLIPS. I appreciate it. | |
| And with our limited time that we have left, Mr. Schoaps, | |
| anything that you want to add, anything that you haven't shared | |
| that would be helpful to the SBA that we can be focused on and | |
| help the rebirth of small business? | |
| Mr. SCHOAPS. Well, I think one of the main things is | |
| somehow we have got to get the communication out to small | |
| business owners of what is available. When I first got my EIDL | |
| loan, I mentioned it to several of my friends in the community. | |
| They didn't know what it even was. I think that we have got to | |
| somehow get that information out to the people that are in | |
| need. | |
| And then I have to go back to what Dr. Fairlie said. The | |
| number one thing that would help us is to get the vaccine | |
| widely distributed and to get us at least people believing that | |
| we are going to get back to normal. | |
| Chairwoman VELAZQUEZ. Time has expired. | |
| Mr. PHILLIPS. I am grateful. Thank you. | |
| Mr. SCHOAPS. Thank you. | |
| Chairwoman VELAZQUEZ. The gentleman yields back. | |
| The gentleman from New York, Mr. Garbarino, is recognized | |
| for 5 minutes. | |
| Mr. GARBARINO. Thank you, Madam Chair. Thank you to all | |
| these witnesses that we have today. | |
| Mr. Schoaps, I just had some questions for you. Can you | |
| share with The Committee how many employees you had before the | |
| COVID-19 pandemic and how many you have now? | |
| Mr. SCHOAPS. Yes. We averaged about 12 employees before the | |
| epidemic, and--the pandemic--excuse me--and, right now, we have | |
| my wife and I, and that is it. | |
| Mr. GARBARINO. Okay. And, before the pandemic, what was the | |
| average age of your employees other than your wife, not | |
| including your wife and yourself? | |
| Mr. SCHOAPS. Probably about 17 to 18. | |
| Mr. GARBARINO. And the average wage you paid those | |
| employees? | |
| Mr. SCHOAPS. Average wage was $8 an hour. | |
| Mr. GARBARINO. $8 an hour. We have heard a little bit about | |
| today how the increase of the minimum wage could be $15 an | |
| hour. That won't happen until 2024, but it starts--it goes up | |
| to $9.50 this year. That would be a pretty big increase from $8 | |
| an hour. | |
| Would that prohibit you from bringing employees back this | |
| year, especially if you didn't have access to the PPP? | |
| Mr. SCHOAPS. No, it would not. We would--we are going to | |
| bring them back--we are going to open our business one way or | |
| the other. We are going to bring employees back. If it means | |
| our costs go up, we will have to figure out a way to increase | |
| our revenue to offset that, and our community will have to | |
| understand that it may include a price increase, it may include | |
| other things that we try to do to supplement what we do right | |
| now. | |
| Mr. GARBARINO. Do you think you would--do you have to | |
| compete with other major chains--I know--I believe you are a | |
| small business--like Regal or AMC, or United Artists theatres? | |
| Do you have to compete with them? Are there any near you? | |
| Mr. SCHOAPS. We have one about 20--we have one 20 miles | |
| away and one 15 miles away, and I don't think--we are really | |
| not in competition with them. We employ mainly local high | |
| school, local junior college employees, and they want to stay | |
| locally. So I really--we are not in competition for employees, | |
| no. | |
| Mr. GARBARINO. But my question is, if you had to increase-- | |
| if you had to increase ticket prices or the costs of your | |
| concessions to cover the increase in minimum wage this year to | |
| $9.50 and then all the way up to 15, would--are you concerned | |
| that your customers would go to other major chains because it | |
| might be cheaper for them to go there? | |
| Mr. SCHOAPS. I am always concerned that our customers are | |
| going to go to the major chains, because they can offer more | |
| than we do even with--not even counting the minimum wage issue. | |
| They will be under the same minimum wage requirements we are, | |
| and I think that, yes, of course I am always concerned about my | |
| competition. However, I think that we have a--in a small town, | |
| we have a very loyal following, and I think we will be able to | |
| get through it. | |
| Mr. GARBARINO. One more question. Did you have--have you | |
| tried to bring back any of the 17- or 18-year-old employees | |
| since you were allowed to reopen? Have you tried to hire | |
| anybody back and they have refused to come back? | |
| Mr. SCHOAPS. No, we have had no one refuse. As a matter of | |
| fact, we had everyone eager to come back. | |
| What has happened was we opened back in--I think it was | |
| June or July, we opened, tried to open, and there was just no | |
| product. Movie theatres are a specialized small business | |
| because, without the movies there, we have nothing to sell. | |
| And, without the new movies being released by Hollywood, we had | |
| nothing really to present. We tried using old, classic movies, | |
| old blockbusters, and that just did not pay the bills. We were | |
| forced to close down again. | |
| But, even now, we--when we are talking about possibly | |
| opening again in a month or two, we have already contacted our | |
| employees, and nearly all of them are eager to come back. | |
| Mr. GARBARINO. Okay. Thank you very much. | |
| And, Ms. Kerrigan, I have a question for you. It is | |
| something that I have heard back in my home State of New York, | |
| and I am wondering if it is something you have heard in your | |
| dealings, that the PPP and the extension of the increased | |
| unemployment insurance, $300 or the $400 a week extra, are | |
| counterproductive because they compete with each other. | |
| Businesses want to bring employees back, but employees | |
| don't want to come back because they are making more on | |
| unemployment. That is something I have heard a lot in New York. | |
| Is that something that you have come across? | |
| Ms. KERRIGAN. I think, initially, you know, at the | |
| beginning of that program and, you know, somewhat into 2020, as | |
| we moved to a more normalized environment and with the economy | |
| opening up and I think with employees thinking about sort of, | |
| again, you know, the long-term prospects, you know, after these | |
| programs are done, it has become less of an issue right now in | |
| terms of more employees wanting to go back to work, and then of | |
| course--and employers, you know, offering them incentives to do | |
| so. | |
| So, I mean, I can ask more of our small business owners | |
| about that now in terms of the current state of play where they | |
| are and what their issues are, and I will be more than happy to | |
| get back with you on that. | |
| Mr. GARBARINO. Thank you very much. | |
| Ms. KERRIGAN. To see how that stacks up in terms of some of | |
| their other concerns and whether it is still a major issue. | |
| Mr. GARBARINO. Thank you very much. I yield back. | |
| Chairwoman VELAZQUEZ. The gentleman yields back, and now we | |
| recognize the gentlelady from Georgia, Carolyn Bourdeaux, for 5 | |
| minutes. | |
| Ms. BOURDEAUX. Okay. Thank you so much, Chairwoman | |
| Velazquez, and thank you to the witnesses here for testifying | |
| on behalf of our small businesses. | |
| I am from Georgia's 7th Congressional District. It is a | |
| very, very diverse community. Twenty-five percent of the people | |
| in my district were born outside of this country. And we have a | |
| vast swath of small businesses, many of which are women and | |
| minority owned, and they have really struggled during this past | |
| year to try to stay afloat. | |
| I just want to cut to the chase, though, and get to some | |
| questions. One, and this could be for Ms. Pinder or Mr. | |
| Fairlie. We have talked a lot about issues of disparity in | |
| terms of getting out the PPP loans, the outreach through the | |
| EIDL program, and things like that. But one of the things that | |
| has come to our attention is disparity in the administration of | |
| the funds, and one of our concerns is that it seemed from a | |
| quick survey that we did of some of our small businesses that a | |
| lot of the Black, other minority owned businesses were having | |
| to pay back the loans, whereas some of our White businesses | |
| seemed to be more likely to be able to find ways to get the | |
| loans forgiven. | |
| And I wanted to see if that was something, Mr. Fairlie, | |
| that you have come across in your research, and for Ms. Pinder, | |
| something that you are hearing from minority communities about | |
| as a particular issue, and, if so, what we might do to address | |
| that? | |
| Mr. FAIRLIE. I guess I can go first. | |
| So, in some of--I haven't actually researched this directly | |
| myself, but I know that there are a couple of projects that | |
| have looked at discrimination in terms of, you know, when you | |
| have a minority lender coming in or a nonminority lender coming | |
| into a bank to get a PPP loan, but there was definitely some | |
| issues there. | |
| And I think that that is really important, right, is that, | |
| if we don't have kind of an equal system from the very | |
| beginning, from getting information, from going into a bank and | |
| asking for help, or into going into somewhere else or looking | |
| into a fintech, that is a real problem, and I know that there | |
| is some evidence that that did occur early in the stages of the | |
| PPP program. | |
| Ms. BOURDEAUX. Thank you. | |
| Ms. PINDER. Congresswoman, we can certainly validate that | |
| that is absolutely true. Part of what we have been doing at the | |
| council and our MBDA centers is addressing issues our minority | |
| businesses have found themselves in relative to obtaining PPP | |
| loans, and then just a whole mystery around the payback of | |
| them, right? And, because it is a revolving door, the rules | |
| kind of shifted in midstream. It is very hard to get a handle | |
| on it. | |
| And so those things that were problematic in terms of how | |
| we were able to even get the loans--we have had to make phone | |
| calls to banks to ask them to look at--to consider these | |
| particular companies, but we also saw a difference when money | |
| from--whether it was State level or money that was done from | |
| foundations or private-sector organizations, that they were | |
| much more successful in getting directly to the folks that were | |
| having the problems with the Federal funds. | |
| Ms. BOURDEAUX. Okay. I just think this might be an area for | |
| further investigation and trying to understand sort of what has | |
| happened out there and sort of what is happening as these | |
| programs are going through the process. | |
| One other question that has come up a lot is we have a lot | |
| of small businesses that have--they need to make investments to | |
| improve ventilation to make their businesses appropriate for | |
| COVID and to allow them to stay open and operate in these | |
| situations. I know that some local governments gave grants to | |
| small businesses. | |
| But do any of you all have a sense of the needs out there | |
| to make further investments in getting their operations to be | |
| COVID safe? | |
| And I will start with you, Ms. Pinder, since I know that | |
| you have that--a very good perspective from the minority | |
| communities. | |
| Ms. PINDER. I am sorry, Congresswoman. You said--what was | |
| the last part of your question? | |
| Ms. BOURDEAUX. Do you have any sense of the additional kind | |
| of infrastructure needs that small businesses have to make sure | |
| that their businesses are safe and able to reopen at least | |
| partially safely right now? | |
| Ms. PINDER. But, you know, part of it is just an education | |
| process of how do you safely reopen your businesses, right? It | |
| is also from the legal perspective, what is your liability | |
| around when your employees come in? Do you require them to have | |
| vaccinations? So a lot of it--what I am finding and what we | |
| have found is just an education program or education | |
| perspective of what are the rules? | |
| And so there is absolutely the need to prepare our | |
| businesses or provide those resources so that our businesses | |
| can understand what they are liable for, how they can assist, | |
| how they can then--you know, what are the compliance efforts | |
| that they have to undertake in order to get that done? And, for | |
| some businesses, it is actually also where can they reside, | |
| because they can no longer afford their places of business. | |
| Chairwoman VELAZQUEZ. Time has expired. | |
| Ms. BOURDEAUX. Thank you. | |
| Chairwoman VELAZQUEZ. Thank you. | |
| Ms. BOURDEAUX. Thank you. | |
| Chairwoman VELAZQUEZ. The gentlelady from California, Mrs. | |
| Kim, is recognized for 5 minutes. | |
| Mrs. KIM of California. Thank you, Chairwoman Velazquez and | |
| Ranking Member Luetkemeyer, for holding this very timely | |
| hearing. I also want to thank the witnesses for taking the time | |
| to join us to share your experience and your relevant and | |
| important data. | |
| As a small business owner myself, I am thrilled to be part | |
| of this Committee, and I look forward to working with my | |
| colleagues to support our small businesses during and after | |
| pandemic, because small businesses are the lifeblood of our | |
| economy and cannot be forgotten. | |
| You know, in my district, California Authority 9, which is | |
| a suburban district, 99.8 percent of California businesses are | |
| employing over 7 million workers. Unfortunately, COVID-19 | |
| shutdowns in my State of California have increased the number | |
| of small businesses closing, and I have witnessed many of them | |
| myself in my district. | |
| More than 19,000 California small businesses have shut down | |
| permanently due to COVID-19, and every small business that | |
| closes takes away jobs, causing economic stress to families and | |
| communities. | |
| Obviously all industry are badly hurt during the shutdown. | |
| So I want to ask--but, you know, all industries, but retailers | |
| in particular. So I would like to ask a question for Dr. | |
| Fairlie. | |
| In your testimony, you mentioned trends in shopping habits, | |
| especially the mood towards online shopping. Do you believe | |
| small businesses are prepared for this trend to become | |
| permanent, and can you elaborate on some of the recommendations | |
| you mentioned in your testimony? | |
| Mr. FAIRLIE. Yes. I would be happy to. I think that it is a | |
| trend that is not going to go away. I mean, I think that | |
| there--there could definitely be some pent-up demand where | |
| people are really excited when the vaccine is rolled out more | |
| completely and they want to go back to downtowns, they want to | |
| go to those vibrant communities, different shops, restaurants. | |
| But I think that there is also this other, you know, trend | |
| happening, which is we are just more used to buying things | |
| online. We are used to that convenience of having, you know, | |
| UPS deliver a package to our house. And often, almost--well, I | |
| don't know if often, but very likely that package is not from a | |
| small business; that package is from a big-box store or an | |
| online retailer. And so we need to do more to get small | |
| businesses online. | |
| You know, we talked a bit about broadband access could be | |
| essential for rural businesses and businesses in other areas | |
| that don't have good internet access. Certainly web page | |
| assistance might be another thing that the Federal Government | |
| can help out with. | |
| And then of course, you know, anything that can help, you | |
| know, with search engines or any other kind of information that | |
| allows customers to find small businesses and buy from them | |
| online. | |
| Mrs. KIM of California. Thank you. | |
| As small businesses recover from this emergency, what | |
| should Congress concentrate on in order to create a small | |
| business environment that focuses on entrepreneurship and | |
| innovation? | |
| This question is for Dr. Fairlie. | |
| Mr. FAIRLIE. Okay. I wasn't sure if it was to me. | |
| I think there are a lot of, you know, different ways. | |
| Certainly, you know, we have talked about financial capital as | |
| being one of the most important. I think that is kind of | |
| crucial, especially for firms that are creating innovative | |
| products that are kind of expanding on what we already have, | |
| that are giving America real strength, right? And so that can | |
| be crucial, as that kind of funding that helps them with | |
| scientific discoveries and innovative products. | |
| Mrs. KIM of California. Thank you. | |
| I have a question for Ms. Kerrigan. As Congress discusses | |
| next steps when it comes to COVID-19, what recommendations do | |
| you have for this Committee? | |
| Ms. KERRIGAN. Well, when I talk to business owners, I mean, | |
| what they are really looking for is a period of certainty and | |
| policy stability. You know, last year was very, very tough in | |
| terms of the uncertainties, and, you know, obviously sort of | |
| the massive revenue reduction that they saw last year. So, to | |
| the extent that we can have a--sort of a period of stability, | |
| policy stability and certainty, I think that is very, very | |
| important. | |
| I mean, obviously the whole issue that we talked about in | |
| terms of capital formation, access to capital, that will remain | |
| to be an issue, not only for existing businesses, but also for | |
| the start-ups and the new entrepreneurs that we see--just, you | |
| know, the surge in new business applications that we saw last | |
| year and that continue to this day, is what can we do to | |
| support them? Again, it is policy stability. It is, you know, | |
| access to capital. | |
| And I have to say, you know, in terms of---- | |
| Chairwoman VELAZQUEZ. Ms. Kerrigan, I am sorry, but we are | |
| running late, and the gentlelady's time has expired. | |
| Mrs. KIM of California. Thank you. | |
| Ms. KERRIGAN. I am sorry. Okay. | |
| Chairwoman VELAZQUEZ. Thank you. | |
| Now we recognize the gentlelady from Texas, Ms. Van Duyne. | |
| Is she here? | |
| Ms. VAN DUYNE. Yes. Thank you. Thank you, Chairman | |
| Velazquez and Ranking Member Luetkemeyer, for holding this | |
| important hearing today. | |
| As a former mayor and businesswoman, I have spent my career | |
| with people from a wide array of backgrounds and experience who | |
| fought tooth and nail to grow their businesses only to see | |
| their doors closed forced by the heavy hand of government due | |
| to coronavirus pandemic. | |
| Since being sworn into office one month ago, I have been | |
| fortunate enough to speak with a number of small businesses and | |
| franchise owners in north Texas to learn more about their | |
| experiences in the face of the global health crisis and their | |
| struggles due to government restrictions that followed. | |
| Just last week, I held a roundtable discussion to hear from | |
| these businesses in our community. Many expressed similar | |
| concerns, but one thing they all had in common, similar to what | |
| Mr. Schoaps has referenced in his testimony today, is that they | |
| are doing all that they can, everything in their power, to | |
| ensure their businesses weather the storm. | |
| While loan programs, like the Paycheck Protection Program | |
| and the Economic Injury Disaster Loans Program, were critical | |
| in keeping their businesses operational, the pandemic has | |
| brought forth new challenges. And, over time, it became clear | |
| that these programs needed additional resources and support to | |
| uplift small businesses and entrepreneurs. | |
| In north Texas, our economy is made better by the | |
| innovation and entrepreneurial spirit small business owners | |
| provide. In talking to the business owners in my community, I | |
| learned that they are hurting and needing help. They are scared | |
| that the powerful few in Washington will make politically | |
| expedient decisions that may force them to permanently close | |
| their doors. | |
| Instead of calls to hike the Federal minimum wage to $15 an | |
| hour, which will kill many small businesses, we should be | |
| discussing how to improve programs, like the Paycheck | |
| Protection Program, that could keep them open past the | |
| pandemic. | |
| Unfortunately, this administration stands ready to hand | |
| down destructive policies that will force north Texans out of | |
| business and demand many change the standards of who they hire. | |
| I hope the calls for unity thus far are not shallow. Small | |
| businesses needed us to come together as a Congress, as a | |
| House, and as a Committee to fix the programs, keeping them | |
| alive, address their unique situations, and reopen the stores, | |
| the restaurants, and service centers that keep our communities | |
| running. | |
| I look forward to working with this Committee to oversee | |
| the programs that have aided so many small businesses thus far | |
| and, as we move past this pandemic, advancing legislation that | |
| will allow America's entrepreneurs to prosper once again. | |
| I thank all of the witnesses being here today. | |
| And, for Ms. Kerrigan, an October report from the | |
| Government Accountability Office concluded that the streamlined | |
| process that the SBA implemented to administer COVID-19 loans | |
| has increased susceptibility to fraud and abuse. Are there any | |
| activities or program features that you believe we should be | |
| examining more closely in our congressional oversight of these | |
| programs? | |
| Ms. KERRIGAN. Yes. And--yeah, that is a big issue, and | |
| obviously of concern. I actually read the recent SBA's IG | |
| report that was released on this very issue, and they have some | |
| very good recommendations in that report in terms of what can | |
| be done on the front end to ensure that there is not--in terms | |
| of the money does not get disbursed to people who may be or | |
| businesses who may be ineligible, and things that they can work | |
| on with Treasury--for example, the do-not-pay data source that | |
| they have over there--again, to sort of, you know, catch this | |
| fraudulent activity before the money goes out the door. | |
| So I was happy to see that SBA IG report, the | |
| recommendations, and also the SBA following through on some of | |
| those recommendations, but more oversight and follow-up | |
| definitely needs to be done. | |
| Ms. VAN DUYNE. All right. I appreciate that. | |
| One of the biggest concerns for small business owners that | |
| the pandemic has exasperated has been providing healthcare to | |
| some of our frontline workers. Our smallest businesses employ | |
| low-wage workers and can't afford to pay for healthcare, | |
| especially with revenues dropping. But, due to the pandemic, | |
| workers are scared to go to work without that safety net. | |
| So, Ms. Kerrigan, I am going to ask: How would you like to | |
| see the issue of small business healthcare addressed for our | |
| smallest of small businesses? | |
| Ms. KERRIGAN. Well, to the extent that you can provide the | |
| incentives and support to the workers themselves in order to | |
| access health coverage, to allow for more, you know, | |
| flexibility, one size doesn't fit all, certainly when it comes | |
| to healthcare. And I do think some of the initiatives of the | |
| last administration, you know, have been helpful. I do believe, | |
| you know, the pooling initiative, you know, for allowing small | |
| businesses to leverage their numbers in terms of accessing | |
| healthcare, was very important. | |
| But one other critical thing that I see is that we want to | |
| be able to incentivize. When it comes back to vaccines, | |
| employers, you know, are looking not to mandate, but to | |
| incentivize employees to get the vaccine, and we joined a group | |
| of our allies in sending a letter to the EEOC to make sure that | |
| proper guidance is put out there, that we are not running afoul | |
| of any laws. And so those---- | |
| Mr. MFUME. [Presiding.] The gentlewoman's time has expired | |
| unfortunately. Thank you so much. I do anticipate there will be | |
| a second round, but I don't want to get in front of the Chair | |
| on that. She will be back momentarily. | |
| So, Ms. Kerrigan, if you would suspend, I would like to | |
| acknowledge Ms. Craig, who has been in the cue and who is up | |
| next, to be recognized. | |
| Ms. Craig. | |
| Ms. CRAIG. Thank you so much, Mr. Chair. Thank you for | |
| yielding. | |
| Before I get to my question, I just want to welcome new | |
| members to the Small Business Committee. Looking forward to | |
| working with all of you. I have been proud of the work on a | |
| bipartisan basis that we have been able to accomplish. And I am | |
| happy to serve on this Committee with members of the Minnesota | |
| delegation as well. | |
| Thank you again to our panelists for being with us today | |
| and for your insightful testimonies. | |
| As I am sure is true for all of my colleagues, many of the | |
| issues discussed today have greatly impacted my constituents. | |
| I would like to address my question to Dr. Fairlie first. | |
| Thank you for your important research and specifically | |
| addressing the negative impacts that COVID-19 has had on | |
| minority owned businesses. | |
| In your testimony, you touched on the issues that | |
| restaurants have faced as well amid the pandemic. We are seeing | |
| the consequences of government-ordered shutdowns on, in | |
| particular, hospitality and restaurants. | |
| On top of the financial losses and shutdowns, people are | |
| anxious to know that it is safe before they return to | |
| restaurants, and that is not going to happen until vaccines are | |
| more broadly available in each of our communities. | |
| The combination of these issues has devastated the | |
| restaurant industry, and the relief grant program for | |
| restaurants to address these unique challenges was widely | |
| supported by my colleagues on this Committee last Congress, | |
| including Chairwoman Velazquez. | |
| As we roll out vaccinations, do you believe a targeted | |
| relief grant program, which would go to independent | |
| restaurants, similar to last Congress' RESTAURANTS Act--120 | |
| billion would go to the industry in grant--would that assist | |
| the recovery of these smallest and hardest hit Main Street | |
| businesses, help them to stay open, and accelerate the recovery | |
| of our Main Street businesses? | |
| Mr. FAIRLIE. Yes. I think it could help a lot. I think it | |
| is important that we save our restaurants. Certainly, you know, | |
| just going around my own town, I have seen a lot of them closed | |
| up, and they have closed up permanently. You know, they have | |
| put up signs saying that they are done. They--you know, they | |
| are not going to reopen at any point in time. | |
| And it is sad, right? You sort of--like we really | |
| experienced these downtowns as part of, you know, what makes | |
| America great, and, you know, is that being able to go and walk | |
| through a town with a lot of diverse restaurants and shops, we | |
| need to provide that assistance to them. And I think directed | |
| assistance, especially financial assistance, so that they can | |
| weather the next couple of months to get that vaccine out is | |
| crucial. | |
| Ms. CRAIG. Well, we see that light at the end of the tunnel | |
| for sure. | |
| I want to open this up to, I guess, any of our panelists | |
| here just as we circle back around to this topic of the second | |
| round of Paycheck Protection Program forgivable loans obviously | |
| did a much better job of assisting minority owned businesses. | |
| But one of the challenges that I saw in our community is that | |
| minority owned businesses don't always have access to the same | |
| information. There are language barriers, et cetera. | |
| So any thoughts on how we can encourage, really, at the | |
| local level--how the Federal Government can support making sure | |
| that the communication and the dollars are getting to these | |
| minority owned businesses? | |
| Ms. KERRIGAN. Congresswoman, I can start out with that. | |
| One of the things--it has been great to, by the way, engage | |
| with the SBA already early on in the administration where they | |
| are already having this discussion about how you use local | |
| organizations, community organizations, sort of a navigator | |
| approach to actually reach those types of businesses, because | |
| many of them don't think they are eligible. They are unaware of | |
| the program. They have technical issues to overcome in terms of | |
| the financials and all those other things that they need to | |
| apply for these loans. | |
| So I think there is--and they have some good models that | |
| they shared of how this worked in certain areas of the country, | |
| and I think using that nationwide, I think, would really be | |
| beneficial---- | |
| Mr. MFUME. Ms. Kerrigan, I am sorry, but the gentlewoman's | |
| time has expired. I don't want to always have to interrupt you. | |
| It is---- | |
| Ms. KERRIGAN. I am sorry. | |
| Ms. CRAIG. I am sorry. I would have done that for you. I | |
| thought I had 20 seconds left, so apologies to the Chair. | |
| Ms. KERRIGAN. All right. | |
| Mr. MFUME. Don't worry. We will roll it over with interest, | |
| Ms. Craig, trust me. | |
| Ms. CRAIG. Okay. Thank you. | |
| Mr. MFUME. The Chair would like to recognize the gentleman | |
| from Florida, Mr. Donalds. | |
| Mr. DONALDS. Thank you, Mr. Chairman. | |
| First of all, to the panelists, thanks for taking the time | |
| out of your day. This is obviously a very important subject | |
| matter facing our country through a very important time. | |
| I am not going to get into speeches. I want to just kind of | |
| get right to it in the interest of time. This actually--my | |
| first line of questioning is really for Professor Fairlie. | |
| Professor, I was going through some of your testimony here, | |
| and the one thing, especially with respect to the closure rate | |
| of minority owned businesses, specifically Black-owned | |
| businesses and even Latin-owned businesses, in your research, | |
| did you take into account the actual location of these | |
| businesses, like where they actually reside around the United | |
| States, or does your research pay no deference to that? | |
| Mr. FAIRLIE. I did look into kind of regional differences, | |
| and I found that it was pretty consistent across, you know, | |
| broader regions of the country. I wasn't able to look at--there | |
| is a lot of concern that urban areas were hit the hardest, | |
| right, in terms of closures and also customers being very | |
| careful about going back to small businesses when things | |
| started to reopen. Unfortunately we don't have the data on | |
| that, and that was difficult. | |
| But the kind of thing that I did look at with the | |
| California tax data is different types of businesses, and that | |
| is where, you know, the numbers were just devastating. You | |
| know, 91 percent of hotels closed down. More than 50 percent of | |
| clothing stores, more than 50 percent of restaurants closed. A | |
| lot of those are owned by minorities and immigrants in | |
| California, and so that is the real concern, is, you know, what | |
| is happening there. | |
| Mr. DONALDS. A quick follow-up on that point. So, you know, | |
| since you have such rampant closures obviously in the State of | |
| California, could you specifically attribute that to the | |
| emergency regulatory environment put in place in California by | |
| Governor Newsom and, with respect to that, local city councils | |
| and local mayors in the State of California? | |
| Mr. FAIRLIE. Well, it is attributed to two things, yes. One | |
| is the mandatory shutdowns for a lot of nonessential | |
| businesses. But the other is customers. Customers were nervous | |
| about going to businesses. Often they were very nervous about | |
| going to small businesses, small restaurants, places where they | |
| thought they might catch the disease. | |
| And so that is where, you know, as I mentioned before, this | |
| kind of shift to online shopping has occurred, that, you know, | |
| individuals are worried about it, they are waiting to get the | |
| vaccine, they are waiting for this to get under control before | |
| they start to go back to small shops and small restaurants and | |
| back to kind of downtown areas. | |
| Mr. DONALDS. My last question really is more so for the | |
| panel. I could get into $15 minimum wage, but I think it has | |
| been covered pretty extensively here, and I--you know, I think | |
| it is pretty clear in the record of what happens when you make | |
| major shifts to your minimum wage in a short period of time, | |
| even in normal economic circumstances, not to mention the | |
| current economic circumstances. | |
| But what I would--my last question is really for the | |
| overall panel. Does the overall panel think it is appropriate | |
| for emergency regulatory orders to be essentially cast across | |
| an entire State with no reflection on whether it is an urban | |
| area, suburban area, or a rural area? And do you think that the | |
| impacts on suburban or rural areas in particular provide just | |
| as many disastrous impacts to small businesses as they would in | |
| an urban area? | |
| Anybody can answer that one. | |
| Mr. SCHOAPS. Well, I think that the effects of the COVID | |
| pandemic across the State--in our State, rural or urban, has | |
| been terrible, of course. I don't think the shutdowns would | |
| have affected us any more than they would have in a rural area | |
| or an urban area. So I don't--I don't really think there is any | |
| difference there. It is going to affect all small businesses | |
| the same. | |
| Ms. KERRIGAN. I would just say on that, the one-size-fits- | |
| all approach, you know, that is--I mean, obviously that is a-- | |
| that is a big problem, both when it comes to government index | |
| regulation, and certainly when it comes to this, is that it | |
| would be--would have been ideal if local governments and | |
| localities were given a little bit more flexibility and | |
| authority, you know, to make decisions based on local | |
| conditions. | |
| So, anyway, one size fits all is--you know, obviously hurt | |
| a lot of small businesses in areas where the pandemic situation | |
| was much different than it was, say, in urban areas. | |
| Mr. DONALDS. All right. I will yield back the rest of my | |
| time. | |
| Thank you, Mr. Chairman. | |
| Chairwoman VELAZQUEZ. [Presiding.] The gentlelady yields | |
| back. | |
| Now I will recognize the gentlelady from Florida, Ms. Maria | |
| Salazar. | |
| Ms. SALAZAR. Thank you very much. | |
| Chairwoman VELAZQUEZ. Five minutes. | |
| Ms. SALAZAR. Thank you, Chairwoman Velazquez, and thanks to | |
| all of you, and to all of the panel--the panelists that are | |
| willing to donate their time to enlighten us. | |
| I come from Miami, Florida, district number 27, where 70 | |
| percent of the constituents are minorities, 80 percent of my | |
| businesses have less than ten employees, and 70 percent have | |
| less than five people. So obviously the impact has been brutal, | |
| specifically for the minority owners. | |
| For that reason, I promised my constituents something that | |
| is very unusual, but I think very necessary as time passes-- | |
| something called a prosperity center, and what is the | |
| prosperity center going to do? | |
| Well, basically three things. Helping everybody find a new | |
| job or find a job, helping my constituents to learn some--learn | |
| something new. If they lost their job at the restaurant and | |
| they wanted to become a welder or an electrician, I could help | |
| them find those courses. | |
| And, third, and for me the most important, the one that is | |
| closest to my heart, is to become a client of the Federal | |
| Government. I am sure that you guys are aware that the Federal | |
| Government has $175 billion available to be bought from goods | |
| and services made by minorities or for minority businesses. | |
| So what we are going to be offering in the prosperity | |
| center is a variety of services that includes roundtables, job | |
| fairs, job training courses, offering the constituents | |
| computers, personal guidance for my staff, for them to be able | |
| to regain their economic lives. | |
| So my question is for the overall panel: If you were to be | |
| in my shoes, what else would you be offering in that prosperity | |
| center in order to help those small business owners get back on | |
| their feet? | |
| Ms. KERRIGAN. Well, I will just start by saying information | |
| is power, education is power, and I applaud you, you know, for | |
| putting this center together. | |
| Ms. SALAZAR. Yep. | |
| Ms. KERRIGAN. I would say that there are a lot of self- | |
| employed minority businesses, individual entrepreneurs that do | |
| not know they are eligible for PPP, EIDL programs, and that | |
| type of support. And, also, there is a lot of tax credits and | |
| tax incentives as well. To the extent that you can provide the | |
| technical information and the training to access these | |
| programs---- | |
| Ms. SALAZAR. Yep. | |
| Ms. KERRIGAN.--I think would be vital. | |
| Ms. SALAZAR. So, when you tell me tax credits and technical | |
| training, could you please expand on that? | |
| Ms. KERRIGAN. Well, yeah. So, you know, in the CARES Act | |
| itself and in the year-end package, there--for PPP and both for | |
| individuals, there are--well, let's start with tax credits. | |
| There is tax credits for employers, but also there is tax | |
| credits for self-employed people. With PPP, there is rules for | |
| employers, and then there is rules for self-employed people. | |
| Ms. SALAZAR. I want to stop you there for a minute. So what | |
| you are telling me is that the government will pay the employer | |
| to hire the employee? | |
| Ms. KERRIGAN. Well, no. To maintain--well, and to hold on, | |
| you know, to their employee, right, so the employee retention | |
| tax credit, that they held onto that employee despite a drop in | |
| revenues, okay? | |
| Ms. SALAZAR. Correct. So that means that the person keeps | |
| the job. So that is what we want. | |
| Ms. KERRIGAN. That is exactly right. And so--and those tax | |
| credits became even more valuable, and they have been extended | |
| through June 30, I believe, of this year. But, also, individual | |
| self-employed people have access to these tax credits as well. | |
| But they--again, many of these entrepreneurs and small | |
| business owners, they just need the technical expertise and the | |
| accountants and, you know, the people to help them get through | |
| these very complicated--not that it is complicated, but just | |
| the forms that they need, the financials that they need in | |
| order to take advantage of these programs. | |
| Ms. SALAZAR. So the information is power, like you said, so | |
| now we got to another layer where we are going to be providing | |
| them sort of accounting for legal guidance so they---- | |
| Ms. KERRIGAN. Correct. | |
| Ms. SALAZAR.--know how to find their way through the maze. | |
| Ms. KERRIGAN. Through the maze, and then all the way, if it | |
| is a PPP loan, through the forgiveness process as well. | |
| Ms. SALAZAR. Now, you kind of--that is one of the most | |
| important information that we could provide, PPP loans, or the | |
| info that comes with it, and where to look for opportunities-- | |
| for tax opportunities? | |
| Ms. KERRIGAN. That is right. There is a lot of them in, as | |
| I said, the CARES Act, and then things that were put in at the | |
| year-end package as well that was signed into law. | |
| Ms. SALAZAR. We are going to make the Kerrigan Prosperity | |
| Center Division. Thank you. | |
| Chairwoman VELAZQUEZ. The gentlelady's time has expired. | |
| Now we are going to go to a second round. | |
| Professor Fairlie, so much has been discussed here | |
| regarding the impact that the minimum wage increase will have | |
| on small businesses. I would like to relate for the record here | |
| that, since nearly 70 percent of our economic activity comes | |
| from consumer spending, raising the minimum wage will put money | |
| back into consumers' pockets, back into our main streets, and | |
| back into our economy. | |
| In fact, the Boston Federal Reserve data demonstrate that | |
| raising the minimum wage leads to increased spending on | |
| groceries, household necessities, and at local restaurants. | |
| Many of the businesses are saying that they need foot traffic, | |
| and that they need consumers to walk through their doors. | |
| The reality is that, unless we successfully vaccinate most | |
| of the people in this country, consumers will not feel safe | |
| going into a restaurant, going into a mall, and spending their | |
| money. | |
| There has to be synergy between being successful at | |
| vaccinating most of the people in this country and increasing | |
| the minimum wage so that we increase consumer spending. The | |
| people that are going to benefit from increasing the minimum | |
| wage are not going to go to Florida or Arizona and purchase a | |
| second home. They are going to go into the grocery store. They | |
| are going to go into the gas station or local restaurant. Small | |
| business owners see and know that this is the reality. | |
| So, Mr. Fairlie, do you see any interconnection between | |
| being successful in terms of a national strategy of addressing | |
| and crushing the pandemic, the virus, and also infusing money | |
| into people's pocket so that they will go out and spend? | |
| Mr. FAIRLIE. Yes. I mean, I think that, you know, one of | |
| the issues that we have been discussing in this conversation is | |
| about increasing the minimum wage, but the fact is the minimum | |
| wage has gone down over time. If you adjust it for inflation, | |
| what we have done is we have let it slip. And so the goal here | |
| is to bring it back to where it was in the past. | |
| It is one of the only things the Federal Government does | |
| that is not indexed for inflation. You know, some other | |
| benefits are often indexed for inflation, but the minimum wage | |
| is not. And, when you look at the numbers, someone getting paid | |
| at the next round, you know, a little over $9 an hour, you | |
| multiply that by a full-time worker over the entire year, they | |
| are still under the poverty line--the Federal poverty line. | |
| So there is issues there about, you know, well, what is a | |
| reasonable amount of money that someone should get in a job? | |
| And, if they do get that reasonable pay, then they will put | |
| that money back, as you are saying, in the local economy. They | |
| will spend it. That will increase their income, and it will | |
| just shift some income over to these--you know, these low-wage | |
| workers. | |
| Chairwoman VELAZQUEZ. Thank you. Thank you. | |
| Now I recognize the Ranking Member, Mr. Luetkemeyer. | |
| Mr. LUETKEMEYER. Thank you, Madam Chair. | |
| And I would like to thank the witnesses today, too, for | |
| hanging in there. I appreciate your time and your expertise. | |
| You have been great. | |
| This responds to a couple of comments that were made by | |
| some of the members. A couple of them talked about the fact | |
| that the Raise the Wage Act was phased in, and I mentioned | |
| that, or at least I--in the report that I asked to put into the | |
| record, which is an NFIB Research Center report, it is a report | |
| on the Raise the Wage Act, which is phased in. But the report | |
| takes into account the phase-in of the minimum wage, and still | |
| winds up with 1.6 million jobs being cut and a real output loss | |
| of $2 trillion. | |
| You know, I understand the need for the minimum wage, and I | |
| think, to me, it is a testimony on the lack of an economy. When | |
| you see the economy going down or stagnating, that is the time | |
| whenever there is the need for--that is where the argument can | |
| be made, anyway, for the need for a minimum wage. When the | |
| economy is growing, you don't need a minimum wage. | |
| We had 1.2 million more jobs right before the pandemic hit. | |
| They needed people to fill them, and we didn't need a minimum | |
| wage. Why? Because there was a competition for the workers. The | |
| wages were going up. That statistically shows that, across the | |
| board, every demographic was improving wage-wise as well as | |
| with unemployment numbers going down. | |
| So we can have an argument on the minimum wage for a long | |
| time. I am more than happy to get into that. | |
| Dr. Fairlie mentioned in response to my question a while | |
| ago with regards to the lockdowns, do populations live | |
| differently between New York and Florida? I didn't have time to | |
| really go into a response to that. | |
| But my response to it is: Yes, they live in a--perhaps a | |
| little differently the way they are spread across their State, | |
| but Florida had or New York had twice as many people die from | |
| COVID as Florida did, and yet their own survey--New York's own | |
| survey shows that the cause of the cases of COVID were not from | |
| businesses. 1.4 percent from restaurants, less than 1 percent | |
| from personal hair care folks. | |
| That is my point, is that the lockdowns were minimally | |
| effective, at best, with regards to keeping COVID cases down, | |
| and yet the suffering by the small business community is | |
| devastating, as given by my State, Missouri, which did not lock | |
| down anytime after November, or mid-May. Some communities did. | |
| Some of them didn't. But, in the process, we have got a 5 | |
| percent increase in revenues and a 4.4 percent unemployment | |
| rate. | |
| So that is my point in making this, is that it goes back to | |
| leadership in the States and the devastating effect that it has | |
| on small businesses and the jobs that are there for those small | |
| businesses. | |
| With regards to my question to Mr. Schoaps with regards to | |
| his banking relationships, I appreciate his comment. Obviously | |
| he has got a good relationship with it--with his banker, but | |
| perhaps part of it could be because, in the first COVID bill | |
| and the second bill as well, we had provisions in there to | |
| suspend the TDR, troubled debt restructuring rule, which helped | |
| banks and credit unions be able to accommodate more lenient | |
| terms for their customers with regards to how they can approach | |
| this, with regards to the regulators not going in and forcing | |
| the banks to foreclose on people. | |
| So I think--you know, Ms. Kerrigan, I have gone on here a | |
| little bit, but I wanted to clarify some of those things, | |
| because I think it is really important to understand the | |
| precise problems that we are talking about here and the | |
| solutions that were in the CARES Act, for instance, with | |
| regards to the troubled debt restructuring rule and CECL, for | |
| instance. | |
| So can you explain to me what you have seen or what you | |
| think is happening here with regards to the small businesses | |
| being worked with as a result of the TDR extension and banks | |
| and their customers? | |
| Ms. KERRIGAN. I think that a lot of the changes that have | |
| been made to PPP have just been very, very important for small | |
| businesses, really responded, you know, to many of their needs. | |
| And so, you know, we, you know, applaud the Congress and this | |
| Committee's leadership, you know, for making that happen. | |
| And moving forward, I mean, I think it is just really | |
| important that we continue to identify [inaudible] as well as | |
| opportunities, you know, in this next round as it goes out the | |
| door to make other changes, and maybe--as they may be needed | |
| where we are in the pandemic right now. So--and I look forward | |
| to working with you on those. | |
| Mr. LUETKEMEYER. My time expired. Thank you. | |
| Chairwoman VELAZQUEZ. The gentleman's--the gentleman yields | |
| back. | |
| I now will recognize the gentleman from Maryland, Mr. | |
| Kweisi Mfume, for 5 minutes. | |
| Mr. MFUME. Thank you, Madam Chair. At this time, I will not | |
| take the whole 5 minutes. You were very gracious. | |
| I would like to go back to the point I was making with | |
| respect to innovation and finding a way to create more capital | |
| opportunities, and I didn't get a chance to get to Ms. Pinder. | |
| And, Ms. Pinder, thank you very much. It is good to see you | |
| again. I appreciate, whether it is this Committee or other | |
| Committees, your willingness always to come before members of | |
| the House and to share your perspective. | |
| Some of the numbers you gave are a bit startling. I guess | |
| for those of us who have watched this closely, maybe not as | |
| startling, but the number of minority owned businesses that are | |
| Black, Latino, Asian, that have pretty much gone under, those | |
| that are facing severe budget drains, and those, quite frankly, | |
| looking for capital--innovative capital initiatives coming out | |
| of the government. | |
| The Mentor Protege Program is something that I originally | |
| wanted to talk to you about, but hearing your testimony, I | |
| wanted to go into your suggestions that we look at the Defense | |
| Production Act, which the current administration is looking at; | |
| specifically, Title III with respect to targeted investment | |
| initiatives that would create the kind of wave under the small | |
| businesses that we are talking about that will allow them to | |
| sail into the future. | |
| I assume you have got some specific ideas there, and if you | |
| could take a moment to talk to the Committee about some of the | |
| things you think that we ought to be arguing for and making a | |
| case for under the Defense Production Act, specifically Title | |
| III, as this administration looks at enacting that. That would | |
| be very helpful. | |
| Ms. PINDER. Thank you, Congressman. | |
| I think that part of what we can examine is showing a | |
| preference--using that vehicle by showing a preference for sole | |
| source provision and 8a. | |
| I am having some audio issues. Can you hear me okay? | |
| Mr. MFUME. I can hear you. | |
| Ms. PINDER. Okay. By expanding use of sole sourcing with | |
| provision under 8a, I mean using that act to do that. | |
| It is an opportunity to look at, as we--as we talked about | |
| businesses pivoting as a result of COVID, the manufacturing | |
| industry, of which, under the Defense Act, has supported in the | |
| past, you know, can we take the opportunity to help engage | |
| minority businesses in manufacturing? An idea that we have been | |
| discussing is looking at maybe some foreign investments in | |
| order to do that, looking at companies that would want to | |
| invest in U.S., having that partnership, whether it is through | |
| teaming agreements and joint ventures, with minority | |
| businesses, and having that as an entre into the manufacturing | |
| world. | |
| And so it is looking at that and looking at Buy American as | |
| to how do we pivot some of these companies to help with--I am | |
| sorry--to help with supporting our minority businesses. | |
| The other thing that I think we need to take into | |
| consideration, Congressman, is the partnering with the private | |
| sector. You know, my organization, the Capital Region Minority | |
| Supply Development Council, which is part of a national | |
| network, is--you know, I think that partnership in with--with | |
| private-sector organizations can help in writing what some of | |
| our businesses are doing with support of capital. | |
| I do apologize. I am having all kinds of issues here. | |
| So that is--that is basically what I was talking about. | |
| Mr. MFUME. Okay. Okay. Thank you. | |
| Before you conclude--and the Chair will interrupt in just a | |
| second, because time is running out. You had mentioned Title IV | |
| also of the Defense Production Act, which concerns me, because | |
| I think it is something a lot of people are not looking at, and | |
| what you have talked about specifically was reworking the 8a | |
| program. | |
| If you could get back to the Committee in writing with some | |
| of your thoughts, suggestions, or ideas are in terms of | |
| rewriting or reworking that 8a program, that would be very, | |
| very helpful, and I would appreciate it. | |
| Ms. PINDER. No. I appreciate the--I appreciate the | |
| opportunity. | |
| Chairwoman VELAZQUEZ. Gentleman's time---- | |
| Mr. MFUME. Madam Chair, I yield back. | |
| Chairwoman VELAZQUEZ. Thank you. Oh, he left? | |
| Okay. Well, thank you again to our witnesses for the | |
| testimony. We appreciate all you have shared with us. As | |
| Congress continues to debate additional COVID relief for small | |
| businesses, it is clear the time to act is now. Big and bold | |
| relief is needed, and it should be targeted to small firms and | |
| industries that need it the most. | |
| As we continue to vaccinate more and more Americans, we | |
| move closer to the end of this crisis, but we are not there | |
| yet. Until that happens, small businesses will struggle to | |
| return to pre-pandemic performance, and they will need our | |
| support. | |
| That is why targeted EIDL grants for micro businesses left | |
| out of PPP, supporting those hardest hit sectors of the small | |
| business economy, and improved entrepreneurial development and | |
| government procurement programs are so vitally important. | |
| I ask unanimous consent that Members have 5 legislative | |
| days to submit statements and supporting materials for the | |
| record. Without objection, so ordered. | |
| If there is no further business before the Committee, we | |
| are adjourned. | |
| [Whereupon, at 12:35 p.m., the Committee was adjourned.] | |
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