[House Hearing, 117 Congress] [From the U.S. Government Publishing Office] COMPETITION AND THE SMALL BUSINESS LANDSCAPE: FAIR COMPETITION AND A LEVEL PLAYING FIELD ======================================================================= HEARING BEFORE THE COMMITTEE ON SMALL BUSINESS UNITED STATES HOUSE OF REPRESENTATIVES ONE HUNDRED SEVENTEENTH CONGRESS SECOND SESSION __________ HEARING HELD MARCH 1, 2022 __________ [GRAPHIC NOT AVAILABLE IN TIFF FORMAT] Small Business Committee Document Number 117-046 Available via the GPO Website: www.govinfo.gov __________ U.S. GOVERNMENT PUBLISHING OFFICE 46-930 WASHINGTON : 2022 ----------------------------------------------------------------------------------- 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 TROY CARTER, Louisiana 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 CLAUDIA TENNEY, New York 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 Ellen Harrington, Majority Deputy Staff Director David Planning, Staff Director C O N T E N T S OPENING STATEMENTS Page Hon. Nydia Velazquez............................................. 1 Hon. Blaine Luetkemeyer.......................................... 1 WITNESSES Dr. Douglas Holtz-Eakin, President, American Action Forum, Washington, DC................................................. 8 Dr. Diana L. Moss, President, American Antitrust Institute, Washington, DC................................................. 9 Dr. Carl Shapiro, Distinguished Professor of the Graduate School at the University of California at Berkeley, University of California, Berkeley, Berkeley, CA............................. 11 Mr. Barry Lynn, Executive Director, Open Markets Institute, Washington, DC................................................. 13 APPENDIX Prepared Statements: Dr. Douglas Holtz-Eakin, President, American Action Forum, Washington, DC............................................. 36 Dr. Diana L. Moss, President, American Antitrust Institute, Washington, DC............................................. 46 Dr. Carl Shapiro, Distinguished Professor of the Graduate School at the University of California at Berkeley, University of California, Berkeley, Berkeley, CA........... 52 Mr. Barry Lynn, Executive Director, Open Markets Institute, Washington, DC............................................. 71 Questions for the Record: None. Answers for the Record: None. Additional Material for the Record: ACT/The App Association...................................... 92 Center for American Entrepreneurship......................... 99 CPR - Center for Progressive Reform.......................... 105 Digitally Driven: 2021....................................... 209 Engine....................................................... 254 Bettina Hein Testimony....................................... 282 NBER Working Paper Series.................................... 288 Public Citizen............................................... 324 SBE - Small Business & Entrepreneurship Council.............. 327 SCL - Society of Composers & Lyricists....................... 331 South Carolina Small Business Chamber of Commerce and American Sustainable Business Network Statement............ 334 COMPETITION AND THE SMALL BUSINESS LANDSCAPE: FAIR COMPETITION AND A LEVEL PLAYING FIELD ---------- TUESDAY, MARCH 1, 2022 House of Representatives, Committee on Small Business, Washington, DC. The committee met, pursuant to call, at 10:00 a.m., in room 2360, Rayburn House Office Building and via Zoom, Hon. Nydia Velazquez [Chairwoman of the Committee] presiding. Present: Representatives Velazquez, Golden, Davids, Phillips, Newman, Bourdeaux, Carter, Delgado, Houlahan, Kim of New Jersey, Craig, Luetkemeyer, Williams, Stauber, Meuser, Tenney, Garbarino, Young Kim of California, Van Duyne, Donalds, and Fitzgerald. Chairwoman VELAZQUEZ. Good morning. I call this hearing to order. Without objection, the Chair is authorized to declare a recess at any time. Before we get started, I would like to take a moment to recognize the passing of our colleague, Congressman Jim Hagedorn, the Ranking Member of the Subcommittee on Underserved, Agricultural, and Rural Business Development. He served on this Committee beginning in 2019 when he was first elected to Congress and over the years established himself as a productive Committee Member and a staunch supporter of small businesses. Even during his courageous battle with cancer, Mr. Hagedorn remained active on the Committee and never stopped advocating for the people and entrepreneurs of southern Minnesota. I respected his commitment to serving America's small employers and I was proud to work with him on several bipartisan initiatives. At this time, my thoughts are with his wife, family, friends, staff, and everyone else that knew him. I would like to take a brief moment of silence in his honor. I know that many on the Committee had the opportunity to work with and get to know Congressman Hagedorn, so I would like to recognize them to say a few words. First, I would like to recognize the Ranking Member, Mr. Luetkemeyer. Mr. LUETKEMEYER. Thank you, Madam Chair, for your kind words about our friend and colleague, James Hagedorn. Jim dedicated his life to public service. He was a strong Christian and worked tirelessly on behalf of his constituents. As a representative from Minnesota's First District and our Ranking Member of the Subcommittee on Underserved, Agricultural, and Rural Business Development, he was a champion for both the small business and agricultural community. In this Committee, Jim led legislation to improve resources for small businesses, advocated for rural entrepreneurs, and always upheld constitutional values. We know that his work to uplift small businesses in rural communities will be remembered for years to come. Dealing with a long battle with cancer, he never lost his optimism, sense of humor, and diligent work ethic. We will greatly miss his presence on this Committee and in Congress. His genuine kindness and uplifting spirit are rare. In reading the kind words shared about Jim after he passed, it was said, and I quote, ``It is hard to imagine someone more passionate about serving the people of southern Minnesota than Jim.'' He was a great man and patriot, and our thoughts and prayers are with his family, friends and staff. Thank you, Madam Chair. I would like to yield now to the gentleman from Minnesota, Mr. Stauber, to share a few words for his colleague from his home state. Mr. STAUBER. Well, thank you very much, Ranking Member Luetkemeyer, and Madam Chair, for those kind words. I think that Jim gave it all he had and he loved nothing more than serving the First District of Minnesota. He loved his small farmers and he loved his small business. And he came to Congress with passion. He and I came in together, and he came with passion. He came with integrity. And I think for those of you who do not know, I think that we had a GOP Small Business Conference led by Ranking Member Luetkemeyer. It was about 2-1/ 2, maybe 3 months ago. Jim Hagedorn brought his father there to that morning breakfast. And do you remember how proud he was to introduce his father, Tom Hagedorn, a former Member of Congress? And you could just see father and son, they were just beaming with pride. And Jim was fighting the cancer for the second time. And having been close to Jim, I can say he never once complained about what he was going through. He battled it with courage. He had faith. Unshakeable faith. And do you all remember just, it was 3 weeks ago that he passed a bipartisan piece of legislature out of this Committee. And it was on Zoom. Unfortunately, we could not be here but this is who he was. And very proud of his home state of Minnesota. And I am just proud to have been a colleague of his. I learned a lot from Jim. His passion. And today, Roger Williams and I, we made the command decision to put his nameplate up here. He is with us in spirit today. And I wrote on the paper in front of his name tag, Madam Chair, ``fiscal responsibility,'' because Jim Hagedorn loved his fiscal responsibility and I see my good friend Mr. Phillips down there. I know he will have some good things to say, too. But, you know, it is unfortunate that it takes something like this to bring us together but we can do better in Congress. And Jim wanted it better. His family, his father, and he gave it all he had for this country and we are going to miss him deeply. Rest in peace, Jim Hagedorn. And I yield back. Chairwoman VELAZQUEZ. Thank you, Mr. Stauber. The gentleman yields back. Now I recognize the gentleman from Minnesota, Mr. Phillips, for a brief statement. Mr. PHILLIPS. Thank you, Madam Chair. And thank you to my friend, Pete Stauber, for the wonderful words about Jim. Just a quick story because it is not one I have told much, but in 2019, Jim wanted to bring his nephew to the White House Christmas party. And wanted also to go with his wife, Jennifer Carnahan. And they needed an extra ticket. So, I volunteered mine. Little did I know that meant I also had to go with them to the White House Christmas party that year. So, Jennifer, his wife, Jim, and I, and Jim's nephew went to the White House Christmas party. And it was one of the more memorable evenings of my tenure in Congress to see Jim beaming with pride about bringing his nephew, his nephew's extraordinary experience, and just the simple humanity that my friend Pete just referred to. We are not Democrats and Republicans; we are Americans. Jim was a gentleman. We did not always agree, of course. He had a wry sense of humor. He did care about southern Minnesota, this country. He persevered. You would never know he was fighting for his life his entire term in Congress. In fact, I think just about a week before he passed away, he declared his run for 2022. He will be missed. And I just hope we use his memory as a blessing and as an inspiration to all of us to look beyond our party labels and get good work done and in the spirit of fiscal responsibility, humanity, and decency. May his memory be for a blessing. Thank you. Chairwoman VELAZQUEZ. Thank you, Mr. Phillips. And thank you for all the kind words. He will be missed. Now, turning to our hearing, I would like to begin by noting some important requirements. Standing House and Committee rules will continue to apply during hybrid proceedings. All Members are reminded that they are expected to adhere to these 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. 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, in accordance with the attending physicians most recent guidance, masks are optional and no longer required. Now let's get into the hearing. For generations, achieving the American dream and starting a business have gone hand in hand. Millions of Americans have utilized entrepreneurship to support their communities and create better lives for their families. Business owners may start small, but the goal is almost always to grow the enterprise, reach more customers, and hire more employees. As these firms evolve, they build up the American economy and produce numerous benefits for our society. These entrepreneurs are the bedrock of our economy, accounting for nearly 90 percent of all private-sector employers and generating roughly two-thirds of all new jobs. However, too often, we take our entrepreneurial ecosystem for granted. The ability of entrepreneurs to start and grow a business is predicated on the existence of a level playing field between large corporations and their small peers. Competition is the precondition that allows small businesses to thrive. In fact, this idea of competition underpins the entire American economy. More competition leads to lower prices, higher quality goods and services, greater variety, and innovation that moves our country forward. Unfortunately, longstanding trends indicate that our economy is becoming less competitive. Today, in over 75 percent of industries, there is more corporate concentration, which has given large companies more market power than they had 20 years ago. From high-tech startups to family farms, small firms across nearly every industry are struggling under the weight of outsized corporate power. As consolidation has increased, small business creation has suffered. Aside from the uptick in new business registrations from 2020 and 2021, the share of small firms entering the market had been declining since the early 1980s. In 1982, new firms constituted 38 percent of all businesses but that fell to only 29 percent in 2018. The pandemic ignited a wave of small business creation, with new business applications reaching record highs in 2021. This is encouraging, but at the same time, we must ask if these businesses have a fair opportunity to develop without being crushed by their corporate competitors. The federal government has a long tradition of creating rules and regulations that minimize anti-competitive behavior dating back to the 1800s. One of the primary means of protecting competition is enforcing antitrust laws. These laws help establish the free market rules, seeking to root out anti- competitive practices, like mergers and acquisitions. However, antitrust laws are just one tool at the government's disposal. Enforcement of intellectual property, labor, and consumer protection laws are also critical to rooting out anti- competitive practices. So today, I want to survey the current competitive landscape and discuss what is needed to ensure a level playing field for small businesses and entrepreneurs. When small businesses have a chance to compete, they can achieve great things and provide tremendous benefits for our country. That is why it is important to assess the current environment to see how larger businesses are in some cases helping to facilitate market competition and in others tipping the scales against it. The Biden administration understands this dynamic. Last July, the president issued an executive order directing government agencies to examine ways to increase competition to benefit consumers, workers, farmers, and small businesses. The order also established a White House Competition Council to monitor the rising power of large corporations in the economy. I hope that this hearing allows us to build off these actions and discuss more ways we can ensure a handful of dominant players are not stifling the growth of small businesses. I would now like to yield to the Ranking Member, Mr. Luetkemeyer, for his opening statement. Mr. LUETKEMEYER. Thank you, Madam Chair. And also, thank you for the opportunity to honor the memory of Mr. Hagedorn this morning. I would also like to thank you for holding the hearing today. As we all know, later this evening, President Biden will deliver his first State of the Union Address. It has been roughly 400 days since President Biden has taken office and I think we need to also take a look at the state of small business. In my view, when we do, we see it is in a crisis. Small businesses are being crushed by soaring prices as they face the highest inflation rates in 40 years. I have heard from contractors that are unable to bid on jobs because the cost of construction materials continues to skyrocket into the unknown. Restaurant owners have limited their menus and shortened their serving hours as the high price of food and labor challenges their bottom line. And just last month, this Committee heard from an entrepreneur who was forced to narrow his scope of business due to the climbing prices at the gas pump. Next, our job creators need workers. As we pass Help Wanted signs on the doors across main street, it is clear small businesses cannot compete with the government to get their employees back to work. Unprecedented government stimulus payments have led to 10.9 million job openings in this country, and despite historic numbers of small business owners raising compensation, nearly half of small businesses cannot find workers. Another problem is that of the supply chain disruptions that are leading to lost revenue. Ninety percent of small businesses have been affected by supply chain disruptions according to NFIB. As consumer demand climbs, our nation is plagued by backlogs at the ports and truck driver shortages. The supply chain bottlenecks have resulted in the scarcity of key materials, project delays, and new challenges for business owners to serve their customers. Also, crime is devasting small businesses. Smash and grab crime waves are damaging main street storefronts, leaving small business owners to pick up the pieces. Looting not only leads to broken windows and stolen goods, but small businesses have also been forced to halt operations and even face increases in insurance premiums. Another problem is that of the regulations that are hamstringing recovery and progress. With all these headwinds, the last thing small businesses need is more regulations. According to the American Action Forum, the Biden administration capped off its first full year in office with more than $200 billion in regulatory costs and 131 million hours in new annual paperwork. These challenges placed businesses at a competitive disadvantage as they lack the staff, ability to absorb costs, pricing flexibility, long-term contracts, and purchasing power. Although innovative and nimble, small businesses, entrepreneurs, and startups often operate on very thin margins. Just as concerning, this administration continues to put small businesses on the back burner. As Members of the Committee, it is our job to advocate for small businesses and conduct oversight. Secretary Yellen continues to ignore the law, this Committee, and small businesses. She is now over 310 days past the April 26th deadline and law for her to testify before this Committee. If a small business owner was late on his legal responsibility, I am confident the IRS would not exercise this level of leniency and allowances. This is another example of the administration's rules for thee but not for me. This Committee has been fortunate enough to hear testimony from SBA Administrator Guzman. However, Members of this Committee deserve responses to questions submitted for the record 9 months ago and throughout this Congress regarding important programs that service our small business constituents. The current economic climate for small businesses in response to the Biden administration are inexcusable. Main street creates approximately two-thirds of all new jobs and is key to our nation's recovery from the pandemic. However, the Job Creators Network Survey found only 7 percent of small businesses have fully recovered from the pandemic. It is clear, endless government spending in Washington and constantly changing mandates are not working for small businesses. We must champion pro-growth policies of lower taxes and deregulatory actions that allow small businesses to operate independently. In short, the multitude of challenges facing the nation's job creators put them at a competitive disadvantage. The state of the small business economy must improve. I look forward to hearing from our witnesses today on how we can restore the small business economy and decrease barriers to competition for small businesses. With that, Madam Chair, I yield back. Chairwoman VELAZQUEZ. Thank you, Mr. Luetkemeyer. 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 is Dr. Diana Moss, President of the American Antitrust Institute. Dr. Moss has an in-depth understanding of antitrust issues with an expertise in digital technology, electricity, petroleum, food and agriculture, airlines, telecommunications, and healthcare. She is also adjunct faculty in the Department of Economics at the University of Colorado at Boulder. Thank you for joining us today, Dr. Moss. Our next witness is Dr. Carl Shapiro, distinguished professor at the University of California-Berkeley. Dr. Shapiro has served on the President's Council of Economic Advisors and was the Deputy Assistant Attorney General for Economics at the Antitrust Division of the U.S. Department of Justice. He holds a Ph.D. in Economics from MIT and he has written extensively on competition policy and antitrust economics. We appreciate you joining us today, Dr. Shapiro. Our third witness is Mr. Barry Lynn, Executive Director of the Open Market Institute. Over the past 2 decades, Mr. Lynn has made significant contributions to our understanding of how monopolies threaten democracy, individual liberties, security, and prosperity. He has authored three books and written extensively on antitrust and fair competition. He was previously the Executive Editor of Global Business Magazine and a correspondent for the Associated Press. Thank you, Mr. Lynn, for being here today. Now, I will yield to the Ranking Member to introduce our final witness. Mr. LUETKEMEYER. Thank you, Madam Chair. Our next witness is Dr. Douglas Holtz-Eakin. Dr. Holtz- Eakin is the president of the American Action Forum and one of the most important economic thinkers in our country. He has served on the Council of Economic Advisors multiple times, first serving as a senior staff economist from 1989 to 1990, and then again as a chief economist from 2000 to 2001. Dr. Holtz-Eakin also served as a sixth director of the Congressional Budget Office. He served in this nonpartisan capacity from 2003 to 2005. Additionally, Dr. Holtz-Eakin was appointed to serve as a commissioner of the Financial Crisis Inquiry Commission in 2009. Dr. Holtz-Eakin, welcome to the Committee. It is a pleasure to have you here in person this morning. Given the current economic conditions facing small businesses, the stakes could not be higher for our nation and we hope to discuss many of these topics with you today. I am looking forward to this morning's conversation and hearing from all our witnesses. And with that, Ms. Madam Chair, I yield back. Chairwoman VELAZQUEZ. The gentleman yields back. Thank you all for joining today. Dr. Moss, you are recognized for 5 minutes. Ms. MOSS. Thank you, Chairwoman Velazquez, and Members of the Committee. It is an honor to be here today to lend the American Antitrust Institute's perspective to the issue of competition and---- Chairwoman VELAZQUEZ. Dr. Moss, you are muted. Ms. MOSS. Can you hear me? You can hear me? Okay, let me continue. My testimony will focus on four important topics that are relevant to today's hearing. They relate specifically to how high concentration and the emergence of dominant firms---- Chairwoman VELAZQUEZ. Okay, Dr. Moss, let's go to the next witness. We cannot hear you well. Mr. LUETKEMEYER. Dr. Holtz-Eakin, you may be the only one we get to hear this morning. Mr. HOLTZ-EAKIN. That is the advantage of being here. Mr. LUETKEMEYER. That is okay; right? Chairwoman VELAZQUEZ. Okay, so we are going to start with Dr. Holtz-Eakin until we fix the technical difficulty. You are welcome, sir. STATEMENTS OF DOUGLAS HOLTZ-EAKIN, PRESIDENT, AMERICAN ACTION FORUM; DIANA L. MOSS, PRESIDENT, AMERICAN ANTITRUST INSTITUTE; CARL SHAPIRO, DISTINGUISHED PROFESSOR OF THE GRADUATE SCHOOL AT THE UNIVERSITY OF CALIFORNIA AT BERKELEY; BARRY LYNN, EXECUTIVE DIRECTOR, OPEN MARKETS INSTITUTE STATEMENT OF DOUGLAS HOLTZ-EAKIN Mr. HOLTZ-EAKIN. Thank you, Chairwoman Velazquez and Ranking Member Luetkemeyer, Members of the Committee. It is a privilege to be here today to discuss this important topic. And I will make a couple of points and then I look forward to answering your questions. To begin, I do not need to remind this Committee of the importance of small businesses in the American economy. A lot of the discussion, the public discussion today is about big firms, and you hear a lot about them, but the reality is that small businesses are the heart of the American economy. There are over 32 million small businesses. Well over 95 percent of all businesses are small businesses. They have 60 million employees, which is nearly half of all employees in the United States. And in 2019, part of the pandemic, small businesses created 1.6 million new jobs, which is over 80 percent of the new job creation in that year. They are central to growth in the U.S. economy. They will be central to the recovery from the pandemic recession. And they are spread throughout the economy. I have tabled my written testimony which shows every sector is populated by small businesses. They are a pervasive phenomenon. The other important aspect of small businesses is the dynamics. As the Chairwoman mentioned in her remarks, we have lots of new startups every year. And indeed, coming out of the pandemic in 2021, we have 5.4 million applications for new businesses. That is up 53 percent over prior applications before the pandemic. But if history is any guide, roughly 50 percent of them will fail in the first 5 years. And that process of entry, growth, sometimes failure, leads to the fact that in every sector of the economy, small and large businesses exist side by side. And that is the norm, not the exception. In the economy as a whole, 62 percent of firms are under 5 employees, 89 are under 20, 99.6 are under 500 employees. So, there is a lot of small businesses out there. And only a very tiny fraction, less than 1 percent, are large employers of over 5,000 employees. And so, the discussion that is dominated by these larger firms I think is misplaced if we want to understand the best for the future of the economy. Now, to my eye, the best single thing this Committee and Congress as a whole can do to promote fair competition is to support the continued entry of new businesses. To apply the competitive pressures that you mentioned in your opening statement, Chairwoman. That is the thing that will discipline large firms the best, has the least potential for unintended consequences. Good competitive pressures have few of those. Will provide American households with value for their money, variety and innovation, and is exactly what the economy needs. Now, if one looks at the National Federation of Independent Business Surveys of Small Businesses, one of the things that becomes real clear is that on a regular basis they complain about the cost of regulation and it is one of the biggest barriers for small businesses. And so, one thing to keep an eye on is the increasing cost of the regulatory state as a great barrier to entry, and thus, a great protector of large incumbents. And anything that can be done to keep that regulatory barrier to a minimum would be important. During the 8 years of the Obama administration, that administration finalized a major regulation, something that cost more than $100 million to comply with, at an average rate of 1.1 per day every day for 8 years. A total self reported-- these are their numbers--regulatory burden of $890 billion. That is a $100 billion stealth tax increase every year and I think one of the reasons we saw diminished entry rates over that period. That growth and regulatory state stopped for several years. But as the Ranking Member mentioned, in the first year of the Biden administration, we saw over $200 billion of regulatory costs. That is the largest first year number of any administration we have tracked. I would be concerned about that. The second thing is, at this moment, what small businesses are most concerned about, the number one thing in the surgery is inflation. And the inflation that the United States has has a component which is due to supply chain difficulties and which many nations share. We hear this a lot. Europe saw inflation rise about a percentage point a quarter during 2021. It went from basically 0 to 4 percent. But the U.S. has a unique inflation problem, a jump that is the third largest in the post-war history, and it contains not just those supply chain components but also excessive demand from, in particular, the American Rescue Plan, a $1.9 trillion stimulus at a time when the economy is growing at 6.5 percent. History shows that if you overstimulate an economy that is growing rapidly, you will create inflation. And we have created a very big inflation problem in the United States. I expect that it will be difficult to tame. Current circumstances, the tragic invasion of Ukraine, will exacerbate commodity and energy prices that will add to the persistence. Workers are demanding higher wages, and inflation expectations have gone from 3 to nearly 6 percent in one year. That is the recipe for more durable inflation that will be much harder to fight. So, this is an environment that is very tough for small businesses. Fighting inflation and keeping regulatory burdens low are two important steps to help in their future. Thank you. Chairwoman VELAZQUEZ. Thank you. Now let's try this again. Dr. Moss, you are recognized for 5 minutes. STATEMENT OF DIANA L. MOSS Ms. MOSS. Thank you, Chairwoman Velazquez and Members of the Committee. It is an honor to be here today to lend the American Antitrust Institute's perspective to the issue of competition and small business. My testimony will focus on four important topics that are relevant to today's hearing. They relate specifically to how high concentration and the emergence of dominant firms and oligopolies affect small business and entrepreneurship. First, small business is an integral part of the U.S. economy. It accounts for a significant portion of all new jobs and economic activity, driving innovative and competitiveness, but there are indicators that small business may be in decline. From 1998 to 2014, the small business share of GDP fell and the portion of real GDP accounted for why small business slowed relative to large business. This translates to hundreds of billions of dollars that would otherwise deliver benefits from small business in terms of innovation, economic development in smaller communities, and injecting competitive discipline and resiliency into our markets. Second, there is evidence that decades of weak antitrust enforcement has adversely affected the competitive process where small business is particularly exposed. Economic research identifies the role of increasing concentration and potentially driving up prices, slowing rates of firm entry, increasing gaps in wage and wealth inequality, and higher returns for only the largest firms. This era was born of conservative ideology that gave too much weight to the risk that antitrust enforcement would chill competition and less weight to the risk that consolidation and anticompetitive conduct would harm it. This has put competition, our markets, and the democratic principles that support them at risk. The exercise of market power harms virtually all market participants. It hurts consumers through higher prices, lower equality, and less innovation. Producers are squeezed through lower prices paid for their products and services, and smaller businesses are harmed through higher costs, barriers to market entry, and the threat of retaliation. Third, horizontal and vertical integration can create and reinforce high concentration that disrupts the role of small business. Mergers can increase a dominant firm's ability and incentive to cut off smaller rivals' access to critical inputs or distribution or to engage in predatory behavior. This was a concern for small craft brewers in the merger of AB InBev and SAB Miller. It is also a concern in beef processing where Members of the domestic packer cartel, which is vertically integrated now into cattle supply have incentives to force out smaller, independent ranchers. The court also noted that in the merger of AT&T and Time Warner consolidation would frustrate innovation from smaller firms with innovative, over-the-top models for delivering content. And in the FTC's pending monopolization case against Facebook, the effect of exclusionary conduct on smaller rivals plays a central role. Finally, legislators and policymakers should consider the importance of a public policy approach to competition to promote the role of small business in the economy. This would tap into multiple tools in the competition policy toolkit, including stronger antitrust enforcement and pursuing mergers, cartels, and strategic conduct that neutralizes smaller rivals, but it also includes antitrust role in policing the abuse of intellectual property and deceptive practices that are designed to squeeze out smaller rivals. However, it is important to recognize that antitrust enforcement may not focus on certain things that are priorities for small business. For example, antitrust is concerned with harm to competition and the competitive process, not independent competitors. Enforcers may challenge acquisitions of smaller rivals who seek to be acquired and maximize their acquisition prices under the venture-capital backed startup model. The same is true of noncompete clauses, which may be disfavored by antitrust enforcement but used by small business to protect trade secrets. Finally, some antitrust remedies put small business in a very difficult position. For example, conduct remedies are enforceable only if smaller firms that are the target of anticompetitive behavior complain to enforcers. These firms often fear retaliation from dominant firms and are therefore reluctant to step forward. These complementarities and tensions highlight the importance of promoting strong antitrust enforcement to do what it was designed to do, not to task it with solving all problems. Antitrust should work together with other policies to support and promote small businesses. These include labor law, intellectual property law, consumer protection law, procurement practices, and others. Thank you very much, and I look forward to your questions. Chairwoman VELAZQUEZ. Thank you, Dr. Moss. Now we recognize Dr. Shapiro for 5 minutes. STATEMENT OF CARL SHAPIRO Mr. SHAPIRO. Good morning. Thank you for inviting me to testify in front of you today. I hope to provide you with a unique and valuable perspective based on my experience as a professor who has been studying competition policy for over 40 years, as someone who served twice as a chief economist in the Antitrust Division at the Department of Justice, and as an economic expert witness who has testified numerous times in federal court on behalf of the government in important antitrust cases. I would like to emphasize three main points. First, I encourage this Committee to reaffirm that the goal of the antitrust laws is to promote and protect competition throughout the American economy. This will benefit small businesses but applies throughout the entire economy. Second, I offer specific recommendations for how Congress can reinvigorate antitrust enforcement, correcting errors made by the courts in recent decades. Third, if this Committee would like to further assist small businesses that are facing powerful competition from larger firms, many policies other than antitrust are available and should be used. There is an active debate today about what the goals of antitrust should be. My answer to that is simple. Antitrust should be about promoting and protecting competition. Full stop. We have learned over many years that competition delivers enormous benefits to our society, fueling economic growth, innovation, and rising standards of living. However, competition is messy. Competition can be rough and tumble, and competition can feel deeply unfair when one loses. We all say we like competition, but who really welcomes a formidable rival in any domain, be it love, sports, or business? Nonetheless, promoting competition does not mean shielding any businesses from the buffing winds of legitimate rivalry. Not large firms with outsized political influence, nor small firms struggling to compete against larger ones with lower costs. My written testimony describes a positive program for strengthening our antitrust laws to better promote and protect competition in the 21st century economy. The basic idea is to shift the law by establishing a number of rebuttable presumptions in favor of antitrust plaintiffs. My written testimony has a number of examples, and my attached paper has more, but here are two. If a dominant firm requires its customers to deal with it exclusively, that presumptively violates the Sherman Act. Or, if a dominant firm acquires a significant actual or potential rival, that presumptive violates the Clayton Act. The changes I recommend would help protect small businesses from predatory and exclusionary conduct by dominant firms. The changes I recommend also would help protect small businesses from anticompetitive mergers. I have been in favor of strengthening merger enforcement for at least 25 years. As an example, I testified a few years ago on behalf of Steves Doors, a 150-year-old family firm based in San Antonio, Texas, that manufactures doors used in homes. Steves Doors successfully challenged a merger between two of the leading suppliers of door skins, a critical input into the manufacturer of doors. That merger threatened to drive Steves Doors and other small door manufacturers out of business. Antitrust law also could be modernized to give small businesses more latitude to cooperate in order to compete more effectively against larger firms. In particular, Congress could establish a presumption that when a group of small businesses cooperate to better serve their customers by replicating what their larger rivals can do internally, that cooperation does not violate the Sherman Act. Finally, let me address those whose calls for stronger antitrust enforcement are motivated by concerns about the political power of large corporations. I very much share those concerns. Very much. We urgently need campaign finance reform, including greater transparency regarding money in politics to control the excessive political power of large corporations, not to mention billionaires. But asking antitrust to solve these political problems is very likely to be counterproductive. The antitrust enforcement agencies are ill-suited to tackle issues beyond competition. Indeed, the core mission of antitrust, to promote competition, could easily be undermined if we ask antitrust to solve problems unrelated to competition. For example, asking the Department of Justice to block mergers that enhance political power as distinct from economic power would necessarily politicize antitrust enforcement, which strikes me as extremely dangerous and unwise. Fortunately, antitrust is just one arrow in the quiver of available policies to assist small businesses. For example, in the meat packing industry, the Biden administration is pursuing a number of policies to expand independent processing capacity and to combat abuses by large meat packers and processors, in part by updating rules under the 1921 Packers and Stockyard Act. As another example, financial service regulators could adjust their rules in favor of community banks if preserving more community banks is judged to be in the public interest. Thank you very much. I look forward to taking your questions. Chairwoman VELAZQUEZ. Thank you, Dr. Shapiro. Now we recognize Mr. Lynn for 5 minutes. STATEMENT OF BARRY LYNN Mr. LYNN. Chairwoman Velazquez, Ranking Member Luetkemeyer, thank you for inviting me to speak. I am Barry Lynn and I direct the Open Markets Institute. Today, I am going to make three simple points. First, independence is essential to American democracy. The declaration is not simply about independence of nation from nation. It was also about the independence of person from person. And from the first, Americans understood such independence required the liberty to work one's own land, ideas, labor, and business free from interference by people with more power. This vision was based on the idea that only someone fully independent can be trusted in political debate and that, to be fully in control of one's own mind and one's own voice requires being in control of one's own means. Second, antimonopoly is the foundation of independent business. From the first, the American people fought to make laws and rules to protect the property of the individual, including independent businesses, from all predation. This meant engineering open markets where every individual is free to succeed based on their own efforts. This meant regulating corporations to ensure they are used to serve people, not to exploit them. We see this in the Constitution with its system of checks and balances. We see it in the Northwest Ordinance, America's first law, that blueprint for the society Americans wanted to build. That careful plan to outlaw slavery. To divide land into family-sized plots. To ban predatory corporations. To provide free education to all. The result was the American system of liberty. After the Civil War, the network technologies of railroad and telegraph upset traditional balances and forced Americans to make new laws to regulate private power--the Interstate Congress Act, the Sherman Antitrust Act. Just as was true of the Declaration and Constitution, these laws aim to protect the independence of small business. As Senator Sherman put it, defending the bill that bears his name, ``It is the right of every man to work, labor, and produce in any lawful vocation. This is industrial liberty and lies at the foundation of the equality of all rights and privileges.'' Buttressed in the 20th century by the Clayton Act, FTC Act, Glass-Steagall, Robinson-Patman, and other acts of Congress, this updated system of liberty worked. In 1980, the United States was home to many giant industrial corporations--IBM, Boeing, General Electric, General Motors--that made America the most powerful nation on earth. Yet, 2 centuries after the founding, most retail, farming, services, light manufacturing and publishing remained family enterprises. And this liberty to be one's own boss was now claimed by every Member of our society no matter the color of their skin, gender, religion, or sexual orientation. Third, the consumer welfare ideology has been a catastrophe for American democracy. In 1981, President Reagan introduced a new political economic goal. No longer was the need to protect liberty and democracy. The aim now was to deliver more stuff. To this end, his administration reinterpreted the laws Americans had put in place to protect independent business. They twisted the laws to promote efficiency instead. Until President Biden, every administration since Reagan has followed this lead. The result was social and political revolution. The expropriation of the businesses of millions of families, the erection of futile control over the family businesses that remain. Today, under the rule of Amazon, Google, Facebook, Uber, millions of Americans most energetic and creative citizens are forced day after day to borrow from the company bank, to buy from the company store, to pay tax to the company treasury, to heed the company's command. In America today, there is no fair competition. There is no level playing field. In 1913, President Wilson defined tyranny as, ``the conduct of our affairs and the shaping of our legislation in the interest of special bodies of capital and those who organize their use.'' By that definition, the American people today live under a tyranny of corporate monopoly, and America's entrepreneurs are among the first to feel the boot. This hearing demonstrates that Congress has awakened to the crisis. We look forward to working with you all to rebuild American entrepreneurship and American democracy. Chairwoman VELAZQUEZ. Thank you, Mr. Lynn. I will begin by recognizing myself for 5 minutes. Dr. Moss, how do we ensure that small firms can compete in today's economy given the massive consumer demand for quick and simple delivery of products and services from large, dominant firms? Ms. MOSS. Thank you for the question, Chairwoman. It is really a central question to public policy surrounding the promotion of small business and the U.S. economy. And I would assert, as I do in my testimony and in my remarks, that a strong system of antitrust enforcement is very, very important to that. We have a lot of small business. I talk to small businesses every day in their calls to the American Antitrust Institute, their struggles, the restraints that they face, the intimidation and the harassment they face by larger firms, including and protecting small business is part of our economy, not only increases diversity and our supply chains; it increases their stability and their resiliency. The COVID-19 pandemic very much is evidence of the failure of that to have occurred. So strong antitrust enforcement, but also other policy tools that can support and assist small business are extremely important. Chairwoman VELAZQUEZ. Thank you. Ms. MOSS. To think about and to work in complementary ways. Chairwoman VELAZQUEZ. Thank you. Amazon holds about 50 percent or more of the U.S. online retail market. Due to Amazon's market power, are there other firms out there that can compete with Amazon? How can we create a level playing field for these other firms? Ms. MOSS. So I think the question of Amazon and their ecommerce platform is really central to the debates that we are having over digital technology. I would take a slightly different view of Amazon and my hope was that this view would have been injected far earlier into the public debate about Amazon. It is not so much about dominance of the online market, which does contain myriad actors. It is really about dominance in a very important part of the supply chain which is the logistics part of the supply chain. So, a monopoly over picking, packing, sorting, and tracking, if you will, has given Amazon an ability and an incentive to use its dominance there to engage in conduct that forecloses small rivals. My hope would be that private enforcement would step forward to think about framing cases and that public enforcers would do as well. Chairwoman VELAZQUEZ. Dr. Moss, can you explain to us how Amazon's self-preferencing practices have hurt small businesses? Ms. MOSS. Sure. So going to the logistics part of the supply chain, again, the use of the Amazon Prime system absolutely creates incentives to preference Amazon's affiliated businesses, their preferred businesses in terms of whether they show up in the consumers' buy box at the end of a transaction. Absolutely. Amazon's incentives to replicate successful products and services on its website are another way for Amazon to see enhanced incentives to disadvantaged smaller businesses. This part of the supply chain is a very specific market and really deserves to be looked at very, very carefully so that Amazon cannot leverage its monopoly to the disadvantage of small businesses. Again, that hinges on strong antitrust enforcement. Chairwoman VELAZQUEZ. Thank you, Dr. Moss. We have seen increased levels of concentration across markets with small and medium-sized businesses sometimes being subject to discriminatory terms and conditions. Mr. Lynn, is the Robinson-Patman Act equipped to deal with the reality of today's economy? Or does Congress need to take steps to strengthen the law to protect small employers? Mr. LYNN. Chairwoman Velazquez, that is a very important question and the answer is no. Right now, the Robinson-Patman Act is not prepared, is not fit for purpose, for protecting America's independent businesses as it was originally created. The problem is that it has been severely eroded by court decisions over the years. It has also been severely eroded by sort of a lack of use by the recent administrations. It is important to understand that there are many other ways to achieve the same ends, and we need to be using these other approaches to achieving these same ends, you know, a much more aggressive use of antidiscrimination law in every aspect, in every way. But we can, and we should be working to sort of restore the original purpose of the Robinson-Patman and the original power of the Robinson-Patman Act. Chairwoman VELAZQUEZ. Thank you, Mr. Lynn. My time has expired. Now I recognize the gentleman, Mr. Luetkemeyer, Ranking Member, for 5 minutes. Mr. LUETKEMEYER. Thank you, Madam Chair. Dr. Holtz-Eakin, in your written testimony you have a statement that says, ``To diagnose the roots of inflation is to identify the appropriate policy response.'' That is a pretty salient comment. If we could identify the roots of the problem, we can fix the problem because we should be able to find solutions for that. So along that line, you know, we had the discussion before with regards to what makes up the problem of inflation within this country right now. We have talked about energy before. Regulations, I would argue. The money supply problem as you mentioned in your testimony, and also the supply chain/ workforce problem. I think that is the four biggest ones. I would assume you agree with that, or is there another one with that or are those the four biggies? Mr. HOLTZ-EAKIN. The excessive stimulus early in 2021 as well. Mr. LUETKEMEYER. Okay. Well, I thought that was money supply. That is where I would throw that underneath there. Too much money in the system. Okay. I would like for you to quantify that if you would. We have talked about this before and you thought energy could make up as much as 40 to 50 percent of the inflation that is being caused today. Could you break down the percentage you think of inflation is caused by energy, regulations, access to money supply and supply chain workforce problems? I realize it is a ballpark but it would give us an idea of the immensity of the problem in each one of these categories. Mr. HOLTZ-EAKIN. So there is a crude way to do it which is in my testimony, is to imagine that the globe suffers from common energy problems, common pandemic-induced workforce problems, common supply chain interruptions. And so, take European consumer price inflation. It goes up at a percentage point a quarter through 2021. That is about 0 to 4 percent. The U.S., the moment the American Rescue Plan is passed in the face of also very, very accommodative monetary policy, gets not a percentage point increase but three. Almost three. Three times bigger. So that is the excessive money supply stimulus part of it compared to the rest. And then I would say you have roughly equal amounts in the workforce and energy components. So that is going to give you something that looks like 2 percentage points or so of inflation. And there is the baseline regulatory inflexibility which comes with the accumulation of regulatory costs. So, I think you really can do some crude breakdowns. But the real issue is to go in the other direction. Stop creating inflationary pressures. So do not do any more stimulus. Do not do any more monetary accommodation. Be careful with the regulatory burden. And allow greater supply of energy. That is the best that Congress can think about. Mr. LUETKEMEYER. Okay. Thank you. In your testimony and written testimony, you also talk about some different, like the Administrative Procedures Act, the Regulatory Flexibility Act, things that Congress should be looking at to minimize the impact on small businesses, as well as being able to help small businesses as we watchdog some of the stuff that we are doing. So as a leader on the Republican side here of the Small Business Committee, this got my attention because this is something we at Congress should be looking at and doing, and I really appreciate you highlighting that. So, I want to kind of go through that a little bit but I am running out of time. Hopefully, my colleagues will follow up on this. The one I want to start out with is Regulatory Flexibility Act, because that technically is what, you know, the agency is supposed to look at the rules and regulations and their impact on small business and it does not seem like they are doing that or we are not doing it. Or is it too weak a law? Do we need to enforce it? Do we need to do something different? What would you suggest we do to make that particular act actually work? Mr. HOLTZ-EAKIN. So first, let me just stipulate, because it is often misunderstood. I am not opposed to all regulation. There is much necessary regulation. But it should be done as well as possible. It should be done best practice, least cost. And the Regulatory Flexibility Act is an attempt to keep the costs from being too onerous, particularly on small businesses. It is not working. So, you can try other methods. The Trump administration essentially stopped the growth of regulatory costs by imposing regulatory budgets on the agencies. They gave them a number. Said you cannot do any more than that. The numbers were all zero and negative and had a very big impact. So, Congress could statutorily impose constraints on the regulatory state and say, okay, we need these regulations. Let's find savings elsewhere to offset those costs, keep the burden low. That way you are constantly cleaning out the regulatory overhead. That is virtuous. You have an attempt to do regs at least cost. There is no particular incentive to do regs at least cost now. And you will have less interference in the economy and still get the regulatory outcomes that you want. Congress can have a strong statutory requirement that they do that. Mr. LUETKEMEYER. My time is just about up here. I would just like to have a general comment here with regards to some of the other folks testifying this morning were talking about basically having a level playing field for small businesses to be able to compete on. That the big guys have got an advantage. So, I guess the question becomes, and I hope we have some follow-up with regards to my colleagues here this morning, are the rules and regulations skewed for the big guys? Do we need to change that? Have they got too much? Not enough? Are the rules and regulations the cost of compliance as Dr. Holtz-Eakin has talked about here in his testimony of $200 billion in 1 year, is that so oppressive that it is taking away the ability of small businesses to compete? I think those are things we need to continue to discuss. And with that, Madam Chair, I yield back. Chairwoman VELAZQUEZ. The gentleman yields back. Now we recognize the gentlelady from Kansas, Chairwoman of the Subcommittee on Economic Growth, Tax, and Capital Access, Ms. Davids, for 5 minutes. Ms. DAVIDS. Good morning. Well, first of all, thank you, Chairwoman Velazquez and Ranking Member Luetkemeyer for holding the hearing that we are having today. I represent the Kansas Third District and entrepreneurship is based into the DNA of our community. And we are definitely proud of our small business community. I think what we are hearing now demonstrates that it is undeniable that the economic environment for small businesses has gotten more difficult. And that was exacerbated by the pandemic. Small business's share of the GDP has been falling steadily since the 1980s and we have certainly seen increased rates of consolidation and concentration across various industries. And with small businesses being an essential piece of our economy, I am glad that we are getting the time to discuss how our current antitrust laws need to be operating to ensure the competitiveness of our economy. I was hoping to ask my first question here to Dr. Moss. We have seen this concentration in something like three-quarters of the U.S. industries over the past 20 years, so I was hoping you could take a moment to explain what that means both for consumers and then for the small businesses that are trying to get into these various industries. Ms. MOSS. Thank you for the question, Congresswoman. I am very happy to answer that. There have been many studies of rising concentration at the sectoral level, at the industry level. The challenge for antitrust enforcement is to do the research, the empirical research that shows that increases in concentration have resulted in what we call antitrust markets, which are much smaller and narrower for the purposes of evaluating antitrust claims. More generally speaking, we have seen increases in concentration across the board. In airlines, we now have a merger on deck that will increase concentration even more. We have seen it in healthcare, pharmacy benefit managers. We have seen it in hospital systems. We see it in food and agriculture. We have essentially cartels of packers and chicken growers and processors. I am sorry, not chicken growers but chicken processors. That is a real problem. These are all very consumer-facing products and services. So, consumers see it through higher prices, lower quality. But in these bottleneck supply chains where we see the midstream portion really dominated by just a few firms, market power is exercised going up the supply chain. So, they depress prices to producers and a lot of these producers are small businesses. So, they are squeezed on the top end by getting lower prices for their products. And consumers are squeezed on the back end by paying higher prices. These supply chains are very unstable and they lack diversity that small business is really important historically has served a very important function in promoting. That must be restored through some combination of policy tools to protect this really vital element of our economy. Ms. DAVIDS. Thank you, Dr. Moss. Can you, and maybe this is not a good way to ask this, but can you give us like a sense of the industries? You kind of did this a little bit with airlines and then a couple of other things, but can you give us a sense of the maybe most impactful concentrations that we have seen? Ms. MOSS. Yeah. So, I mean, there is a number of examples we could cite to. Let's go to medical supplies and medical devices, for example. Very famous antitrust case, Becton Dickinson--I am sorry, Retractable Technologies, Inc. v. Becton Dickinson. Small market player. Came to market with a really superior technology, a retractable syringe, up against a dominant player. And really, in litigation for years. Forced out of the market. Forced to assume a much smaller market share through an innovative product than they would have if there had been more competition in that market. That has a direct effect on small business, and erecting barriers to entry and incentives for other small businesses to form. We are also seeing it, as I said, in other parts of the healthcare supply chain. Take agricultural biotechnology. There are a lot of digital farming startups that are out there. Digital farming is the wave of the future in agriculture. Again, very consumer facing. Unfortunately, a lot of this stuff flies below the antitrust radar, and part of it is a result of this fear factor that smaller firms really are afraid to step forward to complain to enforcers and so the problem goes unnoticed. Ms. DAVIDS. Thank you for that. I do have a bill, The Supplies Act that might help us with some of that and I would love to talk to you more about that offline. Thank you, Madam Chair, and I yield back. Chairwoman VELAZQUEZ. The gentlelady yields back. Now we recognize the vice Ranking Member of the Committee, Mr. Williams from Texas for 5 minutes. Mr. WILLIAMS. Thank you, Madam Chairwoman and Ranking Member Luetkemeyer. Main street businesses are the backbone of our communities, and I am proud to be a main street small business owner for 51 years. And I can tell you this, after hearing some of this testimony, profits are good. The government does not create competition; the private sector does. That is just a basic thing that we have. And from rural to urban America, small businesses provide critical competition are an essential source of jobs as we have already heard. Unfortunately, small business owners continue to be burdened by excessive federal regulations and that is really your competition is the federal government, and often lack the resources to comply with the latest rules. And big government is not the answer; big government is the problem. So, Dr. Holtz-Eakin, the American Action Forum recently reported that the last year alone, the Biden administration addressed the small business owners nearly $201 billion in new regulatory costs and I have also seen numbers of, what, it is 130 some odd million manhours to comply with that. And so, while that figure is astonishing, it further draws attention to how main street American could not possibly be equipped or staffed to closely track these changes to regulatory compliance. So, my question is, can you compare these high regulatory costs for any other recent time period in our history? And how are small business owners, like me, of convenience stores or gas stations, supposed to be able to handle compliance costs that come with these more heavy burdened regulations? Mr. HOLTZ-EAKIN. So thank you for the question. First, I want to just say that these are not our numbers. We keep track of all the rulemaking in the federal government and the agencies report their estimate of the costs it will take the private sector to comply with the rulemaking and that is the burden cost and the hours of paperwork that are generated by that rulemaking. We simply keep track of them by agency in total, by legislation. And the $200 billion in burden costs is the largest single number for the first year of any administration going back to 2005, which is where our data begin. As I mentioned in my opening remarks, the Obama administration was an extraordinary explosion of regulatory costs, over $100 billion a year for 8 straight years. This would exceed that. And I have deep concerns that a big part of the sluggish recovery from the Great Recession and the reduced entry of new firms in that period was due to the regulatory burdens that we were seeing coming out of Washington. Mr. WILLIAMS. Well, and we know it costs jobs. Small businesses cannot take that so they cut jobs. And banks are a good example hiring more compliance officers and loan officers filters down to small business. So, when we talk to small business owners in Texas where I am from, they are most concerned about how they will have to alter their business operations to manage soaring prices and compensate for inflation that has reached record highs since the early 1980s. And the National Federation of Independent Business reported that more than 60 percent of small business owners across America were forced to raise prices to keep up with the Biden administration's policies that are driving inflation and supply chain. And there are a lot of businesses quite frankly as we all know cannot raise their prices. They are stuck even more. So, all while the Biden administration Democrats continue to dismiss this inflation is transitory, one of the famous statements of all time, turning their back on any real solutions to right the ship. So again, my question is, as an economist, you know the negative impacts inflation has on small businesses. What steps should the Biden administration and Congress be taking to get this growing inflation under control? Mr. HOLTZ-EAKIN. Well, step number one is no more harm. And so no more stimulus-style legislation. In particular, the Build Back Better Act had all the structure of upfront spending and backloaded pay-fors that a stimulus bill would have so that would be a misstep at this point. So do not do that. Number two, do not complicate the mission of the Federal Reserve. It has mandates for full employment and price stability. That is a hard enough job in this environment. They do not need mandates for inequality or for climate change or other things that the administration might desire but that should not be their job. Number three, add no new costs. So, the regulatory burden is the thing most directly controllable. Keep those regulatory burdens to a minimum certainly, this year and next year when inflation will continue to persist. I think there is little doubt about that. And I do not know how much of a quick U-turn we can do on energy but global energy prices are going to be stressed for the foreseeable future due to the recovery around the globe but now the invasion of Ukraine by Russia. So those are all very important aspects of the inflation problem. Right now, commodity inflation is running at about 20 percent. It will be higher going forward. And that is a supply chain pressure that is going to go straight through to consumer prices. It will not diminish overnight. Mr. WILLIAMS. And as a small business owner myself, one that deals in inventory is auto industry, it is not going to change in the next several years. Bottom line is maybe we need to cut taxes again. Thank you for being here today, and I yield my time back. Chairwoman VELAZQUEZ. The gentleman yields back. Now we recognize the gentlelady from Illinois, Ms. Newman, for 5 minutes. Ms. NEWMAN. Thank you, Madam Chair, and thank you, Ranking Member for having this great meeting and hearing from our guests. Thank you to our guests this morning. I, first, Madam Chair, I am going to, on behalf of the Authors Guild and Society of Composers and Lyricists, I would like to submit their following testimony for the record. One of the things that they are looking to find solutions for is leveling the playing field through independent artists and entertainment companies. So, these independent workers in the creative economy often go unseen as larger companies monetize their work. So please accept testimony on their behalf. Chairwoman VELAZQUEZ. Without objection, so ordered. Ms. NEWMAN. Thank you. And then I have a couple of questions. I will go to Dr. Holtz-Eakin first. So, I am just curious, can you share the formula by which you use the 2 percent of the inflation attribution, how you cane to that regarding the American Rescue Plan? Mr. HOLTZ-EAKIN. My estimate, based on looking at the difference between European consumer price inflation and U.S. consumer price inflation over the course of 2020-2021, sorry. From January of 2021 to this January, consumer price inflation went from 1.4 percent to 7.5 percent in the United States. It went from 0 to 4 in Europe. So, it is about half. Ms. NEWMAN. Okay. I am not sure I agree with it but thank you for explaining. So, my next question is for Dr. Moss. We heard from Dr. Holtz-Eakin that reduction in interest rate hikes are a good way to curb inflation. I am just curious to get another thought on that. As an economist, can you respond to the impact these strategies might have on small firms, small businesses, and consumers? Thank you. Ms. MOSS. Thank you for the question. Certainly, inflationary pressures are topline news at this stage in the pandemic. I think treating inflation deserves very careful attention. There are numerous policy tools to deal with inflation. There is monetary policy. There is fiscal policy. Exchange rates, reserve requirements at the Fed. There is a big toolkit involved here. As far as small business is concerned, certainly higher interest rates would be directly felt by small business as they seek to take loans, to expand, or to build out their businesses. Debt requirements if they are to be used as a tool would also affect small business. So, when you come up with sort of a macroeconomic policy approach to dealing with inflation, I think you have to get to the genuine sources of the problem. But given the importance of small business, I think it is really important to figure out how small businesses are going to be affected by various types of policy tools and what they need most at this stage in this contraction and coming out of the pandemic, which will have lasting effects for many years to come. It will not be over at the end of the pandemic itself. Ms. NEWMAN. Thank you, Dr. Moss. I have one more question to follow up for you. So, the Biden administration has taken a lot of really strong steps to increase competition. Can you describe the benefits these steps will have in lowering prices and creating a level playing field for small business? Ms. MOSS. Sure. So, the executive order that the Biden administration put out really takes a whole of government approach to looking at competition problems. It recognizes the very different tools and prongs of competition policy more generally and that includes sector regulation. It includes labor law, intellectual property issues, consumer protection issues. And it recognizes antitrust enforcement. Very much a toolkit kind of approach. And to increase coordination and cooperation across federal agencies as they attempt to really build a strong competition policy. This is fundamentally the right approach, I believe. Implementing it, of course, the devil is in the details. We have seen several initiatives come out. USDA, for example, is doing quite a bit of work on that. Department of Transportation on airline alliances and the like. So, increasing coordination and cooperation to develop coherent competition policy, but most important, having these tools work together. Antitrust and sector regulation, for example, should work together in a complementary way to bootstrap each other, not to create conflicts where small business or the competitive process is sort of in the cross-hairs of tensions. Ms. NEWMAN. Well, thank you for the answer. I certainly agree with the complementary and supplementary working together idea very much so. So, thank you, and I yield back. Chairwoman VELAZQUEZ. The gentlelady yields back. Now we recognize the gentleman from Minnesota, Mr. Stauber, for 5 minutes. Mr. STAUBER. Thank you, Madam Chair, and Ranking Member Luetkemeyer, for holding this. And thank you to all the witnesses. I appreciate that. Dr. Holtz-Eakin, you had just mentioned that the Obama administration brought in $100 billion of punishing regulatory burdens on small businesses for 8 straight years. Is that what I heard you say? Mr. HOLTZ-EAKIN. That is correct. Mr. STAUBER. And in your testimony, in the first year, in the very first year of this administration, in a pandemic, this administration brought $201 billion of punishing regulations on small business; is that what you said? Mr. HOLTZ-EAKIN. That is correct. Mr. STAUBER. You know, I think we need more people that have signed the front of the checks in small businesses. Mr. Williams, I have only been a small business owner for 31 years, so you have got 20 years on me. This is unbelievable. You know, my colleagues on the other side of the isle, they said they want to break up big companies and advocate for small businesses. Two hundred billion dollars in year 1 of this administration. We always talk about small businesses are the engine of our economy. They are the mom and pop shops that struggle every day. And to hear some of the witnesses talk about, well, these regulations are good. They do this or do that. I think government ought to get out of the way and let small businesses flourish under those prudent regulations that you talked about, Doctor. Reasonable prudent, not redundant burdensome that punishes those small business owners that just want to live the American dream and employ people. This is really frustrating for me to hear this. To that end, Dr. Holtz-Eakin, in the America Competes Act, how are those provisions? How are they furthering harming small businesses? Can you give us a couple of examples? Mr. HOLTZ-EAKIN. The America Competes is in many ways, well, it is, industrial policy. The stated intent is to improve the U.S. competitive position, especially versus China. And there are places where there are broad public goods and rules and basic research and innovation that makes sense. But there is some $50 billion in there to build semiconductor plants which the private sector can build semiconductor plants, and if they are not in China, they do not have to be in the U.S. They have to be somewhere so they have diversification of the supply chain. I have no idea why they would move money that was in the Senate bill targeted towards the National Science Foundation and give it to the Department of Commerce to fix supply chains. The Department of Commerce does not have a supply chain. Every American business has their own supply chain. They have every incentive to fix it. And so, I have no idea what that will be other than tilting the playing field to those who have access to the Department of Commerce to get a subsidy. And so, I am deeply concerned about those kinds of provisions. Mr. STAUBER. Do those kinds of provisions help or harm small businesses? Mr. HOLTZ-EAKIN. They are not helpful. Small businesses may not yet have started and they are going to now have to enter against someone who has got some help from the Department of Commerce. It is not leveling the playing field. Mr. STAUBER. So that is getting involved in competing? Mr. HOLTZ-EAKIN. Yeah. Mr. STAUBER. You know, to my colleagues on both sides of the aisle on this Committee, we have a responsibility to make sure small businesses across America succeed. My guess is if this keeps up, we are not only going to have $200 billion of punishing burdensome regulations from this administration in year 1; the same thing is going to happen in year 2. How can we do this to our small businesses? They are the engine of our economy. It is the American dream. When my brothers and I opened up our small sporting goods store in June 1990 and dished out what we had in the bank to open up a small business, and to have this type of regulation, we have an opportunity, Madam Chair, Ranking Member Luetkemeyer, on the Small Business Committee, to make sure that our small businesses flourish in this country. We need these regulations, the reduction in the regulations, not adding $200 billion a year. This is very frustrating. And this is a challenge for this Committee. Madam Chair, Ranking Member Luetkemeyer, this is a challenge to stop those burdensome regulations. Madam Chair, I yield back. Chairwoman VELAZQUEZ. The gentleman's time is expired. I invite the gentleman to support legislation when it comes to cutting taxes where small businesses are not an afterthought like it happened before. Now we recognize the gentleman from Louisiana, Mr. Carter for 5 minutes. Mr. CARTER. Madam Chair and Ranking Member, thank you very much for the opportunity. My question is for Mr. Lynn. Mr. Lynn, we know that the president signed an executive order calling for a government- wide approach to increased competition for small businesses. Can you share with me what that really means? Because as you can hear the frustration from some of our Members, we continue to hear the pain of our small businesses that we know are the backbone of our economy. Yet, we continue to see small businesses die on the vine, if you will, because they do not have access to resources or because they oftentimes as subs have to wait so long to be paid by a majority firm. These are things that we have talked about for many years and it is frustrating that here we are in 2022 and we continue to hear the same kind of concerns from small businesses that we all acknowledge are critically important to our economy. In plain language, tell me, what are we doing and what can we do? Mr. LYNN. That is a great question, Mr. Congressman. The Biden administration has taken a radically new approach to competition policy compared to any presidency over the last 40 years. This includes two things. It includes putting much stronger enforcers into the Federal Trade Commission and into the Department of Justice Antitrust Division. And it includes, as you mentioned, taking this whole government approach to competition policy. Together what we see is a radical change in how we are going to enforce the law through the agencies and it is also an approach in which we are going to use every part of the administration to achieve specific ends. Every business person across America right now, every small business, every independent business, including those who own car dealerships should appreciate what the Biden administration is doing to protect you from predatory actors such as Google, Facebook, and Amazon. And also, to create a level playing field in which your ability to sort of use your own tools, your own skills, your own minds to provide better services and goods will be rewarded. Mr. CARTER. But with all due respect, a part of the problem is small businesses often do not have the requisite tools. They do not always have the requisite skills. Small businesses often need a little bit more help to level the playing field and create opportunity. What are we doing? What can we do to level that playing field? And with no disrespect to the car dealerships, I would like to dig a little bit deeper and talk about the truly small businesses. Those who do not have consultants, lawyers, and accountants to help them wade through regulations. What are we doing for the mom-pop, the small drug store, the small sandwich shop or restaurant or barber or beauty shop, people that are struggling but they employ people and they collect sales taxes for police and fire but they need help? Mr. LYNN. Yeah, that is a great question as well. Traditionally, in the United States, we have provided, one, a fair field so that people can compete without predation. But we have also made sure that people have the capital they need. That they have the skills that they need. This is a role that government has fulfilled for 200 years in this country. This is not something new. It is not something that The New Deal created. It goes back to the founding of this country. And when people talk about the idea that people create competition, yeah, they do. But what they do, they create competition by using government to make it possible for them to succeed. And so, as we go forward, we should be looking at new ways to provide the kinds of funding that small businesses, truly small businesses, the kind of credit they need to succeed. Mr. CARTER. I am sorry to cut you off. I have got about 45 seconds and I want you to, if you could, zero in on access to capital. Because many small businesses fail because they do not have enough capital to sustain themselves when they are starting a new business. Small businesses fail because they do not have that technical expertise and capital. Is there a program and how are you addressing those issues for small businesses? Mr. LYNN. It has been a disaster over the last 40 years. This country used to be set up to provide capital to anyone who really needed it. We had community banks. We regulated our commercial banks. We ensured that if you needed capital, you could find it someplace and get it at a reasonable price. You did not have to pay predatory prices. So, we have a number of ways in which we can actually deal with this right now but we have got to get studying what we did for 200 years in this country and not what we did for the last 40 years because that has been choking off credit to our needy small businesses. Chairwoman VELAZQUEZ. The gentleman's time has expired. Now we recognize---- Mr. CARTER. Madam Chair, thank you. I yield. Chairwoman VELAZQUEZ. We recognize the gentleman from Pennsylvania, Ranking Member of the Subcommittee on Economic Growth, Tax, and Capital Access, Mr. Meuser for 5 minutes. Mr. MEUSER. Thank you, Madam Chair. Thank you, too, Ranking Member Luetkemeyer. It is certainly a somber day here in the Small Business Committee on a number of fronts, but seeing our friend's nameplate and him not behind it is very, very sad. Jim told it like it was. Telling the truth was always the only option because our country's national security and economy is truly at stake. So, let's get into this. In my district, you know, all this idea that the biggest problem small business has is big business, in my district, with the exception of big tech, and I was in business for 25 years and I served as revenue secretary for the Commonwealth for 4 years, so I saw all the taxable incomes and who was doing what and so forth. With the exception of big tech these days and online retailers, and definitely Amazon, big government is not the problem. Or excuse me, big business is not the problem for small business. It is big government. So, let's unpack this a little bit. Let's talk about it. Dr. Holtz-Eakin, so in the BBB, our friends who passed it, thought it was a wonderful idea to tack on a 3.8 percent surtax on investment income for pass-throughs. Was that good for small business? Mr. HOLTZ-EAKIN. No. And before I expand on that I will just point out that if you look at the NFIB Monthly Survey of Small Businesses, that never is competing with large business mentioned as their biggest problem. That is mentioned by 1 percent of people. Mr. MEUSER. Precisely. Precisely. And my me search reflects your research throughout all of my district and I visit my small businesses regularly. Let's try to do a little bit of---- Mr. HOLTZ-EAKIN. So the surtax---- Mr. MEUSER. Go ahead. Mr. HOLTZ-EAKIN.--just remember that more than half of all business income is taxed on individual income tax returns. It is not taxed on C corporations. Mr. MEUSER. Precisely. Mr. HOLTZ-EAKIN. So that is where you are going to hit small businesses. Mr. MEUSER. Right. And under 400K in income. It is hurting their taxable income for a small business and then some. Would making the Trump tax cuts permanent be good for small business? Mr. HOLTZ-EAKIN. Yes. The uncertainty is a bad idea. Mr. MEUSER. Predictability, keeping it where it is, they know where they are going to be the following year. Because as we well know, a tax is nothing more than added cost. And if we think it is a great idea to make cost of our businesses, large and small, higher than it is worldwide, well, then you know, somebody is going to have to dispute gravity for me because it simply does not work that way. And, of course, profits lead to more investment in your company, lead to higher taxable incomes, which in fact, lead to higher revenues in the coffers of our Treasury. So are heavier regulations good for small business? Mr. HOLTZ-EAKIN. No. Mr. MEUSER. Dr. Holtz-Eakin? Mr. HOLTZ-EAKIN. No. I mean, there are---- Mr. MEUSER. Two hundred 10 billion dollars added this year, that is not something that small business is benefitting by? Mr. HOLTZ-EAKIN. So there are benefits to regulation. They had better be bigger than $210 billion. So, I have some questions about that. Mr. MEUSER. Very often government's intent is a far cry from what the end results are because it is ridiculous to think that the regulations of 14 months ago somehow are so much better today at a cost of $210 billion that are helping somebody, it is not helping anyone but a bunch of bureaucrats work on forcing it. So is government spending, heavy government spending, trillions of dollars in government spending a cause or an inhibitor of inflation? Mr. HOLTZ-EAKIN. It is one of the causes of the U.S.---- Mr. MEUSER. One of the causes of inflation. Is inflation good for small business? Mr. HOLTZ-EAKIN. No. Mr. MEUSER. No. Inflation is not good for small business. It robs small business and it leads to higher interest rates. Are higher interest rates good for small business? Mr. HOLTZ-EAKIN. No. Mr. MEUSER. Okay. We are the Small Business Committee. We are supposed to be advocates for small business. These policies are not exactly advocating for small business, would you not agree? Mr. HOLTZ-EAKIN. They are not good for the business community as a whole. Mr. MEUSER. No. So how about workforce? Is government competing, providing benefits to workforce and making workforce less available? Is that good for small business? Mr. HOLTZ-EAKIN. We have a very big workforce problem in the United States right now and it is in part due to the policies of the CARES Act and some successors. It is also due to a failure to have an effective public health mission against the pandemic which has harmed labor supply in both the number of people and how much they can work. Mr. MEUSER. Big government meddling. No question. Is higher gasoline prices good for small business? Mr. HOLTZ-EAKIN. No. Mr. MEUSER. Spikes in gasoline prices is an assault on our domestic energy industry, which in my district contains many, many small businesses, suppliers, providers. Is that assault that is taking place on our domestic energy, let alone the national security issues, is that good for small business? Mr. HOLTZ-EAKIN. That was one of the success stories of the post-Great Recession recovery was---- Mr. MEUSER. Absolutely. Particularly in Pennsylvania. Mr. HOLTZ-EAKIN. Yeah. Mr. MEUSER. So I think we should let small business be the most competitive in the world and let large business be competitive as well and focus on the things that we actually can control which are government regulations and taxation. I yield back. Chairwoman VELAZQUEZ. The gentleman yields back. Now we recognize the gentleman from New York, Mr. Garbarino, for 5 minutes. Mr. GARBARINO. Thank you, Madam Chair. I have a couple of questions for Dr. Holtz-Eakin. You just heard a couple of my colleagues mention $210 billion, $200 billion in regulatory costs. But I do not think people understand, you know, what that means in only a year. Can you explain? Can you just go a little further into, you know, we have seen $210 billion in additional regulatory costs. Can you talk about what we have seen in previous administrations and why that $210 billion is so big? Mr. HOLTZ-EAKIN. So what we do is we keep track of all the regulatory costs as reported by the agencies themselves, and we simply total them by agency. And in this case, for the federal government as a whole. We do not have compete records of the Bush administration, so I cannot comment on that. The Obama administration, as I mentioned, had about $895 billion of regulatory costs over the 8 years of its time in office. The Trump adminsitratino had, I forget the exact number, a modest double-digit increase, under $20 billion over its 4 years. And now the Biden administration, we have 1 year of data. It is $200 billion in the first year. Mr. GARBARINO. What was the Obama number again over 8 years? Mr. HOLTZ-EAKIN. Eight hundred ninety-five billion dollars in new costs. Mr. GARBARINO. So $895 billion in new costs over 8 years. Mr. HOLTZ-EAKIN. Yes. Mr. GARBARINO. That is a little over 100. Twenty billion over 4 years for President Trump. Mr. HOLTZ-EAKIN. Yes. Mr. GARBARINO. And we are seeing $200 billion in 1 year alone under this current administration in regulatory costs. Prior to coming to Congress, I was a private practice attorney in New York which had high regulatory costs but my colleagues from New York are on this call also so they can also comment on the regulations coming out of New York. And we saw businesses leaving the state in droves because of these regulatory costs. I just know, I mean, can you talk about what these $200 billion in 1 year, what that will do to small businesses? Mr. HOLTZ-EAKIN. We see some examples historically of what high regulatory costs do. So, for example, the Sarbanes-Oxley Law was intended to control big businesses and their accounting practices in the aftermath of the Enron and WorldCom scandals. That was a legitimate concern and public purpose. But it is extremely costly to comply with Sarbanes-Oxley. And as a result, we have seen the number of initial public offerings cut in half since the 2000s. That means that small businesses starting up are less likely to be able to pay off their venture investors by going public. They are going to have to be bought by somebody or have some other method of getting the money. So that hurts small business startups. There is no question about it. And it is from the regulatory costs of compliance with a well-intended public law. Mr. GARBARINO. I appreciate those answers, Doctor. When I talk to small businesses in my district, it is not just about high regulations, more regulations, and how tough it is to do business. But I am really starting to hear a lot about inflation. And my question specifically for you is, are the inflation levels that we are seeing here in the U.S. unique or is this something that is being experienced all over the world? Mr. HOLTZ-EAKIN. There has been a rise in inflation globally but the levels in the United States and the increase in 2021 of inflation is unique to the United States. So, the headline number is 7.5 percent for consumer price inflation. If you look at the bundle of food, energy, and shelter, which is 50 percent of the typical family's budget, that went from 1.4 to 8.1 percent during the course of 2021. So, it is the sharpest rise on the globe. Mr. GARBARINO. So what does that do to us as a country in competitiveness? Mr. HOLTZ-EAKIN. Inflation is bad news from every dimension. And this will hurt our ability to compete with other countries. Mr. GARBARINO. Two hundred and 10 billion dollars in regulation costs. Highest inflation compared to other countries in 1 year. I think we are definitely going the wrong way, especially in how we can help small business. I appreciate your testimony today, your answering the questions. Thank you very much for being here. And Chairwoman, I yield back. Chairwoman VELAZQUEZ. The gentleman yields back. Now we recognize the gentlelady from California, Ranking Member of the Subcommittee on Innovation, Entrepreneurship, and Workforce Development, Ms. Young Kim, for 5 minutes. Ms. YOUNG KIM. Can you hear me? All right. So, I want to thank our Chair and Ranking Member. And I really want to thank you so much for opening our hearing today in honor of our colleague, Congressman Jim Hagedorn. I thought that was very special to give a special tribute for him. I also want to thank our witnesses for joining us. I think we can all agree that we all want fair competition and a level playing field for our small businesses which are the backbone of our economy. The reality is that most small businesses in my district are not raising the antitrust laws being discussed here. They are complaining about the labor shortages, higher prices, and increasing red tape to establish and expand their small businesses. While consolidation of businesses can destruct markets in certain industries, the Committee should be more focused on how the federal government can negatively impact competition and small business success through more regulations, higher taxes, and ill-timed fiscal expansionary policies. So let me ask this question to Mr. Holtz-Eakin. On February 10, the Department of Labor reported that the CPI registered a 40-year high of 7.5 percent when measured year over year. So, can you describe how legislation that increases spending like the American Rescue Plan has contributed to higher costs for small businesses and families? Mr. HOLTZ-EAKIN. Certainly. What we saw was an economy that in the first quarter of 2021 grew at 6.5 percent. That was how fast it was growing when the American Rescue Plan was passed. As you know, trillions of dollars were sent out in checks to state and local governments and other government spending. That produced for goods and services is broadly defined. And in the classic case of too much money chasing too few goods, we have seen prices rise beginning then and throughout 2021. This got exacerbated by some worldwide conditions, a pandemic. Also, worldwide increases in commodity prices and energy prices so that we now have producer price inflation that is running about 10 percent that leads to even further consumer price inflation in the future. Ms. YOUNG KIM. Do you think we lack more coordination in our fiscal and monetary policies? Mr. HOLTZ-EAKIN. That was an example of extremely loose fiscal and monetary policies simultaneously. Those generally produce more demand. Demand was not the problem in the pandemic. The problem was the virus and the inability of people to go out and conduct their economic affairs. Income rose throughout the pandemic. Wealth rose throughout the pandemic. There was no need for such excessive stimulus to demand which was already well in place. Ms. YOUNG KIM. Thank you. You know, we have discussed the decline of entrepreneurship in the last several decades. And in your written testimony, you stated between 1975 and 2011, an average of 183 new banks were chartered annually. However, between 2012 and 2019, that number dropped to just four. Only four banks were chartered in 7 years. So clearly, regulations are choking capital and credit access for entrepreneurs with less banks being chartered. Can you elaborate on how regulatory barriers are curtaining access to capital for small businesses and entrepreneurs? Mr. HOLTZ-EAKIN. I think this example almost speaks for itself. The best discipline you can have for large banks that fail to serve different aspects of communities of color or geographic areas is to have new entrants who are willing to do that business to make money. But, the regulatory apparatus that came with Dodd-Frank is extremely expensive. Hard for a new bank to set up and comply. And we have seen very little entry as a result. So, we are not getting the discipline that comes from new entrants providing innovative services and products to underserved markets. And that is the most consistent route to success in the U.S. Ms. YOUNG KIM. In the remaining time, I want to ask you for your opinion. What are the long-term repercussions for our economy for families and small businesses if the inflation continues to outpace nominal wages and income? Mr. HOLTZ-EAKIN. We have seen long periods of inflation in the past in the United States. In the late 1960s, the government ran the economy very, very hot for 24 straight quarters and we got sustained high inflation in the 1970s and into the early 1980s. It was taken out of the economy only by a deep and very painful recession. And so, what you see in that period is sustained high inflation, sustained high unemployment, poor productivity growth, a failure to grow adequately as a nation, standards of living not rising. And the ``solution'' being a deep recession that harms everyone in America. That is not a future we want. Chairwoman VELAZQUEZ. Time has expired. Now we recognize the gentlelady from Texas, Ms. Van Duyne, for 5 minutes. Ms. VAN DUYNE. Thank you very much, Chairwoman Velazquez and Ranking Member Luetkemeyer. If the last 2 years have taught us anything through a global pandemic, supply chain troubles, and a rough labor market, our small businesses are the first to feel the dire consequences of economic difficulty. Yet, as large companies have tapped into their vast resources to ease supply chain issues and quickly have raised prices to counter high labor costs, our smallest employers do not have those options. As I have said many times before, our entrepreneurs do not want more handouts from the federal government. What they want is a fair opportunity to start and grow their businesses without government interference, something this administration has failed to provide. Recently, the Small Business Administrator joined me for a roundtable with small business owners from across the district and they all repeatedly brought up the same issue. Their margins are being destroyed by the skyrocketing energy costs directly caused by this administration's push to rely on foreign oil supplies, even amidst a global conflict. There is no doubt that our small businesses are continuing to struggle to compete with big companies. We need to stop the frivolous spending and antigrowth policies created by this administration. I appreciate all the witnesses being with us today and I apologize. You have been under the wire a lot today. You have answered the majority of questions. The first time that you and I met I was really impressed when I asked the question about regulatory reform, regulations, the cost of regulations for all of us, but especially for small businesses. You gave me some very direct answers and solutions to those questions. Can you kind of explain what you explained to me at that time? Mr. HOLTZ-EAKIN. Certainly. It is certainly within the purview of the Congress to place more constraints on the regulatory state in the rulemaking activities in every agency. The Regulatory Flexibility Act was intended to make sure that unnecessary regulations and excessively burdensome regulations went away. That does not happen. There is no genuine lookback to answer the question, if this regulation was once a good idea, is it still a good idea? So, you can do that. You can---- Ms. VAN DUYNE. Would you do that by like setting like a sunset provision on regulations? Mr. HOLTZ-EAKIN. HHS did a preliminary rulemaking on a sunset where everyone of its own rules had to be examined. And if it was deemed to be unnecessary or not working it was going to go away. That just got repealed by the Biden administration. That is the only attempt to do that that I have seen in recent history. So, you could put that in as a statutory requirement and enforce it. You could put regulatory budgets in. That was the Trump administration administrative approach. You could make that a statutory approach. Ms. VAN DUYNE. What was that? Mr. HOLTZ-EAKIN. Regulatory budgets. At the Department of Interior, you get a number. You could do that. Ms. VAN DUYNE. But expand on what that means. Mr. HOLTZ-EAKIN. What it says is that if you are an agency and you have a regulatory budget of say $20 billion and you have a rulemaking that is going to cost $40 billion, you have to find a way to reduce other regulatory burdens by $20 billion because you have a budget for increased costs to be imposed on the private sector. That gives all sorts of good incentives. You do the original rulemaking as cheaply as possible. Forty has to be the cheapest possible way to get that done. And then you are also always reviewing old regulations to see if you do not need them so you can find your $20 billion dollars in savers. And the stabs are permanently incentivized to keep track of what the old ones are doing and what they cost so that you can have a saver in hand when you need to pay for something. It is the same phenomenon we see with pay-for regulations in the Congress for budgetary purposes. You have to have a way to go pay for a piece of legislation. You have to know what other pieces will provide those savings. So those are good incentives to instill into agencies. They do not exist at all right now. There are no incentives now. Ms. VAN DUYNE. That is an easy statutory fix. Mr. HOLTZ-EAKIN. It is an easy thing to pass and then you will have to build the culture to enforce it. Ms. VAN DUYNE. But actually having built it in, look, I used to work for HUD. I understand how difficult it is within the bowels of our bureaucratic beast, how difficult it is. But if that is the regulations that they have to follow, if that is the budgetary, it is a lot easier to get things done, I guess to create the sense of policies that we are talking about. Mr. HOLTZ-EAKIN. Heavily anecdotal evidence from talking with permanent staff and agencies during the Trump administration, but they certainly began to get the game which is, okay, we are not going to have any flexibility so we need to have ways to save money with rulemakings. Here is a couple we will put in our back pocket for when the top floor calls down and says we need something. Ms. VAN DUYNE. And that would save money not only for the federal government, but then it would also relieve a lot of the regulatory red tape and burdens on small businesses. Mr. HOLTZ-EAKIN. These costs are not federal budget cuts. These are costs imposed exclusively on the private sector and that is where the savings will accrue. Ms. VAN DUYNE. Excellent. Thank you. Chairwoman VELAZQUEZ. The gentlelady's time has expired. Now we recognize the gentlelady from New York, Ms. Tenney, for 5 minutes. Ms. TENNEY. Thank you, Madam Chairwoman. I, too, would like to join with my colleagues in recognizing and remembering Jim Hagedorn, Representative, who was just a great friend, great Member of the Committee, and my condolences to him, to his family, and to his friends. It is tough in the Committee without him. But I wanted to say thanks again to the Chairwoman and the Ranking Member for holding this meeting today. And thanks to our witnesses for appearing before the Committee. This hearing will hopefully play an important role in the lively debate that we have across the nation and the future of antitrust in the United States. In recent decades, increased corporate concentration, lagging dynamism, and lacking competitiveness prior to the COVID-19 pandemic, historically low rates of firm formation, and death point to the need for improvement. As the House Small Business Committee, we have an important role to play in investigating and highlighting the impacts of market concentration and antitrust measures of America's firms. In the Antitrust Law, a one dimensional emphasis on consumer prices or the consumer welfare standard is most certainly come at the cost of the interests of American producers and our national industry capacity. The key to getting the antitrust question right is to strike the proper balance between prioritizing low- cost goods for consumers, fair competition for U.S. producers, and the need for a self-sufficient national economy that can sustain stable, well-paying jobs, and provide for the common welfare during times of crisis. In addition, the consumer welfare standard is not always the most applicable lens through which to evaluate antitrust matters. Take for example the digital economy where products are often free to users, such as the case of meta platforms known as Facebook. Another example is Amazon which offers cheap goods to American households supported by subsidies from its web services for which the government is a major customer. In this example, American producers, including many small businesses like my own, are undercut by inexpensive, sometimes dangerous, counterfeit foreign goods while consumers receive lower prices. In this example it is obviously insufficient to look only at what consumers pay. Small businesses are not only important because they are small but because they are often flexible and have great growth potential. In addition, they have connections to their communities and workers in ways that larger firms cannot replicate. We saw many examples during the pandemic. Policymakers must therefore be cautious of taking actions and passing laws that will make it more difficult for these small businesses to grow, hire more people, and benefit from the economies of scale, which can make work higher paying and contribute to technological growth. On the other hand, lax enforcement of antitrust laws are in action in the face of serious market concentration also harms the ability of these smaller firms to form and grow. Antitrust measures can be a powerful tool. They must also be used judiciously and applied in ways that are not subjective. Instead, I would like to focus more on dynamism, innovation, and the ability to let small businesses grow. As a small business owner, I know that many of my customers that rely on their newspaper were negatively impacted by the onslaught of Walmart and big box stores. So, I want to just take my first question and direct it to Dr. Holtz-Eakin. And some of the Members on the Committee have said that the market concentration has been the primary reason for rising costs and the rates if inflation. And I think my colleagues and I witnessed some of the things the Democrats have taken advantage of during the pandemic last year and the year before is to flood the economy with endless cash. To me, this seems to be far more likely an explanation for the crushing inflation Americans are experiencing. Is that something that you would agree with, Mr. Holtz-Eakin? Or Dr. Holtz-Eakin? I feel like it is the huge cash that is actually creating a lot of this problem as the primary reason. What would you say to that? Mr. HOLTZ-EAKIN. I would agree with you, Congresswoman. On the issue of somehow concentration being the source of economy- wide inflation, there simply are no data that show across the board increases in concentration that would be a plausible explanation for the sharp rising prices across every sector and across all geography. So, the cash is a much more plausible candidate. Ms. VAN DUYNE. What do you think that we should do in Congress to deal with this potential problem with anti- competitiveness and concentration? What would you do? What do you think we could do now other than, obviously to me, lowering regulations, less taxes would help our small business but what else do you recommend that we can do as a Small Business Committee? Mr. HOLTZ-EAKIN. Well, I would be happy to give you a longer answer for the record since time has expired. Ms. VAN DUYNE. Okay. Mr. HOLTZ-EAKIN. But certainly, I think the focus should be on ease of entry and the dynamism you focused on. Ms. VAN DUYNE. Thank you very much. I yield back. Chairwoman VELAZQUEZ. The gentlelady yields back. Now we recognize the gentleman from Wisconsin, Mr. Fitzgerald, for 5 minutes. Mr. FITZGERALD. Thank you, Madam Chair. And I also wanted to thank you for your recognition of Congressman Hagedorn. Great guy and we are all going to miss him very, very much. A question for Mr. Eakin. There has been a lot of discussion here today and we have spoken in the past about this assumption that big is bad and that the concentration is inherently harmful to competition. However, I think kind of the jury is out. And as we move through a new phase of America's post-COVID economy, it is probably settled that economics of scale yield efficiencies; right? And I am just wondering what your thoughts are on that. And I know it is a broad question but would love to hear your take on that. Mr. HOLTZ-EAKIN. Well, thank you. Certainly, I do not think anyone should somehow say vigorous enforcement of antitrust is a bad idea. It is a good idea and there are reasons for this. But asking the right question and taking a disciplined approach to the analysis is very important. And I think the consumer welfare standard has provided tremendous discipline to the analysis of competition policy. It does not matter if you are big or small. The question is whether you are good or bad for Americans. And so, concentrating the analysis to make sure that you follow all the way through to the American household and the consumer is a very important part of this. The reason the United States has relied on private enterprise in competitive markets to deliver goods and services is that it has been the most effective way and has led us to be the largest, strongest economy on this globe. Having an antitrust approach that mirrors that is a perfectly sensible idea and I think we should continue to do that. I am concerned about some of these other approaches. There are these pieces of legislation, in the Senate, for example, that target platforms and app stores and they single out those bigger than $600 billion. Why is that the right number? Why is that big and $500 billion is not big? What happens when you do that? Does it help small businesses? Well, if it inhibits their ability to acquire small businesses who cannot do an IPO and where that sale is how they pay off their venture investors, they are going to hurt small business. They are going to hurt that environment. I think there are some legitimate concerns about the privacy and national security implications of those proposed legislation. There is a Chamber of Commerce report on it. So, I guess what I am concerned about is the unintended consequences of taking an ad hoc approach to doing competition policy--writing legislation, targeting a few American firms, some which you can name by name, and people do. Let's have a set of principles that make some sense and will support the capacity of every firm to succeed if it does good business. Mr. FITZGERALD. Very good. And if I could just follow that up really quickly. I was also a Member of the Judiciary Committee. What we have seen is that the FTC and to some extent even DOJ, I mean, these mergers have kind of ground to a halt. And that is kind of a strange message that is being sent to the private sector and I would also say that as a result of that, many of these small businesses that oftentimes find themselves in a position where they have to liquidate after first struggling for some period of time, the best way is to be acquired or some type of merger with a smaller entity and at the end of the day it is kind of a win-win for everybody. And I do not think we should ever take that off the table. I am wondering if you had a comment on that. Mr. HOLTZ-EAKIN. Well, for me, I have never felt that it is the government's job to dictate business models. Firms can acquire new divisions. They can do capital investments, build new divisions. They can configure themselves as they see fit. What matters is their conduct in the marketplace and whether it is harmful to the American household. And that should be the focus, not how businesses choose to configure themselves and making decisions in advance about what is and is not an appropriate business model. I do not think the government should be in that business. Mr. FITZGERALD. Thank you, Madam Chair. And I will yield back. Chairwoman VELAZQUEZ. The gentleman yields back. Thank you again to all of our witnesses for your testimony today. Creating an environment where American small businesses can compete and thrive is one of the Committee's top priorities. So, we must ask ourselves, what type of economy do we want to foster for American entrepreneurs? One where small businesses have the chance to develop and reach their full potential. I think we can all agree we want to create a nurturing environment for our nation's small firms. As always, I look forward to working with my colleagues on both sides of the aisle to pursue policies that help level the playing field for American small businesses. Without objection, Members have 5 legislative days to submit statements and supporting materials for the record. If there is no further business to come before the Committee, without objection, we are adjourned. Thank you all. [Whereupon, at 11:56 a.m., the committee was adjourned.] A P P E N D I X [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] [all]