[House Hearing, 117 Congress] [From the U.S. Government Publishing Office] ENTREPRENEURSHIP IN THE NEW ECONOMY ======================================================================= HEARING BEFORE THE COMMITTEE ON SMALL BUSINESS UNITED STATES HOUSE OF REPRESENTATIVES ONE HUNDRED SEVENTEENTH CONGRESS FIRST SESSION __________ HEARING HELD NOVEMBER 3, 2021 __________ [GRAPHIC NOT AVAILABLE IN TIFF FORMAT] Small Business Committee Document Number 117-039 Available via the GPO Website: www.govinfo.gov __________ U.S. GOVERNMENT PUBLISHING OFFICE 45-954 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.......................................... 3 WITNESSES Ms. Ellie Diop, Chief Executive Officer, Eliza Revella Consulting Services, Los Angeles, CA...................................... 6 Mr. Andrew Fogaty, Executive Director, 36Squared Business Incubator, Chicago, IL......................................... 8 Ms. Stephanie E. DeVane, Vice President of Entrepreneurship & Business Development, National Urban League, New York, NY...... 9 Mr. Raymond Keating, Chief Economist, Small Business & Entrepreneurship Council (SBE Council), Vienna, VA............. 11 APPENDIX Prepared Statements: Ms. Ellie Diop, Chief Executive Officer, Eliza Revella Consulting Services, Los Angeles, CA....................... 39 Mr. Andrew Fogaty, Executive Director, 36Squared Business Incubator, Chicago, IL..................................... 42 Ms. Stephanie E. DeVane, Vice President of Entrepreneurship & Business Development, National Urban League, New York, NY.. 44 Mr. Raymond Keating, Chief Economist, Small Business & Entrepreneurship Council (SBE Council), Vienna, VA......... 50 Questions for the Record: None. Answers for the Record: None. Additional Material for the Record: Airbnb Report................................................ 68 Kauffman Foundation.......................................... 94 ENTREPRENEURSHIP IN THE NEW ECONOMY ---------- WEDNESDAY, NOVEMBER 3, 2021 House of Representatives, Committee on Small Business, Washington, DC. The Committee met, pursuant to call, at 10:03 a.m., in Room 2360, Rayburn House Office Building, Hon. Nydia M. Velazquez [chairwoman of the Committee] presiding. Present: Representatives Velazquez, Golden, Crow, Davids, Phillips, Newman, Chu, Evans, Delgado, Houlahan, Andy Kim, Craig, Luetkemeyer, Williams, Stauber, Meuser, Tenney, Garbarino, Young Kim, Van Duyne, and Salazar. Chairwoman VELAZQUEZ. Good morning. I call this hearing to order. Without objection, the Chair is authorized to declare a recess at any time. I would like to begin by noting some important requirements. Standing House and Committee rules and practice will continue to apply during hybrid proceedings. All Members are reminded that they are expected to adhere to these standing rules, including decorum. House regulations require Members to be visible through a video connection throughout the proceedings, so please keep your cameras on. Also, remember to remain muted until you are recognized to minimize background noise. If you have to participate in another proceeding, please exit this one and log back in later. In the event a Member encounters technical issues that prevent them from being recognized for their questioning, I will move to the next available Member of the same party and will recognize that Member at the next appropriate time slot provided they have returned to the proceeding. For those Members and staff physically present in the committee room today, in accordance with the Attending Physician's most recent guidance, all Members and staff who attend this hybrid hearing in person will be required to wear masks in the hearing room. Furthermore, all Members and staff who have not been fully vaccinated must also maintain six-foot social distancing from others. With that said, Members will be allowed to briefly remove their masks if they have been recognized to speak. With that, let me start my opening statement. Since the 1980s, America has largely been in a slump when it comes to new business formation. This fact rarely generates headlines or garners attention in the media, but its implications are severe. New businesses make up the foundation of our economy. Entrepreneurs that launch enterprises and products are the catalysts for American innovation. The statistics paint a startling picture of the state of our country's entrepreneurial environment over the past four decades. In 1980, 12 percent of employers were new businesses. By 2018, this figure had dropped to 8 percent. In 1982, 38 percent of all businesses were new firms, compared to just 29 percent in 2018. In 2018, larger corporations were doing quite well, but small firms were exiting the market at a higher rate than they were being started. This was the state of American startups in March of 2020 when the pandemic began to intensify. As COVID spread and businesses closed, our country was staring down an unprecedented economic crisis. Using the Great Recession and its aftermath as a guide, experts predicted that the pandemic would continue to drop the rate of business startups to new lows. Despite the dire forecast, American entrepreneurship didn't crater during the pandemic--it flourished. In 2020, Americans filed paperwork to start 4.3 million new businesses. This figure represents a 24-percent increase from 2019, and by far, the highest number over the past 15 years. Many of these businesses didn't look like traditional small firms. As the pandemic drove commerce online, these new enterprises were primarily concentrated in the nonstore, online retail sector. The entrepreneurs starting these new businesses also reflected the diversity of the American population in the 21st century. Black and Hispanic communities led the way in launching new companies. Young entrepreneurs dealt with the tough job market by pivoting toward entrepreneurship to develop businesses and products to serve their communities. No one factor fully account for this entrepreneurship boom. Layoffs, a favorable credit market, and federal stimulus efforts all helped lay the ground work for this record rise in new businesses. So today I hope that this hearing allows us to better understand this entrepreneurial revival and apply those lessons moving forward. The pandemic disrupted many areas of American life, not least of which being the nature of work. The challenges facing this new generation of entrepreneurs aren't identical to the problems of the pre-pandemic economy. We must work to understand these new challenges and find ways Congress can better support them in the post-pandemic world. It is also vital that we grasp why entrepreneurship flourished during COVID and what can we do to sustain that increase in the future. COVID closed countless small businesses and left many others on the brink of disaster. Yet, at the same time, it is possible the pandemic set in motion a revitalization of American entrepreneurship. Today I look forward to hearing from our witnesses about the journey that led them to start a business and how this committee can support them and others like them in the future. I now would like to yield to the Ranking Member, Mr. Luetkemeyer, for his opening statement. Mr. LUETKEMEYER. Thank you, Madam Chair, and good morning. We meet today for a hearing on entrepreneurship in the new economy. Regrettably as we have all witnessed over the past year, the outlook for our nation's entrepreneurs is dismal. Small businesses, small business owners, entrepreneurs, and startups are known to be resilient and skillful, easily adapting to changing conditions. They are fast and can adjust to meet the needs of their customers. They can pivot with speed and capture market share. These small business attributes, along with vigilant risk- taking and investing, are key ingredients to a growing economy. The COVID pandemic, coupled with Biden and the Democrats' failed economic policies have brought severe economic challenges to main street USA. Entrepreneurs across the country, from both coasts to the middle of the country, face incredible obstacles. This fall economic growth ground to a halt as all businesses confronted by severe supply chain disruptions, ongoing labor shortages, skyrocketing inflation, higher costs of nearly everything, and threats of tax increases from the Democrats. To follow, an overreaching vaccine mandate has been proposed with very limited information. Small business owners and the entrepreneurs require clear and concise rules and information to make business decisions. Uncertainty can't be part of their business model. Unknown next steps bring their planning to a complete halt. With each of these issues coming to the forefront, let's review them. We can begin with supply chain disruptions and higher costs. Small businesses, which operate on thin margins, have been shocked by recent supply chain failures. NFIB September Economic Trends survey found 90 percent of small businesses have been affected by these disruptions, and nearly half of all small businesses experience product delays from their suppliers. With empty shelves continuing to be a common sight in our local communities, the fourth quarter and the holiday season could be a rough stretch for the nation's job creators. At the same time, demand for goods has increased, pushing prices even higher. Labor. Across all industries, labor shortages have hindered the ability of companies to get products made, shipped, unpacked, and transported. Once the products and goods have arrived, the businesses often do not have a full staff ready to meet and greet customers. The Biden administration's worker shortage means that employers now have 10.4 million job openings. Let me repeat that: 10.4 million job openings, and no one willing to fill them. NFIB found 51 percent of small businesses have unfilled job openings, a staggering and record number. In addition, employers are facing record numbers of workers quitting their jobs. And, according to the Federal Reserve, the pandemic has resulted in a record 3 million early retirements. This is a dreadful situation as we head into what should be the busiest time of the year for businesses: the holiday season. Inflation. Despite the Biden administration's denials, it is very clear that inflation is no longer temporary or transitory. In October, the Department of Labor reported that the Consumer Price Index, one trusted measure of inflation, is now at a 13-year high of 5.4 percent. Even the Federal Reserve Chairman, who has insisted for months that inflation is transitory, recently admitted that inflation is expected to remain high well into next year. Overall, inflation means higher prices for small businesses, along with higher prices for their customers. Tax increases. Could there be a worse time to threaten entrepreneurs and small firms with tax increases? In February, President Biden said the U.S. had lost more than 400,000 businesses since the pandemic began, and many more were at risk. Yet the Biden administration and congressional Democrats have proposed a huge number of tax increases to fund their massive spending programs. We are not sure, however, which tax increases are still on the table, although it seems to be changing by the minute. But surely the last thing small businesses need coming out of a pandemic are tax increases. Employer vaccine mandates. In September, President Biden announced that his administration is developing a regulation that would require all private sector employers employed by a business with a hundred or more employees to be vaccinated or submit to weekly testing. According to the Society of Human Resource Management, 89 percent of employers fear at least some of their employees will quit as a result. The uncertainty surrounding these rules is putting the brakes on small businesses as they try to get back on their feet and serve their communities. A labor shortage crisis, accompanied by an employer vaccine mandate, are a grave threat to American small business prosperity. How much more can small businesses withstand? Taken alone, each of these policies is devastating, but taken together, their impact is likely to have serious, long-term consequences for entrepreneurship. Madam Chairwoman, we should be enacting policies that will empower entrepreneurs. Attentive risk-taking and investing are what will grow our economy. However, entrepreneurs are facing an economic storm that is preventing this progress. I appreciate our witnesses being with us today. I look forward to the testimony. 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 today is Ms. Ellie Diop, CEO of Ellie Talks Money. Ms. Diop was laid off from her corporate job months before the pandemic. After submitting over 50 job applications, Ms. Diop capitalized on her $1,200 stimulus check and entrepreneurial spirit to create her business. Ellie Talks Money is an online coaching and consulting service for aspiring and established business owners that was able to build a net worth of over a million dollars in less than 1 year. Welcome, Ms. Diop. I would like to yield to Ms. Newman to introduce our second witness. Ms. NEWMAN. Thank you, Madam Chair and Ranking Member. I am proud to introduce Mr. Andrew Fogaty, a resident of the great State of Illinois and from my district. He currently serves as both the director of the Illinois Small Business Development Center at the Greater Southwest Development Corporation and as executive director of the 36Squared Business Incubator, both in Chicago. In addition, he serves as a mentor with the Gallery Incubator in Evanston, Illinois. For over 12 years, Andrew has led local economic development initiatives, help launch nearly 70 companies, served as an adviser to more than 300 others, and facilitated more than $40 million in funding for his clients. In 2017, he founded an all-abilities business incubator in the 36Squared building on the Chicago southwest side and was selected at the 2020 State Star by the Illinois Small Business Development Center Network. I just have to tell you on a personal note that Andrew is quite amazing, and we are so proud to have him in our district. But it is a pleasure to welcome Mr. Fogaty to speak today. Thank you, Chairwoman, and I yield back. Chairwoman VELAZQUEZ. The gentlelady yields back. Our third witness is Ms. Stephanie DeVane, the Vice President of entrepreneurship and business development at the National Urban League. The National Urban League is a historic civil rights organization dedicated to economic empowerment of historically underserved urban communities. As the Vice President of entrepreneurship and business development, Ms. DeVane manages, oversees, and advocates on behalf of 12 entrepreneurship centers located in key affiliates. In this capacity, her division supports these affiliate small business programs through capacity building and programming sub grants and by providing them with training and technical assistance. Welcome, Ms. DeVane. I would now like to yield to the Ranking Member, Mr. Luetkemeyer, to introduce our final witness. Mr. LUETKEMEYER. Thank you, Madam Chair. Our next witness is Raymond J. Keating. Mr. Keating is a chief economist with the Small Business and Entrepreneurship Council, or SBE. He writes and speaks on a wide range of issues impacting the entrepreneurship sector of the economy. His areas of expertise include taxation, monetary policy, federal, state, and local budgets, regulation, and economics. He has written hundreds of articles with pieces published in The Washington Post, Wall Street Journal, Boston Globe, Chicago Tribune, and Investor's Business Daily. Mr. Keating holds an M.A. in economics from New York University and an MBA in banking and finance from Hofstra University, and a B.S. in business administration and economics from St. Joseph's College. I want to thank all the witnesses for joining us today. And, with that, Madam Chair, I yield back. Chairwoman VELAZQUEZ. Thank you, Mr. Luetkemeyer. Thank you all for being here today. Ms. Diop, you are recognized for 5 minutes. STATEMENTS OF ELLIE DIOP, CHIEF EXECUTIVE OFFICER, ELIZA REVELLA CONSULTING SERVICES, LOS ANGELES, CA; ANDREW FOGATY, EXECUTIVE DIRECTOR, 36SQUARED BUSINESS INCUBATOR, CHICAGO, IL; STEPHANIE E. DEVANE, VICE PRESIDENT OF ENTREPRENEURSHIP & BUSINESS DEVELOPMENT, NATIONAL URBAN LEAGUE, NEW YORK, NY; AND RAYMOND KEATING, CHIEF ECONOMIST, SMALL BUSINESS & ENTREPRENEURSHIP COUNCIL (SBE COUNCIL) VIENNA, VA. STATEMENT OF ELLIE DIOP Ms. DIOP. Thank you. Good morning, Members of the Small Business Committee--oh, there we go. Sounds a lot better. Good morning, Members of the Small Business Committee. I am very grateful to be here. My name is Ellie Diop, and I am CEO and founder of Eliza Revella Consulting Services, also known as Ellie Talks Money. I have a business coaching and consulting company that I started in the pandemic. So my path and journey to entrepreneurship is not like many others. I am also a mother of four, and as you mentioned in introducing me, I wanted to get another job after being laid off before the pandemic began. And I did apply feverishly to several jobs, over 53 in fact. And my experience is one in corporate America. I have served as director of sales for over 3 years, but I was not able to find employment. And so, when the stimulus checks, when I knew that they were coming, I began to make a plan on starting a business with that small--what I was looking at as a capital investment. And I conducted market research and really analyzed what did other businesses need at this time, what--where are businesses struggling, you know, and I did this market research by leveraging social media. And so I came to the determination that other small businesses really needed assistance in sales, which is something I was very good at. They needed assistance in finding funding, something I also knew how to do. And so, when I received the stimulus check, I put it to use and purchased things like a website, a domain, a new phone, a ring light, all things that I knew I would be able to use to build a brand and build a following online. And so, with consistency, dedication, and posting content on social media about three to five times per day, in 10 months, I was able to net $1.3 million. And that is sheerly by having the access to entrepreneurship. So I share with my clients all of the time, and as their coach, I am giving them the tools and strategies that they need to scale their own businesses by leveraging what we have, which is the internet and social media. And, because I started this with, you know, $1,200, I am always reminding them that you don't need a large sum of money or a large capital investment in order to make a lot of money in your business. It is just about utilizing the right strategies. It is about staying committed. It is about staying dedicated and leveraging what we have available to us. So now I am very grateful that the business has grown, and I have been able to employ, myself, five people. It is a very, you know, amazing turn of events, being that it was so challenging for me to find a job. Now I am in a position where I can actually create jobs. And my goal for 2022 is to increase our staff to 10, hopefully, and to continue from there, but definitely where the biggest success in this entire accomplishment truly is, is just that I have been able to show and inspire people, over 300,000 people, that if I can do this, so can you. You know, a lot of--there is a misconception that entrepreneurship, or the ability to start a business, is one that begins with a silver spoon in someone's mouth. But I think that my journey has been able to show people that, regardless of where you are starting with, even as, you know, a mother, just coming out of a divorce, single mother trying to find a job, you can actually take the circumstance that you are given and completely change the narrative and change the scenario. So we live in a time where entrepreneurship is truly more accessible than ever, and given the right tools, small business owners can absolutely repeat what I have been able to do. Now, you don't need to have money to pay for advertising. You don't need to always have a lot of connections. You need to have grit. You need to have resilience. You need to have dedication and commitment to what product you want to sell. And now, with platforms like social media--Instagram, Facebook, Twitter--all platforms that I have leveraged, you are able to go directly to your audience and make the sale. We don't have to go through all of these complicated channels, which actually gives small businesses a higher opportunity to thrive and survive than we may have had 4 or 5 or 6 years ago. So I am very grateful to be able to share my experience and my success and entrepreneurship with you all and thank you. Chairwoman VELAZQUEZ. Thank you, Ms. Diop for that inspiring story, it is really rewarding to know that there is a role for the federal government to play, particularly by empowering women like yourself. Now I will recognize Mr. Fogaty for 5 minutes. Mr. Fogaty, please unmute yourself. Mr. FOGATY. I was afraid that would happen. Good morning, Chairwoman Velazquez---- Chairwoman VELAZQUEZ. We cannot hear you, Mr. Fogaty. Mr. FOGATY. Really? I am unmuted. Can you hear me now? Chairwoman VELAZQUEZ. Mr. Fogaty, we are going to correct the technical issues, and now we will recognize Ms. DeVane. Ms. DeVANE. Chairwoman Velazquez, Ranking Member---- Chairwoman VELAZQUEZ. Ms. DeVane, please unmute yourself. Ms. DeVANE. I am also unmuted. Chairwoman VELAZQUEZ. The problem is here. Mr. FOGATY. I should say I can hear Ms. DeVane. Ms. DeVANE. And I can hear Mr. Fogaty. Chairwoman VELAZQUEZ. We are going to take a brief recess until HRS address the issue. [Recess.] Chairwoman VELAZQUEZ. This hearing is called to order. Now we recognize Mr. Fogaty for 5 minutes. STATEMENT OF ANDREW FOGATY Mr. FOGATY. Thank you very much and good morning, Chairwoman Velazquez, and distinguished Members of the Committee. Again, my name is Andrew Fogaty. I am with the 36Squared Business Incubator in Chicago. I also oversee two of the Illinois Small Business Development Center locations, one at 36Squared and one at the Greater Southwest Development Corporation. Both locations are also part of the City of Chicago's Neighborhood Business Development Center Program. What this means is that myself and my colleagues, both across the city and the State, provide business assistance, training, and advising to area residents at no charge. I want to thank Congress for inviting me to participate in this hearing and also for the quick action that was taken last year with programs like the Economic Injury Disaster Loan, Paycheck Protection Program, and CARES Act funding. Given that this was the first time that an unforeseen disaster affected virtually every business in the country at the same time, I think that the actions of Congress and the SBA were key to averting what could have been a much more serious crisis. These programs continue to help save businesses across the country, so again thank you for that. That being said, the small business landscape has changed, and serious challenges remain. The subject today is ``Entrepreneurship in the New Economy,'' and my testimony will focus on four main areas: access to capital, reducing the digital divide, manufacturing, and working with underserved communities. Access to capital for small businesses, and especially startups, remains a challenge. In fact, if a business needs a small loan of $10- or $20,000, I am only aware of one bank in Chicago, CIBC, that actively markets programs to meet that need. There are, of course, also some nonprofit lending options. However, these are typically at a higher interest rate and less desirable than a bank loan. I would like to see more banks offering micro lending and startup funding, and I would like to see the reporting process for lenders streamlined to make small business lending more attractive. It is my understanding that there is legislation now that may--on the books right now--that may significantly increase reporting requirements in all small business loan applications, and I am concerned that this may negatively impact my clients. Access to capital is key to supporting entrepreneurship in the new economy. Next, I would like to address computer literacy. The digital divide is real, especially in underserved communities. Today, computer literacy and basic business training are as key to an entrepreneur's success as being able to read or write was 20 years ago. We need to do better with this by making basic computer skills training and business assistance programs widely available across the country. In fact, when CARES Act funding ends next fall, many small business development programs across the country will actually see a decrease in capacity, and this is a concern. Next, I would like to address manufacturing. Last year's difficulty in obtaining vital PPE supplies and this year's supply chain issues demonstrate a clear need to support our domestic manufacturing capabilities. Certainly a simplification of the federal procurement process would be a start. And, finally, I would like to discuss the underserved population. Here on Chicago's south side, we have a diverse and vibrant small business community, including a significant number of immigrant business owners who hold ITINs instead of Social Security numbers. Currently these business owners are shut out of most SBA lending programs. I certainly don't presume to jump into the immigration debate. However, if a business seeks to expand, buy equipment, a building, or create jobs, I would like to be able to present the same options to all my clients. Perhaps the most disadvantaged of the underserved populations are the disabled people. Advances in technology and making small business ownership--are making small business ownership a much more viable option for our disabled population. This is a trend that is only going to increase in the coming years. I would like to see more of an effort made to include these entrepreneurs into the wider business development world. Thank you again for having me, and I look forward to your questions. Ms. VELAZQUEZ. Thank you, Mr. Fogaty. Ms. DeVane, you are recognized for 5 minutes. STATEMENT OF STEPHANIE E. DEVANE Ms. DeVANE. Chairwoman Velazquez, Ranking Member Luetkemeyer, and Members of the House Committee on Small Business, thank you for the opportunity to testify at today's hearing titled ``Entrepreneurship in the New Economy.'' My name is Stephanie DeVane, and I am the Vice President of Entrepreneurship and Business Development at the National Urban League. I bring you greetings on behalf of Marc Morial, our president and CEO. The National Urban League is a historic civil rights community-based organization dedicated to economic empowerment and the guarantee of civil rights for African Americans and other underserved communities in America. We are a national nonprofit intermediary and provide direct, comprehensive services that improve the lives of nearly 2 million people each year. We are a network of 91 Urban League affiliates and the District of Columbia. In my role, I manage, oversee, and advocate on behalf of 12 Urban League Entrepreneurship Centers, which provide management, counseling, mentoring, and training services for entrepreneurs looking to start, grow, or scale their business. While the typical client of the Entrepreneurship Center program is a low- to moderate-income African-American woman with an existing business, our centers also serve Caucasian, Hispanic, Asian-American entrepreneurs. In 2020, our centers helped approximately 23,928 participants secure $108.6 million in financing and contract opportunities, as well as save or create 714 full- or part-time jobs through our counseling and training services. The COVID-19 pandemic and resulting economic disruption has disproportionately impacted minority businesses and also exacerbated existing structural inequities in small business lending. In April 2021, a Federal Reserve survey found that minority-owned businesses were simultaneously hardest hit by pandemic-related closures and were only half as likely as White-owned firms to receive the necessary Paycheck Protection Program small business relief funding they needed to pay their workers and stay afloat. For minority-owned business, the racial wealth gap and implicit bias have made securing access to capital exceedingly difficult. During the pandemic, our entrepreneurship centers conducted training, workshops, and counseling sessions through digital and telephonic means with clients. We hosted webinars to guide entrepreneurs experiencing cash flow issues through the disaster loan application process and provided links to resources to help entrepreneurs develop disaster recovery plans. From June 1, 2020, through May 31st of this year, with support from a CARES Act MBDA award, our centers helped 11,250 businesses secure $137.6 million in financing and contract opportunities, as well as save or create 1,174 full- and part- time jobs, with over 15,800 hours of counseling and over 33,000 hours of training. Specifically, our services were directed at providing COVID relief to minority businesses lacking access to capital or with inadequate financial management practices and less flexible operating models. We also received support through the PepsiCo Foundation to run our Black Restaurant Accelerator Program which is helping keep the doors of small businesses and food-and-beverage industries open. One of the program's beneficiaries is Beaucoup Eats, a New Orleans neighborhood eatery that provides full-service catering and meal prep services. Here is what owner Keisha Reed had to say about the program: ``The grant from PepsiCo allowed us to purchase three tents, which meant we could serve at least 50 people, and overhead costs were lowered. Given the current 72- hour test and vaccine card mandate for inside eating and the inside reduction, we were only able to accommodate 6 to 10 people on the inside at any given time. Without the assistance of the grant, we wouldn't be able to generate the revenue needed to stay in business during this ongoing pandemic.'' I also note that the National Urban League was just awarded a $5 million Small Business Administration Community Navigator Award, which will allow us, through 25 Urban League affiliates, to reduce barriers for minority-owned businesses through critical support and resources. Last year, Black-owned businesses saw a surge in sales corresponding to the rise of the Black Lives Matter movement. However, as public support for it began to stagnate, business owners saw sales level off. In the new economy, Black-owned small businesses continue to experience lower paths returning to pre-pandemic employment levels and face a more uncertain future recovery relative to their peers. Many Black-owned businesses continue to lack access to capital needed to fully recover due to implicit bias and the legacy of racism. To ensure a full economic return for minority-owned businesses in this new economy, we urge Congress to enact civil rights protections and guardrails that will reduce any racial disparities in access in capital, while increasing access to prime government contract opportunities, mentorship, minority incubator support, and technical skills training. Please see my submitted testimony for more detailed recommendations. On behalf of the National Urban League, thank you for the opportunity to testify. I look forward to your questions. Ms. VELAZQUEZ. Thank you, Ms. DeVane. Now we recognize Mr. Keating for 5 minutes. STATEMENT OF RAYMOND KEATING Mr. KEATING. Chairwoman Velazquez, Ranking Member Luetkemeyer, Members of the Committee, thank you for hosting this important hearing. My name is Raymond Keating. I am chief economist with the Small Business and Entrepreneurship Council. For more than 26 years, SBE Council has worked to strengthen and improve the ecosystem for startups and small business growth. As you all know, entrepreneurs take on risks and uncertainty in order to innovate, introduce new products and services, and find better ways to do things. And, by doing so, they boost productivity, enhance competition and choice, fuel economic growth, and create new jobs. Indeed, entrepreneurs, along with the investors who are essential for funding startups and business growth, are central to the economic income and employment growth we all want to see happen. For our economy, in my written testimony, I look to key indicators on where we stand right now. By the second quarter of 2021, entrepreneurs, investors, businesses, and workers had worked to get the economy back to where it was pre-pandemic. However, we still face the task of getting back to where we should be, given the lost growth, and then maintaining strong growth thereafter. Unfortunately, 2 percent real GDP growth, which is where we stood in the third quarter, is anemic under normal circumstances. At 2 percent growth, U.S. economic underperformance will be extended far into the future. We need to do much better, and that will depend significantly on the state of entrepreneurship. So I go on to look at various measures of entrepreneurship in my testimony. It is clear that entrepreneurship was lagging well before the pandemic. It suffered when COVID hit, and it has struggled to come back in many ways. But hope can be found in the trend in new business applications. After suffering big declines when the pandemic first struck, the number of business applications quickly skyrocketed beyond where they had been prior to the pandemic and have remained at elevated levels. The historical relationship between such applications and actual business formations indicates that they are, again, as reason for hope. Although, it must be noted that a pandemic economy is uncharted waters. At the same time, the expansion of what many call the gig economy would support this data, as would more people positively considering entrepreneurship due to their pandemic experiences, as we have heard here already. As for challenges for entrepreneurs, there are many, some being evergreens and others specific to our current situation. For example, a key evergreen, again, is financing. We have heard people talk about that already. As businesses reach various stages, though, angel investors and venture capitalists, for example, become vital for providing the funds to fuel innovation and growth. And regarding our current situation--again, in my written testimony, I explore the labor shortages, supply chain challenges, and inflation--these are all quite real and quite significant issues, creating problems, risks, and uncertainties. Of course, there are also expanding opportunities for entrepreneurs. I highlight two areas in my written testimony. The first is technology. Whether generating new products, improving and enhancing production, and/or expanding distribution, technological advancements in areas like computer, digital, and broadband technologies, for example, have served to expand opportunities for entrepreneurs. Social media, again, as we have heard, for instance, has served to help create and transform businesses. A second major area of expanding opportunities for entrepreneurs is the international marketplace. Technology advancements coupled with economic growth abroad have opened doors in the international arena for entrepreneurs. Keep in mind that some 95 percent of the world's consumers are outside the United States, and as the data show, international markets are not the near exclusive domain of large businesses, as many assume. Finally, in this, getting the public policy mix right is always critical for our economy and for entrepreneurship, but getting it right becomes even more critical as we struggle to emerge from a pandemic economy. I just offer what I call a pro-entrepreneur policy framework in my testimony: Avoiding tax increases and providing substantive and permanent tax relief that enhance incentives for starting up, building, and investing in businesses. Emphasizing regulatory relief, not imposing additional regulatory burdens. If anyone understands the cost of regulation, it would be small business owners, especially as those costs mount with more and more regulations imposed, you know, regulation after regulation. Advancing free trade is critical. Reducing--meaning, you know, reducing government-imposed cost on trade such as tariffs is pro-growth, and the U.S. really needs to reclaim its global leadership role on trade. Also, implementing a constructive immigration policy agenda that expands avenues of immigration for those who wish to contribute by working and starting businesses, while enhancing security, of course, to keep out terrorists and others who would do us harm. That is a pro-entrepreneur framework that we put forward. Thank you again for your invitation to be part of this hearing today, and I look forward to any questions. Ms. VELAZQUEZ. Thank you, and thank you to all our witnesses. We really appreciate all you have shared with us today. I will begin by recognizing myself for 5 minutes, and I would like to address my first question to Ms. DeVane. As Americans quit their jobs in record numbers, women are leading the change in what is known as the great resignation. Ms. DeVane, what shift in the labor force occurred during the pandemic to make women more likely to launch a small business? Ms. DeVANE. Thank you for that question, Chairwoman Velazquez. My experience, through our entrepreneurship center, is that many of the women that started businesses during the pandemic had been laid off from their jobs, similar to Ellie, who told her story. Many of these women business owners had decided at that point to start their own business. Some of them were passion projects. Some of them were built out of necessity. But many of the business owners that we saw were women, and they were using that opportunity to start businesses. They use and utilized our centers, which had technical assistance services, counseling and mentoring and training services to start businesses. In addition to that, many of them saw opportunities through grant programs that the National Urban Leagues and other organizations made available that were specifically for women- owned businesses to start and grow their businesses. In addition to that, there were grants available for minority women-owned businesses to help undergird some of the training that we were providing to them. Ms. VELAZQUEZ. Thank you for that answer. Ms. Diop, what advice do you have for others that are considering starting a business during times of uncertainty? Ms. DIOP. Thank you, Chairwoman Velazquez, for that question. I would definitely advise women who want to start businesses in a time of uncertainty, or any time, to utilize the resources that they have available to them to the fullest extent. And that may be monetary, but also I would advise them to utilize the resources within themselves. Many times we don't realize that the experience we have gained in jobs or in life can directly lend to success in business. And I know for myself, everything that I have put into my coaching and consulting business are skills and experience that I have gained throughout corporate America and just throughout college and all of the experience that I have. So I think that is a number one thing is to--I always teach my clients to make a list of everything you know how to do, your experiences, your knowledge, your skills, and pull a business from that list. That way you are more guaranteed to succeed because you are naturally working within something you already know how to do rather than venturing off into a business that you think you should start based on what, you know---- Ms. VELAZQUEZ. Thank you. Thank you for that answer. Mr. Fogaty, during the pandemic, many businesses have struggled to adapt to the changing nature of work and have faced challenges with supply chain issues, access to capital, and employee retention. Can you please describe your role at the 36Squared Incubator and how a $1 billion investment in incubators in the Build Back Better Act will help create more entrepreneurs? Mr. FOGATY. Certainly. Well, I certainly agree with the testimony of the previous witnesses. What we do is provide assistance and support, not only through the SBDCs; I also have colleagues in the ITCs, International Trade Centers. This is a network of professionals who, at no charge, will help manufacturers and facilitate their exports, as Mr. Keating alluded to. We also have what is known--I also have colleagues who are what is known PTACs, Procurement Technical Assistance Centers, and these are available across the country, as are SBDCs and ITCs. The PTACs will facilitate and assist entrepreneurs with getting government contracting. We are also in--the city of Chicago has Neighborhood Business Development Centers. So my point is there is a lot of free assistance out there. We don't have all the answers, but we have a number of resources so that we can find the answers. And I think it is important to support small business development centers, entrepreneurship centers, incubators, as they reach out and try and guide entrepreneurs and small businesses through this time. Ms. VELAZQUEZ. Thank you. Mr. Keating, I just ran out of time. Maybe if we go into a second round, I will be able to ask you a question. Thank you very much. Now I recognize Mr. Williams, Vice Ranking Member of the Committee, for 5 minutes. Mr. WILLIAMS. Thank you, Madam Chairwoman, and I want to thank our Ranking Member too, and witnesses for being here today. Every American can see that our country is facing one of the worst supply chain stories in history. I see it firsthand. I am a car dealer--I have been for 51 years--employ hundreds of people, and I can tell you, it is serious. And U.S. ports are struggling to unload deliveries, and inventory is just sitting on container ships in the middle of the ocean. Families are preparing for the most expensive Thanksgiving meal ever, and we are told that by the administration, and worry if Christmas gifts will even be available. This supply chain crisis has become a substantial issue for small businesses across the country, forcing business owners to make operational adjustments in order to compensate for the lack of inventory and revenue. So, Mr. Keating, what are small businesses who operate on fixed margins to do when they don't have a product to sell or can't afford to pay their workers, and what do you think the long-term effects of these supply chain disruptions will have on our economy? Mr. KEATING. Well, I agree with you a hundred percent, and in terms of small businesses owners, they are being impacted more so than large firms just because they operate on such thin margins. You know, the long-term issue--listen, in the short term, this is going to be an issue that we need government to not impose additional burdens, like I mentioned in my testimony-- taxes, regulations, things like that--provide relief where they can, and then the private sector is going to work through this. It is going to be very painful. It has already been very painful. And then the question is how--you know, long-term effect. The long-term effect is going to be determined by how many businesses survive these issues and these problems. We have already seen what the pandemic has done. I mean, various surveys, you know, either we have lost hundreds of thousands or even millions of small businesses during the pandemic. So now we have got this additional issue of working through trying to get back to where we were at least. And the long-term impact is going to be, again, how many small businesses have we lost. Again, I take some hope in those business application numbers, where you see people think--at the very least, they are thinking about entrepreneurship as an option, and that is what we are going to need going forward. Mr. WILLIAMS. Perfect. Let's talk about inflation. It is still on the rise, and hardworking Americans are paying more for food, gas, and other utilities. And a recent report by the Department of Labor showed that inflation has spiked to 5.3 percent, a record high in 13 years. So, meanwhile, Democrats continue their push to inject over $3 trillion of new federal spending into the economy and threatening to worsen inflation for months or years to come. So the Biden administration refuses to acknowledge the risk of hyperinflation. They argue that proposed spending packages are fully paid for and will have no impact on inflation. So, again quickly, Mr. Keating, in your testimony, you state that the inflation numbers are undeniable, and can you talk briefly about the current impact on inflation, whether you think it is transitory like the Federal Reserve argues? Mr. KEATING. Yeah. I always get concerned when the Fed, whose primary responsibility is stable prices, kind of pooh- poohs what is going on with inflation. So I am not quite clear how long this is going to last. I don't think any of us are, and that is part of the problem, right? Inflation comes with uncertainty, there is volatility, all of the issues that, you know, higher interest rates, all of these problems. So the issue--going forward, I wish I heard more from the Fed, that, hey, listen, we are taking this inflation issue very seriously, and perhaps we are going to start to rein in these historically unprecedented loose monetary policies that we have been running really since the summer of 2008. I think that would be a great step. And then also, on the fiscal side of things, you know, inflation is all about too much money chasing too few goods. I like the idea of incentivizing the production of more goods. So, if we could have pro-growth fiscal policies, meaning tax, regulatory, trade policies, combined with some monetary restraint, that is how we got out of this mess in the 1980s when we had stagflation, and that is how we are going to get out of the mess today. Mr. WILLIAMS. Okay. Quickly, in the time I have remaining, in your opinion, what are the impacts of higher taxes and increased government regulations on small businesses, particularly on the heels of the COVID-19 setbacks? Higher taxes do nothing but hurt business. We need to cut taxes. So, quickly, how do you feel about that? Mr. KEATING. Well, you are right on. Listen, higher taxes always come with costs for negatives to the economy, negatives for small business. And then, when you are thinking about doing it as we struggle to get out of a pandemic economy, I am bewildered by that. This is the worst possible time to be imposing higher taxes and more regulatory burdens. And, without a doubt, you can talk about targeting at this income level or that income level; ultimately, everybody gets hurt and largely because investors get hit. That means less capital for entrepreneurs, and we need entrepreneurs, again, to drive innovation, economic growth, and job creation. Mr. WILLIAMS. Thank you, Madam Chairman, I yield my time back. Ms. VELAZQUEZ. The gentleman yields back, and now we recognize the gentlelady from Kansas, Ms. Davids, Chairwoman of the Subcommittee on Economic Growth, Tax, and Capital Access, for 5 minutes. Ms. DAVIDS. Thank you, Chairwoman, and I am excited about this hearing today. You know, America's small businesses and small business owners, entrepreneurs, have really faced enormous and unprecedented challenges over the last year and a half because of COVID, and we have heard about that during this time from our witnesses. And we also heard that, against all odds, we are seeing Americans start new businesses. Even in 2020, 4.3 million new businesses were started, and that is the highest number of new businesses over the last 15 years. So, while we have unprecedented difficulties, we are also seeing unexpected and inspiring startup and unexpected and inspiring startups surge. It is, I think, a testament to the entrepreneurial spirit that we have got in this country, and I am glad we are taking the time to understand that today. And so my first question, Ms. Diop--is that the--okay--I wanted to ask you about, you know, in your written testimony, you mentioned that you became an entrepreneur because you had to. And I think that is something that a lot of folks face, but I am curious, of the things that you were able to navigate, can you share with us a little bit about the challenges that you didn't see coming, and, you know, what were those? Ms. DIOP. Thank you so much, Ms. Davids. Certainly there were challenges that I ended up facing which I couldn't have anticipated, and I would say the largest one is learning how to go from a one-woman, or person, business to then delegating and expanding it. I, as I mentioned in my testimony, started my business out of necessity. Because I couldn't find a job but I had children, I needed to take what I knew how to do and turn it into a business that could then serve others. Where the shift happened and where the first challenge really came is, okay, now how do I take this and make it something that is not only about me but then can create a space for other people who either need a job or further need support in their own businesses. So scaling is a huge part of entrepreneurship, a huge part of running a small business, and can be the largest challenge, but I was able to navigate that through research, support, and trial and error. Ms. DAVIDS. Thank you. And I am--the idea of scaling and kind of those almost, like, back-office type of skills, you know, the Kauffman Foundation, which is based in the Kansas City area--the Kansas Third is on the Kansas side of the Kansas City metro area--and the Kauffman Foundation has done a lot of research, and they talk about accounting and legal advice. And I am curious about how that is one of the biggest obstacles. I am curious how you handled--like, you mentioned research. Like what kind of steps did you take to address that? Ms. DIOP. Absolutely. So I did ask a lot of questions. I am very grateful that, in my time running this business, I have been able to make connections. And so a lot of clients who would book me for a call would actually be in the field of--the legal field, or perhaps they were in the field of finance. And so, in exchange for me helping them to gain clarity on how to scale their own businesses, I was then able to ask them, well, since you are in the financial field, what should I do? You know, since you are in the legal field, what steps can I be taking to really expand this so that it is not just my small business but something that can really grow and walk on its own legs? So that was a key element of my research. And then, as well, I am from Los Angeles, California, so I looked up small business development programs and centers near me where I could go and ask questions: How do I navigate this next step? I have done this much so far by myself, but I know that I need further support. So those types of programs, such as the one you mentioned in Kansas, are so very needed. I really did mine the scrappy way by just, you know, researching and figuring it out. But, when people can have access to information that provides them with that necessary infrastructure support, it really strengthens their ability to be a long-term, lasting business. Ms. DAVIDS. Thank you for that. And I think, you know, from your description about how you got into being an entrepreneur and also from Ms. DeVane, you know, the work that they are doing, and now as a community navigator--community navigator grantee, it sounds like one of the things that we need to do is try to make sure that our resources, from the federal perspective, are available and known to everyone. With that, I will yield back. Thank you, Madam Chair. Ms. VELAZQUEZ. The gentlelady yields back. Now we recognize the Ranking Member, Mr. Luetkemeyer. Mr. LUETKEMEYER. [Inaudible.] Ms. VELAZQUEZ. The gentleman from Pennsylvania, Ranking Member of the Subcommittee on Economic Growth, Tax, and Capital Access, Mr. Meuser, is recognized. Mr. MEUSER. Thank you, Chairwoman Velazquez, and thank you to our Republican leader, Mr. Luetkemeyer, and thank you very much to our witnesses, and thank you, Ms. Diop for being here with us, and to all on virtual. Clearly, the last 19 months have been very challenging for small business. Even though I am a Member of Congress, I have been experiencing it from my past life, as well as just working with the constituents and helping them through, navigating through the COVID crisis, from PPP to shutdowns to you name it. Ms. Diop, your story was compelling, amazing. Congratulations. I want to ask you a couple questions about that, but first I am going to just go to Mr. Keating. Mr. Keating, as small businesses, entrepreneurs, as you have mentioned a couple of times, have dealt with cost of goods, shortages, all kinds of cost increases, inflation, wage increases, which we all like, but when they come so suddenly and creates the shortages, as well as the added unexpected expenses--government is not in the business of creating jobs. Government's role is to create the best environment possible for the private sector to create those jobs. So, in light of the many issues that exist--workforce, I mentioned them, inflation, cost of good increases, supply chain problems, pending OSHA mandates--how has government done in helping or worsening small businesses' challenges, Mr. Keating? Mr. KEATING. Yeah. Unfortunately, I would like to say we were doing better than we are. When you look at all the signals that entrepreneurs, small businesses, investors, are getting from Washington, it has been, you know, what taxes are we going to increase; let's look at all sorts of new regulatory initiatives. And they span across from labor to antitrust and everything in between. You know, we still haven't unwound tariffs that were imposed. So, you know, there is not much going on, on the trade front to be able to expand opportunities. So bottom line is, you know, the overarching signals are not positive from the federal government, I would argue, in terms of policies for small businesses. Mr. MEUSER. Okay. So perhaps reversing some of those, keeping taxes competitive so goods made in Asia are not more competitive, regulations that do affect supply chain, that is what we should--in your view---- Mr. KEATING. Absolutely. Absolutely. Regulatory reform, in a positive sense, would be great. I mean, imagine if the business community, including entrepreneurs and small businesses, were hearing from Washington that, hey, we are going to start sunsetting regulations so that we can assess each one if it makes sense going forward, right? How about we have more input from Congress, rather than leaving it all to appointees and bureaucrats, right, having Congress actually approve each rule and regulation. So those types of reforms would be a big plus, I think. Mr. MEUSER. All right, thanks a lot. So, Ms. Diop, you are based in Los Angeles? Well, again, congratulations, your determination, hard work, probably a lot of smart work as well, a tremendous amount of thinking and probably loss of sleep, but really, really great American business story. So taxes in L.A. and federal taxes, I am not going to ask you what you pay in taxes--it is your business--but I would guess it is somewhere in the neighborhood of about 40 percent. Do you think that that is helpful to your business or--so just talk about that a little bit. Would raising those taxes affect you? Would you prefer them to stay where they are? Would you like to see them lowered a little bit? How would that help your small business? Ms. DIOP. Yes. Thank you so much for your question, Mr. Meuser. Taxes are definitely a challenge, and the biggest wake-up call in this entrepreneurship journey that I have had. I think that, you know, taxes as a new business owner can be navigated more thoroughly with proper education and with proper support. I think one thing that is lacking is taxes are almost like a smack in the face when you start a business. There isn't any, you know, preparation to help a small business owner know what they need to expect in terms of the magnitude of what the tax rate can be and how to fully prepare for it. I do think that, as small business owners, you know, lower taxes can certainly help because of the fact that we are already operating on margins that, you know, we have to pay other employees, we have to, you know, pay for other startup capital, depending on what type of business that you are in. I---- Mr. MEUSER. I am sorry. I am out of time. But, Madam Chair, I would just like to ask, perhaps Ms. Diop can provide us with what you would like to see us do to help your clients and to help you. So maybe we can do that even in a second round or maybe you could just send us an email on that. Ms. DIOP. Okay. Mr. MEUSER. I yield back, Madam Chair. Thank you. Ms. DIOP. Thank you. Chairwoman VELAZQUEZ. The gentleman yields back. The gentlelady from Illinois, Ms. Newman, is recognized for 5 minutes. Ms. NEWMAN. Thank you, Madam Chair. I just have a quick question for Mr. Fogaty and then for Ms. Diop. So, Andrew, first of all, good to see you. Can you share a little bit of what you think would be the number one most powerful thing that Congress can do to help incubators, particularly with entrepreneurs of color and entrepreneurs with disabilities? If you could nail a number one down that Congress could do to provide incubators specifically and then providing--or providing and empowering more incubators, what would that be? Mr. FOGATY. Well, support, of course, in the financial sense for incubators, and I would also--for disadvantaged entrepreneurs, especially the severely disadvantaged entrepreneurs that I deal with, with blind people, severe disabilities, I would like to see some sort of a grant program. Right now, I have a chef who is blind. I would love to see her be able to get a space at O'Hare. She has--she had a restaurant and, fortunately, closed it just before the pandemic--it was a great time to close a restaurant--so that she could start a family, but she is getting ready to get back into it. She would do well at a place like O'Hare or Midway, but the cost of getting into one of those spaces is really prohibitive for a disabled entrepreneur. So, you know, certain segments of our entrepreneurship world do need grants and startup support, and we should also encourage the lenders, the banks, perhaps through the CRA program, to support both incubators and the entrepreneurs themselves. Ms. NEWMAN. Thank you very much. And then, Ms. Diop, so, first of all, congratulations. Amazing. So, if you think back to when you were first starting, what do you think would have been the number one thing that would have helped you with what you are calling the surprise around taxes? And so I was in exactly your shoes 17 years ago, and I was, like, wow, that is interesting. Now, as we all know, that, once you identify your deductions properly, legally, and ethically and all of those things, your taxes come down greatly. And then, when you choose a tax category, it is a breeze then. And, actually, it is much better to be a small business than a big business. And, as you know, moving forward, your rate will likely stay the same or lower based on the Build Back Better plan, so I just wanted to clarify that for the record. That said, what would be the number one thing maybe in terms of, you know, small business literacy on the ledger side or whatever that would have been, gosh, it would have been good to know that? Mr. DOHERTY. Yes. Thank you so much, Ms. Newman, for your question. I would definitely say that what would have been helpful at the very beginning is perhaps when small businesses go to register for their business, and they are in that initial phase of becoming official, you know, any type of documentation or any type--maybe a letter or just something that can really assist them with understanding, okay, now that you have registered a business, here are the most common deductions for the category you have chosen, for the industry that you have chosen. Here are ways that you should be tracking those deductions. Here are resources maybe near you or resources online that can help you to start practicing tracking your deductions and proper accounting measures. Because once I got a handle on my taxes and the expenses, I then immediately had to start coaching other business owners on the proper ways to track their own expenses and track their income because, truly, they had no idea. And if you don't set aside a certain amount of money, then you are slapped with a very large tax bill that then can really set you way back, and you almost feel like you are starting your business from the beginning if you are not fully prepared. So I definitely think measures like that would be very helpful and can further educate business owners even before they start the business on, hey, here is everything you need to be ready for. Yes, it is great, but also make sure that you know what to do when it comes to paying your taxes and when it comes to doing it the legal and ethical way. Ms. NEWMAN. Well stated, and thank you. Great idea. So thank you for your time. And I yield back, Chairwoman. Chairwoman VELAZQUEZ. The gentlelady yields back. The gentleman from Minnesota, Mr. Stauber, is recognized for 5 minutes. Mr. STAUBER. Thank you very much, Madam Chair. You know, the COVID shutdowns were devastating to communities and the American economy. By the end of 2020, government lockdowns eased, businesses began to reopen, and our economy started to rebound. Things were on the up, and businesses had great optimism, but the Democrats marched forward with their first partisan spending spree, the American Rescue Plan, a $1.9 trillion package, despite the nation's positive recovery trends. This was the beginning of the many crises we are facing today. First, the cost of the American Rescue Plan has caused immense inflation. Gasoline is up 42.1 percent. Electricity is up 5.2 percent. Transportation is up almost 5 percent. And all these costs mean less money for our small business owners to take home to their families, who, by the way, are having to pay 12.6 percent more for meat, 12.6 percent more for eggs, and 11.9 percent more for their children's footwear. Second, the American Rescue Plan continued to pay people more money not to work. Now, U.S. employers are still struggling to fill more than 10.4 million job openings. Labor shortages for truck drivers, dock workers, warehouse employees, no wonder there are issues with our supply chain. So here we are in the middle of a crisis. Prices of goods continue to skyrocket right before the holidays. Shelves are empty. A real look at what the Biden agenda has gotten the American people so far, and, yet, the Democrats say let's spend more, trillions more. And how will we pay for it? How are we going to pay for that? Oh, that IS right. Taxes again on small businesses. That is wrong. I simply do not understand how my Democratic colleagues can convince themselves that they are doing good work on behalf of the American people. With that, I would like to use the remainder of my time to turn to the testimony of our witnesses, and I thank you all for being here today. Mr. Keating, do you know how many small businesses are organized as subchapter C corporations or passthrough businesses? Mr. KEATING. Actually, most businesses are passthrough businesses, S corps, LLCs, sole proprietorships and so on, so that is the bulk of--it is--over 90 percent, I believe, off the top of my head, are non-C corps. Mr. STAUBER. Okay. So close to 90 percent. So can you speak to how an increase in the corporate tax rate and a limitation on section 199A deduction will harm these businesses? Mr. KEATING. Well, there are a couple things, real quick, about the corporate tax. First off, there is this misnomer going around that most C corps are large businesses. And, again, when you break down the numbers, most C corps are small businesses, small and midsize companies. So, when you are talking about an increase in the corporate income tax rate, you are talking about an increase directly on many small businesses. And then, obviously, any kind of tax increase on C corps are going to affect their universe, their network of businesses as well, which obviously covers non-C corps that serve those businesses, that work with those businesses and work with their employees. Mr. STAUBER. Well, thank you very much. I think, Madam Chair, Ranking Member Luetkemeyer, I appreciate you holding this hearing. And, you know, we have always talked about small businesses are the engine of our economy. They are the engine of main street. And we continue to tax them and put devastating policies, not allowing them to succeed. We need to protect small businesses and ensure they are the engine of our economy. And I yield back. Chairwoman VELAZQUEZ. The gentleman yields back. The gentlelady from California, Ms. Chu, is recognized for 5 minutes. Ms. CHU. Ms. Diop, I was so inspired to hear your story, and as a Representative of Los Angeles area congressional district, I was especially inspired. You faced obstacles that could have defeated so many people, having been rejected from job interviews 53 times, but you used your creativity and determination to use that $1,200 stimulus check that we sent out to start your own business. And I was thrilled to hear that, because of your success, you hired 5 people and are planning to hire 10 more--5 more for 10 people total. So, Ms. Diop, in April, I reintroduced my legislation, H.R. 2680, the PROGRESS Act, which would support the smallest of businesses, those without any employees, by helping them expand and incentivize third-party investment. This legislation will create a refundable payroll tax for non-employer firms that hire their first full-time employee and also an investment credit to encourage third-party capital investment into non- employer firms. Non-employer firms are much more likely to be owned by women and female entrepreneurs on average and start out with roughly half the capital as male entrepreneurs; hence, the legislation. So can you talk about policies to level the playing field by having such incentives for first-time employees as well as third-party investments could help entrepreneurs like you? Ms. DIOP. Absolutely, and thank you so much for your question, Representative Chu. I would definitely agree that incentives to level the playing field, to use your words, and assisting new business owners, as well as new women business owners, can certainly be helpful because especially those of us who are new entrepreneurs that are mothers, we have an entirely different set of challenges to face when it comes to starting a business. So any measures and incentives that could alleviate some of those to, for example, in my case, give me access to--I had the $1,200 but any other programs that provide grants or simply just access to resources to further assist in starting a business in that way is certainly helpful. Ms. CHU. Okay. Thank you for that. Mr. Fogaty, thank you for your testimony. I am glad that you mentioned that many small businesses struggle to access affordable loans for smaller amounts in the private market, even some nonprofit lenders. In fact, you say that the access to capital is a challenge. And, of course, also some nonprofit lender options exist but that they are typically at a higher interest rate and are less desirable than a bank loan. So that is why I have been working for years to authorize the Community Advantage Loan Program, which provides SBA backed 7(a) loans to this exact subset of small businesses, those who cannot qualify for an affordable loan from a commercial bank or traditional 7(a) lender but need financing that is under $250,000. So I am so pleased that the current Build Back Better framework does include $275 million in funding for the Community Advantage Program. So can you elaborate on this gap in the lending market for smaller dollar loans and what that means for small business borrowers? And can you discuss how SBA programs like Community Advantage, which leverages a government subsidy to offer favorable rates to borrowers, can play in filling the gap? Mr. FOGATY. Sure. The SBA loan programs, all of them, including the Community Advantage, are key to small business growth, and I am all for them, and they should certainly be supported. It is certainly good legislation although, as I did say before, in Chicago, especially on the southwest side, we have a number of ITIN holders who cannot access most of those loan programs. Every small business, every startup, when they are looking for small loans, $20-, $30-, $40,000, it is really not worth the bank's while, in my opinion, to make those loans happen. So I would like to see some way of incentivizing the banks, streamlining the reporting procedures, helping us as the business advisors make these loans available to small businesses because there is that gap from the small amount of startup funding when you get going, and then, when you are ready to expand, hire employees, you are not looking for a million dollar loan. You are--many of my clients are looking for $20-, $30,000, and there are just not a lot of choices out there. Thank you for your question. Ms. CHU. Thank you. I yield back. Chairwoman VELAZQUEZ. The gentlelady yields back. Now we recognize the gentlelady from New York, Ms. Tenney, for 5 minutes. Ms. TENNEY. Thank you, Chair Velazquez and Ranking Member Luetkemeyer, for holding this minute. I am a small business owner in New York. Our business is celebrating its 75th year. It is a very difficult landscape in New York, high taxes, a lot of frustration obviously with the employment situation now, but 95 percent of the businesses and the people in my district actually got a tax cut from the Tax Cuts and Jobs Act. Only the wealthiest actually received a tax increase under the last plan. It was a breather for us to finally get some relief to reinvest in our communities, reinvest in our business from, you know, the heavy tax burden that is put on us by New York State. But my question and my concern is that 60-plus or more percentage of these new jobs always come from the small business community like ours. We would love to expand and grow, and we know that venture capital is really important. But one of the things that, in being the heart of the industrial revolution started in my district when the Erie Canal was started, is the loss of a lot of these manufacturing jobs, a lot of jobs where--a lot of the manufacturing sector where we have a lot of investment, but we need long-term solutions, and we have long horizons that we need to meet which we are going to stay in there for a longer period of time. So we also provide a lot of jobs for people who don't necessarily have to be skilled initially, but we want to put the training in. We take advantage of that if we can. And that is why, you know, one of the initiatives I put through is the American Innovation and Manufacturing Act, which would--and I am grateful for the bipartisan sponsorship of this bill--which would give innovation to small manufacturers and give them the flexible capital that they need. So this is really--you know, we think this is a first step. But I wanted to ask, first, Mr. Fogaty, because I know this is a huge issue. It is a huge issue for my company. We are small. We only have 70 employees. But what is--how important is it to support domestic manufacturing and that we need to streamline the reporting regulations? You alluded to it in investing in small business, but specifically dealing with, you know, the ability to thrive in a State like New York where we have such heavy regulation? Mr. FOGATY. Yeah. No manufacturer likes regulation, and they have been having a very, very tough time of it. I would also--when I talked about streamlining, I think that the manufacturers that I work with would like to see some simplification, some streamlining of the procurement process. The Systems Award Management system, SAM, which is the federal government system for enrolling to get federal contracts, last year, I had a couple of manufacturers pivot pretty quickly from what they were doing to making PPE. And this is a time when the masks were, you know, in great demand. And they were able to pivot quickly, but they were not able to sell to the government in an expedited way. And some of the systems, as I said, the SAM system. I have helped a couple of blind entrepreneurs navigate the SAM system, and it is--you know, I don't want to be overly critical, but it is certainly in need of an update. Ms. TENNEY. We got some of that criticism as well, you know. Good intentions, but in practice, it was hard for a lot of our entrepreneurs to really access it. Mr. FOGATY. Yeah. Absolutely. And, again, we really, really need to--I am sorry. Ms. TENNEY. Go ahead. No. Go ahead. Mr. FOGATY. I was going to say we really need to support domestic manufacturing, American manufacturing through things like on-the-job training programs so that we can bring a job seeker in and the manufacturer, the employer does not have to look to somebody who already has these skills. There is an incentive so they can train them. Ms. TENNEY. Yeah. We have invested heavily in that with our business as well. Thank you. Mr. Keating, you said in your testimony that the recovery from the pandemic slowed dramatically in the third quarter of this year, fiscal year 2021, and that real GDP grew at a mere 2 percent in the third quarter. You said this was largely because of the consumer pullback. Why do you think consumers lost confidence in the recovery, and what steps can we do to restore confidence? Really quickly because I only have 20 seconds left. Mr. KEATING. I would suggest consumers--it was also business investment pulled back. I think the signals again from Washington were very troubling. In your State, I am one of the people that just left. I moved to Florida from New York. I grew up there. The tax and regulatory burden is a mess. That is what you have to deal with to get things right in New York, and good luck. But, yeah, those signals from Washington, I think, had a real effect. Listen. I said for the longest time, and I know I am probably talking too much, but after we experienced the bounce- back, my question has always been, what are we going to do then on the policy front to make sure that we accelerate economic growth going forward? And what we are seeing right now is not the answer. Ms. TENNEY. Thank you. I really appreciate that. Chairwoman VELAZQUEZ. The gentlelady's time has expired. Now we recognize Mr. Evans from Pennsylvania for 5 minutes. Mr. EVANS. Thank you, Madam Chair. Ms. DeVane, it is great to have you here. And, in my younger years before I became a Pennsylvania State legislator, I worked as a job developer at the Urban League in Philadelphia. I have seen tremendous work that your organization does to advance economic opportunity for Black Americans and for those in underserved communities. Despite the toll the pandemic has taken on the economy here, there has been some silver linings. Last year, Americans filed paperwork to start 4.3 million new businesses. This is a 24-percent increase from 2019. This 24-percent surge in entrepreneurship was largely concentrated in Black and Hispanic communities with high median income. Ms. DeVane, this is my question to you: What factors do you think contribute to this increase in Black and Hispanic ownership businesses? Ms. DeVANE. Thank you very much for the question, Representative Evans. And, of course, once an Urban Leaguer, always an Urban Leaguer. It is great to see you. I think a couple of things have contributed to that. One is that many people were laid off from their jobs and needed, quite frankly, to find employment and took to entrepreneurship as an opportunity to gain some economic freedom and independence. I think a number of other entrepreneurs came about because they wanted to start their passion projects. They turned their side hustles into businesses because the environment was right to do so. There were grants available from private companies. There were government grants available. There were PPP loans available for those who could get them. I think, for many business owners, this was an opportune time to delve into the workforce. Mr. EVANS. Ms. DeVane, the National Urban League website states the number one challenge facing 80 percent of small business owners is lack of capital and cash flow. Has this changed during the pandemic, and if so, how? Ms. DeVANE. Yeah. We saw our business owners tremendously affected by the pandemic. Most of them were already struggling beforehand. We have talked about that a little bit. They didn't have the back office, the fiscal systems, the operational systems, the strategic management in place, and so, when the pandemic hit, it was just exacerbated. And I think many of these businesses struggled and shuttered their doors. I think the ticket for many of these business owners is the technical assistance provided. Capital is sorely needed, and we have talked about that. But capital always has to be undergirded by coaching, by training and development. You don't know what you don't know, as Ellie found out with the tax situation. So I think for us, the National Urban League, our affiliate network through our entrepreneurship centers have been providing the knowledge and the tools and the skills that folks need to very develop those operational systems, put fiscal management practices in place, and to help people to strategize to grow their businesses and to avoid this type of situation as they learn to pivot during crises. Mr. EVANS. Ms. DeVane, many small businesses fail after just a few years. Can you tell us what Congress can do to ensure many of the businesses that started during the pandemic, especially minority businesses, continue to grow and provide jobs and opportunities in their communities? Ms. DeVANE. Absolutely. I think that what those businesses need--obviously, capital is always sorely needed, but in addition to that, it is the technical assistance. I think that this SBA community navigator program is a great example of what government can do. This program will help to use trusted advisors, such as the Urban League affiliates, to go out into communities where business owners don't have access to these tools, don't understand what is available to them through the government, and we can go out and talk about the resources that are available and drive people to the SBA and to other organizations that can provide the skills that they need to grow these businesses. We really need technical assistance. We really need incubation programs that help people to develop and scale and grow their businesses, and we need capital. Mr. EVANS. I think I have a few more seconds left. My home city of Philadelphia had a poverty rate of 24.5 percent in 2020 with two-thirds of those at poverty being Black or Hispanic. How do we better reach Black and Hispanic entrepreneurs in communities with lower median income? Ms. DeVANE. We used trusted advisors like our Urban League affiliates. We live and we work in those communities. We know those communities. We provide wraparound services, not just entrepreneurship, through our Urban League affiliates. And those are the folks that know business owners in those communities, those are the ones that are trusted by the business owners, and those are the ones that need to be going out like we are doing through our Urban League affiliates, evangelizing, providing services, technical assistance, and capital to those business owners. And I think that is the ticket. Mr. EVANS. Thank you. I yield back the balance of my time, Madam Chair. Thank you. Chairwoman VELAZQUEZ. The gentleman yields back. The gentlelady from California, Ms. Young Kim, Ranking Member of the Subcommittee on Innovation, Entrepreneurship, and Workforce Development, is recognized for 5 minutes. Ms. YOUNG KIM. Thank you, Chairwoman. I would like to go right into questioning Mr. Keating. Can you elaborate on how continual lackluster job growth, like we saw this past September, this incentivizes individuals from establishing their own small business? Mr. KEATING. I am sorry. The lack of job growth; is that what you are saying? Ms. YOUNG KIM. Yeah. The lack of job growth. Mr. KEATING. Yeah. I think what we have heard here is absolutely correct. When you look at entrepreneurship, there are different types of entrepreneurs, right. Some dive into the waters; others get pushed. And what we saw during the pandemic is, I think, a combination of people being pushed, right. I put in my testimony, Walt Disney once said, when you can't get a job, you start your own business, right, and that is what we have seen here. But, also, I think the fact that people have experienced more independent work or independence, and I think that has them thinking about being their own--you know, owning their own business, looking towards entrepreneurship. I think, in a very tough time, those are some of the positives that hopefully are going to come out of this. Ms. YOUNG KIM. If we are not hitting the mark with expected growth on GDP, how does that affect business confidence in the medium to long term? Mr. KEATING. Yeah. Well, there is uncertainty now, right, and we saw the bounce-back, the snap-back, and we were pleased about that, even with all the problems, supply chains and labor shortages, and all of a sudden, we see GDP kind of put the brakes on at 2 percent here. Now, there are a whole host of issues, I think, that are in the mix, including the Delta variant and so on and so on, but this just raises more questions. That is not good for business. It is going to raise more questions with investors, right, because we saw a part of the story on GDP was the slowdown of business investment. Business investment is critical now, and it is critical for future growth. So that just adds more uncertainty into the equation, and that has me concerned. Ms. YOUNG KIM. Yeah. You know, I represent southern California, and my home State of California has one of the highest unemployment rates in the country, and unemployment claims keep raising. I mean, it keeps going up, not decreasing. It is a concern for us from the big State of California. But, Mr. Keating, in your written testimony, you noted a MetLife U.S. Chamber survey indicating 44 percent of small businesses are finding it harder to fill the open positions. Can you tell us if you have found a correlation between small businesses not having available workers and the decline in the labor force? Why do you think we are seeing a decrease in labor force participation? Mr. KEATING. Yeah. That is--you know, when you look at that unemployment number, I always tell people, go deeper when you look at the unemployment rate because right now, we saw an improvement in the unemployment rate. Like, hey, wow, that is great, right, but part of that improvement was people leaving the labor force again. Now, with the pandemic, everybody should be coming back, right, so this is--again, it is an issue that has been around really since the 2008 recession. Why have people not come back to the labor force to the degree that they should? Some people say it is age, but when you zero in on the work, you know, working age, 25 to 54, we are still not back to where we should be, so that has me very concerned. I am hoping that these business application numbers maybe point to people becoming entrepreneurs. That would be a net positive. But I am not quite sure what the answer is. There are a whole host of things, I think, culturally, economically that are in the mix here. And, again, that is something that I think we need to wrestle with and really delve into. Ms. YOUNG KIM. Something we need to continue to think about and worry about, you know. One more question to you, Mr. Keating. Some parts of California are experiencing some of the highest average gas prices ever. In some parts where I am in southern California, L.A., Orange County, they have hit a 13- year high. Some place I saw close to $6 per gallon. Can you speak of how supply chain bottlenecks and even the threat of higher taxes can impact entrepreneurial behavior? Mr. KEATING. Yeah, all those things. I mean, when you are talking about gas prices, right, that is fundamental to everybody, right, including small business owners. So, you know, California does have to deal with its own regulatory issues and tax issues. There is a reason why, even when gas prices are low, you guys still tend to be among the highest. So I think part of it is a California issue. Ms. YOUNG KIM. Yeah---- Mr. KEATING. But then, obviously, nationally, we are all dealing with the bottlenecks and the shortcomings and so on. So, again, I think it is a question of, yes, the private sector has got to work through this, but we have got to make sure that government allows private and doesn't get in the way of doing that. Ms. YOUNG KIM. Thank you very, very much. I am happy to yield back the balance of my time. Chairwoman VELAZQUEZ. The gentlelady yields back. Now we recognize the gentleman from Minnesota, Mr. Phillips, Chairman of the Subcommittee on Oversight, Investigation, and Regulations. Mr. PHILLIPS. Thank you, Madam Chair. Greetings, colleagues, and great gratitude to our witnesses for being with us today. We all know the pandemic is wreaked havoc on our small business ecosystem, both in the U.S. and around the world. The recent surge in entrepreneurial activity, however, is really a welcome silver lining, I think we would all agree. They represent seeds of optimism, if you will. Now, we, Democrats and Republicans on this committee, have to do everything we can to water those seeds and ensure new businesses have access to the resources and mentorship and assistance necessary for them to keep their doors open and generate economic success. And, you know, I think it is fair to say that all of us on this committee want to see Americans become self-sufficient. But too many people who have dreams, entrepreneurial dreams and ideas, still can't access capital, mentorship, counsel, and assistance. I hope we can unite around this. And my first question is to you, Ms. DeVane. And I think it is fair to say that human beings tend to seek out others who share similarities. It is part of the human condition. It is also a phenomenon that, in my estimation, can adversely affect already underserved communities. A lot of the credited investors are a disproportionate number, of course, in America are older, White, and male, frankly, like me, and they tend to invest in entrepreneurs who share similar backgrounds. And you have noted in your testimony that this contributes to the very disparities we are talking about between White and minority- owned business owners and their abilities to access capital and counsel. So if you might just detail for us policies that you think can directly address that issue and help underserved communities with entrepreneurial dreams and ideas gain access to credit and other federal resources. Ms. DeVANE. Certainly. Thank you for the question, Representative Phillips. I think that one of the things that needs to be addressed--and we have done this at the National Urban League. When the PPP program first came out and a lot of the Black-owned and other minority-owned businesses didn't have access, we worked with the government to make sure that minority depository institutions and CDFI, community-based and community mission-driven institutions played a role and had access to those programs so that they could provide those businesses with capital. Those are businesses that operate in underserved communities. They are trusted by those communities. Having support and the government supporting those types of financial institutions is certainly a ticket. Also, ensuring that SBA lenders, many who our business owners did not have relationships with, have access to and are incentivized to work with those small businesses and also to certainly provide small dollar loans with low interest rates that are accessible and reasonable for small businesses is something that the National Urban League is very interested in making sure that our business owners have access to. Mr. PHILLIPS. Great. If I could go a little further upstream, my friend and colleague Representative Van Duyne from Texas and I were speaking the other day about business day. I remember business day in my school, elementary school, where we learned to start a little organization, whether it is selling lemonade or a service or printing T-shirts, whatever you have. What do you think of that notion of trying to establish entrepreneurial education as part of the public curricula around the country so we can teach kids who don't have entrepreneurial models in their households or communities often, at least the underpinnings of business and try to encourage a more self- sufficient entrepreneurial generation? What do you think of that notion? Ms. DeVANE. That is a great question, and we are huge supporters of that notion. In fact, we--you know, I live in New Rochelle, a little bit upstate of New York City, and our high school has an entrepreneurship program. And I am starting to see many of those, and we are fully supportive of those types of programs. It is never too early for a child to have an option not to go into the workforce but to be financially independent through owning their own business. And our Urban League affiliates are very successful, many of them, with youth entrepreneurship programs down in the elementary and the high school level. As a matter of fact, our Los Angeles Urban League recently over the summer held a small business camp for youth entrepreneurs, and one of our entrepreneurs was extremely successful, just got $10,000 through another organization pitching her business. And so, we are very much in support of youth entrepreneurship. It is never too early. Mr. PHILLIPS. Great. Since I only have 15 seconds left, if the three other witnesses would just raise your hand if you like that idea of trying to inspire business days and entrepreneurship education. Good. I like that. We don't see too much unanimity these days. Thank you all. I yield back my time and am grateful to all of you for being with us. Chairwoman VELAZQUEZ. The gentleman yields back. The gentlelady from Texas, Ms. Van Duyne, Ranking Member of the Subcommittee on Oversight, Investigations, and Regulations is now recognized. Ms. VAN DUYNE. Thank you very much, Ms. Chairwoman, and I appreciate Congressman or Chairman Phillips, your shoutout. Yeah. We have--it is amazing when you talk to each other how much you actually do have in common. And I appreciate your last question and everybody agreeing on it. When you actually try to find common ground, you can find it. So I appreciate that very much and all of you being with us today. Over the past 2 years, small businesses have struggled to survive in this new economy, as my colleagues on the other side have termed it. Now, as we look around, the environment our small businesses and entrepreneurs are living in is dismal. Every economic report we see falls short. GDP growth has slowed to 2 percent. If you take into account what folks had, it is actually zero percent that we have seen. Inflation has hit record levels, raising prices for all Americans, and labor is in short supply. At a time when small businesses need to focus on keeping their shelves stocked, they must begin planning for the higher taxes and increased regulations that come within the two historic new spending bills that some progressive Democrats are rushing to pass. If we want to retain our uniquely American entrepreneurial spirit, the government shouldn't be paying people to stay more at home and to work and trying to regulate American businesses out of existence. Instead, we should be pushing for lower taxes and lower barriers to entry for entrepreneurs. Mr. Keating, I really appreciate your comments here today. A recent World Economic Forum report pointed out that supply chain barriers are hard to overcome for small businesses due to the significant capital investments needed. You know, we have seen Target, Walmart, others are able to figure it out. They have got other avenues that small businesses simply don't. So, in your view, how do regulations impact small business supply chains and their ability to adjust compared with larger firms? Mr. KEATING. Well, by definition, greater regulation is going to make you less innovative, less--there is less agility there to respond as needed, so that is a big part of the supply chain challenges. Now, on the positive side, to go positive for a moment, one of the things about small businesses is that they are more agile, right, so they can work to find ways to perhaps meet, you know, the needs of their customers where bigger businesses might be a little slower. I am not denying your point. Your point is spot on in terms of the Walmarts and Amazons and so on, but the great thing about being a small business owner and entrepreneur is that you have that ability to pivot, and we have seen that in this pandemic. So the challenges are there. More regulation does not help. It hinders it. But being an entrepreneur in and of itself allows you to kind of do some things that a larger business can't. Ms. VAN DUYNE. We just left--it is ironic because I just left. I am on the Transportation and Infrastructure committee as well, and we just had a focus on supply chain issues. We had folks there with trucking, with shipping logistics, and just talking about some of the barriers that government has actually put in their way of being able to be more productive, more efficient, and it is actually hurting the supply chain. One of the things that they discussed was the vaccine mandates. And, obviously, we are in a different moment laborwise. So we spoke with businesses of all sizes, and a common concern is the upcoming vaccine mandate that is being imposed by the Biden administration. How do you think this mandate will affect small businesses? Mr. KEATING. Well, that is the question, isn't it? And that is part of the problem is that we don't know. You know, our organization is--we say we are pro-vaccine, antimandate. Businesses are pretty good at figuring out their own situation and maybe how they might have to deal with certain employees in a certain way, right. When government steps in and does the mandate thing, that doesn't--you know, you don't have that ability to now deal with your particular situation and be able to deal with your particular employees. The flexibility is needed, I think, for small business owners in a big way. Ms. VAN DUYNE. I mean, the concern was--and I think you know our Transportation Secretary, Pete Buttigieg, was very callous in his response. The items in question are not simply Christmas gifts or toys. I mean, we are talking about liquid oxygen. We are talking about seeds and fertilizer to be able to put food into the ground for crops. We are talking---- Mr. KEATING. Pharmaceuticals. I mean---- Ms. VAN DUYNE. Pharmaceuticals, you know, things to be able to keep people's homes warm that don't live on the main grid. Can you explain to me some of these logistics concerns are moving forward, and if you have, in the next 18 seconds, any kind of federal regulations that you think are impeding our progress? Mr. KEATING. Oh, my goodness. Off the top of my head, I can't give you an exact regulation, but I think the key point that I would like to make is all of those industries you mentioned and every single other one are overwhelmingly populated by small businesses. So it is very important for lawmakers to understand that, whether you are talking about trucking, pharmaceuticals, all the way down the line, every one of those is about small businesses. The numbers are there. I mean, I can provide more data if you want, or you can go to our---- Chairwoman VELAZQUEZ. Time has expired. Mr. KEATING. Sorry. Chairwoman VELAZQUEZ. The gentlelady from Pennsylvania, Ms. Houlahan, is recognized for 5 minutes. Ms. HOULAHAN. Thank you, Madam Chair. And thank you very much to all of you all for coming and joining us today. My questions are going to be focused on ESG or environmental, social, and governance ideas, which I think are something that has gained a lot of traction over the past 15 or so years and across the nation. And, especially within my Commonwealth of Pennsylvania, business incubators have been serving as an important part to help startups and individual entrepreneurs scale their businesses, and they provide a range of services, as we have talked about, from legal advice to venture capital funding. But studies have shown and the pandemic has borne out that companies that have a strong environmental and social governance aspect or criteria to them have outperformed companies that did not during this very critical time. And, in fact, this initiative was started on the heels of 2007 and 2008's financial meltdown. And so, as the cofounder, along with Representative Phillips, of the Stakeholder Capitalism Caucus and as an entrepreneur myself who has built a lot of CSR ESG companies, I really acutely and personally understand the importance of ESG as a model for investors to evaluate companies, for employees to decide which ones to work for, for communities to embrace these kinds of companies, for all of the different stakeholders who are involved in these small business enterprises to be able to understand what a good company looks like. So, starting with Mr. Keating, if I could, could I ask you to speak to any efforts that the incubator is acting on to encourage this kind of model for small businesses? And, if it is, can you discuss why this model is important during the midst of a pandemic or, frankly, at any point in time? And if the incubator does not encourage ESG criteria, can you explain why not? Mr. KEATING. I am not an expert in this area at all. The only thing I will say generally, as an economist, that I think it is great that we have all sorts of different business models out there. And, ultimately, consumer sovereignty, consumers in the end decide what works and what doesn't in the marketplace, and we will see that with these types of companies and other more traditional or innovative business models. Ms. HOULAHAN. I think it is beyond the consumer. I think it is also investors. I think it is also employees. I think it is kind of the entire ecosystem, the entire stakeholder ecosystem that makes the determination. And, as I mentioned, this kind of a company has really--I hesitate to say flourished because I don't think many of us have flourished during this difficult time, but I think they have proved more resilient than any other kind of corporation or structure. So I would like to throw that open to anybody else on the panel. Ms. Diop, perhaps if you have any input in that, whether or not you are aware of these kinds of ideas and whether or not you are embracing of them. Ms. DIOP. Thank you so much for your question, Ms. Houlahan. Certainly, it is not my area of expertise, but I am from Los Angeles, California, and environmental measures are very important to us out there and me personally. So I definitely think that access to more information about these types of programs so that small business owners or aspiring business owners could implement them into their business model would certainly be helpful. It would certainly be something that could even increase the awareness of these types of programs so that more people could participate. Ms. HOULAHAN. Thank you. Does anyone else on the panel have any input into this question before I move on? Mr. FOGATY. Yeah. This is Andrew. I would just like to say I agree with the points that have been made. Most of our entrepreneurs, especially the younger ones, are very sensitive to climate change and the challenges that they create. One of my client companies, Omni Ecosystems, was started by Molly Meyer. She has developed a low weight soil. This is a little bit out of my league, the science stuff, but it is a low weight soil so that now rooftop gardens or urban farms are much more viable options because they don't--it is lightweight soil, and it retains moisture. So, yeah, absolutely climate change and being aware of the ecological impact is very important among-- -- Ms. HOULAHAN. Thank you, sir. And, as a point of clarification, although the E, obviously, in the ESG is for environmental, the S and the G are for social and governance as well, and they have everything as well to do with how a company is structured, whether or not all employees or some employees are included in things like equity decisions or whether the board is inclusive, those kinds of things, as well as making sure that we are thinking about the whole impact that a business has and that there aren't externalities that are passed on to other organizations. And, with that, I will yield back my time. I really appreciate you guys and the opportunity to speak to you. Chairwoman VELAZQUEZ. The gentlelady yields back. Now we recognize the gentleman from New York, Mr. Garbarino, for 5 minutes. Mr. GARBARINO. Thank you, Madam Chair, and to the Ranking Member for hosting this hearing today, and thank you to the witnesses for being here. Mr. Fogaty, I have a question for you. You assist small businesses, business owners with business planning, market research, and financing. In the current economic turmoil of labor shortages, price spikes, supply chain disruptions, and inflation, what advice are you giving them? Mr. FOGATY. Well, it very much depends on what type of business that I am dealing with. Over the past 18 months or so, we have been very much focused on keeping--on having businesses survive, so things like EIDL and the Paycheck Protection Program and that type of thing. Startup funding is--and we are kind of repeating ourselves here, but startup funding is very much a challenge. I am sure the other guests on the panel would agree, and small business funding to grow, small loans below $50,000, are also very difficult to come by. So, as far as what I would--I would say that, for Congress, I would like to find some way, I would hope you would find some way of incentivizing banks to lend more to startups and in smaller amounts, and that is what I am really hoping. But, yeah, for the past 18 months, it has been a lot of work with government programs to make sure that the companies survive. Mr. GARBARINO. Okay. And then I imagine anybody dealing with getting companies to survive, a lot of businesses prepandemic did not have an online presence, and it was, I guess, for a lot of them to survive, they had to convert to at least having some sort of online presence. I am the Ranking Member on the Homeland Security Cybersecurity Committee as well, you know, and we have seen, especially in the past couple years, a lot of ransomware attacks, almost 50 percent of them, are targeted at small businesses in a small amount, but, you know, it is a small amount in the grand scheme of things but not to a small business, who has to pay a couple thousand dollars for a ransom. What are you--or any of the other witnesses on the panel today--what are you saying to clients or prospective clients or small business owners on how to deal with this issue because a lot of people don't understand cybersecurity? It is not at the top of their list when they are starting a business. Mr. FOGATY. The Illinois Small Business Development Centers, of which we are a part, we do host cybersecurity experts who have the--where they will come and speak to the small businesses. And, actually, the gallery incubator in Evanston where I am a volunteer mentor, they are--one of the founders is very savvy in the cybersecurity realm. So, yeah, I can't agree with you more. Cybersecurity is key. And certainly an online presence is absolutely vital to any small business. Mr. GARBARINO. And anybody else can jump in, but I would think most new people who start a business now realize they have to have an online business, but I guess some of the small businesses that have been around for a while, it is something they never had to do before. I don't know if Mr. Keating or Ms. DeVane or Ms. Diop want to join in, you know. What are you seeing with current small businesses, and how are they doing making this change? Ms. DeVANE. Sure. I would definitely add that you are a hundred percent on point. One of the things that we saw with our small businesses, many of our businesses are more mature in age and more traditional and really aren't savvy or were not savvy with social media and with technological changes. So, it was a real eye opener for them, and we really had to help them transition into the digital world. Some of that was by necessity because everything had to be Zoom, and nothing was in person, and everybody has phones. But the thing is that we really had to take the type to train them with those tools, branding, marketing your business in a world that is virtual, and social media was very important. And the other thing is through the CARES Act funding that we had, we ran about seven different webinars and workshops for businesses to help them with COVID, and one of those was on cybersecurity. We still provide access to that through all of our affiliates and online through the National Urban League's website, so folks can go in any time and look at that information. Mr. KEATING. If I could add, what is fascinating is some of the survey results that we have had in terms of the impact that this technology, social media, has had on starting up a business. You know, one of the results, we saw that 80 percent of people said that they were able to start up their business because of the affordable nature of online advertising. So it is not just--obviously, it is helping existing businesses, but it is also boosting startups, which is a very exciting aspect of this. Mr. GARBARINO. I appreciate that. And I believe I am out of time, so I yield back. Chairwoman VELAZQUEZ. The gentleman yields back. Now we recognize the gentlelady from Florida, Ms. Salazar, for 5 minutes. Ms. SALAZAR. Thank you, Chairman Velazquez and Ranking Member Luetkemeyer, for holding this important hearing. This comes at a pivotal time for countless small business owners and their families nationwide. And I wanted to thank all the guests that have been here and exposing their testimony, specifically, Mr. Raymond Keating. You were mentioning how constructive pro-immigration policy agenda would be good for the economy, and I completely agree, so I wanted to ask you, what are the major changes to the immigration system that you think we should be implementing in this country directly to improve the small business community space? Mr. KEATING. Well, I think that, number one, it is important to understand that foreign-born individuals have a much higher rate of entrepreneurship than native born. And that shouldn't surprise us because, you know, it is pretty risky to move from one country to another. Having said that, I think some sort of entrepreneurial visa, right, is critical. Why aren't we offering this and attracting entrepreneurs from around the world to the United States? There is no downside. I can't figure out any kind of downside, so I think that is step one. And then, obviously, step two is just getting more--our immigration policy more in tune with labor needs, you know. Right now, we are coming out of the pandemic, but not too far down the road, we are going to have additional problems in terms of working age population and so on, and at the other lower end of skills and the upper end of skills. So I think immigration can help us with that issue in a big way, but the entrepreneurship aspect is critical. Ms. SALAZAR. And, when you are talking about labor, you are talking about basically merit-based visas. What would be the ideal scenario, according to you? Mr. KEATING. Yeah. Well, I think that merit-based, the idea that this is what I want to do, I can do--what I can contribute to the United States as--you know, whether it is high-tech visas or, again, at the lower end of the skill level. So I think it is--we just have to be more cognizant of the realities in our economy. I mean, listen. I am an economist, so I like to--I would love our immigration policy to be focused more on economics than some of the politics that we hear being tossed about. And I think, when you look at the economics of immigration, listen. Every poll of economists always--they always come out lopsided that immigration is a net economic plus for our country. And it can be in all sorts of ways, whether it is lower skilled workers, as I said, high skilled or entrepreneurs. Ms. SALAZAR. So why do you think that we have not been able to pay attention to what the marketplace is saying? You say that you are an economist. How do you interpret? Mr. KEATING. Well, I think--again--yeah. I think the--I think it is politics overruling economics, unfortunately. I think--listen. We also--we have history. We are an entrepreneurial nation. We are a pro-immigration nation. We are a nation of immigrants; it is true. But we have also had our battles along the way where we have not been, at various times, you know, exactly friendly towards immigrants. So I think, to the extent that we can talk about how immigrant workers, for example, new immigrants coming to this country are willing to work, they are complementary to the people that are already here. So, for the most part, overwhelmingly--I mean, it is not even close--they are not taking jobs from somebody else. They are adding to the economy. And that is the part, I think, that we economists fall down on, right. We have to tell people that additional producers, additional consumers, and additional entrepreneurs all lead to economic growth. It is not a case that the pie is only so big, and we are going to divvy it up. So I think it is talking more about growth and how immigration can help. Ms. SALAZAR. And, finally, in the last minute that I have, I wanted to go back to the line that you said, that some people believe that new immigrants or newcomers are going to be taking jobs away from Americans. Why isn't that true? Mr. KEATING. Because, as I said, they--what you see in the research and, you know, in terms of economics straightforward is that they come in and largely are doing work that other people aren't doing. Either they don't want to do it, or we don't have enough people doing it. So, again, in filling those needs, those vacancies, that is how we say they are complementary workers. So, therefore, they are helping other people to be more productive. So it is a good news thing for everybody. But sometimes you would never understand--well, oftentimes, you don't understand that, listening to the politics of it. So, again, I think if we can get back to understanding the role that immigrants have in the workforce and their role in entrepreneurship, I think we can make some great headway in getting to a more constructive immigration policy. Ms. SALAZAR. So I like this complementary workers. Mr. KEATING. Yes. That is what they do, yeah. Ms. SALAZAR. Very good. Well, sir, thank you for explaining that to us. So you are telling me that it is up to us, the public servants, the people that have been elected, the politicians, to learn and to explain to the rest of the American population that the immigrants are coming to give, not to take away? Mr. KEATING. Absolutely. And, to the extent that we have political leaders that can do that, that is a huge plus to talk about, again, being a welcoming society and talking about how this is pro-growth, and it is good for everybody. Ms. SALAZAR. Thank you. I yield back. Chairwoman VELAZQUEZ. The gentlelady yields back. Thank you so very much to all the witnesses. Mr. Keating, I didn't have time to ask you a question, but I really appreciate your answers to Ms. Salazar regarding immigration. I think this is a part of a discussion that needs to happen among Members of Congress and that we approach this issue with the honesty that it requires. With that, I want to thank all of the witnesses for being here today. Your testimony is proof that, even in the darkest of times, the spirit of America's entrepreneurs shines bright. The post-pandemic economy presents many opportunities and challenges for small business owners. As the voice of small businesses in Washington, we must work as a committee to support these new business owners and help their firms flourish. These new businesses will be critical as we work towards full economic recovery and future growth. I look forward to working with Committee Members to ensure that small businesses have the resources they need to navigate this changing economy. I ask unanimous consent that the article and report by the Kauffman Foundation entitled ``America's New Business Plan'' is submitted for the record. With that, I will ask unanimous consent that Members have 5 legislative days to submit statements and supporting materials for the record. Without objection, so ordered. If there is no further business to come before the committee, we are adjourned. Thank you. [Whereupon, at 12:06 p.m., the committee was adjourned.] A P P E N D I X [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] [all]