[Senate Hearing 115-20]
[From the U.S. Government Publishing Office]
S. Hrg. 115-20
NOMINATION OF LINDA E. McMAHON,
TO BE ADMINISTRATOR OF THE SMALL BUSINESS ADMINISTRATION
=======================================================================
HEARING
BEFORE THE
COMMITTEE ON SMALL BUSINESS
AND ENTREPRENEURSHIP
UNITED STATES SENATE
ONE HUNDRED FIFTEENTH CONGRESS
FIRST SESSION
__________
JANUARY 24, 2017
__________
Printed for the Committee on Small Business and Entrepreneurship
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COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP
ONE HUNDRED FIFTEENTH CONGRESS
----------
JAMES E. RISCH, Idaho, Chairman
JEANNE SHAHEEN, New Hampshire, Ranking Member
MARCO RUBIO, Florida MARIA CANTWELL, Washington
RAND PAUL, Kentucky BENJAMIN L. CARDIN, Maryland
TIM SCOTT, South Carolina HEIDI HEITKAMP, North Dakota
JONI ERNST, Iowa EDWARD J. MARKEY, Massachusetts
JAMES M. INHOFE, Oklahoma CORY A. BOOKER, New Jersey
TODD YOUNG, Indiana CHRISTOPHER A. COONS, Delaware
MICHAEL B. ENZI, Wyoming MAZIE K. HIRONO, Hawaii
MIKE ROUNDS, South Dakota TAMMY DUCKWORTH, Illinois
JOHN KENNEDY, Louisiana
Skiffington E. Holderness, Republican Staff Director
Sean Moore, Democratic Staff Director
C O N T E N T S
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Opening Statements
Page
Risch, Hon. James E., Chairman, and a U.S. Senator from Idaho.... 1
Blumenthal, Hon. Richard, a U.S. Senator from Connecticut........ 1
Murphy, Hon. Christopher, a U.S. Senator from Connecticut........ 2
Shaheen, Hon. Jeanne, a U.S. Senator from New Hampshire.......... 5
Witness
McMahon, Linda E., of Connecticut, to be Administrator, Small
Business Administration........................................ 6
Alphabetical Listing
America's Small Business Development Centers
Letter dated January 14, 2017................................ 106
Association of Women's Business Centers
Letter dated January 26, 2017................................ 107
Blumenthal, Hon. Richard
Opening statement............................................ 1
Casey, Maura, Connecticut resident
Letter....................................................... 108
Federal Allies Institute
Letter dated January 24, 2017................................ 109
McMahon, Linda E.
Testimony.................................................... 6
Prepared statement........................................... 9
Responses to questions submitted by Ranking Member Shaheen
and Senators Booker, Cantwell, Coons, Heitkamp, Hirono,
Inhofe, and Markey......................................... 52
Murphy, Hon. Christopher
Opening statement............................................ 2
National Association of Development Companies
Letter dated January 23, 2017................................ 110
National Association of Government Guaranteed Lenders
Letter dated January 23, 2017................................ 111
Risch, Hon. James E.
Opening statement............................................ 3
Rounds, Hon. Mike
Letter from the Small Business Administration Office of
Advocacy dated October 1, 2014............................. 25
Shaheen, Hon. Jeanne
Opening statement............................................ 5
Small Business and Entrepreneurship Council
Letter dated January 23, 2017................................ 112
Small Business Investor Alliance
Letter dated January 24, 2017................................ 114
Small Business Technology Council
Letter dated January 26, 2017................................ 115
U.S. Chamber of Commerce Small Business Council
Letter dated January 30, 2017................................ 116
NOMINATION OF LINDA E. McMAHON, TO BE
ADMINISTRATOR OF THE SMALL BUSINESS ADMINISTRATION
----------
TUESDAY, JANUARY 24, 2017
United States Senate,
Committee on Small Business
and Entrepreneurship,
Washington, DC.
The Committee met, pursuant to notice, at 10:31 a.m., in
Room SR-428A, Russell Senate Office Building, Hon. James E.
Risch, Chairman of the Committee, presiding.
Present: Senators Risch, Rubio, Paul, Scott, Ernst, Inhofe,
Young, Rounds, Kennedy, Shaheen, Cantwell, Cardin, Heitkamp,
Markey, Booker, Coons, Hirono, and Duckworth.
Chairman Risch. The Committee will come to order. This is
the time and place for the hearing to review the qualifications
and start our advise-and-consent process, as afforded by the
Constitution, for Mrs. Linda McMahon to head the SBA.
Linda, thank you so much for being here, and we have
Senators Blumenthal and Murphy to introduce Mrs. McMahon, and
both of these gentlemen have run against Mrs. McMahon, and vice
versa, so I hope they did not bring their files on oppo
research along.
Senator Blumenthal. We have been trying to forget, Mr.
Chairman.
[Laughter].
Chairman Risch. But in any event, Senator Blumenthal, the
floor is yours, and thank you so much for gracing us with your
presence.
STATEMENT OF HON. RICHARD BLUMENTHAL, A U.S. SENATOR FROM
CONNECTICUT
Senator Blumenthal. Thanks, Mr. Chairman. Thanks to you and
Ranking Member Senator Shaheen. I am pleased to join my
colleague in introducing our fellow resident of Connecticut,
Linda McMahon. We know her as a fellow citizen of Connecticut,
but also as a successful business leader, as the co-founder and
former CEO of the WWE, and also as a very generous contributor
to many significant philanthropic and charitable causes and
educational institutions in Connecticut, including, for
example, Sacred Heart University near where we live.
In my view, Mr. Chairman, I recommend her because I think
she would be an excellent fit for this agency based on her
experience and expertise as a business leader. She knows, as I
do, that small businesses are the backbone of our economy. They
are the most vibrant and vital job creators. They not only
innovate by fostering new jobs, but they also invent new
products. They are the startups in every sense, and they embody
the American dream. Having visited many of them in Connecticut,
I know how they create jobs and new products and opportunities
for others. And the SBA plays an integral role, as this
Committee well knows, in supporting small businesses
financially but also encouraging them with expertise and
experience.
And Linda McMahon has that kind of expertise and
experience. She is a tireless leader and a tenacious fighter.
Her professional life has been about building businesses. She
has started and struggled in the entrepreneurial trenches,
meeting payrolls, hiring and firing, working hard for a vision.
And although we have known our share of differences, I have
never questioned her unwavering drive and focus.
She has used her business to help veterans and women
realize their own dreams and opportunities, and I am hopeful
that under her leadership the Small Business Administration
will continue its focus on veterans and women. She has played
an integral role in spearheading opportunities and dreams for
women, and that has been the focus of her professional life
most recently.
So I am pleased to be here to introduce her and recommend
her to the Committee. She understands the needs of states like
Connecticut who are still working hard to recover from the
economic recession, who need new jobs, and I hope that she will
continue to have Connecticut at the top of her mind as she
assumes this new role, and I look forward to working with her,
and I know the other members of the Committee will as well.
Thank you very much
Chairman Risch. Thank you, Senator Blumenthal. I was hoping
she was going to have Idaho at the top of her mind, but----
[Laughter.]
Senator Blumenthal. I will let her say that.
Chairman Risch. I do not think she will.
Senator Murphy, thank you for coming. We are all busy these
days, I know, and it is tough to push things aside to get here.
But thank you so much. The floor is yours.
STATEMENT OF HON. CHRISTOPHER MURPHY, A U.S. SENATOR FROM
CONNECTICUT
Senator Murphy. Well, thank you very much, Chairman Risch,
Ranking Member Shaheen, members of the Committee. It also gives
me great pleasure to help introduce our fellow Nutmegger, Linda
McMahon, as the President's nominee to serve as the next
Administrator of the Small Business Administration.
As you said, Mr. Chairman, this visual is going to be a
little amusing and surprising to folks in Connecticut who
watched the three of us duke it out over two long Senate
campaigns. But you know what? Politics cannot work if political
grudges never die, and political adversaries have to find a way
to work together after the fight is over. And I am here today
to support Linda not because we have magically become of one
mind on how we approach every problem that this country faces,
but because I have confidence that she is going to give good,
sound counsel to President Trump when it comes to policy
affecting small businesses. And I believe that she has the
passion for this job that is vital.
At its core, the SBA's mission is simple: to help Americans
start, build, and grow businesses. And virtually every owner
and starter of a small business wants to one day be the owner
of a big business. And before you today sits a very talented
and experienced businessperson who did just that. Over the past
several decades, Linda has shepherded her small business from a
small one-desk operation to an incredibly profitable enterprise
with hundreds of employees throughout the world. And she also
understands the unique challenges, as Senator Blumenthal said,
facing women business owners. She co-founded the Women's
Leadership LIVE organization that helps equip women to become
successful business leaders. Her work there assures me that she
is going to build on the significant momentum of her
predecessor in the Obama administration.
The Federal Government has just recently surpassed its 5-
percent contracting goal for women-owned small businesses for
the first time in history, and I have confidence that Linda
McMahon is going to further empower women to create and foster
thriving businesses with the help of partner organizations like
the Women's Business Development Council, which has had success
in Connecticut mentoring and nurturing women-owned small
businesses.
Listen, I saw firsthand the fight that Linda brings to any
endeavor that she takes on, and I am sure we will have
disagreements, but I will never question whether she has the
experience and the determination necessary to lead this great
agency. And I would really urge the members of this Committee
to support her nomination. I am very pleased to join with
Senator Blumenthal to introduce her to you today.
Chairman Risch. Well, Senator Murphy, thank you so much.
Senator Blumenthal and Senator Murphy, we will advise the
Guinness World Book of Records about this event and get it duly
noted. You are certainly welcome to stay, but knowing that we
are all drinking out of a fire hose these days, you certainly
can be excused. And I am sure you will see this when you need
to see it. So thanks so much. Thank you for coming.
Senator Blumenthal. Thank you, Mr. Chairman. Thanks for
this opportunity.
OPENING STATEMENT OF HON. JAMES E. RISCH, CHAIRMAN, AND A U.S.
SENATOR FROM IDAHO
Chairman Risch. Thank you.
Linda, so you know where we are headed here and for
everyone else, I am going to make a very brief opening
statement. I am going to yield to Senator Shaheen to do
likewise. And at that point, we will administer the oath, which
is required. And by Committee rules, I will do that. And then
the floor will be yours to make an opening statement, and then
as you can see, you have a list of people with deep, probing
questions who will then take turns at you from each side.
In any event, first of all, thank you for coming to meet
with me and spending the time that you did, and thank you for
being willing to take on this important appointment. The Small
Business Administration is not a large Federal agency as
Federal agencies go, but to a businessperson, a small
businessperson, it can be one of the most important and
critical endeavors that the Government undertakes.
You and I had the opportunity to talk about a couple of
endeavors that the SBA does. The SBA, of course, is known for
its loaning to small businesses, and you will find, I think,
when you drill down, that there is a very robust fleet of
lenders out there who service the small business community
through the Small Business Administration. And I think you will
be well satisfied with how they operate, what they do, and the
work they do for small business.
Of more importance to me, actually, because that part of
the operation is doing so well, are the efforts that the SBA
undertakes to try to level the playing field for small
businesses. When we talk with every business these days--it
used to be, when I started in politics, the most hated
organization of any government was the IRS. The IRS has fallen
way back, and the other agencies that do the regulatory things
that the Government does have really risen to the top. In my
State, in our dealing, the EPA is way up there. And after that,
there are others that come in behind. But if you ask any
businessman today, be it a small businessman or a big
businessman, but particularly small business, what is the
biggest challenge that you face today? And, invariably, they
will not say, well, it is access to capital, or taxes are too
high, or what have you. They will tell you the regulatory
structure of the Government in America today is strangling
businesses. And you will find that--everybody at this table can
tell stories about Government agencies coming into small
businesses and causing them a great deal of difficulty.
We have an operation within the SBA called the Office of
Advocacy. They are supposed to be independent. They have not
been. They are supposed to stand up and complain loudly every
time the Federal Government does something that affects small
businesses. There is a process in place for them to actually
formally do this. It has not worked very well. I am hoping as
we go forward that we are going to be able to make it work
better. The poster child for that was the rule that was
proposed regarding Waters of the United States, and there the
finding--and so the Office of Advocacy rightly complained and
said, look, this is a big problem, especially for small
businesses, especially for small businesses in agriculture, and
others, too. And the agency said, oh, no, we are making a
finding that this will not have a significant impact on
businesses. You have got to be brain dead to reach that kind of
a conclusion.
So, in any event, I know that you share my concern with
that, and I hope we will be able to work together to try to do
more for small businesses. We all know, when the Government
puts out a regulation, if you are General Electric corporate,
and it comes in, they hand it to an army of lawyers and
compliance officers and what have you to take care of it. If
this comes to a guy that is fixing lawn mowers in his garage
and he gets a multi-page inquiry from the Federal Government,
it becomes a big problem for him and cuts into his work
dramatically.
So we will work on that as we go forward, and I look
forward to hearing your thoughts on that.
And with that, I would like to yield to my distinguished
colleague, Senator Shaheen.
OPENING STATEMENT OF HON. JEANNE SHAHEEN, RANKING MEMBER, AND A
U.S. SENATOR FROM NEW HAMPSHIRE
Senator Shaheen. Thank you very much, Mr. Chairman. Thank
you for holding today's hearing, and congratulations on taking
over the gavel as Chairman of this Committee. We have had the
opportunity to work together in the past very well.
Chairman Risch. We have.
Senator Shaheen. And I look forward to working with you
over this coming session to address the needs of small
businesses.
I also want to recognize the new members of the Committee:
Senator Duckworth on the Democratic side, and on the Republican
side Senators Inhofe, Young, and Rounds. Welcome to this
Committee. I think you will find that this is a Committee that
works in a very strong bipartisan way to address the concerns
of small businesses. So I look forward to continuing to do
that.
I am also very pleased to welcome Linda McMahon, who is
President Trump's nominee to head the Small Business
Administration. I appreciated the opportunity to meet with you
and to hear your passion for the work that small businesses do.
I got on this Committee in 2008 after I got elected to the
Senate because small business is such a concern for New
Hampshire. Ninety-six percent of our employers in New Hampshire
are considered small businesses, and they are not just
important to New Hampshire and to so many of the states
represented on this Committee. But they are the engine of the
economy that drives this nation. Two out of every three jobs
that are created are created from small businesses. They are
also leaders when it comes to innovation. They produce--and
this is a statistic that is one of my favorites. They produce
14 times more patents than large businesses. I am not sure that
most people appreciate the innovation that occurs in our small
businesses. But, unfortunately, unlike big business, our small
businesses have not yet fully recovered from the Great
Recession.
For example, according to a Harvard Business School
analysis, small businesses loans have dropped by 20 percent
since the financial crisis while lending to large firms has
increased by 4 percent. That is why SBA and its programs are so
critical. Last year alone, the SBA backed more than 70,000
loans to small businesses, supporting $29 billion in lending
and nearly 700,000 jobs. The SBA also helped small businesses
win more than $90 billion in Federal contracts and provided
counseling to more than a million entrepreneurs.
But, of course, there is more work to be done, and that is
why you are here, Mrs. McMahon. So I know that you share those
goals and values for what we need to support small business in
this economy, and I look forward to hearing your statement
today and your response to questions. Thank you.
Thank you, Mr. Chairman.
Chairman Risch. Thank you, Senator.
I will warn you that--Senator Shaheen referred to the new
members of this Committee. They may be new members to this
Committee, but these people have been around awhile, so do not
think you are going to get softball questions from them.
[Laughter.]
So, with that, I would ask you to stand and be sworn. If
you would raise your right hand, please? Do you solemnly swear
to tell the truth, the whole truth, and nothing but the truth,
so help you God?
Mrs. McMahon. I do.
Chairman Risch. Thank you very much. Now, I understand you
might have some introductions of your own.
Mrs. McMahon. Yes, I certainly do. I am very proud to
introduce this morning my daughter, Stephanie, and her husband,
Paul Levesque. Yes, please stand up.
Chairman Risch. All right. Thank you. Welcome.
[Applause.]
Mrs. McMahon. And I have wonderful friends who have
traveled from around the country to be here today, so I am very
appreciative of their presence as well. So thank you.
Chairman Risch. Thank you very much. Well, at this time,
the floor is yours for an opening statement.
STATEMENT OF LINDA E. McMAHON, OF CONNECTICUT, TO BE
ADMINISTRATOR, SMALL BUSINESS ADMINISTRATION
Mrs. McMahon. Thank you very much.
Thank you, Chairman Risch, Ranking Member Shaheen, and
distinguished members of the Committee. I am honored to have
your consideration to serve as the head of the U.S. Small
Business Administration. I would like to thank Senators
Blumenthal and Murphy for their kind introductions, and it was
nice to be on a really even playing field today. I would also
like to express my gratitude to President Trump for this
opportunity to join his administration and his confidence in
me.
As an entrepreneur myself, I have shared the experiences of
our Nation's small business owners. We are more than our
products and services. We are people. We are families. The
small businesses that are the engine of our national economy
are driven in part by people working to put food on the table,
pay for kids' braces and swimming lessons, save for college,
and prepare for their own retirement. Whether it is an organic
farmer or an app developer, with one employee or a hundred, we
can never forget that small businesses are people with goals
and values that cannot be calculated just on a profit-and-loss
statement. If I have the honor of being confirmed as the head
of the SBA, I will do my best to advocate on their behalf.
My husband and I built our business from scratch. We
started out sharing a desk. Over decades of hard work and
strategic growth, we built it into a publicly traded global
enterprise with more than 800 employees. I am proud of our
success. I know every bit of the hard work that it took to
create that success. I remember the early days when every month
I had to decide whether I should continue to lease a typewriter
or if I could finally afford to buy it. Yes, believe it or not,
that $12 a month at that time made a difference in our budget.
Like all small business owners, I know what it is like to
take a risk on an idea, manage cash flow, navigate regulations
and tax laws, and create jobs. Since stepping down as CEO of
WWE in 2009, I have worked to help more people have the
opportunity to pursue those goals.
In my travels throughout Connecticut in 2010 and 2012, when
I was campaigning, I met with more than 500 small business
owners--touring their shops, restaurants, offices, factories,
and sharing ideas during roundtable discussions. Job growth was
a pillar of my campaign, and because small businesses are
responsible for half of all private sector jobs and the
majority of new jobs, they were my focus.
And for the past 2 years, I have promoted women in
entrepreneurship as co-founder and CEO of a startup called
Women's Leadership LIVE. I wanted to share my vast experience
with others who are launching startups or looking to scale
their businesses. Through live events and webinars, we educate
entrepreneurs about things like applying for a loan and
developing a business plan. We also work to build their
confidence. I always say that even entrepreneurs with the best
ideas sometimes need a little wind beneath their wings. Women's
Leadership LIVE hopes that by sharing our stories of success
and failure, our networks of contacts and resources, and our
strategies for addressing challenges, we can give small
business owners the confidence that will help propel them
forward.
Small business owners do not just need confidence in
themselves; in order to take a risk, they need confidence in
the economy. Should I have the honor of being confirmed to lead
the SBA, I will work to revitalize a spirit of entrepreneurship
in America. Small businesses want to feel they can take a risk
on an expansion or a new hire without fearing onerous new
regulations or unexpected taxes, fees, and fines that will make
such growth unaffordable. We want to renew optimism in our
economy.
Small businesses have had some tough blows in the past
decade. I know what it is like to take a hit, and I have
learned it is not how you fall, but it is how you get up that
truly matters. Early in my career, when we were very young, my
husband and I declared bankruptcy. We invested in a company we
did not understand and trusted people we should not have. When
that company went under, we were left holding the bag. We
worked really hard to pay off those debts until we realized we
just could not. Bankruptcy was a really hard decision and a
very tough time in our lives. We lost our home. My car was
repossessed in our driveway. We had a young son and a baby on
the way. We had no choice but to work hard and start building
again so we could support our family. When our daughter
Stephanie was born--a perfect little baby so full of promise
and potential--I took it as an omen that things were going to
be okay. We owed it to her and to our son that we would make it
okay. And, fortunately, we did.
As I visited small businesses all over the country through
Women's Leadership LIVE, I have seen that same resiliency over
and over again. Entrepreneurs are fighters. They work hard, and
when they get knocked down by a recession or a natural disaster
or simply a change in consumer demand, they turn to their
creativity to make it better. But sometimes they need a helping
hand. If I am honored to be confirmed, I will work to guide SBA
as that helping hand in the most efficient and effective way
possible.
I believe in leadership by example. As a CEO, I never
expected employees to do anything I was not willing to do
myself. I believe in setting expectations and holding people
accountable, but trusting them to do the job for which they
were hired. If confirmed, I look forward to working with the
SBA staff. I am eager to learn from their experience and their
expertise. I will listen, and their ideas, concerns, and
recommendations will be taken seriously. I know there will be
new challenges in a government setting, but I will commit
myself with the same responsibility to deliver value to the
taxpayers of America as I did to shareholders of my company.
Over the past 2 weeks, I have had the pleasure of meeting
with many members of the Committee, and I appreciate the kind
words of encouragement I have received. Thank you very much for
the opportunity to speak with you today, and I would be very
happy to answer your questions.
[The prepared statement of Mrs. McMahon follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chairman Risch. Thank you very much. We appreciate that.
The way we are going to do this is we are going to use what
they call the early bird method or first-come/first-served
method. We are going to go back and forth between Republicans
and Democrats. I will go first, but I am going to reserve my
time to interject as I see appropriate as we go down the pike.
And, with that, I will yield the floor to my friend Senator
Shaheen.
Senator Shaheen. Thank you, Mr. Chairman, and thank you for
your statement, Mrs. McMahon. I know we discussed this issue
when you came to visit me, but I think it is important to give
you an opportunity to address it in the Committee because you
have been quoted as saying that you supported merging the SBA
into the Department of Commerce. That proposal has been a major
concern for businesses in my home State who believe their voice
in Washington is already not loud enough. And so I wonder if
you could clarify your position and whether you believe SBA
should continue as a stand-alone agency or whether you think it
should be merged into another agency.
Mrs. McMahon. Thank you very much, Ranking Member Shaheen,
for the question and the opportunity to clarify. When I was
running for the Senate in Connecticut, I was a strong advocate
for reducing duplicative programs, and as part of my campaign,
I talked about the list every year that the GAO puts out of
duplicative programs.
During that time, President Obama had indicated that he was
looking to merging some of the agencies. When I was asked if I
supported merging SBA into Commerce, I really was not focused
on SBA or Commerce; I was focused on the concept of merging
agencies or reducing duplicative programs so that we could
reduce those costs.
I am a firm believer that SBA needs to be a stand-alone
agency. I am very proud that President Trump has kept it as a
Cabinet post, and I intend to serve my full term and execute as
well as I can to advocate on behalf of small businesses.
Senator Shaheen. Well, thank you very much for clarifying
that. In New Hampshire, SBA has made significant progress over
the past 4 years, and we have seen growth in both lending and
government contracting. And to some extent, this has been
because of the work of so many of SBA's resource partners, such
as the Small Business Development Centers, the Women's Business
Center, SCORE, volunteer mentors, Veterans Business Outreach
Centers, and district offices. And I think these partners are
really critical to the mission of SBA and helping small
businesses.
So as Administrator, how would you identify opportunities
to maximize SBA's resource partners and provide adequate
funding for their staffing and programs?
Mrs. McMahon. Well, first of all, I look forward to going
to our different districts and our different regions and
meeting with those SBA members, A, the leaders and the managers
in those offices to hear about what programs are working, what
programs are not. I do not have a working knowledge today of
how successful those programs have been except to know that,
from you, you have seen that success, and many of the other
members that I have talked to. So I would want to continue to
encourage our outreach.
My former company, WWE, we were always concerned about
veterans and the returning veterans and how to have jobs, and
WWE is part of Hire a Veteran program, so that veteran aspect
of helping them create jobs.
As I have already stated, I have been very forthcoming in
wanting women entrepreneurship to grow and continue to support
that. It is very near and dear to my heart. So I will continue
that outreach with all of our different organizations and
continue to mentor through the Women's Centers as well.
Senator Shaheen. Thank you. I am pleased to hear that, and
I know the resource partners in New Hampshire and across the
country will be very pleased to hear that as well.
As we discussed in our meeting, one of the most important
ways SBA can help small businesses is by making sure they have
access to Federal contracting, and Senator Murphy mentioned in
his introduction that we saw for the first time last year that
women small business owners had reached 5 percent in terms of
access to Federal contracts, so it is a milestone, but a very
slow start to what we need to do more of.
And so I wonder if you could talk about how you plan to
work with Federal agencies to increase small business
opportunities for Federal contracts.
Mrs. McMahon. I would first like to fully understand, you
know, what those projects are and how we can best fit the
businesses to those contracts. You know, I think that in terms
of the prime contracts and the subcontracts, we need to make
sure that we have got that adequate representation for that
growth. So I would want to make sure that our businesses have
the right outreach, the right advocates in those markets, and
that is what I would focus on, is trying to make sure we have
those right advocates.
Senator Shaheen. Thank you. My time is up, but I just
wanted to make a point, Mr. Chairman, of announcing that I am
going to enter a question into the record on behalf of
Congresswoman Nydia Velazquez, who is the Ranking Member of the
House Small Business Committee, and it relates to the ongoing
situation in Puerto Rico. It is something, again, that you and
I discussed when we met, Mrs. McMahon. So I will be submitting
that for the record.
Chairman Risch. Thank you very much.
Senator Paul.
Senator Paul. Congratulations and welcome.
Mrs. McMahon. Thank you.
Senator Paul. I think the Chairman put it very well when he
said that small businesses are worried about regulation. The
cost of regulation is a big deal to small businesses,
particularly when you just imagine, you know, if you have a
thousand banks or you have one bank, your compliance cost is
much greater, obviously, if you have one bank than if you can
spread it through a thousand banks or 10,000 employees. This
goes on across America.
In addition, we have another problem. We actually have big
businesses that come to Washington and actually are in favor of
regulation because they see it as an impediment to smaller
competition. So I think small business does need a voice, and I
hope you will be a good voice for small business.
I guess what I would like to ask is: In your opinion, do
you think we are overregulated? Underregulated? Do you think
regulations are a problem? Do you have any ideas about how the
Small Business Administration might be run to help with the
regulatory burden?
Mrs. McMahon. Thank you very much, Senator, for your
question. What I heard constantly when I was campaigning
through the State of Connecticut from small businesses was the
overregulation environment which is costing them time, effort,
and money that they could not focus on their business. I think
we forget sometimes that in small businesses, especially mom-
and-pop companies that are starting up--and I have a special
place in my heart for them--that, you know, they are the chief
cook and bottle washer. You know, they are the CEO, the CFO,
they are the janitor. They are every other thing. So when they
get a packet of regulation forms that they have to fill out in
order to comply with regulations, A, they do not know what to
do with it; B, they cannot afford to hire lawyers to get them
through the regulatory environment. So either they become more
at fault and not in compliance, or they have taken time away
from their business to do it.
And so it is really difficult for small businesses to have
to suffer under, I think, that kind of burden of the regulatory
environment.
Senator Paul. One of the other burdens or costs of small
business is taxes, and I probably would not discount it from
regulations. I would probably say it is about equal. You know,
a lot of small businesses pass through their income LLCs as
individual income, so a moderately successful small business
might be paying 39.6, you know, income tax, but then in
addition you have got an ObamaCare tax, so you are like 43, 44,
before you--God forbid you live in the Northeast and have a 12-
percent state income tax on top of that. So I think there is a
great burden. You will not get to necessarily address tax
policy directly unless there are ways you can as the Small
Business Administration. But you also will be a voice in the
Cabinet, and I would just like to hear your thoughts on, I
guess, in general the same question. Are we overtaxed or
undertaxed? Is our tax structure currently an impediment to the
formation of small businesses?
Mrs. McMahon. Well, thank you, and having first started out
as a Sub. S Corp., and then Women's Leadership LIVE that I
started as an LLC, I fully understand how the pass-through
aspect of that income works. And I do think that if we are
involved in tax reform, we do need to consider how to also make
it a level playing field for those pass-through companies. So I
would be a strong advocate for that.
Senator Paul. Thank you. Good luck.
Mrs. McMahon. Thank you.
Chairman Risch. Thank you very much, Senator.
Senator Cardin.
Senator Cardin. Mrs. McMahon, first of all, thank you very
much for being willing to serve in this public position. And we
also thank your family because this will be a family sacrifice.
If you think you have traveled before, this is a big country,
so we thank you for your willingness to serve.
Mrs. McMahon. Thank you.
Senator Cardin. You have already heard the numbers. I could
go over the half a million small businesses in Maryland, over a
million jobs. But I will focus a little bit on the individual
companies that I have visited where I see a small business
developing a way to deal with diagnosing student athletes on
head injuries, or I see new drugs being developed along the I-
270 corridor that are going to help quality of life, or I see a
small business developing a better way to help other businesses
deal with their administrative costs. I see it in our national
defense. So many of these small companies are figuring out
better weapons systems or ways that we can test our weapons
systems for efficiency. All of that is the creativity of small
business.
They all had one thing in common. They all used the
services of the Small Business Administration. They used it for
mentoring and developing a business plan because at times it is
difficult to know exactly what a bank needs in order to be able
to get a loan. They used the services of SBA for capital
because that is very challenging for small businesses to get
particularly venture capital to be able to take those risks.
They used the Small Business Administration as an advocate to
make sure that they got fair government procurement, and
particularly in this region, government procurement is a very
important part of opportunities for small business.
So as you and I talked in the office--and I thank you very
much for our personal visit--we need an advocate as the Small
Business Administrator in that dealing with other agencies. We
talked about the procurement issues. We talked about the 5
percent for the women. There is also a set-aside for small
businesses. We have minority businesses, veteran-owned
businesses. One thing is in common. When an agency, a big
agency, is doing their procurement, they at times like as few
contractors as possible because they have to evaluate every
contract that is there, and they tend to bundle into large
contracts that make it virtually impossible for small
businesses to be a prime contractor. We have attempted to pass
anti-bundling legislation so that that is not done.
Can you just share with me how you intend to advocate on
behalf of small businesses, particularly among the other
government agencies, to make sure that procurement is fair to
help small businesses grow?
Mrs. McMahon. Thank you very much for mentioning that again
because we did have a good conversation about that. I have
found that, you know, the best way to obfuscate what it is you
are really trying to do is to bundle things or just stack stuff
on top of it. So I would really like to peel back some of that
bundling and take a look at it so that we have the opportunity
for our small businesses to really have that fair shot. They
should not just continue to get squeezed out. And I would want
to be their advocate. I would want to hear from them. I would
want to find out, well, how did this happen? How can we get
around this? Whom do we need to speak to? How can I advocate
more strongly on your behalf? What avenues have you gone down
or what other avenues do you need to go down so that we can
reach in and make this more about you? And I would be working
very hard to advocate for our small businesses.
Senator Cardin. I appreciate that. I also appreciate your
response in regards to what you have done for veterans,
returning warriors. To me, that is an extremely important part
of our commitment to help veterans and returning warriors in
regards to small business.
I shared with you the initiative that was developed by the
private sector in my State. The Montgomery County Chamber of
Commerce instituted a Veteran Institute for Procurement. It was
a national effort to bring its returning warriors to help
mentor them into starting small businesses and leadership. And
as a result, over 700 veteran-owned businesses have been helped
by this program in Maryland. It received help from the Small
Business Administration to make this a national program, and I
would just urge you to look at these types of programs because
they really do help the entrepreneur spirit for our returning
warriors, and we must do whatever we can to help them in coming
back to our country.
Mrs. McMahon. Thank you very much. Just one quick comment
is that I serve on the board of a company called American
Corporate Partners, and it is a mentoring company for returning
veterans to help them make the transition between the military
and the private sector. And so the outreach is to companies and
corporations that then mentor these men and women who are
returning and guide them and often have them come into that
company and spend days with different members of the executive
or whatever branch that they want to be in, and it has been
very successful.
Senator Cardin. Thank you. The last point I would make is
that, in regards to access to capital, it is particularly
difficult for minority businesses. I hope that we can work
together to find ways that we can do more outreach to help
access to capital for particularly minority businesses.
Thank you, Mr. Chairman.
Chairman Risch. Thank you very much.
And we will go to Senator Inhofe.
Senator Inhofe. Thank you, Mr. Chairman. Well, Linda, I
figured if Chairman Risch can call you Linda, I can, too, and I
will.
Mrs. McMahon. Thank you.
Senator Inhofe. And I want to tell you how much I
appreciate your taking the time that you did. If you spent as
much time with everyone as you did with me, you have been
pretty busy. You are taking this very seriously.
Mrs. McMahon. Yes.
Senator Inhofe. And I particularly enjoyed our visit
because I have been there. You know, we have very similar
backgrounds. You were a lot bigger than I was. I did not get up
to the numbers that you did, 800 employees, but I can remember
spending 20 years getting beat up by the bureaucracy, so I
understand a little bit about it, and I think that the office
that you have has the opportunity to do so much more than it
has done in the past.
We have a guy named Tom Buchanan who is the head of the
Oklahoma Farm Bureau, and when I talked to him about the
problems that the farmers are having, not just in my State of
Oklahoma, which is a farm state, but throughout America, he
said, ``It is nothing that is in the agriculture bill. It is
the overregulation of the EPA.'' Now, those are his words, and
my words, too.
And so we watched this happen. He said, ``Of all the
problems that we had, of all the overregulation, the one that
scared us the most was WOTUS,'' the water bill. And as you
know, there are a lot of people, a lot of liberals, who would
prefer to take that jurisdiction away from the states and give
it to the Federal Government. And there was quite an effort
there.
Now, I bring that up as an example, because you have, as
you and I discussed, in your department that you are going to
be responsible for the Office of Advocacy. Now, the Office of
Advocacy is where--it is an independent office, and its purpose
is to advocate on behalf of small businesses to other agencies
and weigh in on their rulemaking. And during the last
administration, the office has been pretty much ignored. And so
you are going to have to start from a zero base. Have you given
a lot of thought to how you are going to have this Office of
Advocacy there and available for people who it was designed for
originally?
Mrs. McMahon. Thank you very much. Well, if I have the
privilege of being confirmed, I would really like to strengthen
that office, because I have always been a defender of the
little guy, and we need someone who is going to go to bat for
our small businesses. And I am just the girl to do that.
Senator Inhofe. And why do you think it was not done
before? Why do you think it was not done during the last
administration? We had many--you know, I have 300,000 small
businesses in my State of Oklahoma. I did not hear from all of
them, but almost all of them, on the problem. So how are you
going to revive that?
Mrs. McMahon. I think I have to first find out why it did
not work. I have heard that comment from more than one, that
the Office of Advocacy really needs to be strengthened and to
be able to have some teeth when it goes to the other agencies
to say, you know, you are not complying, and why are you not
complying. And as of right now, those teeth are not there. And
I need to find out why, and I do not know why. But I will get
back to you, and I look forward to working with you on that.
Senator Inhofe. Well, that is good, and I would assume that
the number of people who are working, there are a lot of people
who have not been as responsible and responsive to small
businesses, and you will have a chance to determine who they
are and, if necessary, make changes. I would assume that would
be an accurate statement.
Mrs. McMahon. Thank you very much.
Senator Inhofe. All right. They have within there the Small
Business Innovation Research program that provides funding for
the small businesses to develop and commercialize new,
innovative technologies, and companies receiving the SBIR
funding stand a much better chance of bringing their ideas to
market than those not receiving the funding. In recent years,
many rural states, including Oklahoma, have underperformed in
this funding.
Can you tell me what changes the SBA can make to improve
this?
Mrs. McMahon. Well, again, thank you. It is a little bit
difficult to say exactly what you are going to do when you do
not really understand what has been done here to date. I do
understand SBIR has been so helpful with the research and
development aspect and providing that kind of research for
startups, and I would like to understand what those startups
need, how we can continue with SBIR funding.
Senator Inhofe. Have you been able to get the benefits of
SBIR and what they are doing in your company? Or do you know
people personally who have?
Mrs. McMahon. I do not.
Senator Inhofe. I see. Okay. Well, I look forward to
working with you.
Mrs. McMahon. Thank you.
Chairman Risch. Thank you, Senator.
Senator Heitkamp.
Senator Heitkamp. Thank you, Mr. Chairman, and thank you
for attending our Committee hearing last week on the
Subcommittee on Regulatory Affairs and Federal Management. It
was all about small business and all about the small business
advocacy role that SBA should be playing that we were
disappointed that may not have been as aggressive as what they
should have been in the last several years, and I look forward
to continuing to work with Senator Inhofe on a legislative
solution to a lot of our problems.
Chairman Risch. I noticed when I left that Subcommittee, no
one's hair was on fire, so----
Senator Heitkamp. No. Mr. Chairman, it was a great
discussion, and we welcome you at any point, Linda, to our
Subcommittee. I think it is a great place for gathering, for
talking about the cross section between small business
interests and regulatory reform.
I wish just for a minute that you had been able to turn
around when you were speaking about the challenges you had and
had seen the pride and affection in your daughter's face. It
was quite lovely. It is clear you have a great relationship,
and my mother's heart just got a little warmed by that
affection. And I think it is what so many small businesses are
about. They are about families. And they are about working
together and learning how to overcome struggles.
But I want to talk about two groups of entrepreneurs that I
think are looking for a different level of engagement and
involvement--we have talked a lot about programs--and the first
is young entrepreneurs and the second are native entrepreneurs.
And thank you so much for coming to my office. We had a great
discussion. But I am concerned that young entrepreneurs
frequently may be able to write the best app or write the best
program, but they somehow do not know how to translate that
into business.
I personally believe that we are experiencing a computer
failure in financial literacy in America. That is finding its
way into the business community. And I am interested in your
thoughts, and I am going to just throw in the native piece, and
then you can have the rest of my time.
Native Americans have experienced a lot of economic
challenges, really from the initial engagement in this country.
The challenges that SBA has in Indian country are exacerbated
by the challenges we have with jurisdiction and the challenges
that we have with making sure that there is a commercial code
that people can rely on. And so I think I am interested in how
you can work with both these groups of entrepreneurs to engage
a future for small business in America, especially in Indian
country, but among young entrepreneurs.
Mrs. McMahon. Obviously, I have more experience with young
entrepreneurs than I do in Indian country, and I would look
forward to working with you in understanding more of the
situations that are in your state relative to how the Small
Business Administration can be beneficial to our Indian small
business developers. So I look forward to that, so thank you.
Young entrepreneurs, I have found, are great with ideas.
Some of them have a great business savvy. Some of them have no
clue what to do. They are in their garage or they are in their
dorm room, or wherever it is they are, they have developed this
unbelievable app, they have got all kinds of stuff and all,
suddenly, boy, if somebody is going to buy me and I am going to
be a millionaire. But it does not always work that way. And I
think there is a discipline that needs to be shown more to our
young entrepreneurs. I sit on the Board of Trustees of Sacred
Heart University in Connecticut, and one of the things we do is
incubate small business development there, and as we strive to
sort of walk these young entrepreneurs through the steps of
business, but they are actually creating businesses. They have
developed T-shirts and hats with logos, understanding
intellectual property, and all of that and how that is managed,
so that whole educational process is like, ``Wow, this is how
it works.'' But they are making a success of it, and they are
running successful businesses. And we need to continue that,
not just in our universities, but I have kids, you know, in
high school, they do not know how to balance a checkbook, and,
you know, it is like, really, we need to have that fundamental
understanding, I think, of basics of economics as we move
forward to develop this next generation of our young business
people.
Senator Heitkamp. I do not think there is any dispute here
that we need to grow the financial literacy in order for people
to be successful. I saw it when I was tax commissioner. People
with great ideas, great ability, did not know how to file even
the simplest of tax forms, and so--not that we should not have
fewer tax forms, but there is going to be a need for some tax
forms to be filed, and so I look forward to continuing our
discussion, especially about the challenges of Native Americans
and entrepreneurship.
Mrs. McMahon. Thank you very much.
Chairman Risch. Thank you, Senator Heitkamp.
Senator Ernst.
Senator Ernst. Thank you, Mr. Chair, and thank you, Mrs.
McMahon, for being here today. And I appreciate the time you
took to sit down with me and many other members of this
Committee. And I want to say a special thank you as well to
Senators Blumenthal and Murphy for being here today, because I
think so many times we get caught up in partisanship that we
forget that there are many issues that we are very, very
passionate about that share a bipartisan nature. So I want to
thank them as well for being here to support you today, and I
know that many members of this Committee love to work on things
together, especially when it comes to regulatory reform, tax
reform, and others. So I want to thank them for that.
Now, we sat down in my office and talked about a number of
issues, and one of the issues that I brought up as we sat down
was a project that I have been working on over the last year,
and it is legislation that gives small businesses a stronger
voice in the regulatory process, and it is called the ``Prove
It Act.'' And the legislation did pass out of this Committee
last year, and we worked really hard with the folks at SBA in
the Obama administration to get their input and feedback,
because the goal is to make sure that the bill is bipartisan
and that it is a success.
So we did talk about it, and the purpose of the Prove It
Act is to strengthen the voice of small business owners and
provide incentives to agencies to improve the quality of their
certifications and analysis when they are actually writing a
rule. And, simply put, the Prove It Act says if there is a
battle of analysis between different agencies on the economic
impacts of a rule, then there should be a third party that will
step in, review the facts, and then issue an objective
assessment. And as you know, the Small Business Office of
Advocacy testified in front of this Committee last year because
they were in disagreement about the analysis that EPA and the
Corps, the Corps of Engineers, had completed on the WOTUS rule
and believed that the rule would have significant economic
impact on small business.
And as well, with this Prove It Act, there were a number of
organizations that supported it. The NFIB, the Chamber, and the
Women Impacting Public Policy, all of those organizations
supported it.
Can I get a commitment from you to work with me on this
legislation and help implement it, especially given the desire
by our President to make sure that we are reducing regulatory
reform, especially on small businesses?
Mrs. McMahon. Senator Ernst, thank you very much, and I did
enjoy our meeting. And when you talked to me about this
legislation, I thought, ``Wow, isn't that just a really common-
sense thing?'' And I think we just need more common sense in
government. If you have got two sides and cannot agree, you
have a referee; you have a third party that comes in. And I
liked also what you were telling me about the bill, which is
that it actually would make the agencies work together before
it had to become like a public event and help with drafting the
legislation. So I think that it is a very good piece of
legislation that I would like to learn more about and would
look forward to working with you to make sure that we can
support our small businesses.
Senator Ernst. Great. Thank you. I appreciate that so much.
Then on a related topic, too, what are your goals just in
the first few months, should you be confirmed? What are your
goals in the first few months at the SBA?
Mrs. McMahon. There are so many things to look at, and,
obviously, we want to be mentors to our entrepreneurs. We want
to grow and create jobs. But if I had to walk in the first day
and someone were to say to me, ``You know, what is the first
thing you really want to look at today?'' I would say I want to
take a look at our disaster relief program, because disasters
do not pick a time. They happen. And we need to be prepared for
those disasters.
I do not know how effective they have been. I know that
when Sandy hit a few years ago, Hurricane Sandy, you know, the
devastation up the East Coast and in my State of Connecticut
and New Jersey--and I am sure Senator Booker can speak to
that--there was a delay in time of response from SBA. I do not
know if that is because it was a massive storm, it went so far,
resources were not there. But we need to get ready for that.
Just two nights ago, tornadoes in Georgia that killed 19
people. So we have to be ready for disaster relief.
When our small businesses are put out of business for a
while, you know, the economy suffers because they are out of
business. We need to get those funds to them if they are out of
their homes, to make those direct loans to them and their homes
so they can get back and functioning and be families. So that
is a real passion that I think we really need to take a strong
look at.
Senator Ernst. That is really great. Iowa is not immune to
those natural disasters, and in Iowa, 97 percent of our jobs
come from small businesses. So thank you very much, Mrs.
McMahon.
Thank you, Mr. Chairman.
Mrs. McMahon. Thank you. Thank you, Senator.
Chairman Risch. Thank you, Senator Ernst.
Senator Duckworth.
Senator Duckworth. Thank you, Mr. Chairman. And, Mrs.
McMahon, thank you so much for spending so much time with me
yesterday, and I appreciated your candor and willingness to
address my concerns that have to do with WWE's use of 1099
employees, especially as it pertains to the health of your
performers. You are going to head SBA and promote small
businesses, and I do not want that to become the standard that
small businesses use 1099 employees to avoid paying and
providing the health benefits and the protections for small
businesses employees just like anyone else. Also, I appreciated
you addressing my concerns about potential monopolistic
practices at WWE. So thank you.
You know, Congress created the SBA to achieve two goals: to
help American small businesses and to make sure these firms win
a fair amount of government contracts. I want to focus on that
second goal.
As a Member of Congress committed to making government work
better, I am concerned that our Federal procurement system is
not meeting the needs of American small businesses. And in
Illinois, 98 percent of our businesses are small businesses,
and they employ 46 percent of the people living in Illinois. So
they are a significant portion of our economy.
I often hear from Illinois small businesses who are
frustrated by jargon-filled, clunky, and complex Federal
websites, things like FedBizOpps and SAM.gov; they are very
confusing online tools. And these tools may be fine for large
corporations who have teams of accountants and lawyers to weed
through them and figure out what they mean, but you and I
talked a little bit about how a CEO at the very beginning--you
also--has to be the chief cook and bottle washer and janitor of
the enterprise. I think these Federal tools are failing small
businesses who want to do business with the government but just
do not know where to start.
Simply put, the Federal Government is falling short in
tapping the full potential of the millions of American small
businesses who are ready to help agencies achieve their mission
with the innovative products and services that they can
provide.
So, if confirmed, will you commit to working with me to
streamline and modernize these vital online Federal contracting
tools?
Mrs. McMahon. Thank you very much, Senator. Well, as
someone who herself is technologically challenged, I can
certainly understand the frustration of many small business
owners who are trying to break through the morass of looking at
confusing websites. I think it is very important that we make
our tools the simplest and most direct way they can be so that
they are easy to use. If you just make things too complicated,
there are many who will give up before they can even try to get
through, and they do not have the resources to have it
explained.
So I would look forward to working with you, if I am
confirmed, so that we could sort through this and say, okay,
let us bring someone else in, let us hear from these people,
what is it they really need so that when those websites get
developed and refined, they actually do become a very useful
tool.
Senator Duckworth. Thank you. And once companies have used
those tools to try to get some of these contracts of the
government, will you commit also to working with me to improve
the small business prime contracting and subcontracting goals
for each agency? We spoke a little bit yesterday about this,
that small businesses have a hard time competing for some of
these goals, the veteran-owned businesses and women-owned
businesses. I spoke a little bit about the frustrations at the
VA, for example, a major bureaucracy. I am hoping that you will
focus on working with me to improve those goals across the
Federal Government and to hold agencies accountable for
providing minority-owned, women-owned, and veteran-owned small
businesses with a real fair portion of the Federal contracts.
Mrs. McMahon. I am very happy that we have gotten to 5
percent. I would like to see that go up. So, yes, I would look
very forward, should I be honored to be confirmed, to working
with you and all the members of the Committee. And I have been
invited to several of your states to come and visit with the
SBA offices, and I really look forward to that. As a matter of
fact, I would be very happy to sign right up to visit many of
the states that are here. Thank you.
Senator Duckworth. I will not make you come to Chicago in
the winter.
[Laughter.]
And just finally, I want to address the prospect of the
President's potential $1 trillion infrastructure program, which
he spoke about on the campaign trail as a candidate. He seemed
to be recommitting himself to a significant, much-needed
investment in our infrastructure across this country. Again,
this goes back to making sure that small businesses have a shot
at those contracts because small businesses are operating in
our home towns all across the country. They are not just
clustered in large cities, and they can really bring jobs and
development to the local area.
So I hope that you will commit to working with me to make
sure that special attention is paid to providing small
businesses with a fair opportunity to compete for work,
particularly disadvantaged small businesses enterprise, when it
comes to that infrastructure program.
Mrs. McMahon. I would look very forward to doing that, and
I faced some of those same issues when I ran for the Senate in
Connecticut, that small business often talked about they were
shuttled over and they did not get their fair share. So I would
look very forward to doing that.
Senator Duckworth. Thank you so much.
Mrs. McMahon. Thank you.
Senator Duckworth. I yield back, Mr. Chairman.
Chairman Risch. Thank you, Senator Duckworth.
Senator Rounds.
Senator Rounds. Thank you, Mr. Chairman.
Mrs. McMahon, I most certainly appreciated the time that
you spent with me in my office as well, and a lot of our
discussion had to do with the size of the Federal Government
with regard to the amount of regulatory overreach that I
personally feel has been involved, not just over the previous
administration but over a series of administrations.
As you may have heard, since 2008, though, more than 25,000
new regulations have been issued for American businesses under
the Obama administration. Some estimates find that the economic
impact of these new regulations has reached nearly $727 billion
and requires 460 million new hours of paperwork. That is on top
of compliance costs of nearly $2 trillion for all Federal
regulations, or more than 11 percent of our GDP.
The SBA's independent Office of Advocacy is, I believe, a
truly important voice in standing up for small businesses
against these regulations and the burdens that they would
impose on small businesses. The Office of Advocacy intervenes
in the regulatory process when possible, and it really helps to
inform other regulators about the impacts on small businesses.
Some of the other members here have already indicated their
concern with the capabilities of this particular Office of
Advocacy. I would like to go specifically to what happened in
the last year where the Office of Advocacy stepped in on behalf
of many small businesses in the United States. In fact, many
family farms and ranches that would have been impacted by the
EPA's Waters of the U.S., the WOTUS, rule that Senator Inhofe
and Senator Ernst have both identified earlier. As you may
recall from our meeting in the office, the Small Business
Administration's Office of Advocacy sent a letter, which I
would like, Mr. Chairman, to submit for the record today.
[The letter follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
They sent this letter on October 1, 2014, to the EPA's
Administrator, Gina McCarthy, and Major General John Peabody of
the U.S. Army Corps of Engineers criticizing the WOTUS rule and
its impact on small business. And, in fact, they actually
recommended that the entire rule be withdrawn.
Now, that was apparently ignored. The rule continued
forward. I would like to know, if you are confirmed as the
Administrator of the SBA, would you be willing to write a
similar letter recommending that this rule be withdrawn once
again and reminding our new Administrator of the EPA of the
damage that it has done to small businesses, farmers, and
ranchers alike?
Mrs. McMahon. Thank you very much, Senator, for that
question. I would look very forward to working with you and the
other Senators that--Senator Ernst and others who have brought
up especially the issue of WOTUS. In fact, I think it was
Senator Ernst, when I met with her, who told me that if a small
business in her State wanted to expand, it would have to get
approval from the Federal Government in order to do that. I
clearly think that is overreach, and I would look forward to
working with you and other members of the Committee to make
sure that we have the right regulations in place and not
overburdensome ones.
Senator Rounds. Just to put it a little bit more directly,
would you consider, if necessary, if WOTUS is not withdrawn,
would you consider reissuing that letter once again through the
office, similar to the way that it was done last time, but this
time addressing it to the new Director or the new Administrator
of the Environmental Protection Agency under the new
administration?
Mrs. McMahon. I would like to find the most effective way
to put teeth in that Office of Advocacy, and if that is one of
the ways to do that, I would like to work with you to see if we
could make that happen.
Senator Rounds. So I can take that as an ``almost yes''?
Mrs. McMahon. I am looking forward to working with you on
that.
[Laughter.]
Senator Rounds. All right. Let me move on. Mrs. McMahon,
under the Obama administration, fees were waived for a number
of qualifying 7(a) loans, including the up-front one-time loan
guarantee fees and ongoing servicing fees for 7(a) loans of
$150,000 or less for fiscal years 2014, 2015, and 2016.
If you are confirmed as the Administrator, would you
consider looking at the continuation of these waivers?
Mrs. McMahon. I would like to make sure that we are making
it as easy as possible to get these loans and to help our small
businesses. And I would like to take a really strong look at:
What did we accomplish by that? How long was it in effect? Did
we get real feedback from small businesses that this was
beneficial? So when I have those answers, I certainly would
want to see what the merits of that are.
Senator Rounds. Very good. Thank you.
Mrs. McMahon. Thank you.
Senator Rounds. Thank you, Mr. Chairman.
Chairman Risch. Thank you very much, Senator Rounds.
Senator Hirono.
Senator Hirono. Thank you, Mr. Chairman.
It is good to see you. Thank you for the time that we spent
together. I first of all want to commend you for the comments
that you made regarding President Trump's comments about women,
and I asked you to be a strong voice for women. And should you
be the confirmed Administrator, will you commit to preserving
the programs and funding that exist to promote women and
minority entrepreneurship and work with this Committee to
improve these programs?
Mrs. McMahon. I definitely want to be a strong advocate for
women, for our small businesses, and, yes, for our minorities
in business, our veterans. I want to work with the Committee
and with Members of Congress to make sure that we have the
right regulations to help our businesses grow.
Senator Hirono. I think that you have an understanding of
the special challenges that are faced by women entrepreneurs,
having been one yourself, and minority-owned businesses and
veterans. And so those are groups that I particularly am also
focused on to make sure that they have the kind of support from
SBA that they should get.
We have heard a lot about access to capital. That is
something that you mentioned hearing about when you were
running for office. Have you identified the specific factors
that lead to difficulty in accessing capital? Because unless
you know what the causes are, we cannot make the appropriate
changes. So since access to capital has been mentioned by you a
number of times, have you identified those causes and what you
would do about them as SBA Administrator?
Mrs. McMahon. Thank you for your question. Let me share a
story with you. When I was running for the Senate in
Connecticut, there was a company that was in the rural area up
in the northeastern corner of Connecticut. We call it ``quiet
country.'' And it was an entrepreneur who made grips that
looked kind of like springs, and they are made by hand. And in
his company he had probably eight to ten; they were mostly
women who were making these particular grips and springs. And
he had built his business from two or three people and added
people. He had gotten loans from his community bank before,
bridge loans, when it was time for him to expand a bit or he
was a little bit cash shy. He knew his community banker. And
now he had work orders and more business coming in. He wanted
to hire new workers, but in order to do that, he needed to add
on to his facility.
And so he went to see his same community banker, and the
banker told him, he said, ``Well, the problem is you are asset
rich but you are cash poor.'' And he said, ``Well, I totally
get that, because if I had the cash, I would not need to be
here to get through this time.''
And what his banker told him was, ``In the past, I have
been able to loan you this money, but today, under the new
regulatory environment that we find ourselves in, you no longer
qualify as you did before, and you would have to
overcollateralize this loan in order for me now to make the
loan to you.'' That meant that he had to put up all of his
assets--his house and other assets--in order to collateralize a
much smaller loan.
And while entrepreneurs are very happy to take managed
risks, that was just simply too much. So he did not expand, and
he did not grow his business. He did not hire those next
people. And that is an example of a regulatory environment, I
think, that does not allow our small businesses to grow.
Senator Hirono. Well, let me note that. I have heard those
comments also from small businesses in my State, and I visit
with a lot of them. But some of those resulted from the
financial collapse and the underregulation of the financial
services industry on Wall Street. So there is usually a cause
and effect. And I am with you in trying to resolve some of
those issues for our small businesses, but there was a reason
that the collateral rules changed, because there were all these
uncollateralized loans which led to the economic collapse.
I want to make the point that we hear a lot about
overregulation. When I talk with my small businesses and they
say that, it is easy enough to say we are in an overregulated
environment, but I always ask them, ``What specific regulation
is it that is causing you trouble?'' Because unless we identify
them appropriately, we can sit here and talk about
overregulation and not really get to the heart of it.
I will give you an example. There was an orchid farmer, if
I recollect correctly, and he could ship his cut flowers, but
for some various reasons, he could not ship the whole flowers.
And these were all clean flowers, all of that. And so we worked
with, I think it was, USDA to change that.
So I would like to ask you whether--when we actually move
to improve the regulatory environment, that you would ask those
very specific kinds of questions so that we get to the heart of
whatever the regulation is that is causing them problems as
opposed to some kind of, you know, ``Oh, yeah, we are
overregulated.'' That does not take us very far, in my opinion.
Mrs. McMahon. Thank you for that comment, too. I do not
know how you change regulations if you cannot identify them.
Senator Hirono. Good.
Mrs. McMahon. Just exactly what you said. We have to know
their negative and positive impact so that we can change them
or enhance them. And I am committed to doing that for sure.
Senator Hirono. Thank you. I know that my time is up, but I
am really glad that you mentioned one of the first things you
would do is look at disaster relief, because SBA, being on the
ground when disaster strikes--and all of our states have
experienced that--that is really important. I was surprised,
pleasantly surprised by your response to that question.
Thank you.
Mrs. McMahon. Thank you.
Chairman Risch. Thank you, Senator Hirono.
Senator Scott.
Senator Scott. Thank you, Mr. Chairman.
Good to see you again. Thank you for being here, and thank
you for your willingness to serve.
According to the 2016 NFIB survey of problems and
priorities that small business owners listed, they listed
things like cost of health insurance, unreasonable regulations,
Federal taxes, tax complexity, economic uncertainty, and
locating qualified employees as some of their top concerns.
As a business owner, I know that you can identify with many
of these concerns, and if you are confirmed, how will your
experience play a role when determining if the SBA could
alleviate some of the concerns of small business owners?
Mrs. McMahon. Thank you very much, Senator. Having walked
in the shoes of small business owners, I understand how
difficult it is when you are in a cash flow business and not a
brick-and-mortar business. It is very difficult to have access
to capital and get loans when you really have no collateral
against that except your own cash flow. So I know that there
are a lot of startups that face those kinds of issues in
getting capital. So I know how to talk to them a little bit
about that. I know how to talk about their cash management, and
this is what you need to do, and I advise all startup
companies, once you start making a little profit and you can
put it away, get a line of credit, because when you need it,
you cannot get it. And I think that it is really important
advice to small companies. But to manage your cash very, very
carefully, because cash flow is really a great part of the
success, and undercapitalization is one of the reasons that a
lot of small companies fail. So having walked in those shoes, I
absolutely understand that.
Senator Scott. Absolutely. One of the things that you
mentioned, the cash flow, and certainly looking for qualified
local employees, I assume that you have had some success with
local qualified employees like Triple H and The Rock and other
folks, but--I thought that was funny as well.
[Laughter.]
I was looking for a way to throw in my WWE, you know----
Chairman Risch. Good job.
Senator Scott. I am enamored with the concept. I grew up in
the South, so we went and watched NWA, now WWE, and WWF and the
whole 9 yards. So that is just my plug. God bless you. He
turned pretty red over there.
[Laughter.]
He does not do that on TV.
I do think that one of the challenges that small businesses
face is how to align the jobs in the marketplace with the
skills in the marketplace. I was a small business owner for 20
years or so, and I will tell you that attracting the right
talent to the right market is a very difficult task. I think it
is like 64 percent of new jobs are being created in small
businesses. So the reality of it is, in places like Colorado,
they will need one type of employee with a skill set that
matches what is available in Colorado. In South Carolina, the
number one tourist destination in the world, where you should
come visit very soon, the reality of it is tourism drives a lot
of our entrepreneurship. How do we align the opportunities and
access to jobs with those folks looking for those jobs in that
marketplace?
Mrs. McMahon. Thank you, and maybe a little bit different
twist on that as well. I continue to say ``when I was
campaigning.'' However, that was like a 4-year period when I
really did learn a lot about what was going on in my State. And
what I found out was that in many instances there were not as
much a shortage of jobs as there were trained people for those
jobs. And I think we have to like refocus how we are looking at
the jobs market. Sitting on the Board of Trustees at Sacred
Heart, I took a look at some of the educational programs that
we have and asked: Are we reaching out to our corporations and
our companies that are surrounding our university to understand
what kind of shifts or changes do we need to make in order to
fulfill that employment stream?
And I think we are starting to be a little bit more
successful in that, but we have a long ways to go. But that is
one of the things that I have sort of really committed to, just
even before I was asked to do this, but I would like to
continue to make sure we are training our folks for the jobs
that are there.
Senator Scott. I have just about 30 seconds left, Mr.
Chairman. I will just close with a comment. I hope that as our
new head of the SBA you will look for ways to create synergy
within government, perhaps our technical schools on the local
level--it does not matter what level of government--that you
will look for ways to create that synergy that will provide
really an alignment of those jobs and skills in the marketplace
where those jobs are available. I think that is a great place
for SBA perhaps to take a unique perspective on their mission
and find ways to improve the outcome of the average person who
starts in a very difficult place and finds entrepreneurship as
a path forward. It would be wonderful for us to see that happen
under your leadership.
Mrs. McMahon. Thank you very much.
Senator Scott. Thank you, ma'am.
Chairman Risch. Thank you, Senator Scott. The Chamber of
Commerce back home will be delighted with your line of
questioning.
Senator Scott. Thank you, sir.
Chairman Risch. I appreciate it.
Senator Coons.
Senator Coons. Thank you, Chairman Risch, Ranking Member
Shaheen. Welcome, Mrs. McMahon. I thought we had a very
constructive and formative meeting last week, and I really
appreciate the chance to sort of share stories of
entrepreneurship and job growth. And I am thrilled to have the
opportunity to continue that conversation.
It was mostly about the key role the SBA can play in
helping small businesses grow great jobs and the importance of
accessibility of capital, strength of IP, the value of
mentoring programs like SCORE, the value of other areas of the
Federal Government like the Manufacturing Extension Partnership
which can help small businesses to grow.
My own home State of Delaware, which I have invited you to
visit, not to be outdone by Senator Scott, we also have a great
beach community which we hope you will come visit. There are a
number of iconic businesses at the Delaware beaches--Grotto's
Pizza and Dogfish Head--that started with SBA loans, that
helped them grow--in their early stages, I should say. And so I
think you will see on both sides of the aisle here a knowledge
of and enthusiasm for the real impact that SBA has had in our
home States, and the folks who lead SBA in Delaware have done a
terrific job and worked very well with my office. And I love
doing small town visits where we will go up and down the main
street and see, whether it is 7(a) or 504 or SCORE, the impact
that SBA programs can have.
When we met, we talked about your knowledge of and
experience with intellectual property using trademarks and
licensing to protect some of the key innovations that your
business engaged in. And I talked about my passion for patents
and for making sure that small businesses know how to protect
what they have got and what they can bring to the market.
Do you agree it is important to educate small businesses
about how they can protect what they invent or innovate,
whether it is through patents or trademarks or other IP? And is
that something you think we could work on together?
Mrs. McMahon. It is something that was such a large part of
WWE, and from the very beginning, we wanted to make sure at WWE
when I was there--and I started the program. Sometimes you
bring a little bit of knowledge, and you can be dangerous. Or
you have enough knowledge to know you have to go further and
ask somebody with expertise. And it was very important that as
the company developed intellectual property, that we protected
it, that we copyrighted the television shows or our music
programs or our magazine works. It was very important that we
registered trademarks, you know, in the particular
classifications to protect. You have invested so much money to
grow and develop that product or that intellectual property.
But if you do not protect it and then someone else takes it
away from you, you do not have a leg to stand on because you
did not defend your own property.
So it is really important to make sure that young
businesses understand the value of what they create and that
they need to protect that. And you have to expend some money to
do it, but in the long run, you are protecting your investment.
Senator Coons. I look forward to working with you on that.
As the lead Democratic appropriator on the subcommittee that
funds the SBA, we also talked about how this is an area of
general broad agreement on a bipartisan basis in what is often
an otherwise contentious subcommittee. And I think the fact
that you are introduced positively by two gentlemen you ran
against recently was a moment of agreement about the skills and
the value that you bring that is worth remarking on.
In Appropriations, it is my hope that we will also work
together on the 7(a) program to make sure we are finding the
right balance between promoting needed loan programs while
avoiding a return to subsidy.
Let me just mention two other things before my time runs
out. I have had the joy of working with Senators Enzi and
Roberts on extending the R&D tax credit in a way that can help
innovative startups, companies that use technology and
innovation in order to grow quickly. And I would be grateful
for any help you could offer in our working together to inform
more small businesses that are technology centered about that
opportunity.
And then, last, Senator Risch and I worked together in the
last Congress to advocate for the SCORE program, something that
was launched in Delaware by DuPont retirees----
Mrs. McMahon. Yes, I remember we talked about that.
Senator Coons [continuing]. A mentoring program that helps
small businesses that really need to get their first business
plan together or that need someone with relevant sectoral-
specific skills. So I would be interested in hearing whether
you could see your way toward supporting SCORE and seeing this
as a critical program for your time as SBA Administrator, if
you are confirmed.
Mrs. McMahon. Thank you very much. You know, statistics
show, whether it is women-owned businesses or whatever business
there is, that you are more successful with mentors because it
is someone that you can talk to, who can give you advice, and
especially underscore when we have had these executives who
have come in and taken it upon themselves--these are very
seasoned and accomplished professionals, and to be able have
that as a resource I think is fantastic. I would really like to
see more and more mentoring because we will have more
businesses be successful.
Senator Coons. Well, it is a strikingly low-cost and high-
impact Federal program. I would love to work with you on that
in more detail in the future. Thank you for a chance to be with
you again today, and I am grateful that you have stepped up and
are willing to take on this important role in the Trump
administration. Thank you.
Mrs. McMahon. Thank you very much.
Senator Coons. Thank you, Mr. Chairman.
Chairman Risch. Thank you, Senator Coons.
Senator Young.
Senator Young. Thank you, Chairman, Ranking Member. It is
so good to be with you, Mrs. McMahon, to have someone of your
caliber and experience----
Senator McMahon. Thank you.
Senator Young [continuing]. Willing to put yourself forward
and serve in this capacity.
One of the advantages to being lower on the proverbial
totem pole here is I get to hear all the brilliant questions of
my colleagues. One of the disadvantages is I have to rework my
questions when those brilliant questions are ones I intended to
ask, so I will attempt to ask you some things that have not yet
been addressed.
But by way of background, I come from a small business
family as well. My dad has grown a commercial HVAC
distributorship over the years, and now my brother has taken
over that business, and I understand the unique challenges,
unique opportunities that are associated with small businesses.
This town tends to be rigged oftentimes against the little guy
or woman, as it were, on account of regulatory burdens,
sometimes foisted with great deliberation by larger businesses
to crowd out competition from upstarts. Our tax code is another
example.
The Small Business Administration--and it has been
mentioned many times here--I think has an opportunity, perhaps
unrealized to its full extent, to advocate on behalf of small
businesses in each of the different Federal agencies across the
Federal Government through the Office of Advocacy. And you have
already indicated that is going to be a real point of emphasis
on your part.
The Regulatory Flexibility Act of 1980 tasks this Office of
Advocacy with monitoring Federal agency compliance with the act
and assisting regulatory agencies during all stages of
rulemaking development to mitigate the potential adverse impact
of rules on small entities, blah, blah, blah.
So that seems like a lot of work. This is, comparatively
speaking, a small department when you compare it to, say, the
Department of Defense and whatnot. So I would be very
interested, say 180 days into your service, to get feedback to
this Committee, to my office in particular, about what you have
learned with respect to the Office of Advocacy, how its
operations might be improved, if there are additional
authorities or resources required to advocate on behalf of our
nation's small businesses and young firms. That would be
instructive, I think, to all of us. Do I have your commitment
to provide that report, should you become our next head of the
department?
Mrs. McMahon. I look very forward to reporting back to all
the members of the Committee the things that I have found I
think throughout SBA, where I have found issues or problems
that I need your help and guidance, and I hope that you would
not hesitate to reach out to me to say, ``Look, these are some
things I really want you to take a look at,'' because I am
going to be drinking from a fire hose for a while, continuing
to, and it is going to be a lot for me to absorb, and I would
like to be the most effective at it that I can.
Senator Young. So will you make every effort----
Mrs. McMahon. Yes, I will.
Senator Young [continuing]. Within 180 days to provide a
report with respect to the Office of Advocacy and the things I
mentioned?
Mrs. McMahon. I will get back to you as soon as I can with
that in that time period.
Senator Young. All right. That is fair enough. Thank you.
Mrs. McMahon. Thank you.
Senator Young. The second question just pertains to basic
government efficiency and effectiveness and avoiding
duplication, something you indicated earlier is important to
you. Can I get a commitment from you that you will work with me
to find efficiencies and ways to streamline the work at the
SBA?
Mrs. McMahon. I definitely want to streamline where we need
to streamline, and where we need to add, we need to add. And,
yes, I look forward to working with you and everyone on the
Committee to do that.
Senator Young. And, lastly, I know back in my great State
of Indiana, we have stumbled upon some unique approaches to
assisting our small businesses, some which might be replicated
by other states. No doubt other states have their own examples
to put forward. So I think there might be an opportunity for
the Small Business Administration to be an effective
clearinghouse for best practices emerging from the local level
or state level, perhaps even best practices that we have seen
in other countries. So with your commitment to work with me on
that effort, perhaps we will be able to assist our small
businesses.
Can I get your commitment to explore those opportunities as
well?
Mrs. McMahon. Yes. I am a firm believer in best practices.
And I think as we look across all of what is going on relative
to SBA, we will identify some areas that need to be shored up
and others that need to be changed or some that need to be
removed. So, yes, I like best practices.
Senator Young. Thanks so much.
Chairman Risch. Thank you very much, Senator Young, and we
will go to Senator Markey.
Senator Markey. Thank you, Mr. Chairman, very much.
Mrs. McMahon, we talked in my office. I raised this issue
of net neutrality with you, and the reason I did was that it is
not really well understood that 68 percent of all venture
capital goes to software and Internet startups, and they are
small businesses, just beginning.
One of your counterparts over at the Federal Communications
Commission, the new Chairman-designate, is talking about
repealing those rules, which really does make it possible for
new startups to be able to reach all 320 million people in
America, which is the business model that venture capital and
other investment money flows that way. And, again, we have the
next generation of startups.
Are you familiar with that net neutrality issue? And what
is your kind of general philosophy towards those areas of
economic development in the small business area in our country?
Mrs. McMahon. Thank you very much, Senator. I think
yesterday when you and I spoke about it, I said thank you for
informing me of this and educating me more about this. I have
not dealt with net neutrality in any of the businesses that I
have been involved in. I understand your concern from yesterday
that we do not want any restrictions on access to the Internet
because it can impede small businesses. So I would like to
continue to learn more about that and to learn more from you
about that and how it can be used most effectively.
Senator Markey. And I thank you.
SBIR, some staggering numbers from Massachusetts since the
program was created in 1982. Massachusetts small companies have
received 20,000 small business grants, and 2,300 new firms were
created out of those grants, creating tens of thousands of new
jobs in our State. And we very much rely upon SBIR grants as
part of our long-term business planning.
Senator Shaheen and I and others, we have been advocating
to make this a permanent program. Have you had a chance to look
at SBIR? And what would you think about the prospect of your
support for making it a permanent program?
Mrs. McMahon. I have just begun to familiarize myself with
it, and I have talked with many of the Senators who are on the
Committee who have said how important SBIR has been to their
constituents, especially in the world, as you and I talked
about yesterday in small businesses, of technology and startups
and what a large proportion they are now of small businesses,
especially in your State. So I want to delve more into that and
to see how we can best utilize SBIR to make sure if we need to
enhance it, let us do that. If we need to make it permanent, I
want to know why that is beneficial, so I would like to
continue to learn from you and Ranking Member Shaheen and
others about that.
Senator Markey. Okay. Thank you. And climate change:
Climate change is real, it is happening. We see it along the
coastlines especially of our country. And over and over again,
FEMA and the SBA have had to respond in order to give help to
Louisiana, affected by historic flooding, or along the
Northeast, with historic storms that hit our coastlines. And in
each instance, FEMA and the SBA have responded to these natural
disasters. Climate change is only going to get worse.
Have you looked at that issue of what that impact is and
what planning SBA might have to make in order to deal with
these changing conditions, especially its impact on small
businesses?
Mrs. McMahon. I have learned from you yesterday about the
warming of the waters, Massachusetts up to Maine and around
through the Cape Cod area.
Senator Markey. The fastest warming body of water in the
world.
Mrs. McMahon. And I found that a fascinating statistic. And
you indicated to me how it is driving the cod north, lobsters
north, and so the fishing, the fishery industry there, is
really being impacted by that climate change. Those are very
real statistics that I want to learn more about and to know not
only as it relates to Massachusetts but where else in our
country where small business, I think, can be affected and we
should take a more active role.
Senator Markey. And I would just say in conclusion that
after the Tsarnaev brothers attacked Boston on Memorial Day in
2013, the SBA stepped up to help all the small businesses in
that area so that they could recover. And I think that is just
another great function of the SBA that is not fully understood.
Whether it be natural disaster or manmade, the SBA has been
there, and hopefully under your leadership we can see a
continuation of that great tradition. Thank you.
Mrs. McMahon. Thank you very, very much.
Chairman Risch. Thank you, Senator Markey.
Senator Booker.
Senator Booker. Thank you very much, Mr. Chairman.
Mrs. McMahon, I want to thank you for being here. It means
a lot to serve your country and to step forward and be willing
to make the kind of sacrifices you are going to have to make in
this position, so I am grateful for your patriotism.
Mrs. McMahon. Thank you.
Senator Booker. I want to also just say, when your daughter
and son-in-law stood up, I just want to say for the record that
your daughter is far more fierce and intimidating than your
son-in-law.
[Laughter.]
He and I are about the same age, almost exactly the same
age, and Paul is letting himself slip a little bit. So after
this, maybe we should go to the Senate gym so I can give Triple
H some triple help in getting back in shape.
Mrs. McMahon. I am not sure, but Stephanie could give you a
mean hip toss.
[Laughter.]
Senator Booker. I believe that.
Real quick, New Jersey had some good years. In fiscal year
2015, we received about $750 million in SBA loans with over
$500 million of that going to underserved communities. As mayor
of Newark, New Jersey, I was blown away by how minority women
in particular are doing such an extraordinary job in our
country of starting businesses.
I am proud to support a lot of the programs that are
focused on them, and I am wondering if you support a higher cap
for the SBA to be able to make additional loans in fiscal year
2017 and 2018?
Mrs. McMahon. Well, what I would first like to see is: Are
all of our loans being made effectively? Are the loans that we
are making going where we think they are going and have the
results that we want to see? I do not have a handle yet on
whether or not that metric is in place for that accountability.
I want to make sure we are serving more and more minority small
business owners, our veterans, our Native Americans. But I need
to know, first of all, are the loans we are making effective.
Senator Booker. Right.
Mrs. McMahon. And if they are, then let us increase it.
Senator Booker. I really appreciate that response, and the
stimulative effect of these loans is in many ways far more
powerful than other uses of government dollars. The traditional
indices that banks use to evaluate the loans, something I
learned from Kiva, which I am sure you are aware of, that is
doing incredible micro-loan work, by using other indices that
are untraditional, they have loan repayment rates that beat
traditional loans. That is something that I think the SBA
should be looking at to try to figure out other ways to get
capital into the system.
Something else that your predecessor did that I think is
great, trying to correct for really bad policy coming out of
the 1990s, was that a lot of folks who were in prison for
nonviolent drug use, many of them for doing the things that two
of our last three Presidents admitted to doing, would come out
of prison and have paid their debt to society, but would not be
able to get Pell grants, would not be able to get food stamps,
would not be able to get public housing, stripped in many ways
of their ability to compete economically.
What your predecessor did was to make changes to help
formerly incarcerated citizens, many of whom are approaching
parole, be available to get micro loans from the SBA. It was a
remarkable change, and some of our great entrepreneurs are
people who made mistakes in the past. I just want your
commitment that that is something that you are going to look to
continue as a practice.
Mrs. McMahon. Well, I certainly would like to know more
about it, and it sounds like something that has been effective,
and I would like to be able to see if it has been.
Senator Booker. I appreciate you looking into that. Again,
most Americans, one out of ten is violating drug laws, and,
unfortunately, those drug laws are enforced disproportionately
on poor people and minorities at rates that are astonishing if
you are African American in this country. No difference between
blacks and whites for using drugs or dealing drugs, but you are
arrested almost four times more likely, which means you are
four times more likely to be stripped of opportunities to
compete economically. And your attention to continuing that
program is something that would be really helpful.
Mrs. McMahon. Thank you.
Senator Booker. There has been a lot of talk about the SBA
and transparency. I just want to make sure that you are
committed to helping us to have transparency when it comes to
loans so we could have better metrics about how your loans are
doing and being directed towards different populations that
have been mentioned here. I really appreciate that.
Really quickly, I have a lot of problems with regulations
as well. That is something I think there is a lot of
opportunities for people to work on both sides of the aisle.
Take, for example, the fact that the number one employer in
America, if you include contractors with the Federal
Government, is the Federal Government. It creates tremendous
jobs. But as we have heard from others, navigating that
Byzantine labyrinth of complicated rules and regulations is
difficult.
Take, for example, just the people who manage our pension
funds, which has hundreds of billions of dollars in pension
funds, management given to one major outlet, while emerging
managers, which states use to manage their pension funds, often
women-run businesses, often minority businesses, actually
outperform the big folks. But because of the way these
regulations are, it is very hard for those smaller businesses
to complete. In the technology field, this is really difficult
because small tech firms, which often provide greater service,
cannot even compete for government grants because the way it is
promulgated is just too difficult to navigate.
And so I just want your commitment that, as you look at
small businesses in general, looking inward here at the way we
do our processes is really critical to empowering small
businesses, and if we can help to lower these regulations, make
space for smaller businesses to compete for larger contracts or
to break down those large contracts into smaller, bite-size
opportunities, we will help to fuel our economy in a
significant way. It is something that as a member of the
Cabinet, with all these other Cabinet members who push billions
of dollars out into the private market, for you to be a voice
for someone who says let us look at a way to empower small
businesses, it can make a majorly impactful difference and
actually get government better service for their dollars. Is
that something that you will be focused on?
Mrs. McMahon. I absolutely want to advocate for our small
businesses and having that access to compete.
Senator Booker. Thank you very much.
Chairman Risch. Thank you very much, Senator Booker.
Senator Kennedy.
Senator Kennedy. Thank you, Mr. Chairman.
Mrs. McMahon, I enjoyed our visit in my office. I
appreciate your time. I think you will be a great addition to
Mr. Trump's team.
Mrs. McMahon. Thank you.
Senator Kennedy. I have just got a couple of questions. Do
you understand how hard it is to start or expand a small
business in America today?
Mrs. McMahon. Yes, sir. I have had that experience. I know
very well what it takes.
Senator Kennedy. I mean, Senator Booker talked about this,
but let us just start with the regulation. Here is what small
business people tell me every day. They do not complain about
specific rules or paying their fair share. This is what they
tell me. They tell me, ``We need simpler rules. We need fewer
rules. We need quicker decisions by the bureaucracy. We need
government workers who will answer the phone. We need
government websites that a normal person can navigate.'' That
is all they are asking for.
Now, it has been my experience--and I have been in America
longer than I have been in Washington. I have been a Senator
for 3 weeks. You cannot be for jobs if you are against
business. And businesswomen and businessmen need five things:
they need low taxes, they need reasonable regulation, they need
capital, they need decent infrastructure, and they need a
skilled workforce.
Now, I realize SBA cannot provide all of those, but tell me
how at SBA you are going to help small businesswomen and small
businessmen get those things.
Mrs. McMahon. Well, for one thing--and thank you very much,
Senator Kennedy, and I, too, enjoyed our visit. I think a lot
of what you have talked about, if I were fortunate enough to be
confirmed----
Senator Kennedy. You will be.
Mrs. McMahon [continuing]. I would like--thank you. Did you
hear that?
I think it is really important that we do mentor these
small businesses. You know, a lot of times, if someone has a
wonderful idea, this is my business, this is what I want to do,
I am going to come in and I am going to show you, and they come
in with sort of an abstract business plan. And even if you help
them sort of get that business plan right and get all the t's
crossed and the i's dotted, sometimes you have to look at them
and say, ``This is not a good idea. This business really does
not look as though it has the legs to succeed.'' And I think
often there is not enough of that kind of mentoring.
But I think that, you know, all of the other things that
you have identified, it is like a blueprint for success--you
know, lower taxes, fewer regulations, and all of that. But
sometimes you do not have the basic understanding of what it is
going to take to have a successful business. And there needs to
be that aspect of mentoring as well, and I think that will help
us grow more quality businesses that do have the opportunity to
succeed.
Senator Kennedy. Well, lots of small businesses fail. I
understand that. But what I think is happening in our country
is that a lot of really smart people are just afraid to try.
They are afraid of their chances of success. They just think
there are none. They just start looking at the different
permits and regulations and rules, and on top of that you have
got to have the capital, and many people have to put a second
mortgage on their home. You know, it is just insurmountable.
And here is what I hope you will do, Mrs. McMahon, because
I do believe you will be confirmed. I think you are very
qualified for this position.
Mrs. McMahon. Thank you.
Senator Kennedy. And I think the President has chosen well.
But I am familiar with what SBA does, and I know you are, too.
But I hope you will go beyond just SBA. I hope you will be the
advocate for small business in this administration, because in
my state, 90 percent of our jobs are created by small
businesswomen and small businessmen who are taking a risk. And
it is risky. And sometimes they fail. But when they stop
trying, at least in my part of America, we are in real trouble.
So I hope you will take on that role. If there is something
I can do to help you, let me know. Good luck.
Mrs. McMahon. Thank you. I do not think that I could be an
advocate for SBA if I were not an advocate for small business.
I think they are one and the same.
Senator Kennedy. Thank you. I yield back my full 24
seconds, Mr. Chairman.
Chairman Risch. Thank you, Senator Kennedy. We appreciate
it.
And, Senator Shaheen, we are back to you.
Senator Shaheen. Thank you, Mr. Chairman. And I only have
two questions, and I know that we may be waiting on one or two
more other people. But as you are aware, the Small Business
Administration is a relatively small investment in this
economy. If you look at how it compares to many other agencies
within the Federal Government, their budget is not one of the
largest. Let us just put it that way. And yet as we have heard
from all the members of this Committee, small businesses are
very important to this country's economy, to job growth, and we
need to do what we can to support them.
It is particularly true in rural America, I think. New
Hampshire does not have very many large cities. We are mostly a
rural state, and much of America is also. And when there are
cuts to the SBA, that has an inordinate impact on rural America
because one of the places that they can get support, as you
have heard, is from the SBA, for mentoring, for guidance on
issues that come up with their business, for loans. So it is
very significant.
I want to hear from you that you will be an advocate for
the budget of the Small Business Administration, because what
we saw in the last Republican administration is that they cut
SBA's budget by about 32 percent. So can you reassure me that
you will do everything you can to advocate for SBA in the
current administration?
Mrs. McMahon. Absolutely. I want to make sure that we have
the right budget to accomplish what we need to accomplish. And
it may be that, if I have an opportunity and I am confirmed, if
I am looking at one aspect of expenditure, to say, you know, I
think we can best take some of these dollars and move it over
here.
Senator Shaheen. Sure.
Mrs. McMahon. I think those are the right ways to look at
our budget and then to make sure that we are asking for the
right kind of appropriation, but let us lay out our programs.
Here is really what we want to accomplish, and here is what it
is going to take.
When I was a CEO, I often--when it was budget time, we went
back to zero-based budgeting. You had to justify your
department and your expenditures. And it is funny. That is a
pretty sobering experience. And so while I am not advocating
that necessarily at SBA, I do think there is a peeling back of
my understanding of the budget and where those dollars are
being spent and if they are being spent effectively.
My commitment to this Committee will be that I will be an
advocate to make sure that SBA runs effectively and
efficiently.
Senator Shaheen. Thank you. I appreciate that. And
effectiveness, obviously, is a goal that we all share.
With that in mind, I just wanted to call your attention to
what was reported this week, that the new administration is
preparing budget cuts based on a blueprint that was published
by the Heritage Foundation--you may have seen this--because the
blueprint endorsed cutting funding for several programs that I
think are very important to small business. One is the SBIR
program, the Small Business Innovation Research program, and we
have heard from a variety of members attesting to the
importance of that program. We have seen it in New Hampshire in
terms of job creation and providing innovation to the
Department of Defense. In fact, at a hearing before the Armed
Services Committee, we heard from experts that the most
effective existing program to help our military get the
innovation they need is the Small Business Innovation Research
program. So I would urge you to look at that very carefully as
there are discussions about cutting that program.
The other area that the Heritage Foundation blueprint talks
about cutting is SBA's role in disaster assistance. And given
your interest in that--you have expressed it at the hearing;
you expressed it when we discussed it. It has been raised by a
number of members. I would have severe reservations about
cutting SBA's role in disaster assistance.
And just finally, in support for international trade,
which, again, for so many small businesses, having access to
those international markets can make the difference between
growing and succeeding and failing, especially when times are
tough.
So I would just urge you to take a hard look at some of
those issues and advocate for what is in the best interests of
our small businesses. Thank you.
Mrs. McMahon. Thank you.
Chairman Risch. Thank you very much, Senator Shaheen.
And, finally, we are going to turn to Senator Rubio, and
Senator Rubio will be the last, and this is a momentous
occasion because, I will tell you, it is not very often you get
questioned by every single member of the Committee. They have
all shown up.
[Laughter.]
Mrs. McMahon. I am honored today then.
Senator Rubio. Well, thank you, Mr. Chairman, and I
appreciate it. Mrs. McMahon and I have known each other for a
while. I know a lot about her background, had some opportunity
to spend some time with her in our office talking through some
of these issues. And in the interest of time, I will just focus
my questions on one issue that is of particular importance to
the State of Florida.
As we had discussed, you know, the Zika virus had an impact
on small business, and I know there has been a number of
questions asked about disaster relief for communities impacted
by storms and other events. But what I think has become a new
disaster, something we had never quite seen before, is the
impact of a pandemic or the designation of a community as being
a place that people should avoid. This happened during the Zika
outbreak this summer in South Florida, where the CDC was
basically telling people do not visit if you are pregnant
certain geographic areas in a community. I do not need to tell
you that was not good for business.
And while a lot of people think it impacts the big hotels
and the big restaurants and the night clubs, it does, but it
impacts all sorts of small businesses down the chain, from,
quite frankly, the Uber drivers all the way to the florists at
the wedding that got canceled.
And so one of the things that we discussed was an effort I
made last year that the previous administration was open to, to
opening up or redefining the use of the disaster loan program
to address hardships that small businesses face during a public
health crisis.
So I would just ask: Is that something that you would be
open to exploring and looking at? I know you need to look at
what the costs of that would be, and, obviously, there needs to
be some predictability--although in disaster relief, it is hard
to predict, right? But I hope that that is something that I can
encourage you to be open-minded about because while I do not
think we are going to have many of these, there is nothing to
say it could not happen again. And our ability to help some of
these small businesses who are impacted by the outbreak of a
pandemic or what have you like Zika in the future is a new
dynamic, particularly in communities that are involved in a lot
of international travel.
So I do not know if you have had a chance to explore that
issue a little further, but I hope that you will be open-minded
and work with us on achieving it, because I do think that
moving forward we could unfortunately see that play out in a
number of different places in the future.
Mrs. McMahon. I have not had a chance to look at it more
than our discussion, but certainly I will have an open mind and
look forward to working with you on that.
Senator Rubio. Thank you. And the last point I would make
is I would encourage you, at the appropriate time I would love
to have you come to Florida and visit some of our--I know
everybody wants you to get everywhere, right? But Florida is a
big----
Mrs. McMahon. Could it be during the winter?
[Laughter.]
Senator Rubio. Yes. We would try to schedule it sometime
between November and March. But there is some real dynamism in
our small business community, and, in particular, I have always
pointed people to how dynamic first-generation Americans are in
terms of entrepreneurship. As I commented to you in our
meeting, in some of the keys like where I live in South
Florida, in Miami, the people know it as Calle Ocho. It is
Eighth Street. It is kind of a traditional area where the Cuban
exile communities congregate. Of course, there is a Walmart and
all the other big chains, but literally eight out of ten of the
storefronts and businesses are family owned and operated
businesses. And for me, that--and people always say it all the
time. That truly is the backbone of our country and of our
business class, and they do not get the headlines. And a lot of
these businesses face challenges. You could have the greatest
product in the world, but when--and these things that we do not
think about in terms of challenges to a small business, but one
of the things that has happened, when they decide to expand the
road in that area and go into construction, it is great for the
future. But for the next year and a half, customers just think
it is a hassle to get in and out, and it is devastating for
some of these small businesses.
And I think not just--the people focus on the loan programs
and the other financial assistance that the SBA provides, but
to be an advocate for the challenges of small businesses,
whether it is regulations, taxes, or things of this nature, I
believe small business in America needs advocates within the
Federal Government who are constantly watchdogs for any public
policy at any level of government that has a disproportionate
impact on a smaller business.
And so I hope that--I know you are going to be very busy
getting around to everywhere, but at some point, particularly
when it is cold and snowing everywhere else, I encourage you to
come, and we will find the right place, whether it is in
central Florida--we have got small business success everywhere
in our State, and we are excited to host you there, and we
would love to interact with you.
Again, I thank you for your willingness to serve our
country. I really am grateful for the opportunity that we have
had to talk. And the nomination process is not always a
pleasant experience, so I am glad that it sounds like this
meeting has gone well, and I look forward to working with you,
and I anticipate you will be confirmed here fairly soon.
So thank you. Thank you for being here today.
Mrs. McMahon. Thank you very, very much. I appreciate it.
Chairman Risch. Senator Rubio, Senator Hirono had an
equally attractive offer.
Senator Rubio. Hawaii? Yeah, that is good one, too.
[Laughter.]
Mrs. McMahon. However, I was invited to Alaska and North
Dakota, and I said, ``Could we do that in the warm months?''
Chairman Risch. Alaska is great when the salmon are
running.
Senator Rubio. We have got great places everywhere.
Chairman Risch. Thank you, Senator Rubio.
Well, with that we are going to conclude the hearing, and,
Mrs. McMahon, thank you so much for your willingness to serve.
And Senator Shaheen had another meeting to go to and wanted me
to express her appreciation for your willingness to serve and
for your appearance at this hearing and for being as open as
you are.
This has really been a good hearing. As you can see, we
have a very diverse group of Senators with different ideas
about things, but that is what makes America great. Senator
Shaheen and I have been talking about trying to move this as
quickly as possible. We feel very good about being able to get
you confirmed, but, obviously, it is not over until it is over.
And so we are going to try to move this next week. We are
booked up this week, but we are going to do our best to try to
move it next week.
We are going to leave the record open until close of
business tomorrow, Wednesday, January 25th, and we will keep
the record open for 2 weeks to edit statements and submit
letters and any other relevant materials.
So, with that, thank you.
Mrs. McMahon. Thank you very much.
Chairman Risch. Thank you to your family for being so
supportive and being here with us today. With that our
Committee is adjourned.
[Whereupon, at 12:28 p.m., the Committee was adjourned.]
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