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+<html>
+<title> - EXPLORING CHALLENGES AND OPPORTUNITIES OF UNDERSERVED BUSINESSES IN THE 21st CENTURY</title>
+<body><pre>
+[House Hearing, 116 Congress]
+[From the U.S. Government Publishing Office]
+EXPLORING CHALLENGES AND OPPORTUNITIES OF UNDERSERVED BUSINESSES IN THE
+                              21ST CENTURY
+=======================================================================
+                                HEARING
+                               BEFORE THE
+        SUBCOMMITTEE ON ECONOMIC GROWTH, TAX, AND CAPITAL ACCESS
+                                 OF THE
+                      COMMITTEE ON SMALL BUSINESS
+                             UNITED STATES
+                        HOUSE OF REPRESENTATIVES
+                     ONE HUNDRED SIXTEENTH CONGRESS
+                             FIRST SESSION
+                               __________
+                              HEARING HELD
+                            FEBRUARY 7, 2019
+                               __________
+[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
+            Small Business Committee Document Number 116-003
+             Available via the GPO Website: www.govinfo.gov
+                              __________
+                    U.S. GOVERNMENT PUBLISHING OFFICE
+34-645                      WASHINGTON : 2019
+-----------------------------------------------------------------------------------
+For sale by the Superintendent of Documents, U.S. Government Publishing Office,
+http://bookstore.gpo.gov. For more information, contact the GPO Customer Contact Center,
+U.S. Government Publishing Office. Phone 202-512-1800, or 866-512-1800 (toll-free).E-mail,
+<a href="/cdn-cgi/l/email-protection" class="__cf_email__" data-cfemail="d8bfa8b798bbadabacb0bdb4a8f6bbb7b5">[email&#160;protected]</a>.
+                  HOUSE COMMITTEE ON SMALL BUSINESS
+                 NYDIA VELAZQUEZ, New York, Chairwoman
+                         ABBY FINKENAUER, Iowa
+                          ANDY KIM, New Jersey
+                         SHARICE DAVIDS, Kansas
+                          JARED GOLDEN, Maine
+                          JASON CROW, Colorado
+                          JUDY CHU, California
+                           MARC VEASEY, Texas
+                       DWIGHT EVANS, Pennsylvania
+                        BRAD SCHNEIDER, Illinois
+                      ADRIANO ESPAILLAT, New York
+                       ANTONIO DELGADO, New York
+                     CHRISSY HOULAHAN, Pennsylvania
+                                 VACANT
+                   STEVE CHABOT, Ohio, Ranking Member
+   AUMUA AMATA COLEMAN RADEWAGEN, American Samoa, Vice Ranking Member
+                        TRENT KELLY, Mississippi
+                          TROY BALDERSON, Ohio
+                          KEVIN HERN, Oklahoma
+                        JIM HAGEDORN, Minnesota
+                        PETE STAUBER, Minnesota
+                        TIM BURCHETT, Tennessee
+                          ROSS SPANO, Florida
+                        JOHN JOYCE, Pennsylvania
+                Adam Minehardt, Majority Staff Director
+     Melissa Jung, Majority Deputy Staff Director and Chief Counsel
+                   Kevin Fitzpatrick, Staff Director
+                           C O N T E N T S
+                           OPENING STATEMENTS
+                                                                   Page
+Hon. Andy Kim....................................................     1
+Hon. Kevin Hern..................................................     6
+                               WITNESSES
+Ms. Marla Bilonick, Executive Director, Latino Economic
+  Development Center, Washington, DC.............................     4
+Ms. Sharon Pinder, President & CEO, Capital Region Minority
+  Supplier Development Council, Silver Spring, MD................     7
+Mr. Davy Leghorn, Assistant Director, American Legion Veterans
+  Employment & Education Division, Washington, DC................     9
+Mr. Michael Romano, Sr. Vice President of Industry Affairs &
+  Business Development, NTCA--The Rural Broadband Association,
+  Arlington, VA..................................................    10
+                                APPENDIX
+Prepared Statements:
+    Ms. Marla Bilonick, Executive Director, Latino Economic
+      Development Center, Washington, DC.........................    23
+    Hon. Kevin Hern..............................................    27
+    Ms. Sharon Pinder, President & CEO, Capital Region Minority
+      Supplier Development Council, Silver Spring, MD............    29
+    Mr. Davy Leghorn, Assistant Director, American Legion
+      Veterans Employment & Education Division, Washington, DC...    36
+    Mr. Michael Romano, Sr. Vice President of Industry Affairs &
+      Business Development, NTCA--The Rural Broadland
+      Association, Arlington, VA.................................    44
+Questions and Answers for the Record:
+    Questions from Hon. Bradley Schneider to Mr. Davy Leghorn and
+      Answers from Mr. Davy Leghorn..............................    54
+Additional Material for the Record:
+    CCA-Competitive Carriers Association.........................    56
+EXPLORING CHALLENGES AND OPPORTUNITIES OF UNDERSERVED BUSINESSES IN THE
+                              21st CENTURY
+                              ----------
+                       THURSDAY, FEBRUARY 7, 2019
+                  House of Representatives,
+               Committee on Small Business,
+                   Subcommittee on Economic Growth,
+                                   Tax, and Capital Access,
+                                                    Washington, DC.
+    The Subcommittee met, pursuant to call, at 10:10 a.m., in
+Room 2360, Rayburn House Office Building. Hon. Andy Kim
+[chairman of the Subcommittee] presiding.
+    Present: Representatives Kim, Davids, Schneider, Delgado,
+Radewagen, Hern, and Spano.
+    Chairman KIM. We are going to get started here. We have a
+number of members that are coming over from the National Prayer
+Breakfast so they will come in and the Ranking Member will come
+in as he is able.
+    I am Chairman Andy Kim. I am eager to get started here. I
+just want to have an opportunity to be able to make sure we are
+hearing from the incredible people that we have today that are
+going to be sharing with us.
+    Small businesses make up over 99 percent of all businesses
+in the United States and employ almost half of our nation's
+workers. In 2018 alone, America's small employers added 1.9
+million net new jobs to the economy. As I have seen firsthand
+in my district in New Jersey, Main Street businesses are the
+backbone of our communities.
+    In my home state, small businesses employ nearly two
+million people, making up nearly half of the private workforce.
+Among them are approximately 58,000 veteran-owned businesses
+and over 250,000 female-owned businesses, which is why I am
+particularly happy to be chairing this hearing today.
+    While nearly every entrepreneur faces obstacles when it
+comes to getting a new business off the ground and running,
+entrepreneurs from traditionally-underserved backgrounds tend
+to face even greater barriers to entrepreneurial success.
+    We often hear that access to capital is the biggest
+challenge facing aspiring entrepreneurs. As the lifeblood of
+all new businesses, affordable capital is crucial to starting a
+business. Without it, new firms often cannot buy inventory and
+equipment, pay their employees, and expand operations.
+    Unfortunately, studies have shown that women, minority, and
+veteran-owned businesses face heightened obstacles to securing
+affordable capital. For example, the Minority Business
+Development Agency found that minority-owned firms experience
+denial rates three times higher than other firms. Despite a
+similar demand, 60 percent of veterans reported a financing
+shortfall and had approval rates 10 percent lower than all
+other firms.
+    In response to these challenges, minority-owned firms are
+more likely to rely on personal sources of funding, such as
+savings, a family member, or credit. This unfortunate reality
+is not only unsustainable, it is also hindering small business
+growth.
+    Unfortunately, barriers to entering Federal procurement
+markets are also common for underserved firms. Federal
+contracts are a great source of potential for business growth
+and it is crucial that we find ways to make them more
+accessible to budding small firms.
+    Setting government-wide small business contracting goals
+was a meaningful step towards increasing small business
+participation in the Federal procurement marketplace. However,
+as the numbers show, we will have work to do to level the
+playing field for underserved businesses.
+    For instance, women-owned businesses were awarded $21
+billion of the total $500 billion in contracts for fiscal year
+2017. This is highly disappointing considering that women
+entrepreneurs contribute over $1 trillion a year to the U.S.
+economy.
+    Meanwhile, rural businesses are facing a unique set of
+challenges, including smaller labor pools, slow population
+growth, net outmigration, and health problems including
+diabetes and opioid addiction. Though these issues impact rural
+communities at large, they can also have a devastating impact
+on rural entrepreneurship and business growth.
+    To address these disparities, SBA created several
+initiatives which we will hear more about today. For many
+underserved businesses, initiatives such as Small Business
+Development Centers, Women's Business Centers, SCORE, and
+Veterans' Business Outreach Centers are there to provide
+mentorship and other key services.
+    Today, I look forward to hearing the recommendations and
+feedback of our distinguished witnesses to strengthen these
+initiatives, as well as other Federal programs and private
+sector actions serving underrepresented entrepreneurs.
+    I hope today's hearing will be a productive opportunity to
+explore the challenges facing small firms while identifying
+areas where we can work together on legislation that seeks to
+level the playing field for America's small businesses.
+    Thank you.
+    The Ranking Member will submit his statement for the
+record.
+    And if other Committee members have opening statements
+prepared, we would also ask that they be submitted for the
+record.
+    I would like to take a minute to explain the timing rules.
+Each witness will get 5 minutes to testify. Each member will
+get 5 minutes for questioning. There is a lighting system to
+assist you. The green light will be on when you begin, the
+yellow light will come on when you have 1 minute remaining, and
+the red light will come on when you are out of time. And we
+will ask that you stay within the timeframe to the best of your
+ability.
+    Now, I would like to introduce our witnesses. Our first
+witness is Ms. Marla Bilonick. Ms. Bilonick has been the
+executive director of the Latino Economic Development Center
+since 2014. She has also worked for Seedco where she assisted
+businesses in Lower Manhattan that were impacted by the attacks
+of September 11th. Ms. Bilonick is a member of the board of
+directors of the National Association of Latino Community Asset
+Builders. She is a graduate of the University of Wisconsin at
+Madison and received her Master of Arts degree from Johns
+Hopkins University of Advanced International Studies (SAIS).
+    Welcome back, Ms. Bilonick.
+    Our second witness is Ms. Sharon Pinder. Ms. Pinder is the
+president and CEO of the Capital Region Minority Supplier
+Development Council (CRMSDC), a nonprofit corporation whose
+mission is to link corporations and government agencies with
+minority business enterprises. Prior to joining the council,
+she served as the director of the Mayor's Office of Minority
+and Women-Owned Business Development for the City of Baltimore.
+She was also Maryland's first appointed cabinet secretary of
+the Governor's Office of Minority Affairs. Ms. Pinder holds a
+Master of Science degree in Technology Management from the
+University of Maryland, University College, where she has the
+honor of serving as professor of practice in the School of
+Graduate Studies.
+    Welcome, Ms. Pinder.
+    Our third witness today is Mr. Davy Leghorn. Mr. Leghorn is
+the assistant director of the Economic Division of The American
+Legion where he oversees employment, small business, and VA
+contracting policies. He also administers The American Legion's
+Veteran Entrepreneurship Program. Mr. Leghorn served as a motor
+infantryman in the United States Army, then as a civil affairs
+specialist with the 450th Civil Affairs Battalion. He currently
+serves as the sergeant-at arms for George Washington Post 1 in
+The American Legion Department of the District of Columbia.
+    Welcome, Mr. Leghorn, and thank you for your service.
+    And today's final witness is Mr. Mike Romano. Mr. Romano
+serves as a senior vice president of Industry Affairs and
+Business Development for NTCA, the Rural Broadband Association.
+NTCA represents roughly 850 telecom companies throughout the
+United States, many of whom are located in rural communities
+and small towns with a goal of ``building a better broadband
+future for rural America.'' Prior to joining NTCA in 2010, Mr.
+Romano worked at Bingham McCutchen LLP, Global Telecom and
+Technology, America Online, and Level 3 Communications and
+Swidler Berlin. Thank you for joining us today.
+    I want to just get started right from the beginning, so Ms.
+Bilonick, you are recognized for 5 minutes.
+   STATEMENTS OF MARLA BILONICK, EXECUTIVE DIRECTOR, LATINO
+ECONOMIC DEVELOPMENT CENTER; SHARON PINDER, PRESIDENT AND CEO,
+  CAPITAL REGION MINORITY SUPPLIER DEVELOPMENT COUNCIL; DAVY
+     LEGHORN, ASSISTANT DIRECTOR, AMERICAN LEGION VETERANS
+EMPLOYMENT AND EDUCATION DIVISION; MICHAEL ROMANO, SENIOR VICE
+ PRESIDENT OF INDUSTRY AFFAIRS AND BUSINESS DEVELOPMENT, NTCA-
+                THE RURAL BROADBAND ASSOCIATION
+                  STATEMENT OF MARLA BILONICK
+    Ms. BILONICK. Good morning, Subcommittee Chairman Kim and
+members of the Subcommittee. It is my sincere honor to be
+speaking with you all today.
+    My name is Marla Bilonick, and I am the executive director
+and CEO of the Latino Economic Development Center (LEDC).
+    LEDC is a 28-year-old organization with the mission to
+drive the economic and social advancement of low- to moderate-
+income Latinos and other underserved communities in the D.C.
+and Baltimore metropolitan areas. We operate out of six offices
+in the region, with over 40 professional and bilingual staff
+providing top-notch services to our clients. On an annual
+basis, we serve well over 4,000 low- to moderate-income
+residents. We are a SBA Microlending Intermediary, SBA
+Community Advantage Lender, and certified Community Development
+Financial Institution (CDFI).
+    Since we began lending in 1997, we have rolled out more
+than $15 million in capital and have provided small business
+technical assistance services to thousands of aspiring and
+existing small business owners in the region. LEDC is a member
+of, and I sit on the board of the Opportunity Finance Network,
+a membership organization representing the over 1,000 CDFIs in
+the United States. The challenges I will outline are consistent
+with what we hear from our fellow CDFIs operating similarly
+underserved communities around the nation.
+    LEDC exists to help underserved populations overcome the
+challenges that stand in their way of achieving their full
+potential for achieving financial stability and income
+mobility. While the challenges before them are countless, those
+I would characterize as the most significant are: lack of
+access to capital, lack of access to information and
+educational resources, poor or no credit history, and systemic
+and institutional racism and sexism.
+    In my testimony, I will elaborate on each of these barriers
+to success. As the head of a Latino-facing organization and
+member of the Board of Directors of the National Association of
+Latino Community Asset Builders (NALCAB), I will also include
+information on small business challenges that are specific to
+the Latinx community.
+    So starting with lack of access to capital, the traditional
+commercial banking system is often not a viable resource for
+underserved small businesses. Commercial banks defer to a fixed
+minimum credit score they will accept for loan approvals and
+are further hindered from serving small businesses due to
+restrictions around lending to startups or providing smaller-
+dollar financing. A recent report from the Woodstock Institute
+cited that the number of CRA-reported loans under $100,000 in
+2015 remained 58 percent lower than in 2007. What is more, bank
+branches are consolidating and closing at a steady clip, with
+1,700 bank branches closing in the 12 months between June 2016
+and June 2017.
+    The alternative for underserved entrepreneurs operating in
+this climate is to take out credit cards that often charge high
+interest rates, access high-cost financing via the emerging
+online lending industry, tap into merchant service cash
+advances, obtain a loan from a loan shark, or obtain a loan
+from the CDFIs in their area. I will note that we have several
+loans in our portfolio that are restructured financing deals
+for entrepreneurs who fell prey to the allure of online
+lenders.
+    On the other hand, data shows that CDFIs in OFN's
+membership alone have originated more than $65 billion in
+financing in urban, rural, and native communities through 2016.
+To quote OFN's president, Lisa Mensah, `` CDFIs exist to move
+money to places missed by traditional lenders.'' However, CDFIs
+face challenges in terms of reaching the very communities that
+need our services due to minimal or nonexistent marketing
+budgets, challenges to capitalizing our loan funds, and/or
+sustaining the high overhead costs associated with the labor-
+intensive loans we underwrite.
+    In terms of lack of access to information and educational
+resources, starting or growing a business is not for the faint
+at heart. In an ideal scenario, an entrepreneur has the time
+and support to complete an in-depth business plan, complete
+with a market analysis, elaborate revenue projects, a well-
+developed management plan, and options for financing their one-
+time startup costs, as well as ongoing or variable costs to
+come.
+    Unfortunately, underserved entrepreneurs do not always have
+access to business planning information or resources, nor do
+they have the time to invest in business planning as they are
+looking to their business ideas as a source of income for
+themselves and their families.
+    In addition, the regulatory framework is a maze of
+processes and agencies that few could understand without
+outside support. Depending on the business type, entrepreneurs
+frequently need to go through several licensing agencies and
+register with their state and jurisdiction to be compliant.
+Layer on top of that the language barrier that many of our
+immigrant Latinx clients face, and it is doubly challenging to
+meet compliance requirements.
+    I am actually going to skip the reference to poor and no
+credit history, although it is a significant challenge. I want
+to get to sort of the last section which I think is probably
+the most challenging around systemic and institutional
+discrimination.
+    So my testimony cites the same research that you cited, Mr.
+Kim, from MBDA, around the disproportionate disapprovals for
+minority and female borrowers. And, you know, just showing that
+identical applications from minority and nonminority applicants
+were rejected up to 54 percent times more frequently. And for
+women, women-owned businesses received nearly 50 percent less
+funding than men-owned businesses, and that funding actually
+declined by 42 percent between 2016 and 2017.
+    In closing, my request would be that we do not lose sight
+of the protections for consumers in general, as well as
+minorities. The CFPB, OCC, Fed, and FDIC should continue and
+deepen their evaluation of commercial bank activities with
+regard to the demographics of who is and who is not receiving
+loans.
+    Just yesterday, the CFPB said it plans to abolish most of
+its critical consumer protections governing payday loans. And
+while that is not necessarily a direct correlation with our
+small business clients, it just is a signal to the attitude of
+the CFPB at this moment in time, which is certainly troubling.
+Specifically, the CFPB should finalize its implementation of
+section 1071 of the Dodd-Frank Act, which would require
+financial institutions to compile, maintain, and report
+information regarding credit applications made by women-owned,
+minority-owned, and small businesses. This kind of information
+would provide policymakers with insights into the precise
+shortcomings of diverse businesses in seeking credit, enabling
+policymakers to craft narrowly-tailored legislation designed to
+remedy the shortcomings within each of these entrepreneurial
+communities.
+    Thank you.
+    Chairman KIM. Thank you so much.
+    Before we move on to our next witness, I just wanted to
+recognize our Ranking Member here and turn it over to him for
+his opening statement.[16]fb[17]
+    Mr. HERN. Thank you, Mr. Chairman. Thank you for your
+kindness in doing that. My apologies for my tardiness. We were
+at the National Day of Prayer, so I appreciate that.
+    I just want to say that as a small businessperson for 34
+years and a person who has lived the American dream, come from
+extraordinary poverty to being a very successful
+businessperson, there is nothing that has been a greater joy
+for me later in my life than to help small businessmen and
+women see their ideas brought to life, to start small
+businesses, to help so many try to find, actually write
+business plans, and to find access to capital, help them mold
+and model their business plans to work.
+    And so with about 99.9 percent of all businesses in the
+United States being classified as small, the impact that small
+businesses have on our economy cannot be overstated. In my home
+state of Oklahoma alone, we have over 340,000 small firms who
+employ over 700,000 people. Many of these businesses are owned
+by minorities, women, and veterans, and many of these
+businesses are located in rural areas.
+    Small businesses owned by minority, women, and veterans
+face a unique set of challenges, ranging from raising adequate
+financing, to building social capital, to finding the effective
+mentors. Rural businesses, however, while facing those
+challenges, also tend to face a different set of challenges,
+most notably, access to reliable and affordable broadband
+service.
+    Today, more than 24 million Americans lack access to high
+speed internet, the vast majority of whom live in rural
+communities. When comparing urban and rural broadband
+development, 97.9 percent of urban America has access to both
+fixed and mobile broadband, while only 68.6 percent of rural
+citizens have the same access.
+    The lack of a solid business case for rural broadband
+deployment remains a certain reason for what is often referred
+to as the `` digital divide.'' Large telecommunications
+companies have little incentive to invest in broadband
+infrastructure in areas with low population density. Instead,
+small telecommunications carriers are far more likely to invest
+in rural communities, often because they are communities.
+Frequently, however, these small firms face numerous challenges
+in their efforts to increase broadband access.
+    Small businesses specifically require access to reliable
+and affordable technology to compete with larger competitors.
+According to a recent study, digitally advanced small
+businesses were shown to be more than three times likely to
+create jobs and experience revenue growth at a rate four times
+higher than small businesses who do not employ technology. Yet,
+despite such outstanding returns, many small businesses do not
+take full advantage of the technologies available to them.
+Often, this is due to owners not realizing the benefits of such
+tools offered to them, or simply lacking access to reliable
+technological resources as a result of cost or location.
+    Today's hearing will allow us the opportunity to further
+discuss these and other challenges that businesses owned by
+minority, women, veterans, and rural Americans face while also
+exploring potential ways to improve and elevate these issues
+moving forward.
+    I look forward to hearing from our witnesses, I again
+apologize for my tardiness, and to having a productive
+conversation.
+    Thank you, Mr. Chairman. I yield back.
+    Chairman KIM. Thank you. I look forward to working with you
+on this Subcommittee to do what we can for small businesses.
+And I have to say I am just in awe of your experience, the
+great success that you have had over your career, your
+particular knowledge about small businesses. I think it is
+going to add a tremendous amount of expertise to this
+Subcommittee, and I am looking forward to working with you on
+that.
+    Mr. HERN. Thank you.
+    Chairman KIM. Why do we not get moved back to the witness
+panel?
+    I want to move it over to Ms. Pinder, if you do not mind.
+You are recognized for 5 minutes.
+                   STATEMENT OF SHARON PINDER
+    Ms. PINDER. Good morning. I am Sharon Pinder, and for the
+last 4 years I have been the president and CEO of the Capital
+Region Minority Supplier Development Council. Good morning,
+Chairman Kim, Ranking Member Hern, and distinguished Committee.
+I thank you for the opportunity today to have this
+conversation.
+    Today I am actually in real awe as I look at the picture of
+the late Congressman Parren Mitchell on the wall when he was
+Chairman of the Small Business Committee. I think about 40
+years ago, and the foundation of all MBE programs that exist
+today, Public Law 95-570. And so as we look at the basis of the
+foundation of MBE programs and its challenges, we will talk
+about day, they (challenges) still exist 40 years later.
+    The Capital Region Minority Supplier Development Council,
+is the nation's certifying body for the private sector created
+on the heels of civil unrest in the late 1960s, our mission is
+to certify, develop, and advocate for minority businesses.
+    The Capital Region Minority Supplier Development Council
+(my particular territory) is the State of Maryland, District of
+Columbia, and Northern Virginia. In addition to that, I operate
+two Minority Business Development Agency (MBDA) Centers. One is
+the MBDA Business Center Washington D.C., and the other one is
+the only federally funded center, federal procurement center.
+    Yesterday, I was talking to a group of minority businesses
+and I just arbitrarily asked the question, ``What are your
+issues''? ``What are the problems that you face as
+businesses''? And without script, just generally what they said
+to me was (1) capitalization or the undercapitalization of
+their businesses; (2) not having that network or those
+relationships; and (3) not being able to navigate as you look
+at contracts opportunities.
+    As we look at the 21st century, many programs and ideas
+aimed at leveling the playing field have existed for over 40
+years, and across this country we witness enormous gaps that
+exist between the current measures of minority and women
+availability and number of relative size of minority-owned
+firms that you would expect to exist across the country. These
+gaps are not without severe consequences for economic health of
+the country as a whole.
+    When minority businesses thrive, communities of color
+thrive as well. Diverse businesses which are more likely to
+hire local and employ people of similar backgrounds work as
+powerful forces for economic development. Communities of color
+will become the majority in 2044 or before. And how minority
+businesses fair will impact the sustainability and strength of
+our nation.
+    Our nation's economic history is rich with examples of
+public policy and government actions facilitating the spirit of
+entrepreneurship and directly contributing to the success of
+capitalism. At critical junctures throughout the
+industrialization of America, the Federal Government has
+proactively redirected the flow of commerce and in effect has
+launched the birth of new giants of American industry. From the
+issuance of Federal land grants that were essential to spurring
+the growth of railroads and to breathing life into the
+telegraph and telephone industries, from granting the licenses
+and broadcasting frequencies to radio and television companies,
+and from the construction of Federal highway systems to the
+creation of aviation and aerospace programs, the government has
+been a willing partner in forging a path for new industries.
+    For example, the adoption of airmail as the primary mode of
+transportation for the U.S. Postal Service consequently aided
+in contracts to a number of airlines and placed them in a path
+that they became really successful in the private airline
+industry.
+    Due to time, I am going to skip down to the next part of my
+testimony.
+    So what we should consider that timing is everything and
+that this is a critical juncture in our history with an
+opportune time to use the model of the past for purposeful and
+intentional support from the government. Today's minority
+businesses can be tomorrow's moguls, whereas past
+discriminatory practices prevented their participation in
+building some of the nation's top industries because quite
+frankly minority businesses were not at the table when those
+industries were born. There is an opportunity now by which
+minority businesses can benefit by being at the table during
+the infancy of some of today's emerging industries and
+technologies. As in the past, partner with the government and
+as that industry grows, those minority businesses will grow as
+well. Thank you.
+    Chairman KIM. Thank you for that. And I agree with you.
+Timing is everything. And we are at a critical juncture, which
+is why we were grateful to have your expertise here today to
+help us think through the way forward. So thank you so much for
+that.
+    Mr. Leghorn, I want to turn it over to you. You are
+recognized for 5 minutes.
+                   STATEMENT OF DAVY LEGHORN
+    Mr. LEGHORN. Chairman Kim, Ranking Member Hern, and
+distinguished members of the Subcommittee, on behalf of our
+national commander, Brett R. Reistad and the nearly two million
+members of The American Legion, we thank you for the
+opportunity to testify today on exploring challenge sand
+opportunities faced by veteran businesses.
+    In our testimony, we covered a broad spectrum of topics
+from Federal contracting to entrepreneurial development
+programs and access to capital. We would like to dedicate the
+balance of our time this morning to just two issues.
+    One detriment to the veteran small business industrial base
+has always been the misinterpretation of legislation that has
+designated SDVOSBs as a preferred contracting group. In
+legislation from 1999 and 2003, Congress gave SBA and other
+agencies broad business development authority to help veterans.
+Unfortunate, the SBA and FAR Council announced in 2005
+rulemaking comments that government-wide SDVOSB program was for
+established businesses and was not meant to aid in development
+for new businesses.
+    The Kingdomware decision affirmed the intent of the SDVOSB
+set-aside goal in the Veterans Entrepreneurship and Small
+Business Development Act of 1999, was to encourage small
+businesses and was not intended for the purpose of fulfilling a
+quota. The Supreme Court opined that the goals exist to provide
+real opportunities for service-disabled veterans and that the
+subsequent enactment of the Veterans Benefits, Health Care, and
+Information Technology Act was ancillary in nature to the
+Veterans Entrepreneurship and Small Business Development Act
+and shares the same intent.
+    This is significant because agencies are now reminded that
+this reasoning applies to both the Small Business Act goals as
+well as goals under agency-specific laws like the Veterans
+First Contracting Program at VA. The American Legion had hoped
+that the outcome of Kingdomware would force SBA and the FAR
+Council to revisit the rules of the Veterans Entrepreneurship
+and Small Business Development Act. This has not occurred. To
+this end, The American Legion asked Congress to encourage SBA
+and the FAR Council to carry out their business development
+authority.
+    Further, the Kingdomware decision signaled the Supreme
+Court's approval for a model of veterans first or service-
+disabled veterans first to exist in contract set-aside and
+preference programs. Congress can now extend this model
+government-wide in a Small Business Act or an agency-specific
+legislation.
+    Additionally, The American Legion would like to discuss our
+support for SBA's entrepreneurial development programs. Since
+2012, the Boots to Business curriculum taught during the
+military's Transition Assistance Program has been very
+successful. Since its implementation, Boots to Business has
+been the litmus test that has convinced veterans to launch
+their business or to delay the process until they are ready.
+    In the 2019 National Defense Authorization Act, there was
+an attempt to make at least one of the TAP capstone courses
+mandatory. The American Legion supports this effort and hopes
+this will expose more service members to SBA and their
+grantees.
+    The American Legion believes more service members should
+have access to SBA programs. Currently, National Guard and
+reservists are not eligible for veteran entrepreneurship and
+loan programs until they are activated under Title 10. This is
+why The American Legion supports legislation that would amend
+15 USC to extend the eligibility for veteran-focused SBA
+programs to service members who have been ordered to perform
+active service for more than 30 consecutive days.
+    Increased utilization of SBA's veteran-centric programs
+will require more veteran business outreach centers (VBOC). The
+American Legion supports the creation of more VBOCs.
+    Puerto Rico, Guam, Virgin Islands, and American Samoa are
+often overlooked for veterans programs and services, despite
+the heavy military presence and recruitment efforts that occur
+there. This is why we support the Puerto Rico Small Business
+Assistance Act. The American Legion asks this Committee to
+authorize VBOCs in Puerto Rico and other underserved areas
+where veterans reside.
+    In conclusion, Chairman Kim, Ranking Member Hern, and
+distinguished members of the Committee, The American Legion
+thanks you for the opportunity to explain the position of
+nearly two million members of The American Legion, and we look
+forward to any questions you may have.
+    Chairman KIM. Thank you, Mr. Leghorn. That was very
+informative.
+    I want to turn it over to Mr. Romano. You are recognized
+for 5 minutes.
+                  STATEMENT OF MICHAEL ROMANO
+    Mr. ROMANO. Thank you, Mr. Chairman.
+    Good morning, Chairman Kim, Ranking Member Hern, and
+members of the Subcommittee. Thank you for the opportunity to
+testify today.
+    My name is Mike Romano. I am the senior vice president at
+NTCA-The Rural Broadband Association. We represent
+approximately 850 small businesses that provide broadband in
+rural America.
+    Our hope today is to offer a helpful perspective as a
+complement to the discussion of underserved areas and
+populations by my fellow witnesses. The capital-intensive
+nature of building infrastructure is particularly challenging
+in light of the deeply rural, sparsely populated areas NTCA
+members serve. Yet even as our members' rural broadband
+networks are difficult to build and maintain, they are
+essential to ensure that other small businesses and consumers
+in rural America can connect with the rest of the world.
+    Indeed, we believe that a key to helping underserved
+communities of all kinds in the 21st century is to deliver 21st
+century connectivity--high-speed broadband upon which users can
+rely to invest in and operate their own businesses to create
+jobs and provide opportunity.
+    Investing in broadband has far-reaching effects for urban
+and rural America alike, creating efficiencies in health care,
+education, agriculture, energy, and commerce. America needs
+rural broadband not only to help farmers efficiently produce
+crops sold across the U.S. and around the world, but to help
+small businesses of all kinds participate in the national and
+global economies and to help all rural citizens experience the
+life-changing benefits of distance learning, telemedicine, and
+teleworking.
+    This task of connecting everyone, however, is easier said
+than done. These challenges can present in different ways in
+different parts of the country for different communities of
+users. In rural areas, communities are more likely to be
+underserved from a broadband perspective because the economics
+of connecting them are difficult, if not impossible to
+overcome. Distance and density present physical challenges
+unlike any other for the business case of deploying and
+sustaining connections. To compound the business case further,
+rural areas are on average poorer than many urban areas and
+have lower broadband adoption rates.
+    Despite such challenges, NTCA's small business members have
+worked to connect rural America through an effective mix of
+entrepreneurial spirit, community commitment, and Federal and
+state support programs. Most NTCA members live and work in the
+communities they serve. They therefore have ever incentive to
+upgrade networks that connect their workplaces, their kids'
+schools, their libraries, and their hospitals. But as I
+mentioned, the business case is challenging and complicates
+greatly both access to and use of capital.
+    This is where Federal and state programs play a key role.
+For example, the Federal Universal Service Fund (or USF)
+enables and sustains communications infrastructure in rural
+America, helping carriers make the business case needed to
+justify loans or use of other private capital. Although the
+USF's effectiveness was hampered for years due to arbitrary
+caps and regulatory uncertainty, the FCC responded late last
+year to consistent calls from hundreds of members of Congress
+on a bipartisan basis, calling for an infusion of resources and
+other improvements. It is our hope that the bipartisan reforms
+adopted by the FCC will unleash a new round of broadband
+investment in rural areas and help to sustain the networks
+already built.
+    It is important too that the USF programs involve more than
+just helping connect rural areas. More than two decades ago,
+Congress wisely structured the USF as a comprehensive umbrella
+with components that seek to address connectivity concerns for
+discrete sets of potentially underserved populations through
+coordinated programs--schools and libraries, low-income
+consumers, rural healthcare, and high cost support for rural
+networks generally.
+    Indeed, in helping to make sure rates for services are
+affordable on rural networks, the high cost program of USF
+helps Americans living in rural poverty afford better access to
+communications. We therefore believe the Federal universal
+service mechanisms as a whole represent a well-thought,
+comprehensive strategy aiming to ensure that every American--
+regardless of the specific challenge that renders them at risk
+of being unserved or underserved--will be connected.
+    The Rural Utilities Service (or RUS) also plays a
+significant role in helping small broadband providers access
+capital to deploy infrastructure in areas where returns on
+investment are measured in decades. Congress has expanded the
+role of RUS and rural broadband deployment through significant
+resources for new broadband loans and grants. These additional
+funds are welcomed and it is now important to ensure that the
+USF and RUS and other programs are coordinated and used as
+efficiently as possible.
+    Much has already been accomplished in connecting rural
+America. For example, 70 percent of NTCA's members' customers
+already have access to 25/3 megabits broadband which the FCC
+deems to be the standard at this point for broadband, and many
+have faster connections, even up to gigabit service.
+    But much work remains, too, especially in the areas not
+served by smaller operators like those in our membership where
+a digital divide exists.
+    We look forward to working with your Subcommittee and your
+congressional colleagues to ensure that we can address the
+connectivity needs of underserved and unserved areas and keep
+connected those areas that are fortunate enough to be served
+today. Thank you.
+    Chairman KIM. Thank you. And I just wanted to thank again
+all four of you for your testimony here today.
+    I will certainly start moving forward with turning it over
+to my distinguished colleagues in just a few minutes but I did
+want to just start by asking a few questions myself.
+    I want to start by saying I come into this position with a
+lot of humility. You know, I have a lot to learn. All of us
+have a lot to learn about what it is that we can do to serve
+small businesses, and the four of you, amongst many others,
+bring that kind of experience that we need to keep hearing
+about.
+    I joined this Committee, and this was a priority of mine
+because my district in New Jersey is a small business district.
+You know, my district has, from the largest employer, a joint
+military base, but all the small businesses that continue to
+serve the base or are a part of both Burlington County and
+Ocean County.
+    My priority is always to protect these military families
+and, veterans living in my district in particular. And less
+than 3 months ago, SBA and the Federal Reserve Bank of New York
+released a comprehensive report on the state of
+entrepreneurship for military veterans, and it is quite frankly
+concerning. The report found a generational decline in veteran
+entrepreneurship with fewer young veterans owning businesses
+than past generations. At the same time we are now beginning to
+see veterans owning businesses at lower rates than nonveterans.
+    I want to ask unanimous consent to submit this report to
+the record.
+    Without objection, the motion is agreed to.
+    We know that historically the opposite has been true, that
+veterans have been generally more entrepreneurial than
+nonveterans. Of course, the skills gained during military
+service, teamwork, discipline, perseverance, a strong work
+ethic and crisis management all are important parts of the
+equation and those skills certainly have not changed.
+    So Mr. Leghorn, I want to build off of your very
+informative statement. I want to ask you, just taking a step
+back, what has changed? You know, why in your experience are
+fewer young veterans launching businesses and having
+difficulties with access to capital and the financing
+shortfalls? I just wanted to hear from you that bigger picture.
+    Mr. LEGHORN. Thank you for your question, Chairman. I think
+the main reason why we are not seeing as many veterans get into
+small business these days and embrace that entrepreneurial
+spirit is because of the recession and we are still kind of
+climbing out of the recession. A lot of these folks are very
+hesitant to take risks right now. As the economy improves, I
+hope that this is a trend that will be reversed.
+    In terms of lending, I think one of the rather cool things
+that have happened since the decline of regional and community
+banks is that lending has kind of diversified and this is a
+trend we would like to see a lot more of and I think when the
+veterans do come back and start their own businesses the
+lending field is going to be very different for them and it is
+going to be very conducive to starting new business.
+    Chairman KIM. Thank you for that.
+    Based on what you were saying, what we have heard from all
+four, not every business owner experiences the same struggles
+when starting or growing a business. So Mr. Leghorn, just one
+final follow up. What are some of the obstacles unique to
+veteran startup companies? I want to get a better sense of what
+you feel like is particular obstacles or opportunities that are
+being faced and things that we might be able to do to support.
+    Mr. LEGHORN. The main thing that hampers veteran-owned
+small businesses is collateral and we are generally cash poor.
+You know, and that is why folks like what I spoke about before
+with the diversity of lending and CDFIs are so important for
+the veteran community because normal bank products generally do
+not work for us and larger banks are less likely to make 7(a)
+loans to folks without collateral.
+    Chairman KIM. Well, thank you for that.
+    I want to make sure we turn it over to my other colleagues
+who I am sure have very insightful questions.
+    So Ranking Member, Mr. Hern, I want to turn it over to you.
+You are recognized for 5 minutes.
+    Mr. HERN. Thank you, Mr. Chairman.
+    As an opening statement to your testimony, I will tell you,
+I look around. I think I may be the oldest up here. I have been
+creating jobs for a long time. I know that. First small
+business 1985. I will tell you, also having started a bank and
+still in banking, I sat on the board until I got this gig in
+November and I had to resign that board. But I chaired the Loan
+Committee for 10 years. And as you probably can imagine, I have
+a tremendous heart for small businesses and people who want to
+take that journey.
+    Mr. Leghorn, you said your problem with your folks are lack
+of collateral and cash poor. I will tell you that represents
+about 99.9 percent of the folks out there that have an idea, is
+how do I get that idea off the ground? So I would say that is
+probably ubiquitous to everybody that is trying to create a
+business for the first time.
+    I will tell you, you are so right that there are a lot less
+community banks today than there were 15-20 years ago. And
+Dodd-Frank was really the catalyst to that because right now
+community banks over the last 5 years are hiring a lot more
+compliance officers than they are actually lending officers
+because you still have to make money in the banking business
+and you have to also comply with Federal Government
+regulations.
+    So, you know, you all have to work within the banks. The
+banks are very competitive. They are trying to loan to
+everybody and they still have to meet the creditworthiness that
+is required of them of the Federal Government because they are
+monitored relentlessly, audited by the Federal Government and
+by their banking institutions in their states. And so as we
+look at this, you know, we have got to figure out how to help
+folks get mentored, and I think your agencies do that. How to
+present a business plan, because everybody has to look at
+everybody as if there are no color, there are on genders, to
+actually make a loan. Because we have to have the ability to
+repay our loans, either through a guaranteed process through
+the SBA, or if it is a traditional loan, which many are made,
+there obviously has to be the ability to actually function and
+make that loan work.
+    Ms. Pinder, could you tell me, since we are talking about
+this mentorship, could you tell me how you do that with the
+folks that you represent in getting them off the ground if they
+come to you with an idea?
+    Ms. PINDER. Our organization is made up of the Fortune 500
+type companies of corporations. So we do not necessarily look
+at startups. And so when a startup comes to us, our question is
+``Are you ready to do business with these corporations?'' And
+if they are not ready to do business, offer building capacity
+support. And so startups, depending upon the industry, because
+sometimes industry if it is like information technology or if
+that is the idea, may attract more equity (funding) kind of
+things. But to answer your question, we do mentor companies in
+terms of getting them prepared to do business with our
+corporations. And we do that in a number of ways.
+    We have a MBE Academy. We have educational and training
+programs to help people become, at the end of the day,
+competitively viable.
+    Mr. HERN. Okay. Mr. Romano, more and more people today,
+usually they are sole proprietors, they do not really have
+employees. They have an idea and to go from being an idea to
+having multiple employees, which lends itself to usually going
+into an urban area, if you live in the rural area which many of
+Americans do, especially throughout the Midwest, how does what
+you are trying to accomplish, putting broadband in rural areas,
+how does that help them make that transition from an idea to
+concept of starting, making money, getting contracts and work,
+to getting employees?
+    Mr. ROMANO. Thank you, Ranking Member Hern.
+    I would say the first thing is if you are looking to locate
+a business, one of the first things we hear from relocation
+firms or from folks looking to get something off the ground is
+what kind of connectivity do I have? Because whether it is
+obtaining supplies, finding customers, finding markets, that
+connectivity is critical.
+    One of the programs we have started is called Smart Rural
+Community, and it is really intended to focus on not just the
+fact that you have got networks out there but sort of celebrate
+and accentuate the uses of them--focusing on what are people
+doing to generate economic development, job creation, and
+therefore be able to stay in a rural area rather than have to
+move necessarily to the city. We want people to be able to
+choose where they live rather than be forced to live in a
+certain place based upon what kind of access they have.
+    Mr. HERN. Thank you.
+    One last question for, is it Ms. Bilonick? Oh, wow, two in
+a row. That is good.
+    Could you help me understand, and I apologize that I missed
+your opening statements, but could you let me know what is your
+default rate of when you are trying to lend and get folks
+started?
+    Ms. BILONICK. So we have typically stayed below a 10
+percent default rate, which we feel is excellent given the fact
+that we are giving loans to what folks would call sort of the
+most risky population out there. That is startups. That is
+folks with poor or no credit. And so we are very proud of the
+default rate.
+    Mr. HERN. That is incredible.
+    Ms. BILONICK. Yeah, thank you.
+    Mr. HERN. Thank you.
+    Chairman KIM. Great. Thank you for that.
+    I want to recognize my colleague from New York, Congressman
+Delgado.
+    Mr. DELGADO. Thank you, Chairman, Ranking Member. Thank all
+of you. I find your testimony very, very informative.
+    I am going to get right to it. I have a few questions.
+    So in parts of my district, Upstate New York, Hudson
+Valley, Catskills, very, very rural area. I have driven by
+signs that say broadband access coming soon. It is a sight that
+is hard to imagine in New York, in the USA, in the 21st
+century. I cannot overstate how big an issue this is for small
+businesses and communities in my district and Upstate New York.
+Mr. Romano, your testimony very powerfully speaks to that. In
+today's global economy it is unthinkable that startup
+businesses; mom and pop shops; young students; small dairy
+farmers; and innovative, sustainable ag operations are being
+left behind. Left behind because of where they live and
+operate.
+    Now, my state has made significant investments of late to
+bridge this gap, but as we look to a more connected future, I
+think it is critical that we also work to ensure equitable
+broadband access. And again, as you note in your testimony, the
+minimum service thresholds today will be unworkable for folks
+tomorrow. We should be aspirational as we think about the
+quality and speed of service folks need to keep up with our
+rapidly changing economy.
+    So with that in mind, Mr. Romano, what is an acceptable
+speed of service? Not by definition, but in practice. And how
+can we ensure rural communities like mine do not get left
+behind again?
+    Mr. ROMANO. Thank you, Congressman.
+    We have a number of members in your district and I know
+that they are doing a very good job with broadband but they
+also look around and see the challenges you are talking about.
+New York is taking important steps to try to address that.
+    It is somewhat frustrating sometimes when you focus on a
+static speed definition. You're building a network that is
+financed for and then intended to last for decades, 20 years.
+We really believe that you should be looking more at the future
+proof utilization of the network, the applications that are
+going to be utilized, not aiming for a speed standard by date X
+but thinking about will that network be scalable to fulfill
+demands that we might expect reasonably 10, 15, 20 years from
+now, telemedicine applications, 4K TV definitions, 8K and
+beyond. So we really like to focus more on the future-proof
+nature of the technology underlying the network than speed at
+any given moment in time specifically.
+    Mr. DELGADO. And I appreciate your desire not to want to
+put a number out, but is there a range?
+    Mr. ROMANO. I would say we should be aiming for networks
+that are capable of delivering at least 100 megs today and
+scalable to hit gigabit and beyond tomorrow.
+    Mr. DELGADO. Good.
+    Another issue, again, this is for you, Mr. Romano, is
+broadband mapping. Current mapping practices rely on census
+blocks, meaning that if just one home in that block has
+broadband, the entire area is considered served. In rural
+areas, one census block can span several counties. Can you talk
+a little bit about the importance of establishing an accurate
+national broadband map?
+    Mr. ROMANO. One of the most significant problems in
+identifying where broadband is needed is false positives.
+Overstatement of coverage that leads to--in census blocks that
+might be miles wide--one customer on one part of one location
+denying service essentially to a customer miles and miles away.
+Movement towards a more granular or accurate map is going to be
+important. I would submit that granularity and accuracy are not
+the same thing. We need to both get more granular and get more
+accurate. Unless you are going to independently verify the
+submissions by providers in question, I believe you are always
+going to need sort of like what RUS is looking at now, a
+challenge process or some way of having a verification of no
+matter what kind of data is submitted by a provider, ultimately
+having the opportunity to say, yeah, they are there or no, they
+aren't. That is the only way we are going to get to make sure
+that no customer is left behind simply because they happen to
+live in a geography where somebody else claimed to serve.
+    Mr. DELGADO. Thank you. Thank you.
+    And I have just one more question for you, Ms. Bilonick. I
+really appreciate your remarks.
+    I want to speak to some of the limitations you outlined for
+CDFIs. And putting aside the impact of Dodd-Frank, you do list
+a couple of other items that you think pose stress or strain on
+your ability to do the work that you are doing. Specifically,
+and I just want to note, too, that in my district the work that
+your kind of program provides has had a tremendous effect and
+has provided a lot of opportunities, particularly for folks
+actually just north in the Albany area. So I really appreciate
+that work.
+    But specifically, you talk about nonexistent marketing
+budgets, challenges to capitalizing on your loan funds and/or
+sustaining the high overhead costs associated with labor-
+intensive loans we underwrite.
+    Could you specifically tell me what we can do to help
+address these factors?
+    Ms. BILONICK. So I think to start, the marketing issue is
+an issue that all CDFIs face. I think anyone who has worked in
+the industry and gone to a dinner party knows that once you
+tell someone that you work for a CDFI it is then like a 20
+minute later conversation describing what CDFIs do, the
+coverage in the whole United States and the impact that we
+have.
+    So one thing, you know, specifically, I think, and I was
+actually speaking with OFN about this as well, is just a
+broader marketing campaign about the existence of CDFIs. I
+think there are so many clients that come through our offices
+that say we had no idea this existed, if I had only known 10
+years ago, you know, fill in the blank. But it is just sort of
+the best kept secret out there and we really feel like that,
+and maybe that is more at the local level in doing PSAs and
+some things we could certainly engage our local governments in
+as well.
+    And then with regard to capitalizing our loan funds, I
+would just, I would not say beg but I would request that you
+please keep the line items for CDFI fund in Treasury and the
+Small Business Administration be fully funded because that is
+something that really impacts our bottom line it is actually
+the lowest cost capital that we can access in terms of debt to
+then relend out.
+    And then my last issue around the labor intensivity of the
+work that we do, we are really dependent on the philanthropic
+community, whether that be government grants or corporate
+foundation grants that we rely on just because the work that we
+do lending with small businesses is so intensive. You know, if
+you walk into a bank you may meet with a loan officer and then
+they ship your application to a central office located
+elsewhere and that is sort of the end of the story and you may
+have a really quick turnaround, but there is not that face to
+face and personal experience. For us, we are typically working
+with people who have a very big story behind what they are
+presenting on paper and then in addition to that what they are
+presenting on paper requires a lot of support from us to
+actually get from their idea phase to like we help people put
+together their projections for their loan applications to us.
+So we are doing a lot of technical assistance just in the
+underwriting process, so it is not, you know, we do have an
+algorithm that we use internally but it is not like a spit it
+into the machine and get a response, which is the beauty of
+CDFIs, and that is how we are able to do the loans that we are
+able to do, but it costs a lot of money and it costs a lot of
+manpower even at our most efficient.
+    Thank you so much. Thank you.
+    Chairman KIM. Great. Thank you so much.
+    I want to now recognize the gentlelady from American Samoa.
+    Ms. RADEWAGEN. Talofa. Good morning.
+    I want to thank Chairman Kim and Ranking Member Hern for
+holding this hearing. I represent the territory of American
+Samoa. We have the highest enlistment rate in the United States
+Army, and because of that we are also among the highest veteran
+rate per capital. Veterans and serving reservists own and
+operate businesses throughout my district, so I would like to
+direct a couple of questions to you, Mr. Leghorn, though you
+are all welcome to answer if you have any additional input.
+    What resources are veterans currently lacking during their
+business creation process?
+    Mr. LEGHORN. Thank you for your question, ma'am.
+    One of the issues with the military's Transition Assistance
+Program is that it overly focuses on making resumes. The
+problem with American Samoa is that when veterans go back to
+American Samoa there are not any employers there for them to
+give a resume to. What American Samoa really needs is a VBOC so
+that there can be economic development and veterans can go back
+and actually create jobs. So that is definitely something I see
+that needs to happen.
+    Ms. RADEWAGEN. Okay. Your testimony highlights challenges
+associated with veteran participation in the Federal
+contracting process. Can you please expand on what those
+challenges are and any solutions you would recommend? And what
+role does mentorship play in veteran entrepreneurship?
+    Mr. LEGHORN. So I think there were two questions there. I
+will tackle the first one. I will parse them apart.
+    So in terms of participation in Federal contracting, like
+we mentioned in our testimony, the foundation legislation that
+created SDVOSBs as a preferred contracting group was focused on
+established businesses and it was determined at the time that
+it was not meant for business development. So what that means
+is that in Federal contracting right now we see a huge sum of
+money being given to very few small businesses, whereas we want
+the business development aspects to lead the program towards
+giving more money to a larger pool of veteran-owned small
+businesses.
+    And the second part of the question was regarding what we
+are doing mentorship-wise?
+    Ms. RADEWAGEN. Yes.
+    Mr. LEGHORN. Okay. So The American Legion is one of the few
+organizations that offer small business counseling. We help you
+with your governance documents. We help you onboard to VA's Vet
+First program. And we also provide advocacy and also we do a
+lot of events that bring government officials into the room
+where veteran small businesses can interact with them. So
+pretty much advocacy, counseling, and events is what we do.
+    Ms. RADEWAGEN. Thank you.
+    And so as a follow up to that, what additional resources
+are necessary to foster increased mentorship opportunities?
+    Mr. LEGHORN. Can you clarify if you meant what The American
+Legion needs?
+    Ms. RADEWAGEN. Well, what additional resources are
+necessary to foster increased mentorship opportunities? That
+would be part of it.
+    Mr. LEGHORN. Well, I definitely think The American Legion
+could use another small business counselor and advocate like
+me. I think on the government side we definitely want more
+entrepreneurial development programs for veterans. We want the
+programs to have more of a business development aspect. We want
+access to the 7(J) program, and definitely more VBOCs. When we
+are talking about mentorship, VBOCs are where the rubber meets
+the road for veterans.
+    Ms. RADEWAGEN. Thank you, Mr. Chairman. I yield back.
+    Chairman KIM. Thank you.
+    I want to now recognize the gentlelady from Kansas,
+Congresswoman Sharice Davids.
+    Ms. DAVIDS. Good morning. Thank you for your time, and I
+really enjoyed reading through your testimony. I know I missed
+a significant portion of it.
+    But there are a couple of things, so I am actually in the
+Kansas City metro area in Kansas and I always love to talk
+about how entrepreneurship is baked into the DNA of the
+community that I live in. And because of that, one of the
+things that I have seen a lot of is this idea of an ecosystem,
+and actually, I am sure that you all have talked about this a
+lot, is the ecosystem that is needed to support entrepreneurs
+and small businesses as they develop and grow from very small
+businesses to small businesses that can do contracting with
+larger organizations.
+    Can you talk a little bit about the, maybe coalition, if it
+is coalition building that you have done? I know the OFN exists
+and there are a few other spaces. And actually, this is
+probably something that all four of you could maybe say a
+little bit of something about. I think that when we look at
+statistics, like the Kansas City Fed did a report not too long
+ago showing that across the country African American women are
+the highest, fastest growing segment of entrepreneurs, and I
+know in Kansas City, the Kansas City area, we have got an
+ecosystem that can help support folks, like law firms, SEED Law
+in Kansas City does a lot of work with small businesses. We
+have got a number of other organizations that help people from
+CDFIs until they are ready to take on larger contracts.
+    Can you talk a little bit about how we can look at, I do
+not know if it is metrics? I do not know what it is, but how we
+look at how we are supporting the entire ecosystem, not just
+individually CDFIs or mentoring programs. You cannot mentor
+your way out of not having access to capital. So can you talk a
+little bit about that?
+    We will start here with Ms. Bilonick. Thank you.
+    Ms. BILONICK. So I would just say we have been very lucky
+in that we have had at the local level and national level sort
+of preexisting coalitions like OFN, like the National
+Association for Latino Community Asset Builders. At the local
+level we are part of a coalition called the Coalition for
+Nonprofit Housing and Economic Development, which is a
+longstanding organization that has people both from the housing
+and small business development side of work here in Washington,
+D.C.
+    I think what is challenging, at least from my point of
+view, and I do not purport to speak for the entire panel, but
+from my perspective I think the coalitions that exist between
+like organizations are there and are in place. The more
+challenging piece is forming coalition and community between
+needed partnerships that are in differing spaces. For example,
+you mentioned like the legal field. So we have a partnership
+with the D.C. Bar Pro Bono Legal Clinic, but that was sort of
+happenstance because someone on our board is the person that
+leads that clinic. And so I think fostering those kinds of
+relationships would be extremely valuable for the ecosystem.
+Like, those of us who are operating in the same space, we know
+each other, we see each other at meetings. You know, we work
+together. But I think the more challenging hurdle for us to
+overcome as an ecosystem is really bridging those networks that
+are sort of outside of our comfort zone or outside of our usual
+suspects because those networks, you know, I mean, I would even
+say for myself, the people on the panel are not people that I
+work with on a daily basis and we could all benefit from
+working together. And so, you know, that is where I think there
+is a big challenge.
+    Ms. PINDER. Again, thank you for your question.
+    I think what we need to do is recognize that some groups
+are different. You talked about African American women being
+the fastest growing segment in entrepreneurship, and they are.
+And so when you then think about wraparound services for
+businesses, it is not a cookie-cutter approach. I always tell
+businesses that they need the ABCs. That is the attorney,
+banker, and the CPA. Right? And so once you have that
+foundational kind of activities understand that is an integral
+part of your business it helps. But I agree with my colleague,
+there are some intersections of resource that are available.
+Whether you are the person that wants to kick the tires and see
+if an idea works, well, there are resource centers for that,
+whether that is PTAP, SBRC, and that kind of thing. And so just
+an understanding of those issues that businesses face, in
+particular businesses of color, you know, and looking at
+microlending, for example, looking at alternative methods of
+financing businesses, bootstrapping is, yes, universal in terms
+of people starting businesses, but the long-term effect of
+businesses that are bootstrapped, which mean started without
+capital on minority businesses is greater than other
+businesses. And so just recognizing what those nuances are
+relative to groups of entrepreneurs.
+    Chairman KIM. Ms. Davids, do you want to follow up?
+    Ms. DAVIDS. Well, the time ran out.
+    Chairman KIM. Yeah, I mean, I am happy to allow it.
+    Ms. DAVIDS. Do you mind? Yes, do you mind if we take the
+time? Thank you.
+    Mr. LEGHORN. Thank you for your question, ma'am. And I
+believe part of your question was regarding metrics. And that
+is the part that I really want to address.
+    From our testimony, we discussed how SBA and the resource
+partners were really reliant on metrics drawn from the 7(a)
+loan program. The 7(a) loan program has diminished in
+utilization coinciding with the disappearance of regional and
+community banks. So we do not believe that the 7(a) loan should
+be used as the primary metric anymore. I do not know what other
+metrics might be but we have to find other ways of getting
+information aside from pulling it all from 7(a) loans when it
+comes to job creation and lending.
+    Mr. ROMANO. And to pick up on that point about metrics,
+there is no shortage of metrics in the telecommunications
+industry, but one thing I think that could be relevant here is
+the areas our members serve, a town of 5,000 people is a
+metropolis. And so any small business growth there accrues to
+the benefit of the community as a whole because there are not
+that many businesses to start, and a lot of people working from
+home even as well, telecommuting, if you will, teleworking.
+Some way though it occurs to me that tracking sort of small
+business growth in these deeply rural areas paired with, quite
+frankly, and there are statistics separately on this, what
+kinds of increases in connectivity--what has made it possible
+for the small businesses to either establish, relocate, or grow
+in those deeply rural areas--I think is the kind of metric that
+would be relevant to see the better broadband somebody gets,
+how much better do they do in terms of building and growing
+small business.
+    Ms. DAVIDS. Thank you.
+    Chairman KIM. Thank you so much. Thank you again to all the
+witnesses for taking time out of your schedule to be with us
+here today, and I want to thank my colleagues as well for their
+time and for their insightful questions and points.
+    As we have heard today, we certainly have our work cut out
+for us. As we are striving to create more opportunities for
+underserved businesses, small businesses, from accessing
+affordable capital to being able to meaningfully compete for
+contracts in the Federal procurement marketplace,
+underrepresented entrepreneurs have had the deck stacked
+against them for too long and it has kept them from creating
+good private sector jobs in their local neighborhoods.
+    I look forward to working with my colleagues to find policy
+solutions that will empower them to create the good-paying jobs
+of the 21st century.
+    I would ask unanimous consent that members have 5
+legislative days to submit statements and supporting materials
+for the record.
+    Without objection, so ordered.
+    And if there is no further business to come before the
+Committee, we are adjourned. Thank you.
+    Mr. HERN. Mr. Chairman, can I say one thing?
+    Chairman KIM. Yes, please.
+    Mr. HERN. I just want, because in business you are about
+getting results, and I know that you are probably going to
+leave here and feel like you testified and nothing really got
+done. But we will work hard on this because it is so important
+to our nation and I said this in our Full Committee, that we
+cannot have big businesses in the future if we do not have
+small businesses today because we are the incubators, the small
+businesses, for all the big businesses that we have in American
+today that put so many people to work. So I know you are not
+asking to create more programs. You are asking us to help make
+these better and secure them. And so I assure you that I will
+work with my Chairman that we make that happen with the team,
+that we look at every opportunity. And I am with you on the
+metrics, and Ms. Davids, my colleague from Kansas. You know,
+the problem in business is when you have more than one set of
+books you never get anything done. So we have to find the right
+numbers that measure everything because every group that is
+asking us for help will say that they are the fastest growing.
+And so we have to really determine the fastest growing and
+where the real needs are because it is different across this
+very nation and we have to make sure that we take care of
+everyone to the best of our abilities. Thank you.
+    Chairman KIM. Thank you for that. I think that spirit and
+that energy is something all of us here on the Subcommittee
+feel. There is a reason why I wanted to join this Committee on
+Small Business because it has a reputation of just working
+together across the aisle, bipartisanship, to be able to get
+things done for small businesses in America. And I think I am
+looking forward to working with the Ranking Member and members
+on both sides for us to be able to make sure that we can move
+ahead in that productive way.
+    So we certainly will follow up. We are eager to get to work
+and do what we can to improve the overall climate and
+ecosystem, to borrow a word, for small businesses in America.
+    So thank you again. We stand adjourned. Thank you.
+    [Whereupon, at 11:23 a.m., the Subcommittee was adjourned.]
+                            A P P E N D I X
+[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
+             Opening Statement of Ranking Member Kevin Hern
+                      Committee on Small Business
+   Hearing: ``Exploring Challenges and Opportunities of Underserved
+                    Businesses in the 21st Century''
+                            February 7, 2019
+                       *As Prepared for Delivery*
+    Thank you for yielding, Chairman Kim.
+    With 99.9 percent of all businesses in the United States
+being classified as small, the impact that small businesses
+have on our economy cannot be overstated. In my home state of
+Oklahoma alone we have over 340,000 small firms who employ over
+700,000 people. Many of these businesses are owned by
+minorities, women, and veterans and many of these businesses
+are located in rural areas.
+    Small Businesses owned by minority, women, and veterans
+face a unique set of challenges, ranging from raising adequate
+financing, to building social capital, to finding the effective
+mentors. Rural businesses, however, while facing those
+challenges, also tend to face a different set of challenges,
+most notably, access to reliable and affordable broadband
+service.
+    Today, more than 24 million Americans lack access to high
+speed internet, the vast majority of whom live in rural
+communities. When comparing urban and rural broadband
+deployment 97.9 percent of urban America has access to both
+fixed and mobile broadband, while only 68.6 percent of rural
+citizens have that same access.
+    The lack of a solid business case for rural broadband
+deployment remains the central reason for what is often
+referred to as the `digital divide'. Large telecommunications
+companies have little incentive to invest in broadband
+infrastructure in areas with low population density. Instead,
+small telecommunications carriers are far more likely to invest
+in rural communities, often because they are their communities.
+Frequently, however, these small firms face numerous challenges
+in their efforts to increase broadband access.
+    You may ask, why do small businesses need broadband access?
+Why is this a challenge to rural businesses? Simply put, small
+businesses need access to modern technology to complete in the
+modern marketplace. In 2018, 95 percent of Americans own a cell
+phone and 89 percent of Americans use the internet. Technology
+has influenced nearly every aspect of society. From
+manufacturing to education, access to technology is synonymous
+with success.
+    Small businesses specifically require access to reliable
+and affordable technology to compete with larger competitors.
+According to a recent study, digitally advanced small
+businesses were shown to be three times more likely to create
+jobs and experience revenue growth at a rate four times higher
+than small businesses who don't employ technology. Yet despite
+such outstanding returns, many small businesses do not take
+full advantage of the techniques available to them. Often, this
+is due to owners not realizing the benefits such tools offer
+them, or simply lacking access to reliable technological
+resources as a result of cost or location.
+    Today's hearing will allow us the opportunity to further
+discuss these and other challenges that businesses owned by
+minority, women, veteran and rural Americans face while also
+exploring potential ways to improve and elevate these issues
+moving forward. I look forward to hearing from our witnesses
+and to having a productive conversation.
+    Thank you and I yield back.
+[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
+                                 [all]
+</pre><script data-cfasync="false" src="/cdn-cgi/scripts/5c5dd728/cloudflare-static/email-decode.min.js"></script></body></html>

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+<html>
+<title> - ORGANIZATIONAL MEETING FOR THE 116TH CONGRESS</title>
+<body><pre>
+[House Hearing, 116 Congress]
+[From the U.S. Government Publishing Office]
+             ORGANIZATIONAL MEETING FOR THE 116TH CONGRESS
+=======================================================================
+                                HEARING
+                               BEFORE THE
+                      COMMITTEE ON SMALL BUSINESS
+                             UNITED STATES
+                        HOUSE OF REPRESENTATIVES
+                     ONE HUNDRED SIXTEENTH CONGRESS
+                             FIRST SESSION
+                               __________
+                              HEARING HELD
+                            FEBRUARY 6, 2019
+                               __________
+[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
+            Small Business Committee Document Number 116-001
+             Available via the GPO Website: www.govinfo.gov
+                               __________
+                    U.S. GOVERNMENT PUBLISHING OFFICE
+34-740                       WASHINGTON : 2019
+-----------------------------------------------------------------------------------
+For sale by the Superintendent of Documents, U.S. Government Publishing Office,
+http://bookstore.gpo.gov. For more information, contact the GPO Customer Contact Center,
+U.S. Government Publishing Office. Phone 202-512-1800, or 866-512-1800 (toll-free).
+E-mail, <a href="/cdn-cgi/l/email-protection" class="__cf_email__" data-cfemail="ea8d9a85aa899f999e828f869ac4898587">[email&#160;protected]</a>.
+                   HOUSE COMMITTEE ON SMALL BUSINESS
+                 NYDIA VELAZQUEZ, New York, Chairwoman
+                         ABBY FINKENAUER, Iowa
+                          ANDY KIM, New Jersey
+                         SHARICE DAVIDS, Kansas
+                          JARED GOLDEN, Maine
+                          JASON CROW, Colorado
+                          JUDY CHU, California
+                           MARC VEASEY, Texas
+                       DWIGHT EVANS, Pennsylvania
+                        BRAD SCHNEIDER, Illinois
+                      ADRIANO ESPAILLAT, New York
+                       ANTONIO DELGADO, New York
+                     CHRISSY HOULAHAN, Pennsylvania
+                                 VACANT
+                   STEVE CHABOT, Ohio, Ranking Member
+   AUMUA AMATA COLEMAN RADEWAGEN, American Samoa, Vice Ranking Member
+                        TRENT KELLY, Mississippi
+                          TROY BALDERSON, Ohio
+                          KEVIN HERN, Oklahoma
+                        JIM HAGEDORN, Minnesota
+                        PETE STAUBER, Minnesota
+                        TIM BURCHETT, Tennessee
+                          ROSS SPANO, Florida
+                        JOHN JOYCE, Pennsylvania
+                Adam Minehardt, Majority Staff Director
+     Melissa Jung, Majority Deputy Staff Director and Chief Counsel
+                   Kevin Fitzpatrick, Staff Director
+                            C O N T E N T S
+                           OPENING STATEMENT
+                                                                   Page
+Hon. Nydia Velazquez.............................................     1
+Hon. Steve Chabot................................................     3
+                                APPENDIX
+Additional Material for the Record:
+    Rules and Procedures.........................................     9
+    Oversight Plan of the Committee on Small Business for the One
+      Hundred Sixteenth Congress.................................    23
+                         ORGANIZATIONAL MEETING
+                              ----------
+                      WEDNESDAY, FEBRUARY 6, 2019
+                  House of Representatives,
+               Committee on Small Business,
+                                                    Washington, DC.
+    The Committee met, pursuant to call, at 10:34 a.m., in Room
+2360, Rayburn House Office Building. Hon. Nydia Velazquez
+[chairwoman of the Committee] presiding.
+    Present: Representatives Velazquez, Finkenauer, Kim,
+Davids, Golden, Crow, Chu, Veasey, Evans, Espaillat, Schneider,
+Delgado, Chabot, Radewagen, Kelly, Balderson, Hern, Hagedorn,
+Stauber, Burchett, Spano, and Joyce.
+    Chairwoman VELAZQUEZ. Good morning, everyone.
+    I call the Small Business Committee Organizational Meeting
+to order.
+    I want to first welcome all returning and new Members.
+Before we introduce new Members, I want to recognize Ranking
+Member Steve Chabot, who has served on this Committee with me
+for so many years now. We both know what it is like being in
+the majority and the minority, and together we have proven just
+what bipartisanship looks like. Just as Mr. Chabot has done in
+his tenure as Chairman, I intend to continue this Committee's
+history of working together to foster a healthy business
+climate for America's entrepreneurs. I look forward to working
+with you and other Members of the Committee to accomplish this
+goal.
+    Small businesses continue to make unprecedented
+contributions to our economy. They create nearly two-thirds of
+net new jobs and account for nearly half of all private sector
+employment. But, they need our help as they are facing
+challenges accessing capital, identifying a skilled workforce,
+and complying with an overly complex Tax Code. As we move
+forward, it is our duty to make sure they are given all the
+resources they need to prosper.
+    But to do so it is important to address these issues in a
+constructive and inclusive manner. My belief has always been
+that there is not a Republican or Democratic approach to small
+businesses. Good ideas come from both sides of the aisle and we
+need to encourage that, which is why I will make it a priority
+to work in a bipartisan fashion.
+    During the last 2 years we did just that and accomplished a
+great deal together. Small businesses deserve our partnership.
+We have a diverse Committee and that is our strength because we
+will ensure our work benefits all entrepreneurs, no matter
+their location, industry, or background.
+    I look forward to collaborating with the Ranking Member and
+with all Committee Members this Congress.
+    Now, let me take this opportunity to introduce the Members
+on my side. There are a few new Democratic Members of the
+Committee.
+    Congressman Marc Veasey, now in his fourth term, previously
+served in the Texas House of Representatives, and has been
+dedicated to addressing the challenges of many middle-class
+Americans. We are excited to have his experience.
+    The rest of our new Members are from our ambitious crop of
+freshmen.
+    Abby Finkenauer served in the Iowa House of Representatives
+before her election to Congress. She has a passion for rural
+economic development and will be a true asset to our Committee.
+    Andy Kim brings extensive foreign affairs experience to
+Congress after serving at the Pentagon, the State Department,
+the White House National Security Council, and in Afghanistan
+as a civilian advisor.
+    Sharice Davids from Kansas brings her knowledge as a
+businesswoman, lawyer, and professional mixed martial artist.
+Do not mess around with her.
+    Jared Golden is a veteran of the U.S. Marine Corps, and in
+2014, he was elected to the Maine House of Representatives
+where he served as the Democratic Assistant Majority Leader in
+2016.
+    Jason Crow is a former Army Ranger and a lawyer who has
+served multiple tours overseas and earned a Bronze Star for his
+combat actions. As the son of small business owners, he
+understands the hard work our nation's job creators put into
+creating jobs and growing our economy. Thank you for your
+service.
+    Antonio Delgado hails from my home state of New York. He is
+a Rhodes Scholar with diverse professional experience that
+includes working in the music industry and as a lawyer where he
+dedicated significant pro bono work fighting for criminal
+justice reform.
+    Chrissy Houlahan, like many of our colleagues, also served
+our country before being elected to Congress. She served in the
+Air Force, but also brings her background as an engineer and
+entrepreneur through her work here on the Committee.
+    We welcome you all to Congress and are excited you will be
+serving on the House Small Business Committee.
+    I would also like to welcome back the Members who served on
+the Committee in the 115th Congress.
+    Judy Chu is in her sixth term in Congress and fifth with
+the Committee. She has a Ph.D. in psychology and also served in
+the California State Assembly.
+    Joining us from Pennsylvania is Dwight Evans, who
+previously served as the Ranking Member of our Subcommittee on
+Economic Growth, Tax, and Capital Access. We are very lucky to
+have him back in his new position as the Committee's Vice
+Chair. His dedication to small business issues is clear as he
+has served for over 35 years in the Pennsylvania House of
+Representatives before coming to Congress.
+    Mr. Schneider is in his third term serving on this
+Committee where his over 2 decades in business and management
+consulting has helped him address the needs of small businesses
+as they hire and grow their businesses.
+    Last, but not least, Adriano Espaillat, also from the great
+state of New York, is rejoining the Committee for his second
+term. Originally born in the Dominican Republic, he is the
+first Dominican American to serve in Congress.
+    We are very fortunate to have you all back on this
+Committee.
+    I now yield to the Ranking Member, Mr. Chabot, for his
+opening statement and to introduce his new Members.
+    Mr. CHABOT. Thank you, Madam Chairwoman. And as we begin I
+want to mention, as you did, that Chairwoman Velazquez and I
+have served on this Committee for over 20 years together.
+Twenty-three to be exact, but who is counting? And we have both
+held the position of Chair and Ranking Member, depending on
+which party controlled the house. We have worked together in a
+very bipartisan manner at nearly every step of the way and I
+want to thank her for continuing this tradition, at least so
+far in the 116th Congress, although we are not very far in it
+yet but I am sure we are going to continue those bipartisan
+efforts.
+    For new Members of Congress, I am sure that a lot of you
+have seen Committee hearings on TV or on the Internet that have
+been filled with bitter partisanship and that could give a
+preconceived notion of how things work around here but let me
+assure you that while you may find that in other Committees
+that you sit on, you will not find it here, at least not
+usually. Of course, there will be philosophical differences. We
+have real differences on health care and taxes and a whole
+range of issues, but on this Committee we do truly work
+together across the aisle for the betterment of America's small
+businesses.
+    We do this because small businesses are the key to our
+economy. We must ensure that small companies are healthy so
+they can create jobs and continue to grow. Policies that expand
+capital access, create new incentives, and spur investment will
+continue that economic expansion.
+    Small businesses employ over half of America's workers and
+create about 70 percent of new jobs in the American economy.
+They represent approximately 99 percent. So 99 out of 100
+businesses in America are by definition small businesses. They
+comprise about half of the nation's private sector payroll and
+produce about half of our private non-farm gross domestic
+product.
+    The past 2 years have brought great news for small firms.
+Optimism continues to push all-time highs. Small firms are
+investing more capital into their businesses. Wage growth for
+employees at small firms continues to grow and profits are up.
+But as with everything, we can always fine tune the engine to
+get a better performance.
+    I look forward to working with you Madam Chairwoman and the
+other Members of the Committee on both sides of the aisle over
+the next 2 years.
+    Now, I would like to introduce our new Members, the new
+Republican Members of the Small Business Committee.
+    I will begin with Representative Kevin Hern of Oklahoma,
+who started his first small business in 1985 specializing in
+computer and software applications. Then he started saving to
+purchase his first McDonald's restaurant. Starting several
+small business ventures along the way, writing computer
+programs to automate tasks for other businesses, real estate,
+and even hog farming. We welcome him here.
+    Representative Jim Hagedorn of Minnesota started his career
+as a congressional staffer for Minnesota congressman Arlan
+Strangeland here in Washington, D.C. Later, he worked as
+director for legislative and public affairs for the Financial
+Management Service, the U.S. Department of Treasury, and in the
+Congressional Affairs Shop for the Bureau of Engraving and
+Printing.
+    Representative Pete Stauber of Minnesota began his career
+as a police officer in the early 1990s. He served both as the
+president of the Law Enforcement Labor Services Union, Local
+363, and as an area commander with the Duluth Police
+Department. He later became a city councilman and county
+commissioner, and he is a heck of a hockey player as well, both
+at the college level, winning national championships and the
+pros as well.
+    Representative Tim Burchett of Tennessee founded a small
+business early in his life. He then dedicated himself to public
+service, serving in the Tennessee State House, Senate, and most
+recently as mayor of Knox County, Tennessee. And we welcome him
+as well.
+    Representative Ross Spano of Florida spent most of his
+career as a shareholder of his own law practice, representing
+individuals and small businesses in Hillsborough County. In
+2012, he successfully won a seat in Florida's House of
+Representatives where he served for 3 terms.
+    Representative John Joyce of Pennsylvania, is a physician
+who began his medical career working with the Navy at
+Portsmouth Naval Hospital in Virginia during Operations Desert
+Shield and Desert Storm. He returned to his hometown to open
+his own practice and has been caring for Central Pennsylvanians
+ever since.
+    We welcome all our new Members, and this Committee
+considers many issues that are related to our nation's economy,
+so I know the knowledge and expertise of our new Members will
+be extremely helpful. We welcome all of you to the Committee.
+    I also want to recognize the Republican Members who are
+returning to the Committee.
+    Amata Radewagen of American Samoa, who will serve as our
+Vice Ranking Member for the 116th Congress. And Trent Kelly of
+Mississippi and Troy Balderson of Ohio. Each of them has made
+significant contributions to our Committee's consideration of
+policy. And I know that their experience will be invaluable as
+we contemplate the critical issues facing our nation's small
+businesses.
+    So Madam Chairwoman, I look forward to another 2 productive
+years working with you and working on policies that will help
+America's entrepreneurs succeed.
+    And I yield back the balance of my time.
+    Chairwoman VELAZQUEZ. Thank you. The gentleman yields back.
+And I look forward to the discussion and debates that I know
+will transpire over the next 2 years.
+    And now we will move to the rules package. With today's
+rules package, I believe we are making it clear to the small
+business community that we are committed to working together
+and advocating on their behalf.
+    Pursuant to Clause 2(a) of House Rule 11, today's first
+order of business is to adopt the Committee rules for the 116th
+Congress. The adoption of the rules is central to the work we
+do and the tone we set in this body. Perhaps most importantly
+they must ensure that all points of view are considered and
+that the minority retains their full rights to be heard. In
+this context, the rules remain largely unchanged from the 115th
+Congress. The rules have been modified slightly to conform with
+House Rules adopted last month. That change clarifies that
+weekends and holidays when the House is not in session are not
+counted for purposes of the 3 days rule for markups. Hearings
+are one of our best platforms and offer tremendous insight and
+we welcome non-Committee Members to participate. Our rules now
+make it clear that they are welcome to attend our hearings with
+appropriate notice and to question witnesses with the approval
+of the Chair and Ranking Member. However, they cannot be
+counted for purposes of a quorum or to participate in any vote.
+    The rules package also institutes a longstanding practice
+of the Committee to extend the 5 minute oral testimony of a
+witness as long as the Chair and Ranking Member agree.
+    Finally, the rules rename three of our Subcommittees which
+reflect the changing nature of small business challenges. The
+new Subcommittees are the Subcommittee on Contracting and
+Infrastructure, formerly Contracting and Workforce; the
+Subcommittee on Innovation and Workforce Development, formerly
+Health and Technology; and the Subcommittee on Rural
+Development, Agriculture, Trade, and Entrepreneurship, formerly
+Agriculture, Energy, and Trade.
+    This Committee needs to run in a cooperative manner. I
+believe the best way to do that is to make sure both sides have
+an equal voice and are treated in a way that is fair. Through
+adoption of these rules we will continue this practice.
+    I would like to thank the staff on both sides for working
+closely on the rules package. Thank you.
+    At this point I would like to yield to Ranking Member
+Chabot for any comments he may have on the rules.
+    Mr. CHABOT. Thank you, Madam Chairwoman. I want to thank
+you and your staff for working so collaboratively on the
+Committee rules package. This package provides continued
+protection for the rights of the minority, now that we are in
+the minority, and we had those same protections for my
+colleagues on the other side of the aisle when they were in the
+minority. And the opportunity for minorities' input into the
+operation of the Committee.
+    I want to take a moment to highlight just several rules,
+and you have already mentioned these. But the first, the
+minority will continue to have control of fully a third of the
+Committee's budget. This rule goes a long way toward
+maintaining the collegial tone of the Committee.
+    Second, witnesses, as you mentioned, will limit their oral
+presentation to 5 minutes of written testimony. They can
+summarize it, of course, which has been the Committee's rule in
+the past. In the new rules the Chairwoman, in consultation with
+the Ranking Member, may now extend that time if we think that
+that would be helpful for the Committee.
+    Finally, Members who are not Members of the Committee on
+Small Business occasionally join the Committee to participate
+in a hearing. These Members are not permitted to vote for the
+purpose of establishing a quorum or on any matter, but in the
+proposed rules may question witnesses if permitted by the Chair
+in consultation with the Ranking Member. We support those
+efforts and those changes.
+    Again, I appreciate the Chairwoman and her staff for
+working closely with the minority in bringing this rules
+package forward. And I urge my colleagues to support it.
+    And I yield back the balance of my time.
+    Chairwoman VELAZQUEZ. Thank you, Mr. Chabot.
+    Are there any Members that wish to be recognized on the
+rules?
+    The Committee now moves to consideration of the rules
+package. The clerk will read the title of the document.
+    The CLERK. Rules and Procedures Adopted by the Committee.
+    Chairwoman VELAZQUEZ. I ask unanimous consent that the
+rules package be considered as read and open for amendment in
+its entirety.
+    Does any Member seek recognition for the purpose of
+offering an amendment?
+    Seeing none, the question is on adopting the rules.
+    All those in favor say aye.
+    All those opposed say no.
+    In the opinion of the Chair, the ayes have it and the
+proposed rules are adopted and staff is authorized to make
+technical and grammatical changes.
+    Pursuant to House Rules, the rules adopted by the Committee
+on Small Business for the 116th Congress will be published in
+the congressional record and made available to the public on
+the Committee's website.
+    Now, we will approve our Subcommittee Chairs and Ranking
+Members. The Full Committee Vice Chair will be Representative
+Dwight Evans, who was elected by a vote of the Democratic
+Caucus.
+    Representative Jared Golden will be the Chair of the
+Subcommittee on Contracting and Infrastructure.
+    Representative Andy Kim will be Chair of the Subcommittee
+on Economic Growth, Tax, and Capital Access.
+    Representative Jason Crow will be the Chair of the
+Subcommittee on Innovation and Workforce Development.
+    Representative Judy Chu will be Chair of the Subcommittee
+on Investigations, Oversight, and Regulations.
+    And Representative Abby Finkenauer will be the Chair on the
+Subcommittee on Rural Development, Agriculture, Trade, and
+Entrepreneurship.
+    I now yield to the Ranking Member, Mr. Chabot, for any
+remarks that he may have to introduce the Subcommittee Ranking
+Members.
+    Mr. CHABOT. Thank you, Madam Chairwoman.
+    I will now introduce the Subcommittee Ranking Members for
+the republican side of the Committee.
+    Representative John Joyce--I would not mind if the Members
+could kind of just raise their hand so everybody knows who they
+are.
+    Representative John Joyce from Pennsylvania will be the
+Ranking Member for the Subcommittee on Rural Development,
+Agriculture, Trade, and Entrepreneurship.
+    Representative Troy Balderson of Ohio will be the Ranking
+Member for the Subcommittee on Innovation and Workforce
+Development.
+    Representative Kevin Hern from Oklahoma will be the Ranking
+Member for the Subcommittee on Economic Growth, Tax, and
+Capital Access.
+    Representative Ross Spano from Florida will be the Ranking
+Member for the Subcommittee on Investigations, Oversight, and
+Regulations.
+    And Representative Pete Stauber from Minnesota will be the
+Ranking Member for the Subcommittee on Contracting and
+Infrastructure.
+    We have an excellent crop of newcomers on the Committee on
+our side, and I know that the folks on the other side of the
+aisle are pretty good, too. And these folks will be going along
+with the really fantastic Members that are already on the
+Committee. So we appreciate them being here.
+    And I look forward to working with our colleagues on the
+other side of the aisle in the 116th Congress, and as we have
+already indicated, we actually accomplish a lot in a bipartisan
+manner on this Committee and we appreciate that.
+    And I now yield back.
+    Chairwoman VELAZQUEZ. Thank you.
+    I move that the list of Subcommittee Chairs and Ranking
+Members and Vice Chair as set forth in the roster be approved.
+    All those in favor say aye.
+    Those opposed say no.
+    In the opinion of the Chair the ayes have it and the Chairs
+and Ranking Members are appointed.
+    This concludes the order of business for today's meeting.
+    Does any Member seek recognition for debate before we
+conclude?
+    If not, without--yes?
+    Mr. BURCHETT. I am Tim Burchett. I am a new Member. I am
+not sure if I am breaking protocol here but I saw on the news
+where you stepped up and did the right thing. I saw in your
+district where there was, I believe a jail without heat. And as
+a county mayor, I know that a lot of people in our jails are
+not guilty and a lot of people in Knox County maybe do not
+speak the language or are just caught in a bad situation
+financially, and I wanted to thank you for looking at the least
+amongst us. I cannot imagine anything more horrible than being
+in a jail or knowing that your loved one is in there and did
+not have heat or anything there in horrible weather conditions.
+So I wanted to thank you.
+    Chairwoman VELAZQUEZ. Thank you so much.
+    Mr. BURCHETT. And if that costs me votes in Knox County, so
+be it. But thank you.
+    Chairwoman VELAZQUEZ. Thank you so much.
+    Mr. CHABOT. My guess is it will not.
+    Chairwoman VELAZQUEZ. I appreciate it. Really appreciate
+it.
+    Any other Member who wishes to make any comment or ask any
+questions?
+    If not, without objection, this meeting of the Committee on
+Small Business stands adjourned and the Committee will stand in
+recess for a few moments to prepare for the Committee hearing.
+    Thank you. Thank you all.
+    [Whereupon, at 10:56 a.m., the Committee was adjourned.]
+                            A P P E N D I X
+[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
+                                 [all]
+</pre><script data-cfasync="false" src="/cdn-cgi/scripts/5c5dd728/cloudflare-static/email-decode.min.js"></script></body></html>

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+<html>
+<title> - SHUTDOWN LESSONS: SBA CAPITAL ACCESS PROGRAMS</title>
+<body><pre>
+[House Hearing, 116 Congress]
+[From the U.S. Government Publishing Office]
+             SHUTDOWN LESSONS: SBA CAPITAL ACCESS PROGRAMS
+=======================================================================
+                                HEARING
+                               BEFORE THE
+       SUBCOMMITTEE ON INVESTIGATIONS, OVERSIGHT, AND REGULATIONS
+                                 OF THE
+                      COMMITTEE ON SMALL BUSINESS
+                             UNITED STATES
+                        HOUSE OF REPRESENTATIVES
+                     ONE HUNDRED SIXTEENTH CONGRESS
+                             FIRST SESSION
+                               __________
+                              HEARING HELD
+                           FEBRUARY 26, 2019
+                               __________
+[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
+            Small Business Committee Document Number 116-004
+             Available via the GPO Website: www.govinfo.gov
+                               __________
+                    U.S. GOVERNMENT PUBLISHING OFFICE
+34-741                       WASHINGTON : 2019
+-----------------------------------------------------------------------------------
+For sale by the Superintendent of Documents, U.S. Government Publishing Office,
+http://bookstore.gpo.gov. For more information, contact the GPO Customer Contact Center,
+U.S. Government Publishing Office. Phone 202-512-1800, or 866-512-1800 (toll-free).E-mail,
+<a href="/cdn-cgi/l/email-protection" class="__cf_email__" data-cfemail="d8bfa8b798bbadabacb0bdb4a8f6bbb7b5">[email&#160;protected]</a>.
+                   HOUSE COMMITTEE ON SMALL BUSINESS
+                 NYDIA VELAZQUEZ, New York, Chairwoman
+                         ABBY FINKENAUER, Iowa
+                          ANDY KIM, New Jersey
+                         SHARICE DAVIDS, Kansas
+                          JARED GOLDEN, Maine
+                          JASON CROW, Colorado
+                          JUDY CHU, California
+                           MARC VEASEY, Texas
+                       DWIGHT EVANS, Pennsylvania
+                        BRAD SCHNEIDER, Illinois
+                      ADRIANO ESPAILLAT, New York
+                       ANTONIO DELGADO, New York
+                     CHRISSY HOULAHAN, Pennsylvania
+                                 VACANT
+                   STEVE CHABOT, Ohio, Ranking Member
+   AUMUA AMATA COLEMAN RADEWAGEN, American Samoa, Vice Ranking Member
+                        TRENT KELLY, Mississippi
+                          TROY BALDERSON, Ohio
+                          KEVIN HERN, Oklahoma
+                        JIM HAGEDORN, Minnesota
+                        PETE STAUBER, Minnesota
+                        TIM BURCHETT, Tennessee
+                          ROSS SPANO, Florida
+                        JOHN JOYCE, Pennsylvania
+                Adam Minehardt, Majority Staff Director
+     Melissa Jung, Majority Deputy Staff Director and Chief Counsel
+                   Kevin Fitzpatrick, Staff Director
+                            C O N T E N T S
+                           OPENING STATEMENTS
+                                                                   Page
+Hon. Judy Chu....................................................     1
+Hon. Ross Spano..................................................     2
+                                WITNESS
+Mr. William M. Manger, Associate Administrator, Office of Capital
+  Access, United States Small Business Administration,
+  Washington, DC.................................................     3
+                                APPENDIX
+Prepared Statement:
+    Mr. William M. Manger, Associate Administrator, Office of
+      Capital Access, United States Small Business
+      Administration, Washington, DC.............................    11
+Questions for the Record:
+    None.
+Answers for the Record:
+    None.
+Additional Material for the Record:
+    None.
+             SHUTDOWN LESSONS: SBA CAPITAL ACCESS PROGRAMS
+                              ----------
+                       TUESDAY, FEBRUARY 26, 2019
+                  House of Representatives,
+               Committee on Small Business,
+                    Subcommittee on Investigations,
+                                Oversight, and Regulations,
+                                                    Washington, DC.
+    The Subcommittee met, pursuant to call, at 10:01 a.m., in
+Room 2360, Rayburn House Office Building, Hon. Judy Chu
+[chairwoman of the Subcommittee] presiding.
+    Present: Representatives Chu, Burchett, and Spano.
+    Chairwoman CHU. Well, good morning. The committee will come
+to order. We thank everyone for joining us this morning, and I
+want to especially thank our witness for being here today.
+    The recent government shutdown was an acutely painful
+experience for our Nation's small businesses. It was 35 days of
+missed paychecks, delayed loans, and strained budgets for too
+many of our Federal employees, contractors, and small business
+owners. Perhaps most concerning to small firms was the she
+uncertainty of how long the shutdown would last.
+    Though the government is now back open, the damage to our
+economy is lasting. During the shutdown, so many entrepreneurs
+and small business employees took extraordinary measures to
+make ends meet, and they are still fighting to get back on
+their own two feet. It is clear that no business or family
+should be put in this position. Not only were business owners
+feeling the pain, several Federal agencies had to plan for the
+worst and cease operations, and the Small Business
+Administration was one of them.
+    Ironically, the one Federal agency with the sole
+responsibility of helping small firms was in the position of
+not being able to do its job. The shutdown forced SBA to
+suspend many of its critical services, including the processing
+and approval of small business loans. This included the Office
+of Capital Access and loans made under SBA's 7(a), 504, and
+Microloan programs. As a result, SBA could not approve loans
+that were already within the SBA system, nor could they take on
+any new loans. This essentially froze all SBA-backed lending
+activities for 35 days.
+    The good news is that the government is back open again,
+and SBA is back to processing and approving loans for small
+businesses. Yet, I know the agency has much to do in order to
+adequately ensure the stability of small business financing.
+    Today's hearing gives us the opportunity to hear from
+Associate Administrator for the Office of Capital Access, Bill
+Manger, about how he and his office handled the prospect of a
+protracted lapse in appropriations, the challenges that he and
+his team faced upon reopening, and what guidance the office
+gave borrowers and lenders seeking loan guarantees during the
+shutdown.
+    It is important we understand the extent of economic
+injuries caused to entrepreneurs as they sought capital, many
+of whom rely specifically on SBA loans because they have had
+trouble securing affordable credit elsewhere.
+    I look forward to today's hearing, and I thank Mr. Manger
+for testifying. I would now like to yield of the Ranking Member
+of the subcommittee, Mr. Spano, for his opening statement.
+    Mr. SPANO. Thank you so much, Madam Chair. It is a
+privilege to serve with you on the committee. And I look
+forward to supporting you, and I look forward to a very, very
+productive term here serving with you on this committee.
+    Thank you, Madam Chair, again. Small businesses are coming
+off a banner year of increased optimism levels and confidence
+scores. From investing in their businesses, their workers, and
+their communities, the Nation's smallest firms were busy in
+2018. Positive economic news has continued in 2019 with U.S.
+unemployment near record lows, real wage growth, and wage gains
+across the Nation.
+    But despite these trends, small businesses, entrepreneurs,
+and startups still face headwinds when it comes to financing
+their endeavors. Landing a conventional or traditional bank
+loan is often out of reach for them; thus, putting their
+American dream on hold. With all other options exhausted, small
+businesses have the ability to turn to the Small Business
+Administration, and there are many capital access programs to
+assist with financing needs.
+    Unfortunately, last month's partial government shutdown
+halted many of SBA's programs and created a buildup of loans
+waiting to be processed. With SBA again up and running, I look
+forward to today's hearing focusing on SBA's Office of Capital
+Access. The Office of Capital Access administers some of SBA's
+most important government guaranteed programs including the
+7(a) loan program, the 504/CDC loan program, and the Microloan
+program. All three of these programs partner with financial
+institutions to deliver assistance to creditworthy firms that
+cannot access traditional or conventional lending markets. Due
+to lender fees in the programs, many of them are and have been
+running at zero cost to the American taxpayer.
+    Combined, these programs support hundreds of thousands of
+jobs on an annual basis. From my home State of Florida which is
+approximately 3.3 million individuals employed in the small
+business sector to Ohio and beyond, these jobs are transforming
+the country's economy.
+    I look forward to hearing from the Associate Administrator
+regarding the operating plans that they have in place during
+and after a government shutdown, and additionally, I am looking
+forward to an open discussion on other matters in SBA's lending
+world in 2019.
+    In my humble opinion, Congress must continue to create an
+environment where small businesses, entrepreneurs, and startups
+can flourish, grow, and create jobs. Simply put, when they are
+moving forward, so is the American economy.
+    Thank you, Madam Chairwoman, and I yield back.
+    Chairwoman CHU. Thank you, Mr. Spano. And if Committee
+Members have an opening statement prepared, we would ask that
+they submit it for the record.
+    I would like to take a minute to explain the time rules.
+Mr. Manger will get 5 minutes to testify. Each Member gets 5
+minutes for questioning. There is a lighting system to assist
+you. The green light will be on when you begin, and the yellow
+light will come on when you have 1 minute remaining. The red
+light will come on when you are out of time, and we ask that
+you stay within that timeframe to the best of your ability.
+    I would like to now introduce our only witness today, Mr.
+William Manger. Mr. Manger is the Associate Administrator for
+the Office of Capital Access at SBA. He has held this role
+since March 2017 and is responsible for the SBA's loan program
+policy, technology, operations, and oversight.
+    Prior to his current SBA appointment, Mr. Manger served as
+Managing Director at Brock Capital Group, a boutique investment
+bank in New York City, where he advised and supported small to
+medium-size enterprises in their efforts to raise capital and
+expand their businesses. From 2007 to 2009, he served as
+Associate Administrator for Field Operations at SBA. Mr. Manger
+holds an MBA from the Columbia Business School and a BA from
+Trinity College in Hartford, Connecticut.
+    Welcome, Mr. Manger. You are now recognized for 5 minutes.
+STATEMENT OF WILLIAM M. MANGER, ASSOCIATE ADMINISTRATOR, OFFICE
+ OF CAPITAL ACCESS, UNITED STATES SMALL BUSINESS ADMINISTRATION
+    Mr. MANGER. Thank you, Chairman Chu, and Ranking Member
+Spano and Members of the Subcommittee. I appreciate the
+opportunity to testify today about the recent Federal funding
+lapse and the status of our SBA lending programs. With several
+new Members on the Subcommittee and before discussing the
+lapse, I thought it might be helpful to talk briefly about SBA
+and the Office of Capital Access.
+    As many of you know, the SBA provides tools and resources
+that are of great value to America's 30 million small
+businesses. SBA's programs have been helping small businesses
+get on their feet and grow since our inception in 1953. Our job
+in the Office of Capital Access is to administer programs that
+make capital available to entrepreneurs who would otherwise be
+unable to access capital through conventional means.
+    While the SBA works with lenders to provide loans to small
+businesses, the agency doesn't lend money directly to small
+business owners. Rather, we reduce risk for lenders through
+loan guarantees. These lending programs, however, were closed
+during the lapse in appropriations. For a total of 20 full
+business lending days, SBA was unable to approve loans and was
+not able to accept new loan applications. Throughout the lapse,
+we posted a notice on our financial system, and I engaged
+industry as needed to respond to questions.
+    We also closely examined our program functions to make sure
+we complied with the Antideficiency Act. While most routine
+activity in the Office of Capital Access ceased to operate, a
+few excepted and exempt operations were functional. These
+included the administrative closing of certain previously
+approved and obligated 504 loans, limited lender oversight and
+risk management of our loan portfolio, Microloans through the
+intermediaries since they had already received funding,
+disaster loan processing through our servicing centers, and our
+online lender match platform which automatically matches small
+businesses seeking financing with SBA approved lenders.
+    Once funding was restored for SBA operations, our loan
+systems were immediately operational, and we published an
+information notice to notify all lenders that SBA was open for
+business. As a result of process improvements put in place by
+Administrator Linda McMahon, our ability to get back to
+business was greatly enhanced. For example, by the end of 2018,
+we had cut in half the time it takes to process and approve
+loan applications. These developments played a key role in
+dealing with the volume of applications once our systems were
+again open.
+    To provide you an update on that progress, as of this past
+Friday, SBA has now approved over 7900 loans for a total of
+$3.7 billion since we resumed operations on Monday, January 28.
+I am very proud of the hard work and dedication of our SBA
+employees. Through their efforts, we are now back to pre-lapse
+levels in all of our lending categories. This includes loan
+origination, and loan modifications in our 7(a) and 504
+programs.
+    I also want to share with the committee some action that we
+took in response to your February 12 hearing regarding the
+funding lapse. In that hearing, the committee heard from a
+local brewing company who was interested in expanding their
+operations through an SBA loan guarantee. At the time of the
+hearing, however, SBA has not received any paperwork from them.
+And in response to that hearing, our staff reached out to that
+company. I wanted to let you know that we have since received
+their request and approved their loan modification.
+    Madam Chair and Members of the Subcommittee, thank you
+again for inviting me to testify. I look forward to your
+questions and continuing to work together on behalf of small
+businesses across the country. Thank you.
+    Chairwoman CHU. Thank you, Mr. Manger. I will begin by
+recognizing myself for 5 minutes.
+    Mr. Manger, the shutdown essentially froze all SBA-backed
+lending, but many loan applications had already been submitted
+to SBA prior to the shutdown and were pending review when the
+government shutdown began. At the same time, lenders continued
+submitting loan applications to SBA for approval during the
+shutdown. This means that there were two sets of pending loan
+applications, those that were submitted pre-shutdown and those
+submitted during the shutdown. In total, how many such loan
+applications were pending when SBA reopened?
+    Mr. MANGER. Madam Chairwoman, so when the lapse in
+appropriations took place at midnight on the 21st of December
+or the 22nd of December, we had probably about a couple hundred
+loans that had come in on a non-delegated basis. But just so
+you understand, most of our loans, over 80 percent of our 7(a)
+loans come in on a delegated basis. That means they come into
+our electronic system and are funded in real-time. In fact, in
+a matter of seconds.
+    So that is the majority of our 7(a) which is our largest
+program. Those that did not come in on a delegated basis, that
+come into our centers on a non-delegated basis to be reviewed
+by SBA staff, we had probably a couple hundred, and those we
+were unable to process at that time.
+    In the 504 program, though, the way the 504 program
+operates, we actually approve and obligate the funding of those
+loans when the loan application comes into our system. So what
+we did during the shutdown is we had some excepted employees
+that were able to close 504 loans that had come in prior to the
+lapse in appropriations that had been already approved and
+obligated, so those were taken care of.
+    In terms of those that came in during the shutdown, we
+turned our system off, our CAFS, our central service system
+off, when the shutdown took effect. So actually, there were no
+loans coming into a queue during the shutdown. Once the funding
+had been restored and the lapse was over in January, we
+reopened that Monday morning, the 28th of January, with the
+funding that we had on the CR, and all the loans then that came
+in at that point were handled.
+    So really, there was no backlog of loans in the system
+because the system actually had been shut down.
+    Chairwoman CHU. But you did have some that were non-
+delegated. So how did your office strategically work through
+this backlog of loans? For example, did you prioritize by date,
+loan amount, or some other factor?
+    Mr. MANGER. So what we did was we did do it on a first in,
+first out basis, FIFO basis. We did also, in our information
+notice, that we sent out to the public once we reopened in
+January, we said to our lending partners that if there was an
+urgent loan that needed to be taken care of because the
+applicant was up against a deadline, they had a way to send an
+email to our center. That loan would be specifically
+prioritized, which we did in several instances where the
+borrower was up against a deadline that needed to be met.
+    So once we reopened, again, we brought on some additional
+resources, and we were able to work through the huge volume. I
+mean, $3.7 billion since January 28 is pretty spectacular. And
+all of those have been approved. And in fact, the different
+categories for loan modifications, we are down now to pre-lapse
+levels, and we were able to do that within 4 weeks.
+    Chairwoman CHU. So as a result of the shutdown, small
+businesses were in dire need of financing because SBA lending
+programs were not available. And you said that for those 4
+weeks, that basically shut down the loan application process.
+When you opened up again, did you see an uptick in loan
+applications?
+    Mr. MANGER. Absolutely. We had a tremendous amount of
+volume come in in the first several days, and it actually has
+remained high. We have now come back actually a little bit
+stronger than the position we had been pre-lapse, so you know,
+we have seen an incredible increase in our lending over the
+last month.
+    Chairwoman CHU. Let me also ask. Is there any way to
+insulate lending programs from being frozen due to a lapse in
+appropriations and to be able to have other entities be able to
+take over this process of lending if there is such a shutdown?
+    Mr. MANGER. So Chairwoman Chu, because of the Anti-
+deficiency Act, we are prohibited from putting guarantees on
+the loans as we usually do. We would be encumbering assets of
+the Federal Government that we didn't have a right or
+authorization to do. And so, because of the Antideficiency Act,
+we were unable to make new loans during the lapse in
+appropriations.
+    I do want to point out that the one program that actually
+was still up and running during the lapse in appropriations
+was, in fact, the Microloan program. The way the Microloan
+programs works, it is actually a program where we make a loan
+to a not-for-profit lending intermediary who in turn makes the
+loan to the small business.
+    Much of the authorization and the appropriation for those
+microlenders had been made to the lenders prior to the lapse in
+appropriations, so they already had money that they then could
+loan to the small businesses. And during the lapse in
+appropriations, our microlending partners were continuing to
+make microloans.
+    And in fact, our Microloan program this year is doing
+extremely well. We are up 3.5 percent over last year's record.
+We have had a record in that program recently, and I am very
+pleased to tell you some of the statistics on that program; it
+is doing extremely well. In fact, in the last year we have
+increased our lending to African Americans in that program by 5
+percentage points, 33 percent used to be what we would lend in
+that program to African Americans. This past year, it has gone
+up to 38 percent, so we are very pleased with the performance
+of the Microloan program.
+    Chairwoman CHU. Well, thank goodness for that. Well, my
+time has now expired. The Ranking Member, Mr. Spano, is now
+recognized for 5 minutes.
+    Mr. SPANO. Thank you, Madam Chair. Thank you, Mr. Manger,
+for coming, and thank you for your testimony, and thank you for
+your very good work with the programs. And kudos to you for
+getting the program up and going so quickly, for getting caught
+up, and thank you for providing us regular updates as to the
+status of that process, and we appreciate that very much.
+    I have a few questions. It has been a busy couple of
+months, obviously. Can you share with us what your office has
+planned for the remaining part of the fiscal year, calendar
+year? Do you anticipate rolling out any new policy notices,
+SOPs or other regulations? And also, if so, can you provide a
+timeline and details?
+    Mr. MANGER. Sure. Thank you very much for that question. So
+in fact, just last week, we rolled out an update to our SOP. It
+is SOP 50 10 5K, and so it was following on from the J that had
+been launched last year. We try and have updates to that
+program on an annual basis if we can to keep up with the
+market. And again, we launched--we introduced it, but it does
+not take effect until April 1, so it gives us time and our
+lenders time to adjust to any of the changes in the SOP for 45
+days. And again, we will be out, you know, providing classes
+and webinars with the lenders prior to the April 1, you know,
+effective date.
+    We also currently have a rulemaking that is in process.
+This was actually primarily to promulgate rules for our Express
+program which has existed actually for 20 years and has never
+operated on rules. It was only operating on SOP, and that is
+not good policy. So one of the first things I did when I came
+into this position was say we need to promulgate rules for the
+Express program because all of the programs should be operating
+under regulation and not just SOP.
+    So that was launched where we actually made it available to
+the public at the end of September, and we are going through
+the comments that we have received. We have received an awful
+lot of comments, so we are going through that. Then it has to
+go to OMB for review, and then finally, the final rule will
+probably be promulgated sometime later in the summer.
+    Mr. SPANO. Good. Thank you. You already answered my second
+question, so thank you for doing that.
+    The last Congress that then Chairman Chabot and former
+Ranking Member Velazquez introduced H.R. 4743, The Small
+Business 7(a) Lending Oversight Reform Act of 2018. It went on
+to pass the House and the Senate, and the President signed that
+into law last June. Can you provide the committee an update on
+how the implementation of this law is coming and any next steps
+that we should be anticipating?
+    Mr. MANGER. Sure. Thank you very much for that question
+too.
+    So part of that law, there was a report that was due to
+Congress by December 1 of this year. We got that to the
+committees, and we are implementing through regulation and
+actually, in some aspects of the SOP, updates so that we are in
+compliance fully with the statute that passed and was signed by
+the President last June.
+    I believe we have 1 year to finalize that rule, that
+legislation in rulemaking, and so we are going to be able to
+meet that deadline by the end of June. I think it was the 21st
+of June last year that the President signed the bill, so we
+will make that deadline. And we are working diligently on that,
+and we take very seriously the operations in our office of
+credit risk management.
+    Mr. SPANO. Excellent. Thank you so much. And then, if you
+would, for those of us who don't have a real in-depth
+understanding of the programs, give us an idea, if you would,
+what you believe the greatest challenges are that we face in
+2019 with regard to the 7(a) program, the 504/CDC, and the
+Microloan. What is it that you would like to achieve, and what
+are the challenges that you face this year?
+    Mr. MANGER. One of the challenges we are taking on is to
+make sure that our loan programs are available to all Americans
+no matter where they live. We have put into effect a fee
+reduction for loans made in rural areas as well as HUB zones,
+Historically Underutilized Business zones, because we want to
+make sure that again, people that need loans that live in rural
+America as well as in HUB zones have access to the loans that
+we make available.
+    And so we have offered fee relief on loans up to $150,000
+if they are made in a HUB zone or a rural area, and that is one
+of our big initiatives. Administrator McMahon signed an MOU
+with Secretary Sonny Perdue of the Department of Agriculture.
+And we are working jointly with Agriculture to make sure we are
+reaching out to the rural parts of the country and making sure
+that we have a robust lending environment in rural parts of the
+country as well.
+    Mr. SPANO. Thank you. Madam Chair, I yield back.
+    Chairwoman CHU. Thank you. The gentleman's time has
+expired, and now the gentleman from Tennessee, Mr. Burchett, is
+now recognized for 5 minutes.
+    Mr. BURCHETT. Thank you, Chairlady. It is actually
+Burchett, birch like the tree, and et like I just et breakfast,
+so thank you. Thank you so much, Chairlady, and I appreciate
+that. I always enjoy it when somebody misspeaks my name so that
+I can correct them like that, and so it is all in good fun.
+    Thank you, Ranking Member Spano, for the great work you
+have done. It has been enjoyable working with you, brother.
+    I had a bunch of questions, but I think they have already
+been asked, but there was one that I was concerned about, and
+maybe you have answered this or not. If you have, just tell me
+to go on and watch the notes, okay. But is there any
+legislation that we as Congresspeople can focus on to help
+access to capital for small business owners, any legislation
+that is coming down the pike or some that may be just in your
+wish book that you have?
+    Mr. MANGER. Thank you very much for that question. You
+know, the President's budget will be coming out in March, but I
+can speak about last year's budget. We did ask that we increase
+the maximum for Express loans. These are usually smaller loans
+that rely heavily on the lenders' underwriting criteria. And in
+exchange for that, we reduce the guarantee from the Federal
+Government on average from 75 percent down to 50 percent. So it
+is a great program because it is only a 50 percent risk to the
+taxpayer, and we would like to see that program increased from
+$350,000 which is the cap right now to $1 million.
+    In fact, during the Recovery Act, the program was allowed
+to go up to $1 million. Then that expired, that sun set, but we
+are asking through the President's budget again to increase the
+cap on Express loans up to $1 million. So that is something we
+think would be very helpful.
+    The Express program has not been performing as well lately,
+and we think that is because the cap is too low. Even if you
+took into effect inflation, we would be well over half a
+million dollars now in that program. So it needs to grow with
+the times, and anything you can do to help us increase the
+Express Loan cap, we would appreciate it.
+    Mr. BURCHETT. All right. I am writing some notes down. You
+sparked my interest. You said the taxpayers are only on the
+hook for 50 percent. How does that work? Is that some of that
+new math I have been hearing about, or is that----
+    Mr. MANGER. So the way our programs work, Congressman, is
+the Federal Government places a guarantee on our 7(a) loans
+which is our largest program. Last year we did over $25 billion
+in the 7(a) program. So we put a guarantee on average of 75
+percent. If it is a small loan, in fact, the guarantee goes up
+to 85 percent, so that is how we mitigate risk to our lending
+partners, and they are able to make loans to individuals and
+small businesses that they would not normally make a loan to
+because they don't meet their conventional criteria.
+    In the Express program, because we give more authority to
+the lender and their own underwriting criteria, we lower, we
+decrease the guarantee from the Federal Government down to only
+50 percent, but the lenders like it because it is much easier
+for them to process those loans. It is much faster.
+    The program is greatly used as a revolving line of credit
+for those businesses that need a revolver in place to be able
+to draw upon when they need it. For example, they might have a
+seasonal business, and they need to draw money at certain times
+of the year. So that is a great program. And again, because we
+reduce the guarantee that the taxpayer is on the hook for down
+to 50 percent, it is a benefit to the taxpayer as well. But the
+$350,000 cap is just, at this point, too low, and we would like
+to see that increased.
+    Mr. BURCHETT. How are they--you said that these are loans
+that normally wouldn't be able to be made because of some
+circumstances. Are they bad risks? Give me an example. You
+don't have to give me the bureaucrat thing. I am running out of
+time, and I want to get--you go ahead.
+    Mr. MANGER. Sure. So here is an example, you know. There
+are many people who would like to start a restaurant. And if
+they go into their bank and they say look, I am wanting to open
+a restaurant. I have never been in the restaurant business, but
+I would like to start this business. I know I would be good at
+it. I am a great cook. I want to open this business, and the
+bank says you know what? That is just way too high risk an
+industry. We can't give you a loan for that. You have no
+experience. We are not going to do it.
+    But with the SBA guarantee, we mitigate that risk to the
+lender. Again, on average, a 7-day loan is a 75 percent
+guarantee. So by taking that guarantee and putting that in
+place, the lender then says all right. My risk is mitigated at
+least by 75 percent. We are going to take that risk on. We are
+going to make this loan to you so that you can open that
+restaurant that you have always wanted to open.
+    Mr. BURCHETT. Okay. One last question.
+    Mr. MANGER. Sure.
+    Mr. BURCHETT. I have got 13 seconds. How much is a
+Microloan?
+    Mr. MANGER. A Microloan goes up to $50,000. But what is
+really interesting is the average size of a Microloan is only
+$14,000, and that is very, very impactful for the businesses,
+the small businesses that need just that amount of capital. And
+we have seen tremendous growth in that program, and we hope
+that it will continue to grow.
+    Mr. BURCHETT. Okay. Thank you.
+    Sorry, Chairlady. Sorry Chairlady I went over. I apologize,
+ma'am.
+    Chairwoman CHU. Thank you for the questions, and we want to
+thank the witness for taking time out of his schedule to be
+here today.
+    The bottom line remains that for 35 days, our country's
+main avenue for responsible small business lending was shut
+down. Though we may never fully know the exact magnitude of the
+shutdown, we do know that the impact on the economy was far
+more severe than our country's entrepreneurs deserve. I think
+my colleagues on the other side would agree that it should
+never happen again.
+    So I thank you, Mr. Manger, and your whole team that got
+right back to work on day one after the shutdown to get our
+entrepreneurs back on their feet, and already you have made the
+SBA whole.
+    I would ask unanimous consent that Members have 5
+legislative days to submit statements and supporting materials
+for the record.
+    Without objection, so ordered.
+    And if there is no further business to come before the
+committee, we are adjourned. Thank you.
+    Mr. MANGER. Thank you.
+    [Whereupon, at 10:30 a.m., the subcommittee was adjourned.]
+                           A P P E N D I X
+                     Statement of William M. Manger
+                        Associate Administrator
+                        Office of Capital Access
+                   U.S. Small Business Administration
+                               before the
+                   House Committee on Small Business
+       Subcommittee on Investigations, Oversight, and Regulations
+      Hearing on ``Shutdown Lessons: SBA Capital Access Programs''
+                           February 26, 2019
+                    State of William Manger
+                    Associate Administrator
+               U.S. Small Business Administration
+    Thank you, Chairwoman Chu, Ranking Member Spano, and
+members of the subcommittee for inviting me to speak with you
+today. It is my pleasure to appear before you as the 116th
+Congress gets underway. I look forward to building a strong and
+open relationship with all of you moving forward.
+    As some of you may know, the SBA provides tools and
+resources that are of great value to America's 30 million small
+businesses, which account for over 58 million jobs. As
+Associate Administrator for the U.S. Small Business
+Administration's (SBA) Office of Capital Access, it is my job
+to administer programs that make capital available to small
+business entrepreneurs who would otherwise be unable to access
+capital to start or expand a business through conventional
+means.
+    Before assuming my role as the Associate Administrator for
+the Office of Capital Access, I had the honor to serve the
+agency as the Regional Administrator for Region 2, based out of
+New York, from 2005 to 2007, and then as the Associate
+Administrator for the Office of Field Operations in Washington,
+D.C. from 2007 to 2009. From the beginning of my time with the
+SBA, I have been able to witness the positive impact our
+programs have on communities across the country.
+    America's small businesses are our nation's innovators and
+job creators, and I am committed to serving as their advocate.
+The role that the SBA and the Office of Capital Access plays in
+our credit markets fills an important gap in the lending
+marketplace. Our agency aims to help small businesses obtain
+credit that is otherwise unavailable through conventional
+lending. As many of you are aware, entrepreneurs certainly have
+the will and drive to succeed, but at times, access to capital
+unfortunately proves to be an insurmountable hurdle. That is
+where we come in. The SBA works with lenders to provide loans
+to small businesses. The agency doesn't lend money directly to
+small business owners but does reduce the risk for lenders
+through loan guarantees. Our programs have been helping small
+businesses get on their feet and grow since our inception.
+    During the last two years, Administrator Linda McMahon has
+placed an emphasis on agency governance to ensure that our
+entire agency, including our Office of Capital Access, is
+running as efficiently and effectively as possible. Her
+leadership before, during, and after the recent lapse in
+appropriations, has greatly improved our ability to get back to
+business.
+    Regarding the lapse, and in addressing today's hearing
+topic, my testimony will focus on three areas:
+          1. How the recent lapse impacted SBA's loan programs;
+          2. What actions the Office of Capital Access took
+        during the lapse;
+          3. An update on SBA's loan program operations since
+        funding was restored by Congress.
+    Due to the funding lapse, our business lending and surety
+programs were closed from December 22 through January 27, a
+total of 20 full business lending days. SBA was unable to
+approve loans during this period and was not able to accept new
+loan applications. Applications for SBA-guaranteed surety bonds
+were also not able to be processed by SBA. All new secondary
+market 7(a) loan pools were stopped and purchasing of SBA-
+guaranteed loans was also halted. Throughout the lapse, our
+Capital Access Financial System contained the following notice:
+          <bullet> Due to the lapse in appropriations, SBA is
+        not able to approve new 7(a) or 504 loans. Please refer
+        to the SBA website at www.sba.gov/partners/lenders for
+        more information on SBA's 7(a) and 504 loan programs.
+        Limited staff is available at SBA's servicing and
+        liquidation centers to continue 7(a) and 504 loan
+        program servicing and liquidation activities.
+    While most routine activity in the Office of Capital Access
+ceased to operate, a few excepted and exempt operations were
+functional during the lapse. These included:
+          <bullet> The administrative closing of certain
+        previously-approved and obligated 504 loans;
+          <bullet> Continued applications and servicing actions
+        on disaster loans (SBA's Office of Disaster Assistance
+        uses the loan program operations of the Office of
+        Capital Access to process and service disaster loans);
+        and
+          <bullet> The online Lender Match platform, which
+        automatically matches small businesses seeking
+        financing with SBA-approved lenders.
+    During the lapse, I remained engaged with external
+stakeholders, including the trade associations, to help
+communicate information to lenders, as necessary. We also took
+steps to ensure that there would be no impairment to government
+property while the loan program operations were idle. For
+example, the Director of the SBA Office of Credit Risk
+Management was brought in as an excepted official to ensure
+that risk management in the SBA loan portfolio, including
+critical, time-sensitive lender reviews and oversight, was not
+significantly compromised.
+    Once Congress restored funding for SBA operations, our loan
+program systems were immediately operational on Monday, January
+28, and normal business in the Office of Capital Access
+resumed. An Information Notice was published to notify all
+lenders that SBA was open for business. The detailed notice
+covered such topics as interim loans, servicing actions, report
+filings, as well as expedited requests.
+    Since the agency resumed full operations, I am proud to
+report on our progress. Through February 14, our lending data
+is as follows:
+          <bullet> 6,075 7(a) loans have been approved for a
+        total of $2.64 billion;
+          <bullet> 588 504 loans have been approved for $416
+        million;
+          <bullet> 800 secondary market loans pending sale have
+        been processed;
+          <bullet> Surety bond applications have all been
+        reviewed and processed with $188 million in bond
+        guarantees having been approved.
+    Over 80% of SBA 7(a) guaranteed lending is submitted to SBA
+by preferred SBA lenders on a delegated basis, and SBA can turn
+those applications around in a matter of days. 7(a) and 504
+loans that are not submitted under delegated processing are
+sent to SBA loan processing centers for review. Under
+Administrator McMahon's leadership, SBA has dramatically
+improved the time it takes to review and process a non-
+delegated loan for a guarantee at the centers. In fact, the
+turn time has been cut in half by implementing process
+improvements over the last two years.
+    That said, there are non-delegated loans that have been
+submitted for review since January 28 that we estimate will
+take additional time. Our loan processing centers are
+expediting urgent loan application reviews while also ensuring
+fairness so that loans are processed as they have come into the
+system. We have also budgeted overtime to allow for loan center
+staff to address these loans. As of now, the agency feels it
+can handle any resource needs through our existing budget.
+    In conclusion, SBA's loan programs are fully operations, we
+have made significant progress in approving new loans, and we
+are actively addressing any delays in our non-delegated loan
+processing reviews. I am committed to ensuring that the Office
+of Capital Access works efficiently in supporting small
+businesses seeking financing after the lapse in appropriations.
+    Thank you, Chairwoman Chu, for inviting me to testify here
+today. I look forward to answering your questions and
+continuing our work together to help advance small businesses
+across this country.
+                                 [all]
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+<html>
+<title> - SUPPORTING AMERICA'S STARTUPS: REVIEW OF SBA ENTREPRENEURIAL DEVELOPMENT PROGRAMS</title>
+<body><pre>
+[House Hearing, 116 Congress]
+[From the U.S. Government Publishing Office]
+     SUPPORTING AMERICA'S STARTUPS: REVIEW OF SBA ENTREPRENEURIAL
+                          DEVELOPMENT PROGRAMS
+=======================================================================
+                                HEARING
+                               before the
+                      COMMITTEE ON SMALL BUSINESS
+                             UNITED STATES
+                        HOUSE OF REPRESENTATIVES
+                     ONE HUNDRED SIXTEENTH CONGRESS
+                             FIRST SESSION
+                               __________
+                              HEARING HELD
+                           FEBRUARY 27, 2019
+                               __________
+ [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
+            Small Business Committee Document Number 116-006
+             Available via the GPO Website: www.govinfo.gov
+                           _________
+                U.S. GOVERNMENT PUBLISHING OFFICE
+ 35-071                 WASHINGTON : 2019
+                   HOUSE COMMITTEE ON SMALL BUSINESS
+                 NYDIA VELAZQUEZ, New York, Chairwoman
+                         ABBY FINKENAUER, Iowa
+                          ANDY KIM, New Jersey
+                         SHARICE DAVIDS, Kansas
+                          JARED GOLDEN, Maine
+                          JASON CROW, Colorado
+                          JUDY CHU, California
+                           MARC VEASEY, Texas
+                       DWIGHT EVANS, Pennsylvania
+                        BRAD SCHNEIDER, Illinois
+                      ADRIANO ESPAILLAT, New York
+                       ANTONIO DELGADO, New York
+                     CHRISSY HOULAHAN, Pennsylvania
+                                 VACANT
+                   STEVE CHABOT, Ohio, Ranking Member
+   AUMUA AMATA COLEMAN RADEWAGEN, American Samoa, Vice Ranking Member
+                        TRENT KELLY, Mississippi
+                          TROY BALDERSON, Ohio
+                          KEVIN HERN, Oklahoma
+                        JIM HAGEDORN, Minnesota
+                        PETE STAUBER, Minnesota
+                        TIM BURCHETT, Tennessee
+                          ROSS SPANO, Florida
+                        JOHN JOYCE, Pennsylvania
+                Adam Minehardt, Majority Staff Director
+     Melissa Jung, Majority Deputy Staff Director and Chief Counsel
+                   Kevin Fitzpatrick, Staff Director
+                            C O N T E N T S
+                           OPENING STATEMENTS
+                                                                   Page
+Hon. Nydia Velazquez.............................................     1
+Hon. Steve Chabot................................................     2
+                               WITNESSES
+Mr. Charles Rowe, President & CEO, America's Small Business
+  Development Centers, Arlington, VA.............................     4
+Ms. Corinne Hodges, CEO, Association of Women's Business Centers,
+  Washington, DC.................................................     6
+Mr. W. Kenneth Yancey, Jr., CEO, SCORE Association, Herndon, VA..     8
+Ms. Cherylynn Sagester, Veterans Business Outreach Center Program
+  Director, Old Dominion University, Norfolk, VA.................     9
+                                APPENDIX
+Prepared Statements:
+    Hon. Jim Hagedorn............................................    28
+    Mr. Charles Rowe, President & CEO, America's Small Business
+      Development Centers, Arlington, VA.........................    29
+    Ms. Corinne Hodges, CEO, Association of Women's Business
+      Centers, Washington, DC....................................    37
+    Mr. W. Kenneth Yancey, Jr., CEO, SCORE Association, Herndon,
+      VA.........................................................    46
+    Ms. Cherylynn Sagester, Veterans Business Outreach Center
+      Program Director, Old Dominion University, Norfolk, VA.....    62
+Questions and Answers for the Record:
+    Question from Hon. Brad Schneider to Ms. Corinne Hodges and
+      Answer from Ms. Corinne Hodges.............................    65
+    Question from Hon. Brad Schneider to Ms. Cherylynn Sagester
+      and Answer from Ms. Cherylynn Sagester.....................    67
+Additional Material for the Record:
+    None.
+     SUPPORTING AMERICA'S STARTUPS: REVIEW OF SBA ENTREPRENEURIAL
+                          DEVELOPMENT PROGRAMS
+                              ----------
+                      WEDNESDAY, FEBRUARY 27, 2019
+                  House of Representatives,
+               Committee on Small Business,
+                                                    Washington, DC.
+    The Committee met, pursuant to call, at 11:08 a.m., in Room
+2360, Rayburn House Office Building. Hon. Nydia Velazquez
+[chairwoman of the Committee] presiding.
+    Present: Representatives Velazquez, Finkenauer, Kim,
+Davids, Golden, Crow, Veasey, Evans, Schneider, Espaillat,
+Delgado, Houlahan, Chabot, Balderson, Hern, Stauber, Spano, and
+Joyce.
+    Chairwoman VELAZQUEZ. Good morning. The committee will come
+to order.
+    It is a pleasure to have all of you testifying before our
+committee this morning. I applaud you for your leadership on
+behalf of America's small businesses.
+    America's 30 million small businesses are the cornerstones
+of our communities. When a Main Street business succeeds, not
+only do hard-earned dollars get reinvested back into our
+neighborhoods, we also see robust job creation and innovation.
+    But we all know that launching a small business is no task
+for the faint of heart. When it comes to turning a great idea
+into a thriving business, unfortunately, many entrepreneurs
+face a series of challenges.
+    To break down these barriers, the SBA fosters a robust
+entrepreneurial ecosystem, one that offers free or low-cost
+counseling and training to entrepreneurs across the country.
+Whether it is helping to create a business plan, navigate the
+procurement process, market a new product, or identify trade
+opportunities, the SBA, through its resource partners, offers a
+wide range of services to help small businesses succeed.
+    The SBA relies on four main partners to deliver these
+services--Small Business Development Centers, or SBDCs; Women's
+Business Centers, or WBCs; SCORE; and Veterans Business
+Outreach Centers, or VBOCs. Today, we are fortunate to be
+joined by their leaders.
+    Entrepreneurial development initiatives are proven to be a
+great return on investment. Studies have shown that aspiring
+entrepreneurs and small business owners who receive counseling
+and training are able to increase sales and create more jobs.
+They are even proven to be more viable in the long term with
+those receiving 3 or more hours of counseling having higher 1-
+year survival rates.
+    Every year, SBA's resource partners assist more than one
+million entrepreneurs, creating roughly 80,000 jobs. And for
+every dollar invested between 2012 and 2017, SBDCs returned $5
+in revenues to federal and state governments.
+    But, behind these numbers are very real experiences of
+hardworking entrepreneurs. Let me share with you the story of
+DogSpot, a woman-owned small business in Brooklyn, New York.
+    Chelsea Brownridge was reluctant to take her high-energy
+terrier for a walk when she ran errands in Brooklyn. Realizing
+that other dog owners must face similar challenges, Chelsea got
+to work on developing a state-of-the-art doghouse for pet
+owners to safely and comfortably house their pets while
+shopping.
+    For advice and assistance, Chelsea turned to the Brooklyn
+Small Business Development Center, which helped her secure $3.2
+million in capital and hire 10 employees. Now, she is preparing
+to expand DogSpot to more cities nationwide.
+    At today's hearing, I hope to hear similar success stories.
+However, I am also eager to learn more about what must be
+improved.
+    While I commend each one of you for collectively serving
+over a million entrepreneurs per year, there are still more
+than 28 million small businesses that are not utilizing these
+services. Today, I would like to learn what more can be done to
+raise awareness for SBA counseling and training programs to
+ensure we are reaching as many entrepreneurs as possible. I
+also have concerns over the administration's past proposals to
+significantly reduce funding for these programs. Fortunately,
+there was a bicameral, bipartisan push this year to restore the
+proposed cuts. Providing robust levels of funding for these
+programs is essential to their success.
+    Having said that, we must also ensure that taxpayer
+resources are being used wisely and to the maximum effect. That
+is why this committee has long pushed for clearer metrics and
+accountability. I would also like to hear our panelists
+thoughts on ways we can better measure the results of these
+valuable counseling and training programs.
+    Small businesses are the backbone of the American economy,
+and we should provide our entrepreneurs with the critical
+resources they need to succeed. I am eager to hear ideas today
+on how we can improve SBA's entrepreneurial development
+programs and better serve America's innovators.
+    With that, I thank each of the witnesses for joining us
+today and look forward to your testimony.
+    I would now like to yield to the Ranking Member, Mr.
+Chabot, for his opening statement.
+    Mr. CHABOT. Thank you, Madam Chairwoman. And I apologize
+for running a little bit late there. I was in Foreign Affairs
+and our former Secretary of State, Madeline Albright, and I was
+the next questioner and I had been there an hour, so again, I
+apologize for anything, my phone going off.
+    Time and again, this Committee has lauded the importance of
+small businesses to the American economy. The impact that over
+30 million small firms has on our nation simply cannot be
+overestimated. Given the vital nature of small businesses
+providing resources that help entrepreneurs and small business
+owners succeed must be a priority. The Small Business
+Administration's, or SBA's, Entrepreneurial Development
+programs provide those important resources.
+    The SBA Entrepreneurial Development programs include Small
+Business Development Centers, or SBDCs; the Service Corps of
+Retired Executives, or SCORE; Women's Business Centers, or
+WBCs; and Veterans Business Outreach Centers, or VBOCs.
+    These programs provide small business owners and
+entrepreneurs with technical and managerial training related to
+creating, running, and scaling a small business. While
+collectively these programs have provided business training and
+counseling to more than 1.5 million individuals in Fiscal Year
+2017, each SBA Entrepreneurial Development Program is tasked
+with offering a unique and tailored curriculum.
+    The SBDC program is the largest and highest funded
+Entrepreneurial Development Program, with nearly 1,000
+locations all across this country, and provides a broad range
+of business counseling and training aimed at meeting the needs
+of both startup entrepreneurs and existing small business
+owners.
+    While SBDCs focus on counseling and training, SCORE is
+tasked with providing mentorship. With roughly 800 locations
+nationally and over 11,000 volunteer mentors, SCORE seeks to
+pair entrepreneurs or business owners with a SCORE mentor who
+can offer specific and tailored business guidance.
+    The WBC program provides business training and counseling
+specifically tailored to meet the needs of women entrepreneurs,
+often proving long-term training courses on nights and weekends
+at their 100 plus locations.
+    Finally, VBOCs are responsible for providing
+entrepreneurial resources and transition assistance to our
+nation's veterans through both 20 center locations and other
+military locations throughout the country.
+    Each of these Entrepreneurial Development programs plays a
+specific role in ensuring that our nation's small business
+owners have the resources they need to be successful.
+    Today's hearing will allow us to the opportunity to learn
+more about these programs and how they serve America's
+entrepreneurs, while allowing us to ask appropriate questions,
+what is working and what needs to be improved within these
+programs.
+    I look forward to hearing from our witnesses and having a
+productive conversation.
+    And again, I thank you, Madam Chairwoman, and I yield back.
+    Chairwoman VELAZQUEZ. The gentleman yields back.
+    And if committee members have an opening statement
+prepared, we would ask that they be submitted for the record.
+    I would like to take a minute to explain the timing rules.
+Each witness gets 5 minutes to testify and the members get 5
+minutes for questioning. There is a lighting system to assist
+you. The green light will be on when you begin, and the yellow
+light comes on when you have 1 minute remaining. The red light
+comes on when you are out of time, and we ask that you stay
+within the timeframe to the best of your ability.
+    I would now like to introduce our witnesses.
+    Our first witness is Mr. Charles `` Tee'' Rowe. Mr. ``
+Tee'' Rowe is the president and CEO of America's SBDC, the
+association representing Small Business Development Centers. He
+joined America's SBDC in 2009 after serving at the Small
+Business Administration, first as the Assistant General Counsel
+for Legislation and Regulation, and then as the Associate
+Administrator for Congressional Administrative Affairs. Prior
+to that Mr. Rowe was a Counsel here at the House Small Business
+Committee for 6 years, as always welcome.
+    Our second witness is Ms. Corinne Hodges. Ms. Hodges is the
+CEO of the Association of Women's Business Centers. Prior to
+joining the association in January 2019, Ms. Hodges led the
+public relations team for Kia Motors Manufacturing in Georgia.
+She is also an experienced small business owner. Ms. Hodges
+helped at her mother's woman-owned trucking company in
+Michigan, and also ran her own advertising and public relations
+agency. Welcome.
+    Our third witness today is Mr. Kenneth Yancey. Mr. Yancey
+is the Chief Executive Officer at SCORE where he has led the
+nation's largest network of volunteer expert business mentors
+for more than 25 years. Before taking the leadership position
+at SCORE, Mr. Yancey was the Executive Director of the National
+Business Association. Recognized as one of the leading experts
+on small business, Mr. Yancey is a frequent contributor of many
+radio and television shows on the topics of entrepreneurship,
+small business trends, and volunteerism. Welcome.
+    And now I will yield to the Ranking Member, Mr. Chabot, to
+introduce our final witness.
+    Mr. CHABOT. Thank you, Madam Chair.
+    I would like to introduce today's final witness, Ms.
+Cherylynn Sagester. Am I pronouncing that correctly? Thank you.
+Ms. Sagester serves as the Director of the Veterans Business
+Outreach Center at Old Dominion University. The Old Dominion
+VBOC provides eligible veterans from Virginia, Delaware,
+Pennsylvania, and West Virginia with entrepreneurial training
+and counseling as a part of the University's Institute for
+Innovation and Entrepreneurship. Prior to joining the Old
+Dominion VBOC, Ms. Sagester had roughly 2 decades of experience
+in business and economic development within both the public,
+private, and nonprofit sectors, and we thank you for joining us
+this morning.
+    I yield back.
+    Chairwoman VELAZQUEZ. And now we recognize Mr. Rowe for 5
+minutes.
+STATEMENTS OF CHARLES ROWE, PRESIDENT AND CEO, AMERICA'S SMALL
+BUSINESS DEVELOPMENT CENTERS; CORINNE HODGES, CEO, ASSOCIATION
+      OF WOMEN'S BUSINESS CENTERS; KEN YANCEY, CEO, SCORE
+  ASSOCIATION; CHERYLYNN SAGESTER, VETERANS BUSINESS OUTREACH
+        CENTER PROGRAM DIRECTOR, OLD DOMINION UNIVERSITY
+                   STATEMENT OF CHARLES ROWE
+    Mr. ROWE. Thank you, Chairwoman Velazquez, Ranking Member
+Chabot, members of the Committee. Thank you for inviting me to
+testify on behalf of America's Small Business Development
+Centers.
+    For 40 years, SBDCs have been providing services to small
+business owners, focusing on one-on-one advising to improve
+their businesses.
+    As Mr. Chabot said, we have a network of over 975 locations
+with 4,000 dedicated professionals who assist hundreds of
+thousands of small businesses nationwide.
+    We operate primarily through colleges and universities, and
+the SBDC hosts manage the networks and subcenters and provide
+matching funds.
+    We serve small businesses at all stages. The mix is about
+60/40, 60 percent existing, 40 percent startup. Forty-five
+percent of our clients are women, 10 percent are veterans, 33
+percent are minorities. And yearly, we provide over 1.5 million
+hours of counseling and training to over 500,000 small
+businesses.
+    From 2012 to 2018, SBDCs helped their clients obtain over
+$30 billion in capital, increase sales by $40 billion, and
+create over 538,000 jobs.
+    Our services tend to be a little more in-depth and varied,
+so what I would like to highlight is some of the services, but
+more particularly, how we focus on them.
+    Every SBDC undergoes accreditation, a week-long examination
+with a rigorous self-study, interviews, and written reports.
+The process is based on the NIST/Malcolm Baldridge quality
+standards.
+    A key component is the needs assessment. The SBDC focuses
+on the client's needs locally and the local economy, ensuring
+service relevance. As a result, SBDCs offer both specialized
+services and general business assistance.
+    For veterans, we prioritize assistance. We have specialized
+programs in states with large veteran populations to assist
+with pre and post deployment needs, and as well, we participate
+in Boots to Business and other transition assistance programs.
+    Our outreach to underserved communities is also a
+significant priority. Our members support targeted outreach,
+covering everything from MB certification to business quarter
+revitalization.
+    And we are mandated to cover entire states, so our
+initiatives reach rural needs as well. Our Texas SBDC hosts an
+annual rural conference, and our Alabama SBDC has a real strong
+collaboration with USDA.
+    And we have over 500 certified export assistance counselors
+partnering with the Census Bureau to provide export training,
+and in many states the SBDC is a key component of the state's
+export program.
+    And we are integral in disaster response and often the
+first on the scene to set up business recovery centers with
+FEMA and SBA. In Florida, for example, SBDC is a primary
+disaster responder for the state.
+    We also 3 years ago started offering cybersecurity
+training. Small business owners lacked information and skills,
+so SBDCs developed assessment tools, training programs, and
+enhanced their cyber skills and ensured that small contractors
+are current on Federal cybersecurity requirements.
+    And along the lines of procurement, 29 of the 94 PTACs are
+supported by SBDCs, offering in-depth assistance to small
+businesses navigating Federal procurement. Other SBDCs offer
+more introductory courses on contracting and help with
+certifications.
+    Recently, we began collecting new SBA metrics. This year
+will be a baseline year, and our hope is that this will be a
+larger discussion on best ways to help small business.
+    America's SBDCs do not believe in a one size fits all
+approach. Our networks have different resources and needs, and
+what we want to be sure is that the focus is on measures that
+reflect small business success.
+    I just want to sum up here and say I talked about all the
+things we do, but the most important thing we do is work with
+all of our colleagues here at the table and the PTACs. We refer
+clients back and forth regularly because none of us can be all
+things to all small businesses.
+    And with that in mind, I am just finally going to say we
+strongly support the idea of reauthorizing the Entrepreneurial
+Development Programs. I, in my written testimony, outlined a
+number of areas for consideration and I look forward to your
+questions on that. I think it is time for a full conversation
+on the services and all of our commitments.
+    Thank you very much.
+    Chairwoman VELAZQUEZ. Thank you, Mr. Rowe.
+    And now, Ms. Hodges, you are recognized for 5 minutes.
+                  STATEMENT OF CORINNE HODGES
+    Ms. HODGES. Chairwoman Velazquez, Ranking Member Chabot,
+and distinguished members of the Committee, good morning, and
+thank you so much for convening today's hearing.
+    My name is Corinne Hodges, and I serve as the CEO of the
+Association of Women's Business Centers.
+    Our organization supports the network of WBCs by providing
+programming and advocacy to improve services to women
+entrepreneurs. I am honored to be here today, and I am joined
+by our board who is behind me.
+    The WBC program is a public-private partnership with over
+30 years of success in providing long-term training,
+counseling, mentoring, and access to capital to women
+entrepreneurs across the country.
+    What began as four demonstration sites in 1988 is now a
+network of 114 centers with more than 150 locations nationwide.
+In no small part, thanks to this Committee for your effort
+there and support. In that time, WBCs have served more than 2
+million women entrepreneurs leading to the creation and
+expansion of tens of thousands of new businesses and jobs.
+    In Fiscal Year 2017, we reached 148,000 entrepreneurs,
+ranging from startups seeking capital to established businesses
+exploring new markets. Each year we help to secure hundreds of
+millions of dollars in financing, assisting in winning
+government and corporate contracts, and support the hiring of
+thousands of new employees.
+    According to the SBA's 2015 report, the most recently
+released, 96 percent of WBC clients reported revenue growth
+totaling a staggering $658 million. This led to one in 10
+businesses hiring at least one new employee, creating nearly
+25,000 jobs.
+    WBCs also play a significant role in fueling the growth of
+minority-owned businesses. Forty-five percent of clients in
+2016 were minorities, which required many centers to adapt.
+Today, 64 percent of WBCs provide programming in two or more
+languages, and nationally services are provided in more than 35
+languages.
+    Each WBC is unique, designing program and delivery models
+with their communities in mind. At the Brooklyn Women's
+Business Center where fashion and beauty knowledge was in
+demand, counselors created training to meet the needs within
+that industry. They brought in beauty experts, celebrity
+stylists, and even intellectual property attorneys to help
+protect their clients' creations. They now plan to purchase
+sewing machines and offer classes on site for those interested
+in creating fashion prototypes or textile manufacturing.
+    Our services are distinctly different from other resource
+partners due in large part to the unique challenges facing
+women business owners. Our clients consistently say they come
+to WBCs not just for business education and consulting, but for
+supportive environment that helps build self-efficacy through
+addressing four critical issues--competence, confidence,
+capital, and connection. The result is real economic impact
+felt by the client and their community.
+    Janay Brower, a WBC client in Michigan, owns an upcycling
+manufacturing company called Public Thread. It was with the
+support of other business women that she moved this business
+out of her kitchen and into a commercial manufacturing space.
+As she puts it, women are uniquely positioned to see the long-
+term benefits to communities rather than just the short-term
+financial goals.
+    Evaluation data from WBC programs indicate that women like
+Janay who receive business assistance from their programs build
+larger businesses, create more jobs, and have significantly
+higher survivor rates than the national average.
+    Women's Economic Ventures in California boasts an 80
+percent survival rate after 5 years for its clients, far above
+the national average of 50 percent. Moreover, more than 40
+percent of their clients have employees compared to the
+national average of only 12 percent of all woman-owned firms.
+    In Chicago, the Women's Business Development Center created
+the Developing Your Childcare business course,
+professionalizing dozens of home-based businesses in low-income
+communities.
+    Finally, and perhaps most critically, the WBC program has
+proven to be a good investment of taxpayer dollars. Private
+sector fund-raising enhanced by the visibility of the SBA
+partnership helps to match Federal dollars more than three to
+one. For every one Federal dollar invested in the program, the
+WBC program returns $46 to the economy.
+    And yet, we are not realizing our full potential. We need
+policymakers to strengthen and modernize the WBC program,
+expanding our proven impact to communities across the country.
+We urge Congress to raise a 30-year-old arbitrary cap that
+prevents our best centers from expanding and remove outdated
+requirements that divert resources from counseling to back
+office bureaucracy. A key inefficiency that comes to mind
+actually provides a disincentive for centers to raise
+additional nonfederal funds.
+    The upward trajectory of the program is also deserving of
+more Federal funding. Ensuring adequate resources is a key
+component to continuing the growth of the WBC program and
+women's entrepreneurship more broadly.
+    Unfortunately, resources for the program have not grown in
+parallel to the more than 50 percent increase in centers over
+the last 15 years, so we urge congressional action to improve
+data collection in order to quantify just how much growth is
+happening.
+    The challenges facing women entrepreneurs persist as must
+the commitment of Congress to advancing these priorities.
+    Thank you for the opportunity to testify, and I am open to
+your questions.
+    Chairwoman VELAZQUEZ. Thank you, Ms. Hodges.
+    And now, Mr. Yancey, you are recognized for 5 minutes.
+                    STATEMENT OF KEN YANCEY
+    Mr. YANCEY. Chairman Velazquez, Ranking Member Chabot,
+members of the Committee, my name is Ken Yancey, and I am the
+CEO at SCORE. Thank you for the opportunity to offer testimony
+to the Committee regarding SCORE's programs, services, and
+plans for the future. We appreciate being on the witness panel
+with our friends and partners from the SBDC, Women's Business
+Centers, and the VBOCs, and we also want to thank our founding
+partner, who 55 years ago established our organization and
+continues to be that primary partner, the SBA.
+    Fiscal Year 2018 was another effective year for SCORE as
+measured by client volume, impact, and client engagement. In
+Fiscal Year 2018, SCORE helped clients to create more than
+32,000 new small businesses, and 136,000 total jobs. Our cost
+to create a job is $81. The cost to create a business is $340.
+    This efficiency in creating jobs and businesses provides a
+tremendous return on all Federal dollars invested in SCORE. In
+Fiscal Year 2018 alone, SCORE clients returned an estimated $47
+in new tax revenue to the Federal treasury for every dollar
+appropriated to SCORE.
+    Through an annual survey completed by
+PricewaterhouseCoopers, SCORE has measured client engagement
+for nearly a decade. In Fiscal Year 2018, SCORE client
+engagement, a measure similar to client satisfaction, was 4.29
+on a 5-point scale, a significant increase from the previous
+year.
+    We are proud of the work our volunteers do with clients,
+and this improvement continues to show that our volunteer
+onboarding, certification, and training do work.
+    Last year, we began the implementation of SCORE's Vision
+2025, a futures initiative intended to ensure our relevancy for
+the next 50 years. Vision 2025 guides decision and
+organizational development within SCORE.
+    As an organization, we must continue our ongoing cultural
+transformation by operating with a one SCORE mindset in which
+headquarters, chapters, volunteers, and the SCORE foundation
+work together to achieve the goals of increased focus on
+clients, quality, accountability, and growth.
+    Examples of our one SCORE approach include the
+standardization of all chapter websites resulting in greater
+web traffic, consistent messaging and branding, and increased
+client services.
+    SCORE is developing a new salesforce-based CRM system that
+will be deployed in Fiscal Year 2020. The system will make it
+easier for both volunteers and clients to do business with
+SCORE, and it is mobile friendly, allowing both to engage with
+SCORE via their handheld device.
+    SCORE has centralized social media in 270 chapters.
+Participating chapters saw an 8.9 percent increase in services,
+triple that of nonpilot chapters.
+    SCORE is centralizing all accounting and finance systems
+nationwide. Centralizing accounting functions will reduce the
+administrative burden at the chapter level, allowing our
+leaders to focus more on client needs. It also allows chapters
+to continue to have control over their funds, and importantly,
+reduces risk at the organizational level.
+    SCORE standardized volunteer onboarding and volunteer
+training, resulting in greater consistency of services,
+improved quality, and greater client impact.
+    One of SCORE's most important initiatives is diversity and
+inclusion. SCORE is committed to improving the diversity of
+both clients and volunteers and ensuring that SCORE is
+intentionally inclusive at every level of the organization. In
+2017, a National Inclusion Task Force was formed to drive
+strategic cultural change throughout SCORE. By year's end, all
+volunteer leaders have been trained in sessions across the
+country and online inclusivity training is now mandatory
+annually for all of our volunteers.
+    We have improved from 22 percent women and minority
+volunteers in 2012 to 31 percent in 2018. Client diversity has
+improved as well. This, however, is not good enough. We
+continue to aggressively address these challenges. Our goal is
+to effectively serve all people with respect, dignity, and
+professionalism regardless of their adjective.
+    To help SCORE achieve its goal to better serve its goals
+our clients and achieve all that our volunteers are capable of,
+we respectfully request an authorization and appropriation of
+$13.5 million in Fiscal Year 2020. We also request a 3-year
+authorization of $13.5 million in 2020, $13.5 million in 2021,
+and $15.5 million in 2022. I would also encourage the Committee
+to support and invest in the other resource partners who are
+here who are part of the entrepreneurial fabric of all
+communities where we serve and outstanding partners in those
+communities as well.
+    Thank you very much for the opportunity to testify today,
+and I look forward to any questions.
+    Chairwoman VELAZQUEZ. Thank you.
+    Ms. Sagester, you are now recognized for 5 minutes.
+                STATEMENT OF CHERYLYNN SAGESTER
+    Ms. SAGESTER. Good morning. And I want to thank Chairwoman
+Velazquez, and Ranking Member, Mr. Chabot, for this opportunity
+to speak before you this morning, as well as I am honored to
+join our other major resource partners that serve small
+businesses in our country.
+    There is no better time to be a startup entrepreneur in the
+U.S. than at this moment. The financial conditions are
+certainly favorable, as well as the economic outlook for the
+future; not to mention the traditional negative and/or
+skeptical mindset regarding entrepreneurship is a thing of the
+past. Entrepreneurship is currently thought of not only in a
+positive light, but is considered the `` thing to do,''
+especially if you are a millennial or a veteran. And if that is
+the case, it is thought of as the way to achieve autonomy,
+success, and independent wealth.
+    Furthermore, research conducted after each major war since
+post-WWII tells us veteran entrepreneurship significantly
+increases after each major war, and the Iraq and Afghanistan
+war is no different. Research has also shown veterans make the
+best entrepreneurs, as they acquire skills and character that
+are conducive to what is required for entrepreneurial success.
+An example of those character traits are as follows: we have an
+excellent work ethic, we have a sound understanding of the need
+for a plan and the necessity to follow the plan, veterans are
+risk-adverse, and failure is not an option, among other traits.
+In addition, these new veterans are the most educated and
+technologically advanced service members than any before them.
+When considering this, combined with the previously mentioned
+character traits gained by military service, you have a sector
+of the population that is prime for taking on entrepreneurship
+and thereby, control over their future.
+    On the other hand, startups have many challenges, as any
+form of entrepreneurship does. In particular, a startup is
+immediately challenged when it comes to startup capital. A
+startup is like any small business. Funding is the biggest
+obstacle to confront, along with lack of experience or
+knowledge as an entrepreneur. With that said, the following
+statistics provide validity to what is observed in the startup
+and entrepreneurial community. Approximately 50 percent of
+small businesses fail in the first 4 years, with the leading
+cause being incompetence and lack of managerial experience at
+30 percent, and 82 percent of the businesses fail due to cash
+flow deficiency.
+    As the U.S. Small Business Administration's Office of
+Veterans Business Development, we are a premier entrepreneurial
+development program. As the Veteran Business Outreach Centers
+located across the U.S., and there are 22 of us, with each
+center responsible for a geographic region that covers multiple
+states. For example, the center that I oversee as the director
+of Region III includes the states of Virginia and West
+Virginia. We are located at Old Dominion University Veterans
+Business Outreach Center, as part of the university's Institute
+for Innovation and Entrepreneurship. This center is located
+approximately 5.2 miles from the Naval Station Norfolk, the
+largest naval base in the world, who transitions out over
+10,000 sailors each year, and for the last 6 years it has done
+this and continues to do so as our estimates show.
+    With the last few minutes of my time I would like to focus
+on the three requirements that we have as VBOCs. Number one is
+military transition. And that includes military spouses as
+well. And a part of that military transition program is one of
+the best known entrepreneurial programs I have ever seen in my
+career, and that is a program called Boots to Business. Boots
+to Business is a 2-day intense introduction to entrepreneurship
+that our transitioning service members go through. It is
+delivered on an installation of which they are transitioning
+out, and it is one of three tracks that they are given.
+    I look forward to the opportunity to speak more about Boots
+to Business. I look forward to the opportunity to talk about
+military spouses, as well as economic disadvantaged areas of
+the states that we cover and how it is that we are able to
+achieve our requirements. Military transition outreach and
+other trainings, as well as business counseling, which is the
+magic. That is where the magic happens.
+    And I thank this Committee and all guests for this
+opportunity.
+    Chairwoman VELAZQUEZ. Thank you, Ms. Sagester.
+    And now I will recognize myself for 5 minutes.
+    One of my top priorities for this Congress is to, of
+course, review and update and modernize the entrepreneurial
+development programs. So I am giving you this opportunity, each
+one of you, to tell me in your view what is working, what is
+working well, and what needs to be improved.
+    Mr. Rowe?
+    Mr. ROWE. I think the programs here at the table are
+working quite well. We try very hard to work together. We are
+all limited by resources, I think, at a certain level.
+Sometimes the biggest problem we face is kind of a lack of
+clear guidance. It is sort of like we are all on a team
+together. We have got goals set for ourselves but nobody has
+told us what the big goal is at the end. It is sort of like we
+are all there playing football but nobody is talking about the
+Super Bowl. And to me that is what are we trying to get to, all
+of us and the SBA, an endgame for small business in this
+country? And there is just not a clear vision.
+    Chairwoman VELAZQUEZ. Thank you.
+    Ms. Hodges?
+    Ms. HODGES. I would agree with Mr. Rowe. I speak for the
+WBC program and it does work well. Indeed, we surpass or exceed
+the targets that SBA sets for us so we see the program as very
+successful.
+    What is not working for us is just the outdated statute
+that you mentioned. Reauthorization for us means, hopefully,
+increased appropriations that specifically would lift the cap
+per center, which is a 30-year-old cap, and also allow
+additional funding for us to have more centers. Also, we would
+entertain the idea and support the idea of accreditation that
+would most likely be modeled after the SBDCS.
+    Chairwoman VELAZQUEZ. Thank you.
+    Mr. Yancey?
+    Mr. YANCEY. I know that the SBA is working hard at all
+levels on additional transparency. It is good to know as Tee
+said who is doing what and what the end goal is. I also know
+that the SBA is working to update and upgrade their
+technological systems. That would be valuable and useful for
+us. We do our own measurement as you heard. It is important to
+us. It provides far more information than just impact. We use
+it to manage, and we would not want to at any point lose that
+opportunity to do that on our own.
+    Chairwoman VELAZQUEZ. Thank you.
+    Ms. Sagester?
+    Ms. SAGESTER. I can say I absolutely agree with Tee. All of
+us resource partners, we appreciate the value that we all bring
+to the small business owner and the entrepreneur and
+collaborate quite often. As a matter of fact, in our suite we
+have a VBOC, we have a Women's Business Center, and we have a
+PTAC, Procurement Technical Assistance Center, which we are
+constantly collaborating. So I think that is going really well.
+    I think we, personally, our center has experienced great
+success with also our SBA district office in Richmond for
+Virginia and work extremely well with the two district offices
+in the state of West Virginia. And not to mention, our
+headquarters here in D.C. with the OVBD is very supportive.
+    Where I would like to see some action, that would be very
+similar as well to my colleagues, and that is the
+appropriations. We are covering multi states that require
+extensive travel and expenses. And what keeps me awake at
+night, is serving those that are not in my immediate area. And
+so with additional appropriations and consideration for the
+mission that we have, that is where I think we could have a
+greater impact.
+    Chairwoman VELAZQUEZ. Thank you.
+    As you know, the SBA now is moving towards outcome-based
+measures, like unique clients served and new business starts
+from the output-based data. So do you believe these goals
+better measure the quality of services that you provide?
+    Tee?
+    Mr. ROWE. They can, but I think there are problems with all
+of them. If you look at new business starts, unless that is a
+longitudinal view, you know, more than a 1 year snapshot, you
+do not know whether you have created a good business or a
+business that is going to fail in 6 months.
+    Chairwoman VELAZQUEZ. So is SBA working with you in
+establishing these goals? What type of input, feedback are you
+providing, all of you?
+    Mr. ROWE. Well, we have had a few meetings with SBA. I
+would like to establish this as an ongoing collaborative effort
+to negotiate what our goals are nationally and individually
+amongst the networks because they are all changing.
+    Chairwoman VELAZQUEZ. Okay. So I am sorry but I would like
+to hear from the other centers' programs.
+    Ms. Hodges, what is your take on this new development?
+    Ms. HODGES. Sure. It is still very new, this move toward
+capturing the unique clients versus total clients served. That
+is a more fair number. It is a better number. Where we lack is
+in some of the access to the data collected. We are working on
+that, and SBA is committed to that as well and we are glad for
+that. We encourage all of the partners at the table, SBA, and
+Congress, to continue to prioritize this fact, this matter.
+    Chairwoman VELAZQUEZ. Mr. Yancey?
+    Mr. YANCEY. The information that we have been asked to
+collect is information we had previously collected. I am not
+sure that in a vacuum it tells the best story. We like to ask a
+question at SCORE, did SCORE help you? Seventy-seven percent of
+the clients say we did. You might not have started a business.
+We might have helped you understand you were not quite ready
+and what was next, so there are metrics in value beyond just
+the creation of a job and the creation of a business.
+    Chairwoman VELAZQUEZ. Okay. Ms. Sagester?
+    Ms. SAGESTER. One of the difficult metrics to acquire is
+how many businesses are successful and how long have they been
+in business. It is very difficult to get these clients to
+report to us. We have tried surveys, phone calls, letters,
+everything. Once they get off the ground and they are growing
+and running, they say they are too busy to get back to us. That
+is a metric that we need to figure out, how can we better
+measure the successes?
+    Chairwoman VELAZQUEZ. Thank you. My time has expired and
+now I yield to the Ranking Member for 5 minutes.
+    Mr. CHABOT. Thank you, Madam Chair.
+    And the first question will be to all the panelists. I will
+start with you, Tee.
+    In the current economic environment, unemployment being so
+low, a lot of small businesses, and I hear this back in my
+district all the time when I tour various small businesses
+there, they are struggling to find qualified people. In what
+way does your particular program assist small businesses who
+are facing the problem that they just cannot find good people?
+And a lot of times I hear, well, they need to show up for work
+consistently and pass a drug test and those kind of things. And
+unfortunately, there are a lot of folks that that is not the
+case with.
+    So Mr. Rowe?
+    Mr. ROWE. Well, what most SBDCs work on is assisting the
+clients with managing a new workforce. But what we hear
+constantly from them is that there is a lack of workforce
+development with the exception in some of the skilled union
+trades. And really what they need is help developing
+apprenticeship programs that can help the vast majority of
+small businesses and service industries, et cetera, to build a
+workforce.
+    Mr. CHABOT. Okay. Thank you.
+    Ms. Hodges?
+    Ms. HODGES. Workforce development, obviously, is a critical
+need in the country nationwide. For any business who is
+suffering from the ability to attract and recruit the qualified
+and talented workforce that they need, they would benefit from
+the long-term training opportunities that we provide in our
+centers. It is really I think something unique in our program,
+the ability for us to build that relationship and provide the
+long-term training because these solutions are not easy and
+they are not quick.
+    Mr. CHABOT. Thank you.
+    Mr. Yancey?
+    Mr. YANCEY. Similar to our colleagues, we would bring in
+volunteers with HR experience, particularly in recruiting. Help
+clients to package their opportunity differently and maybe
+better than competing organizations. Talk about training that
+could occur for a new employee. Opportunities that could occur
+and help them compete better and be more prepared in a really
+difficult environment where there is truly a war for talent
+right now.
+    Mr. CHABOT. Thank you.
+    Ms. Sagester?
+    Ms. SAGESTER. In our area we have the VEC, the Veteran
+Employment Center, and we are the veteran partner for them. And
+so many times what happens is veterans, of course, also make
+great employees. They show up for work. They have a good work
+ethic. So we are working with the VEC and we are providing
+training on site. We have a new center there in Norfolk and we
+are providing employment training right on site. I think what
+we are looking at, too, across the country is we need to better
+train folks for the jobs that are available now, especially in
+the trades because we do not want to lose those.
+    Mr. CHABOT. Thank you very much.
+    Mr. Rowe, let me go to you again. Your testimony noted that
+SBDCs are often located at colleges and universities. Other
+than being located there, in other ways, what ways does the
+host institution and the SBDC work together other than being at
+the same place?
+    Mr. ROWE. We actually have a lot of resources from the
+business schools where we use the student body, the professors,
+to bring new management concepts out to our small business
+owners. Also, there is a huge science and technical component
+where we work with SBIR applicants regularly to help make sure
+that there is a broad array of small businesses accessing those
+R&D dollars.
+    Mr. CHABOT. Thank you very much.
+    Ms. Hodges, in your testimony you highlighted the
+importance of Women's Business Centers serving economically
+disadvantaged and underserved populations. How do your centers
+specifically target that demographic?
+    Ms. HODGES. I will not say that this is how we target the
+demographic, but they are best served by providing not only the
+counseling, the competence factor and confidence, but access to
+capital is so critical. In fact, I think our program represents
+the majority of the microenterprise lenders in the room. And
+this access to capital is just not available to a lot of these
+entrepreneurs in any other way. If it were not for these
+microenterprise lenders which comprise 40 percent of our
+centers, quite honestly, these entrepreneurs would not have
+access to it at all.
+    Mr. CHABOT. Okay. I am almost at an end, so rather than ask
+a question I will just tell you, Mr. Yancey, I have had an
+opportunity to speak at various gatherings of SCORE and meet
+with them on occasion, and I now you all do a tremendous amount
+of good for a whole lot of folks so I will just leave it there.
+Thank you. And I bet you agree with that.
+    Mr. YANCEY. Yes, sir.
+    Mr. CHABOT. Okay. Very good. Thank you.
+    I yield back.
+    Chairwoman VELAZQUEZ. The gentleman yields back.
+    And now I recognize the Chairwoman of the Subcommittee on
+Rural Development, Agriculture Trade, and Entrepreneurship from
+Iowa, Ms. Finkenauer for 5 minutes.
+    Ms. FINKENAUER. Thank you, Madam Chair.
+    I really appreciate you all being here today. You all do
+incredible work and I am very grateful for your service and
+everything that you do.
+    So I have to tell you, so I am from Iowa, one. It is about
+a fourth of the state of Iowa. So we have got kind of three
+bigger cities and then the rest is pretty rural with some
+smaller towns. And despite the weather lately, my favorite
+thing, obviously, a part of this job is getting to go back and
+have my work periods and getting to meet with folks all over
+the district. And this last work period, so last week, I had a
+great opportunity to go visit University of Northern Iowa, and
+their business community service program, and also a small
+business in one of our smaller towns, Maquoketa, called
+Precision Metal Works. And at the university it was great to
+get to visit them. I have done it multiple times, but again,
+this was one of the first times really focusing on their
+business center. And they are doing a great job. I mean, they
+are housing the Small Business Development Center along with
+other programs all under one roof where you are helping small
+businesses, entrepreneurs, even helping governments with
+marketing, new business incubation, and even help with
+regulatory compliance.
+    And then Precision Metal Works, it is a great business
+model. They have been in Maquoketa since the 1980s, and on top
+of their regular business, which is helping with commercial
+washers, they also work a lot with some of our other folks in
+the state and across the country who come in and say I have a
+great idea for this. Can you manufacture it for me? And see
+what we do here. And I have been hearing great stories from
+what they have been able to do, but unfortunately, even though
+we see this in my district and it is happening, I mean, the
+data according to the Office of Advocacy is just showing that,
+you know, rural self-employment since 1988 to 2016 has fallen
+like 20 percent. And then on top of it we are also lacking more
+youth entrepreneurs as well.
+    So this really is to Mr. Rowe and anybody else who wants to
+jump in on it. I am very curious of all your takes on it. But
+what are some of the bigger challenges that rural entrepreneurs
+are facing? And then what are some of the efforts that you are
+taking to ensure that rural small businesses are receiving the
+technical assistance they require to build a robust,
+sustainable business? And is marketing a part of that suite?
+Because that was one of the things that really stuck out to me
+with talking to Precision Metal Works with some of the folks
+they are working with. They have got great products they are
+developing, yet the next step, that marketing part, you know,
+they have fallen behind on. And so, and it helps them if that
+small business they are helping does well. So I am trying to
+figure out what more can we be doing? And are we missing
+anything?
+    Mr. ROWE. Well, one of the bigger problems we see and we
+face with our clients in rural areas is simply a lack of
+broadband and a lack of internet access that really helps them.
+You cannot reach the world now the way you used to. You have
+got to be internet savvy, but you have also got to be able to
+get serious broadband access.
+    Now, SBDCs are located at colleges and universities, but
+they tend to be just like isolated islands of broadband. And
+building that infrastructure is a huge issue. And I know that
+my folks have talked to you about this. I have talked with Mr.
+Kelly about it. That is probably a key focus for us, how can we
+get more broadband to our clients to get their products to the
+world?
+    Ms. FINKENAUER. Thank you.
+    Ms. Hodges?
+    Ms. HODGES. Thank you.
+    It is an ongoing challenge, but I think we can also, in
+addition to the comments Mr. Rowe made, we can be innovative.
+And some of our centers have done just that. For example, in
+Oklahoma, one of our centers bought buses outfitted with
+entrepreneurial labs and drove to the clients across the state.
+And in Nebraska, we actually do not have a brick and mortar
+center location; rather, those resources are used to deploy the
+counselors and the resources all across the state. So again,
+going to the rural areas to serve. And then sounding like a
+broken record, more resources, you know, appropriate would also
+help support that greater infrastructure needed.
+    Ms. FINKENAUER. Great. Thank you.
+    Mr. Yancey?
+    Mr. YANCEY. I do not have a lot to add. I think the
+broadband issue is a real challenge. Our desire is to serve
+communities using web-based technologies that allow us to do
+that, and where broadband is not available, our ability to
+serve without bricks and mortar is very, very limited. We do
+circuit rides, not exactly like buses and things, but we do try
+and get out. But the broadband piece is important. And it is
+very expensive to do that, so the funding available for that
+purpose would be helpful as well.
+    Ms. FINKENAUER. Thank you.
+    And Ms. Sagester, I am sorry. I know my time has expired,
+but thank you so much for being here, all of you. And Madam
+Chair, I yield back.
+    Chairwoman VELAZQUEZ. The gentlelady yields back.
+    And now we recognize the gentleman from Ohio, Mr.
+Balderson, Ranking Member of the Subcommittee on Innovation and
+Workforce Development for 5 minutes.
+    Mr. BALDERSON. Thank you, Madam Chair. And thank you also
+to the Committee.
+    My dear colleague, Mr. Chabot, kind of jumped on my
+question for you, Mr. Rowe, but it was quite a coincidence this
+morning. I have gotten pretty savvy here on my phone. I even
+highlighted it. But I am reading the newspaper at 6:30 this
+morning, the Plymouth Dispatch, which is my district big
+newspaper, and it was a study that has been done, and this
+organization does it every year annually for small businesses.
+And 56.9 percent of the companies identified finding qualified
+workers as their biggest issue and their biggest challenge to
+doing business and finding those qualified workers. This has
+been the top issue for them the last 5 years during this
+survey. So I thought that was pretty interesting this morning
+for me to come across that at 6:30, 6:35, and to see this.
+    So my question, Mr. Rowe is, you know, as the Ranking
+Member on the Subcommittee for Innovation and Workforce
+Development, this is something I am very passionate about. Are
+there any ideas out there that the SBDCs and the 17:32:09xxx
+program, that they can give us suggestions with or any
+conclusion on that of what support we can do?
+    Mr. ROWE. Well, I have actually been privileged to be
+tasked to work with a working group at the Department of Labor
+on what they call industry recognized apprenticeship programs.
+And essentially what we are trying to do is find a way to
+formalize the apprenticeship programs in a variety of
+industries outside of the skilled trades, the registered
+apprenticeship programs that you find at DOL and expand the
+ability to get workforce. And I think I see my role on that as,
+yes, we have so many clients out there who could use this. What
+we need to do is develop those accredited programs to train
+these folks.
+    Mr. BALDERSON. Thank you.
+    Ms. Sagester, I apologize. My question to you would be my
+office met yesterday with a group from the American Legion and
+had, you know, some of the issues that they were discussing was
+problems that many veterans have lack of access to skilled
+training programs that would help them transition into the
+workforce.
+    My question is, is there anything out there more that we
+could do to help address this problem? You do not have to go
+through a whole list of things.
+    Ms. SAGESTER. As I had been mentioning with regard to
+veteran employment, we are partnering as well with, like I
+said, the Virginia Employment Commission. And there are many
+veterans who have trades to be a good small business owner. So
+what we are seeing a lot of and we are promoting is helping
+them find employment so that they can support themselves and
+their families and then help and assist them on the side to
+start preparing themselves for small business ownership. And we
+have got several that are in that program right now. And
+therefore, it helps solve some of the labor problem's and the
+veterans' issues, as well as their future. But as far as our
+center also goes, we do a lot of in-house training. A lot on
+business itself. You know, life skills. They have a hard time
+converting their military vita into a resume. It is very
+difficult for them and they do not even see the similarities.
+So we are providing support with that as well.
+    Mr. BALDERSON. Okay. I do want to add, and I would love to
+work with your organization on something like this, but in the
+state of Ohio, in the state legislature where I serve, we get a
+bill for veterans for CDL license. A veteran coming back in and
+having done that job in the military service and having that
+ability to do that and taking away a lot of the, I guess I will
+use the word `` red tape'' or bureaucracy to get that license
+back again, and that has been a big tap that has been filled. I
+should not say `` big'' but it has been filled a little bit.
+And that is something I would like to see us do at the Federal
+level.
+    Ms. SAGESTER. We had a similar program such as that at
+Tidewater Community College in Virginia Beach. And it works
+extremely well. We have the same similar program with regard to
+military firefighters and security officers. So it is a great
+transition.
+    Mr. BALDERSON. I look forward to working with you.
+    And Madam Chair, I yield back the remaining time.
+    Ms. SAGESTER. I would welcome the opportunity, sir.
+    Mr. BALDERSON. Thank you.
+    Chairwoman VELAZQUEZ. The gentleman yields back.
+    And now the gentleman from Maine, Mr. Golden, Chairman of
+the Subcommittee on Contracting and Infrastructure is
+recognized for 5 minutes.
+    Mr. GOLDEN. Thank you, Madam Chair.
+    Ms. Sagester, I think I will kind of go where it sounded
+like you might have been talking a little bit about something
+that is top of mind for you, which is how do you reach out to
+those people that are far away from your center. And just to
+give you a sense of why I share that concern with you, Virginia
+has an awful lot of veterans, which is a great thing. And Maine
+does not have as many, but when we look at the per capita
+statistics it is about one in 10. And that is even stronger out
+in rural Maine, in the district that I represent, a much higher
+per capita percentage. Yet, our closest center, similar to
+yours, is in Rhode Island, three states away. So I think we
+agree that more centers would be better if there were enough
+funding for that.
+    But what is the appropriate ratio in your opinion around
+the country?
+    Ms. SAGESTER. With regard to?
+    Mr. GOLDEN. Number of centers?
+    Ms. SAGESTER. Number of centers.
+    Mr. GOLDEN. To region or----
+    Ms. SAGESTER. Well, we have 22 centers as I was saying. And
+a great deal of where those 22 centers are located depends on
+what organizations apply and respond to the proposal to have a
+center. That is where a great of it really is if they do not--
+if the SBA does not receive any proposals from a certain area,
+then that area kind of misses out. So it is something that you
+could encourage in your area, is for organizations to apply
+when the opportunity is there on grants.gov.
+    But I would like to just say real quickly, with regard to
+the economic disadvantaged rural areas that we have, that is
+what keeps me awake at night. I want to make sure that all the
+constituents that we are responsible for have access to our
+resources if at all possible. So we have now been able for the
+last year--it took me 4 years to be able to get there--but we
+now offer all of our trainings are webinars. And we promote
+that. But the challenge we are having is getting the word out
+to those rural areas that this resource is available. That is
+one of the areas that we really, I think need to focus on is
+how can we better market all of our resources and all of our
+partners. So I am personally going to West Virginia next month,
+and I will be there for a week doing just that. And I am also
+traveling to some of our disadvantaged areas here in Virginia,
+such as Wise County. And we are working with the American
+Legion out there to do some outreach. That is very, very, very
+important because we cannot help them if they do not know we
+are here and have the information to dial in for those webinars
+and go to the website and listen to podcasts or so on and so
+forth.
+    Mr. GOLDEN. Thank you very much for that.
+    That brings me to another point which coming off district
+week traveling all over a very large rural area I have talked
+to no shortage of small business owners in the last week and in
+the past couple of months. And look, we often ask, you know,
+are you aware of these programs, each of the ones that you all
+run, and about SBA in particular. And often, it is not the
+first thing that small business owners are thinking about in
+rural Maine. So I have got to put a plug in there to this
+Committee, let us pick up the marketing and make sure that it
+is out there. Obviously, Maine's region should be looking to
+put in an application for a center in Maine. Rhode Island is
+like a life's time away from rural Maine. So that is just not
+good enough.
+    And when it comes to this issue of reaching out on the
+internet, I mean, broadband sounds great. What we often hear
+people in Maine saying is we will just take faster internet
+because it is practically dial up in many regions.
+    If I could, Mr. Rowe, just a question for you. Sitting in a
+community recent, this issue of workforce cane up. And there
+were many different industries sitting around the table, a lot
+of small business. And while they did not have necessarily all
+the same types of work requirements, there were some shared
+factors in terms of the needs that are lacking in the community
+and our workforce. And so we had about 20 different business
+owners sitting, as well as Chamber of Commerce and municipal
+leaders trying to get at this issue of how do we establish some
+kind of training program to get workers in here. What would be
+the proper way for them to interface with someone like SBDC?
+Can they come to you as a group? Can the whole community come
+to you and work with you?
+    Mr. ROWE. Sure.
+    Mr. GOLDEN. Okay.
+    Mr. ROWE. Absolutely, sir.
+    Mr. GOLDEN. Very good. So they do not have to pick one
+business to lead?
+    Mr. ROWE. No.
+    Mr. GOLDEN. They could actually reach out to you as an
+entire municipality?
+    Mr. ROWE. No. Mark Delisle at USM is our state director and
+I am sure he would be happy to hear from them.
+    Mr. GOLDEN. Thank you.
+    Chairwoman VELAZQUEZ. The gentleman yields back.
+    And now we recognize Mr. Joyce from Pennsylvania, Ranking
+Member of the Subcommittee on Rural Development, Agriculture,
+Entrepreneurship, and Trade for 5 minutes.
+    Mr. JOYCE. Thank you. And thank you for being here today
+because what you bring to us is so important.
+    Mr. Rowe, you talked about the lack of internet
+capabilities. I am from South Central Pennsylvania, from
+Gettysburg out to where Flight 93 went down. Even as we travel
+we lose our navigation systems. We know that broadband is very
+limited in these areas. I think that each one of you would be
+able to more effectively do your jobs with a better broadband
+system, particularly when facing rural areas. I think we
+recognize that as a Committee. I think that we are all aware
+that there could be improvements made in that.
+    I am going to turn this question around because I think
+each one of you bring a different skillset to the table. And
+you do have the abilities to communicate with each other.
+    Mr. Rowe, your group is incredible. They bring so much to
+my district. So when you are setting up a program, how do you
+interface with the other people at the table? How do you let
+people know that WBC, which is so important on so many
+different levels, might bring a different flavor if we will use
+that term, a different angle to the entire equation? How do you
+all as a group communicate with each other? How do you present
+to the different communities that you address? Because you have
+different skillsets. You have different tools in your tool
+belts. We are impressed by that. How do you get that out to the
+people?
+    Mr. ROWE. Well, I wish I could say there was some, you
+know, uniform book that we have on this. We have got 63
+networks and I cannot remember how many chapters that Ken has.
+It is really a very individualized thing. It is the investment
+that our folks make to know about the SCORE chapter in their
+area or the Women's Business Center or the VBOC, which
+hopefully is not three states away. And be able to recognize
+our own faults. And that is the big thing. When we do our self-
+assessments and our needs assessments, it is very clear we can
+only cover so many things. So we need to lean on each other,
+and it may be the SBDC in Phoenix sending someone to a SCORE
+counselor in Las Vegas, Nevada, because they know that there is
+an expert there. But it has been a very organic sort of
+communication system for all of us.
+    Mr. JOYCE. Do we need more than that? Do each one of your
+websites need to access each other so that someone, if they are
+not seeing the information that is best provided to their
+specific problems, that they can go back to WBC or they can go
+back to SCORE. Is that something that is worth considering?
+    Mr. ROWE. Yeah, I think it would be fabulous if within our
+networks we could essentially search and say, okay, we need
+someone who is an expert on X.
+    Mr. JOYCE. Military issues. And this is how you click on
+this tab and get to this point. That is my question for you.
+    Ms. Sagester, do you think that that would work as well
+from your side?
+    Ms. SAGESTER. I think it is excellent. What we are in the
+process of doing is adding our resource partners, their links
+from our website directly to theirs so that when clients or
+prospective clients go to our website they can also under
+resources just click SCORE and go straight to either the
+national but right now local SCORE chapters. But again, you
+know, we wished, just so the Committee knows, that we want a
+VBOC in every state. That should be our goal, absolutely,
+because as Tee was saying, we hope that the VBOC is not three
+states away. Okay? But we, also at our center, one of the other
+ways that we reach out and use our resource partners and
+collaborate, is through bringing them in as subject matter
+expert's (SMEs) on our trainings. SCORE is vital. SBDCs are
+vital. Women's Business Centers. They come in as a subject
+matter expert and they will teach a module or whatever, and
+then they have full access to that audience as well. And so
+then the clients start to see us not as individual silos but
+they have an entire team that is on their side.
+    Mr. JOYCE. And that entire team has to be commended. Thank
+you for being here today. I defer my time back.
+    Chairwoman VELAZQUEZ. The gentleman's time has expired.
+    And now I recognize Ms. Houlahan from Pennsylvania for 5
+minutes.
+    Ms. HOULAHAN. Thank you, Madam Chairwoman. Thank you to the
+Committee for coming.
+    I am a woman. I am a veteran. I am an entrepreneur. And so
+I sort of fit into all of your buckets, and I really appreciate
+everything that you have done. I also really appreciated Mr.
+Yancey's testimony that talked a little bit about
+implementation of CRMs and ERPs. And you guys have hall been
+talking about data and the importance of measuring and metrics.
+    My question is sort of turning the business back onto the
+business of your businesses. I appreciate that each of you are
+asking for different resources to be allocated to one another,
+but my question is has there been any form of collaboration--
+this gets to the person's question before me--on use of systems
+to make sure that when you implement something like Salesforce
+that you maybe have a different instance across every one of
+your organizations and that you are kind of using best
+practices and the ways that you have learned to measure your
+successes amongst each other. And I think that there may be an
+enormous amount of overlap on each of your CRMs that you could
+maybe benefit from if that was something that you could fold
+into. So that is one of my questions.
+    Mr. YANCEY. We have at SCORE collaborated with SBA and over
+the years in meetings with other resource partners to talk
+about what was appropriate to measure and how to measure it. We
+never really talked about systems that would talk to one
+another. When we do transmit data we are working on it being a
+very simple process. All of the resource partners would have
+access through our website to volunteers, to counselors,
+skills, whatever it happens to be. In terms of the CRM, that
+has been private only because there is data and other things.
+We would be happy to share what we have done, how we have done
+it, the architecture behind it, what we used for our initial
+business requirements analysis, et cetera. We will share that
+with the world.
+    Ms. HOULAHAN. I just think there would be so much synergy
+and so much opportunity to save money----
+    Mr. YANCEY. There very well may be.
+    Ms. HOULAHAN.--between the four organizations.
+    Mr. YANCEY. Very well may be.
+    Ms. HOULAHAN. And that is sort of my first question.
+    The other question is you touched a little bit on diversity
+and inclusion initiatives and I understand that that is really
+important. But are you guys as entrepreneurial kind of igniters
+also talking about corporate social responsibility initiatives
+at all? Has that become a thing that you also are talking to
+your entrepreneurs about?
+    Ms. SAGESTER. With regard to that I would say the answer is
+yes, but I would like to just back up a second on the previous.
+    Ms. HOULAHAN. Of course.
+    Ms. SAGESTER. The Women's Business Center uses a different
+database than we do. We use Neossera. And it just so happens
+that the PTAC also uses Neossera. However, we are all
+individual as Mr. Yancey was saying. We are not able to share
+based on client privilege----
+    Ms. HOULAHAN. It is more on architecture that I am asking
+about. It is kind of more on sort of best practices and metrics
+and measures that it just seems like there has got to be a
+whole lot going on there where we could save resources and you
+guys could be collaborating on that. And maybe there is some
+sort of an additional initiative that might be necessary to do
+that.
+    Ms. SAGESTER. And there may be some sort of initiative that
+the Committee could bring to light with regard to the SBA. And
+maybe that is a conversation that needs to be had and there
+could be a way to find that out.
+    With regard to corporate responsibility, are you referring
+to, ma'am, such as social entrepreneurship?
+    Ms. HOULAHAN. Exactly. Exactly.
+    Ms. SAGESTER. Okay. I just wanted to make sure we were on
+the same page.
+    Ms. HOULAHAN. Absolutely. There is not a business that we
+start that we do not talk about social entrepreneurship and how
+important it is to the business that the business owner and the
+business shows that they are committed to the community at
+large. And we have had great success. You know, at first the
+entrepreneur is usually kind of like what are you really
+talking about? So we had that conversation. And it is also
+about making meaning. Guy Kawasaki said if you start a business
+to make money and you do not make meaning, not only will you
+not make meaning, you will not make money. But if you make
+meaning, you will make meaning and you will make money. So it
+has got to not always be about you. It has got to be about that
+community oneness.
+    Is there any obligation on the part of folks who access
+your resources that they consider that? You know, that they at
+least have gone through the training of it in terms of the
+resources that they are accessing so that they have the
+conversation? We are at least obliging them to sit and listen
+to the importance of meaning and money?
+    Ms. SAGESTER. Well, at this point it is left up to the
+individual business advisor, but my team knows that we are a
+center that is going to promote social entrepreneurship. And we
+only have two. I had a third advisor just join us on a part-
+time basis, but that is a very important piece of what we bring
+to the table. Has there been any official across the board with
+all the VBOCs? There has not been but you gave me a great idea
+so that when we have our conference this year I am happy to
+lead the charge and offering a training within that area.
+    Ms. HOULAHAN. Thank you. And I know I am out of time and I
+yield back to the Chairwoman. Thank you so much for your
+testimony.
+    Chairwoman VELAZQUEZ. The gentlelady's time has expired.
+    And now we recognize Mr. Antonio Delgado from New York for
+5 minutes.
+    Mr. DELGADO. Thank you, Chairwoman. Thank each and every
+one of you for coming. And I am sorry if my question has
+already been asked.
+    Last week for me was my first in-district work week. I
+spent a lot of time in my district, which is Update New York,
+Hudson Valley, Catskills area, actually one of the more rural
+districts in the country. And the district, at the town halls I
+came across a lot of individuals, self-employed business owners
+who had a lot of questions about economic growth and economic
+opportunity. I think we have about 24,000 self-employed
+individuals in New York 19. And so my question is, what can we
+do to help these self-employed business owners access the
+capital they need to expand and grow their businesses? So can
+you talk about any work that each of you do with community
+financial development institutions and small business
+investment companies that specifically help rural folks who are
+self-employed?
+    Ms. SAGESTER. I would like to address that by saying that
+education and training is one of the best areas to help them to
+understand their small business accounting because most of them
+have never had even a small business accounting class. They
+would not know a balance sheet from a scorecard. So, it is the
+education and training and the managerial training and
+experience that we bring to the table that helps them to see
+where they are and where they need to go to be able to be ready
+not only to launch their business, but it could be to grow. So
+they do not know what the five Cs are. They do not know what a
+bail team is. The training is really crucial. It is key, and we
+are constantly doing that with a program we call Business Plan
+Boot Camp when we help them with their market analysis and get
+started and prepare their plan. We also do twice a year a small
+business finance course, and that to me is the most vital
+piece, is educating these want-to-be startups as well as the
+entrepreneur and the small business owner that is growing.
+    Mr. DELGADO. Can I just ask a follow up to that? When you
+say that there is a lack of education or training, is this
+something that has been consistent through your time in this
+space or have you seen a drop in the level of information or
+one's own ability to have the knowledge base to do what you are
+speaking of?
+    Ms. SAGESTER. I would say it has been consistent.
+    Mr. DELGADO. Any reason why that would be the case?
+    Ms. SAGESTER. Well, most people do not take accounting when
+they are in high school or college unless they are going to be
+a CPA or it is required or mandatory for their program. And
+some people do not even know how to balance a checkbook because
+hardly anyone writes checks anymore. So sometimes things are
+just the way they are. And so we try to help them to understand
+basic small business accounting before they can go on and
+really grasp the finance piece, because there is a learning
+curve there with how do I go from small business accounting to
+actually; how does that equate to me acquiring capital and
+financing my own business? So it is just if they have never
+done it, it is just something like if you tried to teach, if
+you said I want you to go be a gourmet chef, but you are
+someone who has not even ever boiled water before how would you
+do that?
+    Mr. DELGADO. Right. I have boiled water.
+    Ms. SAGESTER. I have a feeling you have.
+    Mr. DELGADO. Just one more follow up. The Boot Camp piece.
+Are there pieces of the curriculum that are designed or
+different depending on the types of community? So whether it is
+a rural community versus an urban community, are there
+different techniques or is it all just more of a sort of basic
+line understanding of startup as opposed to the needs you might
+have for particular geographies?
+    Ms. SAGESTER. That is a good question by the way. There is
+the basic and then we, for example, we teach basic QuickBooks,
+but then for those that have been in business for a little
+while, then they have graduated up and they need training on
+intermediate QuickBooks. That is one example is say I am in a
+rural area and I have not really had much access to resources.
+What is going to happen is we are going to try to help bring
+that client up to speed. It means they are going to get more
+attention and handheld. We hold a lot of hands at the VBOC. So
+a lot more attention one-on-one, not just the general classroom
+setting, until we get them to where they feel comfortable in
+starting and launching and growing their business. So, it does
+vary depending on their individual needs.
+    Mr. DELGADO. Great. Thank you.
+    Chairwoman VELAZQUEZ. The gentleman----
+    Mr. DELGADO. I yield back my time.
+    Chairwoman VELAZQUEZ. Thank you. He yields back.
+    I would like to go into a second round of questions.
+    Well, I would like to share with you, and I know that you
+are all aware about these powerful numbers. In 2018, the State
+of the Woman-Owned Business Report shows how the number of
+woman-owned businesses went from 402,000 in 1972 to 12.3
+million in 2018, and revenues increased from $8.1 billion to
+$1.8 trillion. Those are powerful numbers. And we all know that
+you serve close to one million businesses and we all know the
+return of that technical assistance. We have 29 to 30 million
+businesses, so there is so much potential if we could market
+those services and we could do better outreach. I do not know
+how can we tackle that because so many times people have come
+before our committee and said that they did not know about the
+existence of Women Business Development Centers or the Small
+Business Development Centers or Veterans Business Centers. And
+that question was asked before, but that is an area that we
+need to really think about, how can we expand our marketing
+tools to reach those underserved businesses that are not
+getting the kind of assistance that they need?
+    Mr. Yancey?
+    Mr. YANCEY. We have been very aggressive with what we have
+done in social media. And we had a social media audit in the
+last 4 or 5 months and it says that we outperform standard
+nonprofits by a factor of about 10. We even looked at small
+for-profit organizations and find that we outperform. There is
+a point that you get to, even in social media, where your
+ability to grow is dependent on your ability to invest. And the
+things that we need to do, we boost stories. We do buy ad words
+regularly. We work really hard to find partners that will carry
+our message for us that are active in the space. And you have
+seen the list. That is a really good way to do it.
+    Having said that, marketing campaigns are expensive, and
+they have to be consistent. They have to be long-term in order
+to create awareness that people will act on. You know, in an
+environment like we are in with funding like we have, it is
+difficult. Our goal quickly is to be 1 degree of separation
+from our client. So if they ask anybody in the entrepreneurship
+arena, how do they get help, that person will think of SCORE.
+So we are working hard within that network to make sure there
+is awareness.
+    Chairwoman VELAZQUEZ. So part of the mission, for example,
+of the Women Business Centers is to expand into underserved
+communities. What are you doing about that?
+    Ms. HODGES. Well, I think the problem is even more dramatic
+than you characterized because you accounted only for the
+businesses that have already started. But what about the
+clients out there who want to start a business and do not know
+where to turn? And so I think it is a severe challenge.
+Reaching those socially and economically disadvantaged
+populations, it is part of our mission. And providing the
+services in these creative ways, crafting them specific to the
+communities in which they serve, help answer that question. And
+so each community is distinct. The way that we pull together
+the resources, the partners that are at the table here and
+others all come to bear. But I think it is worth repeating the
+fact that the access to capital is just a critical component.
+    Chairwoman VELAZQUEZ. And in terms of new centers, could
+you explain the process that SBA uses to determine new centers,
+particularly in underserved communities?
+    Ms. HODGES. No, Madam Chairwoman, I am not privy to their
+internal process to select locations. We are in conversations
+though about the future. I do not know what that looks like but
+I would hope that it would be strategic. I hope that we would
+not only be looking at communities where there is just a
+geographic absence of centers, but also where there is already
+service happening in a potential host organization with
+resources to serve. We should be able to entertain
+applications, I believe, for grants in those areas as well.
+    Chairwoman VELAZQUEZ. Mr. Rowe, any comments on that?
+    Mr. ROWE. Well, just to follow on to what Ken says, every
+year, and this year it is March 20th, we have SBDC Day and we
+manage to trend up on Twitter to five, which is an amazing
+outreach. The problem is trying to stay up there without either
+being incredibly offensive or something is just almost
+impossible for us. And so I think one of the things that would
+be very helpful, something I have discussed with my membership,
+is it would be great if SBA would invest in public service
+announcements regarding small business development. You know,
+all of these resources, I went to the, Ad Council, for the
+television PSAs. Sadly, the buy-in is nearly $4 million. So
+that is out of reach for any of us. But collaboratively from
+the agency that would be a huge marketing tool.
+    Chairwoman VELAZQUEZ. The gentleman is recognized, Mr.
+Chabot, for 5 minutes.
+    Mr. CHABOT. Thank you, Madam Chair. I probably will not
+take up the whole 5 minutes, but I come around with a second
+question to you two folks, but not to you two folks. I said how
+great you were, Mr. Yancey, but let me ask you a question.
+    How does SCORE go about recruiting the wide variety of
+mentors it takes to match the unique entrepreneurs that are out
+there?
+    Mr. YANCEY. Recruiting is an activity these days that
+occurs not just at the chapter level but also at the national
+level. Our website is the number two source of new volunteers
+today. Our chapters look to make sure that they maintain an
+array of skills at the chapter that meets the needs of the
+community, and today, we are very focused on our need to be
+more diverse and better at serving all of the communities where
+we are located. I think our challenge, and Ms. Velazquez has
+been kind enough to point it out over the years, we still need
+to do more to better reflect the communities that we serve from
+a race/ethnicity standpoint. And we are committed to that and
+we are working on that and we have made progress. And not good
+enough but we are working at it.
+    Mr. CHABOT. All right. Thank you very much.
+    And then finally, Ms. Sagester, my colleague from Ohio, Mr.
+Balderson got into this somewhat, but I will get a little
+different angle. Veterans often possess a unique skillset that
+they have acquired during their time in the military. In what
+ways do VBOCs tailor their curriculum to best utilize those
+skills and make sure we are able to get those veterans to
+either go through your program either to start up a company
+themselves or to become employed by one of them or to grow an
+existing company or whatever?
+    Ms. SAGESTER. Well, one of the ways, the best way that we
+have found to do that is that one-on-one initial assessment. We
+do a one-on-one initial assessment where we are looking at the
+service member's background. Like, what as their MOS when they
+were in-service. In other words, their military operation
+specialty. What experience do they have that is on the civilian
+side of their life? What experiences do they have? And then as
+well as like what goals they want to achieve, because we have
+to be able to marry where they are and what experience they
+have and talents to what their goal is. So that again, is part
+of where the magic happens is that one-on-one, face to face. We
+are sitting down, we are rolling our sleeves up, and we are
+starting from scratch and we are going to make this happen. So
+that assessment is crucial for that first step as to where we
+take the client to the second step. And Boots to Business
+oftentimes is the first step because they are transitioning
+out. And that is the first time we touch them. We call it a
+touch. We first meet them. And then they are invited for that
+assessment, the initial one-on-one and we go from there. But
+that is how we assess.
+    Mr. CHABOT. Thank you.
+    And I will just conclude by I had somebody in my office.
+This was some years back. They were from, I believe, the
+American Trucking Institute, and they were talking about how we
+had a lot of our young men and women were coming back from
+Afghanistan, Iraq, et cetera, and they were driving multi-ton
+vehicles over there but at that point the unemployment rate was
+not as low as it is now, so it is tougher to get jobs. And
+their point was that a lot of these folk were underage to get
+their chauffeurs driving to drive the big rigs, so we needed to
+do something to change it. I know we were looking into that for
+a long time but some of those folks, as you know, they are not
+necessarily just employees of a trucking company, but they can
+become entrepreneurs, you know, and get a loan and own one of
+these big rigs and go around. A lot of them are independent
+agents. So I think we need to take all those things into
+consideration.
+    Ms. SAGESTER. Absolutely. And those truckers make great
+logistician's.
+    Mr. CHABOT. Right.
+    Ms. SAGESTER. Small businesses. They really do. But you are
+exactly right.
+    Mr. CHABOT. And at that time I think they said that there
+was an underserved need of about 100,000 drivers all over the
+country so we need to do a better job to get all those folks
+together.
+    And thank again all of you. I thought this was a very good
+hearing. So I yield back.
+    Chairwoman VELAZQUEZ. Thank you.
+    Let me take this opportunity to thank all of you. Your
+insightful information and recommendations have been very
+important and enlightening.
+    Entrepreneurship is the backbone of our nation's economy
+helping individuals pursue their dreams and become financially
+self-sufficient. SBA's counseling and training programs are
+critical to their success. This hearing has been very
+informative and your insights are valuable. As we move forward
+with legislation to modernize these programs, it will be
+important to ensure that you have the resources you need to
+provide the counseling and training to America's small
+business.
+    I would ask unanimous consent that members have 5
+legislative days to submit statements and supporting materials
+for the record.
+    Without objection, so ordered.
+    And if there is no further business to come before the
+committee, we are adjourned. Thank you.
+    [Whereupon, at 12:36 p.m., the Committee was adjourned.]
+                            A P P E N D I X
+[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
+                                 <all>
+</pre></body></html>

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+<html>
+<title> - VIEWS AND ESTIMATES OF THE SMALL BUSINESS COMMITTEE FOR FY 2020</title>
+<body><pre>
+[House Hearing, 116 Congress]
+[From the U.S. Government Publishing Office]
+    VIEWS AND ESTIMATES OF THE SMALL BUSINESS COMMITTEE FOR FY 2020
+=======================================================================
+                                HEARING
+                               BEFORE THE
+                      COMMITTEE ON SMALL BUSINESS
+                             UNITED STATES
+                        HOUSE OF REPRESENTATIVES
+                     ONE HUNDRED SIXTEENTH CONGRESS
+                             FIRST SESSION
+                               __________
+                              HEARING HELD
+                             MARCH 6, 2019
+                               __________
+[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
+            Small Business Committee Document Number 116-008
+             Available via the GPO Website: www.govinfo.gov
+                               __________
+                    U.S. GOVERNMENT PUBLISHING OFFICE
+35-261                  WASHINGTON : 2019
+-----------------------------------------------------------------------------------
+For sale by the Superintendent of Documents, U.S. Government Publishing Office,
+http://bookstore.gpo.gov. For more information, contact the GPO Customer Contact Center,
+U.S. Government Publishing Office. Phone 202-512-1800, or 866-512-1800 (toll-free).E-mail,
+<a href="/cdn-cgi/l/email-protection" class="__cf_email__" data-cfemail="baddcad5fad9cfc9ced2dfd6ca94d9d5d7">[email&#160;protected]</a>.
+                   HOUSE COMMITTEE ON SMALL BUSINESS
+                 NYDIA VELAZQUEZ, New York, Chairwoman
+                         ABBY FINKENAUER, Iowa
+                          JARED GOLDEN, Maine
+                          ANDY KIM, New Jersey
+                          JASON CROW, Colorado
+                         SHARICE DAVIDS, Kansas
+                          JUDY CHU, California
+                           MARC VEASEY, Texas
+                       DWIGHT EVANS, Pennsylvania
+                        BRAD SCHNEIDER, Illinois
+                      ADRIANO ESPAILLAT, New York
+                       ANTONIO DELGADO, New York
+                     CHRISSY HOULAHAN, Pennsylvania
+                         ANGIE CRAIG, Minnesota
+                   STEVE CHABOT, Ohio, Ranking Member
+   AUMUA AMATA COLEMAN RADEWAGEN, American Samoa, Vice Ranking Member
+                        TRENT KELLY, Mississippi
+                          TROY BALDERSON, Ohio
+                          KEVIN HERN, Oklahoma
+                        JIM HAGEDORN, Minnesota
+                        PETE STAUBER, Minnesota
+                        TIM BURCHETT, Tennessee
+                          ROSS SPANO, Florida
+                        JOHN JOYCE, Pennsylvania
+                Adam Minehardt, Majority Staff Director
+     Melissa Jung, Majority Deputy Staff Director and Chief Counsel
+                   Kevin Fitzpatrick, Staff Director
+                            C O N T E N T S
+                           OPENING STATEMENTS
+                                                                   Page
+Hon. Nydia Velazquez.............................................     1
+Hon. Steve Chabot................................................     2
+                                APPENDIX
+Additional Material for the Record:
+    Committee's Views and Estimates..............................     4
+ MARKUP OF: VIEWS AND ESTIMATES OF THE SMALL BUSINESS COMMITTEE FOR FY
+                                  2020
+                              ----------
+                        WEDNESDAY, MARCH 6, 2019
+                  House of Representatives,
+               Committee on Small Business,
+                                                    Washington, DC.
+    The committee met, pursuant to call, at 10:50 a.m., in Room
+2360, Rayburn House Office Building. Hon. Nydia Velazquez
+[chairwoman of the committee] presiding.
+    Present: Representatives Velazquez, Finkenauer, Kim,
+Davids, Golden, Crow, Veasey, Evans, Delgado, Houlahan, Chabot,
+Radewagen, Kelly, Balderson, Hern, Hagedorn, Stauber, Burchett,
+and Joyce.
+    Chairwoman VELAZQUEZ. Good morning. The Small Business
+Committee will come to order.
+    Today's order of business is to consider the Views and
+Estimates of the Committee on Small Business for fiscal year
+2020. These resources are a critical first step in helping
+entrepreneurs start and grow their business and in aiding
+established businesses to leverage their experience to invest
+in their business and employees.
+    I will admit that we are again considering our views and
+estimates before there is a proposed budget provided from the
+Administration. Unfortunately, this is becoming all too common.
+Nevertheless, we are here to set our priorities and
+expectations for fiscal year 2020 to ensure the Small Business
+Administration has the necessary resources and funding to
+modernize and strengthen its core programs on behalf of
+America's entrepreneurs.
+    While the economy is healthy, much uncertainty remains. As
+a recent GDP report from the Commerce Department suggests, the
+economy is slowing. In fact, there is consensus among many
+economists that the forecast for this year is growing dim.
+Rising interest rates, increasing tariffs, market volatility,
+and a depressed global economy have led consumer confidence to
+fall.
+    With fears of a recession growing, and a Harvard economist
+and former Treasury secretary estimating a 50 percent chance by
+2020, more entrepreneurs and small business owners are looking
+towards the Small Business Administration and its many programs
+for help.
+    That is why it is imperative that such critical programs
+are properly funded and at robust levels. The SBA's core
+programs ensure small employers and budding entrepreneurs have
+the financing, training, counseling, and access to the Federal
+marketplace they deserve as they work to strengthen our
+economy.
+    Today's Views and Estimates reiterates the Committee's
+longstanding position to prioritize core programs, like the
+Small Business Development Centers and Women's Business
+Centers, rather than expanding critical funding on untested,
+agency-initiated programs.
+    In order to support the SBA in its mission and to leverage
+the success of current programs, such as the SBA's flagship
+7(a) lending program, the agency requires our commitment to
+provide the requisite resources and funding levels.
+    Today's proposal carries forward this commitment, but at
+the same time recognizes where improvements and increased
+oversight are needed. It is a priority for this Committee to
+take a renewed look at the entrepreneurial development programs
+to maximize their effectiveness by modernizing the programs.
+    In doing so, we can deliver better results for the millions
+of entrepreneurs utilizing the SBA's resources and that of its
+resource partners.
+    Finally, we all must work together to level the playing
+field in lending and Federal procurement opportunities for
+socially and economically disadvantaged business owners all
+over the country. We can achieve this through a greater
+emphasis on hiring more contracting personnel and providing
+them with adequate training in order to effectively assist
+small contractors competing in the $500 billion Federal
+marketplace.
+    The budget we are proposing will breathe new life into the
+SBA. More importantly, it will provide tangible benefits to
+small businesses and make sure taxpayers get a positive return
+on their investment.
+    At this point, I will yield to the Ranking Member, Mr.
+Chabot, for any comments he may have on the Committee's Views
+and Estimates.
+    Mr. CHABOT. Thank you, Madam Chairwoman. And good morning
+to everyone who is here. I want to thank the Chair and her
+staff for working in a bipartisan manner on the Budget Views
+and Estimates. I appreciate her willingness to work collegially
+as we meet our responsibilities to small businesses all across
+the country.
+    According to the latest economic numbers, the U.S. economy
+is continuing to improve and economic forecasts are strong. In
+our congressional districts back home and in hearings in
+Cincinnati and here in Washington and all over the country we
+hear from small business owners that they are optimistic about
+the future. There are fewer regulations from Washington, and
+they have more money to invest in their business because of the
+Tax Cuts and Jobs Act.
+    However, small businesses are still finding it difficult
+for access to capital. The Small Business Administration (SBA)
+and its programs are key to helping small firms expand, create
+jobs, and grow our economy. These programs help small
+businesses to access capital, provide counseling and training,
+and link entrepreneurs with mentors.
+    The SBA, in short, is vital to their success in many
+instances. Our job is to ensure that the SBA's programs are
+working efficiently and effectively. We must insist that they
+are transparent and making the best use of taxpayer dollars.
+    I often say that every small business starts as an idea.
+America is a Nation of creators, inventors, and risk-takers.
+Our economy was structured to be driven by entrepreneurs, and
+in fact, most net job growth is from startups and new
+businesses. Under Administrator Linda McMahon's leadership, the
+SBA has made progress in delivering its services and ensuring
+that it is offering the services that small businesses need.
+She has traveled across the country visiting all 68 SBA
+district offices, and she listens to the SBA employees and she
+listens to small businesses.
+    Again, I want to thank the Chairwoman, and I yield back the
+balance of my time.
+    Chairwoman VELAZQUEZ. The gentleman yields back, and I
+thank him for his remarks.
+    Are there any other members who wish to be recognized for a
+statement on the Views and Estimates on the priorities of the
+Committee for fiscal year 2020?
+    Seeing no members, the Committee now moves to consideration
+of the Views and Estimates. The clerk will read the title of
+the document.
+    The CLERK. Views and Estimates of the Committee on Small
+Business on matters to be set forth----
+    Chairwoman VELAZQUEZ. I ask unanimous consent that the
+Views and Estimates be considered as read and open for
+amendment in its entirety.
+    Does any member seek recognition for the purpose of
+offering an amendment?
+    Seeing no amendments we will move on.
+    And the question is on adopting the Views and Estimates on
+the priorities of the Committee for fiscal year 2020.
+    All those in favor say aye.
+    Those opposed no.
+    In the opinion of the Chair the ayes have it.
+    The ayes have it, and the Views and Estimates are agreed
+to.
+    I will now recognize the Ranking Member for the purpose of
+making a motion.
+    Mr. CHABOT. Thank you, Madam Chairwoman.
+    I would move that the minority members of the Committee be
+permitted to offer additional views and estimates on the budget
+for fiscal year 2020.
+    Chairwoman VELAZQUEZ. Thank you.
+    Without objection, so ordered.
+    And the Committee is authorized to make technical and
+grammatical corrections to the Views and Estimates. And I
+believe that concludes the business before the Committee today.
+    So if there is no further business to come before the
+Committee, we are adjourned and the Committee will stand in
+recess for a few moments to prepare for the Committee hearing.
+Thank you.
+    [Whereupon, at 10:57 a.m., the committee was adjourned.]
+                           A P P E N D I X
+[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
+                                 [all]
+</pre><script data-cfasync="false" src="/cdn-cgi/scripts/5c5dd728/cloudflare-static/email-decode.min.js"></script></body></html>

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+<title> - SMALL BUT MIGHTY: A REVIEW OF THE SBA MICROLOAN PROGRAM</title>
+<body><pre>
+[House Hearing, 116 Congress]
+[From the U.S. Government Publishing Office]
+        SMALL BUT MIGHTY: A REVIEW OF THE SBA MICROLOAN PROGRAM
+=======================================================================
+                                HEARING
+                               BEFORE THE
+        SUBCOMMITTEE ON ECONOMIC GROWTH, TAX, AND CAPITAL ACCESS
+                                 OF THE
+                      COMMITTEE ON SMALL BUSINESS
+                             UNITED STATES
+                        HOUSE OF REPRESENTATIVES
+                     ONE HUNDRED SIXTEENTH CONGRESS
+                             FIRST SESSION
+                               __________
+                              HEARING HELD
+                             MARCH 7, 2019
+                               __________
+[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
+            Small Business Committee Document Number 116-009
+             Available via the GPO Website: www.govinfo.gov
+                               __________
+                    U.S. GOVERNMENT PUBLISHING OFFICE
+35-332 PDF                  WASHINGTON : 2019
+-----------------------------------------------------------------------------------
+For sale by the Superintendent of Documents, U.S. Government Publishing Office,
+http://bookstore.gpo.gov. For more information, contact the GPO Customer Contact Center,
+U.S. Government Publishing Office. Phone 202-512-1800, or 866-512-1800 (toll-free).E-mail,
+<a href="/cdn-cgi/l/email-protection" class="__cf_email__" data-cfemail="5631263916352325223e333a267835393b">[email&#160;protected]</a>.
+                   HOUSE COMMITTEE ON SMALL BUSINESS
+                 NYDIA VELAZQUEZ, New York, Chairwoman
+                         ABBY FINKENAUER, Iowa
+                          JARED GOLDEN, Maine
+                          ANDY KIM, New Jersey
+                          JASON CROW, Colorado
+                         SHARICE DAVIDS, Kansas
+                          JUDY CHU, California
+                           MARC VEASEY, Texas
+                       DWIGHT EVANS, Pennsylvania
+                        BRAD SCHNEIDER, Illinois
+                      ADRIANO ESPAILLAT, New York
+                       ANTONIO DELGADO, New York
+                     CHRISSY HOULAHAN, Pennsylvania
+                         ANGIE CRAIG, Minnesota
+                   STEVE CHABOT, Ohio, Ranking Member
+   AUMUA AMATA COLEMAN RADEWAGEN, American Samoa, Vice Ranking Member
+                        TRENT KELLY, Mississippi
+                          TROY BALDERSON, Ohio
+                          KEVIN HERN, Oklahoma
+                        JIM HAGEDORN, Minnesota
+                        PETE STAUBER, Minnesota
+                        TIM BURCHETT, Tennessee
+                          ROSS SPANO, Florida
+                        JOHN JOYCE, Pennsylvania
+                Adam Minehardt, Majority Staff Director
+     Melissa Jung, Majority Deputy Staff Director and Chief Counsel
+                   Kevin Fitzpatrick, Staff Director
+                            C O N T E N T S
+                           OPENING STATEMENTS
+                                                                   Page
+Hon. Andy Kim....................................................     1
+Hon. Kevin Hern..................................................     2
+                               WITNESSES
+Ms. Ceyl Prinster, President & CEO, Colorado Enterprise Fund,
+  Denver, CO.....................................................     4
+Ms. Carolina Martinez, CEO, California Association for Micro
+  Enterprise Opportunity, San Francisco, CA......................     6
+Ms. Mariama Jallow, Owner, Mariama's Beauty Supply, Portland, ME.     7
+Ms. Michelle Richards, Executive Director, Great Lakes Women's
+  Business Council, Livonia, MI, testifying on behalf of Women
+  Impacting Public Policy........................................     8
+                                APPENDIX
+Prepared Statements:
+    Ms. Ceyl Prinster, President & CEO, Colorado Enterprise Fund,
+      Denver, CO.................................................    23
+    Ms. Carolina Martinez, CEO, California Association for Micro
+      Enterprise Opportunity, San Francisco, CA..................    27
+    Ms. Mariama Jallow, Owner, Mariama's Beauty Supply, Portland,
+      ME.........................................................    34
+    Ms. Michelle Richards, Executive Director, Great Lakes
+      Women's Business Council, Livonia, MI, testifying on behalf
+      of Women Impacting Public Policy...........................    36
+Questions for the Record:
+    None.
+Answers for the Record:
+    None.
+Additional Material for the Record:
+    ECDI - Economic & Community Development Institute............    41
+        SMALL BUT MIGHTY: A REVIEW OF THE SBA MICROLOAN PROGRAM
+                              ----------
+                        THURSDAY, MARCH 7, 2019
+                  House of Representatives,
+               Committee on Small Business,
+                   Subcommittee on Economic Growth,
+                                   Tax, and Capital Access,
+                                                    Washington, DC.
+    The Subcommittee met, pursuant to call, at 10:02 a.m., in
+Room 2360, Rayburn House Office Building. Hon. Andy Kim
+[chairman of the Subcommittee] presiding.
+    Present: Representatives Kim, Davids, Crow, Delgado,
+Radewagen, Hern, Stauber, and Spano.
+    Chairman KIM. Good morning, everyone. I will have the
+Committee come to order now.
+    I want to thank everyone for joining us this morning. I
+want to especially thank the witnesses for being here today.
+    On this Subcommittee, our primary focus is ensuring that
+America's small businesses and entrepreneurs have access to the
+capital that they need to start and grow their businesses and
+create good paying jobs. Unfortunately, many entrepreneurs,
+particularly from traditionally underserved communities, lack
+the skills, training, and experience needed to demonstrate to
+conventional lenders that they are worth the risk.
+    This leaves two main challenges facing entrepreneurs. The
+first being a lack of access to capital. The second being the
+skills and tools it takes to become credit worthy. As
+legislators, it is incumbent upon us to address these
+challenges, and it is the reason that we are here today.
+    The Small Business Administration has an array of programs
+designed to boost access to capital and to promote
+entrepreneurial development. However, SBA's Microloan program
+is unique in that it offers entrepreneurs both opportunities to
+unlock affordable capital and the technical assistance they
+need.
+    Here is how it works: SBA lends qualified, nonprofit
+intermediary lenders money these intermediaries then use to
+make their microloans to small businesses and entrepreneurs.
+SBA also provides the intermediaries with grant funding to
+offer marketing, management, and technical assistance to
+borrowers and potential borrowers.
+    In many cases, intermediaries begin by providing technical
+assistance to a potential borrower to enhance their credit
+readiness prior to making a microloan to the entrepreneur. That
+program began as a pilot program in 1991, and following a
+successful start was made permanent in 1997.
+    2018 was a record year for the Microloan program, and the
+program is currently 3.5 percent ahead of where it was at this
+point last year. Last year in my home state of New Jersey, 150
+microloans totaling approximately $2.5 million were approved.
+Since then, it has grown considerably, and many intermediaries
+report that some of the program's original rules are now
+restricting them from meeting existing demands for small
+business financing and providing more technical assistance. In
+other words, they feel the program has outgrown many of those
+rules and have expressed the need for Congress to review some
+of those rules in order to enhance flexibilities for
+intermediaries.
+    That brings me to why we were here today. I look forward to
+hearing the recommendations and feedback of our distinguished
+witnesses to continue strengthening the Microloan program.
+Doing so will allow us to provide intermediaries with
+appropriate flexibility to enable them to continue offering
+affordable capital and essential technical assistance to
+America's smallest businesses.
+    I hope today's hearing will be a productive opportunity to
+explore the ways Congress can continue modernizing and
+optimizing SBA's Microloan program.
+    And now I would like to yield to the Ranking Member, Mr.
+Hern, for an opening statement.
+    Mr. HERN. Thank you, Mr. Chairman.
+    Although the country continues to record above average
+economic marks, the Nation's smallest firms still face
+challenges when it comes to financing their businesses. This is
+even more pronounced for the category of small businesses known
+as microbusinesses. Recognizing the difficulties the Nation's
+smallest firms face, Congress sought to alleviate the capital
+access issue with the creation of the Small Business
+Administration's Microloan program in 1991, and after a brief
+trial period, Congress made the loans permanent in 1997. And
+the Microloan program has been assisting entrepreneurs ever
+since.
+    Unique to the program is the financial transaction that
+includes SBA making a direct loan to a microloan intermediary
+or a nonprofit that is working within the program. From there,
+the intermediary provides loans directly to the small
+businesses in need. Importantly, these small businesses are not
+left by themselves to fight for their survival. Built into the
+program is a requirement of technical assistance or counseling
+by the intermediary. This program is what we are going to be
+discussing today.
+    Last year, members of this Committee were able to enact a
+number of reforms to the Microloan program. Included in the
+legislation were two important studies. First, SBA is required
+to study the utilization levels of the program by microlenders.
+Second, the Government Accountability Office is required to
+examine SBA's microloan oversight capabilities. With any
+government program, it is critical to have comprehensive
+oversight to safeguard American taxpayer dollars.
+    As we eagerly await both reports, which are due to Congress
+this August, I look forward to today's hearing that will review
+the program from the perspective of you, the participants and
+the witnesses directly involved on the ground. SBA's capital
+access programs are transforming neighborhoods and communities
+from my home state of Oklahoma to Florida and beyond. Following
+in last year's footsteps, we must continue to create an
+environment where small businesses are able to grow, expand,
+and create jobs. As the hearing title implies, these companies
+may be small, but they have an outsize effect on our economy.
+    Thank you, Mr. Chairman, and I yield back.
+    Chairman KIM. Thank you, Mr. Hern. The gentleman yields
+back.
+    If Committee members have an opening statement prepared, we
+would ask that they be submitted for the record.
+    I would just like to take a minute to explain the timing
+rules. Each witness gets 5 minutes to testify and each member
+gets 5 minutes for questioning. There is a lighting system to
+assist you. The green light will be on when you begin, and the
+yellow light will come on when you have 1 minute remaining. And
+the red light will come on when you are out of time. And we ask
+that you stay within the timeframe to the best of your
+abilities.
+    I would now like to introduce our witnesses.
+    Our first witness is Ms. Ceyl Prinster. Ms. Prinster is
+president and CEO of Colorado Enterprise Fund, a position she
+has served in for over 30 years. Her current service roles
+include trustee of the Denver Foundation and Chair of its
+Impact Investing Committee, board and executive committee
+member of the National CDFI Coalition, and board member of the
+Other Side Academy. She previously served as trustee for the
+University of Notre Dame and president of its alumni
+association, and was a founding member of the Denver
+Sustainable Food Policy Council. Her awards include the 2018
+David E. Bailey Small Business Advocate Award from the Denver
+Metro Chamber, Outstanding Woman in Business from the Denver
+Business Journal, and the Financial Services Advocate of the
+Year from the SBA, the Tom Dooley Award from the University of
+Notre Dame. Ms. Prinster is a graduate of, you guessed it,
+University of Notre Dame. Welcome, Ms. Prinster. We are lucky
+to have you today.
+    I will continue on and then I will get back to you.
+    Our second witness is Ms. Carolina Martinez. Ms. Martinez
+is the CEO of CAMEO, the California Association for Micro
+Enterprise Opportunity, a statewide association that represents
+over 220 lenders, training programs, job creators, agencies,
+and individuals dedicated to furthering microbusiness
+development in California. Ms. Martinez has over 13 years of
+experience working in the economic development and business
+consulting with a variety of nonprofit organizations and
+universities across the Western Hemisphere. She has developed
+bilingual, culturally appropriate, entrepreneurial training
+programs, trained and coached pre-venture and startups,
+developed international networks promoting partnerships among
+private corporations, provided consulting services to
+vulnerable communities, and has owned her own business
+consulting firm. She is a graduate of the University of the
+Andes in Bogota, Colombia, and received her Masters of Business
+Administration from the University of North, Barranquilla,
+Colombia. Welcome, Ms. Martinez.
+    Our third witness today is Ms. Mariama Jallow. Ms. Jallow
+is the owner of Mariama's Beauty Supply in Portland, Maine.
+Mariama went to school in The Gambia, a country in West Africa
+and grew up helping her mother manage the family grocery store.
+Because of that experience she knew she wanted to open her own
+business someday. She arrived in the United States in 2012 from
+The Gambia. Her dream of opening a business came true in Maine
+where she operates and continues to expand her business.
+Welcome, Ms. Jallow.
+    I would now like to yield to our Ranking Member, Mr. Hern,
+to introduce our final witness.
+    Mr. HERN. Our witness is Michelle Richards. Ms. Richards is
+the executive director and a founding board member of the Great
+Lakes Women's Business Council outside of Detroit, Michigan.
+She was a pioneer in the microlending movement, and has been a
+microloan intermediary with the Small Business Administration
+for over 2 decades. Her organization has helped countless
+startups, entrepreneurs, and small businesses with financial
+assistance and counseling. She is also a previous winner of
+SBA's Women's Business Advocate of the Year Award for the State
+of Michigan. Ms. Richards is testifying today on behalf of
+Women Impacting Public Policy. Thank you.
+    Chairman KIM. Thank you very much. Welcome.
+    We are going to start with Ms. Prinster. Over to you. You
+are recognized for 5 minutes.
+    STATEMENTS OF CEYL PRINSTER, PRESIDENT & CEO, COLORADO
+ENTERPRISE FUND; CAROLINA MARTINEZ, CEO, CALIFORNIA ASSOCIATION
+   FOR MICRO ENTERPRISE OPPORTUNITY; MARIAMA JALLOW, OWNER,
+MARIAMA'S BEAUTY SUPPLY; MICHELLE RICHARDS, EXECUTIVE DIRECTOR,
+              GREAT LAKES WOMEN'S BUSINESS COUNCIL
+                   STATEMENT OF CEYL PRINSTER
+    Ms. PRINSTER. Good morning. Thank you.
+    I am here today to suggest some improvements to the SBA
+Microloan program, but first I will tell you a little bit about
+my organization and myself.
+    I have served as president and CEO of Colorado Enterprise
+Fund (CEF) for over 30 years, starting as its first employee.
+    We were founded in 1976 as a nonprofit providing loans to
+disadvantaged small businesses. We are certified both as a
+community development financial institution and an SBA
+microloan intermediary. Overall, we have made over $81 million
+in loans to more than 2,400 businesses in Colorado, and have
+created or maintained over 12,000 jobs. These loans have helped
+businesses that could have not obtained the capital they needed
+to start or grow from traditional banks.
+    CEF started with the Microloan program in 1992 when the
+program first began. We have received 15 rounds of program
+loans totaling $11.5 million, with 11 of our loans now paid
+off. With Microloan program funding, we have made 1,500 small
+business loans totaling $18.7 million. A significant percentage
+of our loans, 85 percent, have been made to minority, women,
+veteran, or low-income entrepreneurs.
+    The Microloan TA grants have helped us create and
+administer a robust program of business advising, coaching, and
+training using in-house consultants and lending staff and a
+pool of outside legal and accounting professionals, all trained
+to provide trusted guidance to our clients. We deliver an
+average of over 3,000 hours of technical assistance per year
+and over 80 percent of our borrowers utilize our TA services.
+    I have led CEF for the entire time since we began in the
+Microloan program 27 years ago and have been a member for many
+years of the Friends of SBA Microloan Program, an informal
+network of microloan intermediaries. I also serve as a board
+member of the National CDFI Coalition representing microlenders
+within the broader CDFI community.
+    With this experience, I am confident that I speak for a
+consensus of other microlenders to say that as good as the
+program has been for businesses in Colorado and across the
+Nation, it could be even better. There are two changes I
+suggest to the program that would reduce administrative burden
+on both the nonprofit intermediaries and the SBA to help
+microlenders better support small businesses seeking credit.
+    The first improvement is elimination of the 1/55th rule,
+which affects intermediaries' ability to get loan capital from
+the program. This rule was part of the early pilot phase of the
+program and limits the distribution of loan funds for the first
+half of each year to the lesser of 800,000, or 1/55th of the
+new funds appropriated. In some years, the maximum capital
+available gets capped at about 350,000, which will only fund a
+handful of small business loans. Having to wait for additional
+loan funds until the third or fourth quarter of the year
+creates an administrative bottleneck for the agency and undue
+cash restrictions and paperwork for the intermediaries.
+Elimination of this rule will allow SBA to more efficiently get
+loan capital to the microlenders where and when the funds are
+needed and help intermediaries fund their pipeline in a timely
+way.
+    The second improvement is elimination of the 50/50 rule,
+which also is a burdensome rule enacted in the pilot phase of
+the program and it affects the administration of our TA grants.
+It limits funds for pre-loan support to 50 percent of the grant
+amount. Microlenders support many startups needing intensive
+business counseling. We cultivate our borrowers by helping them
+with training and counseling to become ready for credit and
+debt. This rule also limits funding for underwriting, which is
+a costly challenge when working with startups and nonbankable
+borrowers. Elimination of this 50/50 rule would enable
+microlenders, many of which are very seasoned in this work, to
+determine the best use of their grants to support their market.
+They would be able to provide the needed upfront assistance to
+help the entrepreneur build a solid base for their startup, in
+addition to the post-loan assistance to support the ongoing
+growth of the business.
+    We are very grateful for the support of this Committee for
+the very impactful SBA Microloan program and hope you will
+consider elimination of these two rules which would greatly
+improve it. Thank you.
+    Chairman KIM. Thank you so much for sharing that.
+    I want to move it on to Ms. Martinez. Over to you for 5
+minutes.
+                 STATEMENT OF CAROLINA MARTINEZ
+    Ms. MARTINEZ. Chair Kim and Ranking Member Helm and members
+of the Subcommittee, my name is Carolina Martinez, and I
+appreciate the opportunity to testify on behalf of the
+California Association for Micro Enterprise Opportunity
+(CAMEO). CAMEO is California's statewide network, microbusiness
+network of over 220 organizations, agencies, and individuals
+that provide entrepreneurs with loans, credits, and business
+technical assistance. Annually, CAMEO members serve about
+21,000 businesses. These firms, largely startups with less than
+five employees, support or create 37,000 new jobs in California
+and generate a total of $1.5 billion in economic activity.
+    Congressional investment in microbusiness development
+maters. Business ownership increases income and generates
+wealth in both urban and rural underserved communities.
+Business coaching and capital are critical tools for success.
+Thus, the SBA's Microloan program is of great importance to
+CAMEO and our members.
+    Historically, small businesses have struggled to obtain
+access to sufficient capital and credit to enable them to lead
+job growth. The struggle can be even greater for startup and
+microbusinesses.
+    Take, for example, Maria Palacio. She is a fifth-generation
+Colombian coffee farmer who started her U.S.-based coffee
+roasting business to help coffee farmers get a fair price.
+Maria secured a contract with Facebook but needed a loan to
+purchase the beans to fulfill the contract. Since Maria's
+company, Progeny Coffee, was a startup, banks could not make
+that loan. Maria turned to Working Solutions, a CAMEO member,
+who lent her $25,000 with SBA funds to help her purchase
+inventory at this critical moment. Working Solutions helped
+Maria manage her exponential growth. Over the last 3 years,
+Progeny grew from $10,000 in revenue to over $1 million in
+revenue.
+    To address challenges faced by small business owners such
+as Maria, Congress authorized the SBA Microloan program as a 5-
+year pilot program in 1991 and made it permanent in 1997. The
+rules of the program have remained basically the same, while
+the lending landscape has dramatically changed. Congress has
+moved to modernize this program, most recently modifying the
+25/75 rule to 50/50.
+    While this was helpful, CAMEO offers the following four
+suggestions to further modernize the program. First, eliminate
+the 50/50 rule. The Microloan Technical Assistance Program
+previously required that 25 percent of the technical assistance
+given to the entrepreneur by the lender be provided pre-loan
+and 75 percent post-loan. In 2018, the Congress changed its
+percentage from 25/75 to 50/50. While the relaxed requirement
+is a welcome change, the microloan industry has long advocated
+for this percentage to be lifted altogether as every business
+is unique.
+    Second, amend the 1/55th requirement to provide greater
+flexibility. This rule is a left-over requirement from the
+pilot program and is not a sufficient way to distribute funds.
+We, too, support the elimination of the 1/55th rule.
+Additionally, we would support the flexibility of having a
+reserve fund for SBA to deploy capital throughout the year in
+the event of a lapse in appropriations that result in a
+continuing resolution.
+    Third, provide access to microloan data. SBA should make
+available publicly data on borrowers who use the Microloan
+program similar to the data available for the 7(a) program.
+Supporters of the program would benefit from having information
+such as geographical location, loan amount, interest rate,
+terms, et cetera. Requiring individuals to file a Freedom of
+Information Act (FOIA) request is burdensome.
+    Fourth, increase support for microloan funding. We
+appreciate this Committee's history of strong bipartisan
+support for this program. In 2019, SBA is expected to support
+around $42 million in lending to intermediaries. In addition,
+an appropriation of $31 million was allotted for technical
+assistance. CAMEO requests that this program's growth continue,
+and we will advocate for a 10 percent increase in the program.
+    In closing, I am compelled to mention the exponential rise
+of online lending. In 2015, the volume of online lenders was
+five times that of SBA lending and growing at an increasing
+rate. The access to fast money comes at a price, in many cases
+a price too high for many small businesses. Last year,
+California became the first state to pass a transparency in
+small business lending bill to protect entrepreneurs from
+predatory lending. CAMEO believes that the access to capital
+issue has moved beyond access to affordable capital to
+financing that will help it to grow, not force it into
+bankruptcy. We support a federal truth-in-lending bill and
+would welcome this Committee's inquiry into the feasibility of
+such a bill.
+    Thank you for inviting me to testify here today. I look
+forward to answering any questions you may have.
+    Chairman KIM. Thank you for sharing that. That is all very
+helpful.
+    Why do we not move on? Ms. Jallow, over to you. You are
+recognized for 5 minutes.
+                  STATEMENT OF MARIAMA JALLOW
+    Ms. JALLOW. I am Mariama Jallow, owner of Mariama's Beauty
+Supply in Portland, Maine.
+    I arrived in Maine from a small village where my family
+owned and operated a local grocery store. My mother also is a
+leader of a woman's association where every Saturday, 40 to 50
+women meet at our house to make soap. With the money earned by
+selling the soap at the local market, they make loans to
+members of their group so that each woman can start, expand,
+and own their own small business or to help in emergency
+situations.
+    After working in Maine for about 3 years, I began to think
+about opening a small grocery store, like the one my family
+owns in our village, which I had helped manage with my mother.
+I soon discovered that despite my business skills, owning a
+store here is nothing like back home. I then saw that I would
+need help to start any business in Maine, as the licensing,
+credit card, and banking systems are all different.
+    That was when I learned about Coastal Enterprises (CEI), a
+Community Development Financial Institution (CDFI), and began
+to work with John Scribner of the StartSmart program manager.
+StartSmart works with immigrants, at no cost to them,
+throughout Maine, who are looking to start or expand their
+businesses. When it became apparent that the market for new
+immigrant-owned grocery stores in Portland stores was already
+saturated, I saw that there was a potential for a hair and
+braiding business because there was nothing like that in
+Portland, Maine.
+    CEI helped me in all aspects of locating and setting up my
+store, including permitting, recordkeeping, negotiating the
+lease, and many other details. In addition, also, CEI helped in
+passing legislation to allow hair braiders to work in the state
+without a cosmetology license, which at that time was required.
+John and I both testified before the State of Maine
+legislature, in the effort to update the licensing requirements
+at the state level. The bill passed, and then the new
+regulations made it possible for me to offer hair braiding at
+the store without having to obtain the full cosmetology
+license, which has been essential to the cash flow of my
+business.
+    CEI continues to support me to meet the necessary
+requirements and obligations related to operating a business,
+such as bookkeeping and the expansion plans that I have. In
+fact, after Mariama's Beauty Supply had been in business for 2
+years, CEI loaned me funds using the Small Business
+Administration (SBA) Microloans. This allowed me to increase my
+retail stock and to renovate my store to include a full-service
+salon, which will employ a hair stylist and makeup artist, in
+addition to the existing hair braiders.
+    Whenever I have a question, I call John for advice.
+    If it were not for CEI, where would I go for business
+advice?
+    I hope and pray that CEI will be here for the next
+generation of people who are coming to Maine, as well as those
+who are already here.
+    Just as the women's association in my home village is
+making a difference in their community, I see how CEI is having
+an impact on lives in Maine, including mine.
+    Thank you so much.
+    Chairman KIM. Thank you so much for sharing your personal
+experience. It is very helpful for us to understand how this
+all works on the ground.
+    We are going to move on. Ms. Richards, you are recognized
+for 5 minutes.
+                 STATEMENT OF MICHELLE RICHARDS
+    Ms. RICHARDS. Thank you. Good morning, Chair Kim, and
+Ranking Member Hern, members of the Committee. I would like to
+thank you for the opportunity to testify.
+    My name is Michelle Richards, and I am testifying on behalf
+of Women Impacting Public Policy, a national nonpartisan policy
+organization advocating on behalf of women entrepreneurs.
+    I serve as the executive director of the Great Lakes
+Women's Business Council (Great Lakes WBC), which is a
+nonprofit that services women and minority small business
+owners and entrepreneurs through capital, women's business
+certification, training, coaching, and counseling.
+    When I started Great Lakes WBC over 34 years ago in 1984,
+microlending was not an industry. We did not know we were a
+microlender because nobody had yet labeled it. But, when the
+SBA Microloan program began, we became one of the first
+organizations to receive funding. We have made $7 million in
+microloans, creating 1,800 jobs, of which 89 percent were to
+women.
+    Capital is often the determinant of an entrepreneur's
+ability to start or grow a business. There are nearly 10
+million women-owned businesses in the United States generating
+$1.6 trillion in revenue and employing nine million Americans.
+Yet, for women, accessing capital continues to be difficult.
+Women account for only 16 percent of conventional small
+business loans and receive only 4 percent of the actual loan
+dollars.
+    For entrepreneurs in rural areas, the challenge of
+obtaining capital is even greater. As of 2017, only 30 percent
+of community bank branches were in rural areas. Twenty-one
+years have passed since the implementation of the very
+successful Microloan program. It is time for Congress to
+modernize the Microloan program.
+    WIPP supports the following three changes: Amending the 1/
+55th rule to provide greater flexibility to SBA microlenders,
+as you have heard; eliminating the 50/50 technical assistance
+rule; and providing access to SBA microloan data. The 1/55th
+rule is the number one pain point for microlenders. Under this
+rule, as you have heard, only $800,000 or 1/55th of available
+loan funds are made available to intermediaries. It is divided
+equally among states. The SBA asked for authority to eliminate
+this rule, stating that it restricts the ability of capital for
+small businesses without considering the size of the states or
+the needs of the small business community.
+    When the SBA is operating under a continuing resolution,
+loan amounts are even more restricted. We had a loan in which
+we requested a half million dollars and had a pipeline to
+support it, but only received $164,000, because that was all
+that was available for Michigan. Our options were to take the
+smaller loan or forgo it altogether and lose our place in the
+queue for the second half of the year. In another instance, we
+ran out of money at the end of the fiscal year but had to wait
+five months until March when funding was available. This
+affects our credibility and our ability to serve communities.
+    WIPP supports the elimination of the 50/50 rule. The
+Microloan program has strict requirements for microlenders. The
+TA program for many years, as was stated, provided 25 percent
+for pre-loans and 75 percent for post-loans. WIPP asked
+Congress to give microloan lenders the flexibility to use TA as
+they see fit. Rather than set a percentage prescribed by the
+Federal Government, many of these organizations like ours have
+more than 2 decades of experience and need the ability to shape
+the program to be the most effective for our clients.
+    SBA should make available data on borrowers who use the
+Microloan program, similar to the data that is available
+through the 7(a) program. Data on geographic location, loan
+amount, interest rate, and term would be helpful not only to
+supporters of the program, but to microlenders in determining
+gaps and needs.
+    In conclusion, Great Lakes WBC is an example of how
+organizations, in partnership with the SBA, can serve the needs
+of entrepreneurs and their communities, turning them into job
+creators. Making the suggested changes to the Microloan program
+would go a long way toward making the program even more
+impactful.
+    Thank you for inviting me to testify here today. I look
+forward to answering any questions you may have.
+    Chairman KIM. Thank you. We all appreciate everything that
+you have shared with us today.
+    So why do we not move on? We have a lot of questions for
+you and look forward to this conversation.
+    I will begin myself. I will recognize myself for 5 minutes.
+Thank you again for being here.
+    Capital access is critical, is a critical need for small
+businesses. We all know that. It provides an important
+financial foundation which often determines whether a business
+is going to be able to successfully grow. Predatory lending has
+been a growing issue in the small business community, and
+unfortunately, as capital availability from traditional sources
+has declined, predatory practices have emerged. Predatory
+lending has devastated many small businesses throughout my
+state and certainly across the country.
+    I wanted to start with Ms. Martinez. In your testimony you
+mentioned the rapid rise of predatory online small business
+lending and how in many cases access to this fast money comes
+with a price much higher than most small businesses can afford.
+    I wanted to just drill down in this because I think it is a
+very important point. Unfortunately, this often leads to
+entrepreneur insolvency and/or small business bankruptcy. How
+often does your organization, or its members encounter an
+entrepreneur or small business struggling with the consequences
+of agreeing to such a loan with predatory, unfair, or
+unreasonable terms?
+    Ms. MARTINEZ. Thank you, Chairman Kim.
+    Yes. Unfortunately, our members do encounter these cases
+more often than we would like to. So sometimes it is daily. And
+most of our borrowers are actually arriving to us to try to
+save their businesses and save their way of life sometimes. So,
+this predatory lending is really affecting. And one of the
+things that I would say probably is that they are trying to
+serve the clients as efficient as they can, and they are trying
+to use the loan capital that our members have to really help
+the business owners to refinance. But it is something that is
+coming to terms really often and we could say that every day
+they are seeing these kinds of cases.
+    Chairman KIM. Well, as you were saying, with the
+refinancing, since microloans may not be used to refinance
+existing debt, how does your organization's work with the
+microloan intermediaries in its network to remedy this problem
+for the borrowers then?
+    Ms. MARTINEZ. Yeah, well, CAMEO is helping our members to
+find other alternatives, not restricted loan capital, to be
+able to refinance. So, they are not allowed to use microloan
+capital to do these kinds of loans. Sometimes it is not
+possible, and they get to us really late, and your members have
+to find additional capital to be able to do the refinancing and
+help the small businesses.
+    Chairman KIM. Thank you. I believe if Congress is to
+effectively confront this issue of predatory lending we must
+have accurate and current data available as well, and I think
+that gets to a lot of the points you raised, Ms. Richards. In
+your testimony you mentioned challenges in accessing Microloan
+program data. Is the problem that the data around microloans is
+not being collected or that SBA is not reporting it?
+    Ms. RICHARDS. SBA is not reporting----
+    Chairman KIM. Would you mind using----
+    Ms. RICHARDS. Sorry. Technology is never my friend.
+    SBA is not reporting it. The data is available.
+    Chairman KIM. So I guess from my perspective here, would it
+be unduly burdensome for SBA to require participating
+intermediaries as it collects certain data and to report it to
+the SBA and then obviously we need to address what you just
+mentioned as well about making sure SBA is going to be
+reporting this coming out.
+    Ms. RICHARDS. So as a microlender, we report in a system
+that is called MPERS, Microloan Program Economic Reporting
+System, I suspect. And so, in fact, today is the deadline for
+reporting from last month. We report all of this data every
+month. It is available. It is part of the database. It is not
+published. It is not made available.
+    Chairman KIM. And from what you have heard so far, what is
+the reasoning you are hearing why this data has not been made
+available?
+    Ms. RICHARDS. I am not familiar with the reason why.
+    Chairman KIM. Okay. Well, we will make sure we come to the
+bottom of that.
+    Well, my time is coming to an end. I want to turn it over
+to Ranking Member, Mr. Hern, who is now recognized for 5
+minutes.
+    Mr. HERN. Thank you all. Thank you for your story, Ms.
+Jallow, about the American dream coming here and starting with
+an idea and finding access to capital and realizing that you
+can put people to work. So thank you so much for that story.
+    To the entire panel, can you each briefly describe the
+small business environment in your local area, very briefly,
+the optimism? Is there optimism? Very briefly. I have a ton of
+questions.
+    Ms. PRINSTER. Colorado has a very strong economy. We have a
+very high level of small business ownership and entrepreneurial
+spirit, and I would say that our level of small business
+startups and growth is very high.
+    Mr. HERN. Thank you.
+    Ms. Martinez?
+    Ms. MARTINEZ. Yeah. California is also a very strong
+economy, and we do see a lot of businesses starting. And I
+think one of the challenges we see definitely is the access to
+capital, and obviously, to the business consulting. But we do
+see also an interesting rise in small businesses, very small
+businesses, and also some of the freelancers and contractors.
+    Mr. HERN. Thank you.
+    Ms. Jallow?
+    Ms. JALLOW. In Portland, there are a lot of immigrant
+businesses starting in Portland. Like, in all of Forest Avenue,
+there are mostly immigrant businesses. And then they are having
+a lot of help from CEI because when I wanted to start my
+business I went to one lady who had a business and then she
+recommended CEI to me. So that is the way we started. And there
+are a lot of us starting.
+    Mr. HERN. So, well, I am going to have a follow-up question
+for you.
+    Ms. Richards?
+    Ms. RICHARDS. Michigan has a shifting economy----
+    Chairman KIM. Could you use the microphone?
+    Ms. RICHARDS. Michigan has a shifting economy with the
+changes in the automotive industry but actually, three-quarters
+of Michigan is small cities and rural. And so there is still a
+great deal of struggle for enough sufficient support for small
+businesses. But actually, 87 percent of all the businesses in
+Michigan have five employees or less. So that is the bread and
+butter of our state.
+    Mr. HERN. That is awesome.
+    So I am sure you all looked at our backgrounds or bios. I
+have been a small business owner for 34 years and never ran for
+office before I came here, but I ran on one principle, and that
+was getting out of the way of job creators. Let them create
+more jobs and put people to work. One of the biggest problems
+we have in America is we have people with great ideas, like Ms.
+Jallow, that are having trouble trying to find opportunities to
+get access to capital so they can start. Also along that line,
+I am also in banking in the sense that I got to help start a
+bank many years ago. One of my frustrations was, and I am sure
+you all have heard of the infamous two words, Dodd-Frank. And
+Dodd-Frank really destroyed the ability for the small community
+banks to come out and take a chance on people like Ms. Jallow.
+And so I am sure you all have seen a lift in your
+opportunities, but as Ms. Martinez said, you also have people
+who are taking advantage of this inability for community banks
+to provide access to capital. And so therefore, that is the
+byproduct of what we sometimes do not hear about how when we
+get really engaged in Washington, D.C., in policy that there
+are alternatives that happen, bad things happen.
+    So with that, Ms. Richards, we often hear about small
+businesses. They do not have the idea to be able to find like
+CEI like Ms. Jallow did. How are we supposed to find people
+with ideas like Ms. Jallow, how are we supposed to find folks
+like yourself?
+    Ms. RICHARDS. Well, first of all, the internet is really
+critical. The Small Business Administration website has a list
+of the microlenders. Or had. They are updating it currently.
+They use our website. The Small Business Development Center,
+another SBA resource partner, is a critical component. Last
+year we received more referrals from the SBDC than any other
+source. We receive referrals from the banks and from former
+lenders, borrowers from our program also. The word is spread
+very widely and the biggest issue is there are still some gaps
+with the Microloan programs where they do not cover all the
+areas of a state. Just officially this month, the last nine
+counties were given to a microlender, so finally, Michigan is
+fully covered.
+    Mr. HERN. Ms. Jallow, how did you find CEI in my remaining
+30 seconds.
+    Ms. JALLOW. Through a business owner in Portland where I
+used to go and buy groceries. So I was talking to her. I said I
+want to start a grocery store. And then she was like, okay, I
+will give you a name of an organization that helped me, that
+are working with me. And then it was like, okay, I am going to
+call them. And then she gave me CEI's number and then I
+contacted John.
+    Mr. HERN. If I may, we hear testimony a lot in our
+Committee about opportunities to loan money. It seems like one
+of our biggest issues is being able to get the message out to
+people with ideas because we have a lot of programs but very
+little awareness on the entire program itself. Thank you.
+    Ms. JALLOW. You are welcome.
+    Chairman KIM. Thank you. The gentleman's time has expired
+and he yields back.
+    And I agree wholeheartedly about wanting to make sure we
+can find ways to inform people about those programs and that is
+something that the Ranking Member and I are committed to doing
+together.
+    I wanted to recognize Representative Sharice Davids for 5
+minutes.
+    Ms. DAVIS. Thank you, Chairman Kim.
+    I am Sharice Davids from Kansas. It is the Kansas City
+metro area. I got really excited. I am going to say what I have
+here but I got really excited about a couple of things that you
+all have said.
+    You know, the reason I get so excited is because
+entrepreneurship is kind of baked into the DNA of the place
+that I represent and that I live in. And this concept of an
+entrepreneurial ecosystem and the ways that different
+enterprises can make use of programs and that sort of thing
+plays out, at least from what I have seen, there is an
+organization that I know, a CDFI, which I love CDFIs, a CDFI
+called Alt Cap in the Kansas City area. They were only on the
+Missouri side. They are moving over to the Kansas side as well.
+And they have found different ways to collateralize some of the
+loans. And I know that is sometimes an issue, particularly for
+like artisans. They started a program called Art Cap that helps
+artists collateralize in different kind of ways than what we
+might see ordinarily, which I think is one of the great things
+about microlending and CDFIs. So I might come back to that.
+    But I really got excited when you started talking about the
+relationship with SBDC, the Small Business Developments. Can
+you talk, and maybe this will be something that each of you
+could speak to for a moment, about how important it is either
+to build that relationship if it does not exist or if it does,
+and maybe any others, like the PTACs and community colleges. I
+know Johnson County Community College where I went to school
+has a Small Business Development Center. Can you talk a little
+bit about that?
+    Ms. RICHARDS. Certainly. The Small Business Development
+Center's purpose is, in fact, to assist the growth or
+development of small businesses. And so they see us as a
+strategic partner. So as soon as they are meeting with someone
+who is going to need financing they alert us so that if we have
+additional questions to ask or direction to give, we work at
+the very beginning stages with them. We also work with the
+PTACs in the area. And many of the community colleges have
+entrepreneurial tracks now. And they frequently ask us to come
+and speak to their class before they graduate so that they know
+about the resources available to them because startup capital
+is very difficult for banks to provide. And so alternative
+financing, like the microloan programs, are very critical.
+    Ms. JALLOW. For me, having the experience back home, to
+come over here and then to start is a huge difference because
+the licensing, the insurance and everything is different,
+whereas back home you can just start. But when I learned about
+CEI they definitely helped me because I was thinking that I
+cannot do it after talking to people. I was thinking that I
+cannot do it but after meeting with John and talking about it,
+I always get excited whenever I leave the office because I am
+like, okay, I can do it. And then we have people that are
+working in there, too, that are from different countries.
+    Ms. MARTINEZ. Well, from CAMEO, we do believe that the only
+way that we are going to be supporting the entrepreneur is if
+we provide the resources in a comprehensive way. And I think
+the entrepreneurial ecosystem dimension is something that we
+are very interested in continuing to develop. The resources are
+available. There are the SBDCs, the WBCs. There are a lot of
+independent, nonprofit organizations that are providing
+business counseling to the entrepreneurs, but we just need to
+be aware of these resources. And building really strong
+networks where we share what programs are in existence and we
+determine what gaps are needed. It is important to be able to
+fulfill that need of the entrepreneur and find the right
+capital for them as well.
+    Ms. PRINSTER. We work very closely with the SBDCs across
+our state in Colorado. In fact, some of our lending team will
+have office hours within the SBDC to talk specifically about
+financing, and particularly, our ability to help them. Most of
+our SBDCs do a very good job on classes, and we do refer
+businesses to them for counseling and training. Sometimes, and
+this addresses the 50/50 rule, sometimes the SBDCs have long
+waiting times for their counselors, or their counselors might
+not be as attuned to some of the populations that we serve. So,
+we would like to have more flexibility with our grants to do
+that pre-loan technical assistance. And then, of course, we
+will also support them post-loan because we have the loan to
+them. Therefore, that 50/50 rule does play into this issue
+about SBDCs and what they do well and what we feel we have the
+better opportunity to provide.
+    Ms. DAVIS. Thank you. I appreciate that. And I appreciate
+your time. And with that I yield back.
+    Chairman KIM. Great. Thank you.
+    I now want to recognize for 5 minutes Representative
+Radewagen from American Samoa.
+    Mrs. RADEWAGEN. Talofa. And good morning.
+    Thank you, Chairman Kim and Ranking Member Hern for holding
+this hearing. And I want to thank the panel for appearing
+today. Each of you has a fascinating story and I just am very
+interested in it.
+    My main goal while serving on this Committee is to see
+small business development in my home district of American
+Samoa, and it is my belief that microloans are the way forward
+for American Samoa. Now, I have seen the wonder of microloans
+in the neighboring independent Nation of Samoa, which has been
+a great boon for their small businesses. And I actually went
+into their villages and talked with many of the small business
+owners. And interestingly enough, it turns out almost all of
+the ones who get microloans are women. So they have discovered,
+the people who administer the microloan program, discovered men
+are not really as good at paying their loans back on time. So
+women have a better chance at it, so whatever that means.
+    But I have a few questions. I would love to ask all of you
+questions, but Ms. Richards, because our time is so limited,
+when you are speaking with small businesses, what is the number
+one issue they raise?
+    Ms. RICHARDS. Well, truthfully, the number one issue they
+raise is that they need capital. What we recognize is that what
+they need is capital, and usually they need assistance either
+with focused marketing strategy or operational excellence. They
+have business operations that are not successful. And so the
+biggest issue is getting them to understand that it is not just
+the money they need from us; it is the technical assistance and
+us to be a partner in their business growth.
+    Mrs. RADEWAGEN. So after assisting a small business, I
+presume the relationship you built with small business does not
+stop, correct?
+    Ms. RICHARDS. It does not stop. They are much like children
+and they never go away. They come back. They come back in a
+good way. And so truthfully, as they hit key milestones,
+whether that is moving to a new location. We had a company that
+went actually into manufacturing the product instead of
+importing it, that they will come to us first to help
+strategize, create a financing plan, and to move it forward.
+    Mrs. RADEWAGEN. I see. So in your statement you explain
+that 93 percent of all your loans are through SBA's Microloan
+program. What is the makeup of the remaining 7 percent of
+loans?
+    Ms. RICHARDS. The 7 percent is from investments from some
+foundations and some area banks that have key target areas that
+they want to invest money in.
+    Mrs. RADEWAGEN. So do you know on average how many hours of
+technical assistance you might supply to a single small
+business in a given year?
+    Ms. RICHARDS. We tend to estimate about 15 hours of
+technical assistance. Now, that will include any preparation
+time that a counselor, business counselor, will be doing in
+preparation for that meeting.
+    Mrs. RADEWAGEN. So that would be 15 hours in a given year?
+Okay.
+    Thank you, Mr. Chairman. I yield back.
+    Chairman KIM. Thank you.
+    We are going to move forward, and I would like to recognize
+Representative Crow from Colorado for 5 minutes.
+    Mr. CROW. Thank you, Mr. Chairman.
+    Ms. Prinster, always good to see a fellow Coloradan in D.C.
+Thank you for coming and joining us here today. And to all of
+the witnesses, really appreciate your hard work and what you
+are doing for small businesses and your leadership in your
+communities.
+    This is a general question, and I would invite all of you
+to respond to it. But I represent one of the most diverse
+districts in the country. There are over 140 languages spoken
+in my largest city, but one in five residents of my community
+were born outside of the United States. And one of the biggest
+issues that they face, and this tends to be a very
+entrepreneurial community, they start their own businesses, and
+one of the biggest issues they face is just the lack of
+transferability of credit. These are folks that own businesses
+from where they came, but they come over here and they are
+coming with a blank slate and it is very hard for them to
+access capital and to start businesses. And I would love to
+hear your thoughts on whether you have experienced that, maybe
+starting with Ms. Jallow. What are the ways we can address
+that?
+    Ms. JALLOW. Yes. For me, at the start, I had capital to
+start but in 2 years I needed some to grow, to add more
+inventory in the store and then to renovate the store for a
+full license salon because right now we just do braids,
+braiding, which some ladies rent from me and start their own
+businesses. Because, when they arrive some cannot speak English
+but having that opportunity to rent from me and sit and do hair
+braiding does not require much English to do that. But
+definitely the loan helped me to now renovate and put a full
+hair stylist that I will be employing and a makeup artist to do
+makeup.
+    Ms. PRINSTER. I am familiar with your district,
+Representative Crow. Your point about people who lack credit
+history is one of the reasons why the SBA Microloan program is
+so important. We are very familiar with this type of situation.
+Because we are a nonprofit, we see it as part of our mission to
+help immigrants, refugees, re-entering citizens, and veterans
+who may not have any or a very deep credit history or may have
+a troubled credit history. We really see this as part of our
+mission to help them to establish a business and establish
+their credit. We report credit monthly through an agency that
+works with Equifax and TransUnion so it is a credit-building
+function and we see this as very important for those businesses
+that are trying to establish credit. But as far as making the
+loan in the first place, we have the flexibility to look past
+imperfect credit, look at their business plan, work with them,
+and again, more funding for this pre-loan technical assistance
+would help us. These are the kind of populations that really
+need that more dedicated handholding to get to a point where
+they are credit-ready.
+    Ms. MARTINEZ. Well, among our members we do have several of
+them that are providing alternative underwriting criteria when
+they are actually offering loans to a specific population such
+as immigrants and refugees and people with credits that are
+very troubled. So, considering that kind of alternative ways to
+provide the loan and assess the loan before doing it and
+providing that pre-loan technical assistance is key to actually
+help them build the credit and actually access capital to grow
+their business. So, we do believe that needs to be kind of a
+partnership again and with different organizations and the
+microlenders, the SBDCs and WBCs and all of them to really work
+between themselves to provide that pre-loan technical
+assistance and also to consider for the lenders an alternative
+way of considering and assessing the loan before approving.
+    Mr. CROW. Thank you.
+    Thank you. I yield back.
+    Chairman KIM. Thank you.
+    I would like to recognize for 5 minutes Representative
+Spano from Florida.
+    Mr. SPANO. I have a defective microphone so I am just going
+to hold it.
+    First of all, I want to thank the Chairman and the Ranking
+Member for highlighting the need to make sure that small
+businesses know what SBDC does. That has been a frustration for
+me and my community as well.
+    I have a couple questions. I think the first maybe I would
+like to direct to Ms. Richards, if you may. You suggest that
+the 1/55th rule should basically end and essentially, that loan
+funds should be allocated according to state size, needs of the
+business community. I would like for you, if you would, just to
+drill down for me, maybe take 30 seconds, drill down. So would
+it just be an allocation, a proportionate share based on the
+population of the states, and then as it relates to the
+business needs of the community, what would be the types of
+criteria that you think we should look at in order to better
+distribute these funds?
+    Ms. RICHARDS. Some of those practices are in place. The SBA
+requires a pipeline, for us to show a pipeline of loans and
+that we are in good standing with the program before we can
+borrow. And I think those need to continue to stand in place.
+    So I think that the criteria should hold that an
+intermediary has to show that they are in good standing but
+that the funds should be available to the intermediaries who
+are able to effectively deploy them because that is really a
+better indicator I think to Congress of how much funding is
+really needed if we take some of these caps off as to how
+effective we could be at microlending everywhere.
+    Mr. SPANO. Okay. So in your opinion, the most important
+criteria would be the effectiveness of the intermediary rather
+than the population of the states or the specific business
+needs of the community?
+    Ms. RICHARDS. That is right. That is right. We have become
+very well-powered machines at creating jobs and businesses.
+    Mr. SPANO. Do you have any concern that that might
+negatively affect some of the states or the businesses needs of
+the small business community who just happen to be in a region
+that do not really have an effective intermediary?
+    Ms. RICHARDS. There are so many great associations that
+support intermediaries at becoming best in class, and there are
+so many resources to incur those skills that I do not think
+that that is really the issue. More and more intermediaries are
+both emerging and growing, and I think that the real issue is
+that because of the way the funds are structured, they ensure
+that great opportunities cannot occur in two intermediaries in
+one state. Someone gets the bulk of the money and someone does
+not.
+    Mr. SPANO. Follow-up questions. You had also mentioned
+about the 50/50 rule and you guys really are not in the best
+position to provide this technical assistance. And so do you
+know what the rationale was, SBA's rationale when they
+implemented this rule to begin with? What was their expectation
+or anticipation for intermediaries in terms of technical
+assistance? Why did they think it was important?
+    Ms. PRINSTER. If I may answer that question since I was
+around at the early stages of the SBA Microloan Program myself.
+I think the rationale, which originally it was 25/75, 25 being
+for pre-loan, then was changed to 50/50, I think the rationale
+was that they wanted the intermediaries to support the
+businesses who had loans, and to spend most of their time
+working with the borrowers that had an investment from the
+microlender. I think the main rationale was to force us to put
+our focus on businesses that took out loans from us. As the
+industry has grown and matured, we have seen that there are
+many businesses and business owners, including what we were
+talking about with Mr. Crow, not just in Colorado but
+everywhere, that need a lot more of handholding and intense
+work before they are ready for credit. We like being able to
+support them in getting there.
+    Mr. SPANO. So what would you say, and you can answer that
+question, too, Ms. Richards as well, but I also wanted to
+interject there, what would be, you had mentioned that
+processing the loan and working on the loan and getting ready
+for the loan is included in this category of technical
+assistance. What other types of technical assistance do
+intermediaries provide, if any, or is it just processing a
+loan?
+    Ms. RICHARDS. It is absolutely not just processing a loan.
+Most of the work that is really key is what is going to make
+this business successful and this loan get paid back. And so
+sometimes it is helping people to get into new markets. We
+helped a woman who had a battery franchise get an industrial
+contract with a utility company which allowed her to be able to
+grow at a great rate, use the expertise she has and basically
+open up new markets. Our reach is much greater than their
+reach.
+    Mr. SPANO. Just really quickly. Do you have any concern
+that doing away with the 50/50 rule requiring any technical
+assistance at all would create a problem where intermediaries
+would not have really an interest to provide those resources?
+    Ms. RICHARDS. Absolutely not. I think it was originally
+designed because the only benchmark they had was banking, and
+so banks inherently are not going to spend that kind of time
+upfront cultivating those deals. That makes sense. That is a
+good business decision. But we are in a different category and
+we need the flexibility to do what we need to do.
+    Mr. SPANO. Thank you, Mr. Chairman.
+    Chairman KIM. Thank you.
+    Moving on I would like to recognize Representative Delgado
+from New York for 5 minutes.
+    Mr. DELGADO. Thank you, Chairman. And thank you, all the
+witnesses for taking the time to educate us today. It is
+important, this work.
+    And I wanted to stress, as someone who represents Upstate
+New York, New York 19, the home of over 27,000 small
+businesses, one of my priorities is to figure out how to
+increase capital for folk back home. And one of the things I
+often hear from folks back home is that they do not feel that
+the Federal Government is helping to revitalize the economy in
+rural communities, and my district is very rural. They cannot
+discussed loans, as we have discussed, to start their business.
+They do not even know where to start, as we have discussed. And
+they want to stay in the community but there are so many
+hurdles for folks to overcome. So Ms. Jallow, what I would like
+to hear from you is to elaborate more on your personal
+experience in trying to get a loan for your small business
+before you began working with the intermediary. What was that
+experience like?
+    Ms. JALLOW. Before I started working with CEI I would not
+be able to start anything if it were not for them. I would not
+know where to go in the first place because I was thinking like
+the concept that I have that you can just come and start
+similar to back home. But when I talked to people they are
+like, oh, it is not that way. You have to do this and that. And
+then that is the time I contacted CEI, which is really, really
+helpful. Like, whenever I need something, they are always
+there. Whenever I call, John is ready. Sometimes I will be even
+late. He will be like, you know, it is okay. You can come. So
+it is really helpful for me. And then I know a lot of people
+over there, too, that really get help from them.
+    Mr. DELGADO. And can you speak a little bit about how long
+it took before you were made aware of this option, and how did
+you come to learn about it?
+    Ms. JALLOW. I learned about it with a business owner in
+Portland who is an immigrant from Cambodia. She is the one who
+told me about CEI. And when I contacted them, it took me like 5
+days for them, you know, when I called him they just told me we
+can set up an appointment. You can come in. So that is the time
+I went in and we talked about it and it was really helpful for
+me to start and I was like, yeah, I can do this.
+    Mr. DELGADO. Excellent. Thank you.
+    And to anybody on the panel, happy to hear about your
+experiences working with rural businesses that have benefitted
+from the Microloan program and some of the challenges that are
+specific to rural communities when it comes to accessing
+capital.
+    Ms. MARTINEZ. Well, we do have a lot of rural businesses
+also that are member-served in California. And I think the
+challenges are high as you mentioned or there are not as many
+microlenders as they would like but there are also alternative
+ways. So definitely they have really strong ones I might say,
+so the lenders that are there might be just one or two, but
+they are really strong. And then also they are considering
+alternative ways to reach them. So, when we are talking about
+online lending it is actually a good way to reach more rurals.
+It is just it has to be the right way. So, we want to make sure
+that when we are talking about lending and being able to
+optimize the process and make it faster and more accessible for
+our rural business owners especially, we are able to provide
+the right programs and loans. We, being in CAMEO, actually are
+supporting a lot of our members to get more online applications
+and just being able to connect with the members through online
+solutions. And I think that is a really good way to make sure
+that you reach the right business owners without them having to
+travel so far or being able to really experience all the issues
+they might have to find the right partner in the location.
+    Mr. DELGADO. Yes. On that point, broadband access would
+probably be important then.
+    Ms. MARTINEZ. Totally. Absolutely.
+    Mr. DELGADO. Okay. Anybody else want to----
+    Ms. PRINSTER. Colorado has many rural areas as well as
+metropolitan areas. Our primary service area is the Front Range
+which is more the metropolitan and small city area but one of
+the difficulties we have in reaching some of the rural
+communities is our ability to fund that outreach. We create
+partnerships very frequently with SBDCs, banks and economic
+development organizations within those communities to be able
+to get the referrals. We have an online application. So there
+are ways that we can serve a business in a rural area without
+always having to be there, but it is important to have those
+connections.
+    I would also say that outreach and visibility are critical
+to this program. Once we are connected with a business we can
+help them, but it's hard to reach them if they don't know about
+us. So I suggest that the cost of outreach should be allowed
+under the technical assistance grants because the awareness and
+education of our partners in other communities is a really
+important part of making this program accessible to businesses
+across our state, including rural areas.
+    Mr. DELGADO. All right. Thank you.
+    I yield back.
+    Chairman KIM. Thank you.
+    I would like to move on to Representative Stauber from
+Minnesota. You are recognized for 5 minutes.
+    Mr. STAUBER. Thank you very much, Mr. Chair, and to the
+witnesses, I appreciate your comments.
+    I just want to follow up a little bit on our Ranking Member
+Hern's comments about Dodd-Frank and loaning to small
+businesses. However, well-intentioned that was, I can tell you
+back home it was devastating for our small, local community
+lenders and they are feeling it today. And so when we talk
+about access to capital, that was one of the, I think, the
+negative effects of that law. And so I think our goal is to
+allow this capital, allow our small lending institutions across
+rural American have the ability to have that capital ready and
+available when that entrepreneur comes in. So I think what I am
+hearing back home is from our lending institutions, our
+community lending institutions, that was devastating for them.
+A third of their time, approximately a third of their time
+making sure that they are following the government mandates in
+case they are audited or investigated, which does not seem
+right. Our lending institutions, you have all built trusting
+relations with the lending institutions. I think they are a big
+part of our economy.
+    We have talked about broadband. I am on the Transportation
+Infrastructure Committee as well. Broadband is important for
+rural America, rural Minnesota, Northern Minnesota, where I
+represent, and so Ms. Richards, you talk about the Microloan
+program. It is currently operating with half of the number of
+intermediaries that are allowed. So in your opinion, how can we
+attract more intermediaries in that rural area of our country?
+Because we know that once we work broadband in the rural areas,
+that is where our small businesses can relocate or start up.
+Can you just answer that question?
+    Ms. RICHARDS. Well, first of all, the current regulations
+around the program, the 25/75 really limit your ability when
+you have a rural area. There is a significant amount of time of
+going to meet with people because you have to go see their
+business. You have to see what it looks like before you go and
+make the loan. So the upfront costs, the pre-loan costs are so
+much higher. It helps that it was moved up to 50 percent which
+gives us some more flexibility because we have some clients
+that we travel 2-1/2 hours or 3 hours to visit in rural areas.
+So the first is that 50/50 rural is really hampering many
+organizations from stepping up to the plate and becoming
+microlenders. Community action agencies, you know, other
+agencies that exist within the rural construct.
+    Secondarily, I think that there are networks that are
+continuing to work, and associations. AEO is an association and
+others that are trying to identify organizations that can serve
+those communities. We see this movement as critical that every
+county in this country should be covered. And so that is why I
+was so proud that finally every county in Michigan is covered.
+There are four other microlenders and we mentored every single
+one of them to get started. So part of it is we need to have a
+mentoring network of successful Microloan programs that go in
+and mentor an organization, identified resource to actually
+become a lender. Get the best practices out of the way right
+away.
+    Mr. STAUBER. And thank you for those comments.
+    I would say that the testimony today, and I am very
+privileged to be on the Small Business Committee. As a small
+business owner myself, what you are doing is vital to the
+startups and to the entrepreneurial spirit because when
+somebody has a good idea they are excited. The door has got to
+be open when they are ready. When they run into roadblocks and
+stumbling blocks, they are not going to pursue it as you
+described. And I think we call can agree that when that
+entrepreneur comes knocking that is where the excitement phase
+is. They have probably done a lot of research where you can
+assist them in getting or developing their small business
+because I think each of you know, and everybody on this
+Committee knows small businesses are the engine of our economy.
+Main Street America depends on small businesses.
+    I appreciate all your efforts that you have put forth. And
+Mr. Chair, I yield back.
+    Chairman KIM. Thank you so much. And I just want to echo
+your sentiments there. That is certainly the focus of what we
+are trying to do on this Subcommittee and this broader
+Committee. And just in my short time here in Congress already I
+have certainly seen this Committee try to do everything we can
+to put aside any partisan differences and work together to be
+able to figure out how we can help small businesses and
+entrepreneurs, and the work that you are doing is really where
+the rubber hits the road and that is what we need to be
+investing in and figuring out what we can do to make sure to
+help you do your jobs better and help small businesses grow. So
+I just appreciate that sentiment there at the end.
+    I think that is the conclusion here of the questions. I
+just wanted to take a moment--did you----
+    Mr. HERN. Well, I just want to again say thank you so much.
+What you all do goes thankless sometimes, but thank you so much
+for your relentless pursuit of trying to make this a better
+program.
+    Chairman KIM. Absolutely. We all share that sentiment. We
+are grateful for all of you coming out today, and we also just
+want to take a moment to just recognize how exciting it is that
+we have an all-women panel to celebrate Women's History Month
+as well. So I just want to thank you for participating there.
+    As we have heard today, there is a lot of good work the
+Microloan program and its partners, intermediaries, are doing
+to enhance access to capital and entrepreneurial development
+for America's smallest businesses. In the 20-plus years the
+program has been in existence it has grown significantly, and
+as we heard today, some of the rules governing the program have
+not kept up with its growth. I look forward to working with my
+colleagues on both sides of the aisle to find policy solutions
+that will thread the needle to provide the flexibility
+intermediaries need to continue funding and training America's
+entrepreneurs.
+    I would ask unanimous consent that members have 5
+legislative days to submit statements and supporting material
+for the record.
+    Without objection, so ordered.
+    And if there is no further business to come before the
+Committee, we are adjourned. Thank you.
+    [Whereupon, at 11:14 a.m., the subcommittee was adjourned.]
+                           A P P E N D I X
+[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
+                                 [all]
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+<title> - CHALLENGES IN SBA'S STATE TRADE EXPANSION PROGRAM</title>
+<body><pre>
+[House Hearing, 116 Congress]
+[From the U.S. Government Publishing Office]
+           CHALLENGES IN SBA'S STATE TRADE EXPANSION PROGRAM
+=======================================================================
+                                HEARING
+                               before the
+      SUBCOMMITTEE ON RURAL DEVELOPMENT, AGRICULTURE, TRADE, AND
+                            ENTREPRENEURSHIP
+                                 OF THE
+                      COMMITTEE ON SMALL BUSINESS
+                             UNITED STATES
+                        HOUSE OF REPRESENTATIVES
+                     ONE HUNDRED SIXTEENTH CONGRESS
+                             FIRST SESSION
+                               __________
+                              HEARING HELD
+                             MARCH 12, 2019
+                               __________
+ [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
+            Small Business Committee Document Number 116-010
+             Available via the GPO Website: www.govinfo.gov
+                               _________
+                     U.S. GOVERNMENT PUBLISHING OFFICE
+35-333                       WASHINGTON : 2019
+                   HOUSE COMMITTEE ON SMALL BUSINESS
+                 NYDIA VELAZQUEZ, New York, Chairwoman
+                         ABBY FINKENAUER, Iowa
+                          JARED GOLDEN, Maine
+                          ANDY KIM, New Jersey
+                          JASON CROW, Colorado
+                         SHARICE DAVIDS, Kansas
+                          JUDY CHU, California
+                           MARC VEASEY, Texas
+                       DWIGHT EVANS, Pennsylvania
+                        BRAD SCHNEIDER, Illinois
+                      ADRIANO ESPAILLAT, New York
+                       ANTONIO DELGADO, New York
+                     CHRISSY HOULAHAN, Pennsylvania
+                         ANGIE CRAIG, Minnesota
+                   STEVE CHABOT, Ohio, Ranking Member
+   AUMUA AMATA COLEMAN RADEWAGEN, American Samoa, Vice Ranking Member
+                        TRENT KELLY, Mississippi
+                          TROY BALDERSON, Ohio
+                          KEVIN HERN, Oklahoma
+                        JIM HAGEDORN, Minnesota
+                        PETE STAUBER, Minnesota
+                        TIM BURCHETT, Tennessee
+                          ROSS SPANO, Florida
+                        JOHN JOYCE, Pennsylvania
+                Adam Minehardt, Majority Staff Director
+     Melissa Jung, Majority Deputy Staff Director and Chief Counsel
+                   Kevin Fitzpatrick, Staff Director
+                            C O N T E N T S
+                           OPENING STATEMENTS
+                                                                   Page
+Hon. Abby Finkenauer.............................................     1
+Hon. John Joyce..................................................     3
+                               WITNESSES
+Ms. Kim Gianopoulos, Director of International Affairs and Trade,
+  Government Accountability Office, Washington, DC...............     4
+Mr. Hannibal ``Mike'' Ware, Inspector General, United States
+  Small Business Administration, Washington, DC..................     6
+                                APPENDIX
+Prepared Statements:
+    Hon. Jim Hagedorn, Minnesota.................................    15
+    Ms. Kim Gianopoulos, Director of International Affairs and
+      Trade, Government Accountability Office, Washington, DC....    16
+    Mr. Hannibal ``Mike'' Ware, Inspector General, United States
+      Small Business Administration, Washington, DC..............    29
+Questions and Answers for the Record:
+    Questions from Hon. Nydia Velazquez to Mr. Hannibal ``Mike''
+      Ware and Responses from Mr. Hannibal ``Mike'' Ware.........    37
+Additional Material for the Record:
+    None.
+           CHALLENGES IN SBA'S STATE TRADE EXPANSION PROGRAM
+                              ----------
+                        TUESDAY, MARCH 12, 2019
+                  House of Representatives,
+               Committee on Small Business,
+    Subcommittee on Rural Development, Agriculture,
+                               Trade, and Entrepreneurship,
+                                                    Washington, DC.
+    The Subcommittee met, pursuant to call, at 10:11 a.m., in
+Room 2360, Rayburn House Office Building. Hon. Abby Finkenauer
+[chairwoman of the Subcommittee] presiding.
+    Present: Representatives Finkenauer, Chabot, Hagedorn, and
+Joyce.
+    Chairwoman FINKENAUER. Good morning. The Subcommittee will
+come to order.
+    It is a pleasure to have our witnesses testifying before
+our Subcommittee this morning. I commend you for your
+commitment to public service. I also want to take a minute to
+thank Ranking Member Dr. John Joyce of Pennsylvania. He
+introduced himself to me very early on and expressed how
+important trade and rural development was to his district. I am
+glad we share that as a common priority, and I look forward to
+working with him in a bipartisan fashion on this Subcommittee.
+    As someone who grew up in a small town in Iowa--as I like
+to say, in a town with more cows than people--I am thrilled to
+be leading this Subcommittee focused on rural development. We
+have an opportunity to give folks in districts like mine and
+Ranking Member Joyce's a seat at the table for important
+conversations like the one we are having today on helping
+farmers and small businesses export their products.
+    It is no secret that for rural entrepreneurs and family
+farmers in states like Iowa, the ability to do business
+overseas is key to economic success here at home. Trade should
+help us export goods but also protect our workers and our
+communities.
+    Despite the economic rewards that come with exporting
+products overseas, only 1 percent of our nation's 30 million
+small businesses are able to do so.
+    With 95 percent of the world's consumers living outside of
+the United States, small businesses are missing out on
+opportunities to better support their families and communities,
+create jobs, and expand our economy.
+    Today, we have a chance to hear from some of our nation's
+leading experts on a federal program that aims to help small
+businesses enter new markets around the globe. This initiative,
+the State Trade and Expansion Program (STEP), was initially
+created in 2010 as a 3-year pilot program. Five years later,
+Congress enacted the Trade Facilitation and Trade Enforcement
+Act to make the STEP program permanent and authorize $30
+million in funding through fiscal year 2020.
+    STEP provides matching funds to states and territories to
+help small businesses enter new markets, access export
+financing, and go on trade missions.
+    Since its inception, the Small Business Administration has
+awarded approximately $139 million in funding to almost every
+state in the country.
+    In the 2018 annual report, SBA reported that the agency
+awarded 44 grants totaling $18.9 million in fiscal year 2016.
+The rate of return was 31 to 1 for every dollar invested,
+states reported $31 in sales.
+    STEP has the potential to unlock opportunities in the
+global marketplace for small businesses in a town like
+Maquoketa in my district, whose owners may want to sell
+products overseas but could lack the staff capacity or even an
+idea of where to start.
+    Having said that, the reports and audits conducted by our
+nation's watchdogs raise some concerns over the implementation
+of the STEP program and show areas for improvement as we look
+at the need for reauthorization in 2020. Work by the Government
+Accountability Office found that SBA lacks a strong process to
+ensure states are complying with the program's requirements.
+GAO also found states face serious and ongoing challenges in
+trying to utilize the funds with some even giving the funds
+back. Problems range from short application windows and
+difficult reporting requirements to a lack of timely
+communication from SBA.
+    The Inspector General's audits uncovered similar problems
+and determined more work needs to be done to improve the
+program's performance measures and oversight. Moreover, the
+report showed that SBA is at risk of not fully realizing the
+potential of the program.
+    My office had a chance last week to hear from the Iowa
+Economic Development Authority about problems in utilizing the
+funds. In one instance, Iowa was awarded a STEP grant on
+September 21st with a start date of September 29th, just 8 days
+later.
+    In another instance, SBA announced a grant opportunity on
+April 2nd only to post a second announcement with new and more
+accurate information on April 18th. SBA did not respond to
+Iowa's questions about the application until April 27th, but
+the deadline for applying for the STEP grant was May 16th. That
+is a pretty tight turnaround.
+    While this is frustrating, STEP is a needed initiative, and
+I look forward to hearing other states' ideas for improving it
+and hopefully getting some of our states on record in the
+future about how we can make STEP work better.
+    In Congress, we ought to be making it easier for farmers
+and small businesses to succeed in the international
+marketplace-- not harder--while also protecting our workers.
+STEP has the potential to help Iowa's entrepreneurs and
+entrepreneurs around the country tap into new markets.
+    If utilized properly, this program stands to provide small
+businesses with the tools they desperately need to expand,
+create jobs, and boost wages throughout America, especially in
+rural areas that quite frankly have been ignored for too long.
+    Let me close by saying how grateful I am to have the
+opportunity to Chair this Subcommittee. I look forward to
+working with my colleagues on both sides of the aisle to
+harness the feedback we receive today to make much needed
+improvements to the STEP program for all of our communities,
+small businesses, and hard-working families.
+    I want to thank our witnesses for being here for what I
+hope will be a productive discussion.
+    I would like to now yield to the Ranking Member, Dr. Joyce,
+for his opening statement.
+    Mr. JOYCE. Thank you, Madam Chairwoman Finkenauer.
+    Small businesses eying international markets face daunting
+obstacles, such as insufficient manpower, lack of external
+resources, inadequate access to financing, and clearly,
+bureaucratic red tape. The Small Business Administration (SBA)
+is one of the six agencies that offer export promotion programs
+specifically for small businesses.
+    The SBA Office of International Trade, often referred to as
+OIT, is responsible for a variety of programs that provide
+training, counseling, and export financing for small
+businesses. We are here today to review just one unique program
+within an exceptionally complex network of trade promotion
+programs.
+    The statutes governing the State Trade Expansion Program,
+known as STEP, are very specific to ensure each dollar hits its
+target. Since its creation as a pilot program in 2010, SBA OIT
+has struggled to comply with STEP's strict legal requirements.
+One of Congress's most vital roles is not only to exercise
+fiscal responsibility when spending taxpayer dollars but also
+to ensure that the taxpayer dollars we allocate are being spent
+wisely and reaching their maximum impact.
+    I appreciate the cooperation between all agencies and their
+commitment to seeing that SBA fulfills its goals relating to
+this program and maximizes every dollar received to help small
+businesses reach their potential in the international market.
+    This hearing resumes the Committee's oversight of OIT and
+the STEP program. Our witnesses represent the Government
+Accountability Office (GAO) and SBA's Office of Inspector
+General (OIG). They are our eyes and our ears. They are here to
+present the issues plaguing the STEP program. I am encouraged
+by the dedication shown by all parties to expanding the
+opportunities for small businesses and farmers, and I look
+forward to working with you to achieve our common goal of
+reducing barriers to small businesses participating in global
+trade.
+    Thank you again to our distinguished witnesses and I yield
+back.
+    Chairwoman FINKENAUER. Thank you, Dr. Joyce. The gentleman
+yields back.
+    If any Subcommittee members have an opening statement
+prepared, we ask that you submit it for the record.
+    Now I would like to just take a minute to explain the
+timing rules. Each witness will have 5 minutes to testify and
+each member will have 5 minutes for questioning. There is a
+lighting system to assist you. The green light will be on when
+you begin and the yellow light will come on when you have one
+minute remaining. The red light will come on when you are out
+of time, and we ask that you stay within the timeframe to the
+best of your ability.
+    I would now like to introduce the witnesses.
+    Our first witness is Ms. Kimberly Gianopoulos. Ms.
+Gianopoulos serves as the director for international trade
+issues in the International Affairs and Trade Team at the
+Government Accountability Office (GAO). She has a distinguished
+career and has provided leadership in a number of efforts to
+improve government programs, including contributions to GAO's
+high-risk series. Ms. Gianopoulos has also received a number of
+awards, including a Meritorious Service Award, a Client Service
+Award, an Assistant Comptroller General's Award, and several
+Results through Teamwork Awards. Welcome, Ms. Gianopoulos.
+    Our second witness is the Honorable Hannibal ``Mike'' Ware,
+the inspector general of the Small Business Administration. Mr.
+Ware was sworn in as the inspector general of the Small
+Business Administration in May 2018. He is responsible for
+independent oversight of SBA's programs and operations, which
+encompass more than $100 billion in guaranteed loans and nearly
+$100 billion in federal contracting dollars. Mr. Ware has 28
+years of experience within the OIG community and has received
+numerous awards throughout his career, including several awards
+from the Council of Inspectors General on Integrity and
+Efficiency in recognition of his significant work in the
+inspector general community. Welcome, Mr. Ware.
+    Ms. Gianopoulos, you are recognized for 5 minutes.
+   STATEMENTS OF KIM GIANOPOULOS, DIRECTOR OF INTERNATIONAL
+ AFFAIRS AND TRADE, GOVERNMENT ACCOUNTABILITY OFFICE; HANNIBAL
+``MIKE'' WARE, INSPECTOR GENERAL, UNITED STATES SMALL BUSINESS
+                         ADMINISTRATION
+                  STATEMENT OF KIM GIANOPOULOS
+    Ms. GIANOPOULOS. Thank you.
+    Chairwoman Finkenauer, Ranking Member Joyce, and members of
+the Subcommittee, thank you for the opportunity to be here
+today to discuss our recent work on SBA's State Trade Expansion
+Program.
+    As you know, Congress established STEP to help small
+businesses export. Many states report that STEP is important to
+their export promotion operations. However, concerns have been
+raised related to the management of the program, including
+SBA's processes for administering and monitoring grants, and
+the effectiveness of the program in reaching its goals.
+    My testimony today is based on our report, which is being
+released at this hearing. Today, I will discuss two items: one,
+the extent to which SBA's STEP grants management process
+provides reasonable assurance of compliance with selected
+requirements of applicable law, and two, the extent to which
+SBA has responded to states' challenges in using grant funds.
+    First, we found that SBA does not provide reasonable
+assurance that STEP grant recipients meet two of the three
+Trade Facilitation and Trade Enforcement Act requirements that
+we reviewed before the grant is closed out.
+    The first requirement states that SBA must limit the amount
+given to the 10 states with the largest numbers of eligible
+small businesses. SBA demonstrated reasonable assurance that
+this first requirement was being met.
+    The second requirement is that states must provide either a
+25 or 35 percent total match to the Federal grant amount. We
+identified four instances where according to SBA's
+documentation, states did not report sufficient total matches.
+Nevertheless, SBA closed these grants.
+    The third requirement is that a state's match cannot be
+less than 50 percent cash. SBA collects information about the
+matching funds, including the proportion provided in cash.
+However, it does not monitor states' compliance with this
+requirement. Additionally, SBA considers the salaries of state
+trade office staff who work on administering the grant to be a
+form of cash and most states use staff salaries as their total
+match, including the required cash portion.
+    SBA does not ensure that states that do this are not also
+using grant funds from STEP to pay for portions of these
+salaries. As a result, SBA cannot consistently determine
+whether states are meeting the cash match requirement.
+    In our report, we recommend that SBA establish a process to
+ensure documentation of states' compliance with the total match
+requirement and develop a process to determine states'
+compliance with the cash match requirement. SBA agreed with
+these recommendations.
+    Our second finding is related to the overall use of grant
+funds and the challenges that states report in using their
+allocations. We found that nearly 20 percent of grant funds go
+unused each year despite SBA officials stating that they seek
+100 percent use of these funds. For example, in 2016, across 41
+of the 43 recipient states, combined grant use was about 82
+percent, leaving nearly $3.2 million unused. This includes one
+state that left nearly 95 percent of its funds unused that
+year.
+    SBA made some changes to the program that could improve
+states' abilities to use all their grant funds, such as
+extending the fund's usage period to 2 years; allowing certain
+flexibilities, including travel; and reducing the length of the
+technical proposal.
+    The 12 states we interviewed cited numerous challenges,
+including timing of the application and award processes,
+administrative burden, and communication between the states and
+SBA. We heard about variable and short application timeframes,
+inflexible application requirements, a difficult process for
+repurposing funds, burdensome and changing reporting
+requirements, and delayed and inconsistent communication of
+requirements from SBA. SBA does not assess and address the risk
+posed by some states' low use of funds. Also, SBA officials
+told us that while they informally collect feedback from
+states, there is no process to collect states' perspectives on
+challenges with the program. We recommended that SBA assess
+this risk to achieving program goals posed by some states' low
+grant fund use rates. We also recommended that SBA enhance
+collection and sharing of best practices among states. SBA
+agreed with these recommendations.
+    Thank you again for the opportunity to testify. I am happy
+to answer any questions you may have.
+    Chairwoman FINKENAUER. Thank you, Ms. Gianopoulos.
+    Mr. Ware, you are now recognized for 5 minutes.
+              STATEMENT OF HANNIBAL ``MIKE'' WARE
+    Mr. WARE. Thank you, Chairwoman Finkenauer, Ranking Member
+Joyce, and distinguished members of the Subcommittee. Thank you
+for the opportunity to be here today and for your continued
+support of the Office of Inspector General. I am proud to
+represent the dedicated men and women of my office and speak to
+you about their important work.
+    We have published three reports and written one management
+advisory regarding what is now known as the State Trade
+Expansion Program, or STEP. Across these three reports, we made
+22 recommendations, all of which are now considered closed.
+    While the STEP program has benefitted from congressional
+scrutiny, OIG oversight, and most recently oversight by my
+colleagues at GAO, my office has identified systemic risks to
+SBA's grant management practices that are important in context
+of today's discussion.
+    Our first STEP review was conducted pursuant to the Small
+Business Jobs Act of 2010, which authorized SBA to establish a
+STEP grant program as a 3-year pilot to increase the number of
+eligible small business concerns in states that export and to
+increase the export value of those eligible small businesses
+that already export. In 2015, Congress authorized STEP as a
+full-fledged program through the Trade Facilitation and Trade
+Enforcement Act of 2015. Our two most recent reports were
+mandated by the 2015 act.
+    We conducted our 2012 audit of the pilot program to
+determine the extent to which the grant recipients were
+measuring program performance. To achieve our objectives, we
+reviewed the Small Business Jobs Act of 2010 and the Fiscal
+Year 2011 STEP program announcement. We judgmentally selected
+all STEP grants exceeding $1 million to review. Six grant
+recipients met this threshold. We conducted site visits to
+California, Pennsylvania, Washington, Michigan, and Illinois.
+We found that STEP grant recipients did not implement adequate
+metrics to measure program performance and issued nine
+recommendations for corrective action. In addition, SBA granted
+more than $1 million to an ineligible applicant, the
+Commonwealth of the Northern Mariana Islands, which was the
+subject of our advisory report. In response, Congress included
+an expanded definition of state in the 2015 act which resolved
+the issue in the advisory.
+    Our second STEP review was performed to determine how STEP
+funds were used. We requested grant award and expenditure
+totals from SBA, queried STEP data from usaspending.gov, and
+selected 15 grant awards totaling $15.2 million. We found that
+SBA could not provide consistent STEP award and expenditure
+data and did not update usaspending.gov. We did, however, find
+that SBA implemented new reporting requirements for the fiscal
+year 2014 STEP program that significantly improved controls
+over the quality of the grant recipients' performance and
+financial reports. We issued three recommendations based on our
+review findings.
+    Our final report we issued was also issued pursuant to the
+2015 act authorizing STEP. The objectives of the audit were to
+determine the extent to which STEP recipients measure program
+activity performance and the results of those measurements. It
+is noteworthy that Congress included certain performance
+measures within the 2015 authorization as a follow-on to our
+findings that SBA lacked adequate metrics in the pilot stage.
+    We selected five cooperative agreement awards totaling $3.9
+million, conducted site visits and obtained documentation from
+recipients in California, North Carolina, Washington, and
+Mississippi. We also interviewed and obtained documentation
+from cooperative agreement officials for Illinois.
+    We found SBA has made significant progress in improving the
+overall management and effectiveness of STEP since our audit of
+the pilot program in 2012; however, SBA could utilize existing
+data to further improve its performance measures and program
+oversight. We issued six recommendations based on our review
+findings.
+    It is safe to say the STEP program has evolved since its
+inception and has benefitted from oversight review from my
+office, GAO, and congressional scrutiny. Nonetheless, our
+reviews of SBA's grant programs continue to identify systemic
+issues with SBA's accuracy of grant data for both financial and
+performance reporting, ineffective oversight, and inadequate
+standard operating procedures.
+    In our most recently published, most serious management and
+performance challenges facing SBA in fiscal year 2019, we
+identified grant management as an agency challenge for the
+first time. SBA officials acknowledge that there are systemic
+issues with its grant management processes and have documented
+plans to address them. That said, we will continue to perform
+reviews and make recommendations for corrective action to
+promote efficiencies and effectiveness within SBA's grant
+programs.
+    Thank you for the opportunity to speak to you today. I look
+forward to your questions.
+    Chairwoman FINKENAUER. Thank you, Mr. Ware.
+    You guys are very good on time. Oh, my goodness.
+    Mr. WARE. Exactly on the 5 minute mark.
+    Chairwoman FINKENAUER. Exactly. Thank you all. We really
+appreciate everything you have shared with us.
+    I will begin the questioning by recognizing myself for 5
+minutes.
+    The first question is for Ms. Gianopoulos. Trade is
+obviously a priority for me and for the state of Iowa, which is
+why I am so pleased that our first hearing is on how small
+business trade assistance programs can work better for farmers
+and small businesses but also our states. Iowa is the number
+one export state for corn and pork, and number two for
+soybeans. Iowa is also number two in the country overall for
+commodities behind California. I am sure the administration
+shares the goal of improving small business trade assistance
+programs, as well, so I hope this is a bipartisan issue.
+    For GAO's report, you interviewed 12 states that left at
+least 25 percent of their grant funds unused. Why do some
+states spend all their money while others are struggling to do
+so?
+    Ms. GIANOPOULOS. When we spoke with the states, they gave
+us a variety of responses as far as the barriers and challenges
+that they experienced in trying to use some of the grant monies
+that they received from SBA. I touched on them a little bit in
+my oral testimony but they included everything from the, as you
+mentioned earlier in your opening statement, Chairwoman, the
+application deadline. It is not always the same day or the same
+week every year so some folks who have very small state trade
+offices cannot plan in advance when to dedicate their time to
+this application process.
+    As you also noted, sometimes things change. The reporting
+requirements change. In other cases, the states have difficulty
+in repurposing funds. For example, we heard one story where a
+state was unable to attend a trade conference overseas because
+things had changed or certain companies had dropped out and
+they had a very difficult time getting those funds repurposed
+through SBA. So in some cases it is the timing that works
+against the states and in other cases it has to do with the
+management of the program itself.
+    Chairwoman FINKENAUER. Got it. Thank you.
+    My next question is for Mr. Ware. You also found that grant
+recipients did not expend all the funds awarded. In response to
+your findings, SBA enhanced its oversight procedures so that
+the program managers are monitoring states to ensure they are
+meeting their quarterly goals. What could SBA do to make it
+easier for recipients to use funds? Has the appropriations
+process impacted states' abilities to utilize the funds?
+    Mr. WARE. I believe that the appropriations process has
+impacted the states' ability. I mean, the states are on record
+as my colleague stated of discussing the difficulties they have
+with the short timeframe, and it is compounded, of course, when
+the short timeframe is made even shorter. Relative to spending,
+I think one of the things that SBA did was after our last
+audit, they increased the period of performance time which
+should take some of the pressure off the states in terms of
+spending. But I caution that that does come with its own set of
+challenges that I could get into but I am sure that answers
+your question, or I hope it does.
+    Chairwoman FINKENAUER. Great. Thank you.
+    I thank both of you for being here. This is enlightening
+and there is clearly a lot that we need to be doing better.
+STEP is a great program and we need to make sure that it is
+implemented in a way that our states and our small businesses
+can get what they need to be able to grow. I really appreciate
+your time and look forward to ongoing discussions.
+    With that, I am going to yield back my time. The Ranking
+Member, Dr. Joyce, is now recognized for 5 minutes.
+    Mr. JOYCE. Thank you, Madam Chairwoman.
+    My first question is for Mr. Ware. The SBA's OIG identified
+what truly were systemic issues with the SBA's financial and
+performance oversight. These grant programs and the elevation
+of this by this review show that these issues into 2019 had
+management and performance challenges in the report. How do
+STEP's management issues compare to other SBA grant programs?
+    Mr. WARE. Thank you. It goes hand in hand. The same type of
+problems we find in STEP, we find in the other programs. It is
+basically two things. So it is inaccurate data and it is not
+enough oversight or inadequate oversight. And when I say they
+go together it is that those problems are what we find
+systematically across just about every grant program that we
+look at, which was the reason why we elevated it to a top
+management challenge and notified the agency.
+    Mr. JOYCE. Has the SBA Office of Grants Management made any
+changes based on the recommendations in the report, and how
+long will it take for this reform to take place?
+    Mr. WARE. They have made changes. And I will give you some
+of the ways they did. They did the earlier detection in terms
+of a risk management process by which they visit states based
+on risk that are not spending on time based on the quarterly
+reviews of the performance data now. And they also came up with
+an agency-wide data quality plan that they are supposed to
+implement across the board on all their grant programs. They
+provided us with sufficient documentation to prove that they
+have put those things in place. We have not done the work yet
+to determine the impact of those changes.
+    Mr. JOYCE. How can Congress monitor SBA implementation
+progress?
+    Mr. WARE. One way Congress can monitor the implementation
+progress is by the work that both GAO and the Office of
+Inspector General does in terms of that.
+    Mr. JOYCE. And finally, how will grant management reforms
+impact the STEP program?
+    Mr. WARE. It should impact it significantly, mainly because
+we want a transparent, well-functioning program that has the
+right level of oversight on it and that is providing the type
+of performance measures data that Congress can use to provide
+the type of oversight. And I think that based on our work, they
+have come a long way in terms of that. Like, for example, in
+the past they only did the rate of return on investment as the
+true measurement. They have since stepped that up based on our
+recommendations to provide measures more in line with what the
+authorizing language asks for.
+    Mr. JOYCE. And will the better management help states use
+these funds, fully implement the access to these funds?
+    Mr. WARE. I believe so, especially in regard to the early
+detection of states who are struggling to use their funds.
+    Mr. JOYCE. Thank you very much.
+    My next questions are for Ms. Gianopoulos. Your report
+found that the SBA does not have sufficient processes to ensure
+that states meet the total and cash match requirements mandated
+by the statute. Can you explain total and cash match
+requirements and why they are mandated?
+    Ms. GIANOPOULOS. Sure. So the total matching requirement
+that a state has to meet is 25 percent of the total amount that
+they are going to receive. So, for example, if a state was
+going to spend $100 on export promotion, $75 of that could come
+from the STEP program and $25 would come from the state itself.
+And of that $25, $12.50 would have to be in cash and the other
+$12.50 could be either in cash or by some other way, either an
+indirect or an in-kind contribution, that sort of thing. So
+that is what TFTEA, the Trade Facilitation and Trade
+Enforcement Act requires when it updated the program and made
+it a permanent program. So what we found were there were some
+difficulties that SBA had in not only confirming that the match
+had been met, but also that the cash match was being met with
+actual cash. As I explained in my statement, there were some
+issues having to do with staff salaries being used as part of
+that or all of the cash match, and it was unclear to us whether
+that was actually following the guidance that was put forward
+in order to meet the requirements of TFTEA.
+    Mr. JOYCE. Now, you mentioned indirect costs and in-kind
+contributions. Can you tell me more about that? Can you
+directly address what representation of that would be?
+    Ms. GIANOPOULOS. Sure. So, indirect costs and in-kind
+contributions are the noncash options that a state can use to
+help provide its portion of the program. So they could offer a
+conference space for a meeting. They could use the utility of
+their travel offices to arrange overseas travel for some of
+these conferences. It is the different types of services that
+the state can provide that would not be something you would see
+on a balance sheet but could be valued in various ways by the
+states to meet their requirement.
+    Mr. JOYCE. And how do you monitor the----
+    Chairwoman FINKENAUER. Thank you. The gentleman's time has
+expired but we will allow for more questions after this as
+well.
+    Mr. JOYCE. I yield back. Thank you.
+    Chairwoman FINKENAUER. Yes, thank you.
+    The gentleman, Mr. Hagedorn, from Minnesota, is now
+recognized for 5 minutes.
+    Mr. HAGEDORN. I thank the Chair and the Ranking Member and
+the witnesses. Appreciate all the work done by staff, including
+my own. Thanks for putting this together.
+    It is a timely hearing. This is National Agriculture Week,
+so anything we can do to help our farmers and agribusinesses,
+especially expand in area of trade, is very important. And as
+somebody who also sits on the Agriculture Committee, I have a
+vested interest in this in a number of ways.
+    Our farmers and agribusinesses, not just in Southern
+Minnesota where I represent that district, but across the
+country, many of them have been in recession one way or another
+for the better part of 5 years. We have had low commodity
+prices, high input costs, and all this predates anything with
+the trade issue.
+    And so what we try to do, at least my goals with
+agriculture and being here, three things for our farmers: Make
+sure that we can do everything possible to reform the Federal
+Government so we have good government policies in the areas of
+regulation, health care, taxes, energy, you know, work
+requirements for welfare, whatever, to make sure that we drive
+down the cost of farming as much as possible, and make sure
+that we have the workforce there for our farmers. Secondarily,
+we want to sustain our farmers when times are tough, and we do
+that with implementation of the 5-year Farm Bill, E-15 year-
+round, things of that nature. And third, and this is the
+critical part where we have an opportunity at the Federal
+Government, the Federal role, expand our exports. Drop down
+those barriers. Make sure that we have new markets around the
+world.
+    In southern Minnesota, we have about 20,000 farms. It is a
+highly rural area. It happens to also have the urban spot of
+Rochester where we have the preeminent institution of medicine
+in all the world, the Mayo Clinic, but mostly farms. A lot of
+good crop and livestock producers. The second largest hog
+production congressional district in the whole country. And so
+each one of those farms, each one of those farmers is producing
+enough to feed about 165 people. And we see that that reach is
+not just across the country but the whole world.
+    And so when we get into what is going on with these
+programs and how they can be better utilized, do you think we
+should track closer as to how much of this money it spent on
+direct work trying to promote farmers and agribusinesses and
+our commodities? And secondarily, and I will ask both of you,
+do you work closely with USDA to try to implement these things?
+Are there measures that we should take to make sure that we are
+not duplicating costs but we are using our monies as
+efficiently and effectively as possible?
+    Mr. WARE. I believe your first question was should we track
+what goes to the farms differently?
+    Mr. HAGEDORN. Well, just how do you track the money? For
+instance, in Minnesota, we spent, I think it was like $150,000,
+something like that. Do we track exactly what we are trying to
+do with those monies or do you get to that level in your
+reports?
+    Mr. WARE. In my reports, we stay programmatic in line with
+the mandate for us. We did not go into exactly what the states
+were using the money for.
+    Mr. HAGEDORN. Should we do more in that area of tracking
+the money? What would that require? How would we get that done?
+    Mr. WARE. Well, it is a different scope for us if we were
+to do that. The act says that we are supposed to look at XYZ.
+In order for us to do something like that it would just be a
+different focus, a different scope. And if the member wanted to
+request of my office that we did something like that, we are
+definitely open to it.
+    Mr. HAGEDORN. Okay.
+    Ms. GIANOPOULOS. So when we started our work, as you know,
+we looked at the 12 states that used less than 75 percent of
+their allocation in 2015. And I am just looking now at my
+statistics. Your home state Minnesota was actually the one that
+used only 23.3 percent of its 2015 STEP allocation. We did
+pursue possibly looking into the kinds of things that each STEP
+grant was used for, but because the IG identified the issues
+with the reliability of the data that SBA had, we were unable
+to do that. Now, anecdotally, when we spoke with the 12
+different states, we did hear a number of different industries
+that were benefitting from the STEP program, such as heavy
+manufacturing, medical equipment, food and beverage, consumer
+appliances, that sort of thing, but that is purely anecdotal
+and cannot be generalized. So we do not have specific
+information but I did want to share that with you that your
+state was one of the ones that we spoke with about the low use
+rate.
+    Mr. HAGEDORN. Well, that is very useful, and we will follow
+up on that. I appreciate your testimony. I yield back.
+    Chairwoman FINKENAUER. Thank you. Now we will go into a
+second round of questions. There is a lot to talk about here
+today. I will begin by recognizing myself for another 5
+minutes. My first question, again, will be for Ms. Gianopoulos.
+    According to your report, SBA told you that it does not
+formally facilitate the sharing of best practices between
+states. You recommend that SBA enhance its identification and
+sharing of best practices. How might this improve the program?
+And do you have any thoughts on how this can be achieved?
+    Ms. GIANOPOULOS. Well, we did not specifically tell SBA how
+it should be achieved because we wanted them to work within the
+parameters and the resources that they had available to them.
+But there are a number of ways, and we have noted in other
+reports some suggestions of how not only states but also
+agencies can share best practices and information. What the SBA
+officials told us is that they perhaps informally--
+anecdotally--speak with a particular state regarding the
+difficulty it might be having in using its grant funds but
+there is no systematic way. And when we spoke with the 12
+states they told us there is no systematic way that they can
+learn from each other--other than through outside organizations
+such as State International Development Office (SIDO) and that
+sort of thing--to learn from each other what it is that is
+working and not working for a particular state. And we realize
+that every state's situation is a little bit different, but
+because the 12 states we talked to were so variable, they were
+small states, large states, urban and rural, all different in
+and of themselves, there should be some way that SBA could
+facilitate that sharing of information in order to better use
+the money and better achieve the program goals.
+    Chairwoman FINKENAUER. Absolutely. Thank you.
+    Mr. Ware, metrics are obviously a very valuable tool in
+measuring the success of a program, but they also let us know
+where to make improvements. How can we better measure the
+success of the program in terms of increasing exports and the
+number of small businesses that export?
+    Mr. WARE. Right. That is a good question. And I think it is
+a question that we asked based on our recommendations for SBA
+to do. And we believe that they have now done that in terms of
+addressing what the mandate was, which was to increase the
+small businesses that do exports. As I think I said earlier,
+they were focused so much on the return on investment that was
+being reported, and as a matter of fact, that is what was
+mandated to be reported. What the body could possibly do is in
+the new version is to make some of those measurements, the ones
+that they are now doing as a result of our recommendations,
+perhaps make those mandatory as well. And on top of that there
+is a lot of room out there for outcome-based recommendations
+and there are other, like someone said, six other places that
+are doing this. So there should be best practices, like we were
+just discussing, out there on how best to measure this program
+if you are really focused on determining the true impact of the
+program in the states.
+    Chairwoman FINKENAUER. Great. Thank you.
+    I will yield back the rest of my time.
+    And I would like to again recognize the Ranking Member, Dr.
+Joyce, for 5 minutes.
+    Mr. JOYCE. Thank you, Madam Chairwoman.
+    This is for Mr. Ware. We heard earlier that the
+Commonwealth of the Northern Mariana Islands was awarded a STEP
+grant and they were actually an ineligible recipient at that
+time. Testimony says that OIT personnel did not have the
+experience or training required to manage and administer such a
+complex grant program. What has SBA OIT done to ensure its
+staff now fully understands STEP's statutory requirements?
+    Mr. WARE. At the time that happened, it was still in the
+pilot. So it was very much in the beginning. As a result of our
+recommendations, they did implement a training program and
+trained all the grant managers across the board. Now, that
+being said, keep in mind that it is not like contracting
+officers where they have a requirement to do annual training or
+anything like that. They did training at that time and they
+have implemented steps to make sure that they provide the
+training going forward. And that is something that they are
+doing across the board for all the grant programs right now.
+    Mr. JOYCE. So along that same line, how are the states made
+aware and held accountable for the STEP's legal requirements?
+Is that training extended to individual states?
+    Mr. WARE. We did not look at the training to the individual
+states. However, the grant managers from a systematic
+standpoint of SBA's oversight of the program, that was covered
+in the training.
+    Mr. JOYCE. This question is for Ms. Gianopoulos.
+    Several states claim that STEP reporting requirements were
+much more detailed and burdensome than grants from the
+Department of Commerce and other agencies. Can you provide me
+with more details on this, please?
+    Ms. GIANOPOULOS. Well, what we heard from the 12 states
+that we interviewed is that some of the difficulties in using
+all of their funds had to do with the level of detail with
+which they had to report back the use of those funds or to ask
+for reimbursement. So, for example, one of the states told us
+that when a group of trade folks were traveling say to a
+conference, in order to request reimbursement of that money, if
+they were all in a cab together they had to divide the cost of
+the cab and claim it individually by person, which made for--
+and that was only one example--a great deal of administrative
+burden for them and made it very difficult. And in some cases
+they were even having second thoughts about applying for the
+grant the next year because of the amount of burden it was on
+them--to request that money back. And in some cases that money
+is such a small amount, even though it is important to them,
+they had to do a cost-benefit analysis as to whether it was
+worth their time in order to get that money back as part of the
+STEP grant.
+    Mr. JOYCE. Do find that then states apply for less
+burdensome application processes? Are they reaching out in
+other directions when facing such obstacles?
+    Ms. GIANOPOULOS. We did not really get into a lot of detail
+with where they put their efforts, but because the size of the
+state trade offices varies so widely, the very small state
+trade offices have to make choices as to where they are going
+to put their time. And as I mentioned earlier, because this
+program does not follow a set standard routine every year, it
+is not available on the same day every year, it is not the same
+amount of time every year, they have to make those types of
+choices state by state by state as to what they are going to
+apply for and how they are going to use their resources.
+    Mr. JOYCE. Would you presume that they do reach out to less
+burdensome application processes?
+    Ms. GIANOPOULOS. I have not talked with them about that,
+but if I were making a decision as far as what I was going to
+do with my resources and my time, I would want the most bang
+for my buck.
+    Mr. JOYCE. That makes sense.
+    Thank you both for your concise answers. I yield back my
+time.
+    Chairwoman FINKENAUER. Thank you. Thank you very much to
+both of you for being here today, for your public service, and
+for taking out so much time out of your schedule. It really
+means a lot, and this was a very informative day. Ms.
+Gianopoulos and Mr. Ware, we are very grateful.
+    As we have heard today, STEP offers many promising
+opportunities for entrepreneurs and farmers in Iowa and across
+the country to succeed. Over the past decade, STEP has grown
+from a 3-year pilot program to a permanent, successful program
+in SBA that with some improvements will be a critical piece of
+a trade assistance portfolio. I appreciate your work in
+identifying some of the systemic issues that we need to
+resolve. It has led to significant improvements in the
+implementation of the law. More work, obviously, needs to be
+done. In my role as the Chairwoman of the Subcommittee on Rural
+Development, Agriculture, Trade, and Entrepreneurship, I look
+forward to working with my colleagues on both sides of the
+aisle to make much-needed improvements in STEP. I am committed
+to making life easier for small business owners in Iowa and
+across rural America so that they can grow their small
+businesses and better support their families and our rural
+communities.
+    I would ask unanimous consent that members have 5
+legislative days to submit statements and supporting materials
+for the record.
+    Without objection, so ordered.
+    If there is no further business to come before the
+Committee, we are adjourned. Thank you.
+    [Whereupon, at 11:58 a.m., the subcommittee was adjourned.]
+                            A P P E N D I X
+[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
+                                 <all>
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+<title> - [H.A.S.C. No. 116-1] Organizational Meeting for the 116th Congress</title>
+<body><pre>
+[House Hearing, 116 Congress]
+[From the U.S. Government Publishing Office]
+.
+                          [H.A.S.C. No. 116-1]
+             ORGANIZATIONAL MEETING FOR THE 116TH CONGRESS
+                               __________
+                      COMMITTEE ON ARMED SERVICES
+                        HOUSE OF REPRESENTATIVES
+                     ONE HUNDRED SIXTEENTH CONGRESS
+                             FIRST SESSION
+                               __________
+                              MEETING HELD
+                            JANUARY 24, 2019
+[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
+                               __________
+                    U.S. GOVERNMENT PUBLISHING OFFICE
+35-334                      WASHINGTON : 2019
+-----------------------------------------------------------------------------------
+                      COMMITTEE ON ARMED SERVICES
+                     One Hundred Sixteenth Congress
+                    ADAM SMITH, Washington, Chairman
+SUSAN A. DAVIS, California           WILLIAM M. ``MAC'' THORNBERRY,
+JAMES R. LANGEVIN, Rhode Island          Texas
+RICK LARSEN, Washington              JOE WILSON, South Carolina
+JIM COOPER, Tennessee                ROB BISHOP, Utah
+JOE COURTNEY, Connecticut            MICHAEL R. TURNER, Ohio
+JOHN GARAMENDI, California           MIKE ROGERS, Alabama
+JACKIE SPEIER, California            K. MICHAEL CONAWAY, Texas
+TULSI GABBARD, Hawaii                DOUG LAMBORN, Colorado
+DONALD NORCROSS, New Jersey          ROBERT J. WITTMAN, Virginia
+RUBEN GALLEGO, Arizona               VICKY HARTZLER, Missouri
+SETH MOULTON, Massachusetts          AUSTIN SCOTT, Georgia
+SALUD O. CARBAJAL, California        MO BROOKS, Alabama
+ANTHONY G. BROWN, Maryland, Vice     PAUL COOK, California
+    Chair                            BRADLEY BYRNE, Alabama
+RO KHANNA, California                SAM GRAVES, Missouri
+WILLIAM R. KEATING, Massachusetts    ELISE M. STEFANIK, New York
+FILEMON VELA, Texas                  SCOTT DesJARLAIS, Tennessee
+ANDY KIM, New Jersey                 RALPH LEE ABRAHAM, Louisiana
+KENDRA S. HORN, Oklahoma             TRENT KELLY, Mississippi
+GILBERT RAY CISNEROS, Jr.,           MIKE GALLAGHER, Wisconsin
+    California                       MATT GAETZ, Florida
+CHRISSY HOULAHAN, Pennsylvania       DON BACON, Nebraska
+JASON CROW, Colorado                 JIM BANKS, Indiana
+XOCHITL TORRES SMALL, New Mexico     LIZ CHENEY, Wyoming
+ELISSA SLOTKIN, Michigan             PAUL MITCHELL, Michigan
+MIKIE SHERRILL, New Jersey           JACK BERGMAN, Michigan
+KATIE HILL, California               MICHAEL WALTZ, Florida
+VERONICA ESCOBAR, Texas
+DEBRA A. HAALAND, New Mexico
+JARED F. GOLDEN, Maine
+LORI TRAHAN, Massachusetts
+ELAINE G. LURIA, Virginia
+                     Paul Arcangeli, Staff Director
+             Zach Steacy, Director, Legislative Operations
+             ORGANIZATIONAL MEETING FOR THE 116TH CONGRESS
+                              ----------
+                          House of Representatives,
+                               Committee on Armed Services,
+                        Washington, DC, Thursday, January 24, 2019.
+    The committee met, pursuant to call, at 11:00 a.m., in room
+2118, Rayburn House Office Building, Hon. Adam Smith (chairman
+of the committee) presiding.
+  OPENING STATEMENT OF HON. ADAM SMITH, A REPRESENTATIVE FROM
+       WASHINGTON, CHAIRMAN, COMMITTEE ON ARMED SERVICES
+    The Chairman. I would like to call the meeting to order and
+to ask Members to please take their seats.
+    Thank you. Welcome to the organizational meeting for the
+House Armed Services Committee. I know we are a little light on
+Members. Unfortunately, with our ever-changing schedule, there
+are other committees that are picking their subcommittees, in
+particular, T&I [House Transportation and Infrastructure
+Committee] and Education and Labor, I believe. So we won't have
+as many Members here as we would like, but they are coming and
+going, and even if they are not here, I will introduce them.
+    With that, I would just like to make a couple quick opening
+remarks before yielding to the ranking member for the same
+purpose. First of all, welcome, returning Members, returning
+staff, as well as new members and new staff. This is a great
+committee.
+    And I want to start by saying it has been a great pleasure
+working with Chairman Thornberry for--well, for as long as we
+have been in Congress, as long as I have been in Congress
+anyway, 22 years, in particular, on this committee. But in
+particular, when he was chairman he did a fantastic job of
+running this committee and being inclusive with everybody on
+both sides of the aisle, which is the model that we want to
+follow. I appreciate that, and I look forward to us continuing
+to work together.
+    And the best way to sum that up and sum up what our
+committee does, you know, people have asked, you know, what are
+my priorities. I am sure, as members of the committee, you have
+been asked what are your priorities, and there are 1,000 things
+that we are going to work on: district specific issues,
+national issues. That is one of the great things about this
+committee: We have an endless number of very important, very
+interesting, very complicated issues to work on.
+    But at the end of the day my priority for the committee are
+two things: number one, to maintain the bipartisan tradition of
+this committee. We are the most bipartisan committee in
+Congress. Now, this joke is getting old at this point, but I
+then say, that is a very low bar to jump over these days. I
+understand that.
+    But our tradition goes back before this current situation
+and a whole bunch of others. We work together in a bipartisan
+way because we understand how important our committee is. It is
+our job to provide the law and the background so the men and
+women who put their lives on the line for our country can have
+the tools and support that they need to do that job. We
+understand how important that is, and we understand that that
+trumps everything else that we are doing.
+    And during my time on the committee what I have noticed is
+the way we maintain that bipartisan tradition is through
+leadership. Every chairman and every ranking member that we
+have had in this position that I have been privileged to work
+with--you know, and there have been a wide variety of them; you
+can see some of them up on the walls behind us here--have made
+that a priority, to work across the aisle, to make sure that
+the chair and the ranking member work together and that all
+Members work together.
+    So I hope everybody in this committee will understand the
+importance of that and maintain that tradition. And, again,
+Chairman Thornberry did an outstanding job of that, was a
+terrific partner to work with. I worked with Buck McKeon before
+that. He had a similar approach, and that is a huge priority
+for me. So, staff, members, everybody, that is what we are
+working on.
+    And then the second thing is, we produce a bill every
+single year, 58 straight years, I believe, only committee in
+Congress to do that. In fact, over the course of the last 8
+years, as the appropriations process has broken down around us,
+we have some years been literally the only committee that
+produced a product.
+    And I want everyone to know that, don't be sort of drawn in
+by the 58 years thing. Every single year that I have been here
+there has been at least four or five times during the process
+when we have said we are just not going to make it, we can't
+get past this. There have been a bunch of different times. I
+think the latest, probably, I believe, December 16 was the
+latest that we actually passed the bill. So it is not easy, but
+it is enormously important that we get it done. All the other
+issues flow into those two things.
+    So the last thing I will say is, this is an outstanding
+committee. You know, I have worked with all the returning
+members. I have gotten a chance to get to know most of the new
+members. This is an incredibly talented group of people, and I
+am privileged to be part of this effort. I think we have got a
+great team. I think we can do great work. And I am absolutely
+confident that we will.
+    With that, I will yield to the ranking member for any
+comments he has.
+      STATEMENT OF HON. WILLIAM M. ``MAC'' THORNBERRY, A
+ REPRESENTATIVE FROM TEXAS, RANKING MEMBER, COMMITTEE ON ARMED
+                            SERVICES
+    Mr. Thornberry. Thank you, Mr. Chairman.
+    And I will say, first, I appreciate very much the comments
+that you just made; and secondly, congratulations on becoming
+chairman of this committee. As you referenced, you have been on
+this committee 22 years. You have been the ranking member, I
+think, the last 8. You have been either the chairman or ranking
+member of a variety of subcommittees; in other words, as the
+commercial used to say, you got it the old-fashioned way; you
+earned it.
+    And I have no doubt that you will be perfectly in line with
+the portraits who are around us in maintaining a bipartisan
+tradition but with the priority not just to maintain it for its
+own sake but to--but for the reason that the men and women who
+are on the front lines deserve it and the national security of
+the United States deserves it. So congratulations on being
+here. I look forward as well to our work together.
+    I just want to highlight some of the points you just made.
+I think it is a source of pride for members who have served on
+this committee that it is such a--I won't even say bipartisan
+but I would say nonpartisan committee. And I thought one way
+for me to demonstrate that was just to bore you with a few
+numbers from last year.
+    When we marked up last year's national defense
+authorization bill, there were 276 amendments adopted, 132 of
+those were offered by Democrats, 144 by Republicans. The bill
+passed out of committee by a vote of 60 to 1.
+    We go to the floor, the Rules Committee made 271 amendments
+in order, 155 Democrats, 116 Republicans. It passed the floor
+351 to 66. When we came back from conference with the Senate it
+passed the House 359 to 54. It passed the Senate 87 to 10 and
+was signed into law on August 13th.
+    We are not going to make August the 13th this year. We had
+some things working in our advantage last year with the 2-year
+budget deal, but my point is there are no statistics that you
+can cite that shows anything other than this is a nonpartisan
+committee. And the advantage is, whether you are a freshman or
+a senior Member, whether you are a minority or majority, you
+can meaningfully contribute to something that will become law.
+And that is just not true in other committees. And as you point
+out, the purpose is not just for its own sake; it is because we
+have a responsibility to do something bigger.
+    You outlined your priorities, which I wholeheartedly
+endorse. I would just add, from my standpoint, substantively, I
+want to do everything we can to make sure we don't slip
+backwards on the progress that we have started to make in
+rebuilding and repairing the military. The worst thing we can
+do is send somebody out there on a mission and not give them
+the best equipment, the best training, the best support that
+that man or woman deserves and that we can provide.
+    So I don't want to slip backwards. And as you know, I also
+want to continue to work to make the Pentagon work better. Part
+of that is efficiency but a lot of it is incorporating new
+technologies that are just essential to defending the country.
+Again, all of this has been completely nonpartisan in the past.
+I am sure it will be in the future. We look forward to working
+with you.
+    I yield back.
+    The Chairman. Thank you, Mac.
+    And just, yeah, echoing a couple of those remarks, I also
+want to thank you for your work on acquisition and procurement
+reform. The efforts to make sure that we get the most out of
+the money we spend at the Pentagon are enormously important,
+and there is still a lot of work to do on that.
+    But in addition to being the chairman, no member of this
+committee has done more work on that issue than Mr. Thornberry.
+So I appreciate his leadership, continued efforts, and someday
+we will get that audit. So--and I am not just kidding. That is
+actually an enormously important thing to work on to make sure
+we get there.
+    And the second thing is, while, you know, Mac and I have
+had disagreements in the past about how much money to spend and
+where it should go and all of that, as we have throughout both
+sides of the aisle, the point to be made is the most important
+one. Whatever we decide the mission should be, whatever we say,
+okay, this is what our Armed Forces need to be ready to do, it
+is our responsibility to make sure that they are trained and
+equipped so that they can do it.
+    To me, the worst possible outcome is what Mac just
+described, either we don't provide them the money or we decide,
+well, we want to do everything, so they are underprepared for
+what it is that we are asking them to do.
+    We need to decide what the missions are and make sure that
+we can fund it. You know, which is, you know, the prelude to
+some arguments that we have had in the past and will probably
+have in the future, but that baseline premise that we have to
+make sure that we provide for the missions that we are asking
+to be accomplished we are 100 percent in agreement on.
+    So, yeah, I didn't read my script. I was supposed to tell
+you the three things that we had to do today. That was one, so
+we are done with that.
+    Now I am going to introduce the new members and then we
+have got some rules stuff. So I am now going to do something
+that I don't think in the entire 22 years that I have been on
+the committee I have done. I am going to read word for word
+something that my staff gave me. I don't know if they are
+excited about that or a little bit nervous.
+    But we have on our side of the aisle 16 new Members of
+Congress. Now, normally I like to, you know, get some memory of
+this stuff and be able to authentically just, you know, say
+something about everybody. There is no way on God's green Earth
+I am going to be able to do that with 16 different Members.
+    So my staff has helpfully provided me with some background
+on everybody, and I am going to introduce the Members and read
+through that. I know some of them aren't here because of other
+committee assignments probably, although it looks like actually
+most of them are here. But whether you are here or not, I am
+going to introduce you.
+    So I will get started and then we will turn it over to Mr.
+Thornberry to do the same. So, first, we have Bill Keating from
+Massachusetts, who is a returning Member of Congress but new to
+the committee. He represents Massachusetts' Ninth District,
+which includes Joint Base Cape Cod along with several naval
+underwater research academic institutions around the area.
+    He is the grandson of a Gold Star mother and a former
+district attorney. He joins the committee having previously
+served on the Homeland Security Committee and is the
+presumptive chair of the Europe and Eurasia Subcommittee on
+House Foreign Affairs Committee. Welcome, Bill. Good to have
+you.
+    Our second returning Member but new to the committee is
+Filemon Vela. He represents the 34th District of Texas, which
+includes Naval Air Station Kingsville with the Corpus Christi
+Army Depot and Naval Air Station Corpus Christi in the adjacent
+district. Texas 34 is home to the SpaceX South Texas launch
+site in Brownsville.
+    Mr. Vela was first elected to Congress in 2012. He is a
+former trial lawyer and the son of one of first Hispanic
+Federal judges. He previously served on the Homeland Security
+Committee, and he continues to serve as a senior member of the
+Agricultural Committee. Welcome.
+    And now we have our newly elected Members, beginning with
+Andy Kim, who represents New Jersey's Third District. This
+includes Joint Base McGuire-Dix-Lakehurst, the only tri-service
+base in the country. Joint Base MDL includes units from all
+five armed services branches and directly employs 50,000,
+including 30,000 Active Duty.
+    Representative Kim has worked at the U.S. State Department,
+the Pentagon, and has served in Afghanistan as a civilian
+adviser to Generals Petraeus and Allen, and has also served on
+the National Security Council. Welcome.
+    Kendra Horn represents the Fifth District of Oklahoma, home
+to the U.S. Coast Guard Institute, the Mike Monroney
+Aeronautical Center, and thousands of civilian and military
+personnel of Tinker Air Force Base. A lawyer by training, she
+left the nonprofit world to bring her experience in the
+aeronautics industry to the U.S. House of Representatives.
+Thank you for joining us.
+    Gil Cisneros represents California's 39th District covering
+parts of Los Angeles, Orange and San Bernardino Counties, and
+has numerous aerospace and defense industry companies.
+Representative Cisneros comes from a military family, as both
+his grandfathers served in World War II, his father served in
+the Vietnam war, and he earned his education through a Naval
+Reserve Officer Training Corps scholarship and served as a U.S.
+naval officer for 10 years.
+    I will say, we have a good blend of our new Members of
+people who have served in the military, State Department, CIA
+[Central Intelligence Agency], and elsewhere, as well as people
+who are civilians. So I think it is an excellent mix, and we
+are happy to have that breadth of experience.
+    Next is Chrissy Houlahan, who represents Pennsylvania's
+Sixth District, which is the western suburbs of Philadelphia
+and the Reading area in Berks County. Chrissy is third-
+generation military. She served 3 years on Active Duty in the
+Air Force, followed by 13 years in the active and inactive
+Reserves, ultimately rising to the rank of captain. She also
+brings to the committee training as an engineer and a
+background growing global businesses.
+    Jason Crow represents Colorado's Sixth Congressional
+District, which includes Buckley Air Force Base with Fort
+Carson and the Air Force Academy directly south of the
+district. Rep. [Representative] Crow is a former Army Ranger,
+having served in both conventional and special operations units
+during three combat tours in Iraq and Afghanistan.
+    Xochitl--and this, by the way, is a big moment I have been
+waiting for is to see if I could successfully not butcher that
+first name. Xochitl Torres Small is from New Mexico's Second
+District, which is home to Holloman Air Force Base and White
+Sands Missile Range, the largest military installation in the
+country.
+    With an average of less than 10 people per square mile, New
+Mexico's Second District faces many challenges unique to rural
+communities, and as I understand, it is the fifth largest
+district in the country. That is a lot of ground to cover. I
+was telling her earlier, I could walk out my door and drive to
+any place in my district in about 45 minutes, so I understand
+the challenge that you face there, and I am very happy to have
+my much smaller district. But I am sure you will do an
+excellent job representing it.
+    She previously worked as a water attorney and a field
+representative for Senator Udall. Through these roles she
+worked with local governments, farmers, developers, and
+conservationists to protect our water.
+    Next is Elissa Slotkin from Michigan's Eighth District,
+which includes Ingham County, home to Michigan's capital and
+Michigan State University; Livingston County; and North Oakland
+County, home to Michigan's Automation Alley. Just outside the
+district is TAACOM, the U.S. Army Tank, Automotive and
+Armaments Command. Representative Slotkin has spent her career
+in government service.
+    She joined the CIA after 9/11 and served three tours in
+Iraq alongside the military. Rep. Slotkin has held a series of
+leadership positions at the Department of Defense, including as
+acting Assistant Secretary of Defense for International
+Security Affairs. Welcome.
+    Next we have Mikie Sherrill, who represents New Jersey's
+11th District, which includes Picatinny Arsenal, home of the
+Defense Department's Joint Center of Excellence for Armaments
+and Munitions. She graduated from the U.S. Naval Academy and
+spent almost 10 years on Active Duty in the United States Navy
+as a Sea King helicopter pilot and on her last tour served as a
+Russian policy adviser.
+    Next, from California we have Katie Hill. She serves the
+Antelope, Simi, and Santa Clarita Valleys, California's 25th
+District. She is the former executive director of People
+Assisting the Homeless, which she grew from a local
+organization to the State's largest provider of homelessness
+services, where she moved thousands of families and veterans
+off the streets and into permanent, affordable homes.
+    Next, from Texas' 16th Congressional District, we have
+Veronica Escobar, and this includes Fort Bliss Army Base,
+which, I forget, I think it is like the third or fourth largest
+Army base, one of the largest Army bases in the country. And
+she has previously served in El Paso as a county judge for two
+terms.
+    Then back to New Mexico, we have Deb Haaland, who
+represents New Mexico's First District, which includes Kirtland
+Air Force Base, Sandia National Laboratory, and a part of White
+Sands Missile Range. New Mexico is home to three other military
+installations: Cannon Air Force Base, Holloman Air Force Base,
+as well as Los Alamos National Laboratories.
+    Her father was a 30-year combat Marine veteran who was
+awarded the Silver Star Medal for saving six lives during
+Vietnam, and he was laid to rest at Arlington National
+Cemetery. Her mother is a Navy veteran who was a Federal
+employee for 25 years in Indian education. She is an enrolled
+member of the Pueblo of Laguna.
+    Now we go across the country to Maine to Jared Golden, who
+represents Maine's Second District, which is home to the Bangor
+Air National Guard Base and hundreds of Bath Iron Works
+employees. After the September 11 attacks, Golden enlisted in
+the United States Marine Corps. He served 4 years in the
+military as an infantryman deploying to Afghanistan in 2004 and
+Iraq in 2005 and 2006.
+    Staying in the northeast, Lori Trahan from Massachusetts'
+Third District. Fort Devens is in Massachusetts 3 and Hanscom
+Air Force Base abuts the district. Lori is a native of Lowell,
+Massachusetts. She served as chief of staff to former Rep.
+Marty Meehan and later founded a successful consulting firm.
+    And believe it or not, we are now down to the last Member.
+From the great State of Virginia, Elaine Luria, who represents
+Virginia's Second District, which is home to eight major
+military installations representing all branches of the Armed
+Forces, including Naval Station Norfolk, the largest naval base
+in the world.
+    A 20-year Navy veteran who achieved the rank of commander,
+Rep. Luria joins the committee after six deployments in the
+Middle East and Western Pacific supporting both operations
+Enduring Freedom and Iraqi Freedom.
+    A very large group, if we could give them all a collective
+round of applause and welcome them to the committee.
+    And with that, I yield to Mr. Thornberry.
+    Mr. Thornberry. Thank you, Mr. Chairman.
+    I join you in welcoming the new Members on your side of the
+aisle. And Conaway and I are particularly glad to have some
+Texas reinforcements.
+    What we lack in quantity of new Members we make up for with
+quality. We have two new Members: First, in his second term,
+Congressman Jack Bergman from the First District of Michigan.
+He served in a Marine uniform for four decades, starting as a
+combat assault pilot in Vietnam and finishing as commanding
+general of the largest force level organization in the Marine
+Corps responsible for roughly 100,000 Marines and sailors.
+Lieutenant General Bergman is the highest-ranking combat
+veteran ever elected to Congress, but he says you still don't
+have to salute him.
+    And secondly, new Member of Congress, Representative
+Michael Waltz from the Sixth District of Florida. He is the
+first ever Green Beret elected to Congress, served our country
+on the battlefield including multiple combat tours, and also
+served as a senior national security policy adviser in the
+Pentagon and at the White House under Vice President Cheney. He
+is still serving as a lieutenant colonel in the National Guard,
+and we are very glad to have both of these new Members join our
+ranks.
+    The Chairman. And we are being joined by Mr. Brown who is--
+we are in the majority now. We are on this side.
+    Yeah, actually, when we got in the majority after 10 years
+in the minority, I didn't realize that they flipped the side
+that you sit on just based on that. So welcome, Mr. Brown, the
+vice chairman of the committee, Anthony Brown.
+    All right. Now we have some business to take care of, so we
+will get through the script here. I call up Committee
+Resolution No. 1 regarding the committee rules for the 116th
+Congress. The clerk shall read the resolution.
+    Ms. Quinn. ``Committee Resolution No. 1. Resolved, That the
+Committee on Armed Services, U.S. House of Representatives,
+adopt the committee rules for the 116th Congress, which are
+stated in the copy distributed to each Member.''
+    The Chairman. The proposed committee rules have been
+developed jointly by Ranking Member Thornberry and made
+available to Members' offices on Monday, January 21.
+    Following consultation with Mr. Thornberry, I ask unanimous
+consent that the resolution be considered as read and that the
+resolution be open to amendment at any point.
+    Is there objection?
+    Without objection, it is so ordered.
+    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
+    The Chairman. At this time, is there any discussion, or
+are there any questions concerning the committee rules?
+    If there is no further discussion, are there any amendments
+to the committee rules?
+    We will take that as a no as well.
+    There are no amendments.
+    The Chair now recognizes the gentleman from Rhode Island,
+Mr. Langevin, for the purpose of offering a motion regarding
+Committee Resolution No. 1, the committee rules.
+    Mr. Langevin. Mr. Chairman, I move to adopt Committee
+Resolution No. 1 concerning the committee rules.
+    The Chairman. The question now occurs on the motion of the
+gentleman from Rhode Island, Mr. Langevin.
+    So many as are in favor say aye.
+    Those opposed.
+    A quorum being present, the ayes have it, and the motion is
+adopted. And without objection, the motion to consider is laid
+upon the table.
+    The next order of business is Committee Resolution No. 2,
+unsurprisingly, I suppose, regarding the committee's security
+procedures for the 116th Congress. I call up Committee
+Resolution No. 2. The clerk shall read the resolution.
+    Ms. Quinn. ``Committee Resolution No. 2. Resolved, That the
+Committee on Armed Services, U.S. House of Representatives,
+adopt the committee security procedures for the 116th Congress,
+a copy of which has been distributed to each Member.''
+    The Chairman. The security procedures were coordinated
+again with Mr. Thornberry and were made available to Members'
+offices on Monday, January 21.
+    Following consultation with Mr. Thornberry, I ask unanimous
+consent that the resolution be considered as read and the
+resolution be open to amendment at any point.
+    Is there any objection?
+    Without objection, it is so ordered.
+    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
+    The Chairman. At this time, if there are--is there any
+discussion? Are there any questions concerning the security
+procedures?
+    If there is no further discussion, are there any amendments
+to the security procedures?
+    There are no amendments.
+    The Chair now recognizes the gentleman from Rhode Island,
+Mr. Langevin, for the purpose of offering a motion regarding
+Committee Resolution No. 2, the security procedures for the
+116th Congress.
+    Mr. Langevin. Mr. Chairman, I move to adopt Committee
+Resolution No. 2, the security procedures for the 116th
+Congress.
+    The Chairman. The question now occurs on the motion of the
+gentleman from Rhode Island, Mr. Langevin.
+    So many as are in favor will say aye.
+    Those opposed.
+    A quorum being present, the ayes have it, and the motion is
+adopted. And without objection, a motion to reconsider is laid
+upon the table.
+    And I--oh, I thought we were done. There is actually a
+Committee Resolution No. 3. On to the final order of business.
+I call up Committee Resolution No. 3, appointing committee
+staff for the 116th Congress. That is actually kind of
+important. The clerk shall read the resolution.
+    Ms. Quinn. ``Committee Resolution No. 3. Resolved, That the
+persons listed on the sheet distributed to the Members, and
+such other personnel as may be required by the committee within
+the limits and terms authorized under the Rules of the House of
+Representatives, are hereby appointed to the staff of the
+Committee on Armed Services, U.S. House of Representatives, for
+the 116th Congress, it being understood that according to the
+provisions of law, the Chairman will fix the basic salary per
+annum.''
+    The Chairman. As many of you know, our committee is unique
+in that the committee staff is a combined staff. The committee
+staff is here to provide advice and counsel to all of you,
+Democratic and Republican Members alike. Please feel free to
+avail yourself of their services. They are a talented group of
+professionals.
+    And this point actually bears emphasis. The single greatest
+asset that we have on this committee are these people you see
+lined up around us. We have an unbelievably talented staff that
+are incredibly important to the work we do. Please take
+advantage of that.
+    Whatever the issue is you are working on, these people can
+help you. They do an outstanding job for us. In fact, I am
+going to ask you to give our staff a round of applause. They
+work incredibly long hours and do an outstanding job, so
+appreciate having them. Look forward to working with them, as
+always.
+    A copy of the committee staff in the 116th Congress was
+prepared in consultation with the minority and made available
+to Members' offices earlier this week. Following consultation
+with Mr. Thornberry, I ask unanimous consent that the
+resolution be considered as read.
+    Is there objection?
+    Without objection, it is so ordered.
+    [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
+    The Chairman. At this time, is there any discussion, or
+are there any questions concerning the committee staff?
+    Mr. Thornberry. Mr. Chairman.
+    The Chairman. Yes, Mr. Thornberry.
+    Mr. Thornberry. Mr. Chairman, I was going to make a point
+that you made but I do want to emphasize it. This is another
+way this committee is different from all other committees. Now,
+you see some of these ladies and gentlemen on this side and
+some on this side, but we have a unified staff, which means any
+member can go to any member of the staff and they will help
+with whatever issue you want to talk to them about. And that
+just doesn't--and they have different expertise.
+    And so I also encourage all members to take advantage of
+that unique aspect of this committee, which also helps us
+maintain the strong bipartisan tradition here.
+    Thank you. I yield back.
+    The Chairman. Any further discussion?
+    If there is no further discussion, the Chair now recognizes
+the gentleman from Rhode Island, Mr. Langevin, for the purpose
+of offering a motion regarding Committee Resolution No. 3,
+appointing the committee staff for the 116th Congress.
+    Mr. Langevin. Mr. Chairman, I move to adopt Committee
+Resolution No. 3 regarding committee staffing for the 116th
+Congress.
+    The Chairman. The question now occurs on the motion of the
+gentleman from Rhode Island, Mr. Langevin.
+    So many as are in favor will say aye.
+    Those opposed, no.
+    A quorum being present, the ayes have it, and the motion is
+adopted. And without objection a motion to reconsider is laid
+upon the table.
+    Without objection, committee staff is authorized to make
+technical and conforming changes to reflect the action of the
+committee in adopting Committee Resolutions No. 1, 2, and 3.
+    Before we adjourn, there is apparently a brief
+administrative matter. Oh, yeah. Okay. We have a 5-minute rule
+in this committee. Basically when we have hearings, when we do
+markups, you all have 5 minutes to speak. We are going to try
+to strictly adhere to that. The only exception to that is,
+well, me and the ranking member, who--we are, by tradition, not
+on the clock.
+    And, you know, it is a big committee, so there are a lot of
+members to get to. I always like to emphasize that just because
+you have 5 minutes you don't actually have to take all 5
+minutes. Now, I understand you have got important things to do,
+and if you do and it is correct and if you need to, that is
+fine. But it is not required.
+    And the other thing is, I sort of have et al. attention
+deficit disorder to a certain degree, not during hearings but
+in markups. I am going to try to move things along as quickly
+as possible, but also I want a robust debate. So I find it
+better, if you have got something to say, say it. If you can
+say it more briefly, that helps more people be able to say
+their piece.
+    So I am going to try to move that along as quickly as
+possible. But I understand, as members of this committee, you
+have districts to serve, you have issues you are pressing. We
+have the witnesses. We are going to try to get to all of you.
+    I will warn some of you down further that we consistently
+have witnesses, particularly when they are from the Pentagon,
+who have hard stops. And, you know, we don't always get to
+everybody. You will figure that out as you go, but we will try.
+We will do our level best.
+    I believe--I don't know if this is formally in the rules or
+if we do this, and the way it works, that I was unaware of at
+first, is you are in line when the gavel falls. It is by
+seniority for the most part, but if you are not here when the
+committee starts, you lose your place in line. Whoever is here,
+they are in line, and then as you come in you then go to the
+end of the line.
+    And I will say something that every member of this
+committee learns after about the first day, you can show up for
+the gavel falling, leave, and then monitor it and come back
+when you ask your question. I don't necessarily recommend that,
+depending on what you have, but I want to make sure that
+everyone is aware that that is the rule. So if you are sitting
+there waiting to be called on and we call on somebody past you
+and you go, why? That is why.
+    I think that is everything. Mac, do you have anything?
+Okay. All right. I just did that informally because my next
+line says, ``Let me recognize Mr. Thornberry in case he has any
+closing comments or wishes to add to this discussion.''
+    Mr. Thornberry. I am good.
+    The Chairman. All right. Cool.
+    If there is no further business, the committee stands
+adjourned subject to the call of the Chair, and I look forward
+to working with all of you.
+    [Whereupon, at 11:30 a.m., the committee was adjourned.]
+                                  [all]
+</pre></body></html>

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+<html>
+<title> - FLIPPING THE SWITCH ON RURAL DIGITAL ENTREPRENEURSHIP</title>
+<body><pre>
+[House Hearing, 116 Congress]
+[From the U.S. Government Publishing Office]
+         FLIPPING THE SWITCH ON RURAL DIGITAL ENTREPRENEURSHIP
+=======================================================================
+                                HEARING
+                               before the
+                      COMMITTEE ON SMALL BUSINESS
+                             UNITED STATES
+                        HOUSE OF REPRESENTATIVES
+                     ONE HUNDRED SIXTEENTH CONGRESS
+                             FIRST SESSION
+                               __________
+                              HEARING HELD
+                             MARCH 13, 2019
+                               __________
+ [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
+            Small Business Committee Document Number 116-011
+             Available via the GPO Website: www.govinfo.gov
+                                   ______
+                     U.S. GOVERNMENT PUBLISHING OFFICE
+35-340                    WASHINGTON : 2019
+                   HOUSE COMMITTEE ON SMALL BUSINESS
+                 NYDIA VELAZQUEZ, New York, Chairwoman
+                         ABBY FINKENAUER, Iowa
+                          JARED GOLDEN, Maine
+                          ANDY KIM, New Jersey
+                          JASON CROW, Colorado
+                         SHARICE DAVIDS, Kansas
+                          JUDY CHU, California
+                           MARC VEASEY, Texas
+                       DWIGHT EVANS, Pennsylvania
+                        BRAD SCHNEIDER, Illinois
+                      ADRIANO ESPAILLAT, New York
+                       ANTONIO DELGADO, New York
+                     CHRISSY HOULAHAN, Pennsylvania
+                         ANGIE CRAIG, Minnesota
+                   STEVE CHABOT, Ohio, Ranking Member
+   AUMUA AMATA COLEMAN RADEWAGEN, American Samoa, Vice Ranking Member
+                        TRENT KELLY, Mississippi
+                          TROY BALDERSON, Ohio
+                          KEVIN HERN, Oklahoma
+                        JIM HAGEDORN, Minnesota
+                        PETE STAUBER, Minnesota
+                        TIM BURCHETT, Tennessee
+                          ROSS SPANO, Florida
+                        JOHN JOYCE, Pennsylvania
+                Adam Minehardt, Majority Staff Director
+     Melissa Jung, Majority Deputy Staff Director and Chief Counsel
+                   Kevin Fitzpatrick, Staff Director
+                            C O N T E N T S
+                           OPENING STATEMENTS
+                                                                   Page
+Hon. Nydia Velazquez.............................................     1
+Hon. Steve Chabot................................................     2
+                               WITNESSES
+Mr. Dana F. Connors, President & CEO, Maine State Chamber of
+  Commerce, Augusta, ME, testifying on behalf of the Maine State
+  Chamber........................................................     5
+Mr. Bill Ingersoll, Owner, Bikes, Trikes, and Quads, Sloansville,
+  NY.............................................................     6
+Ms. Afton Stout, Owner, My Dinosaur Dreams, State Center, IA.....     8
+Mr. Jake Ward, President, Connected Commerce Council, Washington,
+  DC.............................................................    10
+                                APPENDIX
+Prepared Statements:
+    Mr. Dana F. Connors, President & CEO, Maine State Chamber of
+      Commerce, Augusta, ME, testifying on behalf of the Maine
+      State Chamber..............................................    31
+    Mr. Bill Ingersoll, Owner, Bikes, Trikes, and Quads,
+      Sloansville, NY............................................    36
+    Ms. Afton Stout, Owner, My Dinosaur Dreams, State Center, IA.    40
+    Mr. Jake Ward, President, Connected Commerce Council,
+      Washington, DC.............................................    43
+Questions for the Record:
+    None.
+Answers for the Record:
+    None.
+Additional Material for the Record:
+    Connected Commerce Council SME Research......................    47
+         FLIPPING THE SWITCH ON RURAL DIGITAL ENTREPRENEURSHIP
+                              ----------
+                       WEDNESDAY, MARCH 13, 2019
+                  House of Representatives,
+               Committee on Small Business,
+                                                    Washington, DC.
+    The committee met, pursuant to call, at 11:33 a.m., in Room
+2360, Rayburn House Office Building. Hon. Nydia Velazquez
+[chairwoman of the committee] presiding.
+    Present: Representatives Velazquez, Finkenauer, Kim,
+Golden, Schneider, Delgado, Houlahan, Craig, Chabot, Balderson,
+Hern, Hagedorn, Stauber, Burchett, Spano and Joyce.
+    Chairwoman VELAZQUEZ. Good morning. The committee will come
+to order.
+    I thank everyone for joining us this morning, and I want to
+especially thank the witnesses for being here today.
+    In today's economy, there is no doubt that digital
+technology has revolutionized the way entrepreneurs are looking
+to build, grow, and manage a successful business.
+    Whether it is utilizing the latest app to advertise a
+product or engaging in the sharing economy by renting out a
+work space online, these type of inventions have been a
+catalyst for small businesses in just the last decade. In fact,
+three out of four American small businesses utilize tech
+platforms for sales, according to industry estimates. And, an
+even higher amount use at least one digital platform to display
+products and services, as well as advertise.
+    By harnessing the opportunities of digital platforms and
+marketplaces, many small businesses and entrepreneurs are
+experiencing growth and success. Look no further than the small
+businesses testifying here today.
+    It is also no secret that some of our country's most
+innovative ideas and successful small businesses are hatched
+within our rural communities. Yet, in many rural areas
+throughout this nation, the absence of reliable broadband
+threatens to hold back an entire subset of entrepreneurs.
+    Approximately 14 million rural Americans and 1.2 million
+Americans living on Tribal lands still lack mobile LTE
+broadband at speeds of 10 megabytes per second. Put another
+way, more than 30 percent of rural residents lack broadband,
+compared to just 2 percent of urban residents. Among rural
+tribal residents, the share increases to 66 percent.
+    The stories behind these numbers are of real entrepreneurs
+whose ability to secure affordable capital, expand into new
+markets, and hire workers, are all jeopardized without reliable
+internet access.
+    So, it is important that any technological leap to 5G or
+future investment in infrastructure from Congress secures
+access to reliable broadband, no matter where in the U.S. the
+next small business finds itself.
+    We cannot, however, encourage small businesses to adopt
+today's digital platforms without simultaneously ensuring they
+have the training and resources necessary to protect themselves
+against cyberattacks and bad actors.
+    Therefore, today's conversation about expanding digital
+opportunities for rural entrepreneurs must also consider how we
+as members of this committee, can work to make it easier and
+more affordable for the budding small business to not only
+utilize digital technology, but be smart about not exposing
+themselves to greater risks.
+    Government policies should also keep pace with
+technological innovations and empower rural entrepreneurships
+to look beyond geographic boundaries. In order to access new
+markets and customers all over the world, small businesses need
+policies that encourage digital growth, not hinder it.
+    Finding the right balance to expand the reach and
+capabilities of rural entrepreneurs while also keeping them
+safe is a priority for this committee.
+    It is my hope that today's discussion can help identify
+ways to support and expand the number of businesses utilizing
+digital platforms, particularly for those that are in more
+rural communities.
+    With that, I thank each of the witnesses for joining us
+today and I look forward to your testimony.
+    I now would like to yield to the Ranking Member, Mr.
+Chabot, for his opening statement.
+    Mr. CHABOT. Thank you, Madam Chairwoman, and good morning
+to all those that are here today. I want to thank the witnesses
+especially for taking the time out of their busy work day to be
+here with us.
+    And before I get into my truly stimulating and emotional
+and inspiring opening statement on digital opportunities for
+rural entrepreneurs, I would like to introduce, we have got
+three students here shadowing me today, so if you three could
+stand up. These three are from The Ohio State University. So we
+appreciate them being here.
+    So they have seen us discuss NATO in Foreign Affairs. They
+have seen us discuss VAWA, The Violence Against Women Act, and
+amendments on transgender issues and a whole range of issues,
+and so we are going to try to make the Small Business Committee
+just as interesting here today, and I am sure we will succeed.
+So I will get right into it. Here is my stimulating speech.
+    The use of digital technologies, including access to high
+speed internet and online tools is gaining popularity in rural
+areas because of the opportunities they create for small
+businesses throughout the countryside. Increasingly, digital
+tools and platforms form the foundation of success for the
+modern day American small business. Small businesses that use
+digital tools are more nimble, resourceful, and able to reach
+more potential customers.
+    It is no surprise that digitally-powered businesses earn
+twice the revenue and are three times more likely to create
+jobs. And that is, after all, what this Committee is about;
+trying to create more jobs for more Americans.
+    Unfortunately, there continues to be a lack of data about
+the rural aspect of the small business economy. What we do
+know, however, is that 27 percent of rural residents still do
+not have access to a high-speed internet connection. In
+addition to this lack of infrastructure, rural areas lack
+skilled IT professionals to assist in the adoption of more
+advanced digital technology. That is why this new report from
+the U.S. Chamber of Commerce is so timely and important. The
+Chamber surveyed over 5,000 small business owners across rural
+American about the economic impact to the online tools and
+technology on their businesses. Among other findings they
+discovered that while the ecommerce ecosystem boosts sales and
+reduces costs for rural small companies, such firms are
+adopting digital tools at a pace much slower than their urban
+counterparts.
+    The study also found that greater use of digital tools and
+technology could increase greater economic potential for rural
+small businesses across the country. With better access to
+digital tools and technology, the Chamber's analysis shows
+potential economic benefits in rural areas that is far
+reaching. For example, the study projects that gross sales for
+rural small firms could increase by more than 20 percent over
+the next 3 years, the equivalent of $84.5 billion per year.
+Such increases would also lead to an additional $46.9 billion
+to the U.S. gross domestic product and create over 360,000, so
+about a third of a million jobs.
+    I am looking forward to today's discussion and a further
+examination of these numbers and hearing suggestions about how
+we can increase the utilization of digital tools and
+technologies. The goal, of course, is to unlock the vast
+potential that is out there in the rural small businesses. And
+again, Ms. Velazquez, thank you very much for holding this
+hearing. I know that was pretty stimulating, and I yield back.
+    Chairwoman VELAZQUEZ. The gentleman yields back.
+    And if committee members have an opening statement we would
+ask that they be submitted for the record.
+    I would like to take a minute to explain the timing rules.
+Each witness gets 5 minutes to testify and every member get 5
+minutes for questioning. There is a lighting system to assist
+you. The green light will be on when you begin, and the yellow
+light means that there is 1 minute remaining. The red light
+comes on when you are out of time, and I will ask that you
+please try to stay within the timeframe.
+    I would now like to yield to Mr. Golden from Maine to
+introduce our first witness.
+    Mr. GOLDEN. Thank you, Madam Chair.
+    I would like to introduce, I am very honored and happy to
+introduce first Mr. Dana F. Connors. Mr. Connors is the
+president of the Maine State Chamber of Commerce, where he
+oversees a broad range of activities including advocacy
+efforts, economic and workforce development initiatives in the
+State of Maine, and a wide variety of member services for the
+business community. He is a Maine native who received a
+bachelor's degree in public management from the University of
+Maine in 1965. And I would just say as someone who worked for 4
+years in the Main state legislature, I worked closely with Mr.
+Connors and his business advocacy inside the statehouse. He is
+a class act. In an age that can sometimes be somewhat divisive
+in our political world, this is exactly the kind of guy that
+you want representing businesses before state legislatures and
+Congress. He knows how to keep the focus on the business, on
+the community, and in pulling people together. So just want to
+thank you for that. You have always been someone that I look up
+to very much, so thank you, sir. I look forward to hearing your
+testimony.
+    Chairwoman VELAZQUEZ. I now recognize Mr. Delgado from New
+York to introduce our second witness.
+    Mr. DELGADO. Thank you, Madam Chair. It is also my honor to
+introduce our second witness, Mr. Bill Ingersoll. He was raised
+in Sloansville in Schoharie County, which I just had a town
+hall in this weekend. He grew up racing motocross. As the son
+of a single mother, money was always tight. This led Bill and
+his grandfather and business partner to begin buying and
+selling ATVs and ATV parts to supplement the cost of racing. In
+2008, Bill tragically suffered a severe spinal cord injury
+which confined him to a wheelchair. The accident marked a
+turning point in his life, catalyzing his eBay career and
+leading him to start an ecommerce business. Since 2010, Bill
+has been using his passion for motocross to sell ATV parts in
+his eBay store, Bikes, Trikes, and Quads. I look forward to
+hearing from Bill today. We had a greater conversation earlier
+in my office and he has a lot of wonderful insights as to what
+it means to be a business owner in a rural community like
+Schoharie and how critically important it is for us to focus on
+digital needs, particularly rural broadband. So thank you. I
+appreciate the time.
+    Chairwoman VELAZQUEZ. Thank you, Mr. Delgado.
+    Now, I recognize Ms. Finkenauer from Iowa to introduce our
+next witness.
+    Ms. FINKENAUER. Thank you, Madam Chair.
+    I am very excited to have an Iowan here today and introduce
+Ms. Stout. Ms. Stout makes paper flowers from her home in State
+Center, Iowa. She started her Etsy shop back in 2010 and began
+gaining traction a few years later after her son was born.
+Living with fibromyalgia, her creative business allows her to
+do her work on her own schedule, which has benefitted her
+family greatly. Ms. Stout sells through multiple platforms, as
+well as through her own website. She manages every part of her
+shop, and her husband helps out occasionally. She has many
+international sales and hopes to be able to hire an employee
+soon to give back to her community. We are very happy to have
+you here and really look forward to your testimony today. Thank
+you, Ms. Stout.
+    And I yield back.
+    Chairwoman VELAZQUEZ. Thank you.
+    Now I would like to yield to the Ranking Member, Mr.
+Chabot.
+    Mr. CHABOT. Thank you, Madam Chair.
+    Today's final witness is Mr. Jake Ward, president of the
+Connected Commerce Council, or 3C, a membership organization
+for small businesses powered by digital. 3C works to provide
+small businesses with access to the market's most effective
+digital tools available, provides coaching to optimize growth
+and efficiency, and works to cultivate a policy environment
+that considers and respects the interests of small business.
+Jake is the cofounder and former CEO of Application Developers
+Alliance and Forward Strategies. We thank you for joining us
+here today and look forward to your testimony.
+    And I yield back.
+    Chairwoman VELAZQUEZ. Thank you, Mr. Chabot.
+    Mr. Connors, you are recognized for 5 minutes.
+  STATEMENTS OF DANA F. CONNORS, PRESIDENT & CEO, MAINE STATE
+CHAMBER OF COMMERCE; BILL INGERSOLL, OWNER, BIKES, TRIKES, AND
+   QUADS; AFTON STOUT, OWNER, MY DINOSAUR DREAMS; JAKE WARD,
+             PRESIDENT, CONNECTED COMMERCE COUNCIL
+                  STATEMENT OF DANA F. CONNORS
+    Mr. CONNORS. Thank you. Chairwoman Velazquez, Ranking
+Member Chabot, and distinguished members of the Small Business
+Committee.
+    My name is Dana Connors. I am president of the Maine State
+Chamber of Commerce, and I thank you, Madam Chair, for the
+opportunity to appear before you today and for the privilege of
+doing so. This is an extremely important issue for the state of
+Maine, which is my perspective to this report, because it does
+show what we anecdotally have become aware of but puts proof
+behind the actual issue. And we are grateful for that
+opportunity.
+    And while I am at it, I want to be sure to express my
+appreciation to the Chamber, to NDP Analytics, as well as
+Amazon and the team that came together to put this report
+before you and to show the importance, the impact, and frankly,
+the necessity that it creates for states like Maine that is
+predominantly rural and small business. So I thank them for
+that.
+    My job is as the good congressman from Maine, which we miss
+in Maine and we are grateful that you are representing us in
+Washington, we do miss you in our state capital, you, too, are
+a class act, may I say. We, as you said, work hard to promote a
+positive business environment in Maine, and in doing that we
+represent a network of over 5,000 businesses of all sizes,
+representing all sectors, and from all regions of the state. We
+advocate on their behalf and we try to provide those types of
+programs and partnerships that allow them to do what they do
+best, which is to run their business and be successful at it.
+    You probably are aware somewhat of Maine because many of
+you perhaps have vacationed there because we have 38 million to
+40 million a year that come to our beautiful state, and that is
+probably the reason our license plates bear the name ``
+Vacationland.'' But I want you also to know that we are rich in
+history. We have vibrant communities and we are unparalleled in
+work ethic. And when people ask me about Maine and describe in
+one word I say it is quality. Quality of our people, our place,
+as well as our products. Our state is a fabulous place to
+vacation. It is also a fabulous place to live and work.
+    You also need to know that our population is about
+1,350,000 spread over 33,000 squares miles. And by the way,
+that is the size of the rest of New England. You also need to
+know that our population, 60 percent lives in the rural areas.
+That makes us the most rural state in the country. But when you
+look at the size of our business, you also need to take into
+account that the Federal level describes small business as
+under 500. Seventy-five percent of our businesses are under 10.
+And when you consider we have 35,000 businesses, only 64 exceed
+that 500. So we are the subject in so many ways of this report.
+And that is why this report is so important to us because it
+opens the door to opportunity, it provides a direction, and it
+creates a necessity for us to move on it.
+    I would like to share with you that we have made progress.
+We are rural, we are small, but this state has been, as you
+have implied in your opening comments, moving in this
+direction. There is a lot left to do but we are moving in the
+right direction.
+    I want to give you a couple examples to bear this out. The
+first is a woman who left New York City to come to Maine. She
+did not go to Portland where most of our population is. It has
+a great reputation as a foodie city. She chose our least
+populated county in the state, Washington County. When she came
+there about 10 to 14 years ago, there was no high-speed
+broadband internet connection. But she made it her priority to
+do just that. And today, because of that commitment in that
+rural, most rural part of our state, I will give you two
+examples to bear out. Cranberry Isle is a group of islands.
+There are 141 people that live there. It is also now the
+residence of a renowned artist who came there for vacation but
+loved it like so many people do and wanted to move there. This
+high-speed internet connection now provides him to sell his art
+throughout the world and to live and work on Cranberry Isle.
+    There is another astrophysicist who lives on Roque Bluffs,
+another very small community, probably 250 at max. This aero
+physicist works with NASA, has connections to the University of
+Phoenix, established it as vacation, but he, too, is there.
+    I can see I am running out of time and I barely got
+started. I am hopeful that during the questions that it will
+bear out how important this is, and the report builds the case
+that in Maine it very certainly applies. And I hope the
+questions will give me the opportunity to expand as I would
+like to do. Thank you.
+    Chairwoman VELAZQUEZ. Thank you, Mr. Connors.
+    Mr. Ingersoll, you are now recognized for 5 minutes.
+                  STATEMENT OF BILL INGERSOLL
+    Mr. INGERSOLL. Chairwoman Velazquez, Ranking Member Chabot,
+members of the Committee, thank you for inviting me to
+participate in this important hearing on how digital tools
+improve rural entrepreneurship.
+    My name is Bill Ingersoll. I own Bikes, Trikes, and Quads,
+a small business I started in rural Sloansville, New York. We
+sell motocross and ATV equipment on eBay to customers around
+the U.S. and increasingly around the world. I appreciate the
+opportunity to share my experience son some of the tools that
+make running my eBay business possible in rural America,
+including rural broadband access, universal and reliable Postal
+Service, and breaking down barriers through global trade.
+    I grew up racing motocross in upstate New York. My entire
+life changed when I was injured in a motocross crash and left
+paralyzed in 2008. After the accident, I could no longer work
+construction or do many of the other things I had done
+previously, but I was determined to move forward with my life.
+My grandfather and I had always fixed up old ATVs as a hobby,
+so I was looking for a way to turn that hobby into a business.
+Not long after, I was trying to find some parts to modify an
+ATV we had so that I could get around our property more easily.
+I ended up tracking them down on eBay. The process was so easy
+and convenient for me as a buyer that I began to look into
+selling parts on eBay. We already had a large stock of parts
+from ATVs and dirt bikes from years of racing so we decided to
+give it a try. We opened our eBay store in 2010 and have been
+selling since. I now have three employees and run my business
+out of a warehouse on my property.
+    I often look back today, 10 years later, and wonder what
+life might look like now without eBay and I really do not know.
+Being 23 years old with minimal education in a poor rural area
+never fostered good odds for an able-bodied person, let alone
+someone who was now disabled. EBay and being able to run a
+business online has given me a life that I may have not
+otherwise enjoyed.
+    Living in rural upstate New York, I would not be able to
+use eBay if I did not have access to high-speed internet and
+affordable broadband. Unfortunately, broadband reliance and
+even phone connectivity continue to be constant issues for our
+company. Rural broadband is essential to ensuring that rural
+small business owners and entrepreneurs can take advantage of
+the latest technologies and reach customers around the world no
+matter where they live in our country.
+    There used to be a few ATV dealers in my area who sold
+locally but were not online. Unfortunately, none of them are in
+business anymore. We need real investment in improving and
+expanding our rural communications infrastructure so that
+businesses like mine can take advantage of innovative tools and
+marketplaces like eBay. Even though my store is online, I still
+have to actually ship products to customers around the country
+and around the globe. I rely heavily on the U.S. Postal Service
+to reach my customers. Over 80 percent of our shipments go
+through USPS. I understand there are proposals that would make
+my package delivery to rural parts of the country like my
+hometown nonessential. I cannot imagine how anyone could
+consider small businesses like mine not essential by cutting
+access to Postal Services or raising prices for rural package
+delivery would be disastrous for rural small businesses. Most
+people do not know that private shippers charge surcharges to
+deliver to rural areas. If I had to rely only on private
+shippers or if package services went up dramatically, my costs
+would go through the roof. Like broadband, the U.S. Postal
+Service is essential for all Americans no matter where they
+live, and without it, rural small businesses will have a harder
+time competing with giant ecommerce companies that have their
+own warehouses and logistics networks. Small ecommerce
+businesses depend on reliable, affordable, and universal Postal
+Service.
+    On top of selling to our customers in the U.S., selling
+globally has been key to our success. We have shipped thousands
+of orders globally to some countries where ATVs are their prime
+mode of transportation. Selling worldwide allowed us to reach
+customers and realize new opportunities that we would have
+otherwise not considered. These opportunities are a direct
+result of conducting business online and never would have
+existed before the internet. Small online businesses like mine
+across the U.S. in rural and urban areas need trade policies
+that cut red tape for low value shipments by supporting higher
+de minimis thresholds throughout the world. That way, small
+businesses like mine can truly take advantage of one of the
+best things the internet has to offer, hundreds of millions of
+buyers all over the world.
+    On behalf of rural businesses across the country, thank you
+again for holding this important hearing. I look forward to
+your questions.
+    Chairwoman VELAZQUEZ. Thank you, Mr. Ingersoll.
+    And now, Ms. Stout, you are recognized for 5 minutes.
+                    STATEMENT OF AFTON STOUT
+    Ms. STOUT. Good morning. My name is Afton Stout and I am a
+creative entrepreneur from rural Iowa. Before I begin, I want
+to thank everybody who has been a part of me being here today,
+my mom and my brother, and of course, my husband, Brian, and my
+3-year-old son, Rhys. I also want to send a thank you to my
+dad, who passed away in 2006 because I know he would be super
+proud of me for being here today. Thank you, Chairwoman
+Velazquez, and Ranking Member Chabot, and members of the
+Committee for inviting me to speak with you today about my
+creative business.
+    I was born and raised in eastern Montana, in an even more
+isolated area than I live in now. My dad was diagnosed with
+systemic lupus the year that I was born, and I believe that my
+family's struggles with poverty have been a huge part of who I
+am today. Growing up with limited means instilled a sense of
+restraint when it comes to money and spending it wisely.
+    I have always been motivated by creating and selling,
+starting out in small craft shows in my hometown of Glendive,
+Montana. I can remember buying items from Etsy when I got my
+first bank card, which was pretty exciting. I had always
+planned to start a shop, despite being both intimidated and
+inspired by the success of others. I assumed that living in a
+small town would be a hardship for my creative ventures that I
+would have to struggle to overcome. However, I am certainly not
+alone in that space, as 27 percent of Etsy sellers are from
+rural areas like mine. After graduating from the local college,
+I worked two jobs and crafted on the side, selling through
+local online groups to keep my mother and me afloat after my
+Dad's life insurance ran out.
+    In 2013, my Mom remarried and I was able to kind of rethink
+my life and decide what I wanted to do. My stepdad was a huge
+help in getting me settled in Iowa, which I am super grateful
+for. That same year, I met my husband and went on to marry him
+in 2014. And for our wedding I handmade all of the flowers from
+paper, which was kind of the spark that sent me on to my
+entrepreneurial journey. For the first year of our marriage, I
+made a few pieces of jewelry, some of which I did list on Etsy,
+and after my son was born in 2015, I decided that I would stay
+home with him and see if I could find a few more people who
+were interested in handmade flowers for their weddings or
+events. And from there, things just kind of took off.
+    Thanks to the internet, I am one of 2.1 million sellers on
+Etsy, many of whom like me are able to run our creative
+businesses from home, despite living in a rural area. This has
+improved my quality of life immensely. I was diagnosed with
+fibromyalgia in 2012, an illness that I have been fighting
+since middle school, which ultimately led to me dropping out of
+high school. I did not allow it to hold me back. I took my GED
+a few months later and went to a local college to get my
+associate's degree, and like many creative entrepreneurs, I did
+not set out to become a full-time microbusiness owner, but I am
+very, very happy that I am able to do this.
+    When I first started out, I started advertising on Facebook
+and listed custom-order handmade flowers on Etsy. My first year
+I had about $37,000 in sales, which I thought was absolutely
+amazing. At the end of 2016, I started working with wooden
+flowers and the business just kind of exploded from there.
+After posting some of those on Etsy, my sales nearly tripled.
+    Starting out, most of my sales were online with roughly 10
+percent being local, in-person sales. Since then I have had
+customers from all over the world, including France and
+Germany. With a platform like Etsy, I am able to ship beautiful
+flowers made in Iowa to international buyers that truly value
+my work.
+    Today, the bulk of my business is wedding related. I custom
+dye and arrange wooden flowers to match wedding themes and
+other events. I am able to work with very, very many lovely
+people that I would never know or even reach without the
+internet or online platforms like Etsy. I am making a push for
+a bigger local presence, and even Etsy helps with that by
+showing search results with local businesses closer to the top
+of the search. I work 12-hour days during wedding season, but I
+love what I do and I get to work with people who are absolutely
+amazing.
+    I am proud to say that I am projected to be 80 percent
+above where I was last year in views and sales, and I may have
+to hire my husband to help me run things once my 3-year-old
+starts preschool this fall. In 2016, my husband started staying
+home full time with our toddler so that I could work full time
+on my creative business. He has trauma-induced arthritis in
+both of his feet from an injury back in 2010, so being able to
+stay home has helped him out incredibly and vastly improved the
+quality of life of all of us. Like 97 percent of Etsy sellers,
+I run my shop from my home. In fact, we just finished building
+a studio onto our house to increase productivity.
+    My creative business allows me to pursue my creative
+passions in the comfort of my home, surrounded by my family.
+And while my story is unique, this pathway to rural
+entrepreneurship is not. There are over 2.1 million Etsy
+sellers across the globe, and together, we sold $3.9 billion
+goods in 2018.
+    And I am about to run out of time, so I would appreciate
+any questions to follow up at the end of this. Thank you.
+    Chairwoman VELAZQUEZ. Thank you, Ms. Stout.
+    And now, Mr. Ward, you are recognized for 5 minutes.
+                     STATEMENT OF JAKE WARD
+    Mr. WARD. Good morning.
+    Madam Chairwoman, Ranking Member Chabot, on behalf of
+digitally-empowered small businesses across the country, thank
+you for holding this important hearing.
+    I am coincidentally also a Maine native, and I want to
+commend you for pulling together, though inadvertently, the
+most Maine-centric panel in the history of Congress. It is not
+often that small-town America gets a seat at the table, let
+alone two of them. I am grateful for the opportunity.
+    My hometown of Greenville, Maine, is small. It is fewer
+than 1,500 residents small. It is everybody knows everybody
+else small. There are no chain stores or big companies. In my
+hometown, every business is a small business. And those
+businesses are the foundation of the town, the community, and
+the local economy. That is the rule in rural America, not the
+exception.
+    It is true that much has changed in rural America. Small
+businesses are as important today as they have ever been. The
+digital age has brought its share of challenges, but also
+created many opportunities. Digital resources empower local
+businesses to rise above and grow beyond their geographic
+limitations and find customers around the world, where before
+the next county would have seemed a world away.
+    I am here today to offer the support and help of the
+Connected Commerce Council as this Committee works to unlock
+the potential of America's small businesses. As the son of a
+small business owner in a rural total in a rural state, it is
+my hope that 3C can provide resources, education, and access
+that helps rural small businesses realize their potential. It
+is also my intention to work with policymakers anywhere,
+including and especially members of this Committee to
+accomplish our shared goal.
+    As we have already heard from this panel today, the
+challenge of every small business is unique but their stories
+are universal. Unleashing the potential of rural America
+requires small businesses have access to four things--capital,
+affordable broadband services, talent, and finally access to
+affordable, secure, and scalable digital tools. It also
+requires that we understand that the digital economy is a
+different type of interconnected and interdependent economy
+where the investment of global platforms have direct, tangible
+local benefits that can be measured in new employees and
+increased financial security.
+    In Congress and in many state capitals, debates on data
+privacy, cybersecurity, and competition policy are underway
+that will dramatically affect small businesses' ability to
+succeed or even survive. If our data privacy laws focus only on
+consumer protection and tech giants, they will fail to
+recognize and preserve the importance of data and analytics
+that enable small businesses to compete with larger, urban-
+based companies on quality and price, rather than proximity and
+size.
+    Cybersecurity policy that focuses on only the biggest
+breaches and the gravest risks will leave small businesses in
+the crosshairs of ransomware predators and hackers.
+    Competition regulators who focus only on company size will
+miss the benefits that digital platforms and marketplaces
+provide to 3C members and digitally-empowered small business
+nationwide. Frankly, I am concerned we may lose the forest
+through the trees and focus too much on the largest, most
+prominent companies to the detriment of small businesses that
+will ultimately pay the price if business models are
+dramatically changed, costly regulation is enacted, or access
+to essential tools is limited.
+    The reality of the digital economy for 3C members and
+nearly 30 million small businesses like them is that they stand
+on the shoulders of large companies to reach otherwise
+unobtainable heights. Too often opportunity driven by
+innovation is assumed rather than promoted and protected. Too
+often we talk about small businesses rather than with small
+businesses. I know under the leadership of this Committee that
+will change.
+    If the Committee wishes to unless the potential of American
+small businesses, you must make sure that this Congress and
+state legislators do not limit access to the tools they need.
+We must take great care to ensure that policies focused on the
+largest companies do not inadvertently undermine small
+businesses' opportunities. Your contribution to unleashing the
+potential of all small businesses, including those in rural
+America, can be your vigilant defense of small businesses'
+access to the technology they need to succeed.
+    Thank you, again, for your attention to this important
+subject and for security a seat at the table for America's
+small businesses. I look forward to your questions.
+    Chairwoman VELAZQUEZ. Thank you, Mr. Ward, and all the
+members, all the witnesses for sharing your stories and showing
+us the challenges and the great potential that exists in
+promoting economic opportunities in rural America. And that is
+our responsibility. So I am very grateful for your testimony.
+    Mr. Connors, can you elaborate on the economic cost to
+rural communities of not having high-quality, reliable
+broadband?
+    Mr. CONNORS. Certainly, Madam Chair. I would not express
+that in terms of dollars----
+    Chairwoman VELAZQUEZ. Is your mic on?
+    Mr. CONNORS. Thank you, Madam Chair. I would be pleased to
+give that a response, not so much on the specificity of the
+actual numbers of dollars. I mean, the report bears out very
+effectively that with adequate access, $84 billion, 360,000 new
+jobs is pretty significant, which represents a 20 percent
+increase in business, that would certainly apply to us. We have
+found that in our state advancements have been made but there
+still remain 83,000 that do not have access. And that is based
+upon the FCC standard of 25/3, at which there may be even more.
+And I think what we are finding is that in our state, the
+opportunities to address the two most important issues in our
+state, and this is borne out by a report, an initiative that
+was based upon a collaborative between three organizations, one
+of which was a research organization, that 8 years ago we came
+together and have continued that initiative. But 8 years ago
+when the business community was surveyed and a poll was taken,
+the response was--and the whole initiative called Making Maine
+Work was to actually provide for the administration the
+priorities. At that time we were in a recession, so you can
+imagine it was all about tax incentive, those types of issues.
+Today, the issues that are most important that will serve our
+state and particularly the rural community is workforce, skill
+and education, and broadband. They are our top two issues. The
+business community has adopted and so has----
+    Chairwoman VELAZQUEZ. Mr. Connors, I would like to hear
+also from Ms. Stout and Mr. Ingersoll.
+    Mr. CONNORS. Yep. I am sorry.
+    Chairwoman VELAZQUEZ. But we will have a second round.
+    Mr. CONNORS. Thank you.
+    Chairwoman VELAZQUEZ. And I just want to discuss the
+workforce IT skills.
+    Ms. Stout and Mr. Ingersoll, can you speak to how broadband
+limitations in rural communities have either stifled your
+ability or your community's ability to grow and adapt to
+digital commerce?
+    Mr. INGERSOLL. Even though that we have access in my area
+to high-speed internet, the speeds are never accurate. They
+claim a 7 megabyte service. We will average 4 to 5 megabytes.
+But the other side to that is there are periods where I am
+getting 1 megabyte and it is very difficult for my business to
+operate like that. To call and set up a service call or
+something to that degree, to get a repair person out, they will
+give me a 2 week wait time to get the internet looked at. And
+during that period I have to do things like, you know, I can
+tether off of my cellphone occasionally. Cell service has
+improved in my area to the point where that is viable but I am
+already paying for a service that is not performing and it has
+got a direct cost to my business.
+    Chairwoman VELAZQUEZ. Thank you.
+    Ms. Stout?
+    Ms. STOUT. Pretty much the same things that he touched on
+are what I deal with also. We do not have a very reliable
+service, and we do not have very many options where I live. So
+you just kind of pick the best one that you can get and go off
+of it. I end up using my cellphone also to maintain my business
+contacts because I have to answer messages pretty frequently
+because I work with brides who worry a lot, so I always need to
+be in contact with people. And that is my main concern.
+    Chairwoman VELAZQUEZ. Thank you.
+    Mr. Ingersoll and Ms. Stout, have you had any type of
+interaction with any of the programs of the Small Business
+Administration, whether helping you put together a business
+plan or helping you access lending?
+    Mr. INGERSOLL. I have had no contact.
+    Chairwoman VELAZQUEZ. Yes, Ms. Stout?
+    Ms. STOUT. I also have had no contact with them either.
+    Chairwoman VELAZQUEZ. Okay, thanks.
+    And Ms. Stout, as an entrepreneur--well, my time is almost
+up so I will now recognize Mr. Balderson, Ranking Member of the
+Subcommittee on Innovation and Workforce Development, for 5
+minutes.
+    Mr. BALDERSON. Thank you, Madam Chair. But as the
+Chairwoman, you can keep on going if you want to, so please do
+not let me take that away from you.
+    Thank you, panel, for being here.
+    Mr. Ingersoll, this will probably be the first time this
+has ever happened. I am sorry what happened to you. I raced
+motocross. Just got done with the GNCC series. Then I decided
+to run for Congress so my motorcycling racing days, both KTMs
+450 and 200 have been sold and gone. But like you, the Madam
+Chair talked about one of the questions I had for you.
+    Do you remember flex bars?
+    Mr. INGERSOLL. Mm-hmm.
+    Mr. BALDERSON. I was the first guy in the country to start
+selling those online and going all over and that was back in
+2005-2006 range. And I had a really challenging time. I live in
+Appalachia, which is in rural Ohio is where I am actually from.
+But I was going to ask you, you know, you had no hard time
+getting access to broadband of any sort, or Ms. Stout? Because
+I am shocked by that.
+    Mr. INGERSOLL. At the time of my injury was the first time
+that we had access to broadband internet. That was 2008. You
+know, it has improved over time to where it is more function
+now, but I would say from 2008 until about 2015, it was very
+difficult. It had a direct impact to my business because there
+were days where we could not process orders because the
+internet was down and I had not found workarounds for that.
+    Mr. BALDERSON. Okay. And you talked in your opening
+statement about your United States Postal Service. And I
+totally agree with you. Folks do not know about the private
+carriers and what we had to do with that, and I am sure most of
+you do but I attest to that also. They were very important to
+me.
+    Ms. Stout, this question is for you. I mean, you had no
+inconsistency or lack of broadband when you first started out,
+or any issues at all?
+    Ms. STOUT. I do not really remember having a lot of issues
+getting internet. It is mostly the reliability that is an
+issue. Like I said, ours cuts out quite frequently, kind of on
+a schedule almost. Like they almost plan it. So I kind of work
+around that with my cellphone. But yeah, it was pretty easy to
+get it. I am fairly new though so, I mean, 2015-ish, so.
+    Mr. BALDERSON. Okay. Madam Chair, I yield back the rest of
+my time. Thank you.
+    Chairwoman VELAZQUEZ. The gentleman yields back.
+    And now we recognize the gentlelady from Iowa, Ms.
+Finkenauer, Chairwoman of the Subcommittee on Rural
+Development, Agricultural Trade, and Entrepreneurship.
+    Ms. FINKENAUER. Thank you, Madam Chair.
+    And this question is for Ms. Stout. Again, thank you so
+much for being here today. Really happy to have you. And my
+short time in Congress so far, just the last couple of months,
+this Committee and myself have really been focused on reducing
+barriers for entrepreneurs and looking at ways to ensure that
+we have an environment where small businesses, especially in
+rural areas, can create good paying jobs and also take care of
+their families. One of the things I want to do is plan a
+listening session within the district and talk to young folks
+all across the district, figuring out ways that we can get,
+again, more entrepreneurs. Make sure we are cutting down on
+those barriers so that they are able to have what they need to
+start and create good paying jobs so that we can keep Iowans in
+Iowa and also bring some back home, which is incredibly
+important to me as well.
+    One of the things though that I have already started to
+hear when it comes to barriers for a young person to even start
+a business and want to become an entrepreneur has to do with
+some things like paid family leave and those issues where it is
+incredibly important right now. You know, I know there are a
+lot of ideas out there, and I will not take this Committee to
+debate those, but I will say from my understanding they are
+incredibly important from folks in Iowa and across the country,
+and we need to make sure that our entrepreneurs are able to
+have leave policies to be able to, again, start their business,
+but also take care of their family.
+    And one of the things I also wanted to touch on, too, I
+understand there are other barriers we look at with the
+emergence of the digital economy that, you know, pros and cons
+that go along with it with our cities and towns, also other
+things, you know, health care, retirement benefits, student
+loans, and broadband, for example, that folks are dealing with.
+What are some of the barriers very specifically for you, Afton,
+to becoming an entrepreneur and then what would you like to see
+happen to encourage more young people to get involved and also
+be able to take that next step to be an entrepreneur
+themselves?
+    Ms. STOUT. Okay. That is a good question. A long question
+and a lot of answers.
+    I would say first off my biggest issue so far has been
+health care, which is very important for both my husband and I,
+because we both have health issues. Luckily, we were on
+government assistance previously before business started doing
+so well. My husband was a barista and I was a pharmacy
+technician and I quit to stay home with my son. But looking at
+the healthcare marketplace was very overwhelming. I know there
+is a lot of work that needs to be done with that. It was not
+very realistic the quotes that I was getting for what I would
+need to pay out of pocket to get insurance for my family. I did
+look into other options outside of the marketplace then because
+it just was far too expensive.
+    Another issue that has come up has been taxes to different
+jurisdictions in different areas where now I know that Etsy
+collects state sales tax for Iowa, so I do not have to worry
+about that, which is very helpful. If we were to have to
+collect, I know there are some bills that may require after a
+certain threshold that they collect, we collect sales tax for
+those outside states that we ship to. I think it is $100,000 or
+so. But if we had to do that, that would make it very, very
+hard for us to keep track of as a small business since I do all
+of my own paperwork and everything. Next year I am actually
+paying somebody to do my taxes for the first time. So exciting.
+But yeah, I do all my own paperwork otherwise. So if I had to
+keep track of taxes, otherwise I would definitely have to hire
+somebody else, which is also another set of paperwork and
+everything. So those are the two main things.
+    Things that would help, of course, are the internet issue,
+making sure that we have reliable internet. Health care. Making
+sure that health care is more affordable. And paid leave.
+Luckily, I am in a very lucky situation where my husband has
+gotten to stay home and take care of my son because otherwise,
+I could not do what I was doing or what I am doing. So those
+things are very important to me, and I am sure to others. Thank
+you.
+    Ms. FINKENAUER. Well, I look forward to working on them.
+And I look forward to having this conversation continuing. But
+I know my time is about to expire and again, thank you so much,
+all of you, for being here today, truly.
+    And with that, I yield back, Madam Chair.
+    Chairwoman VELAZQUEZ. The gentlelady yields back.
+    And now we recognize the Ranking Member, Mr. Chabot.
+    Mr. CHABOT. Thank you, Madam Chair. And I want to apologize
+for having to leave. We are marking up the VAWA, the Violence
+Against Women Act in Judiciary and I had an amendment that was
+being called up so I had to go over and take care of that. So I
+apologize.
+    Mr. Ward, let me start with you if I can. You mentioned the
+importance of cybersecurity for small firs, at least in your
+written testimony. I assume you probably talked about it in
+your oral testimony as well. And I really could not agree more.
+Would a nationwide network of counselors that are trained in
+cybersecurity measures help small firms prepare for
+cyberattacks? And additionally, would it be beneficial to offer
+some sort of safe harbor to small firms that have been
+victimized by a cyberattack so they are free to share that
+information with the Federal Government to help strengthen the
+Nation's entire cybersecurity network?
+    Mr. WARD. The short answer, sir, is yes, but this being
+Congress I will give you the longer one.
+    The cyberattacks for small businesses are extinction-level
+events. They will put companies out of business. The burden of
+reporting is complex. Often, too complex for very small
+businesses, for microbusinesses as it currently stands. I think
+a national network is a really good idea. I think that safe
+harbor is an essential idea. I want to congratulate you and
+Madam Chairwoman for the introduction of 1648 and 1649, two
+bills that are bipartisan in this environment is remarkable,
+but also, they really go to the heart of the issue. They are
+simple solutions to an otherwise complex burden. 3C is fully
+behind both of those. In fact, we would be more than happy to
+be part of the solution for 1649 and the network of training
+that you have proposed.
+    Mr. CHABOT. Thank you. Well, in the spirit of
+bipartisanship, the Chairwoman and I heard testimony about you
+just mentioned it can be an existential event to a small
+business if they have a cyberattack. Many literally go out of
+business as a result of that. They go under. And so this
+legislation should really help. And it is H.R. 1648 and H.R.
+1649 as you mentioned, and Ms. Velazquez and I introduced it
+together. So hopefully, we are going to make progress on that
+in a bipartisan manner and maybe actually be able to help the
+small business community tremendously.
+    Mr. WARD. Wonderful. We would love to help.
+    Mr. CHABOT. Thank you.
+    Mr. WARD. Thank you.
+    Mr. CHABOT. Mr. Ingersoll, I will go to you next if I
+could.
+    Could you tell us about how your business kind of grew over
+time? Was it to areas in New York, for example, and then maybe
+across the country and then followed by, I guess, exporting
+around the globe, I guess through eBay? Or did it more or less
+all come at once? Or how did it unfold in your particular
+instance?
+    Mr. INGERSOLL. Initially, I mean, being online you are
+going to get a variety of customers to begin with. Certain
+areas of the southwest, you know, and the southeast, they are
+the primary areas that our sales come in from. The traffic that
+eBay brings to my business and the visibility worldwide, it
+allows me a lot of opportunities in these different markets
+that if I was stuck to just my state or my county or my town,
+those opportunities would not be there. So I was able to grow
+my business completely off of the volume of sales I was getting
+from eBay.
+    Mr. CHABOT. Very good. Thank you.
+    Ms. Stout, you mentioned that the minute you got on Etsy
+your whole world changed. So what is next? Small businesses are
+always at the forefront of what is next because they have to be
+in order to compete with the larger companies that you compete
+all the time with. Are there new technologies out there that
+you see on the horizon or that you are already anticipating
+that will allow you to continue to grow your business in the
+future?
+    Ms. STOUT. Honestly, I am at a point in my business where I
+do not want to grow any bigger.
+    Mr. CHABOT. Okay.
+    Ms. STOUT. Because I would have to hire help, and I do
+not--I am happy being able to support my family and give back
+to my community where I am at.
+    As far as new technology, I am not really sure. I have been
+sticking with Etsy and Facebook pretty much and they have
+helped me out a lot. They reach a very, very large audience of
+people.
+    Mr. CHABOT. If it ain't broke, do not fix it; right?
+    Ms. STOUT. Right? Yeah. So I am happy where I am.
+    Mr. CHABOT. Excellent.
+    Ms. STOUT. So I have not really looked.
+    Mr. CHABOT. I am glad to see somebody happy where they are
+at.
+    Ms. STOUT. Yeah, thank you.
+    Mr. CHABOT. Okay. And finally, Mr. Connors, it is tough to
+get more rural than some parts of northern Maine. And I have a
+two-part question. I will try to get it real quick because my
+time has almost run out.
+    Do you happen to know the percentage of northern Mainers
+that have access to high-speed internet and those that do not?
+And secondly, with the advent of 5G technology and the way it
+is transferring the way we all communicate, do you happen to
+know what percentage of Maine has access to the 5G or 4 or 3
+for that matter?
+    Mr. CONNORS. I am from northern Maine originally where I
+was a city manager for years. I mentioned earlier in my
+response that there are 83,000 individuals that do not have
+access to broadband, and those are in the rural area
+predominantly of our state. And when you go north, there are
+pockets. That is the irony of this issue. Within that 83,000
+without access, you will find that in certain places where you
+least expect it, there is adequate service for that character
+of whether it is the business or the individual. But I would
+say a large percentage would be in my part of the state where I
+came from.
+    Mr. CHABOT. Thank you very much.
+    My time has expired, Madam Chair. Thank you.
+    Chairwoman VELAZQUEZ. Yes, the gentleman's time has
+expired.
+    And now we recognize Mr. Golden from Maine, Chairman of the
+Subcommittee on Contracting and Infrastructure.
+    Mr. GOLDEN. Thank you, Madam Chair.
+    You know, Mr. Connors, I am sure that you have members back
+home in Maine who run businesses very similar to Mr. Ingersoll
+and Ms. Stout.
+    Mr. CONNORS. Yes.
+    Mr. GOLDEN. I see you nodding your head as they talk about
+some of the opportunities and challenges that they face working
+what they do.
+    You were commissioner of the Department of Maine
+Transportation for a number of years. And through my time in
+politics I have traveled around and talked to businesses. I
+think we both agree normally I hear their top concerns in
+Maine, infrastructure, workforce, high energy costs, and then
+regulation falls into the mix. Just thinking about the way that
+we fund our roads and bridges, which I know you are very
+familiar with, I mean, we have got Federal highway, state
+highway fund. We do some municipal stuff. Throw that into the
+mix. Some bonding in Maine as you know. Would you agree that
+broadband, or even access to faster internet in a lot of rural
+areas of Maine has essentially become the economic highway of
+the 21st century?
+    Mr. CONNORS. Absolutely.
+    Mr. GOLDEN. Just as critical?
+    Mr. CONNORS. Yeah, I mean, thank you for that opening
+because I was commissioner for 11 years and I used to go around
+the state preaching the gospel that highways and bridges and
+transportation are the foundation of our economic system. And
+the following comment would be, it costs a lot to build and
+maintain but it costs a lot more not to. And you know what? The
+very parallel between transportation and this issue is striking
+because frankly, it has many of the same features, both in
+terms of its impact, but it also has many of the similar
+features in terms of how we resolve it. Those 83,000 that do
+not have access, that answer is going to come about when we
+share responsibilities, like when the Electrifying America took
+place we were all at the table. When we are looking at this
+issue, we need to be all at the table. And priorities will be
+given to usage and those types of things, but I think your
+point is spot on that I would say that in my opinion, while
+infrastructure overall is extremely important to our state as
+well as any state, broadband, high-speed internet connection is
+the key to our future. It is borne out in this report. To me it
+is parallel with transportation and does not deserve any other
+priority than a top priority.
+    Mr. GOLDEN. Thank you very much. Knowing how important it
+is to our economy and all the members of the Maine State
+Chamber of Commerce, I am sure if you had the capital, if your
+members could afford to build that infrastructure themselves
+they would do it; correct?
+    Mr. CONNORS. Absolutely. And I think that is a point to be
+made, is that our providers have done well. Bearing in mind the
+characteristics of our state, how rural we are, how small
+business we are and that type of thing, that they want to do it
+but the return on investment is simply not there. And that is
+why we need that partnership to develop it. When we do and when
+we deal with the digital literacy, because not everyone is
+aware of the incredible potential that exists, the value that
+it brings. It has expanded fast and that is good, but there is
+more to do. And I think the answer lies in all of us coming
+together. And as you know, our governor has teed this up with
+an expectation of major bond issues this year and the next
+several years.
+    Mr. GOLDEN. And so as the state of Maine looks to put a
+little bit of skin in the game----
+    Mr. CONNORS. Absolutely.
+    Mr. GOLDEN.--and taxpayers show us that they are willing to
+make those investments in infrastructure, some Federal help
+would be important?
+    Mr. CONNORS. Yes, it would. And I think that is the
+relationship that we need to fix this issue.
+    Mr. GOLDEN. Thank you.
+    Mr. CONNORS. To address the issue.
+    Mr. GOLDEN. I appreciate that very much.
+    Just shifting gears very quickly with the last minute I
+have left, since Mr. Ward is from Maine, I have to ask you a
+question as well.
+    You touched on this a little bit. As Congress is looking
+into privacy matters pertaining to the digital world and some
+of the people that you work with, your business included, and
+this includes in state legislatures. I am sure that you
+probably are advocating on these issues around the country. As
+we look into privacy regulation, would you support small
+business exemptions? And if so, where is the trigger? At what
+size does a company grow so large that we have to have some
+regulation to make sure that consumers are being protected in
+terms of their privacy in data and information?
+    Mr. WARD. Thank you, Congressman.
+    We are talking about data privacy. 3C generally opposes
+carve out exemptions of any kind because frankly this is very
+important. It is important that we get this right. Data has
+been in the news a lot over the last several years, obviously.
+But if you are able to put a small business exemption or carve
+out into a piece of legislation, you are doing it because you
+believe the burden is too high. That the compliance burden is
+too high. And you are saying that the size of the company or
+the size of their user base matters more than the privacy of a
+smaller number of people, which frankly betrays the motives of
+the regulation in the first place.
+    As a former Capitol Hill staffer and somebody who has been
+doing this for a little while, my advice to both Congress and
+to the state legislators would be to write a better bill. Do
+the job. Write legislation and regulation that applies to
+everybody. That raises the standard and the practice for
+companies large and small but has a compliance burden and a
+requirement of administration low enough that a two-person shop
+could do it. If we can do that with our own taxes, we can do it
+with data privacy.
+    Chairwoman VELAZQUEZ. The gentleman's time has expired.
+    And now I recognize the gentleman from Oklahoma, Mr. Hern,
+Ranking Member of the Subcommittee on Economic Growth, Tax, and
+Capital Access for 5 minutes.
+    Mr. HERN. Thank you, Madam Chairwoman.
+    I appreciate the opportunity to speak to you all today and
+ask you questions, and thank you all so much for being here.
+Especially thank you, Mr. Ingersoll, for your story, for what
+you have done, how you have been successful, and truly you
+realized the American dream. It is different for all of us, I
+think you would agree.
+    As a business owner and job creator for over 34 years, I
+know firsthand how difficult it is to quantify broadband access
+into our rural communities and how valuable this access can be
+to our small business. Again, as a lifelong small business
+person, my goal is always try to keep government out of my way
+so I can do the things that, you know, truly compete with one
+another.
+    I only have one question, and I would like to ask each of
+you the same question. So obviously the person who goes last
+can get a real opportunity here. But when it comes to
+broadband, all of us on this Committee are probably getting
+asked whether this should be a government-driven project or a
+private industry-driven project. Could you give me your
+thoughts on that?
+    We will start with you, Mr. Connors.
+    Mr. CONNORS. In our state it has been privately driven. We
+are at the point today where government at the state level has
+recognized its value and the need to participate. And we would
+look forward to having the Federal Government be a part of that
+answer. I think it involves all of us. But to date, let me be
+clear, it has been privately d riven almost entirely.
+    Mr. HERN. Okay. Mr. Ingersoll?
+    Mr. INGERSOLL. Where I am from, you know, it is private,
+but I believe they are controlled monopolies. So the
+telecommunications company that I deal with has really no
+incentive to send someone to rural areas when they are having
+issues with higher population centers. I see the internet as a
+public utility, so whatever is going to provide the best
+service to the people, I am all for it. I really do not have an
+opinion one way or the other aside from that.
+    Mr. HERN. My assumption is being an entrepreneur yourself
+that you would like to see two people compete in the area for
+the same business of some sort?
+    Mr. INGERSOLL. Yeah. For sure.
+    Mr. HERN. To drive down cost and to drive up access?
+    Mr. INGERSOLL. More than anything, improve the quality of
+service.
+    Mr. HERN. Sure.
+    Ms. Stout?
+    Ms. STOUT. Very similar to Mr. Ingersoll. I have a couple
+of options for internet in my town and it is public driven. I
+think the government could help. But yeah, definitely having
+more competition would help and increasing the reliability, for
+sure working on that, making sure there are certain standards
+and they have to stick with what they say they are giving you
+would help. Thank you.
+    Mr. HERN. You are welcome.
+    Mr. Ward?
+    Mr. WARD. I guess I have the advantage because I get to go
+last?
+    Mr. HERN. Sure.
+    Mr. WARD. I think that a public-private partnership is
+really the only solution when you are talking about both
+controlled monopolies and natural monopolies. The technological
+feasibility of the last mile is hard enough. It is even worse
+when it has to go through 20 miles of forest to get to two
+people. You cannot make that math work in an open market
+purely. There has to be a partnership.
+    Mr. HERN. Very good.
+    Well, I thank each of you for this. I have listened to all
+your testimony obviously since I have been here. Again, I
+apologize, like the Chairman, there are so many Committee
+hearings going on today. But thank you all so much, and it is
+great to see, especially what you did from figuring out a way
+to be successful, and that is an awesome story. And there is
+nothing greater in this country than to have the opportunity to
+start a job. I would challenge you to hire somebody though
+because the world changes when you have employees.
+    Thank you so much. I yield back.
+    Chairwoman VELAZQUEZ. The gentleman yields back, and now we
+recognize Mr. Delgado from New York for 5 minutes.
+    Mr. DELGADO. Thank you, Madam Chair.
+    Mr. Ingersoll, thank you for taking the time from your
+business in Sloansville to testify here today. It is great to
+hear all that you have accomplished in the face of tragedy. The
+Committee appreciates you sharing your story.
+    It is clear that reliable internet access is critically
+important for someone like you to get online and reach your
+customers, and I really agree wholeheartedly with the way you
+framed the issue in terms of being a public utility. We know
+that about 40 percent of rural Americans lack broadband
+internet access, and 25 percent of my home district does not
+have a broadband subscription. Clearly, we need rural
+investment in broadband services, but it also strikes me, and
+you spoke about this in your testimony, that like broadband, we
+need universal, affordable Postal Service that ensures that
+rural businesses can reach their customers. And so we spent a
+bit of time talking a lot about the rural broadband piece, and
+I would love to hear from you a bit more on the impact on rural
+communities if the Postal Service was privatized.
+    Mr. INGERSOLL. I have concerns about it being prioritized
+just because like right now with UPS, FedEx, and these other
+carriers that are private companies, they charge rural
+surcharges, fuel surcharges, and all these sorts of things to
+deliver it to these rural areas. The post office makes it very
+accessible, and if you want to keep the barrier of entry low
+for ecommerce in general, the Postal Service is the only one
+that is really going to provide that service where you can be
+competitive with larger companies that have their own logistics
+networks and their own deals with carriers to compete with a
+bigger advantage over someone who is just starting out. So I
+would say privatizing it would be a big concern to me because
+rural America is going to be cut out of the deal. Or at the
+very least you are going to increase the cost for people who
+are already struggling.
+    Mr. DELGADO. So it would specifically hurt your business?
+    Mr. INGERSOLL. Yeah, it would specifically hurt me.
+    Mr. DELGADO. In terms of the overhead and the cost
+increases.
+    You talked about controlled monopolies. Another insight
+that I agree with. And the need to figure out how government
+needs to play a role, whether it is in partnership with private
+actors or otherwise, and specifically, given the fact that
+rural communities time and time again, particularly as we lurch
+toward privatization in almost every public sector, is leaving
+specifically rural communities behind because they do not have
+the population centers to incentivize private actors to make
+the investment. And so while we might have access and have had
+access for some time, as you note, since 2008, we see the
+disproportionate disadvantages that the rural communities are
+struggling with.
+    Could you speak a bit more about how the quality, or lack
+thereof, of your broadband access has really impacted your
+ability to conduct business?
+    Mr. INGERSOLL. Well, as ecommerce has evolved, buyer
+expectations have increased. So it is much more of a priority
+to process orders quickly and things like that. If your
+internet goes down and you have no other way to process those
+orders, it is going to negatively impact you. And as ecommerce
+continues to grow, competition increases, people in more urban
+areas with better access to internet are having a big advantage
+over their rural competitors because of that. I think it is
+essential to even the playing field in that regard.
+    Mr. DELGADO. Excellent. Thank you very much.
+    I yield back.
+    Mr. INGERSOLL. Thank you.
+    Chairwoman VELAZQUEZ. The gentleman yields back.
+    And Mr. Stauber, the gentleman from Minnesota, is
+recognized for 5 minutes. He is the Ranking Member of the
+Subcommittee eon Contracting and Infrastructure.
+    Mr. STAUBER. Thank you, Madam Chair. And to the witnesses,
+thank you for your testimony.
+    I, too, am a small business owner for 28 years in rural
+northern Minnesota, and so I understand what you are going
+through and some of the concerns. One of the things, we talk
+about broadband being deployed. What I have said is high-speed,
+dependable internet is not a luxury anymore. It is an absolute
+necessity. And rural America seems to be put on the back
+burner.
+    Mr. Ward, I appreciate your comments about it has to be
+that public-private partnership. Rural Minnesota, rural America
+is left behind and it is not acceptable anymore. And so I hear
+my colleagues from Colorado and Iowa saying the same thing. We
+have a lot of support for deploying that broadband, and I love
+the fact that you all have nodded your head when you understand
+that competition is good for deploying that because competition
+is good for the consumer and we know that for a variety of
+reasons, dependable broadband is absolutely needed.
+    We can go in some of our rural areas that are just miles
+apart the same value of a home, a resale of a home is going to
+go higher when it has a dependable broadband and high-speed
+service.
+    Mr. Ingersoll, you talked about the Postal Service and I
+really appreciate that. In a time when everything is online and
+digitalized, I think we forget how many people and industries
+depend on dependable Postal Service, which make our experience
+as consumers possible and help expand small businesses like
+yours.
+    I have recently cosponsored a number of resolutions to
+maintain important aspects of the Postal Service, such as door
+delivery and 6-day mail service so that we can continue to
+support small rural businesses across this Nation.
+    As Congress continues to discuss postal reform, what are
+some of the biggest challenges you foresee should the Postal
+Service become limited in rural areas? And please give me an
+estimated annual cost to your business if the Postal Service
+does not continue the 6-day service or limits its rural
+delivery and pickups.
+    Mr. INGERSOLL. It would be tough for me to speak to an
+exact number on that just because I do not know exactly what
+percentage of my customers are in a rural area. Typically, the
+nature of my business, you are going to get more of a rural
+customer base than an urban customer base just because people
+are not riding ATVs in cities.
+    But, I mean, overall, if you limit that, I am going to have
+to stop using the Postal Service and, you know, spend more to
+go with FedEx, UPS, someone that is going to offer delivery
+that a customer is going to expect. Unfortunately, I do not set
+the precedent for what a customer expects. Larger companies do
+that negotiate their own deals with carriers. So it puts me at
+a big disadvantage in comparison to----
+    Mr. STAUBER. Well, can you just give me an idea of the
+amount of product you sell and send? Give the Committee an
+idea, just a rough guess what it would cost if you had to add
+those additional charges from other competitors.
+    Mr. INGERSOLL. Well, first off, we use a lot of the
+priority and regional boxes, which are supplied by the Postal
+Service. We send about 8,000 shipments a year with the Postal
+Service. So the average cost of a box is around $1 if I had to
+buy it, so there is $10,000 in costs. The next nearest carrier
+that offers a comparable service to USPS and the flat rate
+program is FedEx, and they are on average about $5 more per
+shipment than Priority Mail. So five times $10,000 plus, you
+know.
+    Mr. STAUBER. It would be a significant increase?
+    Mr. INGERSOLL. Yes.
+    Mr. STAUBER. Thank you very much.
+    And with my last 30 seconds here, Mr. Ward, you talked
+about you have worked on The Hill, and you made a statement to
+both the House and Senate, `` Then make a better bill.'' I can
+assure you that is exactly why I ran, to make sure that rural
+America, rural Minnesota, we matter. And I appreciate those
+comments, and we are going to work that. And with your
+testimony, your expertise, it helps us also. I want to thank
+you all for taking your time and giving us your stories. And we
+appreciate it.
+    Madam Chair, I yield back.
+    Chairwoman VELAZQUEZ. The gentleman yields back.
+    And now we recognize the gentlelady from Pennsylvania, Ms.
+Houlahan, for 5 minutes.
+    Ms. HOULAHAN. Thank you. Thank you, Madam Chair.
+    My name is Chrissy Houlahan. I am a small business and
+entrepreneur person as well, and I have grown a lot of
+businesses from the beginning and did online sales back in the
+early 2000s of footwear and apparel, so I know the trials and
+tribulations of trying to start up a business and trying to get
+things into a box to where they are going across the country
+with all of its ancillary problems. And my questions I guess
+have to do a little bit for Mr. Ward, your conversation and
+your testimony both orally and written, that had to do with an
+emphasis on public and private partnerships for small
+businesses to worry about things like cybersecurity and
+cyberspace. And I was wondering if you could put a little bit
+more meat on the bone of what you mean by a public and private
+partnership and how those small businesses can be tapped into
+being able to be safe and secure online.
+    Mr. WARD. Certainly. Thank you. I appreciate the question.
+    It is amazing how many small business owners are members of
+Congress now, is it not? I think there is something that has to
+do with the experience of starting your own business and
+dealing with a myriad of problems at the same time.
+    It is beyond the pale to also ask small businesses to
+consider how to pay the bills, how to deal with the logistics,
+how to have a good idea, how to deal with their staff, and to
+become IT experts. Right? And far too often the burden of
+running a small business can become overwhelming if you do not
+have answers. If you do not have somebody to turn to on
+guidance.
+    On the issue of cybersecurity, I think most small
+businesses would feel very alone indeed. One of the issues is
+that ransomware, hacks, breaches, data theft generally, they
+put small businesses completely out of business. They are
+extinction-level events because they cost so much, but also
+because the compliance required is far over the head of most
+small business owners.
+    Ms. HOULAHAN. But what does a private-public partnership
+look like?
+    Mr. WARD. So if the SBA, for example, were given more
+resources and more guidance on how to make training available
+and how to make the tools and resources available for small
+businesses, we would be more likely to use them. Additionally,
+there needs to be a safe harbor. There needs to be a place, a
+way for small businesses to report hacks and breaches that does
+not feel like it is going to be the end of their business. The
+next piece I think that is essential is we have to find a way
+to better fund prosecution of these hacks and data breaches. I
+do not have the numbers directly in front of me but I believe
+it is something like 1 percent of all cyberattacks are ever
+reported, and less than 10 percent of those are ever intervened
+or prosecuted. There are no deterrents. And without the public
+enforcement, there is no private incentive. And so there needs
+to be a better understanding between small businesses and the
+SBA, Department of Commerce generally, DHS specifically, on how
+they can work together to harden the target that is small
+business datasets. Because cumulatively, that is valuable data,
+but too often we pay attention to the large breaches--hotel
+chains, retail stores--because it is bigger. It is more data.
+Cumulatively, there is just as much data in the small business
+community.
+    Ms. HOULAHAN. Thank you. And I appreciate your feedback.
+And I have one question. I hate to keep coming back to the
+USPS, the Postal Service thing because it is intriguing to me
+as somebody who is in charge of operations and shipping and
+logistics. But can you try to quantify the impact if you needed
+to go to DHL or to FedEx and you were on longer able to use the
+USPS as 80 percent of your shipments are going out of the USPS,
+would you be able, Mr. Ingersoll, to talk about the impact on
+the bottom line?
+    Mr. INGERSOLL. The effect that would have, it would make
+what I do, it would not be a viable option any longer. The
+problem is it is a lot of reproduction, Chinese parts, whereas
+I sell OEM parts that are coming over, and they are already
+within competition to us but the problem is if my costs
+increase it would price me out completely. My customers are
+typically lower income and they will not spend extra money for
+the same thing they were used to purchasing before.
+    Ms. HOULAHAN. Thank you. And my last question has to do
+with kind of the impact of women-owned businesses, and I am
+interested in trying to understand from you, Ms. Stout, if you
+can tell me a little bit about--I know the question was about
+family leave, and I think you came back around appropriately to
+health care as being probably the biggest issue. What would it
+look like to feel like you were supported to be able to have a
+small business in terms of access to healthcare quality,
+affordable, accessible healthcare? What are the pressure points
+for you right now as a small business owner?
+    Ms. STOUT. Thank you for the question. It is pretty in
+depth, I think.
+    Ms. HOULAHAN. And I have 8 seconds left.
+    Ms. STOUT. There is a lot that goes on with it. I think
+just having better options. It was very hard for me to navigate
+when I was searching and looking for things to help support my
+family once I realized that I was going to need to find another
+solution.
+    Ms. HOULAHAN. And maybe what I can do since I am over time
+is afterwards I can find you.
+    Ms. STOUT. Yes. Yes. Please follow up.
+    Ms. HOULAHAN. And learn from you. Yeah.
+    Ms. STOUT. I would love to answer.
+    Ms. HOULAHAN. I appreciate your time, all of you.
+    Ms. STOUT. Yes, of course. Thank you.
+    Ms. HOULAHAN. Thank you so much.
+    Chairwoman VELAZQUEZ. The gentlelady's time has expired.
+    And now we recognize Mr. Burchett from Tennessee.
+    Mr. BURCHETT. Thank you, Chairlady. And I appreciate you
+all being here. I, myself, have done a little eBay. I think I
+had over 1,000 transactions on eBay. Last week I sold a pair of
+jeans, and I know when my daughter watches this when she gets
+home from school that that money will probably be back out in
+the economy before I can get home. So I am looking forward to
+that.
+    As a matter of fact, when I was in the legislature in
+Tennessee, I carried legislation for eBay. I did not profit
+from it. It was not that type of a situation. It was just some
+clarification in the law of where they were. But all the
+questions really have been asked that I had, but this is sort
+of a catchall, and I am always asking folks this, and I would
+like just an honest answer. We can start down at the end.
+    Mr. Ingersoll, I ride a few bikes myself. Mine are all old
+kick starters though. They are not electric starts or anything
+quite as fancy as what you deal with. But I guess my catchall
+question is, would you all be willing to explain any burdens
+that you see that government is placing on small businesses
+right now that if you could have changed overnight you would?
+Yeah, go ahead. I want everybody to answer that, too, if they
+could.
+    Mr. INGERSOLL. As far as the Federal Government, aside from
+some of the tax policies not being formed around sales tax, the
+thing about bringing opportunity to these rural areas is
+keeping the barrier of entry low. And when you need to keep
+track of 50 different sales tax, it becomes a real problem
+because if you are starting out with $20,000 or $30,000 in
+sales just trying to make a living or something like that and
+you need to keep track of all that, you have to hire an
+accountant, you may have to implement software to track it all.
+And you do not want to make it more difficult than it needs to
+be for someone to go out there and compete because if you are
+going up against someone like Amazon, they have the resources
+to handle that. A small company does not.
+    Mr. BURCHETT. Do any of the websites that you sell--I guess
+you just sell primarily on eBay. Do they currently now take the
+sales tax out for the states that are not brick and mortar in
+your state or however?
+    Mr. INGERSOLL. I believe anyway that it is a marketplace
+nexus.
+    Mr. BURCHETT. Okay.
+    Anybody else have problems?
+    Mr. WARD. I have several problems with the regulatory
+burdens. But I think the primary burden that both state and
+Federal Governments currently are placing on small businesses
+that we can talk about today is uncertainty. Uncertainty for a
+small business is fatal. Not knowing what the market looks
+like, not knowing what access to tools or talent or broadband
+will look like in 18 months makes it incredibly difficult to
+plan. For large businesses, market uncertainty can be an
+opportunity. For small businesses it is incredibly detrimental.
+We need to figure this out sooner than later in order to
+restore some level of sanity to the marketplace.
+    Mr. CONNORS. I would add to that, uncertainty clearly is an
+issue, particularly as it relates to this effort. But for most
+businesses, the companion piece would be predictability. There
+is not a problem for most businesses to recognize you need to
+be regulated, you need to address certain issues, but when
+those areas or when those issues change or the regulations
+around those issues change, that becomes a real problem. So
+with uncertainty would also be the need for predictability
+within any regulation.
+    Mr. BURCHETT. Right. I think something that troubled me was
+you would find out after the fact.
+    Mr. CONNORS. Exactly.
+    Mr. BURCHETT. And it is very tough to retroactively pull
+that back.
+    Mr. CONNORS. Yes.
+    Mr. BURCHETT. And it hurts the small businesses. Big
+businesses, they have accountants and lobbyists and lawyers up
+here and they can tell them exactly.
+    Mr. WARD. Something has happened over the last 5 to 10
+years where we have developed in terms of a digital tool stack
+for small businesses. Right? You can get your email through
+Gmail. You can use Infusion Soft to do your CRM. You can use
+Amazon as a marketplace or eBay as a marketplace. And some of
+these other logistics groups. The price point for those tools
+is as low as it is because of math that has been done at the
+larger level. If you change that business model for larger tech
+companies or even platforms generally, you also change the math
+for the small business. So most of that burden is inadvertent.
+Right? Nobody was aiming for small businesses. But if you aim
+at the top of the interconnected digital economy, you are going
+to hit the bottom.
+    Mr. BURCHETT. Thank you, all. I am out of time. And I
+appreciate you all's entrepreneurship and being willing to roll
+the device.
+    And ma'am, if you had been here, all these people got tax-
+free status for a year but since you walked out you missed your
+opportunity.
+    Thank you, Chairlady, for an excellently run meeting. Thank
+you, ma'am.
+    Chairwoman VELAZQUEZ. The gentleman's time has expired.
+    We now recognize the gentlelady from Minnesota, Ms. Craig,
+for 5 minutes.
+    Ms. CRAIG. Thank you so much, Chairwoman. And thanks to
+each of you. Sorry, I have been in and out, too, but I am also
+on the Transportation and Infrastructure Committee, so we are
+working hard to have those conversations about how we can bring
+rural broadband, high-speed internet to every single part of
+America to help us revitalize and allow you to continue to
+build those small businesses.
+    So a lot of the questions certainly have been asked today.
+And Mr. Ingersoll, I wanted to just start with you. You have
+talked about that rural broadband being essential to ensuring
+the success of your small business. In our hearing here last
+week, we focused on the relationship between broadband and the
+potential larger infrastructure package that we are going to be
+considering we certain hope. Such a package is likely to
+support our existing Federal Recreational Trails Program, and
+that helps fund the development and maintenance of many trails,
+including ATV trails, which is very popular back in my home
+state of Minnesota as well.
+    My question to you is then, what do you see as the most
+viable path forward to get broadband out to our rural
+communities and make that a reality? And if we are unsuccessful
+in some of those areas, what does that do in terms of affecting
+your business?
+    Mr. INGERSOLL. Well, I mean, anyone that does not have
+access to the internet that they can, you know, if they cannot
+easily navigate it or it is consistently down, they are not
+going to feel comfortable shopping online. They are going to
+look for other outlets for whatever they are trying to search
+out because a lot of these rural communities, you have groups
+of people who are not familiar enough with the internet yet to
+have trust in it. They do not understand aspects of it. So I
+think that reliable service would be the foundation of that.
+And I think the future is ecommerce. So ensuring that everyone
+has access to it in a similar manner is essential for any
+business to grow in the business.
+    Ms. CRAIG. Thank you.
+    I worked for a big business for about 2 decades, two
+different big businesses. And after that I ended up becoming a
+senior advisor before being elected to Congress to a small
+startup company. So I just want to say how much harder it is to
+work for a small business than it is a large business in this
+country. And I applaud you, Ms. Stout, for the work that you
+did to build your business. It is wonderful.
+    Let me ask this question of both of you though. What would
+you do different if you had to start this all over again? What
+mistakes did you make and is there any advice to entrepreneurs
+and small businesses? And how can we take that into account as
+we look at either regulation or infrastructure decisions?
+    Mr. INGERSOLL. I would say initially I underestimated the
+potential that marketplaces like eBay have. I was thinking much
+smaller initially than I should have and long term it would
+have benefitted me to realize that opportunity earlier. Outside
+of that, there is not really much I would change as far as how
+I operated and grew my business. The one thing though that
+needs to be considered I think with policy is businesses have
+shifted from being larger retail outlets to being very low
+revenue, one to five person operations. And if policy is not
+formed around that it is just going to push that opportunity to
+larger companies and unless you want to work in a fulfillment
+center, there is not going to be opportunity in these areas
+that are going to be impacted.
+    Ms. CRAIG. Ms. Stout, do you have anything to add?
+    Ms. STOUT. Similarly to what Mr. Ingersoll said, I would
+have started sooner if I would have known what I know now.
+Things went a lot better than I expected also. And also, yes,
+gearing more policy towards smaller businesses and not assuming
+that we all want to be large businesses because some of us do
+not. Some of us want to just support our families and
+communities. And that would be very, very helpful. Thank you.
+    Ms. CRAIG. Thank you both for your story and for your
+commitment to small business and the country. Thank you.
+    Madam Chairwoman, I yield back my time.
+    Chairwoman VELAZQUEZ. The gentlelady yields back.
+    And now we recognize the gentleman from Illinois, Mr.
+Schneider, for 5 minutes.
+    Mr. SCHNEIDER. Thank you. And I want to thank the
+Chairwoman for hosting this hearing, and as always, to thank
+the witnesses for (a) your perseverance in staying here until
+the end, and I appreciate you waiting, but more importantly,
+for sharing your perspectives and experiences is critical.
+    We are talking about unlocking the potential of digital
+economy in rural communities. I am also on the Ways and Means
+Committee. Last week we had a hearing on infrastructure. And I
+represent the northern suburbs of Chicago. Not a lot of rural.
+But I understand how important rural broadband is and I made
+the point there that we need to absolutely make rural broadband
+part of whatever infrastructure conversation we have to empower
+and make sure that not just small businesses but rural
+communities can compete. But I also know from my experience
+working with businesses large and small how important and how
+wonderful small businesses are. I happen to think that I prefer
+the small business world. I prefer being my own boss. And I was
+thinking, Mr. Ingersoll, you mentioned with bigger, and coming
+from Chicago I thought of Daniel Burnham, and I just looked up
+the quote to make sure. But it is `` Make no little plans
+because they otherwise have no magic to stir the soul.'' This
+is what is about, is hopefully your businesses do stir your
+soul, and in so doing, you and millions of others, 29 million
+small businesses in the country, that is what can drive and
+always has driven our economy. But we need to make sure we have
+that access, the access to technology and the new successes.
+    But with those new successes there is also going to be
+challenges. And one of the challenges which I know we have
+talked about a bit is cybersecurity. Last Congress I was
+fortunate, I was able with my colleagues to introduce the Small
+Business Cybersecurity Enhancement Act, which will help
+businesses address their gap in cybersecurity needs from
+enhanced technology defenses to security awareness training.
+And it is key because as you said, while maybe a smaller
+business, it can be a gateway to a bigger breach. I do not care
+if it affects millions or me alone, me alone is a big impact.
+And for everyone who is affected that is true.
+    To our business owners, my question to you is what degree
+do you keep cybersecurity concerns in mind as you look to
+expand your business as you think about those big plans? How
+are you addressing those vulnerabilities? And for Mr. Ward in
+particular, how are groups like 3C working with members to
+shore up these vulnerabilities and ensure everything from
+payment platforms to consumer information are protected?
+    Mr. INGERSOLL. Me?
+    Mr. SCHNEIDER. Anyone? Yeah.
+    Mr. INGERSOLL. Using eBay is a big advantage because I do
+not have to deal with storing that data or even handling it.
+They are controlling that completely so that burden is entirely
+off me. It is not even a concern.
+    Mr. SCHNEIDER. Great.
+    Ms. Stout?
+    Ms. STOUT. Very similar to Mr. Ingersoll, again. I mostly
+work through Etsy and PayPal invoicing so I do not see any
+secure information. It is all taken care of for me which is
+very, very helpful. I would not want to have to deal with it.
+Thank you.
+    Mr. SCHNEIDER. Before I go to Mr. Ward, Mr. Connors,
+anything you want to add?
+    Mr. CONNORS. Well, I would add that it is a real concern to
+businesses, needless to say. And we have tried to bring as much
+information through Federal agencies and so forth to our state
+to help educate and inform our businesses as to the
+vulnerability, but also the things you can do to help address
+it.
+    Mr. SCHNEIDER. Right. Great.
+    And Mr. Ward, I will give you the last word. Because we
+talked earlier with the question of the public-private
+partnerships. This is where I do believe industry, government,
+educational institutions, groups like yours, can work to raise
+the bar and give the security our small businesses need. So I
+will leave you with the last word, the last minute.
+    Mr. WARD. I agree with that. So in reverse order, 3C is
+relatively new to this space. We launched less than a year ago
+but are growing pretty rapidly and cybersecurity training and
+resources are at the top of the list we would like to deliver
+to our small business members. Working with SBA and state
+governments to hone those materials would be a welcomed
+opportunity.
+    The biggest, the most often utilized tool for cybersecurity
+is what you just heard here. It is the platforms that offer
+secure data management, resources, and sort of take that burden
+off the small business. What I am worried about particularly in
+state legislative proposals right now, the California Consumer
+Privacy Act, for example, takes away some of that protection by
+classifying small businesses that cross over into compliance
+requirements at 50,000 installs, for example. They then become
+responsible for data sets. So if you are a realtor that has
+50,000 names entered into a database, it does not matter that
+you are storing it in a Google doc. You are now responsible for
+that data and you cannot rely on a platform to hold your hand
+through that process. So the long answer is--I am sorry, the
+short answer is we are eager to help our members. Do you want
+the long one?
+    Mr. SCHNEIDER. Thank you. I appreciate that. And before I
+yield back, Madam Chairwoman, what I would like to add is we
+are at the frontier. These are new opportunities. Our small
+businesses are always at the frontier, whether it was the
+Industrial Revolution or today with the digital revolution. But
+there will always be unexpected surprises along the way. There
+will be unintended consequences. Together, working together,
+industry, policymakers, we have to find a way to ensure data
+security, create the opportunities through rural broadband and
+other digital access, and make sure that we are providing our
+entrepreneurs, American businesses, the chance to grow the
+American economy.
+    With that I yield back.
+    Chairwoman VELAZQUEZ. The gentleman's time has expired.
+    I want to take this opportunity to again thank all the
+witnesses for taking time out of your busy schedule to be here
+and share your stories, to bring to the halls of Congress the
+importance of including small businesses, but especially rural
+America. This is a bipartisan issue, and hopefully we all come
+together and build a consensus around an important issue that
+will unlock economic opportunities across the country.
+    Whether it is purchasing transnational flights or providing
+distant telehealth services, the internet has completely
+changed our society. Most of all, digital platforms have
+changed the way entrepreneurs reach new and existing customers.
+But without reliable broadband, these new opportunities and the
+economic activity associated with them is severely hampered.
+That is why we must ensure digital tools reach every American
+wherever they call home.
+    I ask unanimous consent that members have 5 legislative
+days to submit statements and supporting materials for the
+record.
+    Without objection, so ordered.
+    And if there is no further business to come before the
+committee, we are adjourned. Thank you.
+    [Whereupon, at 1:06 p.m., the committee was adjourned.]
+                            A P P E N D I X
+[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
+                                 [all]
+</pre></body></html>

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+<html>
+<title> - COMMITTEE ORGANIZATIONAL MEETING</title>
+<body><pre>
+[House Hearing, 116 Congress]
+[From the U.S. Government Publishing Office]
+                    COMMITTEE ORGANIZATIONAL MEETING
+=======================================================================
+                                HEARING
+                               BEFORE THE
+                      COMMITTEE ON FOREIGN AFFAIRS
+                        HOUSE OF REPRESENTATIVES
+                     ONE HUNDRED SIXTEENTH CONGRESS
+                             FIRST SESSION
+                               __________
+                            JANUARY 29, 2019
+                               __________
+                            Serial No. 116-1
+                               __________
+        Printed for the use of the Committee on Foreign Affairs
+[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
+       Available:  http://www.foreignaffairs.house.gov/, http://
+                            docs.house.gov,
+                       or http://www.govinfo.gov
+                              _________
+                U.S. GOVERNMENT PUBLISHING OFFICE
+35-359 PDF               WASHINGTON : 2019
+                      COMMITTEE ON FOREIGN AFFAIRS
+                   ELIOT L. ENGEL, New York, Chairman
+BRAD SHERMAN, California             MICHAEL T. McCAUL, Texas, Ranking
+GREGORY W. MEEKS, New York               Member
+ALBIO SIRES, New Jersey             CHRISTOPHER H. SMITH, New Jersey
+GERALD E. CONNOLLY, Virginia        STEVE CHABOT, Ohio
+THEODORE E. DEUTCH, Florida         JOE WILSON, South Carolina
+KAREN BASS, California              SCOTT PERRY, Pennsylvania
+WILLIAM KEATING, Massachusetts      TED S. YOHO, Florida
+DAVID CICILLINE, Rhode Island       ADAM KINZINGER, Illinois
+AMI BERA, California                LEE ZELDIN, New York
+JOAQUIN CASTRO, Texas               JIM SENSENBRENNER, Wisconsin
+DINA TITUS, Nevada                  ANN WAGNER, Missouri
+ADRIANO ESPAILLAT, New York         BRIAN MAST, Florida
+TED LIEU, California                FRANCIS ROONEY, Florida
+SUSAN WILD, Pennsylvania            BRIAN FITZPATRICK, Pennsylvania
+DEAN PHILLPS, Minnesota             JOHN CURTIS, Utah
+ILHAN OMAR, Minnesota               KEN BUCK, Colorado
+COLIN ALLRED, Texas                 RON WRIGHT, Texas
+ANDY LEVIN, Michigan                GUY RESCHENTHALER, Pennsylvania
+ABIGAIL SPANBERGER, Virginia        TIM BURCHETT, Tennessee
+CHRISSY HOULAHAN, Pennsylvania      GREG PENCE, Indiana
+TOM MALINOWSKI, New Jersey          STEVE WATKINS, Kansas
+DAVID TRONE, Maryland               MIKE GUEST, Mississippi
+JIM COSTA, California
+JUAN VARGAS, California
+VICENTE GONZALEZ, Texas
+                    Jason Steinbaum, Staff Director
+               Brendan Shields, Republican Staff Director
+                            C O N T E N T S
+                              ----------
+                                                                   Page
+                                CONTENTS
+Rules of the Committee on Foreign Affairs, 116th Congress........     4
+House Foreign Affairs Committee Professional Staff...............    24
+House Foreign Affairs Subcommittees..............................    29
+                                APPENDIX
+Hearing Notice...................................................    36
+Hearing Minutes..................................................    37
+Hearing Attendance...............................................    38
+                    COMMITTEE ORGANIZATIONAL MEETING
+                       TUESDAY, JANUARY 29, 2019
+                       House of Representatives,
+                     Committee on Foreign Affairs,
+                                     Washington, DC
+    The committee met, pursuant to notice, at 2:15 p.m., in
+Room 2172, Rayburn House Office Building, Hon. Eliot L. Engel
+presiding.
+    Chairman Engel. We are going to make this abbreviated,
+because I understand a vote has been called and there is liable
+to be a whole series of votes. So I think we are going to do
+this as quickly as we can, as fast as we can.
+    A quorum is present. Let me start by welcoming all members
+to this organizational meeting of the House Foreign Affairs
+Committee for the 116th Congress.
+    We meet today to do a bunch of things, but because of the
+votes I propose that we quickly adopt the committee rules and
+professional staff member list, and then afterwards we can
+introduce the new chairs and ranking members as well as new
+committee members.
+    Pursuant to clause 2(a) of House rule XI, the next order of
+business is adoption of the committee's rules for the 116th
+Congress.
+    [The information referred to follows:]
+[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
+    Chairman Engel. A copy of the proposed rules has been
+distributed to each of you in advance.
+    The changes from the last Congress are relatively minor. We
+made some adjustments to the jurisdiction of the subcommittees,
+some additions to ensure that our rules conform to the House
+rules, and some changes to enhance transparency and oversight.
+    The proposed rules are a bipartisan product, and I thank
+Mr. McCaul for working with me on this package. I would like to
+give Mr. McCaul a chance to make any statement he may wish on
+the rules.
+    Mr. McCaul. We are fully in support of the rules package,
+and it is my understanding that we will vote on that first and
+then make opening statements and introduce the new members.
+    Chairman Engel. Does any member wish to be recognized?
+    If not, I move that the proposed rules be adopted as the
+rules of the Committee on Foreign Affairs for the 116th
+Congress.
+    All in favor, say aye.
+    Those opposed, say no.
+    The ayes have it, and the proposed rules are adopted.
+    Without objection, the motion to reconsider is laid on the
+table and staff are authorized to make technical and conforming
+changes to the rules.
+    The next order of business is to adopt the list of
+committee professional staff members, as required by House
+rules.
+    [The information referred to follows:]
+[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
+    Chairman Engel. You have in your folders the list of staff.
+    We are very fortunate to have such a talented and dedicated
+staff on both sides of the aisle. In particular, I would like
+to recognize my staff director, Jason Steinbaum, who most of
+you know, and the ranking member's staff director, Brendan
+Shields.
+    Without objection, I move that the committee staff list be
+adopted.
+    OK. So moved.
+    Thank you, Mr. McCaul, and thank you to all our committee
+members.
+    Let me yield to Mr. McCaul for any remarks he may wish to
+make.
+    Mr. McCaul. Thank you, Chairman Engel. It is a great honor
+to serve alongside of you as the lead Republican on the Foreign
+Affairs Committee.
+    This is a historic committee that deals with serious issues
+of war and peace. It dates back to the Continental Congress,
+where Benjamin Franklin served as its first chairman.
+    In the next 2 years, America will be met with many
+international challenges. Some of these problems are very
+familiar; others have yet to materialize. As we sit here today,
+we are seeing in real-time the fight for the future of
+Venezuela. I know all of you hope there is a peaceful
+transition of power and that democracy triumphs over tyranny.
+    As we confront these challenges, it will be important for
+all of us to work together to put forward the best solutions.
+As I have always said and always heard Chairman Engel say many
+times, partisanship must end at the water's edge. This
+committee has enormous responsibilities, and I look forward to
+showing the American people that both parties can unite to do
+what is best for our country.
+    Some of my priorities are to confront our adversaries by
+taking real steps to counter China and Russia and increase
+pressure on Iran and North Korea; bolster engagement with our
+allies, including NATO and Israel; enhance our presence and
+leadership around the world; expand market access for American
+business abroad; reform and streamline the State Department,
+with its first comprehensive reauthorization since 2002, and
+modernize our foreign aid programs; secure America by combating
+human trafficking, transnational organized crime, gangs, and
+drug cartels, in addition to enhancing cybersecurity and
+counterterrorism measures around the globe; ensure the American
+Government is doing all we can to tackle childhood cancer in
+the developing worlds, especially in Africa.
+    There will be times we may not see eye to eye, but in those
+instances I look forward to having a respectful and civil
+debate.
+    I would like to take this opportunity to recognize my
+subcommittee ranking members and introduce new Republican
+members of the committee.
+    First, the vice ranking member, Representative Ann Wagner,
+former Ambassador to Luxembourg.
+    Congratulations, Ann.
+    Next, on Africa, Global Health and Human Rights, and
+International Organizations, Representative Chris Smith, who
+has served in Congress for 38 years as a champion of human
+rights.
+    Next, Asia, the Pacific, and Nonproliferation,
+Representative Ted Yoho, who has become a real leader and a
+real expert in this area and this region.
+    Next, Europe, Eurasia, Energy, and the Environment,
+Representative Adam Kinzinger, an Air Force veteran who served
+in Iraq and Afghanistan.
+    Next, Middle East, North Africa, and International
+Terrorism, Representative Joe Wilson, an Army veteran, father
+of four sons who have served our country in the military, and
+one of the nicest guys you will meet in Congress.
+    Next, Oversight and Investigations, Representative Lee
+Zeldin, a former attorney who served in Iraq and continues to
+serve in the Army Reserves today.
+    And then finally, Western Hemisphere, Civilian Security,
+and Trade, Representative Francis Rooney, former Ambassador to
+the Holy See.
+    The new Republican members joining our team are: Ken Buck
+from Colorado, former prosecutor with the Department of
+Justice, served as chief for the Criminal Division in the U.S.
+Attorney's Office; Tim Burchett from Tennessee, former mayor of
+Knox County and served 16 years in the State legislature;
+Michael Guest from Mississippi, a former district attorney;
+Greg Pence--I think we all know his last name very well--from
+Indiana, a former Marine and businessman; and Guy Reschenthaler
+from Pennsylvania, a U.S. Navy veteran who served in the JAG
+Corps in Iraq, he also served as a district judge in the
+Pennsylvania legislature; Steve Watkins from Kansas, a graduate
+of West Point, MIT, and Harvard, combat veteran who served in
+Afghanistan; and, last, Ron Wright from my home State of Texas,
+who has been involved in politics for 30 years and worked with
+Congressman Joe Barton, my dear friend.
+    I want to congratulate all of you. I am delighted at the
+experience we have, particularly the military and veteran
+experience and prosecutorial experience in foreign policy. I
+know everyone is ready to get to work.
+    And, with that, Mr. Chairman, let me say what an honor it
+is to serve with you, and, above all, I will cherish our
+friendship.
+    With that, I yield back.
+    Chairman Engel. Thank you very much, Mr. McCaul.
+    Let me just say at the outset, those of you who have been
+on the committee for the past several years know that Chairman
+Royce and myself had an extraordinary relationship. We always
+said that politics should stop at the water's edge when it
+comes to foreign policy, and we conducted ourselves that way. I
+believe that the same thing will be true of Mr. McCaul and
+myself.
+    I want to just say that, while people may have differences
+of opinion, we can do it in a respectful way and even find out
+that maybe with a little bit of tweaking here and there we
+could actually agree on most of the things.
+    I would hope that the traditions from the past 6 years on
+the Foreign Affairs Committee will continue with myself and Mr.
+McCaul as leaders of the committee.
+    I am very honored to serve as chairman of this very
+important committee, and I hope to continue our longstanding
+tradition of bipartisan cooperation to advance American
+interests around the world. And previous chairmen from both
+parties have been fair, transparent, and inclusive, and my
+commitment is that I will follow in their footsteps.
+    The committee will do good work. It will not shirk its
+responsibilities. We will conduct thorough oversight of the
+agencies, programs, and policies under our jurisdiction. That
+is our constitutional obligation. It is what the American
+people expect us to do.
+    There will be times when we disagree on policy matters, and
+that is what democracy is all about, but those disagreements
+should not descend into personal animosity. And, as I said, I
+look forward to working with Mr. McCaul to set a positive tone
+and make sure the voices of all of our members, Democrats and
+Republicans alike, are heard.
+    I would like to now take a moment to introduce our
+subcommittee chairs and the new Democratic members of the
+committee.
+    First, the chairs: Brad Sherman will serve as chair of the
+Subcommittee on Asia, the Pacific, and Nonproliferation. Albio
+Sires will serve as chair of the Subcommittee on Western
+Hemisphere, Civilian Security, and Trade. Ted Deutch will serve
+as chair of the Subcommittee on Middle East, North Africa, and
+International Terrorism. Karen Bass will serve as the chair of
+the Subcommittee on Africa, Global Health, Global Human Rights,
+and International Organizations. Bill Keating will serve as
+chair of the Subcommittee on Europe, Eurasia, Energy, and the
+Environment. And Ami Bera will serve as chair of the
+Subcommittee on Oversight and Investigations.
+    The vice chair is Joaquin Castro. He is a valuable member
+of the committee and will be a great vice chair. I look forward
+to working with him.
+    Now our new Democratic members.
+    First, we have Susan Wild, who won a special election to
+serve the remaining 2 months of the 115th Congress in the 15th
+District of Pennsylvania and now represents the new Seventh
+District. Previously, she served as the Allentown city
+solicitor.
+    Next, we have Dean Phillips, a newly elected Member
+representing the Third District of Minnesota. He was a
+businessman before coming to Congress.
+    Next. we have another newly elected Minnesotan, Ilhan Omar,
+who represents that State's Fifth District. Prior to joining us
+on Capitol Hill, she was the assistant minority leader in the
+Minnesota House of Representatives.
+    Next, we have Colin Allred, a newly elected Member
+representing the 32d District of Texas. Previously, he served
+at the Department of Housing and Urban Development and played
+professional football. We can challenge some of the other
+committees on that.
+    He is followed by Andy Levin, a newly elected Member
+representing Michigan's Ninth District. Before coming to
+Congress, he was a union organizer, human rights activist, and
+green energy entrepreneur.
+    Next, is Abigail Spanberger. She is a newly elected Member
+representing the Seventh District of Virginia and previously
+served as a CIA case officer.
+    She is followed by Chrissy Houlahan, a newly elected Member
+representing Pennsylvania's Sixth District. She is an Air Force
+veteran, engineer, entrepreneur, and educator.
+    Next, we have Tom Malinowski, another first term Member,
+who represents the Seventh District of New Jersey. Previously,
+he served as Assistant Secretary of State for Democracy, Human
+Rights, and Labor, on the staff of the National Security
+Council, and worked at Human Rights Watch.
+    Next, is David Trone, a newly elected Member representing
+Maryland's Sixth District. Previously, he worked at his family
+business, a well-known retailer of fine wine and other
+beverages.
+    He is followed by Jim Costa, who is in his seventh term
+representing the 16th District of California. He previously
+served on this committee, and we are very happy to welcome him
+back.
+    And next, we welcome another Californian, Juan Vargas, who
+is now in his fourth term, representing the Golden State's 51st
+District of California. Like Jim Costa, he is also returning to
+the committee.
+    Last but not least, we have Vicente Gonzalez, now serving
+his second term representing the 15th District of Texas.
+    [The information referred to follows:]
+[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
+    Chairman Engel. And now we are done, and we have to go and
+vote. So I want to thank everybody. We will see you on the
+floor.
+    The committee is adjourned.
+    [Whereupon, at 2:28 p.m., the committee was adjourned.]
+                            A P P E N D I X
+                              ----------
+[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
+                                 <all>
+</pre></body></html>

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+<html>
+<title> - MARKUP OF: H.J. RES 37, DIRECTING THE REMOVAL OF UNITED STATES ARMED FORCES FROM HOSTILITIES IN THE REPUBLIC OF YEMEN THAT HAVE NOT BEEN AUTHORIZED BY CONGRESS</title>
+<body><pre>
+[House Hearing, 116 Congress]
+[From the U.S. Government Publishing Office]
+ MARKUP OF: H.J. RES 37, DIRECTING THE REMOVAL OF UNITED STATES ARMED
+  FORCES FROM HOSTILITIES IN THE REPUBLIC OF YEMEN THAT HAVE NOT BEEN
+                         AUTHORIZED BY CONGRESS
+=======================================================================
+                                HEARING
+                               BEFORE THE
+                      COMMITTEE ON FOREIGN AFFAIRS
+                        HOUSE OF REPRESENTATIVES
+                     ONE HUNDRED SIXTEENTH CONGRESS
+                             FIRST SESSION
+                               __________
+                            FEBRUARY 6, 2019
+                               __________
+                            Serial No. 116-3
+                               __________
+        Printed for the use of the Committee on Foreign Affairs
+[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
+       Available:  http://www.foreignaffairs.house.gov/, http://
+                            docs.house.gov,
+                       or http://www.govinfo.gov
+                           _________
+                U.S. GOVERNMENT PUBLISHING OFFICE
+35-361 PDF                WASHINGTON : 2019
+                      COMMITTEE ON FOREIGN AFFAIRS
+                   ELIOT L. ENGEL, New York, Chairman
+BRAD SHERMAN, California             MICHAEL T. McCAUL, Texas, Ranking
+GREGORY W. MEEKS, New York               Member
+ALBIO SIRES, New Jersey              CHRISTOPHER H. SMITH, New Jersey
+GERALD E. CONNOLLY, Virginia         STEVE CHABOT, Ohio
+THEODORE E. DEUTCH, Florida          JOE WILSON, South Carolina
+KAREN BASS, California               SCOTT PERRY, Pennsylvania
+WILLIAM KEATING, Massachusetts       TED S. YOHO, Florida
+DAVID CICILLINE, Rhode Island        ADAM KINZINGER, Illinois
+AMI BERA, California                 LEE ZELDIN, New York
+JOAQUIN CASTRO, Texas                JIM SENSENBRENNER, Wisconsin
+DINA TITUS, Nevada                   ANN WAGNER, Missouri
+ADRIANO ESPAILLAT, New York          BRIAN MAST, Florida
+TED LIEU, California                 FRANCIS ROONEY, Florida
+SUSAN WILD, Pennsylvania             BRIAN FITZPATRICK, Pennsylvania
+DEAN PHILLPS, Minnesota              JOHN CURTIS, Utah
+ILHAN OMAR, Minnesota                KEN BUCK, Colorado
+COLIN ALLRED, Texas                  RON WRIGHT, Texas
+ANDY LEVIN, Michigan                 GUY RESCHENTHALER, Pennsylvania
+ABIGAIL SPANBERGER, Virginia         TIM BURCHETT, Tennessee
+CHRISSY HOULAHAN, Pennsylvania       GREG PENCE, Indiana
+TOM MALINOWSKI, New Jersey           STEVE WATKINS, Kansas
+DAVID TRONE, Maryland                MIKE GUEST, Mississippi
+JIM COSTA, California
+JUAN VARGAS, California
+VICENTE GONZALEZ, Texas
+                    Jason Steinbaum, Staff Director
+               Brendan Shields, Republican Staff Director
+                            C O N T E N T S
+                              ----------
+                                                                   Page
+                       STATEMENTS FOR THE RECORD
+Representative David Cicilline...................................    40
+Representative Ken Buck..........................................    42
+                                APPENDIX
+Hearing Notice...................................................    37
+Hearing Minutes..................................................    38
+Hearing Attendance...............................................    39
+             ADDITIONAL MATERIALS SUBMITTED FOR THE RECORD
+Report to Congress...............................................    12
+Statement of Administration Policy...............................    19
+Department of Defense letter.....................................    20
+New York Times article submitted by Representative Cicilline.....    43
+                              RECORD VOTE
+Record Vote Talley...............................................    47
+                             MARKUP SUMMARY
+Markup Summary...................................................    48
+ MARKUP OF: H.J. RES. 37, DIRECTING THE REMOVAL OF UNITED STATES ARMED
+  FORCES FROM HOSTILITIES IN THE REPUBLIC OF YEMEN THAT HAVE NOT BEEN
+                         AUTHORIZED BY CONGRESS
+                              ----------
+                      WEDNESDAY, FEBRUARY 6, 2019
+                          House of Representatives,
+                      Committee on Foreign Affairs,
+                                                     Washington, DC
+    The committee met, pursuant to notice, at 1:34 p.m., in
+Room 2172 Rayburn House Office Building, Hon. Eliot Engel
+(chairman of the committee) presiding.
+    Chairman Engel. A quorum which is carried over from before
+is present, and we meet today to consider a single item.
+Pursuant to notice for purposes of markup, I call up House
+Joint Resolution 37.
+    [H.J. Res. 37 follows:]
+[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
+    Without objection, the resolution is considered read the
+first and second time and open for amendment at any point and
+committee members may have five calendar days to submit
+statements for the record.
+    According to House Rule 11 Clause 2, the chair announces
+that he may postpone further proceedings today on the question
+of approving any measure or matter or adopting an amendment on
+which a recorded vote is ordered.
+    Without objection, the chair is authorized to declare a
+recess at any time. Now I recognize myself for opening remarks.
+We are going to have opening remarks, Mr. McCaul's opening
+remarks. Then we are going to go to vote and come back
+immediately after votes to mark this up and to have members say
+anything they might want to say.
+    So the committee has just heard testimony about the crisis
+in Yemen, about the death, disease, and displacement of
+millions that this destructive conflict has caused, and in my
+view, it is incumbent on this committee and this body to do
+everything we can to put a stop to it. We need to push all
+parties toward a political solution.
+    And let me explain why I think this measure introduced by
+Mr. Khanna of California will help us do that.
+    Now, in last year's Defense Authorization, Congress
+required the administration to certify that the Saudis and
+Emiratis were taking real steps to reduce the risk of harm to
+civilians and civilian infrastructure resulting from the
+military operations in Yemen.
+    In the period of time before the certification was due,
+attacks against civilians rose sharply. According to the
+International Red Cross, August was the most violent month in
+2018 in Yemen with nearly 500 people killed in just 9 days.
+    Since 2015, the coalition has undertaken 18,000 air
+strikes. That is one every 99 minutes, if you do the math.
+Fully one-third of those have hit nonmilitary targets--one in
+three.
+    This is not just a statistic. One of those one in three was
+a school bus in northern Yemen with 40 children on it. That is
+not acceptable.
+    So I was stunned, frankly, that in September the
+administration certified that the Saudis and Emiratis were
+indeed taking these steps, these so-called demonstrable actions
+to reduce civilian deaths.
+    The administration simply could have waived the
+requirement. The law allowed that. But they did not. They
+essentially told us not to believe our eyes.
+    Let me be clear. We have real strategic interests in that
+part of the world. Iran continues to destabilize the region and
+their support for the Houthis is only part of their strategy to
+bleed their regional adversaries.
+    But I do not support providing assistance that we know is
+being used to kill civilians. And so, if the administration
+will not demand any sort of accountability from the Saudis and
+Emirates, the work then falls to the Congress.
+    The Pentagon cutoff refueling as a matter of policy. But
+that could be reversed at any time. This resolution would
+cutoff refueling as a matter of law. It also sends a clear
+message to the administration, to our partners in the Gulf, and
+to our adversaries that Congress will not sit back and shirk
+our responsibilities when it comes to foreign policy. It is
+time to have the debates about how, when, and where the U.S.
+military is engaged around the world. This resolution is
+sparking that debate.
+    So I will support moving this measure to the floor and at
+this time I will yield to the ranking member for any comments
+he might have.
+    Mr. McCaul. Thank you, Mr. Chairman.
+    I have a tremendous respect for the chair, but I must say
+this first markup is a a departure from the strongly bipartisan
+cooperation that we have enjoyed on this committee.
+    I believe that this committee does have a solemn
+responsibility to appropriately exercise congressional war
+powers under Article 1 of the Constitution. But the mechanism
+to force withdrawal of U.S. forces under the War Powers Act
+applies only when we are engaged in live fire hostilities.
+    This is not the case here. This is not what our military is
+doing currently in Yemen. This resolution would set a very
+dangerous precedent. Are we now going to allow any member to
+use this privileged war powers tool to second guess all U.S.
+security cooperation agreements throughout the world?
+    This interpretation could impact our assistance to Israel.
+It could impact our cooperation with African nations in the
+Sahel. We could recklessly undo critical security relationships
+we have spent decades building.
+    This is not what the War Powers Resolution has ever meant
+and it should not be used this way now. A vote in favor is a
+victory for bad policy.
+    As we heard at this morning's hearing, the situation in
+Yemen poses critical, strategic, and humanitarian issues that
+deserve careful attention. If we want to discuss conditioning
+assistance to Saudi Arabia in this conflict, that is an area we
+can explore and debate.
+    But this resolution is trying to hammer a square peg into a
+round hole. It misuses an extraordinary an extraordinary War
+Powers tool to try to get at the issue of security assistance
+to a third country.
+    Even our aerial refueling of Saudi jets, which does not
+constitute hostilities as traditionally understood, ended last
+November. And I spoke with Defense Department representatives
+yesterday who reaffirmed that U.S. forces are not engaged in
+hostilities against Houthi forces in Yemen.
+    They confirmed the continuing accuracy of the detailed
+letter sent to Congress last year by the department's acting
+general counsel.
+    No one is saying that U.S. security assistance to Saudi
+Arabia or anyone else is beyond congressional scrutiny. We have
+many tools to use including this committee's arms sales
+notifications, targeted legislation, and the annual
+appropriations process, among others.
+    But this resolution stretches the definition of hostilities
+to cover non-U.S. military operations by other countries. It
+reinterprets U.S. support to those countries as engagement in
+hostility.
+    This has implications far beyond Saudi Arabia. Under this
+model, if any Member of Congress does not like something that
+any of our security partners does overseas, that member can
+force quick consideration of a resolution directing the removal
+of U.S. forces from hostilities, quote, ``in or affecting,''
+unquote, that situation. It no longer matters that U.S. forces
+are not actually conducting those hostilities.
+    The bill is vague and irresponsible. It will create doubts
+for our partners and allies around the world. It will trouble
+the many Americans who believe the burden sharing with capable
+allies is vital for U.S. national security.
+    And for that reason, I oppose this measure and, Mr.
+Chairman, I ask unanimous consent to place into the record
+three documents.
+    One, the January 2019 Department of Defense report to
+Congress concerning our similar acquisition and cross-servicing
+activities with over 117 nations around the world including our
+NATO allies, CT partners in the Sahel, Israel, and others.
+    Two, the November 28th, 2018 statement of the
+administration policy opposing S.J. Res. 54 because, quote,
+``The United States forces are not engaged in hostilities
+between the Saudi-led coalition and Houthi forces in Yemen,''
+unquote.
+    And third, the February 27th, 2018 letter from the
+Department of Defense Office of General Council explaining the
+legal and security concerns posed by the approach used by
+today's resolution.
+    I ask unanimous consent to place those in the record.
+    Chairman Engel. Without objection, so moved.
+    [The information referred to follows:]
+[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
+    Mr. McCaul. And I thank the chairman for that and, again, I
+oppose this measure and I yield back my time.
+    Chairman Engel. The ranking member yields back.
+    Does any other member seek recognition on the resolution? I
+am told Mr. Connolly does.
+    Mr. Connolly.
+    Mr. Connolly. Thank you, Mr. Chairman.
+    I appreciate the juridical distinction made by the ranking
+member that the United States is not technically involved on
+the ground in hostilities.
+    But the United States most certainly has been involved in
+equipping, re-equipping, training, and other support for the
+Saudi activity in Yemen that has led to one of the greatest
+humanitarian crises on the face of the planet.
+    And that is what we are trying to address today. We can
+hide behind juridical language that it is not technically a
+combat involvement of the United States. But it begs the
+question.
+    Since 2015, the United States has provided support to the
+Saudi-led coalition in its war against Houthis rebels in Yemen.
+In addition to claiming an estimated 60,000 Yemeni lives, this
+war is fueling the world's largest humanitarian crisis.
+    Humanitarian agencies now estimate that 85,000 children--
+children--have died from malnutrition. More than half the
+population currently requires emergency food assistance and one
+in every ten Yemeni children has been forcibly displaced from
+his or her home due to this conflict.
+    In September 2018, Secretary Pompeo certified to this
+Congress that the Saudi and Emirate government were mitigating
+harm to civilians and civilian infrastructure in Yemen.
+    Meanwhile, the Saudi-led coalition has conducted attacks,
+killing dozens of civilians at a time often with U.S.-provided
+munitions, giving--belying the certification made in September
+2018.
+    Article 1 Section 8 of the United States Constitution
+States unequivocally Congress shall have the power to declare
+war and to raise and support armies and other armed forces.
+    I would argue, just as the executive branch says there are
+implied in the role of commander in chief, certainly there are
+implied powers about our ability to stop military interventions
+as we deem fit. Article 1 says so, as far as I am concerned.
+    Pursuant to the War Powers Resolution, Public Law 93148,
+the president must remove U.S. armed forces engaged in
+hostilities outside U.S. territory without a specific statutory
+authorization if Congress so directs, and I would argue that
+that's a broad, broad authority for Congress.
+    It does not necessarily mean U.S. combat troops on the
+ground. Support for ongoing hostilities by a third power--an
+ally--certainly qualify as far as I am concerned.
+    Chairman Engel. Will the gentleman yield? We are concerned
+that there's time running out. There is 37 seconds left. So----
+    Mr. Connolly. I support the resolution in front of us. I
+believe Congress needs to reclaim its congressional power and I
+will vote for the resolution pending before this committee.
+    I thank the chair.
+    Chairman Engel. I thank the gentleman.
+    The committee will now recess until after votes on the
+floor. The committee stands in recess.
+    [Recess.]
+    Chairman Engel. The committee will come back to order.
+    For those who were not here, before we broke I gave my
+opening statement and the ranking member gave his opening
+statement and then Mr. Connolly of Virginia gave a statement.
+    So we can now call on any other members seeking
+recognition. First we will start from the Republican side.
+Anybody seeking recognition?
+    Mr. Wilson. Mr. Chairman.
+    Chairman Engel. Mr. Wilson.
+    Mr. Wilson. Thank you, Mr. Chairman.
+    Mr. Chairman, I appreciate that the Foreign Affairs
+Committee has always had a strongly bipartisan cooperation to
+work on issues that are so important to the American people.
+    I believe the committee has the solemn responsibility to
+appropriately exercise the congressional War Powers Act under
+Article 1 of the Constitution.
+    But the mechanism to force withdrawal of U.S. forces under
+the War Powers Act applies only when we are engaged in live-
+fire hostilities. This is not what our military is currently
+doing in its operations and support of operations in Yemen.
+    This resolution would set a very dangerous precedent as we
+are now going to allow any member to use this privileged war
+powers tool to second guess all U.S. security cooperation
+agreements throughout the world.
+    This interpretation could impact our assistance to Israel.
+It would impact our cooperation with African countries in the
+Sahel. It would recklessly undo critical security relationships
+we have spent decades building.
+    This is not what the War Powers Resolution was ever meant
+and it should not be used in this way. A vote in favor is a
+victory for bad politics.
+    As we have heard at this morning's hearing, the situation
+in Yemen poses critical strategic and humanitarian issues that
+deserve careful attention. If we want to discuss conditioning
+assistance to Saudi Arabia in this conflict, that is the area
+that we need to explore and debate.
+    But this resolution is trying to hammer a square peg into a
+round hole. It misuses the extraordinary War Powers tool to try
+to get to the issue of security assistance to a third country.
+    This--even our refueling of Saudi jets, which does not
+constitute hostilities as traditionally understood, ended last
+November. I spoke with the Department of Defense
+representatives yesterday who reaffirmed that U.S. forces are
+not engaged in hostilities against the Houthis forces in Yemen.
+    They confirmed the continuing accuracy of the detailed
+letter sent to Congress last year by the department's acting
+general counsel.
+    No one is saying that U.S. security assistance to Saudi
+Arabia or anyone else is beyond congressional scrutiny. We have
+many tools to use including the committee's arms sales
+notifications, targeted legislation, and the annual
+appropriations process, among others.
+    But this resolution stretches the definition of hostilities
+to cover non-U.S. military operations by other countries. It
+reiterates and reinterprets U.S. support to these countries as
+engagement in hostilities.
+    This has implications far beyond Saudi Arabia. Under this
+model, if any Member of Congress does not like something that
+any of our security partners conducts overseas, that member can
+force quick consideration of a resolution directing the removal
+of U.S. forces from hostilities, quote, ``in or on affecting,''
+end of quote, that situation. It no longer matters that U.S.
+forces are not actually conducting the hostilities.
+    The bill is vague and irresponsible. It will create doubts
+for our partners and allies around the world. It will trouble
+the many Americans who believe that burden sharing with capable
+allies is vital for U.S. security to protect American families.
+    For these reasons, I strongly oppose this measure. I yield
+back my time.
+    Chairman Engel. Are there any other members seeking
+recognition?
+    Mr. Deutch.
+    Mr. Deutch. Thank you, Mr. Chairman.
+    Mr. Chairman, I am grateful to you for moving quickly to
+give this committee the opportunity to advance debate on U.S.
+involvement in the Yemen conflict. It is a debate that is long
+overdue.
+    As we just heard earlier today, U.S. presence in the
+Arabian Peninsula and our relationships with regional States
+are vital to stability in the Middle East. These ties are
+enduring and date to the end of the Second World War.
+    We should be clear from the outset that we value our
+alliances and we do share common interests. But we should be
+honest in reassessing where those interests diverge and in
+identifying actions that set back our mutual objectives.
+    First and foremost, we have to view our relationship with
+regional States through the prism of our own interests. Where
+do our priorities align? What types of action undermine our own
+goals?
+    The Saudis and Emirates are preoccupied with their campaign
+in Yemen, which they see as a direct threat to their national
+security. The U.S. is right to support these countries' right
+to self-defense and shares the concern that Iran is assisting
+the Houthis to further its own regional ambitions.
+    But I also remain deeply troubled by the protracted
+military campaign in Yemen. The number of civilian casualties
+is alarming, to say the least. The lack of humanitarian access
+that has fostered famine and other extreme conditions and has
+put tens of millions of people at risk of starvation and
+disease is creating the worst crisis in decades.
+    And I fear that the United States, through our coalition
+support, may be furthering the suffering and helping to
+perpetuate a conflict that has no military solution.
+    The coalition war against the Houthis also redirects
+attention away from al-Qaida in the Arabian Peninsula, the most
+dangerous branch of al-Qaida, and one that has sought to attack
+the United States directly.
+    In fact, public reporting has indicated these very groups
+the U.S. has long targeted in Yemen have at times been
+empowered by our own allies. Numerous reports of the use of
+child soldiers on both sides, illegal detention centers, shadow
+mercenaries, and continued reckless targeting should at least
+give us pause to reexamine exactly what role we should play in
+this conflict.
+    That is why I am an original co-sponsor of H.J. Res. 37.
+That is why I will vote in support of it today. For too long
+this Congress has abdicated its role in foreign policy.
+    Last Congress procedural moves were made to prevent us from
+even having this debate. The Trump administration, our Saudi
+and Emirate partners, the Houthis, and the Iranian backers must
+know that the status quo is unacceptable and must take greater
+steps to reach a diplomatic settlement to end the war.
+    The administration has only been willing to stand up for
+U.S. principles when there is sustained pressure by Congress,
+as we saw with the suspension of refueling. It is time for
+accountability.
+    The world must know that the United States does not accept
+and cannot be complicit in the deaths of innocent civilians in
+Yemen. Being an ally does not mean being given free rein and we
+must ensure that we are supporting our partners and making
+decisions that are in our best interest.
+    I look forward to continuing this debate with my colleagues
+on the House floor and I look forward to ensuring that our
+policies in the Middle East are also protecting U.S. security
+interests.
+    And I appreciate, Mr. Chairman, the opportunity to speak on
+this and yield back the balance of my time.
+    Chairman Engel. Thank you, Mr. Deutch.
+    Mr. Kinzinger.
+    Mr. Kinzinger. Mr. Chairman, I can pass on my opening
+statement if there is nobody else. Otherwise, I will speak.
+    Chairman Engel. I think--Mr. Curtis, I think, wanted to
+speak.
+    Mr. Kinzinger. Yes, go ahead.
+    Chairman Engel. Mr. Curtis.
+    Mr. Curtis. Thank you, Mr. Chairman, Ranking Member McCaul,
+for giving me a brief moment to speak regarding House Joint
+Resolution 37 directing the removal of U.S. armed forces from
+hostilities in Yemen.
+    To be clear, I support the intent of the resolution. I have
+spoken often and including on the House floor regarding my
+concerns with U.S. involvement in Yemen's civil war.
+    This is one of the world's deadliest wars that has killed
+tens of thousands of civilians. It is horrific--a horrific
+humanitarian crisis. An estimated 85,000 children have been
+killed or died of malnutrition and disease.
+    The time has come for the U.S. to reconsider our support of
+this disastrous war and to consider the moral imperatives that
+form the foundation of our values and strategic interests.
+    It is my fear that our continued support of the Saudi-led
+coalition's effort in Yemen will only increase resentment of
+United States in the region and could diminish America's
+reputation as champion of human rights and civil liberties.
+    Aside from the gross inhumanity of this war, I have growing
+concerns about the behavior of Saudi Arabia as it affects our
+larger American strategic interest in the region and our
+interest in preserving global humanitarian norms.
+    With all of that said, I will be voting no on the
+resolution before the committee today. My concerns are with the
+way the resolution is written and I believe it is the wrong
+vehicle to achieve the objective.
+    I believe that the resolution distorts the War Powers tool
+to address the situation in Yemen. It is my concern that this
+resolution could set a dangerous precedent and would have the
+unintended consequences of complicating U.S. security
+cooperation with partners around the world.
+    And for those reasons, I oppose the resolution. With that,
+Mr. Chairman, I yield my time.
+    Chairman Engel. Thank you. Thank you.
+    Mr. Lieu.
+    Mr. Lieu. Thank you, Mr. Chair.
+    Yemen is not and should not be a partisan issue. As all of
+you know, U.S. assistance to the Saudi-led coalition started
+under the Obama Administration in September 2015.
+    I wrote a letter to the Pentagon about this then little
+known war in Yemen because we were seeing reports that the
+Saudi-led coalition was striking innocent civilians.
+    In the following months and years more and more Democrats
+as well as Republicans started to get involved, and it is not
+just the humanitarian catastrophe we are concerned about. It is
+war crimes.
+    And regardless of what your view is of Saudi Arabia or our
+relationship, we cannot be assisting a coalition that is
+engaging in war crimes.
+    We also know, based on years of looking at their activity,
+it is not as if the Saudi jets are trying to hit a moving
+Houthi target and they miss and they strike a bunch of
+civilians.
+    What they are doing is precisely trying to strike the
+civilians. They have intentionally hit schools, wedding
+parties, funerals, most recently a bus with over 40 school
+kids.
+    And that is why I support this resolution. I do note that
+some of my Republican colleagues do have concerns related to
+War Powers.
+    That is why Representative Malinowski, Yoho, and I also
+introduced a simple clean bill that just tells us to get out of
+Yemen and the Armed Services Committee will have jurisdiction
+over that.
+    Having said that, I support this resolution and I urge
+people to support it as well.
+    Chairman Engel. Thank you.
+    Does any other member seek recognition?
+    If not, we can go to an immediate vote.
+    Mr. Kinzinger.
+    Mr. Kinzinger. Thank you, Mr. Chairman. I did change my
+mind because there was more discussion than I thought. So thank
+you for this opportunity to address this again.
+    Mr. Chairman, I respect the intention of everybody to try
+to get to the solution. I respect the fact that everybody has
+compassion for what is going on in Yemen, as we all should.
+    I am going to make the point that I made earlier today,
+which I think is very important to make, before I make a few
+other points.
+    The vast majority, or at least a significant number of
+people that are on this committee are freshmen. The freshmen on
+this committee have not had an opportunity to be briefed by the
+administration on what is going on in Yemen and what we are
+doing in Yemen.
+    The reason many people that are supporting this are
+supporting this are supporting this and OK voting for this
+without being briefed in a SCIF about what is going on in
+Yemen. And I hate to say this because I love this committee,
+but it is political.
+    It is because back home the Yemen war is all over Twitter
+and because there is pressure so we want to just pass this
+thing out of here. I mean, I love the hearing we did earlier.
+That is important.
+    But for the very first action of this committee to be to
+pass a War Powers Resolution that has nothing to do with what
+the War Powers Resolution was intended to do, the fact that
+there is over a hundred agreements between the Department of
+Defense and other countries that this, if passed, would now
+open up for any Member of Congress who disagrees with any one
+of those cooperation agreements to do the same exact thing.
+    Let us say we have a member of this committee that is--or
+of Congress that does not like our engagement with Israel. By
+the way, I notice that in this resolution it says none of this
+shall be construed to hurt our cooperation with Israel.
+    Well, that is true. It also is not construed for our
+cooperation with Georgia or the puppy brigade or anybody
+because this is specifically about Yemen.
+    The point about Israel is this opens up that opportunity
+now for any member to come forward and say they disagree with
+our military cooperation with Israel and do a privileged
+resolution and force a vote on the floor.
+    In the country of Georgia, where a third of it is occupied
+by Russian forces, we have cooperation with that nation. Now
+anybody that is pro-Russian can come forward and say that we
+need to debate ending cooperation with the Georgian military
+and everything else.
+    I am not--look, if you vote for this I do not think you are
+a bad person. Trust me. I do not think you have America's
+interests not at your heart. But my request of this committee,
+if we are going to take up this resolution is let us all have
+really good discussions about it.
+    Let us have information in the SCIF about what we are
+really doing over there. Let us have a detailed discussion
+about what happens if we pull out all cooperation of Saudi
+Arabia and what does that look like in terms of targeting in
+Yemen, and go through what we need and then as a committee we
+can have this vote.
+    But, Mr. Chairman, respectively, and I have a great deal of
+respect for you, this is our very first committee action and we
+are getting ready to take an action that is going to have
+detrimental consequences without really thinking it through.
+    So I have a great deal of respect here for all of my
+colleagues. But I would beg you--I would beg you to think
+through what your vote would have. I get the political
+implications of this. I get that Saudi Arabia, for instance, is
+a hot topic right now in the political sphere.
+    But what we do on this committee is not about politics.
+There is always some of that. We get it. What I have loved
+about being on the Foreign Affairs Committee and the reason I
+have fought hard to get my waivers to be on this committee is
+because this is a committee that puts partisan politics for the
+most part in front--behind what is good for this Nation.
+    And if you all think this is good for this Nation, that is
+fine. But I think you need to make that decision after having
+all the information in front of you before just saying in the
+very first meeting of this committee let us have a vote that
+could have a massive impact, open up over a hundred defense
+agreements for any other member of the House of Representatives
+that takes a problem with that to debate and bring a privileged
+resolution.
+    So with all due respect, I would beg you to vote against
+this. I would beg the majority to pull this resolution. But if
+they do not pull it, I would beg you to vote against it.
+    Let us get briefings, let us move on, and then have a
+really good debate and vote after that.
+    Thank you, Mr. Chairman.
+    Chairman Engel. Thank you.
+    Mr. Malinowski.
+    Mr. Malinowski. Thank you, Mr. Chairman.
+    I very much appreciate the sentiment that was just
+expressed and the passion behind it. With respect, I am a
+freshman who has spent many, many hours in SCIFs looking at
+this situation, having helped to oversee some of our assistance
+to Saudi Arabia in this conflict.
+    We have a number of freshman members here who have
+significant national security experience. So I think we should
+debate the substance of this rather than suggest that any of us
+on this side have not thoroughly studied the question.
+    For me, I--look, many of us on both sides have concerns
+about our engagement with Saudi Arabia. I share some of my
+Republican colleagues' concerns about not overusing the War
+Powers Resolution.
+    I think there may be other ways to address these concerns,
+and as Mr. Lieu mentioned, we hope to be able to work together
+with you on that.
+    But the question here before us is a very simple one. Are
+we actually involved in active hostilities with the Saudis in
+Yemen?
+    I can tell you most of my former colleagues in the State
+Department who are lawyers looking at this question believe
+that the answer to is was yes and I think it stands to reason.
+    Imagine, if you will, if a foreign power were engaged in
+air strikes against Washington, DC. as we spoke and a second
+foreign power was refueling its aircraft over the Chesapeake
+Bay and then servicing those aircraft when they landed to stock
+up on bombs again so that they could resume their operations
+against us.
+    Would we consider the second power to be engaged in active
+hostilities against us? I think all of us in this room would
+say yes. We are deeply, deeply embedded in the Saudi conflict
+in Yemen in a way that we are not in the various partnership
+relationships we have in Africa, in the Middle East, that my
+friend fears that this will implicate.
+    I think the standard we are setting here for defining
+engagement in active hostilities is in fact very, very high,
+very, very appropriate and I will be voting for this resolution
+as a result.
+    Thank you.
+    Mr. Connolly. Would my friend yield for a question?
+    Mr. Malinowski.
+    Mr. Malinowski. Yes, absolutely.
+    Mr. Connolly. Would my friend agree, in addition to the
+points he made, that we are arguing over what constitutes
+combat and hostilities and that the support we have been giving
+in the Yemen conflict with the Saudis would clearly fall within
+the penumbra of hostilities and combat support involving U.S.
+military if not on the ground?
+    Mr. Malinowski. I would say yes and in a way that is
+distinct from most of our partner relationships around the
+world. The provision of weapons to Saudi Arabia, in my mind,
+would not rise to that level.
+    Mr. Connolly. And would my friend----
+    Mr. Malinowski. But refueling operations, targeting where
+we are actually there with them selecting the target and
+enabling the aircraft to reach the target, if any--if this was
+being done to us there is no question in my mind that we would
+agree that that would be hostilities against the United States.
+    Mr. Kinzinger. Will the gentleman----
+    Mr. Connolly. So--I am not finished yet. If my friend would
+further yield.
+    Mr. Malinowski. Of course, yes.
+    Mr. Connolly. So some--I understand that there are
+differences in approach and that some have a juridical
+approach, which is that strictly speaking, unless there are
+boots on the ground, we are not in combat and this does not
+apply and we are overreaching.
+    I beg to differ as, obviously, does my friend from New
+Jersey. But let me ask one final question.
+    Would my friend also agree that just as there are implied
+powers for the role of the commander in chief that over the
+years have really been expanded that there are also implied
+powers in Article 1 Section A to the Constitution exclusively
+granting to the legislative branch the power of war and peace
+and the assembling of armed forces? That is explicit language
+in the Constitution of the United States.
+    And that today we are in fact--you could disagree with the
+action but certainly you cannot argue constitutionally that we
+are not within our right to circumscribe the involvement of
+U.S. military when we have grave doubts about half the people
+we represent.
+    Mr. Malinowski. I certainly agree with my friend and it is
+a responsibility that Congress over the years has, arguably,
+abdicated and I think one of the points of this resolution and
+our broader efforts on Saudi Arabia, however we approach them,
+is to assert that Congress has that role and responsibility.
+    Obviously, we need to exercise it responsibly. But I think
+we are doing so here.
+    Chairman Engel. Time is up.
+    Anybody on the Republican side wish to be heard?
+    If not, we have one more--Mr. Zeldin?
+    Mr. Zeldin. I yield to Mr. Kinzinger.
+    Mr. Kinzinger. Thank you, Mr. Zeldin. Thank you, Mr.
+Chairman.
+    Just I am not going to take all 5 minutes. I do want to
+make a point, though. If the U.S. Government was overthrown by
+a terrorist organization and somebody was bombing that
+terrorist organization and there was a country refueling and
+giving them targeting against the terrorist organization, I
+certainly would not consider them an enemy.
+    I think that is an important point to make. And again, I
+think just--because I do not want to take all 5 minutes--one of
+the biggest things here is what precedent are we setting in any
+one of our defense cooperation agreements by this?
+    I respect, sir, the gentleman from New Jersey, that you do
+know what is going on. I would argue that there are a lot of
+people that just do not. And that is not a cut to them. There
+is probably situations around the world I do not know anything
+about because I have not been briefed to the level I should
+have been.
+    And I got to tell you--and this is dead honest, and my
+friends on the other side of the aisle know this about me--if
+my party in 2015 was bringing this up against President Obama,
+who began this cooperation, I would be saying the exact words I
+am saying today and I would be opposing my own party in this
+resolution because I think it is so bad.
+    With that, I will just yield back, or I will yield back to
+the gentleman.
+    Mr. Zeldin. I yield back to the chair.
+    Chairman Engel. Thank you.
+    Ms. Spanberger.
+    Ms. Spanberger. Thank you, Mr. Chair.
+    To comment on the positions put forth by my colleague from
+Illinois, I would like to posit that we in fact are making
+informed decisions. That is the focus of what we are doing
+here, and I can think of no better first action than one that
+is focused on Article 1 of the Constitution that requires that
+Members of Congress make informed decisions about hostile
+engagement that in fact we undergo.
+    And my colleague's reverse hypothetical of my colleague
+from New Jersey's position was actually not one that was
+something that we can perceive as a comparison because in fact
+the minute we start changing under which circumstances we are
+willing to abdicate our responsibility related to Article 1 in
+the case of a government overthrow, does Congress just step
+back and let the administration or the executive branch do
+whatever they want in this circumstance or that circumstance.
+    We are taking away and we are abdicating our responsibility
+as Members of Congress and the minute we engage in these
+hypotheticals where we are talking about different
+circumstances and allowing for and justifying behaviors in
+different circumstances, I think that is where we get into
+challenging territory.
+    And so I will be supporting this resolution today because I
+think it is absolutely because we need to make informed
+decisions that Congress should be engaged on where it is that
+we are in fact engaged in hostile activity or military
+activity.
+    I yield back. Thank you.
+    Chairman Engel. All right. Thank you.
+    Hearing no further requests for recognition, the question
+is to report House Joint Resolution 37 to the House with the
+recommendation that the bill does pass.
+    All those in favor, say aye.
+    [Chorus of ayes.]
+    All opposed, no.
+    [Chorus of noes.]
+    In the opinion of the chair, the ayes have it.
+    Mr. Kinzinger. Mr. Chairman, I ask for a recorded vote.
+    Chairman Engel. A recorded vote has been requested. The
+clerk will call the role.
+    Ms. Stiles. Mr. Sherman. Mr. Sherman.
+    [No response.]
+    Ms. Stiles. Mr. Meeks. Mr. Meeks.
+    [No response.]
+    Ms. Stiles. Mr. Sires.
+    Mr. Sires. Aye.
+    Ms. Stiles. Mr. Sires votes aye.
+    Mr. Connolly.
+    Mr. Connolly. Aye.
+    Ms. Stiles. Mr. Connolly votes aye.
+    Mr. Deutch.
+    Mr. Deutch. Aye.
+    Ms. Stiles. Mr. Deutch votes aye.
+    Ms. Bass.
+    Ms. Bass. Aye.
+    Ms. Stiles. Ms. Bass votes aye.
+    Mr. Keating.
+    Mr. Keating. Aye.
+    Ms. Stiles. Mr. Keating votes aye.
+    Mr. Cicilline.
+    Mr. Cicilline. Aye.
+    Ms. Stiles. Mr. Cicilline votes aye.
+    Mr. Bera.
+    Mr. Bera. Aye.
+    Ms. Stiles. Mr. Bera votes aye.
+    Mr. Castro.
+    Mr. Castro. Aye.
+    Ms. Stiles. Mr. Castro votes aye.
+    Ms. Titus.
+    Ms. Titus. Aye.
+    Ms. Stiles. Ms. Titus votes aye.
+    Mr. Espaillat. Mr. Espaillat.
+    [No response.]
+    Mr. Lieu.
+    Mr. Lieu. Aye.
+    Ms. Stiles. Mr. Lieu votes aye.
+    Ms. Wild.
+    Ms. Wild. Aye.
+    Ms. Stiles. Ms. Wild votes aye.
+    Mr. Phillips.
+    Ms. Phillips. Aye.
+    Ms. Stiles. Mr. Phillips votes aye.
+    Ms. Omar.
+    Ms. Omar. Aye.
+    Ms. Stiles. Ms. Omar votes aye.
+    Mr. Allred.
+    Mr. Allred. Aye.
+    Ms. Stiles. Mr. Allred votes aye.
+    Mr. Levin.
+    Mr. Levin. Aye.
+    Ms. Stiles. Mr. Levin votes aye.
+    Ms. Spanberger.
+    Ms. Spanberger. Aye.
+    Ms. Stiles. Ms. Spanberger votes aye.
+    Ms. Houlahan.
+    Ms. Houlahan. Aye.
+    Ms. Stiles. Ms. Houlahan votes aye.
+    Mr. Malinowski.
+    Mr. Malinowski. Aye.
+    Ms. Stiles. Mr. Malinowski votes aye.
+    Mr. Trone.
+    Mr. Trone. Aye.
+    Ms. Stiles. Mr. Trone votes aye.
+    Mr. Costa.
+    Mr. Costa. Aye.
+    Ms. Stiles. Mr. Costa votes aye.
+    Mr. Vargas.
+    Mr. Vargas. Aye.
+    Ms. Stiles. Mr. Vargas votes aye.
+    Mr. Gonzalez.
+    Mr. Gonzalez. Aye.
+    Ms. Stiles. Mr. Gonzalez votes aye.
+    Mr. McCaul.
+    Mr. McCaul. No.
+    Ms. Stiles. Mr. McCaul votes no.
+    Mr. Smith.
+    Mr. Smith. No.
+    Ms. Stiles. Mr. Smith votes no.
+    Mr. Chabot. Mr. Chabot.
+    [No response.]
+    Mr. Wilson.
+    Mr. Wilson. No.
+    Ms. Stiles. Mr. Wilson votes no.
+    Mr. Perry.
+    Mr. Perry. No.
+    Ms. Stiles. Mr. Perry votes no.
+    Mr. Yoho.
+    Mr. Yoho. No.
+    Ms. Stiles. Mr. Yoho votes no.
+    Mr. Kinzinger.
+    Mr. Kinzinger. No.
+    Ms. Stiles. Mr. Kinzinger votes no.
+    Mr. Zeldin.
+    Mr. Zeldin. No.
+    Ms. Stiles. Mr. Zeldin votes no.
+    Mr. Sensenbrenner. Mr. Sensenbrenner.
+    [No response.]
+    Mrs. Wagner.
+    Mrs. Wagner. No.
+    Ms. Stiles. Mrs. Wagner votes no.
+    Mr. Mast.
+    Mr. Mast. No.
+    Ms. Stiles. Mr. Mast votes no.
+    Mr. Rooney. Mr. Rooney.
+    [No response.]
+    Mr. Fitzpatrick.
+    Mr. Fitzpatrick. No.
+    Ms. Stiles. Mr. Fitzpatrick votes no.
+    Mr. Curtis.
+    Mr. Curtis. No.
+    Ms. Stiles. Mr. Curtis votes no.
+    Mr. Buck. Mr. Buck.
+    [No response.]
+    Mr. Wright.
+    Mr. Wright. No.
+    Ms. Stiles. Mr. Wright votes no.
+    Mr. Reschenthaler.
+    Mr. Reschenthaler. No.
+    Ms. Stiles. Mr. Reschenthaler votes no.
+    Mr. Burchett.
+    Mr. Burchett. No.
+    Ms. Stiles. Mr. Burchett votes no.
+    Mr. Pence.
+    Mr. Pence. No.
+    Ms. Stiles. Mr. Pence votes no.
+    Mr. Watkins.
+    Mr. Watkins. No.
+    Ms. Stiles. Mr. Watkins votes no.
+    Mr. Guest.
+    Mr. Guest. No.
+    Ms. Stiles. Mr. Guest votes no.
+    Chairman Engel. May I ask the clerk how----
+    Ms. Stiles. Chairman Engel.
+    Chairman Engel. Votes aye.
+    Ms. Stiles. Chairman Engel votes aye.
+    Chairman Engel. Mr. Espaillat.
+    Mr. Espaillat. Aye.
+    Ms. Stiles. Mr. Espaillat votes aye.
+    Chairman Engel. Have all members been recorded?
+    And the clerk will report.
+    One more?
+    Chairman Engel. Is Mr. Sherman recorded?
+    Mr. Sherman. Aye.
+    Ms. Stiles. Mr. Sherman votes aye.
+    [Laughter.]
+    Ms. Stiles. Mr. Chairman, on that vote, there were 25 ayes
+and 17 noes.
+    Chairman Engel. Twenty-five ayes and 17 noes. The ayes have
+it.
+    The measure is ordered favorably reported and the motion to
+reconsider is laid upon the table.
+    Without objection, the staff is authorized to make
+necessary technical and conforming changes, and this concludes
+our business today.
+    I want to thank Mr. McCaul and all our members on both
+sides of the aisle and the committee stands adjourned.
+    [Whereupon, at 2:50 p.m., the committee was adjourned.]
+                                APPENDIX
+[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
+                  STATEMENTS SUBMITTED FOR THE RECORD
+[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
+             ADDITIONAL MATERIALS SUBMITTED FOR THE RECORD
+[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
+                              RECORD VOTE
+[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
+                             MARKUP SUMMARY
+[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
+                                 <all>
+</pre></body></html>

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+<html>
+<title> - MADE BY MADURO: THE HUMANITARIAN CRISIS IN VENEZUELAAND U.S. POLICY RESPONSES</title>
+<body><pre>
+[House Hearing, 116 Congress]
+[From the U.S. Government Publishing Office]
+                          MADE BY MADURO: THE
+       HUMANITARIAN CRISIS IN VENEZUELA AND U.S. POLICY RESPONSES
+=======================================================================
+                                HEARING
+                               BEFORE THE
+                            SUBCOMMITTEE ON
+          THE WESTERN HEMISPHERE, CIVILIAN SECURITY, AND TRADE
+                                 OF THE
+                      COMMITTEE ON FOREIGN AFFAIRS
+                        HOUSE OF REPRESENTATIVES
+                     ONE HUNDRED SIXTEENTH CONGRESS
+                             FIRST SESSION
+                               __________
+                           FEBRUARY 26, 2019
+                               __________
+                            Serial No. 116-7
+                               __________
+        Printed for the use of the Committee on Foreign Affairs
+                [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
+Available: http://www.foreignaffairs.house.gov/, http://docs.house.gov,
+                           or www.govinfo.gov
+                               __________
+                     U.S GOVERNMENT PUBLISHING OFFICE
+35-365PDF		   WASHINGTON : 2019
+                      COMMITTEE ON FOREIGN AFFAIRS
+                   ELIOT L. ENGEL, New York, Chairman
+BRAD SHERMAN, California             MICHAEL T. McCAUL, Texas, Ranking
+GREGORY W. MEEKS, New York               Member
+ALBIO SIRES, New Jersey		     CHRISTOPHER H. SMITH, New Jersey
+GERALD E. CONNOLLY, Virginia         STEVE CHABOT, Ohio
+THEODORE E. DEUTCH, Florida          JOE WILSON, South Carolina
+KAREN BASS, California               SCOTT PERRY, Pennsylvania
+WILLIAM KEATING, Massachusetts       TED S. YOHO, Florida
+DAVID CICILLINE, Rhode Island        ADAM KINZINGER, Illinois
+AMI BERA, California                 LEE ZELDIN, New York
+JOAQUIN CASTRO, Texas                JIM SENSENBRENNER, Wisconsin
+DINA TITUS, Nevada                   ANN WAGNER, Missouri
+ADRIANO ESPAILLAT, New York          BRIAN MAST, Florida
+TED LIEU, California                 FRANCIS ROONEY, Florida
+SUSAN WILD, Pennsylvania             BRIAN FITZPATRICK, Pennsylvania
+DEAN PHILLIPS, Minnesota             JOHN CURTIS, Utah
+ILHAN OMAR, Minnesota                KEN BUCK, Colorado
+COLIN ALLRED, Texas                  RON WRIGHT, Texas
+ANDY LEVIN, Michigan                 GUY RESCHENTHALER, Pennsylvania
+ABIGAIL SPANBERGER, Virginia         TIM BURCHETT, Tennessee
+CHRISSY HOULAHAN, Pennsylvania       GREG PENCE, Indiana
+TOM MALINOWSKI, New Jersey           STEVE WATKINS, Kansas
+DAVID TRONE, Maryland                MIKE GUEST, Mississippi
+JIM COSTA, California
+JUAN VARGAS, California
+VICENTE GONZALEZ, Texas
+                    Jason Steinbaum, Staff Director
+              Brendan Shields,  Republican Staff Director
+                                 ------
+  Subcommittee on the Western Hemisphere, Civilian Security, and Trade
+                   ALBIO SIRES, New Jersey, Chairman
+GREGORY W. MEEKS, New York           FRANCIS ROONEY, Florida, Ranking
+JOAQUIN CASTRO, Texas                    Member
+ADRIANO ESPAILLAT, New York          CHRISTOPHER H. SMITH, New Jersey
+DEAN PHILLIPS, Minnesota             TED S. YOHO, Florida
+ANDY LEVIN, Michigan                 JOHN CURTIS, Utah
+VICENTE GONZALEZ, Texas              KEN BUCK, Colorado
+JUAN VARGAS, California              MIKE GUEST, Mississippi
+                       Sadaf Khan, Staff Director
+                            C O N T E N T S
+                              ----------
+                                                                   Page
+                               WITNESSES
+Escobari, Marcela, Senior Fellow For Global Economy and
+  Development, Center for Universal Education, Brookings
+  Institution....................................................    21
+Canton, Santiago, Former Executive Secretary, Inter-American
+  Commission on Human Rights.....................................    30
+Rendon, Moises, Associate Director and Associate Fellow, Americas
+  Program, Center for Strategic and International Studies........    38
+              STATEMENTS SUBMITTED FROM COMMITTEE MEMBERS
+Hon. Albio Sires, chairman of the subcommittee...................     3
+Representative Yoho for Ambassador Rooney........................     8
+Representative Meeks.............................................    13
+                                APPENDIX
+Hearing Notice...................................................    59
+Hearing Minutes..................................................    60
+Hearing Attendance...............................................    61
+             ADDITIONAL MATERIALS SUBMITTED FOR THE RECORD
+Amensty International letter submitted from Representative Levin.    62
+            RESPONSES TO QUESTIONS SUBMITTED FOR THE RECORD
+Question submitted to Ms. Marcela Escobari from Chairman Sires...    70
+Question submitted to Mr. Santiago Canton from Representative
+  Levin..........................................................    73
+                    MADE BY MADURO: THE HUMANITARIAN
+             CRISIS IN VENEZUELA AND U.S. POLICY RESPONSES
+                       Tuesday, February 26, 2019
+                           House of Representatives
+            Subcommittee on the Western Hemisphere,
+                       Civilian Security, and Trade
+                       Committee on Foreign Affairs
+                                                     Washington, DC
+    The committee met, pursuant to notice, at 2:08 p.m., in
+Room 2172 Rayburn House Office Building, Hon. Albio Sires
+(chairman of the subcommittee) presiding.
+    Mr. Sires. This hearing will come to order.
+    This hearing titled Made by Maduro: The Humanitarian Crisis
+in Venezuela and U.S. Policy Responses will focus on the
+political, economic, and human rights crisis in Venezuela, and
+ways for the international community to support the Venezuelan
+people.
+    Without objection, all members may have 5 days to submit
+statements, questions, extraneous material for the record,
+subject to the length limitation in the rules. I will now make
+an opening statement and then turn it over to the ranking
+member for his opening statement.
+    Good afternoon, everyone, and thank you to our witnesses
+for being here today for such a timely and important topic.
+This is our first subcommittee hearing of the 116th Congress,
+and I just want to say that I am looking forward to working
+with every member of this committee, including Ranking Member
+Rooney and Vice Chair Meeks, to bring much-needed attention to
+the Western Hemisphere.
+    Today the Venezuelan people are suffering under a
+humanitarian crisis caused by authoritarian leader Nicolas
+Maduro. Since Maduro came to power in 2013, he has consistently
+repressed human rights. Under his command, security forces have
+arbitrarily detained and abused thousands of protesters,
+committed acts of torture and forced disappearances, and
+carried out hundreds of brutal killings, all with the single
+goal of eliminating any and all opposition.
+    Just yesterday we saw another assault on democracy when
+Maduro detained American journalist Jorge Ramos for hours just
+because he did not like the questions he was being asked.
+    Maduro has caused an economic collapse that has left nearly
+90 percent of Venezuelans in poverty, and forced over 3 million
+Venezuelans to leave their country. While average Venezuelans
+suffer from crippling inflation and shortages of food and
+medicine, Maduro and his cronies have enriched themselves
+through drug trafficking and money laundering.
+    Maduro's illegitimate reelection last year cemented his
+position as a dictator. If there was any doubt, one just needs
+to examine this weekend's event when Maduro thugs burned tons
+of boxes of food and medicine. He would rather see his people
+starve and suffer than face the truth.
+    It is clear from the massive demonstrations that have been
+taking place that Venezuelans have had enough. They are
+demanding an end to Maduro's reign of terror. At this pivotal
+moment the United States must stand by the Venezuelan people
+and on the side of democracy. I have joined many of my
+colleagues in recognizing the interim President Juan Guaido and
+calling for swift elections that are free, fair, and
+transparent.
+    I believe the U.S. must work closely with allies in Latin
+America and Europe to help the Venezuelan people reclaim their
+fundamental rights and restore democracy. And we must take note
+of the regimes that are enabling Maduro.
+    Cuba continues to provide intelligence support to Maduro to
+prevent military officials from defecting to the side of
+democracy. And Russia and Turkey are providing financial
+lifelines to keep Maduro afloat. The international community
+should be unified in calling for an immediate peaceful
+transition that swiftly leads to free and fair elections in
+which every political party is allowed to participate in fully
+competitive conditions, as guaranteed by international
+observers.
+    To achieve that goal, we must apply maximum diplomatic and
+economic pressure on Maduro and do all we can to support the
+Venezuelan people. That is why I have joined my colleagues in
+working to hold Maduro accountable, while providing aid to
+address the humanitarian crisis. I have joined Congressman Soto
+in calling for the U.S. to grant temporary protected status to
+Venezuelans fleeing this crisis. And I cosponsored legislation
+proposed by Congresswoman Mucarsel-Powell which will authorize
+the President to direct $150 million in humanitarian assistance
+to the people of Venezuela.
+    As we ramp up the pressure under Maduro, we need to be
+thinking also about the day after he is gone and how we can
+support the Venezuelan people to rebuild not just their
+democracy but their economy.
+    I look forward to hearing from the experts with us today
+about what further steps the U.S. Government can take in close
+coordination with our allies to help the Venezuelan people
+reclaim their democracy.
+    Thank you. And I now turn to the ranking member for his
+opening statement, Congressman Yoho.
+    [The prepared statement of Mr. Sires follows:]
+    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT
+    Mr. Yoho. Mr. Chairman, I appreciate it. And I am going to
+read Ambassador Rooney's opening statement.
+    Thank you, Mr. Chairman. The current humanitarian and
+economic catas--thank you, catastrophe, that word, plaguing
+Venezuela is unprecedented in our hemisphere. The socialist
+policies, corruption, and economic mismanagement by the Maduro
+regime have destroyed what was once the most prosperous, the
+most prosperous country in Latin America and created one of the
+greatest exoduses of people, wealth, and talent in recent
+historical memories. Up to 3 million people have fled
+Venezuela.
+    We said this on a news conference yesterday. You know, if
+it is doing so well, the Maduro regime is doing so well, why
+would 3 million people of your own country want to leave,
+destabilizing the region and most severely impacting our strong
+ally Colombia, and all of South America?
+    Of course, an illegitimate dictator like Maduro refuses to
+accept responsibility for the current crisis. Blaming the
+United States will never explain hyperinflation exceeding 2
+million percent I read the other day--I do not know how that is
+possible--or an average Venezuelan losing over 20 pounds in
+body weight due to malnutrition. Instead, Maduro ignores the
+suffering of the Venezuelan people and continues to block
+humanitarian aid from entering his country.
+    I comment the Trump administration for leading the effort
+to bring humanitarian assistance to the Venezuelan people in
+response to interim President Guido's request.
+    I also applaud Colombian President Duque, who we met with
+last week, and Brazilian President Bolsonaro for their support
+and strong commitment to democracy and freedom for the
+Venezuelan people. The Maduro regime also refuses to listen to
+the request of the Venezuelan people, and has violently cracked
+down on peaceful dissent and committed serious human rights
+violation and abuses, including torture and death.
+    Just this past weekend security forces are believed to have
+killed at least 25 people and injured more than 285 because
+they dared to protest. He has usurped the power of the
+democratically elected National Assembly and destroyed
+Venezuela's democratic institutions, while ignoring
+condemnation from the international community. The Maduro
+regime is not one elected officials chosen by--is not one of
+elected officials chosen by the Venezuelan people but criminals
+who run a mafia-like enterprise to enrich themselves at the
+expense of ordinary Venezuelans.
+    Just last week we had a meeting where we found out that
+over $11 billion was pilfered off of the petroleum companies
+that have enriched the upper echelons of the Maduro regime at
+the expense of the Venezuelan people.
+    The mafia State has not risen to power on its own. U.S.
+adversaries--and keep in mind it goes back to what our parents
+taught us as kids, you become who you hang around with--U.S.
+adversaries like Russia, Cuba, China, Iran, and Morales of
+Bolivia support the Maduro regime. That should tell you right
+there they are on the wrong side. Cuban officials are embedded
+in the Venezuelan military to the point where Maduro relies on
+the security forces of the Cuban regime for support because he
+cannot trust his own people.
+    Russia and Iran see Venezuela as a disruptive thorn in the
+side of the United States. And China exploits a corrupt regime
+for discounted oil and access to resources. This is the real
+foreign interference we should be talking about. The
+illegitimate Maduro regime also has ties to drug trafficking
+and other illicit activities, and the Venezuelan people are the
+first victims of this corruption and cronyism. Over the last
+month the Venezuelan people have stood up to the Maduro regime
+and demanded the return of Venezuela to the prosperous, free
+nation it once was.
+    President, interim President Juan Guaido has certified a
+united movement against the Maduro regime, and it has gained
+the recognition of over 50 countries. Maduro wants to blame the
+U.S. for this, but this is 50 international companies--
+countries that have stood up to this. Again, I commend the
+Trump administration's strong support for Guaido and the
+Venezuelan people, and support the calls for free and fair
+elections in Venezuela as soon as conditions allow for them.
+And I strongly support the continuation of sanctions against
+the Maduro regime and the use of all economic tools at our
+disposal to hold them accountable for the crimes.
+    There is much work to be done for Venezuela to regain its
+freedom, and freedom they will regain because the Venezuelan
+people grew up in this generation of liberties and freedoms and
+he is trying to snatch that away from them. They will not
+tolerate that. And that on itself is enough to change that
+regime.
+    I am encouraged by the efforts of the administration and
+Special Representative Elliott Abrams to achieves these goals
+and coordination with our regional allies, and further hope my
+Democrat and Republican colleagues here in Congress will work
+together to present a united front against the Maduro regime
+that will encourage other nations to be on the right side of
+history.
+    I look forward to the hearing. And, Mr. Chairman, I yield
+back. Thank you.
+    [The prepared statement of Mr. Rooney follows:].
+                  AMBASSADOR ROONEY OPENING STATEMENT
+    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT
+    Mr. Sires. Thank you. Thank you, Congressman Yoho.
+    We are going to open it up for 1-minute remarks by the
+members. Vice Chair Meeks, you have it.
+    Mr. Meeks. Thank you, Mr. Chairman. And I am going to
+submit my full statement for the record. I will summarize it
+real quickly in this 1 minute.
+    You know, clearly, to see what is happening to the people
+of Venezuela is heartbreaking to witness. When we talk about
+the scenario and human lives being lost in many instances and
+people going hungry, and no one wants to stand by and see such
+tragedies. But I do believe that it is important that the Lima
+Group and some of our allies in the region take the lead on
+this. It is just too much, I think, that it seems as though
+with our past history in the region, in Central and South
+America, and some of the bellicose talks that are going on
+about military threats, that hurts getting things done.
+    I appreciate the fact that I see how and such with not a
+lot of bellicose that Peru, and Colombia, and Brazil, those
+border States have been dealing with. I look forward to
+questioning the witnesses and going and pursuing this a little
+bit further.
+    But I submit my full statement for the record.
+    [The prepared statement of Mr. Meeks follows:]
+        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT
+    Mr. Sires. Thank you, Congressman.
+    Congressman Yoho, 1-minute remark.
+    Mr. Yoho. One minute. You know, we look at this. And we met
+with the interim Ambassador that has been placed in that
+position that we recognize, and what I see is not, this is just
+not about Venezuela. This is about the other nations that we
+talked about, Cuba, China, Russia, Iran, Bolivia. These are all
+anti-western democracies. And the Rubicon is Venezuela. If the
+Maduro regime fails, so does Cuba because they have invested so
+much over the course of the years, and the same with Russia.
+    This is something that we have over 70 million displaced
+refugees around the world because of conflict. We have the
+potential, having millions more that we have never seen in this
+country coming through our southern border. And this is
+something that we need to have a peaceful resolution as soon as
+possible.
+    And I look forward to this hearing.
+    Mr. Sires. Thank you. Congressman Espaillat.
+    Mr. Espaillat. Thank you, Mr. Chairman.
+    Although I have in the past been outspoken against any form
+of military intervention by our nation--we cannot continue to
+be the policeman of the world--I am very distressed to see what
+is occurring in Venezuela, particularly yesterday. We saw how
+Jorge Ramos and his Univision crew were detained for 2 hours
+when he showed Maduro a film of the children, Venezuelan
+children eating off a garbage truck. That has been protested by
+the entire world, including Mexico who has been somewhat
+ambivalent about what is happening in Venezuela, they protested
+this.
+    And yesterday Jorge Ramos and his crew were deported from,
+forcefully moved from Venezuela. That is, Mr. Chairman,
+troubling because the eyes of the world must be on what is
+happening there. The whole world must be watching what is
+happening there. We cannot be blindfolded to that. And that is
+an egregious act against humanity.
+    Mr. Sires. Thank you, Congressman.
+    Congressman Vargas.
+    Mr. Vargas. Thank you very much, Mr. Chair. And thank you
+for holding this hearing.
+    I have to say that I am very distressed with what is
+happening in Venezuela. Venezuela has been a very proud
+country. In fact, has the largest oil reserves in the world. It
+has been a country that has historically been very wealthy in
+Latin America and on the move. And to see what has happened to
+it under Maduro is tragic. It has become a failed state.
+    And also to reiterate what has happened to Jorge Ramos, a
+lot of us see Jorge Ramos as the Walter Cronkite of Spanish
+news. Someone that we always trust. He is very straightforward
+in what he says. And to see him, see what happened to him and
+his crew, how they were manhandled, and mishandled, and
+mistreated was really tragic because we need to see with the
+eyes, I think, of a very honest newsperson like himself what is
+going on there.
+    So, again, I am very happy that we are having this hearing
+today. And I want to thank you, Mr. Chairman and the ranking
+member.
+    Mr. Sires. Thank you, Congressman.
+    Let me introduce first Ms. Marcela Escobari, Senior Fellow
+in the Center for Universal Education at Brookings where she is
+leading the Workforce of the Future Initiative. She spent the
+last year of President Obama's administration as an assistant
+administrator of the U.S. Agency for International
+Development's Bureau for Latin America and the Caribbean,
+focusing its initiatives on poverty, inequality, citizen
+security, and governance.
+    Since 2007, Ms. Escobari served as the Executive Director
+of the Center for International Development at Harvard
+University. She has also worked as head of the Americas Region
+at the OTF Group where she advised governments on poverty
+alleviation through private enterprise.
+    We welcome you again. Thank you.
+    We will then hear from Mr. Santiago Canton who currently
+serves as Secretary of Human Rights for the Province of Buenos
+Aires. In 2017, he was appointed by the Organization of
+American States' Secretary General Luis Almagro as one of three
+experts to join an independent panel to examine the human
+rights situation in Venezuela. Mr. Canton was formerly director
+of RFK Partners for Human Rights at the Robert F. Kennedy
+Center for Justice and Human Rights.
+    Before joining the RFK Center, Mr. Canton was the Executive
+Secretary of the Inter-American Commission on Human Rights for
+11 years, after serving as the first Special Rapporteur for
+Freedom of Expression in the Inter-American System. He also
+served as Director for Latin America and the Caribbean for the
+National Democratic Institute for International Affairs as a
+political assistant to former United States President Jimmy
+Carter.
+    Welcome.
+    Finally, we will hear from Moises Rendon, Associate
+Director and Associate Fellow of the Center for Strategic and
+International Studies, Americas Program. His research focuses
+on Latin American States in transition, trade and investment,
+governance and transparency, and U.S. foreign policy toward
+Latin America, with particular emphasis on Venezuela. He is a
+native Venezuelan.
+    Thank you all for being here. Now we will go to testimony.
+Ms. Escobari, you have 5 minutes.
+STATEMENT OF MARCELA ESCOBARI, SENIOR FELLOW FOR GLOBAL ECONOMY
+  AND DEVELOPMENT, CENTER FOR UNIVERSAL EDUCATION, BROOKINGS
+                          INSTITUTION
+    Ms. Escobari. Thank you, Chairman Sires and members of the
+committee for calling this hearing and for the opportunity to
+testify today. I will be summarizing my views and ask that my
+full testimony be placed in the record.
+    Venezuela presents a complex situation for a humanitarian
+response, where there is a legitimate, widely recognized, and
+democratically elected entity in the National Assembly, and now
+interim President Juan Guaido . However, he does not, as of
+now, have the command of the military forces or the government
+bureaucracy. So, while the official request of humanitarian aid
+from the National Assembly has started to be answered by the
+international community, it is a contested environment, where
+the delivery of aid is being explicitly blocked by Nicolas
+Maduro and the military.
+    So, the situation calls for a two-tiered response.
+    One, is what to do during this impasse.
+    And, two, what to do in case of a much-needed democratic
+transition.
+    Alleviating the human suffering and the refugee crisis
+looks different under these two scenarios. In the status quo we
+need to deliver aid in a politically neutral way to those that
+need it the most. This may involve engaging the United Nations,
+funding exisiting local and multinational NGO's on the ground,
+and using a variety of delivery channels, from cash transfers
+to air drops of supplies. As the need is and will be massive,
+both inside Venezuela and the neighboring countries affected by
+the refugee crisis.
+    I would like to be clear that while important and
+necessary, given the extent of the humanitarian crisis, this
+approach is palliative. In the case of a democratic transition,
+Venezuela can engage in the profound reforms that are needed:
+Stabilizing the currency, rebooting the private provision of
+goods, massive cash transfers to alleviate acute shortages, and
+investing in public services from the replenishment of
+hospitals to citizen security. This transition will involve
+significant aid and, likely, the largest IMF package in its
+history.
+    So, what is the situation? Venezuela has seen one of the
+most dramatic economic contractions in human history. Inflation
+has surpassed 1 million percent in the last year. If
+Venezuelans used to buy a carton of milk with $1 in January, in
+December it cost them $10,000. Obviously, salaries have not
+kept up.
+    GDP has contracted over 50 percent in the last 5 years, the
+largest contraction in the world in 2017. It has over $150
+billion in debt, while oil output, which is 95 percent of
+exports, has gone down 64 percent in the last 20 years due to
+mismanagement and corruption.
+    Poverty has gone from 48 percent to 91 percent in the last
+4 years. Venezuela is one of the most violent countries in the
+world. Parts of Venezuela have become lawless refuge for the
+FARC, the ELN, and non-state actors who engage in
+narcotrafficking, illegal mining, and contraband of gasoline.
+    There are shortages of almost every basic medication. The
+Ministry of Health reported on a hundredfold increase in
+neonatal death. We have seen the rise of diseases previously
+eradicated, from malaria where we have seen over 500,000 cases,
+as well as Zika, polio, diphtheria, and measles. Shortages of
+vaccines means that this problem is likely to aggravate and
+spread, given the refugee crisis which has reached 3.4 million
+Venezuelans which have left their country, an average of 5,000
+Venezuelans who cross the border every day.
+    Diseases do not respect borders and pose a regional
+security threat.
+    To conclude, our unwavering support of the Venezuelan
+people is critical in this moment. There are two distinct
+strategies at play. One involves exerting maximum economic and
+political pressure on the regime that increase the chances of a
+bloodless transition.
+    The second is a humanitarian response which is distinct
+from the political and diplomatic strategy, and should be
+neutral and target the most vulnerable. We should also be
+prepared to commit the resources that are commensurate with the
+needs, which will be multiples of the current commitment.
+    In both of these fronts we need to maintain a multilateral
+approach. We are stronger and wiser when we work with others.
+And what makes this moment remarkable is the global support
+coalescing behind the new government and the humanitarian
+response. The Grupo de Lima, the OAS, most of the European
+Union make up the over 50 countries recognizing Guaido and
+pressing for a democratic transition. It is this coalition,
+ideally led by the Grupo de Lima, and supported by the U.S.
+that represents a hope for the Venezuelan people who have
+suffered too long under a brutal and corrupt regime.
+    I wish to sincerely thank you for calling this hearing on
+the Venezuelan crisis and for inviting me to testify today.
+    [The prepared statement of Ms. Escobari follows:]
+        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT
+    Mr. Sires. Thank you.
+    Mr. Canton.
+   STATEMENT OF SANTIAGO CANTON, FORMER EXECUTIVE SECRETARY,
+           INTER-AMERICAN COMMISSION ON HUMAN RIGHTS
+    Mr. Canton. Mr. Chairman, Ranking Member Rooney, and
+members of the committee----
+    Mr. Sires. Can you please turn your mike on. Thank you.
+    Mr. Canton. Thank you for the opportunity to testify today.
+    The Secretary General of the Organization of American
+States, Luis Almagro, has recently stated: ``The regime in
+Venezuela is responsible for what has become one of the worst
+humanitarian crisis the region has experienced. This crisis is
+man-made and a direct result of inhumane actions by leaders who
+do not care about the suffering of their people, allowing their
+citizens to die of hunger and preventable diseases.''
+    In 2018, the U.N.'s Food and Agriculture Organization
+indicated that between 2015 and 2017, 11 percent of Venezuela's
+population, 3.7 million people, were undernourished, up from
+less than 5 percent between 2008 and 2013.
+    The 2018 National Survey of Hospitals showed that the
+capacity of the national network of hospitals has been
+gradually dismantled over the last 5 years. The survey reports
+88 percent of shortages of medicine and 79 percent of shortages
+of surgical supplies.
+    Indicators such as the increase of maternal mortality by 60
+percent, and infant mortality by 30 percent from 2014 to 2016,
+the lack of access to adequate and regular treatment for more
+than 300,000 patients with chronic diseases, or the outbreak of
+malaria and diphtheria all point to a dramatic deterioration of
+the healthcare system.
+    The Office of the High Commissioner of Human Rights at the
+U.N. observed that women are particularly affected by the
+health crisis. For instance, the number of maternal deaths rose
+from 368 in 2012 to 756 in 2016.
+    Last year, as mentioned by the chairman, I was appointed by
+the OAS to a panel of three independent international experts
+that, after evaluating the information on the humanitarian
+crisis, concluded that the use of the crisis as an instrument
+to pressure a segment of the population that is considered as
+dissident or that is identified as such, constituted multiple
+violations of fundamental rights, such as the right to life,
+right to humane treatment, the right to health, and the right
+to food, making it a crime of persecution for political
+reasons.
+    The humanitarian crisis has created more demonstrations,
+and the government response to the demonstrations was a policy
+of systematic violations which between 2014 and 2018 left
+thousands of extrajudicial executions, 12,000 arbitrary
+detentions, 289 cases of torture, 192 cases of rape of persons
+under State control, and a number of enforced disappearances.
+    The panel of experts found reasonable grounds to believe
+that these acts against the civilian population of Venezuela
+constituted crimes against humanity, in accordance with Article
+7 of the Rome Statute of the International Criminal Court,
+including the crimes of murder, imprisonment, torture, rape and
+other forms of sexual violence, persecution, and enforced
+disappearances. Finally, the case that the panel worked on was
+sent by five countries to the ICC.
+    In 2001, the countries of this hemisphere approved the
+world's first democratic charter with the goal of defending
+democracy and human rights. Unfortunately, due to regional
+politics, the Inter-American Democratic Charter has clearly
+failed. Mr. Chairman, this is not about politics, this is not
+about the Latin American left or the Latin American right,
+populism or fascism, this crisis is about the personal greed,
+corruption and organized criminal activity of the mafia that
+under the banner of nationalism and sovereignty is killing,
+torturing, persecuting, and detaining its own people.
+    In the year 2000, the Canadian Government established a
+commission to respond to a question of the U.N. Secretary
+General Kofi Annan on when the international community must
+intervene for humanitarian purposes. The Canadian Commission
+stated that sovereignty entails not only rights, but also the
+responsibility to protect its people from major violations of
+human rights. Basically, Mr. Chairman, the principle of non-
+intervention yields to the international responsibility to
+protect. In this situation, it means to exercise the
+responsibility to protect the Venezuelan citizens facing grave
+human rights violations.
+    And that is where we are now, Mr. Chairman. The
+international community, not any country individually, should
+work together, particularly with the countries from the Lima
+Group, but also with those who have not joined the Lima Group
+to return to the Venezuelans the democracy, the human rights,
+and the dignity that the group of organized criminals took away
+from them.
+    Thank you very much, Mr. Chairman.
+    [The prepared statement of Mr. Canton follows:]
+    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT
+    Mr. Sires. Thank you.
+    Votes have just been called so, Mr. Rendon, can you do your
+5 minutes and then we will go into recess and come back so we
+can ask you some questions. And thank you for your patience.
+ STATEMENT OF MOISES RENDON, ASSOCIATE DIRECTOR AND ASSOCIATE
+      FELLOW, AMERICAS PROGRAM, CENTER FOR STRATEGIC AND
+                     INTERNATIONAL STUDIES
+    Mr. Rendon. Thank you. Mr. Chairman and ranking member,
+distinguished committee members, thank you for the opportunity
+to share my thoughts on the crisis in Venezuela. My colleagues
+already talked about how we got here, including the most
+important humanitarian and economic indicators, so I will
+highlight some issues on how the U.S. and the international
+community can non-violently support Venezuelans to reclaim
+their democracy from this kleptocratic mafia state.
+    It is important to emphasize that interim President Guaido
+did not proclaim himself as president, as has been reported.
+After January 10th of this year, Maduro lost any legitimacy
+left to continue in office. The Presidential elections held
+last May were not only unfree and unfair, but also illegally
+called by the illegitimate constituent assembly and organized
+by an unconstitutionally named national council, election
+council. This is why more than 50 countries, together with the
+National Assembly and the Supreme Court in exile did not
+recognize the results, and now recognize Guaido in lines of
+articles 233, 333, and 350 of the Venezuelan Constitution.
+    The next step should be supporting the path that Guaido
+himself has announced to restore the country's democracy: Stop
+Maduro's usurpation of power, set up Guido's interim government
+such that free and fair elections can be held.
+    The events this past Saturday, on February 23d, prove once
+again that the regime does not care that its own people faces
+starvation, and is not willing to leave power even if it means
+committing crimes against humanity. The rejection of
+humanitarian aid, including with the use of force, has been
+part of Maduro's policy and has been systematically enforced
+for many years in Venezuela.
+    I want to briefly talk about the role of Cuba, China, and
+Russia. Venezuela has not been a truly sovereign nation for
+years. The presence of Cuban State actors in different sectors
+in Venezuela, including in the intelligence, military, and
+property registration offices, violates the Venezuelan
+Constitution and international law.
+    China has propped up Maduro, has propped up the Maduro
+regime, lending nearly $70 billion, and possessing large oil
+fields in the Orinoco Belt where most of the Venezuelan oil is.
+    Russia's influence in Venezuela, on the other hand, is
+driven both by economic and foreign policy objectives.
+    I can comment more on this and other issues later but I
+want to turn now to where we go from here.
+    I think a military intervention would be catastrophic, Mr.
+Chairman. Let me be clear, the threat of military involvement
+is a worthwhile strategy when it exists only as a threat or
+political language. However, actual boots on the ground or
+military activity will send the country deeper into chaos. The
+FARC members, ELN, gangs, and other paramilitary groups operate
+in this lawless environment. All of these groups are in peace
+right now. But as soon as one military action comes to
+Venezuela they will panic and it will cause even greater
+security concerns.
+    What's more, the international community does not support
+military intervention as of now. We have not yet exhausted all
+peaceful policy options. Saturday was the first attempt that
+humanitarians had attempted to enter into the country. This
+happened because Juan Guaido has been recognized as the interim
+president of Venezuela, and together with the National Assembly
+urgently requested aid.
+    Now that there is a consensus today within the
+international community that there is no time to waste in
+Venezuela, the path to limit the suffering of the Venezuelan
+people and help Venezuelans restore their democracy could be
+accelerated if the following steps are taken in the short term:
+    One, provide much-needed humanitarian assistance within
+Venezuela. Again, Saturday was the first time this was
+attempted. And the planning and execution needs to be improved
+moving forward.
+    Second, help Guido's government get off the ground by
+recovering the republic's assets from Maduro's control and
+transferring them to the Guaido and the National Assembly
+control.
+    Third, recognize the new Ambassadors appointed by Guido's
+interim government and revoking diplomatic visas to those
+members of the regime and their families, including visas, the
+older visas, because revoking the older visas is also very
+important.
+    Fourth, back the National Assembly's amnesty law for
+current and former military officials who decide to help
+restore the country's democracy and let the humanitarian aid
+in.
+    Fifth, increase pressure on Maduro and his inner circle
+with legal sanctions, especially by countries who have not
+imposed sanctions yet.
+    And, sixth, prohibit any further international agreements
+or oil payments to the Maduro regime and transfer those
+payments to Maduro's government and the National Assembly.
+    And to finalize, this is, there is no silver bullet to
+resolve the Venezuelan crisis, Mr. Chairman. However, from the
+humanitarian and international law perspective the provision of
+humanitarian aid needs to be the top priority. The more the
+U.S. works together with the OAS and the Lima Group which, by
+the way, Venezuela formally joined the Lima Group just
+yesterday, we will have a better chance to find a peaceful
+solution.
+    Thank you, Mr. Chairman.
+    [The prepared statement of Mr. Rendon follows:]
+    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT
+    Mr. Sires. Thank you. We will recess now. We have floor
+votes. We will be right back.
+    Thank you.
+    [Recess.]
+    Mr. Sires. We are going to start because I know, Mr.
+Canton, you have to leave. And we will start with the
+questioning. And I will start.
+    You know, I get asked this question all the time. And the
+question basically is this:
+    Are there any other methods for us delivering humanitarian
+aid that have been used in other places that we could try in
+Venezuela? Ms. Escobari, is there? I mean, obviously this past
+weekend did not go well. And I do not know, quite frankly, how
+to answer that.
+    Ms. Escobari. No, it is a great question. And I think what
+we saw this weekend is that Venezuelans are desperate to find
+ways out of this repressive regime. And they also need to bring
+food in. And these two goals were conflated this weekend, and
+most of the aid did not go through.
+    But I think there is a lot more that we can try. It is
+difficult in a contested environment. But it involves working
+with international NGO's like the Red Cross, working with local
+NGO's. There are hundreds of local NGO's. And thinking
+creatively about ways to bring in goods, sometimes we need
+goods but also cash, because around 20 percent of the goods are
+still provided by the private sector. It is just that most
+Venezuelans cannot afford them.
+    And I do think there is an opportunity for the U.N. to step
+up their game and help----
+    Mr. Sires. They have been pretty quiet about this.
+    Ms. Escobari. Yes. I think the U.N. has played a brokering
+role in many of these politically contested environments, from
+Yemen to Sudan. And my colleague Jeremy Konyndyk who used to
+work at USAID, has suggested the U.N. needs to challenge
+Maduro's denial of the crisis. And Maduro's refusal of the aid
+has left the U.N. with no funding appeal for Venezuela, no
+humanitarian coordinator appointed within the U.N. system.
+    OCHA, which coordinates aid, does not even include
+Venezuela as a contry of focus. And so I think that that is an
+opportunity to find a political mediator in this crisis.
+    Mr. Canton. Thank you, Mr. Chairman.
+    Unfortunately I would say that, many of the questions you
+have are the same questions that we all have. And we all also
+do not have an answer. There are no clear answers to many of
+the problems we are facing in Venezuela.
+    One thing that at least I believe is very important,
+particularly for the U.S. Government, is to follow the Lima
+Group. There is a dialog going on there and if there is any
+possibility of finding a solution, very likely may come from
+the Lima Group.
+    And in addition to the Lima Group I would say let's not
+forget about Mexico, let's not forget about Uruguay. Although
+those two countries have not recognized Guaido, that does not
+mean that they do not want to collaborate. And you always need,
+particularly in situations like this one that this, you know,
+is very close, you need some interlocutors that can talk, that
+can talk to the government. And those are going to be more
+likely Mexico and Uruguay than in the Lima Group.
+    So, the combination of the work of other Latin American
+countries which Latin America has a history, sometimes good,
+sometimes bad, but it does have a history of trying to find
+solutions to this big crisis. The Contadora group back in the
+'80's, and there are some experiences like that. They should
+take the lead. And it is important that the U.S. understands
+that and takes the lead of the decision of the Lima Group.
+    Mr. Rendon. Thank you, Mr. Chairman for the question. I
+have done some research on finding new methods to try to
+provide humanitarian aid in Venezuela. Very interestingly, the
+use of new technology, specifically the use of cryptocurrency,
+is already playing a role in Venezuela. We brought groups on
+the ground in Venezuela that are receiving donations through
+cryptocurrency, and they are using those donations to buy food
+and medicine and distribute it within Venezuela.
+    This is increasingly happening because Venezuela has
+hyperinflation and the donations to get into the country is
+really limited, really repressive; right? So that is where the
+use of cryptocurrency is shedding a light of how we can use
+that as a method to get aid in a way that we probably have not
+seen before. So, I think looking into those.
+    And the benefits are countless. I mean, it is transparent,
+censorship-resistant, it is borderless, and it is empowering
+the people to use their own resources, right, because it is
+direct. So I would look at that as a way to, because again we
+need to think out of the box here, and I think that is one of
+those tools that can maybe help.
+    Mr. Sires. Thank you. My time is up.
+    Congressman Guest.
+    Mr. Guest. Thank you, Mr. Chairman.
+    Mr. Rendon, would you agree that the Maduro regime is a
+corrupt regime? I think you mentioned that in your report or
+your transcript on page 2. Would you agree with that?
+    Mr. Rendon. I am sorry, what is that? Would you repeat
+that, please?
+    Mr. Guest. Would you agree that the current regime is a
+corrupt regime?
+    Mr. Rendon. Yes.
+    Mr. Guest. Being involved, I believe you say, in illicit
+activities, including drug trafficking, massive corruption, and
+money laundering?
+    Mr. Rendon. Yes. Correct.
+    Mr. Guest. And would each of you also agree with that as
+well, with that, with that assessment of the current regime?
+And to each of you, would you agree that the current regime is
+an illegitimate regime based upon the sham elections that were
+held earlier last year?
+    Mr. Rendon. Correct.
+    Mr. Guest. And would you also agree that the current regime
+has created both a political crisis and a humanitarian crisis
+in Venezuela?
+    Mr. Rendon. Correct.
+    Mr. Guest. All right. So, with that, what can be done,
+short of military intervention, what can be done to remove
+Maduro from currently presiding over the people of Venezuela? I
+believe, Mr. Rendon, you talked in one of your statements that
+we must increase pressure on his inner circle. What methods
+could we use that we are currently not to increase pressure on
+his inner circle to have him step down?
+    Mr. Rendon. Yes, thank you for that question.
+    So, there are many tools that we have not yet accomplished
+yet. One of those, for example, is to work with other countries
+like Cuba, China, Iran, Russia to make sure that they do not
+support Maduro.
+    Mr. Guest. All right, let me ask you, I hate to interrupt
+you,----
+    Mr. Rendon. Yes.
+    Mr. Guest [continuing]. But would you agree that that is
+highly unlikely that we are going to convince China, and
+Russia, and Cuba----
+    Mr. Rendon. Yes.
+    Mr. Guest [continuing]. Not to support this regime?
+    Mr. Rendon. Yes. It is going to be a difficult task.
+    Mr. Guest. OK. All right, go ahead. I am sorry, I did not
+mean to interrupt you.
+    Mr. Rendon. No, no. No.
+    Mr. Guest. But just wanted to make sure.
+    Mr. Rendon. No, that is a fair question.
+    And, second, I think now that we have a new recognized
+government led by Juan Guaido we should be supporting him,
+trying to get his government get off the ground as quick as
+possible. How? Making sure to freeze those bank accounts, those
+assets that Maduro still controls today, not only within the
+U.S. through restriction but also on those countries who
+recognize Guaido as the president.
+    And also transfer those bank accounts to Guaido and the
+National Assembly. That is a very key point but I do not think
+we are there yet. And I think that is an important task to
+empower the legitimate government and try and find a
+resolution. Right?
+    So I will add that, Congressman Guest.
+    Mr. Canton. Thank you for, thank you for your question.
+    I would start by saying that your question assumes that
+military intervention is the solution.
+    Mr. Guest. No, I said in light of that. What can we do----
+    Mr. Canton. OK. Right, OK.
+    Mr. Guest [continuing]. Because I think no one wants the
+United States military to go into Venezuela and forcibly remove
+Mr. Maduro.
+    Mr. Canton. Right. Right.
+    Mr. Guest. And so what can we do short of that----
+    Mr. Canton. Right. All right, OK.
+    Mr. Guest [continuing]. To accomplish that purpose? Because
+I believe once he is removed and we are going to see
+humanitarian aid begin to flow into Venezuela, I believe he is
+the roadblock controlling the military----
+    Mr. Canton. Correct.
+    Mr. Guest [continuing]. That is creating this crisis. And
+we all want to see him removed but no one wants to use any
+military force.
+    Mr. Canton. Correct.
+    Mr. Guest. So that is the question, what are we not
+currently doing that would promote regime change in Venezuela?
+    Mr. Canton. Right. I do not think that anybody has the
+magic solution and the, you know, the great answer to that
+question. But there is one thing that is different now than
+before. For the last 20 years, and I have been following
+Venezuela as secretary, Secretary of the Inter-American
+Commission on Human Rights for, you know, 15 years, this
+situation has been going on and on and on for easily 15 years
+but the international community, particularly Latin American
+community did not pay attention to it.
+    There are several reports of the Inter-American Commission
+on Human Rights, and most NGO's on human rights denouncing
+grave violation of human rights in Venezuela at least since
+2005. And the Latin American countries did not pay attention to
+it for whatever reason.
+    Right now for the first time that is happening. So there is
+a big difference between now, the Lima Group, the political
+negotiations that are going on, to everything else that was
+tried before. So, there is a need to give time, to give chance
+to the political negotiations, to give chance to diplomacy, to
+give chance to the U.N. This is the time to do it. What is
+going on right now it just started but all the failures are
+from the last 20 years. So we need to give a chance to this
+situation right now.
+    Mr. Guest. And in addition to what we are currently doing
+is there any additional pressure that we can put on that regime
+that, again, you talk about freezing assets and about putting
+pressure on his inner circle, and what I was wanting from each
+of you, what can we do as a government to make sure that we are
+putting as much political pressure on Maduro to resign as
+possible?
+    Mr. Canton. I, you know, this might sound--I am not a U.S.
+citizen, I am from Argentina and it might sound a little bit I
+am getting involved into something that is not my affair. But,
+you know, I live in this country for 30 years. And the U.S.
+should be, that is why I used that word before, following what
+the Lima Group decides rather than pushing the Lima Group to do
+something. That negotiation has taken place. And when the U.S.,
+you know, makes the decision to keep, you know, it is the U.S.
+Government particularly, but it is important to let the Latin
+American countries that now for the first time in 20 years are
+doing something, it is important to support them and to
+followup on their decisions.
+    Mr. Sires. Congressman Vargas.
+    Mr. Vargas. Thank you very much, Mr. Chairman. And thank
+you again to the witnesses for being here today.
+    When I always thought of Venezuela I always thought of it
+as a very stable democracy, just like Mexico, Colombia, a
+number of the large Latin American countries. And it really is
+tragic and almost unbelievable what has happened to Venezuela.
+Now we have, Ms. Escobari, as you call it, a contested
+environment. I never would have expected that.
+    Now, in the situation that we find ourselves--they find
+themselves in, it is a humanitarian crisis that we seldom see
+in our hemisphere. And, again, as being someone who is not in
+favor in any way of military intervention, I am not in favor of
+that, but at the same time we have to move this thing along
+because the suffering of the people is so dramatic, and not
+getting better.
+    I mean, how can we help? I mean, we are attempting to
+humanitarian--I have listened to all your testimoneys today--
+and humanitarian help first and a whole bunch of other things,
+but is there anything else that we can do, and again not using
+military force which I am not in favor of it, is there anything
+else we can do without hurting the people? In other words,
+moving toward a transition but without doing more damage to
+these poor people who have been hurt so badly.
+    Ms. Escobari. To add to this question and to what my fellow
+panelists have said, I think the strategy is twofold. And it
+involves strengthening both of those strategies. It is widely
+accepted that the government uses oil to distribute rents to
+the military officers and maintain itself in power. So the
+sanctions are meant to limit his ability to do so can be
+strengthened.
+    We can work with the international community so that all of
+Latin America and the European Union enforce these sanctions
+fully. And use diplomatic avenues so that Maduro, if we are
+going to go for this short-term dramatic strategy, that Maduro
+does not have options to sell its oil, and that we use our
+diplomatic leverage with India, and Turkey, and others.
+    And while it is true that Russia and China may not be our
+allies, at the end they want to get paid. And they are deciding
+right now whether Maduro is the right person to bet on. And
+those, I think are calculations that are changing by the
+minute.
+    And there are other stronger actions and escalations that
+we can engage in, short of military intervention.
+    Mr. Vargas. But also short of hurting people. I mean, one
+of the things that I have great concern about is oftentimes
+when we have sanctions placed on countries, you know, we try to
+target them to hit the culprits. But oftentimes it ends up
+hurting the people in general. We do not want to starve the
+people of Venezuela. I mean, that does concern me.
+    Ms. Escobari. Yes.
+    Mr. Vargas. Because 95 percent of the exports is oil.
+    Ms. Escobari. Yes.
+    Mr. Vargas. I mean, if we cutoff all oil and we cannot get
+humanitarian aid into the country, I mean how are the people
+going to eat? I mean, how are they going to survive?
+    Ms. Escobari. Yes, exactly. And this is why when we think
+of it as humanitarian aid, the effort should be massive and
+using all possible ways, including negotiating corridors,
+safety corridors and finding all ways because exactly of the
+calculus that you are, that you are describing.
+    Mr. Vargas. That is very hard in a contested environment. I
+mean, you are the one that mentioned it actually in your
+testimony, you said this is a contested environment. I mean, it
+is hard to do that. I mean, we saw what happened with a little
+bit of aid and literally Maduro's thugs did not allow most of
+the aid in.
+    And how do you negotiate it when they have armed thugs
+preventing the aid from coming in? Anyone else want to try
+that?
+    Mr. Canton. I have a very, very short answer which I
+mentioned it before. Give it a try. It just happened now. You
+know, when we tried for the last 20 years, nothing happened.
+But this is not the first time it is happening. And the Latin
+American countries are serious about it. So let's give it a
+try.
+    Mr. Vargas. OK. The last thing, last question I did want to
+ask is this, one of the things that I fear. What if Maduro
+rolls the tanks? I mean, what if at the end of the day he
+decides that he is just going to go to try to put down these
+massive demonstrations with massive assault on the people, then
+what do we do? Because this is not unheard of. I mean, this has
+happened, of course. Dictators have done this throughout
+history.
+    Do not be afraid of the question. Somebody answer. Mr.
+Rendon, go ahead.
+    Mr. Rendon. So far it has not been the experience in
+Venezuela. And, you know, I have, again, I have followed it
+since 2000. I met Chavez. I met Maduro. I spoke with them for
+the last, you know, many occasions. That has not happened.
+Really very great things have happened, but not that.
+    Mr. Vargas. Well, let's pray that it does not happen. My
+time is over. Let's pray that it does not happen.
+    Thank you.
+    Mr. Sires. Thank you.
+    Congressman Meeks.
+    Mr. Meeks. Thank you, Mr. Chairman.
+    Mr. Canton, you have particularly some of what my concerns
+are. There is no question in my mind, and I, like you, have
+been down to Venezuela and I have been going down there for the
+last 20 years. Knew Chavez when he was there, and Maduro was
+part of the National Assembly.
+    My concern, though, is with the United States being in
+front of everything, as opposed to Lima Group and other allies,
+and particularly those, the Lima Group, who are in the region,
+who surround the borders, what is happening is, as opposed to
+some of these other countries, or other NGO's, or other ones
+who are trying to get that humanitarian aid in, it seems as
+thought it is a political fight to a degree where it is the
+United States that has taken the front of this as opposed to
+the back and supporting other groups from behind in that
+regard, as opposed to making it look like, you know, it is--and
+the threat of military aid, military intervention.
+    And so the boasterous talk is going, taking place. But that
+helps hinder helping the Venezuelan people who needs help. The
+focus should be on the help. And one thing that I have not
+heard, what we need to make sure is done in this conversation,
+is bringing forth elections, democratic, free, and fair
+elections so it does not just look like you are trying to put
+somebody in an topple a government. We are saying, and I agree,
+that the prior election of Nicolas Maduro was not free, was not
+fair, was not, and so therefore he was not legitimately
+elected.
+    But what we should be advocating for is for the legitimate
+elections, not just putting someone in. And that is what the
+Venezuelan people want because they do believe in democracy. I
+have seen it.
+    When I was over in Europe just, you know, last week, our
+European allies they believe it is an illegitimate government.
+But they do not want, they want others, they want to make sure
+that there are others that are involved in this. And when I
+look at what is taking place at the border it is just the
+United States. China forced their way in. And when I look at,
+you know, I am told from some, they, you know, have questions
+with Elliott Abrams, just the imagery because of what our past
+history is. That is a problem. And then some of the rhetoric
+that is taking place here with the Colombians, and the
+Brazilians, and others, you know, millions of people are
+running across. And these governments are welcoming then. And
+so they did not ask whether this is part of it or not, but they
+do ask, well, how does the United States gets involved when you
+have people who are suffering and hurting.
+    And Central America, and our country is saying not accept
+them, put up a wall to stop them from coming here. Send them
+back. Thank God Colombia and Brazil is not doing that. Thank
+God they are not doing that because then what would happen to
+those people?
+    And that gives us a problem from leading in front because
+of the problems that we have with other areas on the
+hemisphere.
+    So, would it not make sense, or am I just, you know, crazy
+here, that we allow Lima, the Lima Group, we allow OAS, we
+allow and get more involved so it is another party, and we do
+all we can to support those groups? So it is not us trying to
+be the big guys coming in, the whatever Maduro calls us now.
+Does that make any sense to you?
+    Mr. Canton. Yes, of course. I agree with you. And I do have
+in my presentation, you know, calling for elections. You know,
+the 5-minutes time did not allow me to reach the end. But I do,
+I do think that that should be the way out. Although I am not
+very optimistic about it, I have to recognize that. But it
+should be a natural way out and peaceful way.
+    The U.S. has a difficult role, no question about that. And
+it has a history of relationship with Latin America which was
+up and down along the decades, but it is an very important role
+the U.S. can play.
+    But at this stage I agree with you and I insist for the
+first time in many, many years when the issue of Venezuela
+comes up, for the first time the Latin American countries, most
+of them are working together. It is critical for the U.S. to
+support that process and let the Latin American countries, the
+OAS, the United Nations, I would include Mexico as well, and I
+would include Uruguay as well, work with them to try to find a
+solution.
+    Mr. Meeks. Ms. Escobari, we still have time here.
+    Ms. Escobari. I agree. And I mentioned in my testimony that
+we should let the Grupo de Lima lead but--we need to support
+them. And our capabilities are massive, both in our ability to
+help in aid and otherwise. But we should let the Grupo de Lima
+lead.
+    And in support, President Guaido in terms of directing, you
+know, the carrots and sticks.
+    Mr. Meeks. Thank you.
+    Mr. Sires. Congressman Phillips.
+    Mr. Phillips. Thank you, Mr. Chairman. Thank you to our
+witnesses, and also thank you to my colleague Mr. Meeks who
+referenced elections.
+    And I want to turn our attention a little bit prospectively
+to a post-transition, hopefully peaceful transition. And I
+would like to hear from each of you relative to what specific
+conditions you believe the international community and this
+U.S. Congress should ensure are satisfied to ensure that
+Venezuela has free, and open, and fair elections after a
+transition.
+    And also, what timeframe you think would be most
+appropriate thereafter.
+    Mr. Canton. I am sorry I answer first, but I have to leave
+because I----
+    Mr. Phillips. Please.
+    Mr. Canton [continuing]. Need to take a flight.
+    I would say credible international observers which the last
+elections in Venezuela and these last two elections, you
+probably know better than I do, there was no credible
+international election observation. And the OAS was not allowed
+to go. And most important NGO's doing election observations
+were not allowed to go. The European Union was not allowed to
+go.
+    So, you need election observations.
+    And the timeframe, the timeframe is now. But, you know, you
+cannot call for a snap election because that is not helpful.
+But a reasonable time for all the political parties to be able
+to participate freely, so you have to have months.
+    Mr. Phillips. Months.
+    Mr. Rendon. Yes, just to briefly add on that. You also need
+to work the conditions on the ground. Maduro has been proved to
+be intimidating the Venezuelan people using food as a weapon.
+And so when you are calling elections you need international
+observers but you also need to work the conditions on the
+ground by providing humanitarian aid and disempowering the
+regime by using this tool, this food program called CLAP, which
+is the main political tool that they have to use. But it is
+linked to the national I.D. and to the way you vote and the way
+you are politically affiliated.
+    So, in a way it is like the Chinese credit system but with
+lower technology. So, if you want to set up free and fair
+elections in the future, that CLAP program needs to be one of
+the first things that need to be out. And among the many
+others, right, because now we--I mean, I agree, elections are
+the first step but you need to announce a new electoral system.
+The current electoral system right now is highly corrupt, so
+you need to have a new council and as well.
+    Mr. Phillips. And any thoughts on who is in a position to
+initiate such a new system?
+    Mr. Rendon. The only institution based on the Venezuelan
+Constitution is the National Assembly. They are the only ones
+who can announce elections at this point and also a new
+electoral system----
+    Mr. Phillips. The infrastructure.
+    Mr. Rendon [continuing]. That can promote free and fair
+elections.
+    Mr. Phillips. OK, thank you.
+    Ms. Escobari.
+    Ms. Escobari. And just to add to that, which I agree with,
+I think you need a minimum of stabilization and citizen
+security to hold elections. And the National Assembly has
+actually approved guidelines on the transition and thinks that
+this might take around a year.
+    Mr. Phillips. OK, a full year.
+    All right, thank you. I yield the rest of my time.
+    Mr. Sires. Congressman Levin.
+    Mr. Levin. Thank you, Mr. Chairman.
+    I want to explore a little the question of amnesty and
+human rights violations. And now I will direct this to Ms.
+Escobari. But I am curious to hear both of your thoughts.
+    Reports indicate that under Maduro Venezuelan military
+officials have committed grave human rights abuses. The U.N.
+Office of the High Commissioner for Human Rights has reported
+the use of ``excessive force to deter demonstrations, crush
+dissent, and instill fear.'' It is my understanding that the
+Venezuelan National Assembly has enacted legislation to provide
+amnesty to public officials, including security forces, that
+abandon the Maduro regime and support the transition, you know,
+the transitional government.
+    President Trump relayed a similar message himself last week
+during a speech at Florida International University in Miami.
+He delivered what he called a ``message for every official who
+is helping keep Maduro in place,'' and he said the following:
+    ``You can choose to accept President Guido's generous offer
+of amnesty, to live your life in peace with your families and
+your countrymen. President Guaido does not seek retribution
+against you, and neither do we.''
+    There is a long history of impunity for human rights
+abusers in the Western Hemisphere and other parts of the world.
+And, you know, on the other hand there have been some examples
+of truth commissions and efforts to hold people accountable
+which, in my view, are necessary for the development of healthy
+democracies.
+    So, can you provide a little more detail on the kinds of
+human rights abuses that may have been perpetrated by
+Venezuelan military officials to start with?
+    Ms. Escobari. Yes. I wish our colleague was here because he
+had a long list and the list includes torture, and
+imprisonment, and the killings that we witnessed this weekend.
+And I think, the amnesty law and the proposal by Guaido is
+powerful because it is part of the strategy of getting the
+military to defect. However, there will be, there will be a
+determination on those who have committed crimes against
+humanity, and that amnesty law cannot protect those.
+    Mr. Levin. It cannot protect those under Venezuelan law or
+under international law you are saying?
+    Ms. Escobari. I think neither.
+    Mr. Levin. That is something that is in Venezuelan law, in
+the constitution, in the statute? Where is that? Or is that
+just an aspirational kind of statement?
+    Mr. Rendon. Yes.
+    Ms. Escobari. Sorry, go on.
+    Mr. Rendon. According to the Venezuelan Constitution there
+cannot be any pardon on human rights violations. And so when I
+think of this amnesty law I think not of the top generals who
+have--who are the responsibles of committing human rights
+violations, I am thinking more of the bottom, the bottom
+soldiers who are just following orders from their generals.
+Right? And that is where the strategy can be found.
+    Now, there is a tricky part here because when it comes to
+crimes against humanitarian, following orders is not an excuse.
+    Mr. Levin. Exactly. I mean, I you, if I, if you are my
+commander and you tell me to torture Mr. Phillips, I may not
+torture Mr. Phillips and, if I do so, I am committing a grave
+human rights violation.
+    Mr. Rendon. That is----
+    Mr. Levin. So I do not understand the point about generals
+and soldiers on the ground.
+    Mr. Rendon. That is correct. There are soldiers who have
+either not committed crimes against humanity who can be saved
+by this amnesty law. And that is where I think this law can
+provide a bridge to some of those to support Guaido and the
+democracy of Venezuela. And I think it is a tool together with
+the whole pressure that we are trying to use toe facilitate the
+democracy in Venezuela within, led by Venezuelans. Right? So, I
+think it is a powerful tool and I think we need to support that
+as much as possible.
+    Mr. Levin. Well, thank you. I will just say that given the
+almost complete disregard for human rights of the current
+occupant of the White House in everywhere from South America to
+North Korea, this body has a responsibility to step up and
+proclaim American--America's long dedication to, imperfect, but
+our dedication to human rights. And as urgent as the situation
+is in Venezuela, we need to proceed in a way that holds the
+respect of human rights sacrosanct.
+    Thank you. And I yield back my time.
+    Mr. Sires. Thank you, Congressman.
+    We are going to have another round of questioning. I and
+maybe they have another question.
+    It was recently stated that India now has stepped up and
+bought the oil from Venezuela. And they did it pretty quickly.
+What can we do to stop that? Because that is basically the
+funding for Maduro.
+    Mr. Rendon. Yes, I think that is a critical point, Mr.
+Chairman. And I think we need to engage the Indians. That cash
+is being used by Maduro to keep up the repressive regime;
+right?
+    And but that has a specific purpose to that trade, and that
+is fueling the domestic gas in Venezuela. And Venezuela is
+running out of gas. And people would not--are not going to be
+able to fill their own cars with gas if the Indians are not
+sending that cash to Maduro.
+    I think the more we empower, again, Guido's government,
+providing those oil payments to Guido's government and the
+National Assembly, providing those trade agreements to Guido's
+government and National Assembly is not only the only
+constitutional, legitimate way forward, but it is the right
+thing to do. And I think we need to as much as possible
+transfer those to Guaido.
+    So, when the U.S. talks to India, that is the direction
+that we need to be engaging, recognizing Guaido and engaging
+the Guido's government.
+    Mr. Sires. Can the Lima Group talk to India?
+    Mr. Rendon. That is a good question. I think they are under
+the authority to do it. And they should be, they should be
+pursuing that route.
+    Ms. Escobari. They probably can, but we probably hold more
+leverage. And I think for India it is completely an economic
+decision.
+    If we think about the numbers, last year Venezuela sold
+about $20 billion but most of the cash came from the U.S. Now
+that the U.S. is not going to be providing that, they are going
+to be selling it at a deep discount.
+    But just think about the magnitude of the need. I think
+there still would be around $5 billion that would, that would
+not reach the Maduro government. And I think that number is
+also important when we think about our humanitarian package.
+    Mr. Sires. Thank you.
+    Congressman Levin, do you have a second question?
+    Mr. Levin. Yes. Thank you, Mr. Chairman.
+    I would just like to followup actually on the PDVSA
+sanctions situation. And I would like to get your all's take
+on, you know, the possibility of unintended consequences.
+    As you know, the Trump administration put sanctions on
+PDVSA, presumably in hopes that cutting off Maduro's money
+supply would force him to exit. But as I said during our last
+hearing on this subject, I am worried about what is going to
+happen to the Venezuelan people while this strategy plays out
+or does not.
+    The New York Times ran a story earlier this month on this
+very question, and I think the headline said it all: ``U.S.
+Sanctions Are Aimed at Venezuela's Oil. Its Citizens May Suffer
+First.''
+    So, my question is, could these particular sanctions worsen
+the humanitarian crisis that has already gotten so bad in
+Venezuela? And either, I am interested in either of your
+answers.
+    Ms. Escobari. Yes, I think the strategy is one to be able
+to starve Maduro of his ability to continue to maintain himself
+in power. And that cannot happen without an equally robust
+strategy on the humanitarian side. And these are the orders of
+magnitude that we should be talking about.
+    Mr. Rendon. Yes, in a way it is going to limit Maduro to
+keep importing food and other products. It is the only way the
+Venezuelan people are getting fed, by imports. So, Maduro is no
+longer going to be able to import as much as people are
+needing.
+    Mr. Levin. So we are sort of playing a game of chicken with
+him where we, at the risk of the people starving?
+    Mr. Rendon. I think the key part here, again to the point
+of Guido's government, is to make sure that he has the power to
+keep, and the National Assembly to import now. And if we are
+now recognizing Guaido as the only legitimate president, we
+need to give him that power. And I think providing humanitarian
+aid is the first step. We should be trying to keep pushing
+humanitarian aid, not only to the Colombian border but to
+every, every single border in the country.
+    And we only tried once. Let's keep trying, let's keep
+trying because, again, Venezuelans are starving. So I think
+that is the----
+    Mr. Levin. Do you think it is fair to say that we
+politicized humanitarian aid in this situation, that the U.S.
+is saying, well, this is the government over here and they, and
+given the long history of the Yanqui intervention in the
+hemisphere in many countries, overthrowing democratic
+governments, that it is problematic for us----
+    Mr. Rendon. Yes.
+    Mr. Levin [continuing]. To be playing the role, even the,
+you know, a good strategy in, you know, in other circumstances?
+    Mr. Rendon. I will argue because of the National Assembly
+and President Guaido himself requested aid, and also this was a
+multilateral approach. No, it is not about the U.S. sending
+aid, it is about Canada, Colombia, Argentina, Chile, Peru,
+Ecuador, and even Uruguay sending medical supplies, the
+European Union, following the National Assembly and Guido's
+request for aid.
+    And on top of that the one politicizing, using food as a
+weapon here is Maduro. He has been doing this for years. So
+when I see Saturday's event I do not think aid's being
+politicized, I think it is following, again, the only
+constitutional route that we have today to support the
+Venezuelan people. And I think we should be continuing that
+path.
+    Yes, there is room for improvement. I think the execution
+of Saturday's humanitarian aid can be improved in many ways. We
+only saw that happening in three points, crossing points in
+that border. That is a border that has 250 unofficial crossing
+points. So, if we want to----
+    Mr. Levin. Unofficial or?
+    Mr. Rendon. Unofficial.
+    Mr. Levin. OK.
+    Mr. Rendon. Called trochas, which are, you know, your
+regular path where people--which, by the way, 50 percent of the
+people crossing the border are using those unofficial paths.
+So, if we want to really send humanitarian aid we can, we need
+to find those ways and we need to keep continuing that pursuit
+following the National Assembly request and President Guido's
+request.
+    Mr. Levin. Thank you. I really, I really appreciate that.
+    I mean, Mr. Chairman, I do not say any of this to support,
+you know, the Maduro regime one iota. I just worry about
+finding the most effective way forward given, you know, given
+our country's history, and whether us playing such a prominent
+role and, of course, threatening force is the most effective
+way.
+    I yield back. Thank you.
+    Mr. Sires. Thank you, Congressman.
+    Congressman Dean Phillips.
+    Mr. Phillips. Thank you, Mr. Chairman.
+    We spend a lot of time talking about what we should do,
+perhaps not enough time listening to what people want or need.
+I would welcome both of your perspectives, to the extent that
+you can share them, about what both the National Assembly,
+members of the Assembly, specifically independent of aid,
+because when you are hungry and in need it does not matter
+where it comes from, independent of that what would the
+National Assembly if they were here, as many as possible in
+front of us, what would they want from us right now? And what
+would the people of Venezuela, those that remain in country,
+what would they be asking us for right now if we could listen
+to them?
+    Mr. Rendon. I think the National Assembly has a clear
+priority right now which is the same as President Guaido,
+stopping usurpation, Maduro's usurpation of power is priority
+No. 1.
+    Second, letting Guaido set up----
+    Mr. Phillips. May I interrupt you? And how?
+    Mr. Rendon. Yes. I think going back to the points we have
+discussed, humanitarian aid is one, but also supporting the
+amnesty law that the National Assembly passed. I am sure they
+will be asking the U.S. to support that amnesty law in ways
+that can be legal; right? I am not supporting a violation
+against international law and human rights. But there is room
+to support this law that is kind of the only bridge that many
+military members have to get out of their situation; right?
+    So, that would be another.
+    I think the day after scenario is a crucial issue that the
+National Assembly has been trying to put effort and energy on
+that. I think that would be in our request. They would be
+asking the U.S. and the international community to keep in mind
+that the day after they are going to be, the role of the U.S.
+and the international community is going to be crucial from
+economic, financial, security, social, institutional point of
+view. Everything needs to be done in Venezuela. It is going to
+be a blank sheet. It is a completely destroyed country.
+    And the only institution able, legitimate to pursue that
+route, is the National Assembly. But they cannot do it alone.
+They need the support of the U.S. and other countries. So that
+would be I am sure another, another request that they would be
+asking if they were here.
+    And among many other priorities, right, and going back to
+the bank accounts and the assets, and they need to operate as a
+government. They cannot do it right now because Maduro is
+limiting them financially and economically. So they will be
+probably asking the U.S., hey, we need, we need access to bank
+accounts and to assets so we can operate as a government.
+    Mr. Phillips. Thank you.
+    Ms. Escobari?
+    Ms. Escobari. I mean, I think to just reiterate, the
+situation is unbearable on the ground for most Venezuelans. And
+I think we have shared a lot of numbers. But these numbers do
+not reveal the sense of powerlessness of not having a voice to
+democratically choose another path.
+    And I think there is an incredible momentum around the
+world. Venezuelans want to know that we have their back and
+that we will not forget them, and that we will push as hard as
+we can as they see an opening right now.
+    Mr. Phillips. So it is fair to say that the people of
+Venezuela want us to play a role in both promoting a transition
+and in, of course very importantly, rebuilding the Nation. And
+my question was more to the sentiment right now of the----
+    Ms. Escobari. Absolutely.
+    Mr. Phillips [continuing]. Venezuelan people vis-a-vis the
+United States of America and what role they want us to play.
+    Ms. Escobari. Absolutely. And this is why I think they
+continue to go to the streets even though this country has been
+battered in this way.
+    Mr. Phillips. OK. Thank you very much. I yield back.
+    Mr. Sires. Thank you. I thank the witnesses and all members
+for being here today.
+    With that, the committee is adjourned. Thank you.
+    [Whereupon, at 4:18 p.m., the subcommittee was adjourned.]
+                                APPENDIX
+    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT
+             ADDITIONAL MATERIALS SUBMITTED FOR THE RECORD
+    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT
+            RESPONSES TO QUESTIONS SUBMITTED FOR THE RECORD
+    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT
+                                 [all]
+</pre></body></html>

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+<html>
+<title> - AMERICA'S GLOBAL LEADERSHIP: WHY DIPLOMACY AND DEVELOPMENT MATTER</title>
+<body><pre>
+[House Hearing, 116 Congress]
+[From the U.S. Government Publishing Office]
+                     AMERICA'S GLOBAL LEADERSHIP:
+                  WHY DIPLOMACY AND DEVELOPMENT MATTER
+=======================================================================
+                                HEARING
+                               BEFORE THE
+                            SUBCOMMITTEE ON
+                      OVERSIGHT AND INVESTIGATIONS
+                                 OF THE
+                      COMMITTEE ON FOREIGN AFFAIRS
+                        HOUSE OF REPRESENTATIVES
+                     ONE HUNDRED SIXTEENTH CONGRESS
+                             FIRST SESSION
+                           FEBRUARY 27, 2019
+                               __________
+                            Serial No. 116-8
+                               __________
+        Printed for the use of the Committee on Foreign Affairs
+  		[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
+       Available:  http://www.foreignaffairs.house.gov/, http://
+                            docs.house.gov,
+                       or http://www.govinfo.gov
+                               __________
+                    U.S. GOVERNMENT PUBLISHING OFFICE
+35-366PDF                  WASHINGTON : 2019
+                      COMMITTEE ON FOREIGN AFFAIRS
+                   ELIOT L. ENGEL, New York, Chairman
+BRAD SHERMAN, California             MICHAEL T. McCAUL, Texas, Ranking
+GREGORY W. MEEKS, New York               Member
+ALBIO SIRES, New Jersey		     CHRISTOPHER H. SMITH, New Jersey
+GERALD E. CONNOLLY, Virginia         STEVE CHABOT, Ohio
+THEODORE E. DEUTCH, Florida          JOE WILSON, South Carolina
+KAREN BASS, California               SCOTT PERRY, Pennsylvania
+WILLIAM KEATING, Massachusetts       TED S. YOHO, Florida
+DAVID CICILLINE, Rhode Island        ADAM KINZINGER, Illinois
+AMI BERA, California                 LEE ZELDIN, New York
+JOAQUIN CASTRO, Texas                JIM SENSENBRENNER, Wisconsin
+DINA TITUS, Nevada                   ANN WAGNER, Missouri
+ADRIANO ESPAILLAT, New York          BRIAN MAST, Florida
+TED LIEU, California                 FRANCIS ROONEY, Florida
+SUSAN WILD, Pennsylvania             BRIAN FITZPATRICK, Pennsylvania
+DEAN PHILLIPS, Minnesota             JOHN CURTIS, Utah
+ILHAN OMAR, Minnesota                KEN BUCK, Colorado
+COLIN ALLRED, Texas                  RON WRIGHT, Texas
+ANDY LEVIN, Michigan                 GUY RESCHENTHALER, Pennsylvania
+ABIGAIL SPANBERGER, Virginia         TIM BURCHETT, Tennessee
+CHRISSY HOULAHAN, Pennsylvania       GREG PENCE, Indiana
+TOM MALINOWSKI, New Jersey           STEVE WATKINS, Kansas
+DAVID TRONE, Maryland                MIKE GUEST, Mississippi
+JIM COSTA, California
+JUAN VARGAS, California
+VICENTE GONZALEZ, Texas
+                    Jason Steinbaum, Staff Director
+               Brendan Shields, Republican Staff Director
+              SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS
+                     Ami Bera, California, Chairman
+Ilhan Omar,Minnesota                 Lee Zeldin, New York, Ranking
+Adriano Espaillat, New York              Member
+Ted Lieu, California                 Scott Perry, Pennsylvania
+Tom Malinowski, New Jersey           Ken Buck, Colorado
+David Cicilline, Rhode Island        Guy Reschenthaler, Pennsylvania
+                    Chad Obermiller, Staff Director
+                            C O N T E N T S
+                              ----------
+                                                                   Page
+                    OPENING STATEMENT FOR THE RECORD
+Chairman Ami Bera................................................    52
+                               WITNESSES
+Higginbottom, Honorable Heather, Chief Operating Officer, Care
+  USA, Former Deputy Secretary of State, Management and Resources     9
+Natsios, Honorable Andrew S., Director of the Scowcroft Institute
+  of International Affairs & Executive Professor, George H. W.
+  Bush School of Government and Public Service at Texas A&M
+  University, Former Administrator, United States Agency For
+  International Development......................................    16
+                                APPENDIX
+Hearing Notice...................................................    49
+Hearing Minutes..................................................    50
+Hearing Attendance...............................................    51
+   AMERICA'S GLOBAL LEADERSHIP: WHY DIPLOMACY AND DEVELOPMENT MATTER
+                      Wednesday, February 27, 2019
+                           House of Representatives
+       Subcommittee on Oversight and Investigations
+                       Committee on Foreign Affairs
+                                                     Washington, DC
+    The committee met, pursuant to notice, at 2:02 p.m., in
+Room 2172 Rayburn House Office Building, Hon. Ami Bera
+(chairman of the subcommittee) presiding.
+    Mr. Bera. Before I gavel in and do my opening statement--
+this is all new to me. So but in my three terms in Congress and
+now my fourth term, I really have had the desire to try to work
+in a bipartisan way, especially when we approach foreign
+policy.
+    And I think we have been blessed to have the prior
+chairman, Ed Royce, as well as the current chairman, Eliot
+Engel, as our leaders and, historically this had been a
+relatively bipartisan committee looking at solving some of the
+issues and, it is certainly my desire and my intent, working
+with the ranking member, Mr. Zeldin, for us to approach this in
+a bipartisan way because, if you look at our history, America's
+soft power but America's diplomacy and development really has
+been incredibly important to how we have shaped the world and I
+would argue that we have shaped the world for the better.
+    I also, when I think about the members on this committee,
+both in the majority and the minority, you look at the quality
+of the membership and the number of veterans, including the
+ranking member who currently, I believe, still serves in the
+Reserves, bringing that experience to have a senior diplomat
+like Mr. Malinowski, to have a refugee who understands that
+experience, like Ms. Omar, and to have folks that either came
+here as immigrants or are children of immigrants.
+    I think that breadth of knowing what the American
+experience is and, hopefully, will bring that spirit to who we
+are on this committee. And, again, I could not be more honored
+to have the privilege of chairing what I think is going to be a
+very important committee on oversight. So----
+    Mr. Zeldin. Thank you, Mr. Chairman, and it has been a
+privilege over the course of the first couple months here of
+the new Congress with this new subcommittee.
+    In conversations and meetings with the chair I could
+certainly confirm his desire, his strong interest, in
+bipartisanship. That certainly will result in a stronger
+product coming out of this committee. It helps empower the full
+committee and I think bipartisanship is something for all of us
+to be very proud of.
+    So thank you to Chairman Bera for setting the right tone,
+and with regards to his priorities coming out of the gate I am
+confident that at the end of this Congress a couple years from
+now, a year and a half from now or so, we are going to be able
+to have real product, maybe in legislative form, maybe through
+oversight, that will help strengthen America.
+    So I look forward to serving with you and all the other
+members of this committee, and I yield back.
+    Mr. Bera. So the hearing will come to order.
+    This hearing, titled ``America's Global Leadership: Why
+Diplomacy and Development Matters,'' will focus on why the
+State Department and USAID are critical to the success of our
+country, our foreign policy, and how Congress can ensure that
+they thrive.
+    Without objection, all members may have 5 days to submit
+statements, questions, extraneous materials for the record
+subject to the length limitations in the rules. I will now make
+my opening statement and then turn it over to the ranking
+member for his opening statement.
+    Good afternoon. I want to welcome all the members to this
+first hearing of the Oversight and Investigations Committee.
+Chairman Engel reestablished this subcommittee to strengthen
+Congress's oversight of the executive branch and reassert our
+authority in foreign policy.
+    This subcommittee will work closely with the full committee
+and other subcommittees to exercise our role, and as we heard
+this morning from Secretary Albright, it is her belief and I
+think it is all of our belief, as I listen to the questions and
+testimony of members on both sides, that foreign policy best is
+done in a bipartisan way and that the best foreign policy at
+our best is when the executive branch is working closely with
+the legislative branch in partnership, sending a singular
+message to the world so there is no ambiguity to our allies and
+others, and I think, as we mentioned earlier, that really is a
+goal and I would like to acknowledge the partnership that I
+think we will have with the ranking member, Mr. Zeldin, from
+New York.
+    To begin with, as we look at Article 1 and, again,
+Secretary Albright said now is the time for Article 1 to really
+reemerge.
+    It really has far too long under both Democratic and
+Republican administrations Congress has allowed oversight to
+falter and more and more of our ability, really, has shifted
+over to the executive branch both under Democratic
+administrations and Republican administrations and I think this
+is our opportunity to re-exert that oversight and start
+bringing things back to what we should be doing.
+    With that, if I look at our history as the United States,
+particularly in the post-World War II history as we looked at
+the three pillars of defense but also diplomacy and
+development, our foreign policy and our approach to the rest of
+the world really did make the world a better place.
+    And I know Mr. Natsios in his opening comments will talk
+about the Marshall Plan and the remarkable work that we did
+rebuilding Europe, rebuilding Japan, going and protecting Korea
+and the miracle that is the Republic of Korea today.
+    And you would rightfully argue that our presence around the
+world--the American presence--leading with our values and
+leadership in the 70 years post-World War II made the world a
+better place, made the world a safer place, made the world a
+more democratic place.
+    But I think we can also, as we think about the purview of
+this committee over the next 2 years, we understand that the
+world has changed. It is a different place today.
+    You see it is not a given that the democratic model of our
+values will rule the 21st century. You see more autocratic
+leaderships--the rise of China, the reemergence of Russia.
+    You also see the failed States, the terror States that
+are--have to be approached in a very different way than we may
+have approached a cold war with the Nation State and this is an
+opportune time for us to take a step back, take a deep dive
+into where America's diplomacy is today, where America's
+development is but then also come out of this thinking about
+where we need to go.
+    And this committee is Oversight and Investigations and we
+will use the tools that we have available to investigate where
+we are today.
+    But that would be only half the battle if we did not
+actually try to come out and present to this administration or
+the next administration and then this secretary of State or the
+next secretary of State a roadmap of where we think we could go
+to continue to lead the world both with our soft power and hard
+power and, again, there is no reason that this next century
+cannot be an American century because the last century
+certainly was an American century.
+    And with that, I would like to thank both Ms. Higginbottom
+and Mr. Natsios for joining us and I will turn this over to my
+esteemed colleague, Mr. Zeldin, the ranking member.
+    Mr. Zeldin. Thank you, Mr. Chairman. This is the first
+hearing of the Subcommittee on Oversight and Investigations. I
+look forward to working with you on bipartisan priorities we
+both share.
+    This hearing is, certainly, the first step. We both believe
+in American leadership and Congress's role in oversight and
+investigations.
+    I wanted to extend my thanks to today's two witnesses for
+being here today to discuss the importance of American foreign
+policy, aid, and development around the world.
+    There is no question that targeted and measured foreign aid
+and level-headed diplomacy further American national security,
+business, and humanitarian interests.
+    Today, we are not here to question this consensus but,
+rather, examine the tools and resources used in these endeavors
+in an effort to ensure they are the most effective and
+efficient means possible.
+    Too often, we have witnessed programs with good intentions
+originally established to forward American values and improve
+the lives of those around the world go off the tracks and it is
+our responsibility as the Oversight and Investigations
+Subcommittee to monitor these programs and help correct course
+when necessary.
+    For example, and given the backgrounds of our two witnesses
+and I am here with Congressman Perry, who has joined us, I will
+touch on the stated mission of the previously U.S. taxpayer-
+funded United Nations Relief and Works Agency, also known as
+UNRWA, which has a mission to provide humanitarian support for
+Palestinian refugees in Jordan, Lebanon, Syria, and the West
+Bank and Gaza.
+    The education of children, especially those in war-torn
+areas, is a noble mission. But over the past 6 years, UNRWA and
+the State Department have failed to provide Congress with an
+accurate picture to implement oversight measures by
+deliberately withholding information and certain reporting
+requirements and we recently found out why.
+    In a recently declassified portion of a GAO report, we
+learned that the textbooks in the educational program of UNRWA
+were delegitimizing Israel and that supplementary material to
+counter this textbook content that promotes anti-Semitism, paid
+for with American tax dollars was being rejected on the ground.
+    The underlying mission of foreign aid programs like UNRWA
+is critical. But holding them to that mission and ensuring its
+funding goes to furthering that goal may be even more
+important.
+    U.S. foreign aid should be an investment, building a strong
+foundation with our allies. However, providing economic
+assistance to the Palestinian Authority, which supports a
+``pay-for-slay'' program to financially reward terrorists for
+killing innocent Americans and Israelis is in direct violation
+of this ideology.
+    Last Congress, the Taylor Force Act was passed and signed
+into law. It withholds economics assistance to the Palestinian
+Authority until it publicly condemns these acts of violence and
+stops inciting and rewarding the terrorists who perpetrate
+these horrific crimes, therefore protecting the innocent
+Americans and Israelis and better allocating these limited
+foreign aid resources.
+    The United States must support aid programs that promote
+the interests of our Nation and, therefore, of our allies. For
+example, foreign aid that promotes good governance in a country
+like Venezuela is a proud show of what an important investment
+this funding can be.
+    There are so many different examples all across the entire
+map for the entire world that this committee can get into. Just
+touching on a couple of examples there, but I am sure we will
+hear a lot more over the course of today's testimony with our
+two great witnesses.
+    There should be an integrated policy approach to aid and
+diplomacy in which we leverage greater influence per aid
+dollar. We must employ greater accurate oversight and
+accountability internally within the State Department as well
+as over these foreign assistance programs ensuring those
+utilizing U.S. funding are better aligned with our Nation's
+values.
+    We need to examine whether the millions of dollars we give
+to multilateral agencies serve our needs and whether they
+continue to maintain the high standards Americans would expect.
+    We need to share the burden so that we can offer the
+opportunity for other regional actors to contribute as well.
+Are there administrative efficiencies we could implement to
+make our dollars go farther? How can we improve transparency
+and accountability in a manner that does not hinder development
+efforts?
+    These are the questions I hope our witnesses will address.
+Thank you both again for being here and I look forward to your
+statements.
+    I would like to thank our subcommittee chairman, Mr. Bera,
+full committee chairman Mr. Engel, and lead Republican, Mr.
+McCaul, for their leadership and assistance on these issues.
+    I yield back.
+    Mr. Bera. I will now introduce the witnesses.
+    As I stated earlier, you know, Ms. Heather Higginbottom is
+the chief operating officer of CARE USA, one of the world's
+largest humanitarian organizations. She served as deputy
+secretary of State for management and resources in the Obama
+Administration.
+    Andrew Natsios is currently the director of the Scowcroft
+Institute at Texas A&M. He served as the thirteenth
+administrator for the United States Agency for International
+Development.
+    Thank you both for being here, and with that, Ms.
+Higginbottom.
+ STATEMENT OF MS. HIGGINBOTTOM, CHIEF OPERATING OFFICER, CARE
+USA, FORMER DEPUTY SECRETARY OF STATE, MANAGEMENT AND RESOURCES
+    Ms. Higginbottom. Chairman Bera, Ranking Member Zeldin, and
+distinguished members of the committee, thank you for the
+opportunity to testify as you work to make the State Department
+and USAID more effective and more efficient. I have edited my
+remarks for time and ask that my full statement be included in
+the record.
+    Mr. Bera. And without objection, your full statement--
+written statement will be part of the record. Thank you for
+reminding me that I was supposed to do that.
+    Ms. Higginbottom. For the last 6 years, first as deputy
+secretary of State for management and resources and currently
+as CARE chief operating officer, I have had the privilege of
+seeing American diplomacy and development in action and the
+responsibility of thinking about how to strengthen it.
+    With just about 1 percent of the Federal budget, the United
+States gets no better return on its investment than the work of
+our diplomats and development professionals which saves
+millions of lives, builds stronger economies, and creates a
+safer world.
+    Mr. Chairman, I know that it has never been popular to
+invest money overseas. President Reagan acknowledged that,
+quote, ``Foreign aid suffers from a lack of a domestic
+constituency.''
+    The very DNA of care is a daily reminder that Americans
+have always stepped up to address global challenges. Seventy-
+three years ago, a small group of Americans joined forces to
+create the first ever CARE packages for starving survivors of
+World War II.
+    Today, instead of delivering aid in a box, CARE works to
+address the roots of poverty using proven tools to empower
+women and girls and help entire communities create long-term
+prosperity, stability, and resiliency.
+    We are here today to focus on what we can do better. But we
+should not lose sight of what the U.S. already does so well and
+I saw it firsthand in 2014 as the Ebola outbreak in West Africa
+threatened whole countries.
+    American leadership made the difference. Working with
+partners in a coordinated, rapid, innovative way, we brought
+every tool we had to bear from deploying civilian health and
+development experts to engaging our military and Border Patrol
+agents.
+    We work with Congress to provide resources, pharmaceutical
+companies to develop a vaccine, manufacturing companies to make
+protection suits for health workers, and we galvanize partners
+to build an aircraft to evacuate patients with infectious
+diseases.
+    As a result, Ebola was contained in West Africa and in our
+interconnected world where a disease knows no boundaries we
+should be building upon, not weakening, instruments of
+diplomacy and development.
+    The U.S. is a catalytic leader and what we do encourages
+other countries to act, and it is why over the past 25 years
+the number of people worldwide living in extreme poverty has
+been halved as has the number of women dying during pregnancy
+and the number of children dying before their fifth birthday,
+and this has been a bipartisan effort across Republican and
+Democratic administrations.
+    Despite these clear results, the president's budgets for
+Fiscal Year 2018 and 2019, and we fear once again in Fiscal
+Year 2020, have proposed slashing foreign assistance by 30
+percent, jeopardizing countless lifesaving programs.
+    We appreciate that Congress has rejected these cuts, but
+there has been damage done due to uncertain funding levels and
+time lines, the threat of recisions packages, and government
+shut downs.
+    Just earlier this month, we came days away from halting a
+Food For Peace program in Haiti that supports 100,000
+chronically poor households. We are very grateful to our USAID
+colleagues who managed to release funds at the eleventh hour.
+    But when lives are on the line we cannot afford crises of
+our own making. To be sure, the State Department and USAID are
+not perfect institutions. The 2015 Quadrennial Diplomacy and
+Development Review, which I oversaw, contains many
+recommendations to make these institutions more efficient and
+more effective. I will highlight just three.
+    First, the currency of the State Department is information
+and relationships, and yet there is no enterprise wide system
+for organizing, collecting, and sharing information.
+    Second, better utilization and expertise in data analytics,
+science, and technology is essential, and the siloed natures of
+both the State Department and USAID mean that crosscutting
+analysis and engagement is often unavailable.
+    Third, performance management and strategic planning at
+both agencies should be strengthened and collaboration and
+communication across agencies should be enhanced.
+    As the history of the CARE package shows, often the best
+way to combat fragility, address poverty, and prevent mass
+displacement is by harnessing the generosity and talents of the
+American people in partnership with communities around the
+world.
+    This work, backed by continued American engagement and
+diplomacy in development, is essential to building a future
+worth having for ourselves, our children, and our neighbors
+around the world.
+    Thank you very much, and I look forward to answering your
+questions.
+    [The prepared statement of Ms. Higginbottom follows:]
+    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
+ STATEMENT OF MR. NATSIOS, DIRECTOR OF THE SCOWCROFT INSTITUTE
+ OF INTERNATIONAL AFFAIRS & EXECUTIVE PROFESSOR, GEORGE H. W.
+   BUSH SCHOOL OF GOVERNMENT AND PUBLIC SERVICE AT TEXAS A&M
+  UNIVERSITY, FORMER ADMINISTRATOR, UNITED STATES AGENCY FOR
+                   INTERNATIONAL DEVELOPMENT
+    Mr. Natsios. Thank you, Mr. Chairman, Ranking Member, and
+members of the committee. I want to thank you for the
+opportunity to speak today on the importance of foreign aid
+programs.
+    My comments today are my own. I am not representing Texas A
+& M Univ. the Bush School of Government and Public Service at
+Texas A&M.
+    Since World War II, the United States foreign aid programs
+have played a leading role improving the livelihoods of the
+world's poor, cultivating good governance and democratic
+practice, protecting human rights, and accelerating economic
+growth.
+    We are living through the greatest golden age in civilized
+history for the common people of the world. The reason I say
+that is based on the statistic that Ms. Higginbottom here just
+mentioned.
+    There has been a dramatic improvement in the lives of the
+poor. Ninety percent of the population a hundred years ago in
+the developing world was poor. In fact, there was not even a
+developing world; there were colonial empires a hundred years
+ago.
+    But that has dramatically shifted. The number of poor
+people has dramatically declined. The number of democracies,
+until recently, has been on the rise. Certainly, there have
+been terrible abuses of human rights. I know this firsthand: I
+was in the center of the Rwandan genocide. I was there when
+Darfur took place. I like to think we blew the whistle in USAID
+about what was happening in Darfur before anyone else even
+noticed what was going on. But the fact is that people did not
+even know what human rights were a hundred years ago. They did
+not use those words, and there were no institutions protecting
+human rights.
+    We have made enormous progress and we are living through
+it, but we do not see the forest from the trees. We do not see
+what things were like 200 years ago, or 300 years ago, when a
+life expectancy of 40 years was regarded as long.
+    The Marshall Plan was our first organized, systematic
+effort to extend American humanitarian power abroad in a
+lasting way. We had carried out humanitarian efforts before:
+Herbert Hoover ran the greatest food aid program in world
+history during World War I and its the immediate aftermath. But
+that was a temporary program. By the way, Hoover also went into
+Russia in the middle of the Great Famine after Lenin took over.
+It is a very interesting story regarding how he prevented the
+central government from manipulating the food aid at that time.
+The same problems we have now concerning the manipulation of
+food aid took place in Russia in the early 1920's. Hoover
+simply told Lenin that the U.S. would leave the country if he
+did not stop interfering. We would not distribute food on a
+political basis. It will only be done based on need.
+    That is one of the hallmarks of our aid programs,
+particularly in humanitarian assistance and in health programs.
+We distribute aid based on need.
+    Now, I understand some aid has to be distributed to our
+allies--economic aid, that sort of thing. But when it comes to
+the survival of people, including women, and children, and
+noncombatants, we need to focus on aid distributed based on
+need, not based on interest.
+    USAID helped the United States win the cold war more than
+most people realize, even within USAID. For example, in South
+Korea there are amusing stories regarding how intrusive USAID
+was in the Park government in terms of forcing reforms. The
+same thing happened in Taiwan, in Indonesia, and in Thailand.
+In Greece and in Turkey in the early 1950's after USAID
+encouraged reforms Stalin worked to destabilize both countries
+in the late 1940's.
+    We have had remarkable successes in countries that were
+extremely poor and are now developed countries in Latin
+America, in Asia, and, more recently, Africa.
+    One of the greatest success stories--my favorite--is the
+Green Revolution. That was an effort started by Dr. Norman
+Borlaug, who was a professor at Texas A&M later in his life; we
+have a Borlaug Institute for International Agriculture there.
+The Green Revolution doubled yields in Asia at the same time
+that Mao was killing 45 million Chinese through the Great Leap
+Forward Famine, USAID's work increased and contributed to a
+dramatic decline in famine in Asia.
+    In fact, a study has been done on the topic. The book is
+called ``Mass Starvation'' by Alex de Waal and it came out last
+year. Alex de Waal is a good friend of mine, he teaches at
+Tufts. In the book, he says that with the creation of the
+international humanitarian response system, there has been a
+massive decline in the number of famine deaths, since 1980.
+    He traced famine deaths from 1870 until 2010. So, we have
+empirical evidence showing that starvation deaths and famines
+have massively declined at the same time that this
+international response system was set up.
+    Now, I have mentioned in my paper four challenges. I am
+running out of time now so I cannot go into them, but they are
+the forced displacement crisis, the pandemic disease risk, the
+risks posed by fragile and failing States, and food price
+volatility (which was a major factor in the uprisings in the
+Arab world). People said it was the Arab Spring. It was not a
+spring. It has been a nightmare in Syria, Yemen, and Libya in
+particular. There is a direct connection between food price
+increases (which make people hungry when theye cannot afford
+the food)--and political uprisings. The evidence--empirical
+evidence from political scientists and scholars--is very
+convincing in showing that there is a direct relationship.
+    There are three things I propose in my testimony that we
+need to do to address these challenges. First, we must
+decentralize back to the USAID missions. The reason we were
+successful in the Cold War is that the mission directors (and,
+I might add, our Ambassadors) had far greater discretion to
+carry out policies and programs at the country level than we do
+now. Everything has been centralized over the last 30 years,
+and it is not helping things because we, in Washington, are
+separated from the reality of what is going on in these
+countries.
+    Second, we need to deregulate USAID. USAID is overburdened
+with the regulatory requirement that have been imposed on it in
+order, supposedly, to reduce abuse. These reporting
+requirements do not reduce abuse. They just generate a huge
+amount of paperwork. The abuse still takes place anyway, and it
+costs USAID a lot of money to fulfill these reporting
+requirements.
+    The third proposal is consolidation of programs. Having
+USAID programs at 18 different Federal agencies is very unwise.
+    Those are the three reforms that I propose at the end of my
+written testimony.
+    Thank you very much.
+    [The prepared statement of Mr. Natsios follows:]
+    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
+    Mr. Bera. Thank you.
+    Obviously, you have got a lot of say there and all of it
+really important. I will go ahead and start the questioning.
+    Ms. Higginbottom--and let me frame it this way. I think it
+is incredibly important for us to, you know, recognize our
+veterans every day and have a day like Veterans Day to just
+remind us of what they do to protect our freedoms and represent
+us around the world and the sacrifice that they and their
+families make.
+    But I do think far too often we forget about the others
+that are out there representing us from our diplomats to our
+aid workers to the folks that are working through the NGO's
+and, you know, I just want to make sure that we do not lose
+sight of that and, you know, our generals are the first ones to
+admit that that partnership that they have with the development
+community and the diplomatic community is incredibly important,
+because it is this combination of our hard power and our soft
+power.
+    You have been inside the building at State Department and
+certainly have looked at how the department is working
+currently and if you would just make a few comments on, as we
+get this committee underway, some of the things that we should
+be thinking about and how we best could work with the folks
+inside the building.
+    Ms. Higginbottom. Thank you. Thank you, Mr. Chair.
+    I think that this committee can play a really important
+role in highlighting some of the challenges that both the
+Foreign Service and the civil services face as well as to
+understand, to your point, Ranking Member, about how to have
+oversight of program and ensure we have accountability and that
+we have the right processes in place for those things.
+    With respect to some broad areas that I think are important
+for the committee to consider, we are seeing a decrease in the
+number of people taking the Foreign Service exam and we are
+seeing some attrition.
+    The building is built on the professional nature of its
+Foreign and civil service employees. I think it is really
+important that we understand what is happening there. We need
+the best and brightest to represent us around the world and
+that is really critical.
+    I mentioned in my testimony something that I am really
+seized of and I want to just mention it again, and that is that
+we do not have an enterprise wide knowledge management system
+and it is inefficient and ineffective to have a personal system
+that is contingent upon rotations with no clear way of
+maintaining information and relationships that is organized and
+centrally housed.
+    I think that is a critical issue. It takes investment and
+it is complicated, but I think it is really, really necessary.
+    Mr. Bera. Great. Thank you.
+    Mr. Natsios, you are a long-serving USAID director and,
+certainly, served at a very interesting time. As you think
+about your lessons and as you think about where we need to go
+in aid and development, we are seeing other governments, you
+know, taking a different approach, the Chinese for one
+certainly how they are approaching the rest of the world.
+    What would, if you were to just imagine the absence of the
+U.S. presence there, who is going to fill that? And then the
+flip side is the importance of how should we be thinking about
+this as we go forward as we think about aid and development in
+the 21st century and the importance of the U.S.'s role in that
+capacity and what it says to the rest of the world when the
+United States shows up.
+    Mr. Natsios. Well, I can tell you I am a very strong
+internationalist. I am right of center rather than left of
+center. But that is where the bipartisan nature of this
+coalition is.
+    There are conservative internationalists and there are
+liberal internationalists, and I think we agree on more than we
+disagree, frankly.
+    Mr. Guterres, the secretary general of the United Nations,
+publicly said something we all knew privately. The U.N. does
+not work without American leadership. It does not. President
+Bush used to have a weekly call with Kofi Annan, the U.N.
+Secretary General at the time.
+    He would sit there and go through a list of things we
+needed done and Kofi would say we need help on this or that.
+They were not the best of friends, I have to tell you. They
+disagreed on some issues.
+    But they worked together on a regular, systematic basis and
+it made a difference. That relationship between the U.S. and
+the U. N. is weaker now, and it has been weakening for some
+time. That is not a good thing.
+    I am an Africanist--that is where I spent a lot of time. My
+African colleagues tell me that African States that signed
+these infrastructure agreements with the Chinese are kicking
+themselves for failing to read the fine print.
+    One colleague told me that the financing agreement says if
+the recipient country cannot pay the bill, the Chinese take
+over their ports. I think it was in Zambia recently that the
+Chinese took over a mine.
+    We do not do things like that. Everybody knows the United
+States protectds its interests. But we have other interests,
+including the broader development of poor countries.
+    It is in our interest to have a stable world order in which
+fewer people are poor. No one thinks that the Chinese have that
+anywhere in their foreign policy.
+    If the Chinese displace us--which I do not think they are
+going to do--I think this notion the Chinese are going to take
+over the system is nonsense. It is not going to happen for a
+variety of reasons that are beyond this hearing.
+    But if it should happen, the international system will not
+be functional.
+    Mr. Bera. Well, my sense, having traveled a lot and talked
+to leaders around the world, is they would much rather the U.S.
+presence be there because they know, you know, obviously, we
+have our interests. But we do act in a much more benevolent way
+in helping build the capacity of the countries that we are
+involved in.
+    In my remaining time, you know, Ms. Higginbottom, you are
+now at CARE International and as we think about our role in
+diplomacy but, more important, aid and development, how should
+we be thinking about our partnership with the NGO sector and
+also, potentially, with the corporate sector?
+    Ms. Higginbottom. I think in the NGO sector we look at,
+across the spectrum, at partnerships. That is how we work.
+Whether it is with USAID or with private sector companies with
+other INGO's, and I think as we see the world changing and
+particularly the development landscape changing, what we see is
+that official development assistance, as critical as it is, is
+a very small percentage of private revenue flows that are going
+into countries, and that means if we are going to be really
+effective with our work we have to look across a whole range of
+partnerships.
+    And I think as we look at State and USAID, ensuring they
+have the capacity--both agencies--to develop those partnerships
+and relationships and work more seamlessly across different
+sectors, I think we will be much more effective and efficient
+with our--with our resources.
+    Mr. Bera. Well, maybe expanding on that then as well,
+knowing that we have limited and we certainly have challenges
+that we will have to look at here domestically, I think my
+perception is, it will not be the United States going it alone.
+    We now have multiple allies that are developed nations and
+so forth and the president is not incorrect that we should be
+working with them.
+    Maybe, Mr. Natsios or Ms. Higginbottom, how do you envision
+us working with the international community? And, again, let me
+couch I think the Americans should be leading because of our
+leadership and our values. But what has changed from the 20th
+century to the 21st century?
+    Mr. Natsios. I think when political systems--democratic
+systems in particular but even dictatorships get under severe
+stress they begin to behave differently.
+    And it is not just in the United States. This has been
+happening across the world in other democracies. You are seeing
+what is happening in Europe right now.
+    The Democratic Party of Sweden is actually the Nazi Party
+of Sweden from the 1930's. It got 17 percent of the vote in the
+last Swedish election. That is very disturbing.
+    The auditor general, which is a big job in this party, was
+a member of the Waffen-SS. He is an old man, but he was a
+member of the Waffen-SS, one of the most horrendous parts of
+Hitler's structure of terror.
+    This party received 17 percent of the vote in Sweden
+because of the immigrant issue in Europe. So it is an issue--
+these issues are churning across the world.
+    We interviewed someone for admission to the Bush School.
+She is Chilean and works in refugee issues. She told me that a
+million refugees have escaped to Chile--a million.
+    The Refugee crisis is having an effect across the world,
+and that is why people start turning inward, becoming more
+protectionist, more ultra nationalist, more isolationist, and
+that is not good.
+    Mr. Bera. Mr. Natsios, I notice that votes have gotten
+called.
+    Mr. Zeldin, I think you can probably do your questions and
+then we will recess and come back after votes.
+    Mr. Zeldin. Thank you, Mr. Chair.
+    Earlier in my opening remarks I referenced the GAO report
+that Congressman Perry and I recently secured the
+declassification of revealed a number of concerning issues
+regarding staff who failed to implement appropriate policies
+and push back with the host country.
+    When UNRWA developed complementary teaching materials and
+seminars to address concerning content following three textbook
+reviews, some staff refused to attend training and workshops
+and utilized this supplementary material, which countered the
+content that was not aligned with U.S. values and, in many
+cases, not aligned with reality.
+    I want to ask you this question more generally. It is not
+specific to that report. But based on your experience, how did
+you deal with local beneficiaries who did not implement
+appropriate standards?
+    Mr. Natsios. Well, Congressman, I hesitate saying this, but
+I will say it. It is not this committee, but this Congress and
+other committees have placed draconian limits on American
+diplomats and USAID officers getting out-- not just of the
+capital city--but out of the mission itself.
+    The USAID mission in Kabul is called ``the prison" by the
+USAID staff. You can go for one year on duty in Kabul and never
+leave the mission. They will not let you out because of the
+security restrictions.
+    Mr. Zeldin. Just so you know, the question, though, is with
+regards to the local----
+    Mr. Natsios. The question is: How do you monitor programs
+if you cannot go out and see them? If you to improve
+accountability, you need to take the authority over our
+embassies and missions out of those other committees, because
+they have told everyone there is no tolerance for risk. If
+there is no tolerance for risk, we should not have embassies.
+We should not have missions around the world. You have to get
+out of the capital city, out of the mission, and out of the
+embassy to find out what is going on. These abuses are taking
+place because we cannot see what is going on.
+    Why? Because of these security restrictions and, more
+importantly, because of restrictions on how many USAID officers
+and diplomats can be assigned to these countries. We hire more
+Foreign Service Officersand then we cannot send them out to the
+field.
+    I used to blame the State Department for this until I
+became a diplomat and realized it is not the State Department
+that is the problem. It is Congressional Committees, but it is
+not the four committees that oversee Foreign Affairs.
+    The committees that are the problem are giving exactly
+opposite instructions than all of you are giving to the State
+Department and USAID, and that is the problem.
+    There are conflicting instructions in terms of access and
+openness to get out of the capital city and the mission and the
+embassy.
+    Mr. Zeldin. Ms. Higginbottom, if you could, I guess, just
+speak to the interaction with the locals, based on your
+experience. What else can we improve upon?
+    Ms. Higginbottom. I do--I just want to agree with what Mr.
+Natsios said. The issue of how we manage risk, not how we
+eliminate it, has got to be taken up and I think this committee
+can play an important role because a lot of the concern we
+would have about program implementation would be the limit that
+we would have imposed for mobility and not having the ability
+to really know what is happening in a given program.
+    When you do know that there are--there are a lot of
+mechanisms, I think, actually to deal with staff that are not
+following policy or guidelines and when it is very clearly the
+case then the line management has a lot of tools at their
+disposal to take action and they should.
+    The inspector generals at both agencies play an important
+role. I met with our inspector general every week. It was not
+my favorite meeting but it was really important, and I think
+they can highlight critical areas where we need to focus and
+where there are problems. They do inspections of embassies.
+They can highlight some of these issues.
+    So I think there are tools. I do think the risk issue is
+really important and I do think that this committee can play an
+important role in helping to address that.
+    Mr. Zeldin. OK. So I am going to just continue based off of
+your answers as opposed to--I had a couple of other followup
+questions.
+    But I guess going back to Mr. Natsios, can you now take
+your point, I guess, to the next level a little more? Is there
+more specificity you can share? I know you did not--you were
+not naming other committees but what can we get out of your
+exchange that we can act on?
+    Mr. Natsios. Well, you cannot reassign responsibility
+within the congressional system.
+    But if I had my way, the only four committees that would be
+allowed to deal with the State Department and USAID would be
+the four appropriators and the authorizers in the House and the
+Senate.
+    Even though I have had disagreements with these committees
+over the years, I have never seen then do things that are
+damaging to either institution. But I have seen other
+committees in this Congress who do not travel.
+    They do not know what is going on in the world, and their
+objective is not the carrying out of American foreign policy or
+USAID programs. It has nothing to do with party. The Democrats
+and the Republicans are equally damaging to the operational
+capacity of State and USAID.
+    I wrote a article for the Weekly Standard about 10 years
+ago called ``American Fortresses,'' because the embassies often
+look like medieval fortresses.
+    Mr. Zeldin. Well, we all have more to talk about. I know
+that--I will yield back to the chair at this time because I
+know we only have a few minutes left of votes.
+    Mr. Bera. I want to--at this time the subcommittee will
+recess so that members can vote and then the hearing will
+resume immediately following the votes.
+    Thank you.
+    [Recess.]
+    Mr. Bera. The committee will come to order. I ask that, you
+know, at this juncture, Mr. Perry from Pennsylvania. So we will
+go to you.
+    Mr. Perry. Thank you, Mr. Chairman. I appreciate coming
+directly--oh, do you want to defer to the----
+    Mr. Bera. OK. Thank you for that. See, we are already
+acting in a bipartisan manner, as you know, working together.
+What a tone.
+    Mr. Malinowski.
+    Mr. Malinowski. OK. Thank you. Thank you.
+    Thank you for your testimony earlier today and for your
+patience with us as we vote.
+    Let me start with this question to you, Mr. Natsios. As a
+general matter, I assume you would agree that when the United
+States military deploys to a complicated dangerous place it is
+helpful to have civilian agencies involved as well providing
+humanitarian assistance, development, reconstruction, good
+governance, and all of that. I presume we are in agreement.
+Yes.
+    And Ms. Higginbottom, OK. Let me--let me apply that
+principle then to a situation we are dealing with right now and
+that is Syria.
+    A number of us, on a very bipartisan basis, over the last
+few weeks and the last few days including at the Munich
+Conference made an effort to try to persuade President Trump
+not to follow through on his policy or tweet or whatever it was
+to pull all of our forces out of that country prematurely
+before the mission was complete.
+    And he heard us and I think, fortunately, made the decision
+to retain around 400 troops with our allies as part of the
+effort in that country.
+    But what has been lost in the debate over our presence in
+Syria is that late last year the administration also made a
+decision to completely end, not to spend some $230 million that
+the Congress had provided for stabilization programs in Syria
+because, they argued, others, particularly the Saudis, could
+fill our shoes.
+    So I wanted to ask you, do you think that is a good idea if
+we have 400 troops or any number of troops deployed in Syria to
+have absolutely no civilian component to that mission?
+    Mr. Natsios. Congressman, I was the co-chairman of the
+Committee on Human Rights in North Korea with my good friend,
+Roberta Cohen, when you were assistant secretary of state. You
+were our biggest supporter in granting money for investigating
+the outrageous atrocities that the North Korean regime has
+committed against its own people, and I do want to thank you
+for that.
+    Mr. Malinowski. Thank you.
+    Mr. Natsios. It made a very great difference to us. We are
+a small organization and we appreciate it. Thank you.
+    The first thing is that it is not about how much money we
+spend. It is about who is spending it and how it is spent.
+USAID has expertise in war zones that even our friends in
+Europe do not have--and I think some of our friends in Europe
+do some things very well.
+    We perhaps, because of the U.S. being a great power, have
+mastered, though not completely, how to work in very difficult
+places and run programs.
+    The Saudis have no experience in this. They do not have any
+experience even in stable environments. That is point number
+one.
+    It is not going to work with the Saudis taking over in
+Syria. Second, if we are going to keep troops on the ground, we
+need to have a civilian component next to them.
+    So I, frankly, do not support the withdrawal of these
+civilian personnel from Syria. I think we are going to have to
+send them back in again. I know we keep telling the Russians
+and the Iranians they are going to fund the reconstruction.
+    I have to say the Russians do not have a lot of experience
+doing reconstruction work in the developing world and the
+Iranians have no experience.
+    Mr. Malinowski. Right. Well, we are keeping them as--so we
+are actually keeping the troops with no----
+    Mr. Natsios. I know, but what about the civilian component?
+    Mr. Malinowski. Nothing. It has been completely eliminated
+and, I mean, does that make our troops safer? I mean, is there
+an issue potentially with--in terms of the safety of our troops
+if there are no civilian eyes or ears? If we are not working
+with local governments? If we are not working with NGO's on the
+ground to counter extremism, which we were doing?
+    We were funding in Syria these extraordinary women-led
+human rights organizations that operated under ISIS control
+and, in my view, are the most effective counterweight to ISIS
+at a time when, well, they were obviously risking their lives.
+Would the Saudis fund those kinds of organizations, do you
+think, if we turned it over to them?
+    Ms. Higginbottom. I would not expect that they would and I
+agree that--Congressman, that the type of relationships and
+engagements that you have with some civilian capacity in a
+context like that is really important and I do think it can
+have a direct contribution to the security of the troops. I am
+pleased to see that there has been a shift in that--in that
+posture from the president.
+    Mr. Malinowski. Thanks. And just, finally, a comment on a
+different issue that has come up--our assistance in Palestinian
+areas--and I take the point about criticism of UNRWA.
+    But let us also not forget that we have completely
+eliminated USAID programs operating to improve water systems,
+to encourage Palestinian and Israeli children to get to know
+each other, to support schools.
+    Presumably, you do not think USAID was teaching people to
+delegitimize Israel. Who do you think benefits more from the
+complete elimination of those programs, Israel or Hamas?
+    Mr. Natsios. I think eliminating the programs helps Hamas.
+That is not what the intention was by the administration, but
+that is what the effect is.
+    I can tell you from personal experience, and I might add a
+little story. When we went into Afghanistan the first thing we
+did, not just to educate kids but to get them off the streets
+into school, was to print 7 million textbooks from the old
+royal curriculum used when the king was in power. These were at
+the University of Nebraska, where there was an archive from
+Afghanistan.
+    I had nine Afghan intellectuals--journalists, women's
+groups, and academics--read all 200 textbooks to make sure
+there was no anti-Semitic or anti-Russian content. (There was
+anti-Russian content because of the civil war.) Female stick
+figures--stick figures-- had been scratched out from all the
+textbooks.
+    We fixed these issues and I had the Afghan intellectuals
+read the books twice to make sure we did not miss anything. The
+point is that there is a utility in having USAID there because
+we are sensitive to these issues, and without us there I think,
+frankly, the extremists will have more license.
+    I understand the pressure of politics. I was in the
+legislature of Massachusetts for 12 years. But I think it is
+unwise to shut these programs down. That is my experience.
+    Mr. Malinowski. Thank you. Fully agree.
+    Mr. Bera. Thanks, Mr. Malinowski.
+    And Mr. Perry from Pennsylvania.
+    Mr. Perry. Thanks, Mr. Chairman. Ladies and gentlemen,
+thanks for being here. These foreign assistance dollars are
+precious and, of course, I do not have to tell you or remind
+you they come from the hardworking taxpayers of the 10th
+District in Pennsylvania and everybody else's district here,
+too. So it is really important that we safeguard them.
+    And, you know, oversight is important and I am sure you are
+familiar with the stories of fraud and abuse and so this is the
+Oversight Committee. I think it is important to highlight some
+of these things and then just have a discussion about it.
+    There is a 2018 report that assistance provided to
+Afghanistan through the reconstruction trust fund was at risk
+for misuse. The special inspector general for Afghanistan
+reconstruction who was appointed by Congress stated that once
+the U.S. or any other donor provided its contributions to
+fund--to the fund, neither the World Bank nor USAID could
+account for how those funds were specifically spent.
+    There is also--this goes back a way--but, you know,
+because, Mr. Natsios, I have listened to some of your comments
+and also Ms. Higginbottom. I want to get to some of those about
+why this is happening if you are not able to monitor correctly.
+    But this goes back to 2013. An investigation by the Wall
+Street Journal found that more than 20 percent of the malaria
+drugs sent to Africa under the president's Malaria Initiative
+were stolen or diverted each year and then sold on the black
+market.
+    Is the circumstance that you have described where the risk
+assessment or the aversion to risk is so great that we are not
+letting the people that would oversee--that staff that oversee
+these funds and these programs, is that--is that something
+fairly new?
+    Is that the--let us be candid--is that the advent of this
+administration or does it go prior to this administration?
+    Mr. Natsios. Oh, no. This goes back 20 years. This goes
+back to the embassy bombings in Nairobi and Dar es Salaam in
+the 1990's. I wrote an article, as I said, for Weekly Standard
+in 2006 called ``American Fortress.''
+    But it was based on what had happened earlier. This is now
+new at all.
+    Mr. Perry. So----
+    Mr. Natsios. And it is not just in Afghanistan and Iraq.
+This is across the world.
+    Mr. Perry. Across the spectrum. So when the IG does
+inspections and finds these flaws and the lost money, so to
+speak, or the evidence of lost money, do they include in their
+report the circumstances, and why is that? Do you know?
+    Mr. Natsios. Well, I am being very candid here.
+    The special IG for Afghan reconstruction is outrageous in
+some of the accusations he makes. I will give you an example.
+He said: we went to a school that USAID rebuilt. There was no
+one in the school. That is true.
+    You know why there was no one in the school? Taliban had
+taken out the headmaster and beheaded him in front of all the
+teachers and the children. If your child watched the headmaster
+being be headed,--would you send your child back to the school?
+    Of course the school was empty. He did not mention that in
+the audit, however. In fact, their people did not even go to
+see for themselves. They sent someone else from one of the
+ministries to go in. Half of his staff has never even been to
+Afghanistan.
+    I think the regulators overstepping, and I say that
+carefully. The IG for USAID, in my view, does very good work.
+    But he has to be in competition to find more abuse than the
+special IG. They compete with each other, and if he does not
+show that he is saving money, his budget gets cut by the
+Congress.
+    I wrote an article about this in 2010 called, ``The Clash
+of the Counter-Bureaucracy and Development.'' You can access it
+on the website of the Center for Global Development.
+    I would urge you to read it--I know it is a long article
+but your staff could read it. It discusses the consequences of
+these systems that have been set up. When you have competing
+IGs to see who can find more abuse, you get inaccurate
+reporting.
+    Are there problems in USAID? Absolutely. But half the
+problems that I have seen they got reported by the IG because
+they never discovered them.
+    Ms. Higginbottom. If I could just add very briefly, I think
+that as USAID and State, to a certain extent, have come up with
+new ways to try to monitor when they are limited in access,
+particularly in places like Afghanistan, questioning the
+efficacy of those frameworks I think is worthwhile because they
+are really committed to ensuring that the programs that are
+being funded work and that they are not subject to fraud.
+    But I think there is a good conversation to have to see
+whether that oversight--the accountability framework that USAID
+and State are doing is effective and I do think that the risk
+issue is more acute in some places than others. But post-
+Benghazi it is more--it has been more constrained.
+    Mr. Perry. Sure. So what is the--if we are not--you know,
+these are all policymakers up here interested in making sure
+that you have the resources that you need, that American
+foreign policy and interests are furthered and that is what we
+are doing here.
+    So and we count on things like the IG, right? I mean, that
+is what we are supposed to do. We are not there and they are,
+allegedly. So is there--what is the mechanism for people
+inside--and thanks for the indulgence, Mr. Chairman--inside the
+organizations?
+    What is the--what is the internal mechanism? Is there an
+internal mechanism when you--you said, you know, they are not
+reporting on half the things that you saw that apparently you
+found problematic at some level.
+    Is there a mechanism for you to find a way to report and
+make sure the right thing is done?
+    Mr. Natsios. As Administrator, I used to meet with the IG
+every week. We had a very good relationship. When I saw
+something wrong I would tell him: I want you to go in and find
+out what is going on here.
+    There are two functions of the IG. One is to make sure the
+management systems work properly and conduct do financial
+audits. That is sacrosanct. We cannot touch that.
+    The other function is to look into fraud and abuse. Most of
+the things that the IG investigates USAID officers report.
+    The IG does not discover the abuse. We discover the abuse
+and we call in the IG. I can give you a lot of examples--some
+of them entertaining, some of them very disturbing.
+    But the staff calls up the IG--that is the standard
+procedure in USAID. If you discover something wrong and you do
+not report it, you can get fired for not reporting.
+    Mr. Bera. Mr. Perry, if I can also--I would like that to be
+part of our role as congressional oversight as well. You know,
+if we are authorizing and appropriating funds for programs I do
+think it is part of our responsibility to say are these
+programs actually working the way they are--are we using the
+taxpayer dollars in the most effective way.
+    And, you know, if programs are working really well in one
+part of the world, you know, certainly, thinking about how you
+take that and, you know, if programs are not working or funds
+are not being used the way we intended them to be used as
+Congress.
+    I also think it is our responsibility to expose that and--
+--
+    Mr. Perry. Without a doubt, and I appreciate the chairman's
+indulgence. And for the purposes of the discussion, it seems to
+me that there is somewhat of a breakdown in the system here and
+maybe, you know, while we rely on the IG as well is there any
+way reconcile between what the folks that work for the agency
+report to the IG and what the IG reports to us, right? I mean--
+--
+    Mr. Natsios. The special IG for Iraq reconstruction was
+more responsible than the one in Afghanistan, in my view. I
+worked with the guy. I sent the IG into Iraq. When the Marines
+took the city, the IG and the USAID officers were right behind
+them.
+    The mission director called me up and said, Andrew, could
+you have given me a month to set the systems up before you sent
+the IG in? I told him, ``I do not want any problems". We had
+one contract that got screwed up.
+    Guess where the contract was? The U.S. Air Force. We asked
+the Air Force auditors to look into it. It was a corrupt
+contract, and we had to dump the whole thing. That is the only
+contract that got screwed up.
+    Mr. Perry. Well, as two Army guys, look, we like picking on
+the Air Force but that is another--Mr. Chairman----
+    Mr. Natsios. I am Army too or I would not have told you the
+story.
+    [Laughter.]
+    Mr. Bera. Well, and I know Mr. Espaillat is on his way over
+here. You know, I have additional questions. So since we do
+have a little bit of time we will go and do a second round of
+questions if you also have questions.
+    I am conscious and supportive of what Mr. Perry brought up
+in terms of, you know, we do have a responsibility to use the
+taxpayer dollars in the most effective way and in conversation
+with the current USAID administrator, Ambassador Green, I
+really do think the shift to capacity building and looking at
+the assets in the countries that we are going into and trying
+to, as opposed to a one-size-fits-all, saying, you know, each
+country in each situation is specific.
+    Ms. Higginbottom, we had a chance to travel together to
+Europe and I think there are some specific examples of how
+CARE, working with USAID and the U.S. Government, are doing
+some specific programs to help empower women in villages to
+care for themselves.
+    And if you want to share some of those, you know, because
+those are not ones that demand donations from the United States
+in the long term. What it is doing is building self-
+sufficiency.
+    Ms. Higginbottom. Yes, thank you. A lot of the care
+programming is really aimed at how we build capacity over time,
+how we make sustained investments, not--I mean, we do
+humanitarian response. We respond to emergencies.
+    But we also look at investments we can make that can really
+lift up communities and we do that with a lot of USG support,
+with a lot of resources from the USAID as well as other
+partners, and we have a variety of different programs. We saw
+some in Sierra Leone and the idea--and I think it is consistent
+with Administrator Green's approach--to get a path to self-
+reliance.
+    We want to lift whole communities out and one of the
+reasons why--the principal reason why we have over time come to
+focus on women and girls is that the data shows that by
+targeting not just women and girls--we benefit boys and men as
+well--but by targeting them we see that there are greater
+returns in terms of investment in health care and education for
+their children and it lifts them up into becoming
+entrepreneurs.
+    We have an incredibly powerful--it is called the Village
+Savings and Loan Association. They are small savings groups but
+they are much more than that. They become really a platform to
+save some money but also to become empowered in communities and
+make permanent and sustained change.
+    I think that is the type of development assistance that we
+know is successful and that works and that over time should
+become really the lever that lifts these countries.
+    Mr. Natsios was talking earlier about countries that were
+once the recipient of aid and are now our trading partners--
+some of the biggest countries in the world. That is our
+objective with the approach on poverty reduction.
+    Mr. Bera. Mr. Natsios, in the remaining time that I have
+left, your focus on Africa, and when we think about there is
+many things that we should be focused on in Africa.
+    You know, one, that I spend a lot of time worried about is
+the youth bulge that we are seeing in sub-Saharan Africa and,
+you know, a large population of young people, young men, who
+may not have anything to do--you know, potentially
+destabilizing to the region, et cetera.
+    And I would just be curious if we were thinking about how
+we approach that and how we are approaching it and, again,
+sticking with what is working, what is not working--you know,
+just in the remaining minute and a half I would be curious
+about your thoughts on that.
+    Mr. Natsios. First, when I became administrator one of the
+first things we did was set up the Office of Conflict
+Mitigation and Management. Some people said, ``Why? That's the
+State Department's job." I said, diplomatically it is.
+Developmentally, we can do things that cause conflict if we are
+not careful, and we can do things that prevent conflict if we
+are strategic in our planning.
+    We asked how many of the 70 missions had civil wars or
+major conflicts in the preceding 5 years. Sixty percent. Sixty
+percent had major conflicts.
+    I asked this office to intergrate ways to deal with that
+into their country strategis. The research showed that the
+youth bulge and illiteracy are correlated with conflict. The
+young men who join these militias in West Africa, in Yemen, and
+in other places are often illiterate and unemployed.
+    So the youth bulge is affecting the stability of the world
+order, even if we do not see it. It is at the grassroots level,
+and when we begin to study what is causing this, it is very
+interesting.
+    We sent teams in with the State Department and DOD in 2003
+into the Sahelian region to see why people were joining al-
+Qaida--I think it is called al-Qaeda in the Islamic Maghreb
+now.
+    They started interviewing young men. It was not poverty
+that was causing them to join. It was the sense of belonging,
+of purpose in life. Most of them were not Islamists. They had
+no theological training. They did not even know what that
+meant. They were being propagandized by the leaders who were
+using them for this purpose.
+    But it is the same mentality for young people--young men
+particularly but young women now, to joining gangs in L.A. and
+Central America and other places.
+    So what we have noticed is if you can get these vulnerable
+young people into youth groups--more soccer teams--it helps.
+When I first saw this I asked why we were spending money on
+soccer teams. My staff told me, ``do you want them joining
+militias or a soccer team?" I chose the soccer team.
+    You will notice in the USAID RFPs that workforce planning
+for youth is now a much bigger theme in all of USAID
+programming. I have noticed it much more than when I was in
+office.
+    Mr. Bera. So it is a worthwhile area for us to pay
+attention to.
+    Mr. Natsios. It is a very worthwhile area.
+    Mr. Bera. Mr. Zeldin has been kind enough to let me go to
+Mr. Espaillat from New York first. Then we will come back to
+Mr. Zeldin.
+    Mr. Espaillat. Thank you. Thank you so much, Chairman.
+    Violence and illicit trafficking in Latin America and the
+Caribbean has become a more serious problem and I think that it
+deserves further attention from the U.S.
+    I believe we need to do more with the State Department's
+Caribbean Basin Security Initiative and the Central America
+Regional Security Initiative Programs to curve the persistent
+violence in the region.
+    Now, previously, many of these countries, so like
+transported drugs to the north, to the U.S., and they were
+involved in that aspect of the trade. But now there seems to
+also be a very dangerous and persistent code of violence in
+those urban cities of those countries that need to be addressed
+as well.
+    And so what are--what are some of the recommendations that
+you can share with us today and with regards to improving the
+situation regarding this violence and illicit trafficking in
+Latin America and the Caribbean?
+    Ms. Higginbottom. Just a couple of comments and ask Mr.
+Natsios to jump in.
+    I think that it is clearly an issue. It is impacting us
+directly, whether it is because of migration and drivers there
+or because of the drug trade itself.
+    I think we can look at the success of Plan Colombia for
+some lessons learned when we have a long-term sustained
+commitment. We talked about an incredibly fragile State,
+dealing with many of those issues. Now over 15 years later we
+get to Paz, Colombia and we see a different opportunity.
+    I think the investment in the Northern Triangle of Central
+America where we see a lot of those conditions is absolutely
+critical to both addressing the drivers of migration but also
+encountering, you know, the cartels and the drugs that are--and
+the gangs in that area that are driving it.
+    During the last administration we made a significant
+increased investment there. It is a longer-term commitment that
+takes some time to address the violence and the corruption and
+the security issues. But I think that is critical to maintain.
+    Mr. Espaillat. But in addition to the sort of like
+traditional law enforcement efforts that could be augmented via
+additional funding, what are some of the social programs beyond
+the soccer leagues, right, that could help relieve the
+situation locally and also curtail the migration problem?
+    Ms. Higginbottom. Yes. What I have seen, particularly in
+the Northern Triangle countries, is a combination of things.
+    You are working with law enforcement. You are doing
+training. You are cracking down on corruption. You are working
+with the three governments to ensure they are making
+commitments to follow through.
+    But there is a lot of programming for kids and young
+people, A, to give them something to do to keep them out of the
+gangs, to protect their safety. They are complicated to
+implement in certain very, very dangerous places but when done
+well are very successful, and I visited many of them when I was
+at the State Department and I think sustaining that investment
+is really important.
+    But it has to be alongside a crackdown on corruption and
+really focusing on law enforcement as well.
+    Mr. Natsios. Can I just add to that?
+    Mr. Espaillat. Sure.
+    Mr. Natsios. There is a part of that program, just to drill
+down a little further, that Ms. Higinbottom is referring to
+that looks at the indices that help us understand whether a kid
+is vulnerable to being recruited into the gang.
+    What USAID and its partner organizations have done in those
+three countries--and this is based, by the way, on a model used
+in L.A. to keep kinds out of the gangs is identify what all
+those risk factors are, the figure out which kids are
+vulnerable, then put them in specific programs that reduce the
+vulnerability based on the factor that put them in the category
+in the first place.
+    They are showing a substantial decline in gang membership
+as a result of this system. So the programs work. But the
+biggest problem--and this is something, Mr. Chairman, that I
+strongly urge the committee to consider--is the time horizon.
+    USAID programs do work. They take 10 to 15 years sometimes
+to work. When we cut a program halfway through, we wipe out
+half the investment because it takes 10 years--sometimes 15
+years, particularly in democracy programs--change to occur.
+    So one of the things this committee can do is look at the
+time horizon problem.
+    Now, if there is mismanagement, I am not saying you should
+not absolutely look at it. We are not talking about
+mismanagement. But if you want to see results, realize that the
+Green Revolution took 30 years to implement. Thirty years.
+    I am the chairman of a the board of Harvest Plus, a member
+of CGIAR, the Consultative Group for International Agricultural
+Research. Harvest Plus breeds plants for micro-nutrients--
+specifically zinc, iron, and vitamin A--to address micro-
+nutrient deficiencies among the poor in developimg countries.
+    The reason I am bringing this up is that it will take 30
+years to fully inplement this program. Harvest Plus has bred
+these micro nutrients into 298 crops grown by poor people in
+the developing world. We have proved this can work. Now we have
+to get the seed out to farmers in a sustainable way. It is
+going to take at least 15 years, additional years to do that.
+    Washington policy makers want want immediate results. I
+say, how are you going to get the seed out to a billion people
+in a year? It takes years to do this stuff.
+    Mr. Espaillat. Yes. Mr. Chairman, just to conclude, and
+these programs, obviously, cost money and this current
+administration continues to repeatedly send to Congress
+requests for deep cuts, and so that is, obviously, a major,
+major problem that--there is a perception out there that we are
+giving away everything when in fact foreign aid is just
+minuscule in regards to the entire budget and there is proposed
+cuts to begin with.
+    Thank you, Mr. Chairman.
+    Mr. Natsios. I do not support these cuts, Mr. Chairman.
+    Mr. Espaillat. Thank you.
+    Mr. Bera. Mr. Zeldin.
+    Mr. Zeldin. USAID put forth a plan to partially reorganize
+a lot of consultation with Congress. I do not know if you had
+any thoughts you wanted to share that would be pertinent to the
+topic of this hearing with regards to the plan the USAID
+Administrator Green has.
+    Ms. Higginbottom. I will just say one brief thing because I
+know you will have a lot to say. I think that there are some--
+it seems to be, from my perspective, some really good ideas.
+How they are implemented is really important.
+    But when I look at, for example, the proposal to bring the
+food and nutrition programs into--to stop isolating them and
+bring them into more comprehensive that is just aligned with
+the way we do programming, for example, that we know is much
+more effective when it is combined with other interventions.
+    I think there is a lot of logic there. From what I have
+understood from the proposals there is still a lot to learn
+about its implementation.
+    Mr. Natsios. When I was the director of OFDA--the Office of
+Foreign Disaster Assistance--which was our emergency response
+mechanism in USAID for famines, civil wars, and disasters like
+earthquakes, we considered seriously merging Food for Peace and
+OFDA together.
+    If Bush 41 had been elected to a second term, we were going
+to implement it. We were seriously considering it.
+    Mark Green just did it 2 weeks ago and he asked me for
+support. This has nothing to do with the Trump administration.
+We were considering doing this 30 years ago.
+    So I strongly support what Mark Green is doing. If I
+thought he was damaging the agency, I would say it in public.
+    He is not damaging the agency. I think he is a very good
+administrator. He was a good choice. He is an honorable guy. He
+is trying to do the right thing.
+    Now, do I agree with every single detail of everything he
+is doing? No. But the reorganization you are talking about,
+Congressman, I support and as I said before, we were
+considering it in 1992.
+    Mr. Zeldin. Any other specific suggestions that you want to
+throw out there for our consideration and his?
+    Mr. Natsios. Regarding the oversight functions, a council
+needs to be formed of the special IGs, the IG for USAID. The
+OMB, the GAO, and the Congressional Oversight Committees.
+    A council should be formed statutorily to meet and
+coordinate so they are not auditing the same program in the
+same country at the same time. We had three different agencies
+auditing capacity building in Iraq in the middle of a war.
+    We spent much of our time responding to three different
+agencies auditing the same program. That is a waste of taxpayer
+money while our people and soldiers are getting killed.
+    We lost 300 people in Iraq, 600 in Afghanistan, while we
+were in the middle of answering three different audits by three
+different agencies. It is too much.
+    Ms. Higginbottom. I would add a couple of things that are a
+bit different. One there is, in the 2015 Quadrennial Diplomacy
+and Development Review, some recommendations about how to
+increase efficiencies across the two agencies that I think
+regardless of administration this is--this is separate from any
+sort of strategic priorities I think are important.
+    One of them that I led was a joint strategic planning
+exercise across the two agencies--that does not happen
+anymore--as well as joint reviews, and the reason for that--
+there is some tension, of course, between what development
+priorities and what foreign policy or diplomatic priorities we
+might have in certain places.
+    But the fact of coordinating and communicating and
+collaborating is just a more efficient use of our dollars and
+it does not--it does not subjugate one department's priorities
+to the other.
+    It is really about coordination and making sure. In
+Washington, we have the same level of understanding that you
+might have in a mission or an embassy, which does not--is not
+always the case.
+    And also I would say--Mr. Natsios said something earlier
+about empowering the field. One very practical thing--when the
+State Department begins its budget and planning process it
+starts at the mission and it comes up to the bureaus and then
+eventually to the--and at State it is the--excuse me, at USAID
+it is the other way, and I think there is a lot of inefficiency
+in having those processes sort of start in different places and
+end up differently. They need to be separate processes but they
+should be better aligned.
+    Mr. Natsios. We used to do planning at the mission level,
+but because nearly every dollar is earmarked in USAID, we had
+to tell the missions, ``These are the earmarks that they are
+going to get imposed, and you need to plan accordingly.".
+    The old system, for 40 years in USAID, was that everything
+was done from the bottom up. Now, everything is earmarked.
+There is no discretion left.
+    Mr. Zeldin. Briefly, I just have just over a minute left.
+    Switching over to State Department and the special envoy
+positions, Secretary Tillerson was starting to look at the five
+dozen or so special envoys. Are there any that your--that you
+have identified as wanting to elevate higher?
+    Are there any positions--any of the special envoy positions
+that you think are unnecessary? Do you have any thoughts that
+you want to share as far as----
+    Ms. Higginbottom. I think from a--excuse me--from a process
+perspective, I think there should be a regular and I would do a
+every one-or 2-year review of the special envoy offices.
+    Many are congressionally mandated. Others are appointed
+because at a moment in time you need them and those are
+important and we should not say all special envoys are bad, in
+my opinion.
+    But some are outdated and it is not a great use of
+resources. We did that under Secretary Kerry's leadership and
+we got rid of a bunch. It was not the most popular thing within
+the building but it was the way that we could then say we need
+a special envoy to counter ISIL or another--a strategic
+priority.
+    So I think it is an important regular process that should--
+that should occur in the State Department in terms of
+currently. I do not think my--I am as familiar with the current
+spectrum but I think they should be regularly reviewed and they
+should be presented to Congress as well.
+    Mr. Natsios. I was a special envoy myself under President
+Bush for Sudan. I think I did a pretty good job under difficult
+circumstances in the middle of two terrible civil wars.
+    Still, we have to understand the effect this has on the
+assistant secretaries when we put special envoys in to do their
+job, because that is what is happening.
+    Now, are there situations in which you need a special envoy
+for a major crisis that requires someone's full attention. Yes,
+there are, and I agree with Ms. Higginbotom that saying all
+special envoys are a bad idea is not wise.
+    However, having 50 special envoys is excessive. Why do you
+have a State Department, then? Why are there assistant
+secretaries? What are they left to do?
+    I know it is very difficult from a political standpoint to
+get rid of some of these titles. But from a management
+standpoint, it does not make any sense.
+    Mr. Zeldin. My time is up. I will yield back to the chair.
+    Ms. Omar. Thank you. And in line with some of the things
+that sometimes does not make any sense, Ms. Higginbottom, it
+seems that sometimes our humanitarian goals under--are under
+cut by other parts of U.S. foreign policy.
+    To me, there seems to be--an emblematic example is the
+horrific situation that is happening in Yemen. Money for
+humanitarian aid does not seem to be a problem.
+    We sent over $700 million trying to alleviate the enormous
+human suffering that is taking place in Yemen but it cannot get
+to the people because of the political and the military
+realities there.
+    And one of those realities is that under the Obama and
+Trump administration we have been militarily supporting the
+Saudi-led coalition. I was proud to co-sponsor the Yemen War
+Powers Resolution and my question to you is to kind of think
+about the big picture.
+    Is it the case that our diplomacy and development
+objectives sometimes seem to severely undercut our military and
+political objectives?
+    Ms. Higginbottom. Thank you, Congresswoman. I mean, the
+situation--the humanitarian situation in Yemen is just awful.
+It is one of the worst crises, obviously, in the world. There
+is 80 million--80 percent of the, excuse me, of the Yemeni
+population that is in need of humanitarian assistance.
+    We have a very large program with CARE trying to address
+some of those needs. I can speak to my perspective from the
+Obama Administration in which we were deeply engaged in trying
+to support a political solution--a peace solution--and had
+quite a deep involvement in that, which is ultimately how we
+are going to reduce the violence, and I think that diplomacy
+and engaging in that is critical important.
+    Obviously, you know, we find ourselves facing just an
+absolutely horrific crisis there and we have got to figure out
+what are the steps forward now.
+    Mr. Natsios. If I could just add.
+    Ms. Omar. Yes, I actually was going to have you answer this
+question for me. Would you explain why a focus on humanitarian
+aid and human rights and development are important from a
+national security standpoint?
+    Mr. Natsios. Sometimes there is a conflict between defense
+and development, Congresswoman. I watched it. I would get
+enraged sometimes. But this has been going on for 70 years. It
+is not new, though sometimes it is more public than it used to
+be.
+    Food was used as a weapon against North Korea during the
+nuclear negotiations 25 years ago when there was a famine and 2
+1/2 million people died. I was part of the NGO community. I was
+vice president of World Vision and we had a coalition to stop
+using food as a weapon in diplomacy.
+    President Bush said we would never do it, and he did not
+for the 8 years he was President, I do not think President
+Obama did it either while he was in office.
+    There are clear tensions, and you have to make a judgment
+as to what is most important and whether aid is appropriate to
+use in achieving other ends. For me, using food aid as a weapon
+in negotiations is like blaming the people who have been the
+object of atrocities for the atrocity.
+    They are not the ones that caused the problem. The people
+who are dying in a famine are usually weak, vulnerable people
+who have no way of protecting themselves. Why are we punishing
+them?
+    Sometimes we fail to consider the ethical consequences of
+what we are doing. With respect to Yemen, I wrote an op-ed
+piece with the former director of OFDA--the Office of Foreign
+Disaster Assistance--in the Obama Administration. It was a
+bipartisan op-ed criticizing the Saudi government's blockade.
+And we timed it for the Saudi Crown Prince's visit. He
+apparently got a little upset that it appeared in the newspaper
+when he arrived.
+    Ms. Omar. Yes.
+    Mr. Natsios. Then, President Trump actually issued a tweet
+attacking the Saudis for doing this, and they suspended the
+blockade for a few months, but then they reimposed it.
+    Reimposing it was not ethical. You have to consider the
+ethical consequences of this.
+    Ms. Omar. So we are in agreement that humanitarian aid
+should never be politicized?
+    Mr. Natsios. I do not think it should be politicized and I
+have spent 30 years of my career trying to prevent that from
+happening.
+    Ms. Higginbottom. I agree with that.
+    Ms. Omar. I appreciate that. I yield back my time.
+    Mr. Bera. Mr. Zeldin, if you do not have any additional
+questions----
+    Mr. Natsios. Now, let me just add one little qualification.
+    Mr. Bera. Please.
+    Mr. Natsios. If we find out that large amounts of food aid
+is being diverted by the regime or by any combatants or
+militias, then we must stop the program. That is what we found
+in North Korea. The North Koreans were diverting food.
+    I sent someone up, under cover, to the Chinese border with
+North Korea to interview refugees. We found that 40 to 60
+percent of the food was being diverted by the secret police and
+the military. So I ended the program. We did it very quietly,.
+But the aid was not going to the people who were supposed to
+get it.
+    That is a legitimate reason for ending it. That is not
+politicizing the aid. The purpose of the aid is to feed hungru
+people.
+    Mr. Bera. And part of our job as oversight----
+    Mr. Natsios. Yes.
+    Mr. Bera [continuing]. Is to make sure our aid and
+humanitarian efforts are getting to the folks that we are
+actually trying to help.
+    Mr. Natsios. Exactly. Exactly.
+    Mr. Bera. Sure. Go ahead.
+    Ms. Omar. Can you think of an example where a country that
+we might send humanitarian aid into can see it as inciting
+violence within that country?
+    Mr. Natsios. Well, you might get that view point, if you
+talk to Omar al-Bashir, who I dealt with for 30 years as the
+president of Sudan, and who may be leaving office shortly,
+involuntarily, given the uprising going on in northern Sudan
+right now. He saw all of the humanitarian aid as helping his
+opponents and prolonging the war.
+    He said, ``If you would only stop the aid, all these people
+would stop fighting." I said, ``They will stop fighting because
+they will all be dead. That is what you want to happen."
+    I understood what he was saying, and he did argue that some
+of the food was being diverted and we had to be careful not to
+let that happen--to let aid get to the rebels, for example, in
+Darfur.
+    But 2 million people's villages were burned down. Thirty-
+eight hundred villages were burned by the Janjaweed in
+cooperation with the Sudanese government. Are we supposed to
+just ignore that? Three hundred thousand people died in Darfur.
+    Ms. Omar. Yes. Well, thank you. I think we are in agreement
+that sometimes in particular situations, depending on who is
+looking at it, sometimes we can see it as being diverted and we
+can--we can have a moral clarity and ethical understanding of
+why we are doing it, and sometimes people within those nations
+can look at it as having an alternative motive in getting
+involved and sending that aid.
+    And so there is a balance and oftentimes we have to be
+cautious of towing the line and making sure that we are not
+being seen as bad actors intervening in other people's affairs.
+    Thank you.
+    Mr. Bera. Thank you.
+    I want to thank both of the witnesses for being here. We
+will get you to your plane on time and----
+    Mr. Natsios. Thank you, Congressman.
+    Mr. Bera [continuing]. Again, we look forward to continuing
+to work with both your organizations and both of you as well.
+    So thank you.
+    Mr. Natsios. Thank you very much.
+    Ms. Higginbottom. Thank you very much.
+    Mr. Bera. With that, I adjourn.
+    [Whereupon, at 4:39 p.m., the committee was adjourned.]
+                                APPENDIX
+[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
+                  STATEMENTS SUBMITTED FOR THE RECORD
+[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
+                                 [all]
+</pre></body></html>

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+<html>
+<title> - THE HUMANITARIAN CRISIS IN YEMEN: ADDRESSING CURRENT POLITICAL AND HUMANITARIAN CHALLENGES</title>
+<body><pre>
+[House Hearing, 116 Congress]
+[From the U.S. Government Publishing Office]
+         THE HUMANITARIAN CRISIS IN YEMEN: ADDRESSING CURRENT
+                 POLITICAL AND HUMANITARIAN CHALLENGES
+=======================================================================
+                                HEARING
+                               BEFORE THE
+                            SUBCOMMITTEE ON
+       THE MIDDLE EAST, NORTH AFRICA, AND INTERNATIONAL TERRORISM
+                                 OF THE
+                      COMMITTEE ON FOREIGN AFFAIRS
+                        HOUSE OF REPRESENTATIVES
+                     ONE HUNDRED SIXTEENTH CONGRESS
+                             FIRST SESSION
+                               __________
+                             MARCH 6, 2019
+                               __________
+                            Serial No. 116-9
+                               __________
+        Printed for the use of the Committee on Foreign Affairs
+ [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
+Available: http://www.foreignaffairs.house.gov/, http://docs.house.gov,
+                       or http://www.govinfo.gov
+                           ______
+             U.S. GOVERNMENT PUBLISHING OFFICE
+ 35-368PDF             WASHINGTON : 2019
+                      COMMITTEE ON FOREIGN AFFAIRS
+                   ELIOT L. ENGEL, New York, Chairman
+BRAD SHERMAN, California             MICHAEL T. McCAUL, Texas, Ranking
+GREGORY W. MEEKS, New York               Member
+ALBIO SIRES, New Jersey              CHRISTOPHER H. SMITH, New Jersey
+GERALD E. CONNOLLY, Virginia         STEVE CHABOT, Ohio
+THEODORE E. DEUTCH, Florida          JOE WILSON, South Carolina
+KAREN BASS, California               SCOTT PERRY, Pennsylvania
+WILLIAM KEATING, Massachusetts       TED S. YOHO, Florida
+DAVID CICILLINE, Rhode Island        ADAM KINZINGER, Illinois
+AMI BERA, California                 LEE ZELDIN, New York
+JOAQUIN CASTRO, Texas                JIM SENSENBRENNER, Wisconsin
+DINA TITUS, Nevada                   ANN WAGNER, Missouri
+ADRIANO ESPAILLAT, New York          BRIAN MAST, Florida
+TED LIEU, California                 FRANCIS ROONEY, Florida
+SUSAN WILD, Pennsylvania             BRIAN FITZPATRICK, Pennsylvania
+DEAN PHILLIPS, Minnesota             JOHN CURTIS, Utah
+ILHAN OMAR, Minnesota                KEN BUCK, Colorado
+COLIN ALLRED, Texas                  RON WRIGHT, Texas
+ANDY LEVIN, Michigan                 GUY RESCHENTHALER, Pennsylvania
+ABIGAIL SPANBERGER, Virginia         TIM BURCHETT, Tennessee
+CHRISSY HOULAHAN, Pennsylvania       GREG PENCE, Indiana
+TOM MALINOWSKI, New Jersey           STEVE WATKINS, Kansas
+DAVID TRONE, Maryland                MIKE GUEST, Mississippi
+JIM COSTA, California
+JUAN VARGAS, California
+VICENTE GONZALEZ, Texas
+                    Jason Steinbaum, Staff Director
+               Brendon Shields, Republican Staff Director
+                                 ------
+   Subcommittee on the Middle East, North Africa, and International
+                               Terrorism
+                 THEODORE E. DEUTCH, Florida, Chairman
+GERALD E. CONNOLLY, Virginia         JOE WILSON, South Carolina,
+DAVID CICILLINE, Rhode Island            Ranking Member
+TED LIEU, California                 STEVE CHABOT, Ohio
+COLIN ALLRED, Texas                  ADAM KINZINGER, Illinois
+TOM MALINOWSKI, New Jersey           LEE ZELDIN, New York
+DAVID TRONE, Maryland                BRIAN MAST, Florida
+BRAD SHERMAN, California             BRIAN FITZPATRICK, Pennsylvania
+WILLIAM KEATING, Massachusetts       GUY RESCHENTHALER, Pennsylvania
+JUAN VARGAS, California              STEVE WATKINS, Kansas
+                      Casey Kustin, Staff Director
+                            C O N T E N T S
+                              ----------
+                                                                   Page
+                               WITNESSES
+Rand, Dr. Dafna, Vice President for Policy and Research, Mercy
+  Corps..........................................................     7
+Almutawakel. Ms. Radhya, Co-Founder and Chairperson, Mwatana for
+  Human Rights...................................................    14
+Konyndyk, Mr. Jeremy, Senior Policy Fellow, Center for Global
+  Development....................................................    20
+Zimmerman, Ms. Katherine, Research Fellow, American Enterprise
+  Institute......................................................    34
+                                APPENDIX
+Hearing Notice...................................................    61
+Hearing Minutes..................................................    62
+Hearing Attendance...............................................    63
+                        STATEMENT FOR THE RECORD
+Statement for the record submitted from Representative Gerald
+  Connolly.......................................................    64
+            RESPONSES TO QUESTIONS SUBMITTED FOR THE RECORD
+Responses to questions submitted from Representative Steve
+  Watkins........................................................    65
+                   THE HUMANITARIAN CRISIS IN YEMEN:
+        ADDRESSING CURRENT POLITICAL AND HUMANITARIAN CHALLENGES
+                        Wednesday, March 6, 2019
+                       House of Representatives,
+                    Subcommittee on the Middle East,
+               North Africa, and International Terrorism,
+                     Committee on Foreign Affairs,
+                                     Washington, DC
+    The subcommittee met, pursuant to notice, at 2:40 p.m., in
+Room 2172, Rayburn House Office Building, Hon. Theodore E.
+Deutch (chairman of the subcommittee) presiding.
+    Mr. Deutch. This hearing, titled ``The Humanitarian Crisis
+in Yemen,'' will examine current political and humanitarian
+challenges in Yemen and how the U.S. Congress can address them.
+    Without objection, all members may have 5 days to submit
+statements, questions, extraneous materials for the record,
+subject to the length limitation of the rules. I will now make
+an opening statement and then turn it over to the ranking
+member for his opening statement.
+    I want to thank our esteemed panel for being here today. I
+would like to particularly thank Ms. Radhya Almutawakel for
+joining us today. She and her organization, Mwatana for Human
+Rights, bravely advocate for justice, accountability, and human
+rights in Yemen. We are so honored by your presence today.
+Thank you very much. Having your voice on this panel to help us
+better understand both the situation on the ground and the
+plight of the people of Yemen will help us make better and more
+informed, well-informed decisions. We really are grateful.
+    In September 2014, Houthi rebels attacked the Yemeni
+capital of Sana'a and forced the internationally recognized
+government of President Hadi to flee. In March 2015, in
+response, the military coalition led by Saudi Arabia and the
+United Arab Emirates launched devastating airstrikes in Yemen
+and partnered with local forces to reclaim territory from the
+Houthis. The Saudis and Emiratis remain preoccupied with their
+military campaign in Yemen, which they view as directly related
+to their national security, and I share their concern that Iran
+is providing training as well as military and logistical
+support to the Houthis. This assistance has allowed the Houthis
+to attack international shipping, including an American naval
+vessel, in the Red Sea and the Gulf of Aden. It also prepared
+the Houthis to launch attacks on territory in both Saudi Arabia
+and the UAE, where approximately 130,000 Americans live.
+    U.S. relationships with these States are enduring and date
+to the end of the Second World War. I believe these
+partnerships are vital to stability in the Middle East. The
+United States is correct to support these countries' legitimate
+right to self-defense. However, we cannot avoid the fact that
+the war has directly caused tens of thousands of civilian
+deaths in Yemen. The United Nations has verified more than
+18,000 civilian casualties since March 2015, although the
+actual number is likely much higher. The total does not include
+the tens of thousands of additional Yemenis who have died from
+nonmilitary causes, such as disease and hunger, that are
+worsened by the conflict.
+    Last year's National Defense Authorization Act, the NDAA,
+required the Trump administration to certify to Congress that
+Saudi Arabia and the UAE are taking demonstrable actions to
+reduce harm to civilians and damage to civilian infrastructure
+in Yemen. However, the administration brazenly ignored the
+February 9th certification deadline. The administration
+continues to refuse to certify, ignoring a law supported by
+both Republicans and Democrats.
+    Even worse, the military conflict has exacerbated a
+devastating humanitarian crisis in Yemen that began in 2011.
+According to the United Nations, the crisis in Yemen is the
+worst humanitarian situation in the world. Approximately 3.3
+million people remain displaced, and an estimated 24 million
+people, nearly 80 percent of the population, require assistance
+and protection. More than 20 million people in Yemen are food
+insecure with 5 million--5 million--people on the brink of
+famine. More than 17.8 million lack access to safe water and
+sanitation, and 19.7 million lack access to adequate
+healthcare. Because of the conflict, poor sanitation and
+waterborne diseases, like cholera, are widespread. The World
+Health Organization estimates that more than 1.1 million people
+in Yemen have cholera and that thousands have already died from
+the disease.
+    A lack of humanitarian access in Yemen aggravates these
+extreme conditions, putting millions at risk of starvation,
+disease, and death. In response, the United Nations has
+contributed nearly $700 million in humanitarian aid since
+Fiscal Year 2018. In late November, another $131 million in
+food assistance was announced. The Saudis and Emiratis have
+provided billions of dollars in assistance, but billions of
+dollars are meaningless if the goods cannot reach those in
+need, if there is no cold storage for food, if there is no cash
+available to buy food in places where there might actually be
+food. Money is not going to solve the crisis. Only a political
+solution will end the war in Yemen and begin to relieve the
+suffering of its people.
+    Like most Americans, I am deeply troubled by this crisis.
+That is why I cosponsored and voted for H.J. Res. 37, a
+resolution that requires the removal of U.S. Forces from the
+Saudi-led military campaign in Yemen. I supported the
+resolution because I believe there is no military solution to
+this situation. We cannot allow American resources to
+contribute to or, worse, be complicit in the suffering created
+by this conflict.
+    Furthermore, with this resolution, Congress is finally
+engaging in a thoughtful and nuanced debate on our role in
+foreign policy decisions and the constitutional limits of
+Presidential authority to participate in military action abroad
+without congressional consent. Congress has an important
+oversight responsibility when it comes to the use of military
+force, and we are appropriately reasserting ourselves in these
+decisions. This afternoon, I hope our witnesses can provide
+insight into the political situation and humanitarian
+challenges in Yemen. I also look forward to hearing how the
+U.S. Government, specifically Congress, can take steps to
+increase humanitarian access and stem the spread of disease,
+displacement, and famine. And, finally, I hope the witnesses
+will outline how the United States can support diplomatic
+efforts to reach a lasting political solution, which is the
+best way to secure U.S. national interests, end the suffering
+of Yemen's people, and provide the country with a brighter
+future. I now turn for the first time in the subcommittee
+proudly to the ranking member for his opening statement.
+    Mr. Wilson. Chairman, thank you.
+    Mr. Chairman and Chairman Deutch, first of all, I want to
+congratulate you on assuming the chairmanship of this important
+subcommittee. Your leadership on U.S. policy issues in the
+Middle East is well known, and I look forward to working
+closely with you and your staff in moving forward.
+    Second, I would like to thank you for calling this
+important hearing. Now, ongoing conflict in Yemen has produced
+the most devastating humanitarian catastrophe in the world. To
+reaffirm the chairman's statistics, our concerns are
+bipartisan. Close to 80 percent of Yemen's population of nearly
+30 million people are currently in need of some form of
+assistance. That is a staggering 22 million people. Sixteen
+million Yemenis lack access to drinking water and sanitation.
+Another 16 million are classified as severely food insecure.
+Unfortunately, children have borne the brunt of this
+humanitarian nightmare. The regional director of the United
+Nations International Children's Emergency Fund, UNICEF,
+remarked just last week that, quote, ``today Yemen is the worst
+place on Earth for a child'', end of quote. Nearly 85,000
+children have died from severe acute malnutrition between 2015
+and the end of last year. About 360,000 children are suffering
+from acute malnutrition with life-threatening consequences.
+Cholera has resurfaced in Yemen with roughly 10,000 suspected
+cases now reported per week, according to the World Health
+Organization. Tragically, children account for 30 percent of
+the infections.
+    Amid the conflict and humanitarian crisis, Yemen's economy
+continues to unravel. The exchange rate is around 600 Yemeni
+rials to the U.S. dollar. As the economy's situation gets
+increasingly worse, the price of food for Yemenis rises,
+exacerbating the situation on the ground. We are optimistic
+that the U.N.-brokered Stockholm agreement signed in December
+2018 could alleviate some of the humanitarian concerns, but
+little progress has been achieved since the parties met in
+Sweden, and violations of the agreement and resulting cease-
+fire continue unabated. I am saddened by reports that the
+Iranian-backed Houthi rebels have been targeting and detaining
+humanitarian workers in the country. International aid is a
+lifeline to millions of Yemenis, and humanitarian workers
+should have unhindered and unimpeded access to civilians in war
+zones. Everyone should condemn harassment and intimidation of
+these good people risking their lives to help others. But
+fundamentally, I agree with the U.N. Secretary General
+Guterres' comments last week when he said that we cannot have a
+humanitarian solution to a humanitarian problem. Only a
+comprehensive political solution to the conflict can begin to
+address Yemen's immense problems. Throwing money at the many
+problems Yemen faces will not fix the country.
+    I appreciate Chairman Deutch calling this hearing and
+shedding some light on the tragic humanitarian conditions on
+the ground currently in Yemen. Too often we focus exclusively
+on our Nation's more direct security concerns, whether it be
+al-Qaeda's local branch or the increasing influence of Iran.
+The truth, however, is that the humanitarian crisis in Yemen is
+laying the groundwork for future decades of instability in the
+country that will be inevitably a breeding ground for
+terrorists to attack the United States. This is a long-term
+threat to our national security interest and must be addressed.
+Thank you, Mr. Chairman, and I look forward to hearing from our
+esteemed witnesses. I yield back my time.
+    Mr. Deutch. I thank the ranking member, Mr. Wilson. And I
+would ask if any other members, Mr. Malinowski, would like to
+make a 1 minute opening statement. No. Seeing none, I would
+like to introduce the witnesses.
+    Dr. Dafna Rand is vice president for policy and research at
+Mercy Corps. Prior to joining Mercy Corps, Dr. Rand held a
+number of leadership positions in government and academia, most
+recently as the Deputy Assistant Secretary, Bureau of
+Democracy, Human Rights, and Labor at U.S. Department of State.
+    Mr. Malinowski, do you have anything to add to that
+introduction?
+    Mr. Malinowski. And served ably as my Deputy Assistant
+Secretary of State for Middle East Affairs when I had the honor
+to work with her at the State Department.
+    And this will not protect you from tough questions today.
+    Mr. Deutch. Thanks.
+    Also joining us is Radhya Almutawakel. She is chair of
+Mwatana for Human Rights, a Yemeni human rights organization.
+Again, we are so grateful for your presence here on the panel
+with us today.
+    Jeremy Konyndyk is a senior policy fellow at the Center for
+Global Development. He previously served in the Obama
+Administration from 2013 to 2017 as the Director of USAID's
+Office of U.S. Foreign Disaster Assistance where he led the
+U.S. Government's response to international disasters.
+    And Katherine Zimmerman is a research fellow at the
+American Enterprise Institute.
+    To all of our distinguished witnesses, I ask that you limit
+your testimony to 5 minutes.
+    And, without objection, your prepared written statements
+will be made a part of the record.
+    I thank you again so much for being here with us today.
+    And, Dr. Rand, I will turn it over to you.
+ STATEMENT OF DAFNA RAND, PH.D., VICE PRESIDENT FOR POLICY AND
+                     RESEARCH, MERCY CORPS
+    Dr. Rand. Thank you. Thank you, Chairman Deutch, Ranking
+Member Wilson, members of this committee. I am really honored
+to testify, especially with this expert group of witnesses. In
+addition to my written statement, I would like to make four
+additional points quickly.
+    First, I would like to analyze a bit the humanitarian
+tragedy that you have both described so ably. It is clear that
+institutional and governance solutions are the longer term
+complement to the current humanitarian relief operations. There
+is food in the marketplace but no money in the household to buy
+it. Forty percent of the hospitals are closed or shuttered in
+Yemen or have been targeted by airstrikes while 1.2 million
+people have contracted cholera. Both the public and private
+sectors have been politicized and, in some cases, weaponized
+with no social safety net, massive inflation, and no regulation
+on the remaining formal private sector.
+    The second nuance to the humanitarian situation: We have
+heard about the predominant strikes on weddings, funerals, and
+school buses, but there also have been strike upon strike on
+potato chip factories, agricultural infrastructure, water
+treatment centers, and electric grids. No party to the conflict
+is innocent. And the bottom line is this: In Yemen, the
+military conduct of State and non-State actors has downgraded
+international norms of warfare, expectations for how security
+actors treat civilians, expectations that have held for
+decades, and I worry that the damage to these international
+norms will extend far beyond the Arabian Peninsula.
+    The second point is that we are at an inflection moment.
+There have been recent agreements regarding de-escalation led
+by the U.N. special envoy. They have focused rightly on
+Hudaydah Port and City, through which so much of the
+humanitarian operations transit. And the United States
+congressional action of last year, your oversight, your
+legislative activity, your floor statements, these were
+instrumental in 2018 in creating this diplomatic opportunity.
+Congressional pressure on this administration dragged the
+parties to Stockholm, I believe. And although they are limited
+agreements, negotiated by the United Nations, they have the
+potential to shift the dynamic. For the first time, Congress
+has questioned the assumption and the assumed logic that only
+escalation will achieve the end goals of the coalition, the
+Government of Yemen, or the Houthis.
+    The third point is that, buoyed by recent evidence that
+your voice matters, Congress should continue signaling
+privately and publicly that there will be consequences for
+failing to follow through on the Stockholm agreements. In
+Yemen, like in so many other places, when Congress speaks
+united with one voice, you are echoing the conscience as well
+as the common sense of the global community. So Congress must
+continue to publicly and privately support the U.N. Special
+Envoy process, pushing through to follow through on the current
+commitments and demand additional de-escalation; call on the
+parties directly to empower and improve the functioning of the
+Central Bank of Yemen in order to control the currency crisis;
+tell the Government of Yemen and the Houthis to pay the public
+sector employees, the doctors and the teachers, before the
+militias; tell the Government of Yemen and the UAE to finally
+cut through that backlog at the Aden Port so that humanitarian
+shipments can offload there; tell the Saudis to allow flights
+out of the Sana'a airport at least for medical treatment and
+other basic needs; and, finally and perhaps most fundamentally,
+call out publicly when U.S. partners and all parties commit
+human rights abuses in their military operations, whether these
+abuses are through interrogation or torture, through unlawful
+airstrikes, or through any other means.
+    And, finally, the United States must definitively and
+completely end its support for the coalition. This is a 4-year
+policy that has failed. It has incurred significant cost to the
+United States, generating greater instability and potential new
+rounds of terrorism in the Arabian Peninsula, offering Iran a
+broad and chaotic civil conflict to exploit and manipulate.
+U.S. support for this coalition has had significant moral costs
+for the United States and for U.S. global leadership worldwide.
+Congress must ensure that the Trump administration extricates
+itself from this war. This means legislating a formal end to
+DOD operations, including the refueling. This means signaling
+through oversight that the new focus of U.S. power will be on
+diplomatic opportunities that have arisen, and this means
+blocking all future offensive arms sales that could be used in
+the war in Yemen.
+    Finally and in conclusion, I urge this committee and
+Members of Congress to learn from this failed policy approach
+of 4 years. There is a dangerous trap lurking when the United
+States offers a blank check in the form of a security
+assistance to partners who whose values and interests can
+diverge from ours. Thank you very much, and I look forward to
+your questions.
+    [The prepared statement of Dr. Rand follows:]
+ [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
+    Mr. Deutch. Thank you very much, Dr. Rand.
+    Ms. Almutawakel, thank you again for being with us.
+ STATEMENT OF RADHYA ALMUTAWAKEL, CO-FOUNDER AND CHAIRPERSON,
+                    MWATANA FOR HUMAN RIGHTS
+    Ms. Almutawakel. Thank you. Chairman Deutch, Ranking Member
+Wilson, subcommittee members, thank you for the opportunity to
+speak to you today. I will summarize my written statement,
+which I submit for the record.
+    Mwatana for Human Rights documents violations by all sides
+in Yemen. It is a dangerous job, but our 70 staff, men and
+women, know that for humanity to be preserved, the brave must
+stand up in the face of abuses.
+    Today I urge Congress to do the same. Congress has the
+power to change the face of millions of Yemeni civilians but
+must choose to do so. Twenty-four million Yemenis need
+humanitarian aid, more people than live in Florida. Ten million
+are on the brink of famine, twice South Carolina's population.
+    It is a manmade crisis. Yemenis are not starving. They are
+being starved. The humanitarian crisis cannot be addressed
+without addressing the human rights situation.
+    The war in Yemen is not some distant tragedy with no
+connection to America. Since 2015, the U.S. has supported Saudi
+and Emirati attacks on Yemeni civilians by selling billions in
+bombs and other weapons and providing military and political
+support. After 4 years of war, Yemenis are losing hope for a
+country based on rule of law. Most now live under de facto
+control of extremist groups. On the one hand, the Houthis, who
+are supported by Iran and commit terrible abuses, such as
+indiscriminate attacks, disappearances, and land mines; on the
+other hand, armed groups loyal to the Hadi government and
+Saudi-Emirati coalition who also commit horrible violations.
+All these armed groups act with impunity because they think no
+one will stand up in the face of their abuses, but neither does
+Saudi-Emirati coalition.
+    When CNN recently showed U.S. weapons sold to Saudi Arabia
+and United Arab Emirates in the hands of extremist armed
+groups, Congress was right to be angry at this business, but
+you should not have been surprised because, since 2015, the
+Saudi-Emirati coalition have used U.S. weapons recklessly to
+kill and maim Yemeni civilians. Mwatana has documented hundreds
+of attacks, killing and maiming thousands of civilians, and
+destroying key infrastructure. We found U.S. bomb remnants at
+dozens of these airstrikes. Many are likely war crimes. Every
+single one destroyed innocent lives.
+    The 2016 Saudi bombing of a Sana'a funeral using U.S.
+Munitions, killing and maiming hundreds, should have been a
+turning point. Congress should have stopped arms sales until
+unlawful attacks ended and war criminals were held accountable.
+And instead, the U.S. accepted Saudi and Emirati promises to
+end violations and investigate. Two years later, there has been
+no accountability, and airstrikes on Yemeni civilians continue.
+    Yemen cannot survive another 4 years. In the short time I
+have been talking to you, another child has died because of
+war-inflicted wounds, starvation, or disease. Congress has the
+power to change this, to stop this.
+    Attention to Yemen increased after the outrageous Khashoggi
+murder. The Stockholm talks showed that the international
+community can push to end the war, but this tentative progress
+needs sustained global pressure including from Congress. Your
+recent votes on Yemen drew the parties to take small steps
+toward peace. By ending U.S. arms sales and military support to
+Saudi Arabia and the United Arab Emirates, Congress can stop
+American allies from using American weapons to kill Yemeni
+civilians with impunity. This would be a significant step
+toward accountability and an end to the war.
+    This month, America pledged millions in humanitarian aid
+for Yemen, but if U.S. arms sales to Saudi Arabia and United
+Arab Emirates continue, American bombs might reach Yemeni
+civilians before American aid will. Peace in Yemen is very
+possible, but to achieve it, Congress must act. Thank you.
+    [The prepared statement of Ms. Almutawakel follows:]
+[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
+    Mr. Deutch. Thank you very much.
+    Mr. Konyndyk.
+STATEMENT OF JEREMY KONYNDYK, SENIOR POLICY FELLOW, CENTER FOR
+                       GLOBAL DEVELOPMENT
+    Mr. Konyndyk. Thank you, Chairman Deutch, Ranking Member
+Wilson, and distinguished members of the panel. Thank you for
+the opportunity to testify before you today. When this crisis
+began in 2015, I served as the Director for Foreign Disaster
+Assistance at USAID, and in that capacity, I oversaw U.S.
+Government humanitarian aid to Yemen for several years, and I
+also participated actively in U.S. policymaking on the crisis.
+Since leaving government, I have tracked the crisis closely in
+my new position at the Center for Global Development.
+    Yemen is the world's worst humanitarian catastrophe, and it
+is worsening rapidly. Humanitarian relief operations there are
+robust, and they are growing, but aid alone cannot offset State
+collapse. As you mentioned in your own opening remarks, 20
+million people are hungry; 7.4 million are malnourished. At
+least 238,000 live in areas affected by famine-level
+conditions. Health and water systems have imploded. Twenty
+million people lack access to adequate healthcare. Cholera is
+present. Diphtheria is present. Millions have been forced to
+flee their homes.
+    All parties to this conflict are culpable, but that
+culpability is not evenly distributed. Any fair assessment must
+assign predominant responsibility to the Saudi and Emirati-led
+coalition. To be clear, the Houthis are a part of the problem
+and bear special responsibility for having instigated the
+conflict. They have blocked and sought to manipulate relief
+operations. They have harassed humanitarian personnel and
+committed a litany of other human rights violations. The
+Houthis are not angels or good guys by any stretch of the
+imagination. But while both sides have impeded humanitarian
+response to the emergency, it is Saudi and Emirati behavior
+that has been the engine of the emergency. This is because the
+crisis flows from the collapse of Yemen's economy and its
+infrastructure, and that has been a direct and seemingly
+intentional consequence of the coalition's political and
+military strategy. Their airstrikes have repeatedly and
+intentionally targeted Yemen's critical infrastructure,
+directly fostering both Yemen's massive cholera outbreak and
+its creeping famine. Examples of this include strikes on major
+ports and roads vital to humanitarian relief and movements,
+including roads and other facilities that the U.S. Government
+has specifically asked them not to strike, more than 100
+attacks on water and electrical facilities, more than 70
+attacks on medical facilities, and concerted targeting of food
+production and commerce, including nearly 600 attacks on farms
+and 200 attacks on marketplaces. They have also struck
+weddings, funerals, a packed school bus, and countless other
+targets with no plausible military purpose. This is not the
+behavior of a campaign that is seeking to minimize civilian
+harm. The Saudis and Emiratis have simultaneously pursued a
+policy of economic punishment. Their naval blockade and flight
+restrictions have disrupted supplies of food, fuel, and other
+essential goods. The shift of the Yemeni Central Bank out of
+Houthi-controlled territory has been a fiasco, depriving huge
+numbers of Yemenis of their wages and dramatically weakening
+the currency.
+    For 4 years, the U.S. has treated this kind of reckless
+behavior as a problem of weak systems rather than maligned
+intent. U.S. officials argue to this day that U.S. military
+cooperation is a moderating factor. It is time to end this
+delusion. Saudi Arabia and the UAE have continued to drop U.S.-
+supplied bombs out of U.S.-refueled planes flown by U.S.-
+trained pilots onto innocent civilians. If this is due to
+coalition military incompetence, then years of U.S. Engagement
+and support have delivered no improvement whereas if this
+targeting is intentional, then these same U.S. efforts are
+arguably enabling war crimes. Either way, the Saudis and
+Emiratis have shown willful disregard for the laws of war and
+have manifestly failed to demonstrably reduce civilian harm as
+Congress demanded rightly last year. U.S. involvement in this
+confers on us a degree of culpability, but it also gives us
+unique leverage to change coalition behavior.
+    And one clear takeaway from the last 4 years is that when
+it comes to moderating Saudi and Emirati behavior, pressure
+delivers while quiet engagement does not. To that end, I make
+three recommendations: First, the U.S. should halt all military
+assistance, including ongoing arm sales and maintenance that
+supports offensive military operations in Yemen. This is
+important leverage, and we should use it.
+    Second, the U.S. should put this leverage toward a
+concerted diplomatic surge. Recent U.S. actions shielding the
+coalition from Security Council criticism or giving them a pass
+on Congress' civilian targeting concerns have undermined U.S.
+goals of halting the fighting and bringing the parties to the
+table. The U.S. should instead make clear that sustaining the
+conflict will deal long-term damage to U.S.-Saudi and U.S.-
+Emirati bilateral relationships. Two immediate confidence-
+building measures would be to negotiate humanitarian access to
+besieged Taiz and to restore neutrality and functionality to
+the Central Bank and restart salary payments.
+    Finally, the U.S. should pull out all the stops to protect
+the Hudaydah cease-fire. A major battle for Hudaydah would
+devastate the food import lifelines on which most of Yemen
+depends. The U.S. should make clear to the Saudis and Emirates
+that this is a red line.
+    There is much that Congress can do to shape policy in these
+areas, and I look forward to your questions. Thank you.
+    [The prepared statement of Mr. Konyndyk follows:]
+[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
+    Mr. Deutch. Thank you, Mr. Konyndyk.
+    Ms. Zimmerman.
+  STATEMENT OF KATHERINE ZIMMERMAN, RESEARCH FELLOW, AMERICAN
+                      ENTERPRISE INSTITUTE
+    Ms. Zimmerman. Chairman Deutch, Ranking Member Wilson,
+members of the subcommittee, thank you for your attention to
+this issue and the opportunity to participate in this hearing.
+America has vital national security interests in Yemen,
+defeating al-Qaeda and the Islamic state, reducing Iran's
+ability to threaten allies in the Bab-el-Mandeb Strait, and
+addressing the deepening humanitarian catastrophe. The U.S.
+must develop a policy that pursues all of these interests.
+Above all, America must lead in securing itself and shaping
+allies and actions to support American interests in accord with
+international laws and norms. The U.S. must help our partners
+develop strategies to resolve the underlying conflicts that
+permit both al-Qaeda and Iran to operate in Yemen rather than
+partial and limited approaches that exacerbate those conflicts.
+The U.S. must also engage diplomatically not only with the
+recognized Yemeni Government and the United Nations-led peace
+process but also with sub-State actors whose views will
+ultimately determine the durability of any settlement.
+    The U.S. bears some responsibility for the conditions in
+Yemen. The Obama Administration subcontracted Yemen to Gulf
+partners while pursuing the Iranian nuclear deal. The Trump
+administration has continued this approach for fear of becoming
+entangled in Yemen's complexities. American efforts to stay out
+of the Yemeni mire have helped make the situation worse and
+reduced the likelihood that our vital national security
+interests will be secured.
+    Yemen's complexities make finding a solution seem
+impossible. Trying to simplify it by focusing on one of
+America's interests to avoid dealing with local conflicts will
+lead to failure across the board. A U.S. strategy to secure its
+interests requires dealing with the problem in all of its
+complexity and abandoning the search for simplistic, short-
+term, feel-good solutions. If relying on Gulf partners has been
+counterproductive, abandoning them would be disastrous. They
+are unlikely to find their way out of this war on their own and
+will continue it without us.
+    Although limited, American influence has shaped both Saudi
+and Emirati actions for the better. The U.S. could do even more
+to shape their behavior if engaged more seriously in the
+effort. War in Yemen has acquired a momentum that will not
+easily be stopped. The U.S. must recognize the importance and
+interest of sub-State actors who benefit from continued
+conflict and engage them directly and through partners to shape
+conditions for enduring peace. U.S. policy must recognize that
+the U.N.-led effort to resolve the current political crisis may
+not succeed and will not address the conditions that drove
+Yemenis to war in the first place. Any elite settlement does
+not resolve the sub-State actor conflicts which allow al-Qaeda
+and Iran to persist, and there is also a gap between what the
+Houthis and the Saudis will accept in terms of the Houthi
+representation in the final government.
+    Persuading the Houthis that they will ultimately lose
+requires a more skillful and nuanced strategy than the
+coalition has been pursuing along with much more serious and
+energetic diplomatic engagements with the United States and
+extra regional partners.
+    The Salafi jihadi movement in Yemen has transformed in the
+context of the war. It has decentralized in such a way that
+defeating al-Qaeda and the Islamic state will not eliminate the
+threat. Additional Salafi jihadi groups have established
+themselves and exist independent of al-Qaeda support. The
+current U.S. counterterrorism strategy does not address this
+transformation. The UAE has been a critical enabler for
+counterterrorism successes in Yemen, but its efforts are
+unlikely to yield permanent success. The risk that
+counterterrorism gains will be reversed is high unless the U.S.
+helps shape Emirati operations and nests the counterterrorism
+effort into a larger effort to resolve the underlying drivers.
+The U.S. should leverage its continued support to this end.
+    The threat from the al Houthi movement is unacceptable, and
+it has grown largely through Iranian support. Iran and Lebanese
+Hezbollah have transferred asymmetrical attack capabilities
+that threaten maritime security and U.S. Gulf partners. No
+clear incentives exist for Iran to stop supporting the Houthis
+and for the al Houthis to stop receiving Iranian support, but
+the Houthis are not Iranian proxies. They are not in the same
+category as Lebanese Hezbollah, and Yemen is a defensive front
+for the U.S. in the struggle against Iranian regional maligned
+behavior. Pressure on the Houthis does not harm Iran enough.
+    The humanitarian situation in Yemen has sharply declined
+over the course of the war, but any emergency humanitarian
+situation solution without a political settlement will not be
+enduring. Long-term international engagement to improve Yemen's
+weak State institutions and economy will be required for any
+lasting effect, and low-level conflict will be disruptive. The
+Trump administration and Congress must prioritize securing a
+political resolution in Yemen.
+    A first step is for the U.S. to rebuild trust with Yemeni
+power brokers not close to Riyadh. We might consider moving our
+embassy to into a country other than Saudi Arabia. We must also
+persuade our partners away from practices that exacerbate the
+humanitarian crisis, but neither should we defend their
+practices. We should chastise them publicly when they do wrong
+and make it clear that our support is conditional. The time to
+end it has not yet come because we have not yet put enough
+energy into shaping their actions and giving them a strategy
+and a way out. America must regain a position of leadership in
+shaping the coalition's strategies and our own interests inside
+of Yemen. Real success might not be possible, but it is vital.
+Thank you for the opportunity to testify.
+    [The prepared statement of Ms. Zimmerman follows:]
+[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
+    Mr. Deutch. Thank you very much, Ms. Zimmerman.
+    I will begin the questioning.
+    There is consensus on the panel that political settlement
+is what we must be striving for. In December, Martin Griffiths
+brokered a cease-fire and the Stockholm agreement between the
+warring parties. What role should the United States play in
+diplomacy? How can Congress support those diplomatic efforts
+springing out of there?
+    Dr. Rand, I will start with you.
+    Dr. Rand. Thanks. The U.S. diplomatic efforts have been
+behind the scenes, and they have been a bit timid. It is
+important at this stage that the U.S. State Department step up
+and both publicly and privately show U.S. leadership and
+resolve, elevating this issue. It has been great the U.S.
+Special Envoy has taken the lead and has been quite successful,
+but there has been too little effort from Washington to show
+how important this is to the U.S. Government. So I would urge
+greater public and private diplomacy from the U.S. side.
+    Mr. Deutch. Ms. Almutawakel, how do the Yemeni people view
+American involvement in the war?
+    Ms. Almutawakel. When we say ``parties to the conflict,''
+Yemenis consider America as one of the parties to the conflict
+in a very negative way.
+    Mr. Deutch. Were they aware of the House's recent passage
+of the War Powers Resolution?
+    Ms. Almutawakel. Whatever happens, although they--Yemenis,
+they have a lot of anger toward America for many reasons. But
+whenever there is something happening in America, they follow
+it with a lot of interest because they know what is happening
+here has a lot of influence in Yemen.
+    And for your first question, let me tell you that the peace
+talk in Sweden, why have it happened? It happened only because
+of the pressure that happened because of the Khashoggi murder.
+So the international community pressure, especially from the
+U.S., in 2 months succeeded to send parties to the conflict to
+the table. So, if the pressure continues, it should be a
+balanced pressure on all parties to the conflict. If this
+pressure continues, then the peace talks will just continue,
+and Martin should be supported to be successful in this.
+    Mr. Deutch. Can I just ask? The work that you do at Mwatana
+for Human Rights, we have heard a lot of--there a lot of
+harrowing statistics that have been thrown around. The numbers
+are so staggering, but given the data that you collect, can you
+personalize it for us? Make this, the humanitarian crisis, the
+abuses that you have seen, can you give it some context from
+the work that you do through your organization?
+    Ms. Almutawakel. So, in our work, we work on the details,
+not in the numbers. So we go deep--we just try to move the
+numbers to details of the suffering of people with just
+documentation that can be even a legal paper for the future. We
+build a human rights memory. So it is a lot, yes. We are
+documenting a lot of incidents daily. But I will just mention
+one of the incidents that was in our late report regarding
+using U.S. and U.K. Weapons in some of the airstrikes. There
+was an airstrike in 2018, in April 2018. It was a wedding in
+Hajjah, in a very poor area. Most of the people who died in
+this wedding were the drummers and dancers, and people, they
+said it was just a very happy day that ended like a judgment
+day. And those people are marginalized.
+    This picture is not even unique. It is happening. So the
+bus incident is famous, but it is not the only one. The funeral
+incident in Sana'a is famous, but it is not the only one. It is
+not new in Yemen. It is not even strange to sleep as a whole
+family and then to get up in the morning, one person, and all
+your family is dead. This is only because of the airstrikes,
+but airstrike is not the only attacks in Yemen, the only
+violation in Yemen. It is just only one.
+    What has really broke the back of Yemenis is the
+starvation. It is not having their salaries. And many Yemenis
+will not go to ask for humanitarian aid because the middle
+class, they are now very poor. And they are dying behind the
+closed doors. That is why humanitarian aid is just an emergency
+that helps a lot but will never solve the situation in Yemen.
+We miss the feeling safe. We are safe in Yemen by accident, not
+because we are protected by anything. We miss the feel of being
+safe and sleeping while we are sure that, in the morning, all
+the people we love is going to be safe. Whatever I say, there
+is just more.
+    Mr. Deutch. I appreciate that very much. Thank you. Thank
+you so much.
+    Mr. Wilson.
+    Mr. Wilson. Thank you, Mr. Chairman, and thank all of you
+for being here today.
+    Ms. Zimmerman, given that Iran has not been a party to any
+of the negotiations or diplomatic initiatives surrounding the
+conflict, do you assess that Iran has had any incentive to
+encourage the Houthi rebels to meaningfully come to the
+negotiating table? If not, how do we incentivize Iran as the
+major outside supporter of the Houthis to support a peaceful
+solution to the conflict, including stopping the missile
+attacks from Yemen on Saudi Arabia?
+    Ms. Zimmerman. The issue of whether Iran supports the
+Houthis going to the negotiating table or not is a little bit
+moot because Iran does not pull the strings in Yemen. It does
+not make the decisions for the Houthi family. There are
+instances where Foreign Minister Javad Zarif has met with
+Houthis during negotiations, so there are clearly conversations
+happening back door and Iranian advice going forward with the
+Houthi delegation and negotiating team, but it is not going to
+be Iranian pressure on the Houthis that changes their actions.
+They have actually ignored it before, and so I think that is
+not the vector for changing the Houthi behavior. This is where
+the nuance in what I put forward is actually putting forward a
+strategy that would convince the Houthis that ultimately they
+will lose the majority position they hold in Sana'a. That will
+bring them to the table, and they are there. They just disagree
+with the Saudis over how much of a share in the government they
+should hold.
+    Mr. Wilson. Well, thank you very much.
+    Ms. Almutawakel, thank you for your courage to be here, and
+a question for you, but Mr. Konyndyk can add, too, because I am
+a big fan of USAID, and so it relates to aid. And that is
+multiple reports earlier this year indicated the Houthi rebels
+were engaging in wholesale food aid diversion to key areas they
+control. How big a problem is this, the Houthi aid diversion?
+Have the Houthis used the aid diversion to finance their
+operations in the past? What is the international aid community
+doing to mitigate this type of phenomenon?
+    Ms. Almutawakel. So it is me, yes?
+    Mr. Wilson. Yes.
+    Ms. Almutawakel. Yes. OK. It is big. It is very big. We
+documented many cases where Houthis just obstructed
+humanitarian access for food and medicine, and also they are
+bothering humanitarian NGO's on the ground, and humanitarian
+NGO's cannot talk because Houthis might just do anything. They
+just might close the humanitarian NGO's and they do not care.
+So it is very big. But how to solve it? It is only how to stop
+the war because Houthis is just one issue regarding the
+humanitarian access, and the Saudi-led coalition is another
+issue. The other avenues are the third issue. So it is a huge
+problem for all parties to the conflict. But, again,
+humanitarian aid is not the solution in Yemen. It is just a
+lifeline emergency. So, whether we solve it or not, it is not
+going to solve the problem.
+    Mr. Konyndyk. Thanks for that question, Congressman, and
+thank you for your support for USAID. I know when I worked
+there, we really felt the support from the Hill, and we really
+appreciated it. I know that they still do.
+    It is a problem. The Houthi diversion is a problem. I think
+obstruction by both sides is a problem, and that is important
+to understand, you know. Neither side has their hand clean when
+it comes to obstructing humanitarian aid. They have different
+tactics of it. Obviously, you know, it is the more on kind of
+the entry side with the coalition and then the ground side with
+the Houthis, but both sides have been playing games with and
+obstructing humanitarian aid really from the get-go. My
+understanding of what has happened since that report on the
+concerns about food aid diversion by the World Food Program is
+that, as you all have seen in the news reports, the World Food
+Program put out an ultimatum to the Houthis that this behavior
+needed to change. The Houthis have begun engaging with WFP in
+dialog and have begun changing some of their practices that had
+caused so much concern. I would not say it is completely
+resolved or perfect, but there is at least, as I understand it,
+a constructive dialog going on to address the underlying
+problem.
+    Mr. Wilson. Well, you make a difference, and we want to
+continue that.
+    And Dr. Rand, what is the current status of the Stockholm
+agreement and cease-fire?
+    Dr. Rand. Unfortunately, Congressman, as of this morning or
+yesterday, Martin Griffiths, the esteemed and excellent U.N.
+Special Envoy, has said it is on life support. He is really
+trying, and he is disappointed, as we all are, there has not
+been greater commitment by the parties. There has been some
+redeployment. There has been a diminution in the airstrikes in
+the Hudaydah city and port, and that was one of the goals was
+to decrease the fighting in and around the port, so that has
+been sort of the best part of the progress, but there has not
+been so far the full redeployment of the forces out of
+Hudaydah. So there needs to be pressure right now in the next
+week or two to ensure that the parties commit to the agreements
+made in Stockholm.
+    Mr. Wilson. Well, thank you for your extraordinarily
+current information. Thank you very much.
+    Mr. Deutch. The gentleman yields back.
+    Mr. Malinowski will be recognized.
+    Mr. Malinowski. Thank you, Mr. Chairman.
+    Dr. Rand, excuse me. You and I were both involved in the
+effort to advise the Saudis early in the conflict on how to
+avoid hitting civilians, on how to conduct their operations in
+a way that was more consistent with the laws of war and more
+effective. Could you describe that effort and the lessons that
+you think we should learn from it?
+    Dr. Rand. Sure. Thanks. To Katie Zimmerman's point, to your
+great point, that, at the beginning of the war, we at the State
+Department thought that the best approach was to work with our
+partners, work with our allies behind closed doors, to build on
+the strong partnership that the U.S. had with Saudi Arabia. So,
+in 2015, when it was clear that there was these mass casualty
+civilian targets and we assumed that they were mistakes in the
+fog of war that U.S. State Department sent a trainer to Riyadh,
+you know, someone who had worked with CENCOM on trying to limit
+civilian casualties for U.S. coalition operations in
+Afghanistan, thinking that we could train and support the
+coalition using the same models that had successfully reduced
+U.S. civilian casualties in Afghanistan. We approached this
+very technically behind closed doors, very quietly sent our
+trainer in, and he was well received by the Saudi Ministry of
+Defense. We kept on trying this, and we were hopeful in the
+beginning, and we kept on sending him. And then there was a
+cease-fire in 2016, so we remained hopeful that maybe our
+efforts to train the Saudis to limit civilian casualties were
+working.
+    But then, in August 2016 when the cease-fire broke down,
+there was a series of mass casualty civilian targets that were
+hit in a span of 2 weeks in that deadly August 2016, and it
+gave us pause to recalibrate the strategy and wonder what had
+happened to our training. Where had been the lessons learned
+that had been taken so receptively by the Saudi Ministry of
+Defense, and so we continued. We continued. We very quietly re-
+sent him. We really, really tried. And we came to the
+conclusion by late 2016 that, although there were very many
+well-meaning and good and professional generals in the Saudi
+Ministry of Defense, there was a lack of political will at the
+top, senior levels, to reduce the number of civilian
+casualties. There were many technicians and tacticians who
+wanted to learn the software and the approaches that the U.S.
+military had tried in Afghanistan, but at the end of the day,
+the shots were called from up high, from up above, and there
+was no political will to change the status quo.
+    Mr. Malinowski. So was it a problem of imprecise targeting
+or that they were precisely targeting the wrong things?
+    Dr. Rand. Right. It was very clear that precision was not
+the issue and that guidedness was not the issue. It was the
+type of target selection that became the clear issue. And even
+when, as Jeremy has mentioned, the U.S. Government told them
+which targets not to hit, we saw instances where the coalition
+was targeting the wrong things.
+    Mr. Malinowski. So they deliberately struck targets like
+water treatment facilities, food distribution centers that were
+on a no-fly list, a no-strike list that was handed to them. Is
+that correct?
+    Mr. Konyndyk, if you want to chime in as well, or either of
+you, yes.
+    Mr. Konyndyk. Yes. So the basic progression was this:
+Initially we provided--USAID compiled the list of initially
+just strictly humanitarian sites, NGO offices, warehouses,
+things that if you, you know, you looked at them from the air,
+you might not be aware it is a humanitarian facility whereas we
+would assume you would know what a school looks like, what a
+hospital looks like, and so on, and not hit those things.
+    What we found was that the Saudis tended to treat anything
+not on the no-strike list we gave them as fair game. So then we
+expanded the list, and we began naming categories of sites
+including specific road routes that were critical to the
+humanitarian effort. And in an instance in, I believe it was
+2018, they struck the bridges along the main road from Hudaydah
+Port to Sana'a, which was the principal artery for bringing
+food, aid, and commercial food into the country. They struck
+that despite us having specifically told them through that
+process not to.
+    Mr. Malinowski. Thank you.
+    And, Ms. Almutawakel, first of all, thank you so much for
+being here and for speaking for people in Yemen whose voices
+are not normally heard in our debate here in the Congress.
+    When American bombs reach Yemeni civilians before American
+aid does, as you aptly described the situation, what impact
+does that have on the Houthis and on other extremist groups
+like al-Qaeda? Does it hurt them, or does it help them? Do they
+take advantage of this?
+    Ms. Almutawakel. Well, in the war in Yemen in general, the
+war in Yemen is empowering two groups in Yemen: al-Qaeda and
+Iran. The war is a very perfect environment for all armed
+groups and their allies, whoever they are. So only rebuilding
+the State in Yemen can just defeat different groups. For
+Yemenis, many of the Yemenis, they have never been to America,
+but they received America through the weapons--not through
+technology, not through education, not through civilization. It
+is just through weapons.
+    And in many instances, we documented 300 incidents since
+the beginning of the war until today, but not in all incidents
+we could find evidence of weapons. We could find this in 25
+incidents, but it might be even much more. So people, they know
+America through these weapons, and they feel very angry about
+it, and it is propaganda for the Houthis and for al-Qaeda, but
+the situation in general does not depend on the propaganda
+itself.
+    The war--because the war is--all parties to the conflict,
+they do not have a war plan; they do not have a peace plan. And
+even in the areas that are controlled by Hadi government and
+the coalition, they did not try to rebuild the State, the
+judicial system, the national army. They decided to empower
+fanatic religious armed groups in the ground. So this is also
+empowering Houthis and other armed groups in the areas. If the
+80 percent that was controlled by the coalition and Hadi
+government was administrated in a good way, then this would
+defeat also Houthis easily, much easily than the war itself.
+    Mr. Malinowski. Thank you.
+    Mr. Deutch. Thank you.
+    And I will recognize Mr. Chabot for 5 minutes.
+    Mr. Chabot. Thank you very much, Mr. Chairman. As a former
+chair of this subcommittee and a long-time member of it, it is
+really heartbreaking to have the need for this hearing today
+because this is clearly one of the most significant, if not the
+most significant, humanitarian crisis on Earth. And,
+unfortunately, it has been extremely frustrating for those of
+us that are really trying to help and trying to get aid to
+those people who need it and try to get a cease-fire on the
+targeting of civilians or even if it is collateral damage, so
+to speak. That is where you really want to have some impact to
+be able to not have people who are completely innocent
+targeted, or it is always hard, but particularly in this type
+of situation where you do have the fighters oftentimes in
+civilian populations. And then another challenge, of course,
+and I apologize for being in and out. I have had meetings here
+on and off, and so I have I missed and I probably am repeating
+some of the things my colleagues have said. And I know speaking
+for probably folks on both sides of the aisle, the inability to
+get the aid to those who need it, the access, is a big problem,
+so I guess my first question would be how can we improve that?
+What could actually work to get the aid to the people who
+really need it? Is there anything we can do? And I know your
+organization is USAID. I know that is what you all do, but I
+would be happy to just go down the line.
+    Doctor?
+    Dr. Rand. I would highlight three things. One is the Sana'a
+airport is a very important center because of the number of
+people who cannot leave the country seeking medical help and
+other treatments, so urging the coalition to open the Sana'a
+airport. That would be one.
+    Second, continuing to monitor the verification mechanisms
+in the Red Sea Port. Part of the challenge is there are
+legitimate concerns about Iranian and other nefarious missile
+activity in the region, and so the U.N. has tried very hard to
+broker a compromise with the coalition to check ships to see,
+you know, to make sure there are not bad things on some of
+these vessels, but that has really slowed down the humanitarian
+access into the port. So there has to be more that can be done
+to ensure that these ships that are coming in with the
+humanitarian relief are not stopped and blocked because it is
+deterring the commercial shipping industry from coming in at
+all. So there can be more work that can be done with the U.N.
+and the coalition to ensure that this verification mechanism is
+not delaying and stopping humanitarian relief access.
+    And then, finally, calling attention to parts of the
+Stockholm agreements that were intended to enable the recovery
+of the Hudaydah and Red Sea Ports along that area. Because of
+the backlogs at the Aden Port, there is no substitute for
+Hudaydah Port, despite the parties' wish that there could be
+run-arounds. It is still true that 70 or 80 percent of all
+humanitarian relief must get into the country through that
+region and that part of Yemen. And so, therefore, ensuring port
+capacity, ensuring the management, the administration, and the
+free flow of goods into that port remains critical.
+    Mr. Chabot. Thank you. You know, I am actually--I have only
+got a minute and 30 seconds to go, so I am going to hold your
+thought, if I can, because I had one other point that I wanted
+to make. If I go down the line, I am going to be infringing on
+other people's times. I was in Yemeni some years ago--in Yemen
+a number of years ago, and I remember at the time because we
+got a call. There were only a couple of us on the codel. We got
+there the day after they blew up the graduation of the police,
+or it was about 100 people I think killed on the parade
+grounds. We went in anyway and met with an awful lot of
+goodwilled people, but it was--I remember the date specifically
+because of that.
+    Let me ask this question, Ms. Zimmerman. Let me go to you
+on this one. I know Mr. Wilson was interested in this as well.
+The business about human shields, you know. We have heard
+reports that there are examples where that has happened, where
+Houthis have embedded, you know, militant fighters or military
+equipment in civilian areas. Could you address that issue?
+    Ms. Zimmerman. Yes. Thank you, Congressman. The Houthis and
+many other of the actors on the ground have used civilian
+positions including the offices of international NGO's as a
+shield against airstrikes or other artillery fire, and there
+are multiple instances where you can map the no-strike list
+against a Houthi military position, and the Houthi military
+position is right adjacent to a civilian position which places
+the coalition in a lot of stress.
+    I think the challenge with civilian casualties in Yemen is
+not just limited to targeting from the air, however, and what
+is missed is the mortar fire that is somewhat indiscriminate in
+certain places, some in Taiz City, which gets lost in the
+discussion about Hudaydah because it is not stuck on
+humanitarian issues. All sides are committing egregious
+targeting cases, and I think we need to be holding all actors
+accountable.
+    Mr. Chabot. Thank you very much.
+    My time has expired.
+    Mr. Deutch. Thank you, Mr. Chabot.
+    Mr. Trone.
+    Mr. Trone. Thank you, Ms. Almutawakel, for your courage and
+efforts in this unmitigated tragedy. Food insecurity, lack of
+sanitation, relocation to the IDP camps, real negative impacts
+on all the citizens of Yemen. My question is: The women and
+girls are specifically disadvantaged in this humanitarian
+crisis and subject to even greater risk, gender-based violence
+during the conflict. Could you make any comments on protections
+that we should be taking?
+    Ms. Almutawakel. You know, the state in Yemen has collapsed
+100 percent. Before the war, we used to have a stable state.
+Now we do not. So you can imagine how much the situation is
+horrible. Before the war, we started to discuss to have a law
+to stop the early marriage. You can now just imagine how much
+we are away far from this. It is just like a dream; it never
+happened. And the war is very masculine, yes. So women were
+just fighting for many years to be in the front in many jobs in
+Yemen, and they succeed to have a lot of success in this. And
+now all of this has destroyed as we are just starting from the
+scratch. And it is scary how much children, girls and boys, are
+not going to school now. So I am just worried about the future
+of Yemen. Many, many, I mean, thousands of schools have been
+destroyed, and millions of children are not going to school. So
+we are just going very steps--very huge steps to the back.
+Yemen was not that bad before.
+    Mr. Trone. Ms. Zimmerman, your thoughts on that?
+    Ms. Zimmerman. The challenge that I see is that we are
+focused on the very serious humanitarian catastrophe right now,
+which is revolving around the civilian casualties and the
+distribution of food and fuel, frankly. The challenge that
+Yemen will face is that it has now gone through 4 years of war,
+and it is not just coming out of this war, but even from the
+Arab Spring, children were not going to school. And so, when
+you look at the Yemeni population, about half of it is under 15
+years of age at this moment, and most of them have not had a
+regular education. Yemenis already suffered from a high level
+of illiteracy. It is driving them and setting up their
+opportunities such that when they come out of this, there will
+be a significant investment required from the international
+community to rebuild the institutions to allow Yemenis to start
+succeeding.
+    Mr. Trone. Mr. Konyndyk, denial of humanitarian assistance
+is a violation of international humanitarian law. Under the
+U.S. Foreign Assistance Act, a government that prohibits or
+restricts the transport or delivery of U.S. foreign assistance
+faces penalties, including withholding of foreign assistance
+and withholding that under the Arms Export Control Act. Based
+on your observations over the past 4 years, is it your opinion
+the Government of Saudi Arabia and/or UAE have prohibited or
+otherwise restricted foreign assistance?
+    Mr. Konyndyk. So, on the strict legal question, I am not a
+lawyer, and I would defer to the lawyers, but I can tell you,
+on the broader policy question, which I engaged with very
+closely during my several years in the administration,
+absolutely the Saudis and the Emiratis, principally the Saudis
+in that case, were obstructing humanitarian--legitimate
+humanitarian assistance from entering the country.
+    And, you know, I think they have given large amounts to the
+United Nations, and they deserve some recognition for that, but
+no amount of aid that they give can keep pace with the damage
+they are doing.
+    We saw repeatedly that it was very difficult for
+humanitarian groups to get aid into the country, and there were
+instances, for example, in 2015, when ships of World Food
+Program food were being prevented for weeks on end from being
+allowed to enter the country. I think what we typically saw was
+that eventually, in that sort of an instance where there was a
+specific item that they were blocking, they would eventually
+relent but only after pretty extensive pressure from the U.S.
+And that to me is a microcosm of I think a key takeaway from
+this entire process over the last 4 years, which is that when
+the Saudis are doing something we do not want them to do or the
+Emiratis are doing something we do not want them to do, asking
+them nicely while continuing to sell them arms has not yielded
+much progress. And the only times we have seen progress has
+been when, at a very high level, up to and including at times
+the President himself, when they put that request forward and
+make clear that it will have consequences for the U.S.
+bilateral relationship if it is ignored, then we see movement.
+    Mr. Trone. Thank you.
+    Mr. Deutch. Mr. Reschenthaler.
+    Mr. Reschenthaler. Thank you, Mr. Chairman.
+    Violence and human rights atrocities, as you know,
+devastate Yemen. Iran, the world's largest State sponsor of
+terror, illegally supplies Houthi rebels with missiles,
+training, and support. These Houthi rebels terrorize civilians
+and American allies by attacking cities in Saudi Arabia, the
+UAE, and even civilian aircraft. Yemen also remains a focal
+point of U.S. counterterrorism. AQAP, al-Qaeda of the Arabian
+Peninsula, is one of the largest and most capable terror groups
+in the region. This is why I voted against the decision to try
+to remove U.S. Forces from the conflict. Frankly, it was
+dangerous and misguided, and abandoning this region will not
+end the humanitarian crisis. In fact, it will just make it
+worse. Without the United States, bad actors will continue to
+become more reckless and the tens of millions of Yemenis will
+continue to suffer without us. If Syria has shown us anything,
+it is that rogue countries like Russia and China, who have very
+little regard for peace, prosperity, or even human life, will
+fill the power vacuum that we create.
+    So, Ms. Zimmerman, can you please elaborate on how the U.S.
+can better provide security assistance in the Arabian Peninsula
+while also holding our counterparts accountable for actions
+that we as Americans would not adhere to?
+    Ms. Zimmerman. Thank you, Congressman.
+    I think you have heard today that the U.S. has provided
+significant tactical training in how to limit civilian
+casualties and how to improve operations on the battlefield,
+and you can see that we have done it with Saudi Arabia, and
+then we have also done that through counterterrorism training
+and with cooperation with the United Arab Emirates. What has
+been missing from this piece is the actual strategic guidance
+and a nuanced approach that will lead our coalition partners to
+some sort of victory. And so they have applied the tactics that
+they have learned not perfectly against the strategy that is
+fundamentally flawed, and this is one of the reasons why I
+think that the U.S. should lean further in and provide what
+only America can provide, which is the expertise that we have
+in order to coalesce something that will deliver a better
+negotiated settlement than, frankly, what I can see on the
+table. I still do not see the path from Hudaydah to a national
+settlement, and, you know, that is the key piece that we need
+to start delivering.
+    Mr. Reschenthaler. And what are your thoughts on if we
+continue to withdraw, with Russia and China filling that power
+vacuum? Do you want to elaborate on that?
+    Ms. Zimmerman. Saudi Arabia and the UAE are one of the few
+partners we have that do not need our money, and if we were to
+stop selling munitions and weapons, the question is then, will
+they keep buying it? And I think the answer is yes. And when we
+provide it, we also provide it with significant support in
+terms of military training. It has not been completed in terms
+of our military training and the professional development,
+especially of the Saudi military, and withdrawing the provision
+of weapons will probably lead to the end of that sort of
+training, which means that we have gotten halfway there and
+then we lose that investment.
+    Russia and China do not have that sort of predilection in
+terms of who they sell their weapons to and the end use of the
+weapon. And so we have seen cases where our partners have not
+used our weapons as we have desired. We should publicly hold
+them accountable, but we also need to recognize that, at the
+end of the day, there are other actors out there with weapons
+that are high end, and they are willing to sell, as well.
+    Mr. Reschenthaler. Thanks, Ms. Zimmerman.
+    Thank you, Mr. Chairman. I yield back the balance of my
+time.
+    Mr. Deutch. Thank you, Mr. Reschenthaler.
+    Mr. Vargas, you are recognized.
+    Mr. Vargas. Thank you very much, Mr. Chairman.
+    And thank you again, the witnesses, for being here today.
+    Obviously, it is a hugely tragic humanitarian crisis. I
+have also had the opportunity to talk to David Beasley,
+Governor--former Governor from South Carolina, who tells me of
+the issues they have had at the port, and so I want to talk a
+little bit about that. Has the issues of the food coming in--I
+mean, I understood you saying that there could be some
+contraband on the ships, and because of that, they have stopped
+them, and maybe there is a lot more hassle, if you will, to get
+in. Has that been corrected, or how can that be corrected? I
+know that that is not the whole issue because there is just so
+many people that are on the point of starvation, but it does
+seem that so much of--you said 80, 90 percent--of the food goes
+through there. How is that being corrected? Who would like to
+handle that? Go ahead.
+    Mr. Konyndyk. I can take a first crack at that, and I am
+sure others have thoughts.
+    Mr. Vargas. Sure.
+    Mr. Konyndyk. So when I was at AID, that was one of our
+major preoccupations, protecting that lifeline through Hudaydah
+because it is where most of the country's food comes from. And,
+you know, we saw two important dynamics that were concerning.
+One was obviously the Saudi naval blockade, which was
+preventing a lot of legitimate material from getting in out of
+fear, as you said, that there may be contraband upon some of
+the ships.
+    We also saw Iran playing games. And Iran at one point sent
+a what they called an aid ship, and I think that ship probably
+did only have aid on it, but there was no way to know that, and
+they were doing that to test the Saudi blockade, and they were
+in effect misusing using aid, as well.
+    So we did two things. First, we worked with the U.N. to set
+up an arrangement where all aid from Iran and other States
+would go through the U.N. and be validated by them and
+delivered by them rather than directly by the State. So that
+ensured that the contents of the aid were legitimate and not
+being, you know, no contraband was on board.
+    And then we set up something called the U.N. Verification
+and Inspection Mechanism for all commercial shipping, so kind
+of a counterpart for commercial to what existed for the aid.
+And that was a U.N. process for similarly verifying and
+validating what was on board ships to avoid contraband.
+    The concern has been that the Saudis have not--Saudis and
+Emiratis have not been great about respecting and working
+through on them. And I think that gets to the underlying issue,
+which is that the purpose of the blockade is not merely to
+prevent contraband; it is also to economically hurt the country
+with cover of this contraband argument.
+    Mr. Vargas. So that was going to be my question because it
+seems that there is the whole issue of, you know, the
+contraband, but more than that, they were using it almost as a
+way to starve the country.
+    Mr. Konyndyk. It was an excuse.
+    Mr. Vargas. It was an excuse. OK. Has that been corrected
+at all? What can we do to change that reality again?
+    Mr. Konyndyk. It has not--it is a problem that requires
+constant management. Others may want to weigh in.
+    Dr. Rand. I would just add that I think these two questions
+actually relate to each other. Congressman, your question
+assumed a bit of a binary between either withdrawing completely
+from our relationship with Saudi Arabia and stopping to limit
+U.S. support for the coalition for the war in Yemen.
+    The United States is actively engaged to support the
+defense of Saudi Arabia day in and day out, aside from
+operational DOD and arms sales support for the war in Yemen,
+and this is a great example, right? The United States will
+continue to defend Saudi Arabia from contraband material going
+through the Red Sea Port through the activities that my
+colleague just described and many, many other naval and
+maritime activities.
+    Mr. Vargas. I am going to reclaim my time because you are
+actually not focusing on my question. My question was not about
+Saudi Arabia. They are doing quite fine. My question was more
+about Yemen and how are we going to help the Yemeni people.
+    So, again, I want to focus how can we get more food in
+there. I know one of the things that we can do also is try to
+figure out how to help their currency. I mean, their currency
+in free fall creates a real problem when there is, in fact,
+imported food that people would be able to buy if it was not
+for the depreciation of their currency.
+    Ms. Almutawakel. This is not only your question. I have
+heard this question from more than one: How can we just help
+the humanitarian access? We are in the Congress, and just it is
+so weird for me to ask this question rather than asking how can
+we stop the war in Yemen. Humanitarian access is a very small
+issue in Yemen, and it is not even the only thing that
+causesstarvation in Yemen. For example, millions of Yemenis are
+not receiving their salaries for years now. Those who are
+living under the control of Houthis, which is most of the
+population of Yemen, Houthis they do not consider themselves
+responsible to obey salaries, and the Hadi government, the
+coalition, are not paying salaries for people just because they
+are living in the areas that is controlled by Houthis. That is
+one of the main reasons that causes starvation in Yemen, more
+than the access of humanitarian aid.
+    So the issue in Yemen is not an issue of how to flow the
+humanitarian access. It is much more than this, and if there is
+a humanitarian crisis here and you have a very big influence to
+just to stop the crisis, just like the symbol, then to stop it
+by we have to stop it by to stop the war, not to just solve the
+problem of how to get the food in.
+    Humanitarian NGO's can get--can solve this problem, and
+they are trying to, and it is not your question. It is an----
+    Mr. Vargas. No, I know. My time is the expired, but thank
+you for your answer. I appreciate it. Thank you.
+    Thank you, Mr. Chair.
+    Mr. Deutch. Thank you, Mr. Vargas.
+    Mr. Sherman, you are recognized.
+    Mr. Sherman. If our goal was just to feel better and more
+moral, we would get ourselves completely out of Yemen in all
+respects. It is unlikely that Yemen will be a place that anyone
+says: That is where great things are happening, and America is
+a great country to be a part of that.
+    But the fact is that washing our hands of the issue is not
+necessarily the best thing we could do for the Yemeni people.
+    I know that air power has been criticized here. I point out
+as the country that has the leading air power in the world, we
+should defend the rules of engagement and the laws of war,
+which make it plain that if you are hitting strategic targets
+for strategic reasons and, in that context, that you are trying
+to avoid civilian casualties, then that is legal. If we then
+take the position that you cannot use air power if you have any
+adverse effect on the civilians, then air power is illegal, and
+it puts us in a much worse strategic position.
+    One way this war could end is we could change sides or
+whatever and join the Houthi. And how bad would the Houthi be
+if they just took over the country? They have a record of
+enforced disappearances, you know, children soldiers. The U.N.
+has said they have committed war crimes, but if they, Dr. Rand,
+if the Houthis just swept their opponents from the battlefield,
+would they engage in reprisals? Would they kill civilians? Or I
+do not expect them to provide good governance, but would the
+people of Yemen be better if, 6 months from now, the Houthis
+just controlled the whole country?
+    Dr. Rand. Thanks, Congressman. The Houthis do control
+around 75, 80 percent of the population. So this is not a
+hypothetical.
+    Mr. Sherman. Right. Well, it is in some ways. They may be
+holding themselves back saying: We want to restrain ourselves
+and not kill 50,000, 100,000 civilians until we win the war.
+Then, once we win the war, then we do not have to worry as much
+about our world image, and then we can kill our enemies.
+    You know, Lenin did not kill all his enemies in 1917. He
+waited until more like 1920, 1925. So, if the Houthis really
+had freedom of action, what would they do?
+    Ms. Almutawakel. I want to invite you to visit Mwatana's
+website just to see how much Houthis are already killing
+civilians. They are not holding their thumbs back. They are
+engaged in many serious violations, indiscriminate shelling,
+child soldiers, torture, enforced disappearance, a lot. They
+are doing whatever they can do in the areas that they are
+controlling, but who said that the scenario of stopping the war
+that the Houthis control the areas? How this idea came up?
+    So the idea for the political agreement is to just end, to
+just replace all armed groups to a state, the state of rule of
+law----
+    Mr. Sherman. Well, obviously, if we can create peace and
+compromise, that is the best possible outcome. But we have been
+trying to do that for a long time.
+    I will ask the panel: How optimistic are you that a
+peaceful solution will be reached among the parties?
+    Dr. Rand. Congressman, you know, in 2015 and in 2016, the
+U.S. Government was focused very, very directly on reaching a
+cease-fire----
+    Mr. Sherman. Right.
+    Ms. Rand [continuing]. In Yemen, and to be honest, in the
+past 2 years, that has not been a focus of U.S. foreign policy.
+So what we are advocating here is elevating this issue as a
+diplomatic priority given the momentum in Sweden and pushing
+the Trump administration to really make compromise and
+political negotiation the end goal as opposed to some of the
+parties maybe preferred strategy of escalation. So that is the
+recommendation here.
+    Mr. Konyndyk. And, Congressman, I think, to hit on a couple
+of your other points, I do not think anyone is advocating for
+the U.S. pulling out or for the Houthis winning or just----
+    Mr. Sherman. Well, when you say ``pulling out,'' nobody is
+advocating for us to pull out diplomatically. And, in fact,
+there is a consensus on the panel that we should have a higher
+level diplomat involved in these issues, but there are a lot of
+folks urging us to pull out militarily.
+    Mr. Konyndyk. Yes, including me. And the reason for that
+is, you know, in your comment, you said: Would this have
+implications for U.S. use of air power?
+    I think if the Saudis were anywhere close to the quality of
+targeting and the quality of respect for international law of
+armed conflict that the U.S. military has, there would be far
+less of a problem.
+    Mr. Sherman. We are doing a much better job now if you
+compare what the Saudis are doing to our approach in World War
+II. I do not know how historians would rate us, but I yield
+back.
+    Mr. Deutch. Thank you.
+    Mr. Lieu, you are recognized.
+    Mr. Lieu. Thank you.
+    Thank you, Chairman Deutch, for calling this hearing on
+Yemen, and I appreciate your doing so, and the message we are
+sending is that we are not going to let this issue go.
+    So, if you are a Saudi Arabia or UAE or the Trump
+administration, we are going to keep highlighting it. We are
+going to keep exposing your war crimes and the famine that you
+are causing in Yemen. I do note that, as the witnesses had
+testified, a new report recently came out with nearly a
+thousand people killed by U.S. munitions and over 120 children
+killed. I do have a question about that report. So, Ms.
+Almutawakel, was that from airstrikes from a Saudi-led
+coalition that did not also include airstrikes from, let's say,
+civilian drones and others with U.S. intel? What was the nature
+of that casualty count?
+    Ms. Almutawakel. No, these ones, we have reports about
+drones, and there are incidents regarding the drones. And there
+are civilians who have been killed and injured because of
+drones in 2017 and 2018.
+    Mr. Lieu. Is that in your report or a separate report?
+    Ms. Almutawakel. No, separate. This one, in this report, it
+is only the Saudi and Emirati airstrikes.
+    Mr. Lieu. Thank you. And are you aware of any Saudi or UAE
+officials being held accountable for the killing of civilians
+through these airstrikes?
+    Ms. Almutawakel. This is a dream.
+    Mr. Lieu. So the answer is no. And as you had testified
+earlier, as Congressman Malinowski noted, it appears that many
+of these airstrikes are not because they are trying to hit a
+moving Houthi target and missed; it is that they are
+deliberately trying to target the actual places to hit that
+have lots of civilians. Is that correct?
+    Ms. Almutawakel. What is really strange about the incidents
+that killed and injured civilians in Yemen is it is very
+preventable. Many of the cases that we have documented, there
+is not even a military target. People themselves were asking,
+why we were targeted? It is even strange. It is just--that is
+why it is not a matter of training. It is a matter of
+accountability. They do not care. If they cared, they can just
+make it much better, at least not to embarrass their allies.
+    Mr. Lieu. Thank you.
+    I actually think it is worse than that they do not care. It
+does appear to me that they are intentionally hitting
+civilians. So, as you know, during the Obama Administration,
+Saudi jets flew and hit a funeral that had a lot of civilians,
+injuring and killing hundreds, and then they came back around
+and struck the very same precise location again. So my view is
+they are deliberately targeting civilians. I think these are
+war crimes.
+    And my question to Dr. Rand is, when you have civilians in
+Yemen watching a U.S.-supported coalition killing a lot of
+civilians, would not that fuel what terrorists are trying to do
+in recruiting members and causing more people to hate the
+United States as well as the British, who are also providing
+these munitions?
+    Dr. Rand. Yes. As my colleague said earlier today----
+    Mr. Deutch. Turn on your mike, please.
+    Dr. Rand. Thank you, Congressman. As my colleague had said
+earlier in the hearing, I think if you are sitting in Yemen,
+none of the outside powers look particularly appealing at this
+point, and I think there is a lot of blaming that is going on.
+But yes, this is so directly and obviously a recruiting vehicle
+for radicalism, extremism, and the next generation of AQAP in
+Yemen. And behind every sortie is clearly the image of a U.S.-
+sold weapon, a U.S.-sold airplane, and the maintenance, and the
+other support services. So there is no doubt there is a real,
+real risk here of generating greater terrorist threat in Yemen
+of the like AQAP or a future generation of radicalization.
+    Mr. Lieu. And then just as a question for anyone on the
+panel: It was reported today that the Trump administration is
+reversing an executive order that would essentially now hide
+the number of civilian deaths being caused from drone strikes
+from our intelligence agencies. How many of you think that is a
+good idea? OK. No one does.
+    So what is your view of what the harm would be if we hide
+that information from Congress and the American people?
+    Dr. Rand. I am sure my colleagues have ideas and have
+responses as well, but just in brief, the idea of the 2016
+executive order was in keeping with democratic principles of
+transparency and clear communication to be open about the
+civilian casualties in line with current operational procedure
+at DOD. That was the goal of the 2016 policy, and revoking it
+sends a signal to the American public and to, more importantly
+probably, allies, friends, and enemies around the world that
+the United States will be hiding its civilian casualties.
+    I would also say this is a global executive order. It is
+not related to Yemen, but it is related to today's hearing
+because one of the original purposes of the 2016 executive
+order was to send the signal to U.S. allies of how America
+handles its own civilian casualties and wartime operation, to
+send the signal that the U.S. is open, the U.S. is transparent,
+the U.S. is willing to investigate ourselves, which was what we
+were urging the coalition to do and continue to urge it. So
+there was a diplomatic value to this executive order in 2016,
+and revoking it is stepping back and saying that we are not
+going to expect allies and partners of the United States to
+adhere to the same standards of accountability of the U.S.
+military.
+    Mr. Lieu. Thank you.
+    I yield back.
+    Mr. Deutch. Thank you very much, Mr. Lieu. This was an
+excellent hearing. I am really grateful to all of the
+witnesses.
+    Yemen is a humanitarian crisis, and American leadership is
+necessary to ensure food is delivered and that we stop the
+spread of the disease, but ultimately a political solution is
+necessary to end the war, and American leverage is what can be
+used to accomplish that.
+    Again, I thank the witnesses.
+    Ms. Almutawakel, your voice here with us today is so
+critically important to our decisionmaking going forward. I
+would just ask that, as you return to Yemen, that you make sure
+that you take with you the commitment by this committee and by
+this Congress to continue to focus on the crisis in Yemen and
+the war and work to see that it ends.
+    And, with that, this committee is adjourned.
+    [The information referred to follows:]
+    [Whereupon, at 4:06 p.m., the subcommittee was adjourned.]
+                                APPENDIX
+[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
+                        STATEMENT FOR THE RECORD
+[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
+            RESPONSES TO QUESTIONS SUBMITTED FOR THE RECORD
+ [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
+                                 <all>
+</pre></body></html>

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+<html>
+<title> - MARKUP of H. Res. 75, H.R. 739, H. Res. 156, H.R. 596, and H.R. 295</title>
+<body><pre>
+[House Hearing, 116 Congress]
+[From the U.S. Government Publishing Office]
+                    MARKUP of H. Res. 75, H.R. 739,
+                  H. Res. 156, H.R. 596, and H.R. 295
+=======================================================================
+                                 MARKUP
+                               BEFORE THE
+                      COMMITTEE ON FOREIGN AFFAIRS
+                        HOUSE OF REPRESENTATIVES
+                     ONE HUNDRED SIXTEENTH CONGRESS
+                             FIRST SESSION
+                               __________
+                             MARCH 7, 2019
+                               __________
+                           Serial No. 116-11
+                               __________
+        Printed for the use of the Committee on Foreign Affairs
+ [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
+       Available:  http://www.foreignaffairs.house.gov/, http://
+                            docs.house.gov,
+                       or http://www.govinfo.gov
+                               __________
+                   U.S. GOVERNMENT PUBLISHING OFFICE
+35-369PDF                  WASHINGTON : 2019
+--------------------------------------------------------------------------------------
+For sale by the Superintendent of Documents, U.S. Government Publishing Office,
+http://bookstore.gpo.gov. For more information, contact the GPO Customer Contact Center,
+U.S. Government Publishing Office. Phone 202-512-1800, or 866-512-1800 (toll-free).E-mail,
+<a href="/cdn-cgi/l/email-protection" class="__cf_email__" data-cfemail="e483948ba4879197908c818894ca878b89">[email&#160;protected]</a>.
+                      COMMITTEE ON FOREIGN AFFAIRS
+ ELIOT L. ENGEL, New York, Chairman
+BRAD SHERMAN, California             MICHAEL T. McCAUL, Texas,
+Ranking
+GREGORY W. MEEKS, New York               Member
+ALBIO SIRES, New Jersey		     CHRISTOPHER H. SMITH, New Jersey
+GERALD E. CONNOLLY, Virginia         STEVE CHABOT, Ohio
+THEODORE E. DEUTCH, Florida	     JOE WILSON, South Carolina
+KAREN BASS, California		     SCOTT PERRY, Pennsylvania
+WILLIAM KEATING, Massachusetts	     TED S. YOHO, Florida
+DAVID CICILLINE, Rhode Island	     ADAM KINZINGER, Illinois
+AMI BERA, California		     LEE ZELDIN, New York
+JOAQUIN CASTRO, Texas		     JIM SENSENBRENNER, Wisconsin
+DINA TITUS, Nevada		     ANN WAGNER, Missouri
+ADRIANO ESPAILLAT, New York          BRIAN MAST, Florida
+TED LIEU, California		     FRANCIS ROONEY, Florida
+SUSAN WILD, Pennsylvania	     BRIAN FITZPATRICK, Pennsylvania
+DEAN PHILLPS, Minnesota	             JOHN CURTIS, Utah
+ILHAN OMAR, Minnesota		     KEN BUCK, Colorado
+COLIN ALLRED, Texas		     RON WRIGHT, Texas
+ANDY LEVIN, Michigan		     GUY RESCHENTHALER, Pennsylvania
+ABIGAIL SPANBERGER, Virginia	     TIM BURCHETT, Tennessee
+CHRISSY HOULAHAN, Pennsylvania       GREG PENCE, Indiana
+TOM MALINOWSKI, New Jersey	     STEVE WATKINS, Kansas
+DAVID TRONE, Maryland		     MIKE GUEST, Mississippi
+JIM COSTA, California
+JUAN VARGAS, California
+VICENTE GONZALEZ, Texas
+                Jason Steinbaum, Democrat Staff Director
+               Brendan Shieds, Republican Staff Director
+                            C O N T E N T S
+                              ----------
+                                                                   Page
+                                APPENDIX
+Hearing Notice...................................................   106
+Hearing Minutes..................................................   107
+Hearing Attendance...............................................   108
+Prepared statement submitted from Representative Castro..........   109
+                             MARKUP SUMMARY
+Markup Summary...................................................   111
+             ADDITIONAL MATERIALS SUBMITTED FOR THE RECORD
+H. Res. 75, Strongly Condemning the January 2019 Terrorist attack
+  on the 14 Riverside Complex in Nairobi, Kenya..................     2
+H.R. 739, the Cyber Diplomacy Act of 2019 With the McCaul
+  Amendment......................................................     6
+Amendment in the Nature of a Substitute to H.R. 739 Offered by
+  Mr. Mccaul of Texas............................................    35
+H. Res. 156 Calling for Accountability and Justice for the
+  Assassination of Boris Nemtsov with the two Malinowski
+  Amendments.....................................................    64
+Amendment to H. Res. 156 Offered by Mr. Malinowski of New Jersey
+  (1 of 2 Listed)................................................    72
+Amendment to H. Res. 156 Offered by Mr. Malinowski of New Jersey
+  (2 of 2 Listed)................................................    73
+H.R. 596, Crimea Annexation Nonrecognition Act with the Connolly
+  Amendment in the Nature of a Substitute........................    74
+Amendment in the Nature of a Substitute to H.R. 596 Offered by
+  Mr. Connolly of Virginia.......................................    76
+H.R. 295, End Banking for Human Traffickers Act of 2019 with the
+  Engel Amendment in the Nature of a Substitute..................    78
+Amendment in the Nature of a Substitute to H.R. 295 Offered by
+  Mr. Engel of New York..........................................    87
+                       MARKUP OF VARIOUS MEASURES
+                        Thursday, March 7, 2019
+                           House of Representatives
+                       Committee on Foreign Affairs
+                                                     Washington, DC
+    The committee met, pursuant to notice, at 10:05 a.m., in
+Room 2172 Rayburn House Office Building, Hon. Eliot Engel
+(chairman of the committee) presiding.
+    Chairman Engel. So pursuant to notice, we meet today to
+markup five bipartisan measures. Without objection, all members
+may have 5 days to submit statements or extraneous materials on
+today's business.
+    As members were notified yesterday, we intend to consider
+today's measures en bloc. The measures are H. Res. 75, strongly
+condemning the January 2019 terrorist attack on the 14
+Riverside Complex in Nairobi, Kenya; H.R. 739, the Cyber
+Diplomacy Act of 2019 with the McCaul Amendment; H. Res. 156
+calling for accountability and justice for the assassination of
+Boris Nemtsov with the two Malinowski Amendments; H.R. 596,
+Crimea Annexation Nonrecognition Act with the Connolly
+Amendment in the nature of a substitute; and H.R. 295, End
+Banking for Human Traffickers Act of 2019 with the Engel
+Amendment in the nature of a substitute.
+    [The bills and resolutions offered en bloc follow:]
+    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
+    Chairman Engel. At this time I recognize myself to speak on
+today's business.
+    We have five good measures before us today and I am pleased
+to support them all. The first measure I want to discuss is H.
+Res. 156, a resolution I authored with Ranking Member McCaul
+that calls for justice for the assassination of Boris Nemtsov.
+    Nemtsov was a brave advocate for democracy and free
+elections in Russia. Sadly, that put him right in Vladimir
+Putin's cross hairs.
+    Now he joins a long list of brave journalists, human rights
+activists, and political opponents murdered by Putin's henchmen
+in their quest to silence all criticism of the Kremlin and
+stamp out any perceived threat to Putin's authoritarian regime.
+    This resolution condemns the Kremlin's systematic targeting
+of its political opponents and it calls on the administration
+to implement Magnitsky Act sanctions on those responsible for
+Nemtsov's murder and cover up.
+    It also requires the administration to deliver to Congress
+a thorough report on Nemtsov's assassination. That is a
+critical part of this legislation because, sadly, the
+administration has not done nearly enough to give us much
+reason to stand up to Russia and call out Putin's thuggery.
+    So it is up to Congress to assert American leadership on
+this issue and Putin's strong arm tactics extend beyond the
+authoritarian rule in his own country. We have seen this all
+too clearly in Russia's malign actions with its neighbors,
+which brings me to our next measure.
+    But before I do that, I want to just personally tell you I
+have on my desk in my office a picture of me shaking hands with
+Boris Nemtsov. It is shocking. When we moved offices I saw that
+picture. I had forgotten about it.
+    He came and visited me and told me he was the opponent of
+Putin and that he was for free, independent elections and for a
+free Russia.
+    I was very, very impressed with him and thought, wow, this
+man is really special. Unfortunately, Putin thought so too and
+had him killed right in Moscow. But I remember him telling me
+about how he felt how important his work was, and I told him
+that I thought he was really working, not for just the people
+in Russia, but for people all over the world.
+    So I want to just mention that because it was quite an
+honor for me to meet Boris Nemtsov and, of course, just a few
+months later he was murdered.
+    And so it is just startling.
+    The Crimea Annexation Nonrecognition Act puts that
+conviction into law by stating that the United States will not
+recognize Russia's claims of sovereignty in Ukraine.
+    Putin's disrespect for independent, sovereign democracies
+is something we in the United States know all too well. By
+advancing this legislation we send a clear message to our
+Ukrainian partners and their neighbors. We stand with you. I
+support this bill and I urge my colleagues to do the same.
+    And just as an aside, I have been a strong supporter of
+Ukraine being admitted to NATO and I think we should pursue
+that down the road.
+    It is critical that we support our partners and allies
+whenever they are under threat and that brings me to our next
+measure, H. Res. 75. I want to thank Mr. McCaul, Ms. Bass, and
+Mr. Smith for joining me in this resolution that strongly
+condemns the January 2019 attack by the terrorist group Al-
+Shabaab in Nairobi, Kenya.
+    This horrific attack killed dozens of people, including
+American citizen Jason Spindler. Just last week, we saw another
+Al-Shabaab attack in Mogadishu, Somalia, claim the lives of
+nearly 30 people.
+    So this resolution rightly affirms that the United States
+supports our regional partners in their ongoing efforts to
+counter terrorism and violent extremism in the Horn of Africa.
+I hope all members will join me in supporting this measure.
+    Next, I would like to discuss the End Banking for Human
+Traffickers Act introduced by Mr. Fitzpatrick and Mr. Keating.
+It is horrible that in 2019, we still live in a world where
+human beings are held in slavery. It is a moral outrage.
+    So we need to be consistently evaluating our government's
+efforts on this issue and looking for areas where we can
+improve. This bill does just that by having the financial
+industry play a bigger role in tracking down human traffickers.
+    By connecting the industry with experts on human
+trafficking, banks and other financial institutions will be
+better equipped to spot suspect financial transactions that may
+be related to this heinous criminal enterprise.
+    This bill continues our fight against the scourge of human
+trafficking, and I urge my colleagues to join me in supporting
+it.
+    And finally, we turn to Ranking Member McCall's bill, the
+Cyber Diplomacy Act. Last Congress, I worked with Chairman
+Royce on this bill and we got it through this committee, the
+House, and the Senate Foreign Relations Committee with broad
+bipartisan support.
+    This Congress, Ranking Member McCaul has taken up that
+mantle and I am pleased to join him as we work to get this bill
+over the finish line and on the president's desk.
+    Cyberspace is an increasingly critical part of foreign
+policy and we desperately need to update our government
+agencies to reflect that reality.
+    America has significant interest in cybersecurity, the
+digital economy, issues of internet freedom, and we need to be
+engaging with the international community to articulate and
+protect those interests.
+    If we do not focus on all of these areas, we run the real
+risk of seeing authoritarian regimes like Russia and China
+playing a bigger role in determining the way the international
+community handles these issues.
+    So this bill would create a high-level Ambassador position
+at the State Department dedicated to this endeavor and require
+a comprehensive cyberspace strategy.
+    I am frustrated by the lack of progress on this issue at
+the State Department, and I hope they will work with us to
+ensure that this bill becomes law.
+    I hope my colleagues will join me in supporting this
+measure.
+    Thank you to all of our members for your hard work on these
+good bills before us today. As I said before, I am pleased to
+support them all.
+    And now, I recognize the ranking member, Mike McCaul of
+Texas, for his opening remarks.
+    Mr. McCaul. Thank you, Mr. Chairman.
+    Today, our committee will markup three important bills and
+two resolutions, the Cyber Diplomacy Act, which I introduced
+with you, Mr. Chairman. I want to thank you for working with me
+on that. It takes several steps to support an open and secure
+cyberspace. As chairman of Homeland Security, I elevated the
+mission at the Department of Homeland Security and I intend to
+do the same with you, sir, at the Department of State.
+    It establishes an ambassador at large to lead the State's
+cyber diplomacy efforts, outlines an international cyber policy
+to advance democratic principles and reject Russian and Chinese
+attempts to control and censor the internet.
+    It requires the State Department to provide assessments
+related to internet freedom, freedoms in other countries, and,
+as you know, Mr. Chairman, malicious cyber activity by State
+and non-State actors threatens our national security and harms
+our economic interests.
+    We understand the State Department has plans for a new
+cyber bureau, which varies a little bit from what our bill
+calls for. I pledge to work with the State Department and you,
+Mr. Chairman, and the Senate to find the best path forward to
+advance our shared goals of bolstering and elevating State's
+critical cyber mission.
+    I also want to thank Mr. Fitzpatrick and Mr. Keating for
+their bipartisan bill, the End Banking for Human Traffickers
+Act, which will help address the scourge of human trafficking.
+    This bill will help choke off traffickers' access to
+financial systems. It is time we put an end to this modern-day
+form of slavery once and for all.
+    We are also marking up the Crimea Annexation Nonrecognition
+Act. This bill clearly states that America will not recognize
+Russian sovereignty over Crimea.
+    Doing so would condone Russia's belligerent behavior toward
+its neighbors. Vladimir Putin needs to understand that we will
+not tolerate this kind of aggression in Crimea or anywhere else
+in the world.
+    And that is also why today's resolution condemning the
+assassination of Boris Nemtsov is also important. We cannot be
+silent when political opponents are targeted for supporting
+democratic reforms.
+    I was proud to introduce this resolution with Chairman
+Engel because Putin needs to know that both Democrats and
+Republicans will call out and condemn his authoritarian ways.
+    And finally, we must continue to stand united in our fight
+against Islamist terrorism. The terror attack in Nairobi,
+Kenya, on January the 15th that killed 21 people including
+Jason Spindler, a fellow Texan, was a painful reminder that our
+fight against terrorism is a global struggle.
+    Our resolution condemns this attack and reaffirms our
+commitment to eradicating this evil.
+    I look forward to passing these bills out of committee with
+bipartisan support.
+    And, finally, Mr. Chairman, on the floor and in the halls
+of Congress there has been much discussion recently about anti-
+Semitism. I want to thank you for your leadership on this issue
+and I look forward to continuing to work with you on measures
+that support our close ally, Israel, and denounce anti-Semitism
+wherever it may be.
+    And with that, I yield back the balance of my time.
+    Chairman Engel. Thank you, Mr. McCaul.
+    Are there any other members seeking recognition?
+    Mr. Connolly. Mr. Chairman?
+    Chairman Engel. Yes, Mr. Connolly.
+    Mr. Connolly. I thank the chair and the ranking member. I
+want to thank them both for putting together this bipartisan
+package of five bills for our consideration today.
+    These measures condemn terrorist attacks, strengthen U.S.
+diplomacy, condemn Russia's violations of human rights and
+territorial sovereignty, and bolster U.S. efforts to reduce
+global human trafficking, the scourge of our time.
+    In particular, Mr. Chairman, I would like to thank you and
+the ranking member for including in this markup H.R. 596, the
+Crimea Annexation Nonrecognition Act, which I introduced with
+my good friend and Republican colleague, Representative Steve
+Chabot.
+    This bill states that it is the policy of the United States
+not to recognize the Russian Federation's claim of sovereignty
+over Crimea, its airspace, or its territorial waters.
+    Furthermore, this bill prohibits the U.S. Government from
+taking any action that implies recognition of Russian
+sovereignty over Crimea.
+    It has been the longstanding policy of the United States to
+not recognize territorial changes effected by force as dictated
+by the long-ago Stimson Doctrine established in 1932 by then-
+Secretary of State Henry Stimson.
+    The matter of rejecting the forcible and illegal attack on
+sovereign territory is so important we should be satisfied with
+nothing less than absolute clarity about our position, which is
+one that supports Ukraine sovereignty over its own territory in
+Crimea.
+    Failure to stand up, as Mr. McCaul just said, to Putin's
+illegal annexation of Crimea sets a dangerous and irrevocable
+precedent. Crimea was Russia's original violation in Ukraine
+and we have limited credibility objecting to Russia's
+subsequent invasion of the Luhansk and Donetsk if we do not
+take a stand in Crimea.
+    Russian occupation of Crimea has inflicted great harm
+within the Ukraine, throughout former Soviet occupied
+territories, and beyond.
+    What has happened in Ukraine--Russia's forcible and illegal
+annexation of Crimea, its invasion of Eastern Ukraine, and
+continued occupation in Crimea, Luhansk and Donetsk, has
+precipitated an international crisis and the resulting conflict
+has claimed more than 10,000 lives.
+    Russia has subjected Crimeans who refuse Russian
+citizenship to discrimination in accessing education, health
+care, and employment, and Russian authorities have attacked
+travel rights and the free press.
+    Acquiesence on the part of the United States threatens the
+security of all sovereign nations. Russia's forcible and
+illegal annexation of Crimea has sent shock waves throughout
+the former Soviet occupied territories, many of whom are now
+NATO allies, including the Baltic States.
+    After the Welles Declaration in June 1940, the U.S. refused
+to recognize the Soviet Union's de facto or de jure sovereignty
+over the Baltics during the Soviet Union's 50 years of illegal
+occupation.
+    The Baltic Republics eventually received their independence
+and they are now reliable NATO allies, in part because of our
+steadfastness.
+    We first introduced this bill in the wake of Russia's
+forcible and illegal annexation in 2014. This committee
+previously passed this legislation in the 113th Congress.
+    I inserted similar language into the Fiscal Year 2016
+National Defense Authorization Act in order to prohibit the use
+of defense funds in a manner that recognizes Russian
+sovereignty over Crimea. That is to say that we did not.
+    That language has remained in the NDAA, I am grateful to
+say, every year since. I have also successfully authored an
+amendment to Stand For Ukraine Act, which would create only one
+condition under which the president can relax Crimea-related
+sanctions--the restoration of Ukraine sovereignty.
+    The United States must lead the way in refusing to
+recognize or legitimize Russia's illegal and forcible
+annexation in Crimea. That is why both Mr. Chabot and I are
+glad to offer this bill, which expresses the will of Congress
+as a loud and declarative voice for sovereignty and freedom and
+I urge my colleagues to support it.
+    And, again, I thank the chair and ranking member for
+including it in today's markup. I yield back.
+    Chairman Engel. Thank you very much, Mr. Connolly.
+    Mr. Smith.
+    Mr. Smith. Thank you very much, Mr. Chairman.
+    Chairman, I strongly support your resolution, H. Res. 156,
+calling for accountability and justice for the assassination of
+Boris Nemtsov, a Russian patriot killed in 2015, a great
+defender of democracy in his home country of Russia.
+    Last July, I had the privilege of leading the United States
+delegation to the OSCE Parliamentary Assembly in Berlin and I
+actually chaired the public event that you reference in your
+resolution, the July 8th public event, and we featured Hanna
+Nemtsova, Boris Nemtsov's daughter, who was absolutely
+compelling and brave and full of courage.
+    Boris's friend and colleague, Vladimir Kara-Murza, who
+serves as chairman of the board of trustees for the Boris
+Nemtsov Foundation for Freedom, and Vadim Prokhorov, who is a
+lawyer for the Nemtsov family.
+    I believe that this resolution is a timely followup to that
+OSCE effort because we have been calling on the administration
+to do more and I think the fact that you articulate the concern
+and the need, frankly, to do some better reporting and to hold
+those responsible besides the five low-level individuals who
+have been tried--who ordered the hit.
+    It was an assassination, and it seems to me that it is
+time, frankly, to really impose Magnitsky sanctions on those
+who are directly responsible for this. But we need that
+information. We need our government to redouble down. So thank
+you for that resolution.
+    Second, I do want to thank you for marking up H.R. 295, the
+End Banking for Human Traffickers Act of 2019. This is
+authored, of course, by my good friend and colleague, Mr.
+Fitzpatrick.
+    This bill will help ensure that human traffickers find
+trafficking even more unprofitable because they will be curbed
+in their financial work that they do. They often use banks.
+This helps to increase that net to catch these people.
+    We have been making strides, Mr. Chairman, in this
+direction. For example, last Congress the Frederick Douglass
+Trafficking Victims Prevention and Protection Reauthorization
+Act, which I authored along with my friend and colleague, Karen
+Bass, the prime Democratic co-sponsor, was signed into law on
+January 8th, and among its many provisions, it added the
+secretary of the Treasury to the President's Inter-Agency Task
+Force to monitor and combat trafficking in persons.
+    H.R. 295 calls on the task force to evaluate the anti-money
+laundering efforts of the U.S. Government and U.S. financial
+institutions to see if we are doing enough, and I do not think
+we are, to recognize and act against financial movements to
+signal red flags that human trafficking is occurring.
+    The task force will consult with trafficking survivors and
+the financial industry representatives who have been pioneering
+anti-trafficking efforts in their best practices.
+    So, again, I want to thank you for all of these bills. I
+think they are all excellent pieces of legislation and I
+especially want to thank Mr. Fitzpatrick for his leadership on
+combatting the scourge of human trafficking.
+    Chairman Engel. Thank you, Mr. Smith.
+    Is there anyone else who seeks recognition?
+    Mr. Chabot. Mr. Chairman? Mr. Chairman?
+    Chairman Engel. Mr. Chabot.
+    Mr. Chabot. Thank you, Mr. Chairman. Move to strike the
+last word.
+    Mr. Chairman, I want to thank you for holding this markup
+today, and I want to thank you for this slate of five excellent
+bipartisan bills.
+    First, Ukraine--I am honored to be the lead Republican co-
+sponsor of H.R. 596, Mr. Connolly's Crimean Annexation
+Nonrecognition Act, and I want to thank him for his hard work
+on this important legislation.
+    We have been working together on this since the bully Putin
+first acted on Crimea. I know a number of members of this
+committee have done so and I think it is critical that we
+continue to do so. So I want to thank Mr. Connolly for his hard
+work on this.
+    Passage of this bill would cement firmly in place the
+policy that the United States will not recognize Putin's bogus
+claims over Crimea and will prohibit any part of our government
+from taking any action that would imply our recognition of
+Russian sovereignty over the peninsula.
+    It is vitally important that we support a democratic and
+unified Ukraine by not giving in to Putin's thuggish behavior
+and that behavior continues.
+    For example, in November, Russian vessels blockaded the
+Kerch Strait, the entrance to the Sea of Azov, and illegally
+seized Ukrainian naval vessels.
+    By these and other actions, Putin is seeking to strangle
+Ukraine's trade and in all likelihood annex more of it. We
+cannot let that happen. The world cannot stand by as it did
+previously when Putin annexed Crimea.
+    Unfortunately, Putin's gangster ways are not confined to
+his foreign policy. That is why we are considering H. Res. 156,
+which I am also a co-sponsor of. This resolution calls for
+justice for Boris Nemtsov, who, as was mentioned, was murdered
+in cold blood near the Kremlin on February 25th of 2015.
+    For those who do not know, Mr. Nemtsov was a leading
+opposition figure, outspoken Putin critic, and the former first
+deputy prime minister of Russia and was in all likelihood--we
+do not know for absolutely sure--but in all likelihood was
+executed at the direction of Putin.
+    The Russian government must do a thorough investigation to
+uncover the truth behind Mr. Nemtsov--that we should not let
+this rest.
+    I also want to turn briefly to a couple of other bills we
+have. The terrorist attack on Kenya earlier this year is yet
+another example of the scourge of radical terrorism and we must
+continue to fight against that every time it rears its ugly
+head.
+    That is why I am a co-sponsor of H. Res. 75. And finally, I
+want to thank Ranking Member McCaul for his leadership on the
+critical issue of Cybersecurity.
+    As a co-sponsor of the Cyber Diplomacy Act, I think it is
+necessary that we work with our like-minded allies to ensure
+that the internet remains a place of robust debate and access
+to uncensored information.
+    This legislation provides the State Department tools and
+direction to help accomplish this important priority, and I
+want to echo the words that our ranking member mentioned
+before--Mr. McCaul.
+    I completely agree with him that there is absolutely no
+place for anti-Semitism in this country, on this globe, or in
+this committee. I have been on this committee for a long time--
+23 years--and we have always been bipartisan on that issue. I
+would hope that would continue.
+    Israel is a strong ally of the United States. The Jewish
+people have been for a long time and will continue to be,
+whether it is as a nation or whether as a people, and there is
+absolutely no room for anti-Semitism.
+    And I think that we should work on that in a bipartisan
+manner, and it always has been that way. I hope it will be in
+the future. There is absolutely no place for anti-Semitism.
+    Thank you, Mr. Chairman.
+    Chairman Engel. Thank you very much, Mr. Chabot.
+    Mr. Malinowski.
+    Mr. Malinowski. Thank you. Thank you so much, Chairman
+Engel, Ranking Member McCaul.
+    I wanted to say a few words in particular about the
+resolution regarding Boris Nemtsov and to explain the two small
+amendments that I will be offering today.
+    First of all, thank you for introducing this resolution to
+help us remember this very good man and to put the Putin regime
+on notice that we are not going to forget what happened and who
+is responsible.
+    If you read the resolution, you will see that one of the
+central villains in this terrible story is Ramzan Kadyrov, the
+strong man who rules and has ruled Chechnya with an iron hand
+for many, many years.
+    Even the flawed Russian investigation of the murder of Mr.
+Nemtsov determined that the murder was carried out by members
+of an elite battalion loyal to Kadyrov.
+    Kadyrov publicly praised the gunmen. Previously, he had
+publicly called for the death of Nemtsov. One of the chief
+suspects is still living at large in Chechnya under Kadyrov's
+protection.
+    Kadyrov has also, over the years, been credibly accused of
+murdering human rights activists, journalists. He has ordered
+his police forces to round up and torture gay men and women in
+Chechnya. He has ordered the assassination of his critics
+living in other countries, in Europe, and in the Middle East.
+    In 2017, the U.S. Government put Mr. Kadyrov on the Global
+Magnitsky sanctions list, which means that his business
+activities overseas involving any sort of transactions through
+international banks should be blocked.
+    In reality, though, Mr. Kadyrov has repeatedly shown
+himself outside of Russia, particularly in Persian Gulf
+countries such as the UAE and Saudi Arabia.
+    His hobby is horse racing. He spends millions of dollars
+purchasing race horses, winning races around the world, again,
+particularly in the Middle East.
+    He is blocked in Europe. What my first amendment does is
+simply to urge the administration to prioritize sanctions-
+enforcement with respect to Ramzan Kadyrov, to investigate his
+business activities and that of entities he may control outside
+of the Russian federation and to determine whether any of them
+might implicate the sanctions that we have imposed.
+    The second amendment ensures that the resolution includes
+an additional key suspect in Mr. Nemtsov's murder, Adam
+Delimkhanov, who is a notorious associate and relative of
+Ramzan Kadyrov.
+    Delimkhanov is a member of the Russian State Duma where he
+has abused his immunity to shield himself from accountability
+for a range of human rights abuses.
+    He has been identified by multiple independent sources as
+one of the organizers of Mr. Nemtsov's murder. So this
+amendment would add his name to the list of suspects in two
+clauses of the resolution's preamble.
+    I ask my colleagues to support both of these amendments.
+Thank you very much.
+    Chairman Engel. Thank you, Mr. Malinowski.
+    Mr. Fitzpatrick.
+    Mr. Fitzpatrick. Thank you, Mr. Chairman.
+    Chairman, Ranking Member, I really do appreciate your
+considering of H.R. 295. As an FBI agent, one of the most
+horrific crimes that we were called upon to investigate was
+human trafficking, and human trafficking continues to devastate
+millions of lives around the world.
+    And this criminal conduct may seem a distant problem but it
+is far from it. It exists right in all of our back yards, in
+every single congressional district in this country, in all of
+our communities, and at times it is right in front of us and we
+do not even know it exists.
+    My legislation, H.R. 295, the End Banking of Human
+Traffickers Act, is one step we can take to end the suffering
+caused by human trafficking.
+    Traffickers are not hiding their illegal profits under a
+mattress or burying them in their back yard. They use our very
+sophisticated global financial system to launder their illicit
+funds through banks, credit card companies, and money transfer
+companies, which are all used by traffickers to facilitate
+their business and to perpetuate their exploitation of victims.
+    The scale of profits from this illicit trade is really
+staggering. The International Labor Organization estimates that
+over $150 billion in illegal profits are made from forced labor
+each year, and $99 billion are earned through the exploitation
+of victims of sexual exploitation, making human trafficking the
+third most lucrative criminal enterprise on this planet.
+    The perpetrators of this exploitation play on the
+defenseless in our society, including young children. Cutting
+off their access to the banking system is a critical aspect
+both from the investigative standpoint, and the legislative
+standpoint and I am proud to push this bipartisan bill with my
+friend and colleague, Congressman Keating, to continue working
+to end this horror once and for all.
+    And I thank my colleagues both on and off this committee
+for their support, many of whom have joined this effort. I also
+want to thank Congressman Chris Smith from New Jersey, who has
+made it one of his top priorities to advance this mission.
+    This legislation directs Federal banking regulators to work
+with law enforcement and financial institutions to combat the
+use of the financial system for human trafficking.
+    The bill further increases collaboration between law
+enforcement and experts in financial crimes by adding financial
+intelligence and regulatory officers to the President's Inter-
+Agency Task Force to monitor and combat trafficking in persons
+and requires the task force to develop recommendations for
+Congress and regulators that would strengthen anti-money
+laundering programs to better target human trafficking.
+    Moreover, this bill allows advocates of human trafficking
+victims to serve as stakeholders and to provide feedback to the
+U.S. Treasury and, additionally, clarifies that banks not
+restrict trafficker victims' access to bank accounts.
+    I urge ever Member of Congress, especially those on this
+committee, to support this legislation, which passed both the
+committee and the House last Congress with broad bipartisan
+support.
+    We must do everything possible to put an end to human
+trafficking and this legislation is a very important step along
+that path.
+    Mr. Chairman, I yield back.
+    Chairman Engel. Thank you, Mr. Fitzpatrick.
+    Is there anyone else who seeks recognition?
+    OK. Hearing no further requests for recognition, then
+without objection the committee will proceed to consider the
+noticed items en bloc. A reporting quorum is present.
+    Without objection, the question occurs on the measures en
+bloc as amended.
+    All those in favor, say aye.
+    All those opposed, no.
+    In the opinion of the chair, the ayes have it.
+    The measures considered en bloc are agreed to and without
+objection each measure in the en bloc is ordered favorably
+reported as amended and each amendment to each bill shall be
+reported as a single amendment in the nature of a substitute.
+    Without objection, staff is authorized to make any
+technical and conforming changes and the chair is authorized to
+seek House consideration under suspension of the rules.
+    This concludes----
+    Mr. McCaul. Mr. Chairman?
+    Chairman Engel. Yes, Mr. McCaul.
+    Mr. McCaul. Pursuant to House rules, I request that members
+have the opportunity to submit views for any committee report
+that may be produced on any of today's measures.
+    Chairman Engel. Obviously, there is no objection to that
+and I thank Ranking Member McCaul and all of the committee
+members for their contribution and assistance with today's
+markup.
+    The committee stands adjourned.
+    [Whereupon, at 10:37 a.m., the committee was adjourned.]
+    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
+                                 [all]
+</pre><script data-cfasync="false" src="/cdn-cgi/scripts/5c5dd728/cloudflare-static/email-decode.min.js"></script></body></html>

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+<html>
+<title> - THE STATUS OF AMERICAN HOSTAGES IN IRAN</title>
+<body><pre>
+[House Hearing, 116 Congress]
+[From the U.S. Government Publishing Office]
+                THE STATUS OF AMERICAN HOSTAGES IN IRAN
+=======================================================================
+                                HEARING
+                               BEFORE THE
+                            SUBCOMMITTEE ON
+       THE MIDDLE EAST, NORTH AFRICA, AND INTERNATIONAL TERRORISM
+                                 OF THE
+                      COMMITTEE ON FOREIGN AFFAIRS
+                        HOUSE OF REPRESENTATIVES
+                     ONE HUNDRED SIXTEENTH CONGRESS
+                             FIRST SESSION
+                               __________
+                             MARCH 7, 2019
+                               __________
+                           Serial No. 116-12
+                               __________
+        Printed for the use of the Committee on Foreign Affairs
+[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
+       Available:  http://www.foreignaffairs.house.gov/, http://
+                            docs.house.gov,
+                       or http://www.govinfo.gov
+                               __________
+                    U.S. GOVERNMENT PUBLISHING OFFICE
+35-370PDF                  WASHINGTON : 2019
+--------------------------------------------------------------------------------------
+For sale by the Superintendent of Documents, U.S. Government Publishing Office,
+http://bookstore.gpo.gov. For more information, contact the GPO Customer Contact Center,
+U.S. Government Publishing Office. Phone 202-512-1800, or 866-512-1800 (toll-free).
+E-mail, <a href="/cdn-cgi/l/email-protection" class="__cf_email__" data-cfemail="65150a25061016110d0009154b060a08">[email&#160;protected]</a>.
+                      COMMITTEE ON FOREIGN AFFAIRS
+                   ELIOT L. ENGEL, New York, Chairman
+ BRAD SHERMAN, California             MICHAEL T. McCAUL, Texas, Ranking
+GREGORY W. MEEKS, New York               Member
+ALBIO SIRES, New Jersey		     CHRISTOPHER H. SMITH, New Jersey
+GERALD E. CONNOLLY, Virginia         STEVE CHABOT, Ohio
+THEODORE E. DEUTCH, Florida	     JOE WILSON, South Carolina
+KAREN BASS, California		     SCOTT PERRY, Pennsylvania
+WILLIAM KEATING, Massachusetts	     TED S. YOHO, Florida
+DAVID CICILLINE, Rhode Island	     ADAM KINZINGER, Illinois
+AMI BERA, California		     LEE ZELDIN, New York
+JOAQUIN CASTRO, Texas		     JIM SENSENBRENNER, Wisconsin
+DINA TITUS, Nevada		     ANN WAGNER, Missouri
+ADRIANO ESPAILLAT, New York          BRIAN MAST, Florida
+TED LIEU, California		     FRANCIS ROONEY, Florida
+SUSAN WILD, Pennsylvania	     BRIAN FITZPATRICK, Pennsylvania
+DEAN PHILLPS, Minnesota	             JOHN CURTIS, Utah
+ILHAN OMAR, Minnesota		     KEN BUCK, Colorado
+COLIN ALLRED, Texas		     RON WRIGHT, Texas
+ANDY LEVIN, Michigan		     GUY RESCHENTHALER, Pennsylvania
+ABIGAIL SPANBERGER, Virginia	     TIM BURCHETT, Tennessee
+CHRISSY HOULAHAN, Pennsylvania       GREG PENCE, Indiana
+TOM MALINOWSKI, New Jersey	     STEVE WATKINS, Kansas
+DAVID TRONE, Maryland		     MIKE GUEST, Mississippi
+JIM COSTA, California
+JUAN VARGAS, California
+VICENTE GONZALEZ, Texas
+                     Jason Steinbaum, Staff Director
+               Brendon Shields, Republican Staff Director
+                                 ------
+   SUBCOMMITTEE ON THE MIDDLE EAST, NORTH AFRICA, AND INTERNATIONAL
+                               TERRORISM
+                       THEODORE DEUTCH, Chairman
+GERALD CONNOLLY, Virginia            JOE WILSON, South Carolina,
+DAVID CICILLINE, Rhode Island            Ranking Member
+TED LIEU, California                 STEVE CHABOT, Ohio
+COLIN ALLRED, Texas                  ADAM KINZINGER, Illinois
+TOM MALINOWSKI, New Jersey           LEE ZELDIN, New York
+DAVID TRONE, Maryland                BRIAN MAST, Florida
+BRAD SHERMAN, California             BRIAN FITZPATRICK, Pennsylvania
+WILLIAM KEATING, Massachusetts       GUY RESCHENTHALER, Pennsylvania
+JUAN VARGAS, California              STEVE WATKINS, Kansas
+                      Casey Kustin, Staff Director
+                           C O N T E N T S
+                              ----------
+                                                                   Page
+                               WITNESSES
+Levinson, Christine, wife of Robert Levinson.....................     7
+Namazi, Babak, brother of Siamak Namazi and son of Baquer Namazi.    13
+Zakka, Omar, son of Nizar Zakka..................................    18
+                                APPENDIX
+Hearing Notice...................................................    45
+Hearing Minutes..................................................    46
+Hearing Attendance...............................................    47
+             ADDITIONAL MATERIALS SUBMITTED FOR THE RECORD
+Robert Levinson Fact Sheet.......................................    48
+Letter from Representative Jayapal...............................    49
+Letter from Governor Inslee......................................    50
+Questions for the record submitted from Representative Watkins...    52
+                THE STATUS OF AMERICAN HOSTAGES IN IRAN
+                             MARCH 7, 2019
+                      House of Representatives,
+Subcommittee on the Middle East, North Africa, and
+                            International Terrorism
+                      Committee on Foreign Affairs,
+                                                     Washington, DC
+    The committee met, pursuant to notice, at 1:33 p.m., in
+Room 2172 Rayburn House Office Building, Hon. Theodore E.
+Deutch (chairman of the subcommittee) presiding.
+    Mr. Deutch. This hearing will come to order. I start by
+asking unanimous consent that the gentleman from Florida, Mr.
+Waltz, be allowed to sit on the dais and participate in today's
+hearing. Without objection, so ordered.
+    Welcome, nice to have you with us.
+    This hearing, entitled ``The Status of American Hostages in
+Iran," will allow members of the Levinson, Namazi, and Zakka
+families to share information about their loved ones who remain
+imprisoned or missing in Iran. The hearing will also help
+subcommittee members examine how Congress can both hold Iran
+accountable for its actions and advance efforts to bring
+detained American citizens and legal residents home.
+    Without objection, all members may have 5 days to submit
+statements, questions, and extraneous materials for the record
+subject to the length limitations in the rules. I will offer an
+opening statement and then turn it over to the ranking member,
+Mr. Wilson, for his opening statement.
+    I want to welcome our witnesses. I am heartbroken to see
+you back at this table. I thank each of you for your courage
+and for your advocacy. It is my goal to have this be the last
+hearing like this that we do together. I want to acknowledge
+all the families, the family members that are here today in the
+audience and if you would, I would ask you to stand.
+    Please know that we see you and we support you and we thank
+you for being here. You may be seated, thanks.
+    I thank the ranking member for his partnership. In
+conjunction with today's hearing, Ranking Member Wilson and I
+are introducing a number of related legislative efforts. We
+would welcome the support of all members of the subcommittee.
+    Saturday will mark the 12th anniversary of the
+disappearance of Robert Levinson from Iran's Kish Island. Bob
+was last seen at his hotel on March 9th, 2007. Bob is a
+patriot. Bob devoted 30 years to serving his country, first
+with the DEA and then a quarter century with the FBI. Bob is a
+husband of 40 years. He is a father of seven. He is a
+grandfather of six, five of whom he has never met.
+    Bob is my constituent and a part of our community back in
+Coral Springs, Florida. Bob is not at home enjoying his
+retirement and his family because of Iran. In the days after
+Bob disappeared, Iranian State TV reported he was in government
+custody, yet the story soon changed. To this day, Iran's
+leaders refuse to acknowledge it is responsible for Bob's
+disappearance.
+    The regime has never fulfilled its repeated promises of
+assistance on locating and returning Bob. To echo my former
+Florida colleague, Senator Bill Nelson, who fought on behalf of
+the Levinson family for a decade, ``If Iran does not have Bob,
+they know who does and where to find him.'' Bob Levinson is the
+longest-held American hostage. Today, Mr. Wilson and I
+introduce the Bob Levinson Hostage-Taking Accountability Act
+that strengthens U.S. Government policy on hostage taking and
+authorizes sanctions on those who engage in hostage taking.
+    Today, we are joined by Bob's wife, Christine, and three of
+his seven children, Sarah, Dan, and Doug. We thank them and
+their four siblings, Susan, Stephanie, Samantha, and David for
+their strength and for their advocacy. I have gotten to know
+the Levinsons over the past 9 years I have been in Congress.
+They are remarkable. I am grateful to know them and I wish that
+I did not have to know them under these circumstances.
+    Doug and Dan have each sat at this witness table where
+their mother sits today. We cannot and we must not convene
+another hearing where we sit across from a member of this
+family. Iran's despicable practice of holding Americans and
+other foreign nationals hostage should not be tolerated by any
+responsible nation.
+    Today we will hear from Babak Namazi about the horrific
+conditions his brother and father have faced since they were
+imprisoned in 2015 and 1916, respectively. Siamak detained
+first followed by his father Baquer, a former United Nations
+official, is in his 80's. Baquer's health has dramatically
+deteriorated since his detention. Siamak and Baquer were
+sentenced to 10 years in prison at a sham trial, their appeals
+repeatedly denied. Baquer should not spend the rest of his life
+in prison. He and Siamak must be released immediately and
+returned to their family.
+    The subcommittee first heard from Omar Zakka when he was
+still in high school. Omar's father, Nizar, is a U.S. legal
+permanent resident and a Lebanese citizen. Nizar is an IT
+professional who was invited to Iran to participate in an IT
+conference. Let me say that again. He was invited to the
+country and then detained. Nizar has been in prison since 2015
+and his physical state has weakened. Like the Namazis, he was
+sentenced to 10 years in a sham trial in 2016.
+    And these families are not the only families suffering.
+There are other Americans in Iran. Xiyue Wang is a doctoral
+student at Princeton who went to Iran to do research for his
+dissertation. He was arrested on bogus charges and sentenced to
+10 years in Iran's notorious Evin Prison.
+    I would note that just months ago, Iran also arrested
+Michael White, a U.S. Navy veteran, in July. White was beaten,
+has no money to hire a lawyer, and still does not know if any
+charges are filed against him. White is a former cancer patient
+and his health is worsening. Furthermore, there are Canadians
+and Brits and French detained in Iran. It is disgusting the way
+that this regime disregards the human rights of its own people
+and of foreign nationals.
+    Hostage taking is a violation of international law. For the
+Levinsons, they have now worked with three U.S.
+administrations; the rest of the families are on their second.
+They encounter the same problems time after time, well-meaning
+officials who run into bureaucratic hurdles, geopolitical
+shifts in our relations with Iran and, worst of all, being left
+behind when others come home.
+    This administration has taken pride in its ability to bring
+Americans home, but I am concerned that the withdrawal from the
+JCPOA, the heightened rhetoric, and lack of contact with any
+Iranian officials may slow down efforts to return these
+Americans to their families. But I urge the administration and
+I urge President Trump to sit down with each of these families,
+hear their stories, understand their suffering, and then take
+bold action to return their loved ones.
+    And I will turn it over to the ranking member, Mr. Wilson,
+for his opening statement.
+    Mr. Wilson. Thank you, Chairman Ted Deutch. I want to thank
+you for holding this important hearing today. I am grateful to
+work with you on this subcommittee on such critical issues. You
+have long fought for the release of Americans unjustly held in
+Iran and I have been particularly inspired by your hard work
+highlighting the case of your constituent, Robert Levinson, who
+disappeared in Iran in 2007.
+    Sadly, today is the 12th anniversary of his disappearance.
+I hope that together we can continue the bipartisan tradition
+of the committee of elevating these tragic cases as you and the
+former chairman of the subcommittee, Ileana Ros-Lehtinen, have
+been so successful in raising this issue in the past.
+    Ms. Levinson, Mr. Namazi, Mr. Zakka, thank you for being
+here today to share your stories of your loved ones. None of us
+can imagine what your families go through every single day.
+Your testimony today will give Congress and the American people
+a small window into the imaginable reality that you face each
+day.
+    Iran is currently holding at least eight Americans and dual
+U.S.-Iranian nationals on trumped up charges that amount to
+clear and definitive hostage taking. At least nine other
+individuals with British, French, Australian, and Canadian
+nationality are also being held by the regime. This is
+unfortunately not the first time this subcommittee has held a
+hearing on Iran's hostages.
+    Iran's taking of hostage in exchange for political or
+financial concessions is morally reprehensible. It is symbolic
+of Iran's outrageous disregard for international law and basic
+human decency. It goes hand in hand with the regime's
+designation as the foremost State sponsor of terrorism in the
+world. We need to see additional pressure and sanctions
+specifically against Iranian individuals and entities
+responsible for detaining the family members of our witnesses
+here today. Iran has been taking hostages as a matter of policy
+and we must force Iran to change its behavior. We need to see
+an intense, concerted effort from Congress and the
+administration to seek the release of our Americans who are
+being held in Iran.
+    I am grateful to join Chairman Deutch as the lead
+Republican on two important pieces of legislation introduced
+today, including a resolution that will be calling for the
+immediate release of Mr. Levinson, Siamak and Baquer Namazi,
+and Nizar Zakka. With all three are U.S.--and all other U.S.
+citizens, legal permanent residents, and foreign nationals
+which are being held in Iran. The other crucial measure that
+will be introduced would impose sanctions on any foreign person
+responsible for or complicit in the unlawful detention abroad
+of a U.S. national.
+    It is time for Iran and other rogue regimes to pay the
+price for taking American hostages. I urge this committee to
+take up the bills as soon as possible. And, hey, I know they
+will with Chairman Deutch. Thank you again for the
+extraordinary and brave and courageous witnesses who are here
+today. We look forward to your testimony. I yield back.
+    Mr. Deutch. Thank you, Mr. Wilson.
+    I will now introduce the witnesses. Mrs. Christine Levinson
+is the wife of Robert Levinson; Mr. Babak Namazi is the brother
+of Siamak Namazi and the son of Baquer Namazi; and Mr. Omar
+Zakka is the son of Nizar Zakka.
+    Mrs. Levinson, you are recognized. Witnesses please limit
+your testimony to 5 minutes and, without objection, your
+written statements will be made a part of the record. Thanks
+again for being here.
+    Christine, Mrs. Levinson.
+    STATEMENT OF CHRISTINE LEVINSON, WIFE OF ROBERT LEVINSON
+    Mrs. Levinson. Mr. Chairman, Ranking Member, and
+distinguished members of this committee, my name is Christine
+Levinson. I am the wife of Robert ``Bob" Levinson, an American
+held by the Iranian Government. My husband is the longest-held
+hostage in American history. If I had my choice I would not be
+sitting here before you to give the testimony I am about to
+give. I would sitting at home with my husband by my side. I am
+only here out of necessity.
+    My husband, Bob, has been a hostage for 12 years. Despite
+trying to get him home by every means possible, I am absolutely
+no closer than I was when he first went missing on March 9th,
+2007. I hold the Iranian Government responsible, but I believe
+the U.S. Government is at fault as well. Bob was taken nearly
+12 years ago to this day on Kish Island, Iran.
+    Since that time, my family and I have had no direct contact
+with him. A few years ago we received a video of him as a
+hostage pleading for help of the U.S. Government, then we
+received photos of him wearing an orange jumpsuit. We have been
+unable to obtain any information on what needs to be done to
+return Bob home. All the facts of this case tell us that the
+Iranian authorities kidnapped my husband.
+    I have been to Kish Island. I believe it would be
+impossible for the Iranian Government not to know what happened
+to Bob. We have confirmed that he made it to his hotel on Kish
+on March 8th, 2007, and left the hotel the next day. But his
+name was nowhere to be found on the passenger manifest for the
+flight returning to Dubai.
+    Additionally, the FBI assessment of the video and photos we
+received years later concluded that the Iranian Government had
+to have developed them and sent them to us. The FBI also has a
+$5 million reward that remains unclaimed. The evidence is so
+conclusive that the United Nations released an opinion in 2016
+holding Iran responsible for Bob's continued deprivation of
+liberty, yet Iran has been allowed to feign ignorance over and
+over again with absolutely no consequences from the U.S.
+    My family's dreams of reuniting with Bob continue to remain
+just dreams. We believe he is alive and we continue to receive
+reports that he is alive. At this time, there is mounting
+urgency for his health and well-being. Every moment is of the
+essence for Bob, who turns 71 this Saturday. After three very
+different Presidential administrations, we are no closer to
+bringing Bob home than we were when we started. We have
+nothing. There have been some dedicated people from various
+government agencies on the front lines of Bob's case working
+hard to get him home. We are deeply grateful to them.
+    At the same time, we have experienced shocking dysfunction
+from our other officials. It became clear to me early on that
+major government bodies were not even talking to each other
+about the case. In the past, statements and misstatements to
+the media by U.S. officials about Bob's status questioning if
+he is alive or in Iran have severely undercut the efforts to
+hold Iran accountable. We know this because Iranian authorities
+have thrown these wrong statements back in our faces.
+    The Iranians still regularly point to a statement made in
+error by the White House several years ago that Bob was not in
+Iran. That was wrong. But the U.S. Government gave Iran an
+excuse not to send Bob home. And in January 2016, when other
+American hostages were released and Bob was left behind, the
+U.S. Government let Iran get away with it. My husband served
+this country tirelessly for decades. He deserves better from us
+and from our government.
+    In addition to being a patriot, Bob is an incredible
+husband and father. We have raised seven children together.
+When our youngest daughter gets married in just 2 months, it
+will be the last daughter he has the opportunity to walk down
+the aisle, and everyone knows how important that is to a dad.
+Not a day or week goes by that I do not get a phone call from
+one of my children saying how much they miss Bob and struggle
+without him.
+    We are all suffering a living nightmare. We wonder
+endlessly what kind of conditions my husband is living through.
+We know how deeply he must ache physically and spiritually from
+being away from us for so long, by being away from anyone he
+knows and loves with absolutely no human rights. What kind of
+hell must he be living in that both our government and Iranian
+authorities have allowed him to live in for so long?
+    I want to close my testimony by asking each of you to
+imagine how devastated you would feel being ripped away from
+your family with no contact with your loved ones and no contact
+with the outside world. My husband has been held captive for
+4,381 days. That is 12 years this Saturday, without his family.
+Imagine how alone he must feel. We need your help.
+    Today, Congressman Deutch and Senators Menendez and Rubio
+introduced the Robert Levinson Hostage Recovery Hostage-Taking
+Accountability Act. I cannot thank them enough for their
+continued support for Bob and our family. I truly hope this
+will be something that brings Bob home. But when Saturday's
+anniversary passes and the media attention immediately shifts,
+a different issue will take the priority and we will again feel
+like we have this immense burden alone. Without you we cannot
+succeed. Please help my family to get Bob home. Thank you.
+    [The prepared statement of Mrs. Levinson follows:]
+    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
+    Mr. Deutch. Thank you, Mrs. Levinson.
+    Mr. Namazi, you are recognized.
+STATEMENT OF BABAK NAMAZI, BROTHER OF SIAMAK NAMAZI AND SON OF
+                         BAQUER NAMAZI
+    Mr. Namazi. Mr. Chairman and distinguished members of the
+subcommittee, thank you for inviting me to testify today. I sit
+before you in utter desperation and disbelief that over three
+and a half years into my family's indescribable anguish both my
+82-year-old ailing father Baquer Namazi and 47-year-old brother
+Siamak Namazi continue to unjustly and cruelly languish in
+Iran, each with 10-year prison sentences.
+    For reasons I still do not understand, my innocent family
+was targeted by Iran's Revolutionary Guards and being used as
+pawns and hostages. Since this nightmare began, my family has
+faced the evil might and power of the IRGC which has imposed on
+us a relentless and sustained campaign of cruelty, pain,
+suffering, lies, and horrors which continue until today.
+    I am here today, however, because it must be emphasized
+that the situation for my family, and especially my seriously
+ill father, is critical and swiftly heading toward an
+irreversible tragedy unless something is done and done
+urgently. I am here today to implore the Trump administration,
+the U.S. Congress, the United Nations and, really, anyone at
+all to help me save the lives of my father and brother.
+    Since my father's unjust imprisonment in February 2016, he
+has been hospitalized eight times, two of which required
+emergency heart-related surgeries including the installation of
+a pacemaker. My father would only be rushed to the hospital by
+the IRGC when his health reached critical deterioration and
+often his requests for medical attention were ignored, causing
+severe harm.
+    My father lost over 20 pounds, was placed for extended
+periods in solitary confinement, and was subjected to severe
+psychological torment. While my father is currently on a
+restricted, temporary medical furlough, his health continues to
+decline. In fact, the rate of deterioration is accelerating
+daily. Aside from his already weakened heart and related
+ailments which continue to deteriorate, he has been recently
+diagnosed with epilepsy as well as a 70 percent blockage of
+main arteries leading to his brain, significantly increasing
+the risk of a stroke.
+    My father is getting weaker every day and cannot take a few
+steps without his knees buckling under him and loss of balance.
+It seems every day a new ailment unleashes itself on my frail
+father. We live in constant fear that at any moment my father
+will have his temporary medical furlough revoked and be dragged
+back to Evin Prison. It is due to this fear that I reluctantly
+have been keeping a lower profile and drawing less attention to
+our plight.
+    But as the only capable family member living in freedom I
+must do all I can to save my beloved father and brother. I can
+no longer keep quiet. The horrific and painful realities is
+that my father is dying. He needs proper medical attention
+outside of Iran and is living on borrowed time. Unless he is
+allowed to leave urgently, I feel already desperate
+circumstances will turn tragic.
+    I have begged repeatedly and do so again for the Iranian
+Government to allow my sick father to be allowed to leave Iran.
+We do not want my father to leave Iran in a coma, or worse,
+dead. The situation is also terrible for my innocent brother
+Siamak who has been languishing in Evin Prison since October
+2015.
+    Mr. Chairman, going against all values that we stand for as
+Americans, the prior administration inexplicably and
+unforgivably left Siamak behind in January 2016 when it brought
+other American hostages home. At the time, a mere promise made
+by the Iranians to release my brother within weeks provided
+license to leave an American behind in the name of the greater
+good of a nuclear deal.
+    Well, we know how that horrific miscalculation turned out
+for my family. Not only was my brother not released, but the
+IRGC doubled down and also arrested my father who had been
+lured back to visit my brother, shattering our lives beyond
+what we could have ever imagined. I spend a lot of time still
+wondering how our lives would have been so different today had
+Siamak not been abandoned in January 2016.
+    Both my father and Siamak are innocent and are being used
+as pawns and hostages. My father has spent his entire life
+serving humanity, including decades spent working with UNICEF
+in the most dangerous parts of the world. Growing up, my
+brother and I missed having my dad around terribly, but we
+understood the importance of his humanitarian mission. It is
+because of his impeccable record with UNICEF that the U.N.
+Secretary General, UNICEF, and hundreds of U.N. staff and
+retirees have privately and publicly reached out to the highest
+levels of the Iranian Government to ask them to release my
+father on humanitarian grounds.
+    Siamak similarly followed in my father's footsteps in
+serving humanity. In his most recent efforts, Siamak published
+a detailed report in 2013 that identified the negative effects
+of U.S. sanctions on lifesaving medicine and medical equipment
+reaching the Iranian people. In part, due to his work, the U.S.
+Government relaxed its rules to allow more lifesaving medicine
+to reach the Iranian people.
+    I have engaged countless Trump administration officials to
+advocate for my family. With the recent appointment of the
+Special Presidential Envoy on Hostage Affairs Robert O'Brien, I
+am glad there is finally a person responsible for coordinating
+and leading the efforts to bring home hostages like my family.
+I am grateful to Robert and his team for working incredibly
+hard at this. However, the reality is that more than 2 years
+after President Trump's inauguration, at least to me, it seems
+that we are not any closer to bringing my family and other
+hostages home.
+    While I do not understand the politics involved between our
+country and Iran, what I do know is that whatever has been
+tried so far has not worked. I strongly believe that only
+through direct engagement focused on the humanitarian
+imperative of bringing home American hostages will there be a
+likelihood of success. While a direct dialog will not guarantee
+success, in my view, the absence of dialog will guarantee
+failure, a failure which would result in my father's death and
+my brother serving at least 10 years in prison. We cannot
+afford to spare any efforts.
+    I am counting on President Trump to stay good to his word
+that Americans will not languish in Iran when he is President.
+The President has had great success in freeing other American
+hostages from other countries like North Korea, Venezuela,
+Turkey, Yemen, and Egypt, and I implore the President to spare
+no effort to bring my family and other American hostages home
+from Iran.
+    Finally, I would like to share with you a part of a
+personal message from my dad to his UNICEF colleagues urging
+them to continue humanitarian efforts on behalf of the needy.
+My father sent this message to me as he was being forced back
+to prison after one of his emergency heart-related surgeries:
+    ``While the pain of those dearest to me continues to hurt
+deeply, I am also sorry that with the help of all of you and
+other great humanitarians that I could not continue to serve
+our common cause of peace for children, especially in the
+sorely troubled Middle East region, elimination of poverty
+through people empowerment, combating child trafficking, and
+opening space to hear the voices of the poor. Sustaining these
+great causes will be the best reward that can, God willing, be
+granted to this humble man.''
+    My father and brother have dedicated their lives to the
+most important causes of humanity. Now, we desperately and
+urgently need humanity to be a voice for them before it is too
+late. Please be that voice. Thank you.
+    [The prepared statement of Mr. Namazi follows:]
+    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
+    Mr. Deutch. Thank you, Mr. Namazi, and thank you for
+sharing that message with us.
+    Mr. Zakka.
+          STATEMENT OF OMAR ZAKKA, SON OF NIZAR ZAKKA
+    Mr. Zakka. Good afternoon. My name is Omar Zakka. I am the
+youngest of Nizar Zakka's three sons and I am speaking on
+behalf of all us today. Thank you all, ladies and gentlemen of
+the Congress and representatives of the American people, for
+the opportunity to speak to you today and for the attention you
+give to my father's kidnapping. This is my second time here. I
+was first here in July 25, 2017.
+    Mr. Zakka. It is now nearly 4 years since I have seen my
+father. My father was last seen leaving his hotel on 18th of
+September 2015 on the way to the airport. He was kidnapped and
+taken hostage by the IRGC. My father was in Iran on the
+official invitation of the Iranian Vice President, Ms.
+Molaverdi, who had invited my father to speak on the second
+conference on Women and Sustainable Development.
+    I repeat, he was officially invited to Iran by the Vice
+President of Iran.
+    My father is an internet freedom advocate. He is the
+president of IJMA3, an international NGO that specializes in
+information technology for development, based in Washington,
+DC. He has spent most of his career working on bridging the
+digital divide between different communities around the world.
+In September 2018, 3 years after my father had been taken, his
+host, Mrs. Molaverdi, admitted to the Associated Press that
+Iran had failed my father, and yet my father remains a hostage
+of the Revolutionary Guard.
+    The last 4 years and especially in the 2-years since the
+last hearing, life has been very difficult for us. Time and
+again, our hopes that our father will be released have been
+shattered. My father has been subjected to physical and mental
+torture and ill treatment by his captors who continue to exert
+pressure on him to make false confessions to support his
+crimes. Sometimes my father has been promised that if he
+confesses he will be released. My father is a man of honor and
+integrity. He will not confess to crime he has not committed.
+    Somehow, my father sustains his mental strength. He has
+just stopped a 3-week hunger strike a few days ago, the only
+means available to him to protest against his treatment. He
+stopped because we, his family and friends, pleaded to him. His
+body cannot handle such a long hunger strike anymore. My father
+has been denied his human rights. When the Foreign Minister of
+Iran, Mr. Zarif, was once asked by the media about my father's
+case, his reply was that my father's case ``is a problem
+between the U.S. and Iran." What problem between the U.S. and
+Iran could justify kidnapping my father?
+    Not a single day of those 4 years has passed that my family
+and I do not fear for my family's safety. The feeling of dread
+we experience if we miss my father's call or if we do not hear
+from him for 3 days is unbearable. We are tormented by the fear
+that something terrible has happened to him or will happen to
+him. In December last year, he was taken into incommunicado
+solitary confinement for approximately 40 days. We did not know
+where he was, if he was alive or dead.
+    After 4 years of not seeing my father, I see him on film
+released by the Iranian TV, while being arrested. The film was
+shamelessly broadcast by the Iranian State news. The film, part
+of a smear campaign, it was broadcasted four times on prime
+time television. There is no truth whatsoever in these
+allegations. My father is innocent.
+    We thank Secretary of State Mr. Pompeo for the following
+statement he made about my father in mid-September 2016 when he
+was in Congress, in which he said: ``This week marks 1 year the
+Iranian Government has been holding hostage Nizar Zakka, a U.S.
+legal permanent resident and international internet development
+expert. Mr. Zakka this week was sentenced to 10 years in
+prison, millions of dollars in fines; his only crime was to
+bring greater internet access to the women of Iran."
+    Currently, my father is being held underground sharing four
+crowded cells between 50 of them, about 17 men to each cell.
+The air in my father's cell is rank with the smell of sewage.
+It is infested with rats and bedbugs. There is no designated
+place for him to eat. My father spends 16 hours of each day and
+every day in a coffin-size space, where he sleeps and keeps all
+of his clothes and a few of his possessions. They cannot see
+the sunlight or breathe fresh air at any time except for 2
+hours a day during lunchtime. They have to choose to have lunch
+and miss the sun, or to see the sun and miss lunch.
+    My father's kidnapping is an act of State terrorism. Iran
+has conducted this practice of hostage taking for over 40
+years. We believe it will continue if you, the representatives
+of the American people, do not help to put an end to it. We
+have done everything possible in our capacity to put an end to
+this misery. We have reached out to the U.N. and other
+international human rights organizations, have launched
+petitions, we have campaigned for my father's cause in the
+media, and we have issued countless press releases done by my
+brothers and I about my father's case. But we feel like we are
+facing obstacles we do not understand.
+    We are looking forward for President Trump to name my
+father and other hostages, while condemning their arbitrary
+detention by IRGC. Such a statement will help us sustain the
+pain and suffering they are experiencing knowing they are not
+forgotten. We ask America to take all available legal and
+diplomatic measures to reunite us with our father. We ask this
+government to do the same for all the families of the other
+hostages.
+    Thank you again to the representatives of the American
+people for this opportunity and for your continuous support.
+Thank you.
+    [The prepared statement of Mr. Zakka follows:]
+    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
+    Mr. Deutch. Thank you, Mr. Zakka. Thank you to all of our
+witnesses.
+    Let me begin by asking, on the July 2018 appointment of
+Robert O'Brien to serve as Special Presidential Envoy for
+Hostage Affairs, the National Security Advisor, John Bolton,
+pledged that O'Brien would maintain a collaborative dialog with
+the families of current hostages regarding diplomatic recovery
+efforts for their loved ones.
+    I just would ask each of you, in your view, are Special
+Envoy O'Brien and his staff fulfilling that pledge and in what
+areas could there be improvements from your very important
+perspectives?
+    Mrs. Levinson.
+    Mrs. Levinson. Robert O'Brien and his team are extremely
+helpful in our case. They are available whenever we need them
+to be. Their team coordinates any meetings that we need to have
+and Mr. O'Brien, himself, is in contact with us whenever he
+feels he needs to give us an update on my husband's case. So I
+think the hostage fusion cell as it is called is doing a good
+job and is necessary to maintain the status of one place where
+you can get all the information about a hostage.
+    Mr. Deutch. Good. Thank you, Mrs. Levinson.
+    Mr. Namazi.
+    Mr. Namazi. Insofar as that office is concerned----
+    Mr. Deutch. Can you turn the microphone on, sorry.
+    Mr. Namazi. As far as that office is concerned----
+    Mr. Deutch. Wait, actually, sorry. Is it on?
+    Mr. Namazi. Is that on?
+    Mr. Deutch. OK, thank you very much.
+    Mr. Namazi. The office has been very helpful. I have had no
+problem having communications. Obviously it is important to
+have a single point who is leading and managing this, but
+obviously from at least my point of view, while that office is
+very valuable and it has been very helpful to have the
+communications, we are all sitting here today because our loved
+ones are not with us yet.
+    Mr. Deutch. Mr. Zakka?
+    Mr. Zakka. We do appreciate all the support we are getting
+and we hope to see more of this support in the future.
+    Mr. Deutch. OK, thanks.
+    Ms. Levinson, last May you told Time Magazine that your
+family had been left behind after the Trump administration
+prioritized securing the release of American hostages in North
+Korea. Have you seen increased focus from the Trump
+administration on your husband's case since the release of
+those Americans in North Korea?
+    Mrs. Levinson. Unfortunately, I have not. I feel that more
+could be done. Bob is still not home and so it is necessary for
+the Trump administration to make it a priority. Bob is the
+longest-held hostage, as I said before, and the U.S. Government
+needs to get him home and that is all we are asking for. It is
+not something that every American would not want for their
+family.
+    Mr. Deutch. It is a little unorthodox and probably not
+quite the right thing to do, but I would just ask each of you,
+since I know the White House watches what happens here, shares
+it with the President, do you have a message for the President?
+    Mrs. Levinson. I would ask that he would meet with us. He
+does not know us. He does not understand how difficult it has
+been for our family because he has not talked to us. We need to
+make sure that everyone in the U.S. Government at the highest
+levels knows how difficult it is for any family to be away from
+their loved one and unable to resolve it themselves.
+    Mr. Deutch. I appreciate that.
+    Mr. Namazi.
+    Mr. Deutch. I am not sure that it is----
+    Mr. Namazi. Yes. I mean obviously I would welcome very much
+the President's direct engagement. I mean again in the case of
+my family, he set a very, very high standard for me personally,
+my family personally, when he tweeted about my family. And I
+have a feeling with the incredible success he has had with
+releasing other hostages from other countries, if he does meet
+with us and hear our stories he will be even further motivated
+to spare no efforts especially given the urgency of my father's
+health. And I am sure he would be very keen to do more himself.
+    Mr. Deutch. I appreciate that.
+    Ms. Zakka.
+    Mr. Zakka. I hope President Trump sees our case and puts a
+little bit more focus to it and accomplishes the same
+accomplishments he has done with other hostages throughout the
+world. And I hope our families are next, all of our families,
+because we do miss them and we cannot wait for them to come
+home.
+    Mr. Deutch. I appreciate that and I appreciate those
+messages.
+    Mr. Wilson, I will turn it over to you.
+    Mr. Wilson. Thank you very much, Mr. Chairman.
+    And this is one of the most meaningful hearings I have ever
+been to and it is so meaningful because of your participation,
+your heartfelt presentation.
+    And for Mr. Zakka and Mr. Namazi, if you are able, can you
+tell us the conditions that you know about your loved one, how
+being held, and the importance for the world to understand that
+the Iranian regime is not only holding your loved ones, but
+also abusing them. And if each of you could explain, begin with
+Mr. Namazi and Mr. Zakka. And the only reason I did not ask
+Mrs. Levinson, because they still are concealing what occurred
+March the 9th, so we--that is why I am asking you.
+    Mr. Namazi. Thank you. I mean since the arrest there has
+been just absolutely horrific mistreatment. I mean in the case
+of Siamak there has been also physical abuse. This has included
+the use of tasers. He has been placed in solitary confinement
+and isolation for close to a year. And in certain circumstances
+there was a threat of electric shock with the authorities going
+as far as actually putting wiring on him. He has had no
+mattress to sleep on for a very extended period of time. He was
+in a dark, cold cell.
+    And in the case of my father, as I mentioned, he is on
+medical furlough right now, but you know while he was there he
+has been as an 82-year-old man someone woke up one morning and
+decided that let's put this old man in the solitary confinement
+for a few weeks. Well, who does this? Who wakes up and make a
+decision like this?
+    We appreciate the attention. It has been a painful decision
+for me to come out and speak publicly as it has been for other
+family members, but I fear if I do not speak about this I--it
+is important for the world to know that the suffering we are
+going and our loved ones are going through and that is why the
+urgency.
+    Mr. Wilson. Thank you.
+    And, Mr. Zakka?
+    Mr. Zakka. The treatment of everyone in Evin especially the
+ones taken from American citizens and other people they do not
+care about their physical condition. They do not care about
+their mental condition. They subject them to being in solitary
+confinement for extended periods of time with disregard of any
+human rights.
+    Mr. Wilson. Thank you very much.
+    And, Mrs. Levinson, it really is so impressive to be here
+with your family, and I look forward to having your input in
+trying to identify the most effective way forward. From your
+experience, from your study, from your family's study, and what
+talented family you have, what do you believe can be most
+effective to try to change the course of the Iranian conduct of
+the illegal concealing and holding of your husband?
+    Mrs. Levinson. I am not sure what is going to resolve my
+husband's case. What I would hope is that both sides of the
+U.S. Government and Iran would work to get the cases of both my
+husband and all the other people being held hostage resolved.
+There is no reason for a government to hold an individual. I
+hope that the United States administration just continues to
+make it a priority to get all the hostages everywhere in the
+world home. These are the people who make up the United States.
+The United States is a country of freedom and these people have
+no freedom. And that is what we need to make sure the other
+governments do, especially Iran.
+    Mr. Wilson. And we go back to the Tripoli pirates. I mean
+this has always been the standard of our country to recover
+hostages and not be subject to hostages and, sadly, and, Mrs.
+Levinson, in your situation there has been no contact at all.
+    But, Mr. Namazi and Mr. Zakka, have you been in contact at
+all with the Iranian regime in terms of what may be required
+for their release, for your family's release?
+    Mr. Namazi. I personally have had no contact with the
+Iranian Government. No.
+    Mr. Zakka. Neither do I.
+    Mr. Wilson. And, additionally, has there been any
+intimidation by any, all three of you, by the Iranian regime
+that could be directed from the Iranian regime? Has there been
+any intimidation effort on your family?
+    Mrs. Levinson. No, we have not received any kind of
+intimidation. They have not acknowledged that they have Bob,
+officially, so they have not done anything as far as
+intimidating us.
+    Mr. Namazi. Half of my family was ripped away from me, so I
+do not think they needed to call and threaten anymore. The
+action spoke very, very loudly. I know for a fact that my
+brother was constantly threatened with the arrest of my mom,
+for example, but from my perspective I would have rather had
+threatening calls, I mean between the decisions. I mean this is
+horrible to have to sit here and say this, but I would rather
+be threatened, beaten than have my father and none of my family
+members. But I wish they had taken me instead of my father
+because he would not be dying right now today, perhaps.
+    Mr. Wilson. And, Mr. Zakka?
+    Mr. Zakka. To be honest, I could not have said it better
+than my peer, Mr. Namazi. We did not have any intimidation,
+though they have--I have nothing to say, sir.
+    Mr. Wilson. Again, as I conclude I want to thank each of
+you and what wonderful families you have. God bless you.
+    Mr. Zakka. Thank you.
+    Mr. Deutch. Mr. Vargas, you are recognized.
+    Mr. Vargas. Thank you very much, Mr. Chair. Thank you for
+holding this hearing and the ranking member also, and
+especially I want to thank the witnesses here today.
+    Mrs. Levinson, obviously I listened very carefully to your
+testimony and I mean what was very moving was the sad situation
+that your daughter may be walking down the aisle, again without
+your husband. I have two daughters and I think that was very
+moving. And then when you were asked, you know, if you could
+say anything to the President, you would like to talk to him.
+And I hope you do get a chance because you communicated that so
+well how sad it is and how tormenting it is not to have your
+husband home.
+    And how that also, Mr. Namazi, your dad and your brother,
+Mr. Zakka, your dad, I hope you get that opportunity because I
+think there is more that we can do as a government to bring
+them home. I did want to ask specifically about that. I mean,
+my family has never been taken hostage, I hope they never do
+obviously, and I want to know what kind of contact do you have
+from the American government?
+    Now obviously we talked about the Special Envoy O'Brien,
+but what kind of day-to-day contact or week-to-week or month-
+to-month or year-to-year, what kind of contact do you have
+officially with the government as we tell you what we are doing
+or what we cannot do to help you?
+    Mrs. Levinson. In Bob's case the U.S. Government, as I said
+before Bob was a retired FBI agent so we have always maintained
+contact with the FBI. We do have contact with--we did have
+contact with the State Department as well over the years and we
+have met with the high-level officials that we need to over the
+years.
+    As far as the Hostage Envoy goes, I feel that it is much
+easier now because there is one person who you get in touch
+with and then you are able to get all the meetings you need
+through that one person. And the Hostage Envoy Mr. O'Brien does
+get in touch with us whenever he has new information to share.
+If we ask for a phone call they are always willing to talk to
+us. I have never seen any problem with getting in touch with
+them about the case.
+    Mr. Vargas. That is good to hear. My question was going to
+be then, he does communicate with you then. You do not only
+call him, he sometimes calls you if he has information?
+    Mrs. Levinson. Right. He will ask for a call with us and we
+will make an arrangement for actually the whole family to get
+on a conference line and talk about the case, and he has done
+that several times. And as I said, he has invited us to DC for
+meetings and so on, so he has done a very good job at this.
+    Mr. Vargas. Thank you.
+    Mr. Namazi, how about yourself?
+    Mr. Namazi. I am of course in regular contact with senior
+administration officials and I live in Dubai so, and I come to,
+you know, Washington quite regularly, and on this trip also I
+did meet with them. I have had again not a difficulty in
+meeting with senior officials, although before the Hostage
+Envoy Mr. O'Brien was appointed, there were changes. It was not
+continuity and that was a challenge, you know, that it was
+almost a restart. And I know they are working hard for the
+release of my family as well as the other family members that
+we have here, but at the same time I feel there is not enough
+is being done fast enough, I mean especially in the sense of
+the urgency is very clear in the case of my father and it has
+been clear for the past year or two and the deterioration has
+been very rapid.
+    And so while I do--I am very grateful for the engagement, I
+do hope that we can step up and deploy whatever tools we have
+as American government because obviously there is a lot we can
+do.
+    Mr. Vargas. Yes. Well, I know even in your testimony you
+were reticent to come up and speak because of the--you were
+hesitant because of potential danger. But thank you for your
+bravery. Thank you for coming forward. And I know that you are
+very concerned because of your father's age and his illness, so
+I hope that this does encourage our government and obviously
+the regime in Iran to do more to release him.
+    How about you, Mr. Zakka?
+    Mr. Zakka. They do communicate with my lawyer, but
+personally they do not, and as needed.
+    Mr. Vargas. So the Special Envoy has never communicated
+with you personally?
+    Mr. Zakka. No, sir.
+    Mr. Vargas. OK. Do you feel like you get the information
+that you need?
+    Mr. Zakka. No, sir.
+    Mr. Vargas. You do not, OK. So in your case then it does
+seem like we have to do a better job to communicate with you to
+let you know what is going on; is that correct?
+    Mr. Zakka. Yes, sir. I sure hope so.
+    Mr. Vargas. OK. My time has expired. Again thank you very
+much for showing the courage to come forward and I hope we can
+help. And again I want to thank the chair for the bills that
+they have proposed and I certainly will support them. Thank you
+very much. Thank you, Mr. Chair.
+    Mr. Deutch. Thank you, Mr. Vargas.
+    Mr. Chabot, you are recognized.
+    Mr. Chabot. Thank you, Mr. Chairman. And I would like to
+begin by thanking Mr. Deutch for his commitment, I know, to the
+Levinson family. He has been involved in this for a long--it is
+obviously much harder on the family, but I know it is something
+he has been committed to and done everything that he could for
+his constituents in this particular instance, so we appreciate
+that.
+    I know how frustrating it has been for obviously the
+family, principally, and a lot of the questions I think, you
+know, it mostly comes down to what can we do when we are
+considering legislation? Are there--have you all had a chance
+to review or was that done in cooperation with you? Are there
+things that you would like us to do additionally other than
+supporting that legislation?
+    Mrs. Levinson, in particular was there something that you
+would like to, for example, you know, boy, I wish this would
+have gotten in the bill, or did not get in there. Are there any
+other thoughts that you have or----
+    Mrs. Levinson. I personally have not seen the wording on
+the bill so I do not know exactly what it states. I would ask,
+a Special Envoy is I think something that is necessary, but I
+would hope that the administration would not use this as an
+excuse to pass the buck, so to speak, and not meet with the
+families themselves. I would like everybody to be able to see
+the families and see what they are going through and be able to
+help in any way possible.
+    And sometimes I think because there is one person to go to
+who handles everything, it is hard. People just do not take the
+interest as much in the case. I do not think the overall
+government does that and we need to do that.
+    Mr. Chabot. OK, thank you very much.
+    Let me ask this. I know one of the things that being in
+your circumstances and, you know, obviously none of us can
+relate to this unless we are actually under those circumstances
+and we are not, but let me just ask you this. It must be very,
+very frustrating to have to kind of hold your tongue with
+respect to Iran and the government knowing that they have your
+loved one over there and if you express your outrage that they
+can take it out on your loved one, so you have to be somewhat
+careful about that. Is that the case or what? I would be
+interested in hearing from each of you.
+    Mrs. Levinson.
+    Mrs. Levinson. Honestly, that is always in the back of my
+mind. We have over the 12 years been silent and we have also
+tried to push them hard, and I do wonder every time we open our
+mouths whether it is going to have an effect on Bob and what
+happens to him, especially since we have no information----
+    Mr. Chabot. Yes.
+    Mrs. Levinson [continuing]. About what they are doing to
+him right now.
+    Mr. Chabot. Yes. Just as Member of Congress, I am sure you
+are all familiar with Otto Warmbier who was taken by the North
+Koreans. Well, I used to represent the little part of the
+greater Cincinnati area that he was in--now it is Brad
+Wenstrup--and I think Brad felt the same way. We were very--as
+much as I hate Kim Jong-un and think he is a brutal, thuggish
+dictator who has done the most outrageous things to his own
+people, you sort of wanted to bite your tongue because you
+always thought if you are saying that they might take it out on
+this person knowing that they have anything to do with you. So
+I was always very careful until he got back here, obviously in
+a terrible state, but that has got to be even tougher for the
+family.
+    Mr. Namazi and Mr. Zakka, how about, about holding your
+tongue?
+    Mr. Namazi. It is an extremely difficult decision. Being
+here today for me was a very difficult decision because the
+Iranian Government will always take the easy way out and blame
+the victims for what it is doing to them. So every time I speak
+to the press, every time I come to hearings, which I wish it
+would end soon that I be here to celebrate as opposed to
+sharing the pain, but the fact is that it is important, I
+think, to--if there is not attention given to my family and
+others there could be even--I feel there could be even more
+mistreatment.
+    So yes, I do fear but I have to wrestle that versus the
+absolute silence of what that would mean for them. I do not
+have that luxury of knowing what is right and wrong all the
+time. I have to go with my gut feeling and of course the advice
+I get. The Iranians have always insisted on keeping it quiet
+because who wants this kind of publicity? Who wants this kind
+of attention?
+    So I learned the difficult way, because for the first years
+since this nightmare started for my family we did keep quiet. I
+broke my silence only when there was a conviction. And I have
+to say that was also encouraged by the previous administration
+to keep quiet especially when my brother was left behind. No
+one wanted to get that kind of attention on that side as well.
+    Mr. Chabot. Thank you.
+    Mr. Chair, my time has expired, but could Mr. Zakka answer
+as well?
+    Mr. Deutch. Of course, of course.
+    Mr. Zakka, you are recognized.
+    Mr. Zakka. I am actually very fearful about what I say and
+what I do in front of the public in regards to IRGC or Iran
+just because they are very unpredictable. They will take
+anything and just maybe put it out on him and it does affect
+me. I do not know what I can say or what I cannot and how they
+will perceive it. It is a constant fear whenever I do present
+myself in public toward this cause.
+    Mr. Chabot. Thank you very much. I yield back.
+    Mr. Deutch. Thank you.
+    Mr. Trone.
+    Mr. Trone. First of all, I want to thank Chairman Deutch
+for holding this hearing. This is an unmitigated tragedy for
+the families. I mean I cannot--it is hard to comprehend a
+brother, a father, or a husband not going down the aisle with
+the daughters, it is mind boggling. America has had a tradition
+of no person left behind and we owe it to you folks to continue
+that.
+    And I guess my first question would be, how would you
+characterize the differences between how the Obama
+Administration was working on this versus the Trump
+administration?
+    Mrs. Levinson.
+    Mrs. Levinson. The Trump administration--the Hostage Envoy
+was not in place during President Obama's first administration.
+He was only created in, the position was only created at the
+end of his second term.
+    Mr. Trone. Who was the Hostage Envoy?
+    Mrs. Levinson. James O'Brien. And now with the Trump
+administration that position has been in place since the
+beginning. And so it is a whole different situation and it is
+difficult because I cannot really judge the two administrations
+differently because of the two different situations. In the
+beginning we had no contact with President Obama or his
+administration the way we do since the Hostage Envoy was
+created, so I would say that the Hostage Envoy is helpful.
+    The differences also, the Obama Administration was willing
+to talk to the Iranians and the Trump administration has said
+they will not talk to the Iranians. So it is a----
+    Mr. Trone. It is going to be hard getting a resolution if
+we do not talk to the Iranians.
+    Mrs. Levinson. Right, right.
+    Mr. Trone. Mr. Namazi?
+    Mr. Namazi. I mean again, you open with a very correct
+statement. As Americans we do not leave anyone behind and with,
+you know as I have mentioned a few times, but I cannot help
+myself because this is just so--I am living every day as a
+consequence of that--that is what I thought. That is what my
+family thought. That is what we all believe in. This is what
+America stands for.
+    We realize on national television that my brother was left
+behind. So yes, it was Iranians. It was Revolutionary Guards
+who took my family and kept them. It was Obama Administration
+who chose to leave Siamak behind for reasons I will not
+understand until today. My family will not understand.
+    So my engagement again was very unique because for the
+first few months obviously that was still my family's only hope
+was the engagement. And I met with Jim O'Brien, an amazing
+person and he cared. And people who take this position is not
+for the money, obviously. It is not for the glory. It is a
+thankless job and I appreciate people who are dedicated to
+this. What policy is going to be implemented by these
+individuals and what powers do they have?
+    And I share Mrs. Levinson's concern that yes, it is amazing
+and it is incredible to have this Special Presidential Envoy
+because there is one person in charge. At the same time, I used
+to go to the White House quite often, not that I want to go to
+the White House, you know, do not misunderstand me. But I felt
+I was being more engaged with decisionmakers.
+    And I think, one, you had asked what can be done with the
+Presidential Envoy. I think perhaps empower him even more and
+for him to be a principal. And we had spoken about a position
+as Ambassador because obviously whatever decisions are made are
+made at the White House and especially with this administration
+that has a whole different approach with Iran that becomes even
+more important.
+    Mr. Trone. Mr. Zakka?
+    Mr. Zakka. I am not very aware of how like government works
+and the policies that go around, at least most of them. What I
+could see is that the new administration is more upfront with
+their, well, activities and everything they do a little bit
+more than the Obama Administration.
+    Mr. Trone. Well, I tell you, I think it is certainly
+important to Mr. Wilson's point that we have an opportunity,
+you have an opportunity to sit down with the President at some
+point in time, sooner not later. Every day, it is a bad day--
+and tell him your story and if he has that as an imperative he
+can get that job done. And we owe it to you to get that job
+done. Thank you.
+    Mr. Zakka. Thank you.
+    Mr. Deutch. I thank you, Mr. Trone.
+    Mr. Watkins, you are recognized.
+    Mr. Watkins. I yield my time.
+    Mr. Deutch. OK, thank you.
+    Mr. Keating.
+    Mr. Keating. Thank you, Mr. Chairman. I would like to thank
+you and the ranking member for having this important hearing. I
+also would like to say, Mr. Chairman, I think as Mrs. Levinson
+knows in particular that each and every opportunity over the
+years, you have been making sure at every possible committee
+hearing that we have had publicly that people know that this is
+a priority for us, that these Americans are being detained
+without legal justification.
+    And I would like to really thank the witnesses for coming
+forward here today because it is not easy. It takes a lot of
+courage and I know how difficult that must be. But I also know
+how important it is that we hear your voices and that the rest
+of America hears your voices through these hearings. And I
+hope, too, the Iranians hear your voices.
+    In fact, I will tell you with your presence here--I want to
+say this and I think I do not speak for myself in many ways,
+but this Congress there is legislation to impose sanctions on
+those Iranians that are responsible for and complicit with
+politically motivated and extended detention or trial of U.S.
+citizens or legal permanent citizens. And your presence here
+and hearing these stories and seeing the actions of the Iranian
+Government in doing this will shape greatly the way I view that
+legislation.
+    And that legislation would not only pertain to sanctions
+individually on those people, but on their families as well.
+    So thank you for being here in that regard. We have heard
+most of what you have had to say. I have, like so many members,
+I have family members who are being detained, Paul Whelan in
+Russia, right now without legal justification.
+    And I would just like to ask one question other than the
+statement I made. Is there anything outside the official areas
+of action that is taken by the State Department or by the Envoy
+that we could ever be helpful with, you know, the effects on
+your family, maybe some help for your family and they are
+coping with this that there might be areas where we can provide
+some assistance?
+    Before I did this I was a district attorney and I know that
+people suffering the kind of trauma you are having, although it
+is hard to compare some of that I know that what they are going
+through as a family and what they are going through themselves.
+Could you suggest perhaps, maybe some other resources that
+might help you or your family members to get through this?
+    Mrs. Levinson. Actually, I think the Victims Services
+Administration, the people in that group do help sometimes. I
+have been in contact with them and they have helped my family.
+I do not know what else they can do right now.
+    Mr. Keating. I know. There is only one thing that will
+remedy the situation.
+    Mrs. Levinson. Right, right.
+    Mr. Keating. And that is getting them back.
+    Mrs. Levinson. Right.
+    Mr. Keating. And these are years of your life and of their
+lives that are taken away. And all our lives are measured in
+years and hours and minutes and it is a terrible deprivation.
+Any other suggestions that you might have other than--you
+really do not have to suggest much or tell us. Your presence
+here says it all, so thank you for doing this.
+    And I yield back.
+    Mr. Deutch. Thank you, Mr. Keating.
+    Mr. Waltz, please, you are recognized.
+    Mr. Waltz. And thank you, Chairman and Ranking Member
+Wilson, for allowing me to support the families today and your
+important legislative efforts. And I just want to echo my
+colleagues, the Iranian--I do not even want to say habit, I
+want to say practice--deliberate State practice of hostage
+taking that has been a part of their foreign policy since the
+taking of our embassy in 1979. We may remember former Army
+officer and CIA Officer Buckley who was tortured and hung
+through the Iranian proxies Hezbollah, in the 1980's, and they
+are still operating through proxies. I also want to call
+attention in addition to your tragic cases to the longest-held
+journalist, Austin Tice, through the Syrian regime backed by
+Iran.
+    My question for you--well, before I get to my question, I
+certainly agree with my colleagues and I would be interested in
+your families' take on this as well. I certainly agree we need
+to turn up the pressure through sanctions that will be in this
+legislation. I think that is how the Iranian regime responds.
+    I also understand your desire for dialog and talk and would
+certainly support a humanitarian track that is limited but
+specifically talks about these cases and opens that up. My
+guardrail on that and I would be interested in your take, is
+that no other substance though. And as a way to keep up the
+pressure to keep them to the table and no other substance in
+terms of improving our relationship, in terms of easing the
+sanctions, in terms of any other thing the regime wants,
+without resolution on these issues whether it is the--and it is
+the full release.
+    My question is, one, your opinion there, do you agree with
+that if the administration were to take that approach?
+    And then, second, specifically for you, Mr. Namazi, can you
+elaborate on how your brother was left behind, your
+understanding of how that happened? I think we need to get that
+out in the public consciousness in a very real way so that it
+never happens again with any other type of negotiation. So just
+first a humanitarian track, but no other substance and then
+second, if you can elaborate on that, Mr. Namazi.
+    Mr. Namazi. Thank you. I believe it is very much consistent
+with American values of cherishing life and cherishing bringing
+Americans home. And we can only do that in my view--and I do
+not think there are many people who would disagree with that,
+really--is through dialog and a very narrow dialog just as you
+have described it on a humanitarian track.
+    We have managed to get other hostages home from countries
+that we thought we were going to go to war with imminently, you
+know, I am referring to North Korea. If you recall, there were
+discussions and fear of a nuclear engagement and within months
+through dialog, I would imagine, and then other countries. So,
+yes, I would very much support that. I believe not doing it
+would result in failure.
+    Mr. Waltz. So not to interrupt you, Mr. Namazi, but you
+would agree then as a resolution in all of these cases with
+Iran as a precondition for any other talks?
+    Mr. Namazi. From my point of view----
+    Mr. Waltz. From your perspective.
+    Mr. Namazi. From my point of view, this is the most
+important thing in the world for me, yes. I do not know why my
+brother was left behind. I have heard different stories. I have
+heard different versions and I have also been accused, my
+family has also been accused unofficially and off the record by
+unnamed sources that we never requested help. This is a puzzle
+that I will take to grave with me, I would imagine.
+    But the fact is that Siamak was left behind. He was left
+behind when there was an opportunity not to leave him behind.
+And I think it was because it was so important to have a deal
+on a specific date and that date could not be----
+    Mr. Waltz. You are referring to the Iran deal?
+    Mr. Namazi. Yes.
+    Mr. Waltz. Yes.
+    Mr. Namazi. I cannot imagine anything else. But I do not
+understand what happened in the back doors. I have heard
+different stories. I have never heard--I hope 1 day someone
+writes a book who knows what really happened and I can find out
+what happened to my family.
+    But the painful truth is he was not on a plane when other
+hostages were on there. We found out about it, did not even get
+the heads up. Not that that would have made it any easier, but
+if someone had called and said, oh, we cannot tell you why,
+but, you know, be prepared for bad news.
+    Mr. Waltz. Mr. Namazi, I am sorry to interrupt you.
+    Just in the interest of the little bit of time I have
+remaining, would--I think there is a notion within media that
+we deal with that and well-meaning that they do not want to
+highlight these cases because they do not want to, you know,
+increase the value of these hostages that are clearly being
+held as part of hostage diplomacy.
+    And as you have gone through this process do you see now
+this horrible process you are going through that there is
+actually value, more value--I know there is risks and you have
+all described there are risks, to my colleagues. But just as a
+way for us to help in highlighting these cases and keeping the
+spotlight on them that there is more to be gained there than
+risk? Is that, I mean is there kind of a consensus there
+amongst the families?
+    And apologies, Chairman, for going over my time.
+    Mrs. Levinson. Bob was actually also left behind in that
+2016 deal. And they were supposed to continue talking about his
+case and they were supposed to have meetings between the U.S.
+Government and the Iranian officials on Bob's case. After the
+deal was made they had one meeting and nothing happened and it
+took from January to May before they had that one meeting. They
+had that one meeting and said they could not resolve the case
+and so therefore nothing else was done.
+    When asked about the differences between the two
+administrations, I would say that although the Trump
+administration has the Hostage Envoy in place, the Obama
+Administration had an opportunity to get Bob home and failed to
+get him home and they had 8 years to do it. I hope that
+President Trump does not follow that lead and leave Bob behind
+again.
+    I think we need dialog. I think we need to figure out how
+to make that dialog happen because the Iranians do not need to
+come to the table if they do not want to. Something has to
+change to make them want to come to the table.
+    Mr. Deutch. Thank you very much, Mr. Waltz.
+    Ms. Levinson, Mr. Namazi, Mr. Zakka, to your families we
+are immensely grateful for your participation at our hearing
+today. Thank you for reminding us how extremely personal this
+is for you. Thank you for reminding us that we have a critical
+role to play in bringing your family members home.
+    And I would echo what Mr. Wilson said, the power of your
+testimony today will help compel that we continue to act on
+behalf of your loved ones and do everything that we possibly
+can to ensure that this is the last time that we ever have to
+have this hearing. Thank you and this hearing is adjourned.
+    [Whereupon, at 2:42 p.m., the subcommittee was adjourned.]
+                                APPENDIX
+[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
+                                 [all]
+</pre><script data-cfasync="false" src="/cdn-cgi/scripts/5c5dd728/cloudflare-static/email-decode.min.js"></script></body></html>

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