Small Business Experience

Small Business Experience

Barletta Kelly

Frustration with Congress came to a boiling point in 2010 with millions of Americans fed up with the direction of the country and demanding good government. The result was the largest swing of House seats since 1948 with House Republicans capturing 63 new seats with incoming freshmen of different backgrounds, stripes, and patterns.

Voters in the 3rd and 11th Congressional Districts in Pennsylvania elected to send two small businessmen to Congress to effect policy that would drive the economy and grow jobs in their communities; Rep. Mike Kelly and Rep. Lou Barletta.

PACB President/CEO Nick DiFrancesco walked the marble halls of Congress to sit down and talk with both Congressmen about their experiences in Congress and how they have successfully leveraged their small business knowledge to advocate pro-business policy. Now in their second term, Rep. Kelly and Barletta discuss legislative priorities and how their small business background is causing Congress to shift and retreat from the institutionalized perspective that, “Government is the solution”.

Nick DiFrancesco (ND): This article has been on my mind for some time now. Both of you believe very passionately in the American dream and the importance of small business development. In fact, both of you ran because of big government policies that threatened small businesses and communities across our Commonwealth. How has your prior experience shaped your perspective in Congress?

Rep. Mike Kelly (MK): We both come from the private sector and each of us has a story that is unique, but it’s common with where everyone else who has business experience has been. Now maybe it’s not the same product or terminology, but fundamentally the same story when you’re coming from the private sector. As a businessman it scares me that some members of Congress have never worked outside of government, because they have never felt the impact of onerous regulation. There are people in Washington crafting and voting on policies that simply do not understand the negative effects bad decisions have on hard working people.

ND: You’re right in that different people with different experiences are going to come to Washington. An attorney that’s been an attorney their entire career, and never been a small business owner, is going to have a different perspective. One of the common questions people ask of Congress is, “Is the system broken?” What is your perspective on the system and do you think it’s a fair question?

MK: I think it’s an honest question. I think it’s a very good question. There’s nothing wrong with the system. Let me give you an analogy. Lou (Congressman Barletta) loves baseball, I love football and the ways the teams are set up are perfect but it’s a question of who you have at the different positions. At each position you’re supposed to perform at a certain level, there’s an expectation of performance and the expectations are what are coming up short. You’ve got all these individuals in Congress with very high skills but you have to assign them to the right position. In baseball you have a first base coach and a third base coach for a very specific reason. Their responsibility is to guide you around the base paths because you’re not supposed to be looking to see where the ball is. You rely on them to communicate that to you so that each person, either player or coach, understands the nuances of their responsibility and can be efficient.

We were recently talking, how much longer do you think we’ll be here? A lot of that has to do with the voters but it also becomes, if I’m going to invest that time and all that effort in, we need to be seeing better results and getting this country back on track. I think our biggest problem is a lack of strong policy. Politics always trumps policy and I don’t think that’s good, but the system itself is great.

Rep. Lou Barletta (LB): The business experience brings a different perspective for people who come from that environment in contrast to someone who came up through state government to Congress. I think there’s a different view on how to get things done here. I was, and still am at times, frustrated by the process that it takes to get things accomplished. In business you identify what has to get done and you do it.

Ever since I ran for city council, when I complained about the city politics, I asked, “Why can’t you run government like a business?” The response was always well that’s not the way government works. Well I understand how government works and it can be run like a business. The subcommittee that I’m chairman of has oversight over all the federal buildings so I thought I should be able to do something about this. I’ve toured a lot of federal buildings and seen the wasted space. One building I toured has 1,200 square feet per employee, I couldn’t find anybody in the place. I thought it was a federal holiday since no one was around. So in my first year (as chairman) as leases expired, we moved federal agencies into smaller spaces and we saved $1.1 billion in one year alone. In business, that’s a common sense approach, but in government the practice was to keep renewing the leases.

ND: Let’s talk for a moment more about your motivation. Your motivations for running are actually a little bit different because you both came from a small business background for sure, but you’ve walked down different paths. What brought you to the point where you wanted to run for Congress?

MK: For me it was the loss of all of our franchises. You know you go through this; you get up to go to work and get on that treadmill making sure you’re okay until payday. But to have someone interfere with the business cycle, not because of anything you did wrong, but because they could, is totally against everything we believe in; the way we’re raised, the way we think the country should operate. So losing one of our franchises was a real motivator for me running. Then there was the cash for clunkers program.

The biggest receivable we ever had on our books was from the federal government. They owed us over $600,000 and you couldn’t get an answer as to when the money would come in. With cash for clunkers the person selling the car would get either $3,500 or $4,500 depending on the car they traded in and the car that they bought. The idea was to get cars that use an awful lot of gas off the road to get more fuel efficient cars on the road. That’s not what happened but they did manage to sell new cars.

The other side of that is that if we’re really concerned about lower-middle income and lower income people one of the things they rely on when it comes to transportation are used cars or the ability to fix a used car if it breaks. So if you take all these cars off the road and crush them, you not only lose the car itself but you lose all the parts people use to keep their car on the road by going to scrapyards. You took a complete segment of the market away.

For me personally, watching this unwind, and then watching what was happening to us from a standpoint of an impossible model to run, when you had a partner making business decisions that did not have one penny invested. On the other side it was even worse because they were making business decisions that would absolutely end your life.

I was also on dealer council for Hyundai at the time and I remember a lot of my fellow dealers would call me and we started finding out what legislative things we could do. How can we get in touch with people? There are very few people that look beyond the problem. They don’t say well “how can we fix this?” It was impossible for me to try and get a hold of my Congressional representative. They sent out a staff member who was actually an intern to find out what the problem was. This was a twenty year old person who had absolutely no concept about business and accounts receivable, and liability, and the fact that we had products that were in stock that we had to pay off and without having the money to take care of it we had a problem; we had collateral that had left the store. If you’re a lender we have 72 hours to make sure that either the car’s on the ground or the money’s in the bank.

There was a disconnect between the way we know businesses have to work and the fact that you’re going to run from time to time around a pinch. Never to be put in a position by somebody who’s never been in your business but making a policy that doesn’t make sense to anybody.

So getting into the decision to run, that’s what it was all about. I had friends say you’ve really been looking at this and I’d tell them we need to get better people in Washington. They said what about you and at first I said, “No I can’t, I have a business to run”. Then my son came along and was really good at the nuts and bolt of the business and it was the perfect storm.

ND: It certainly seems that recent administration policy hasn’t been concerned with the fate of smaller businesses, especially when it comes to regulation. Would you say the United States has reached a point where small businesses are “too small to succeed”? Does small business still drive the economy?

LB: I don’t think there’s any such thing as “too small to succeed.” Steve Jobs and Steve Wozniak started Apple Computers in a garage. If someone invents a new device or technology, or provides a service that people need, want, and are willing to pay for, then there is still room for those entrepreneurs to survive and thrive. Small businesses account for about two-thirds of all new jobs created in the American economy.

What we can do in Congress is to create the conditions under which private enterprise can succeed. That means removing barriers to entering business by reducing red tape and regulations, and providing greater access to capital. America was built on small business and ingenuity, and we have to keep it going.

MK: A lot of it boils down to the unintended consequences people talk about all the time. Whether they’re unintended or not, they’re still dangerous and when you hear about, “well you can’t change them because once it’s set up, it can’t be changed”, that’s the dumbest thing I’ve ever heard in my life.

If you’re pre-diabetic and you say, “I’d like to eat that kind of food even though I know it could lead to my death. I can’t change that because it’s the way I am”. People would say you are out of your mind. Government is doing the same thing with businesses. They’re putting people at risk and making them stay with it because the government refuses to change; whether it’s at the local level, the state level or federal level.

ND: That’s the beautiful part when you talk about how everyone comes from a different life experience and if everyone is positioned correctly, good things can happen. You really have broad expertise with the right players strategically situated. Congressman Barletta you started as a small businessman growing something from literally nothing to something of a very sizeable business. What motivated you to get into government at all and what brought you to Washington?

LB: I was working for my family’s road construction business when I first saw an ad for a kit that would let you paint stripes in your own parking lot for only $29.95. I realized I could start my own business and stripe other people’s parking lots, so I started my own company for that fee — $29.95. Once I began, I knew I would do whatever it took to keep that business going and make it successful. Having grown up in a family-run business, I knew how much work it took, and I was willing to do it to be successful. In five years we had built it into the largest business of its kind in Pennsylvania, and the sixth-largest in the country.

It was during that time I didn’t like politics at all but it was during that time, when I was growing the business, that I started really paying attention to how government affects my small business; the regulations and bureaucracy. So many of these regulations kept getting in the way and being hurdles as I was trying to grow the business. Business is tough enough but it seemed the government was making it more difficult. I noticed in the local government there was always fighting going on between the mayor and city council so the headlines were always very negative. If you were striving to grow a business or raise a family, I felt it was impacting the business environment. I made the connection, the environment in which you do business is why many companies leave or come.

We started seeing businesses leaving Hazelton and I was concerned about my own business so I went to the politicians and said listen, why can’t you run government like a business. They laughed at me, told me that I was naïve, and that I didn’t understand the way government works. It was then that I decided I was going to run for city council. I ran for city council and realized I disliked politicians more than I thought I did, and that in order to make the changes I wanted to make I would need to be mayor. So I ran for mayor, fired the entire administration, because they were all friends and family of the former mayor, put a freeze on wages, set a record for number of grievances filed against a mayor in one day, put an ad in the paper we were accepting resumes to give interviews, and I started hiring people around me the same way you would do in your own business.

We began to turn things around. The city was coming back and businesses were beginning to move in again, but we had a problem with illegal immigration. It was very clear to me the federal government wasn’t going to do anything about it. I came to Washington in December 2005 to talk about the problems that I was having in the city and the lack of resources I had to fight it. This was a big issue caused by the federal government and I wanted help. At the end of the day I got a pat on the back and a nice coffee mug that I keep in my office as a reminder of why I’m here today.

ND: Let’s turn the discussion a little bit. You both are in your fourth year now, the middle of your second term. There’s not a lot happening currently in this Congress, in fact the statistics suggest that the output from this Congress is one of the lowest historically in terms of legislation passed. Have you been able to make inroads on the issues that have brought you to Washington? If not, what needs to be changed in order to make it more likely to have direct input or get things moving?

LB: Yes. I would say I’ve been a voice at the forefront on illegal immigration trying to bring a different perspective to what we need to do to fix the problem. Whether I’m going to be successful or not still remains to be seen but my voice is going to be heard.

ND: What would you want to say in terms of what’s holding the issue of broad based immigration reform back?

LB: I came here to solve this problem and I’m not going to sit back now that I’m here and watch, what I believe will be a grave mistake for our national security as well as for the American worker. Earlier this year I went to a naturalization ceremony in Harrisburg. It is demeaning to the process of becoming a United States citizen to allow people who didn’t go through that process to have the same rights and opportunities as those immigrants that stood there from 25 different countries that waited to come here and said that this was the happiest day of their life; to become an American citizen. We’re making it harder for immigrants to find work. We’re making it harder for American workers to find work.

You wouldn’t replace you carpet in your home if you had a gaping hole in your roof, you’d replace the roof. That’s the common sense attitude that needs to be taken when fixing the immigration problem. Here’s the common ground, let’s secure the border.

ND: There’s seems to be a mentality from our government, when it comes to policy, that we’re either going to score a touchdown on the next play or the ball is going to sit there because we can’t move the ball forward incrementally. In the banking industry when we look at the issues that we’re dealing with, we understand the wholesale repeal of Dodd-Frank is unlikely but here are a couple things we can move forward on that both parties agree on.

MK: We’ve made some progress as far as understanding and identifying the real problems. I’m on the Ways and Means Committee and we’re talking about real world tax-reform and we’re talking about looking at regulations that have been put in place that we can’t imagine how we’re going to continue to exist with those regulations because it’s too hard to get to an end game.

If we talk about anything other than having a dynamic and robust economy the rest of it is hollow chatter because we know what drives everything, revenue. We grew up in a world where running a successful business as profitable is how you make capital investments. You retain earnings and make other investments that grow your business. I do disagree with people that say government can’t be run like a business and that is why we’re in the position we’re in. There’s a belief that government can’t be run like business.

Until the government is run like a business you’re going to continue to run deficits. It’s unsustainable and you’re going to continue with programs you buy into because it’s important for the next election. We talked about it earlier but what we’re talking about is policy that drives an American agenda to success. Not a political stance that buys you the next election.

ND: How hard is it when you have been that successful businessman to come here when a lot is out of your control, and keep plugging along?

MK: It’s frustrating. If we think this is optional, that we can walk away and go home and think that it’s going to get fixed, shame on us. We have ups and downs but the one thing that remains constant is we know it’s fallen on our shoulders right now.

LB: We came here with a business background knowing what had to be done. If when we had that chance we just gave up then what? People don’t realize that we, the US House, passed over 40 jobs bills, great legislation to roll back uncertainty that’s holding the economy back, legislation that rolls back regulations, and it goes over to the Senate and dies and doesn’t even come up for a vote. That’s what’s frustrating to us.

ND: Shifting gears a little, you both were early co-sponsors of the CLEAR Relief Act which provides relief for community financial institutions while still protecting consumers. What prompted your support for this bill?

MK: The lifeblood for our businesses is small banks and that’s what drives the district that I’m from; it’s not the big banks.

LB: I first heard about this legislation from members of the Pennsylvania Association of Community Bankers and the Pennsylvania Bankers Association. It seems to me that it is filled with common-sense solutions.

Why should banks have to mail updated annual notices to their customers about their privacy policies if nothing has changed? This is a simple solution that will save community institutions thousands, if not hundreds of thousands, of dollars.

ND: Can you talk about the importance of being a small businessman and taking time for advocacy?

LB: I think it’s important for everyone to be politically active. As the saying goes, the world is controlled by those who show up.

In some cases, that can mean being involved in what goes on in Congress, with national tax policies or environmental issues. It can be the state level. Or, as probably happens more often, it is the local government that makes decisions that are felt immediately by small businesses. I ran for mayor of my hometown of Hazleton partly because I knew what it was like to be in business and deal with the local government. I knew there was a better way.

I think it is extremely beneficial for small business owners to be involved in policy debates. That can mean individually, or by joining associations like the National Federation of Independent Business or the Pennsylvania Association of Community Bankers. If there is a government body that is making decisions that can affect your business, I think it’s a good idea to be involved in the debate.

MK: If you’re not happy with your school board, run for it. If you’re not happy with your city council, run for it. If you’re not happy with the way the state’s being run, run for office. There’s no sense standing on the sideline complaining about it when you refuse to get into the battle.

This article can be found featured in the September 2014 issue of Transactions. Not a subscriber? Visit the Transactions page on this website or call PACB at 717-231-7447 to start receiving the magazine.