Math Always Wins

Floor Speech

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Mr. SCHWEIKERT. Mr. Speaker, we have one-half hour. We have a number of different things to make it through. As we know, our running sarcasm is that we all work in a math-free zone where we use feelings to make public policy and then we wonder what the hell is going on when we actually have to deal with the honesty of the math. So let's have a little bit of fun with the honesty of the math.

A couple of days ago was tax day.

Mr. Speaker, did you know when you paid your taxes that 39 cents out of every dollar you sent in was just interest, 39 cents of every dollar you sent in, Mr. Speaker, as an individual taxpayer?

Now, that is the billionaire and that is down to the working stiff who actually had income tax, you paid 39 cents of your tax dollars just to interest.

The point, once again, that we are going to go through is understanding how fragile we have made part of the American economy because of the scale of the debt. Remember, Mr. Speaker, every 110, 115 days we are clicking off another trillion dollars of borrowing. So yay for that.

We also hit another benchmark. Yesterday, we had $100,000 a second we were borrowing. Congratulations, once again. It is the third time--the third time outside COVID--when we have clicked through $100,000 a second.

The reason I break it down to a second is: How many people can visualize $1 trillion?

It is hard to visualize 12 zeros, so let's actually walk through this. As we are clicking off $100,000 a second, that basically means gross borrowing. It looks like it is going to be, if we stay close to this, $3.151 trillion, $3 trillion 151 billion.

Now, why is that a big deal?

That was yesterday. Today, it fell way down. We are 99,000 something per second.

We were expecting to see the number actually really bounce down because what happened in the last couple of days? It was tax collection time.

We are trying to figure out what is going on because these are right off the Treasury's website we get every afternoon. You can sign up on our website for our office and get something we call the daily debt. We will text it to you. We break it down both in gross--gross is all borrowing because remember, we borrow from the Social Security trust fund and we borrow from the transportation trust fund. We borrow from all of those. We do pay interest, and we have got to pay it back.

Then there is what they call net borrowing. That is where we go to public bonds. Many of you saw yesterday we had a bond auction that wasn't great at the interest rates we paid, and even if you do the public borrowing, Mr. Speaker, we are crossing over $2.8 trillion this year.

So let's process this for one moment because I feel as if I can't find a way to get this through people's heads. GDP, now, I believe it was yesterday, which is the Atlanta Fed, they have a neat little app you can sign up for, they will send you updates and give you market predictions on interest rates and these things, but they also give you an estimator of what they think the gross national product is for this quarter. They had a number of 2.9 percent come out yesterday.

That is remarkable. The American people should be given a ginormous hug for how hard they are out there working.

Yet, how much of that 2.9 percent GDP growth that was on the Atlanta Fed website is because we are spending at this remarkable rate?

Just as the left used to attack us when we did tax reform, which actually has the elegance of being proper allocation, they have been spending money at a crazy rate--remember, $100,000 a second--and here are some of the other parts of the punch line. I hope I am not throwing too much out. Tax receipts so far this fiscal year are up 7 percent.

Okay, that is wonderful. But we are still borrowing close to $3 trillion this year. Nonetheless, tax receipts are up 7 percent, and we are still having to borrow like that, and Medicare is up 10 percent so far this year.

Does anyone see a problem?

Part of the point we have got to walk through is how much is on autopilot, and we, as policymakers, are terrified to go home and tell the truth, or--let's be honest, let's be honest--we haven't told a lot of our voters the truth for so long, how do you get in front of them and say: It is not foreign aid, it is not waste and fraud, we can't tax our way out of this?

So I have shown this chart a number of times.

So, Mr. Speaker, if you look at a chart like this, do you see the blue area?

That is all we get to vote on. We function and only get to vote on about 26, 25 percent of all spending, and part of that, one-half of that, is basically defense. So if you don't want us to cut defense and you want us to maintain that, Mr. Speaker, then you do realize that the nondefense appropriations in this place is 12 percent, 13 percent of our spending. That is all we vote on. Everything else is on autopilot.

On my chart here, I have $890 billion as interest, but we already know the interest number now looks like it is going to be 1.1. It could actually be, if interest rates stay where they have been this week, $1.2 trillion.

One more time, let's do this.

Medicare will be $1 trillion 450 billion; interest will be $1.1, $1.2 trillion; Medicare will be 839; and defense will be right there.

Now, remember, Mr. Speaker, we were just calculating that Medicare spending has already moved up almost 10 percent this year. We have Medicare coming in as number three and defense coming in as number four.

It is a lot different than the folklore out there in society.

Part of the point we keep trying to make here is we have made this society, this government, and the world actually in some ways incredibly fragile because as interest rates move up it is starting to consume everything around us.

So, I have not done this chart in years, but we have updated it. Understand, Mr. Speaker, it is a little hard to see. We will put it up on one of our websites, but we are right here at 2024. We were supposed to only be borrowing about $1.5 trillion this year. It looks like we may double that.

This chart is only a few months old, and it is already out of date, but understand it is an interest rate scenario chart. Right now, CBO has us at 3\1/2\ percent. Well, we are already over that. At 3\1/2\ percent in functionally 9 budget years, we are borrowing almost close to $4 trillion a year. I would say that is actually 8 budget years.

If we go up one full point, then we are well over $4 trillion. If we go up to the 5.5, which is historically closer to what we were before the fake years of the previous decade, at suppressed interest rates, if you do the 35 years before that, Mr. Speaker, even if you take out the Volcker years, 5\1/2\ was closer to what norm was, and then you are starting to approach in 9 budget years almost $5 trillion in a single year interest.

There is our problem.

We have listened to speeches already today of people telling us that this is a human right and that is a human right. Okay, fine.

Do you want to think like an economist, Mr. Speaker, or someone who believes in fairy tales?

We actually make public policy here by our feelings and not by facts because the facts are uncomfortable, and they don't sound that great on campaign stumps.

I actually originally intended to come here, Mr. Speaker, and just do some basic economics charts and then do some optimism of solutions.

Nonetheless, let's run through these charts, and then we will actually talk about the reality that there is hope. There is a way to deal with this. It just would require thinking, but we are so busy having the drama of: Are we going to remove another Speaker?

Are we going to knife each other over some foreign aid?

Understand, Mr. Speaker, I know some people passionately care about Israel, Ukraine, and Taiwan. Add up the total amount of money, remove the money that functionally comes back to the United States, and you are talking about 3 or 4 days of borrowing. People have no sense of the scale.

So, Mr. Speaker, you look at a chart like this, and here is part of your classic problem. Remove COVID, that is COVID right there, and just look at the basic chart. All we are trying to say is that historically, next year a bunch of TCJA, which was the tax reform, expires. Your tax rates will go up next year. If you have an LLC, a pass-through, a Subchapter S, employee owned, then your taxes go up next year, and that is already based in this number. We still functionally get a little less than 18 percent of the size of the economy in taxes.

Nonetheless, the blue line going up, that you have got to understand, Mr. Speaker--and I know it is a 30-year chart and nobody wants to think about a 30-year chart--but this is the crisis: tax receipts stay stable as a percentage of the economy.

So I have already brought charts here before that show: hey, here are times when we have had remarkably high marginal tax rates, here are times when we have had really low tax rates, and you get this percentage of the economy that always sort of falls in between, about 17 to 19. It is always right there in that bandwidth.

So the secret is: have a bigger economy.

Understand, Mr. Speaker, over the next couple of decades the Congressional Budget Office has a number where we are saying, hey, 2054--that is a long time from now. What is that? It is 28 budget years from now. Mr. Speaker, 31.9 percent of the economy is in spending, but tax receipts are still projected to be about 17.9, 18 percent. So the tax receipts stay level, but our spending--what is the primary driver of spending?

This is the thing we share, at least I share, that gets you unelected, but it happens to be true. From today through the next 30 years, 100 percent of growth of borrowing--and most of the growth is spending--is demographics. We got old.

The fact of the matter is that when I was a kid, $5 to $6 was spent for those under the age of 18 and for every $1 a senior. Today that is reversed. Today we spend about $5 for a senior for every dollar we spend for those under the age of 18.

It is demographics. There are different population dynamics. Then the healthcare costs, because if Medicare is going up just 10 percent so far this fiscal year, then you have to see what the numbers look like over the next decade--particularly baby boomers--as what is it, close to some 70 million of us age.

So if we had a revolution in changing the cost of healthcare, which we have written about and actually have designed ways to do it, but you couldn't get a hearing around here because there are too many lobbyists running up and down the hallways saying: That will affect our business models or that will affect the bureaucracy.

The bureaucracy has its own lobbyists here.

Math will win, but this place will still curl up in a fetal position of fantasy.

One more time, it keeps ticking away from us.

Remember, Mr. Speaker, 1 year ago we were estimating and saying: oh, yeah, this 2024 budget we will only borrow about 1.3, then it was 1.5, then maybe 1.6. We are looking at numbers now of what the public borrows, that means selling bonds, it is 2.8, the total borrowing now is approaching--and this is from the Treasury. This isn't from my joint economic economists or Schweikert's brain. This is from the Treasury's own numbers. They are at now $1,1436 trillion in interest this fiscal year, and this was put together before the most recent pop in interest rates.

So I have said this--and this seems to upset some folks--Congress has made a governing decision, and it is not a governing decision of whether we want to go through the chaos of removing another Speaker or the chaos of letting the Democrats have more power around here. It is the chaos that we have made the decision that the bond markets are in charge of your country.

If we have a failed bond auction, Mr. Speaker, do you understand the cascade of hell that happens in this country and around the world?

So it is our moral, fiscal sanity and economic obligation to demonstrate to those who are willing to buy our country's debt that we are adults, that we understand what is going on, we understand our demographics, and we understand our earned entitlements that we have got to pay.

How are we going to pay them when functionally the taxes you just paid, 39 cents out of every dollar you paid, went just to cover the interest, and it will be worse next year?

We live in a country where we have made the decision to put the bond market in charge of our country because we are too much of a wimp to tell the truth. For those who are going to say: Well, Schweikert, if you would just vote against this or that, and we don't understand those are rounding errors.

The scale, this is not today. It is as we move over the next couple of years. The scale of borrowing is structural. It is what we are demographically. Heaven forbid, in 8 years, 9 years when the Social Security trust fund is exhausted--to my Democrats who get cranky and say we can't use the word ``exhausted,'' that is what the Social Security actuary report, if we actually read the math, actually says. They use the word ``exhausted'' because it is gone.

At that moment, we get a 25 percent cut in our Social Security check, and we double senior poverty in America. Yesterday, we had a Social Security Subcommittee hearing in the Ways and Means, and one of the members--I think Jodey Arrington gets credit for this--asked a simple question: For Democrats, how many would support policy changes and raising taxes? Nope. They only want raising taxes.

Over here, the Republicans said: We have to do everything. At least the Republicans on the committee and the Republican witnesses told the truth. The Democrats are so locked in that there is this fantasy, and I have shown the charts over and over. The caps can all be raised. If no benefits are given, the caps are raised, so Social Security is functionally turned into everything that FDR swore it would never be. It is functionally a wealth transfer system. It only covers half, at best, of the shortfall.

When you hear people say: Well, we have a solution. We are going to fix it through tax hikes. You do understand that what the fraud is, to be able to close the gap, you have to tax unrealized capital gains all up and down the economy.

We are still trying to figure out what Democrats mean when they say that because we are walking through the details in their proposals, and we are having trouble making the math work.

You have a house. You have a building. You have a retirement account. You have investments. Do they get to come in and take 12.4 percent of everything you gained that year, because that is the only way you start to cover these scales of shortfall. The first year, 2033, first year Social Security is empty, the shortfall is $616 billion.

Every dime of Defense is in the $800 billion range. Do you understand the scale of what is coming at us? Look, I have already done these charts before over and over saying: Hey, here we are right now. We are actually a little higher. This is interest rates. We are probably at 3.6 now. We are going to go higher with the recent bond auctions.

Here is what we were during the 2001 to 2022, sort of the suppressed years of the Federal Reserve, suppressing interest rates. However, when we go back to 1975 to 2001, understand what the average interest rate was on U.S. sovereign debt. It was 3.5 percent.

I just showed a chart a moment ago that said we are almost at Armageddon if we go to 5.5. So don't think it is some sort of crazy, dystopian fantasy, oh, you are never going to get that high. Our math, we are not even going up to what the historical average was. However, we want to live in a fantasy world.

This is another chart trying to show where interest rates are and where they are going.

I wanted to do this one again because I had someone that was looking at the video on YouTube from last week's floor speech, and I used this chart, and we had a misunderstanding, so I want to walk through it again.

This line here is Social Security. This line is Medicare's spending as a percentage of GDP. Understand, one of the key differences in Medicare is there is a trust fund, but it only covers maybe 30, 40 percent. It is the hospital portion. The rest comes out of the general fund.

Social Security, even when the trust fund is exhausted, 75 percent, and then it falls to 70, and a little bit less of that comes from your taxes.

Right now, for every dollar you pay in, they basically take that, and they put it out the door, and then they reach over and cash in a little bit of the special trust bonds, T bills, Treasury bills they have, to pay out, and that is what is exhausting the trust fund.

When you see this, this is not borrowing, but spending, according to GDP. What is fascinating is, sometime in the next decade, you actually have Medicare taking more of the total economy than Social Security.

However, the thing that I was surprised no one noticed, if Medicare, functioning in the 30-year window, gets as high as 6.9 percent of the entire economy, and then Social Security is another 5.9 percent of the economy, that is just the two earned retirement programs.

Start to think about that. If that is consuming that much of the entire economy, how do you pay for the rest of government? How do you pay for military? How do you pay for anything else? You start to understand how, very quickly, the government spending starts getting around 31, 32 percent of the entire economy. That is actually calculated on last year's interest rates.

Think what those numbers will be over the next few months when we update them on what happens if the interest rate environment goes back to normal.

Social Security Subcommittee yesterday, the Democrat solution for Social Security was: Well, we just need to tax people more.

The problem is, of the crisis that we are on the cusp of, two-thirds is healthcare, one-third is Social Security, and the Social Security trust fund still has another 8 years or 9 years.

When we did tax reform, a dirty little secret that the Democrats never want you to hear: The top income, so the top 20 percent of income earners, do you know they actually, today, pay a higher percentage of Federal income taxes than before tax reform?

The U.S. tax code actually got more progressive. Now, a lot of that was because the bottom quartiles, we almost removed from paying income taxes. Now, they still pay payroll taxes. They pay into their Social Security. They pay into their Medicare. They pay into their unemployment. However, from the income tax standpoint, if you take a look, the bottom quartiles functionally pay nothing. The top 20 percent today pay 70, 71 percent of all taxes.

I will do more of this in a future speech. I want to go through these fairly quickly because I want to end on something that is a little more optimistic than some of these more dystopian numbers.

Social Security faces a $39 trillion shortfall over the next 30 years, $36 trillion if subtracting the trust fund. Therefore, functionally what we are saying here is this is income. Payroll taxes and benefits, the red. You see the little green part here? That is actually up to the moment; the trust fund is exhausted. That is the interest we get from the general fund. The general fund borrows the money; we pay a little interest back.

See the purple here? That is how much is going out the door.

See this up here? That is the interest covering if the general fund covers the shortfall. These numbers are so stunningly ginormous. A word my 8-year-old likes to use, ginormous.

When you think about this, if Social Security itself has a structural $36, $39 trillion shortfall, what happens when I come to you and explain Medicare, $80, $90 trillion shortfall? Actually, I think it is closer to 90-something now. That is, when you add in the interest, 100 percent of all the debt from today through the next 30 years.

I just meant to show this to try to make the point again. It is sometimes like talking to a Golden Retriever. They are adorable, but at the end of the day, they are still adorable and didn't really understand a word you said.

Some of my Democrat colleagues, when you walk through saying here is your proposals of raising the cap on all taxpayers and what the outlays are expected on Social Security, that it doesn't actually close the gap. One more time. This chart does it by percentage of GDP, but let's conceptually one more time process this.

The trust fund is almost gone. You basically say: Everyone now pays 12.4 percent. You pay 12.4, and that is your Social Security tax. You give no benefits, no additional benefits for the folks over the cap. You covered, to be generous, 50 percent of the shortfall, and you basically have chewed up all the potential taxes that you needed to shore up Medicare, and there becomes the math problem. To be honest, you will almost never see someone from the left saying: Well, to save Medicare and Social Security and a couple of these other programs they care about, here is the scale.

You even saw the President stand behind that microphone here at the State of the Union, and you noticed he only talked about the Medicare taxes, and that didn't solve the problem. It just shored up part of the trust fund for a little bit. Still, the vast majority of spending comes out of the general fund.

Look, we have come here repeatedly and said: There are solutions. We actually, several months ago, wrote an entire chapter in the economic position of the Republicans on the Joint Economic Committee, and I thought I was going to get absolute hell for it because I stood on one of the third rails of politics. I had five economists work on a paper. It was a whole chapter in here, chapter 3, and we talked about what would happen in society if we took on obesity.

It turns out the single greatest thing you could do to lower the debt of the United States, produce growth, family formation, all those things, originally, we were coming up with 5 trillion, 7 trillion. We are right now doing the math updating that chapter.

It turns out--I am not committing to it because we still have weeks of math to do--it could be $9 trillion over the decade. The single greatest thing we can do to save this country and start to stabilize our debt is actually moral. Let's give our brothers and sisters the opportunity to be healthier. There is a way to do it, Mr. Speaker.

Maybe I should stop coming and doing the dystopian anger about people not wanting to deal with the realities of the math, and I will try to spend a little more time talking about the fact there are solutions.

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