What is Happening in Our Nation's Debt

Floor Speech

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Mr. SCHWEIKERT. Mr. Speaker, as I get myself organized here, this evening I am going to actually try to do something that is probably a little dangerous and a little tricky. I am going to try to do some math from behind the microphone.

You know, we have a running joke in our office that being a Member of Congress means you often work in a math-free zone but the math always wins.

And, you know, to our friends over here, I guess I should--I don't mean to jump onto this, but we just heard some of the discussion about Ms. Slaughter. I am, obviously, from a different part of the country, a different party, different philosophy, and she was always incredibly kind to me and funny. Most people, I don't know, completely understood. She had a brutal wit, and so a couple of times, when I would go in front of the Rules Committee, sometimes the banter back and forth, you sat there and go: Is she just playing with me? So just for my friends that are just leaving from that.

All right. So I am going to try to do a couple of things here, Mr. Speaker. I am going to actually sort of walk through what was in the most recent CBO report, but also a couple of the previous CBO reports and what is happening in our Nation's debt. At the same time, I am also going to talk about some of the positive things that are happening, and some of it because of the tax reform, some of the things that are happening in our unemployment and opportunity out there.

So, first off, let's walk through a couple of baseline numbers, and then I am going to grind through these so it tells a story of where we are going and where we are at as a country.

When we get behind these microphones and say, ``We have an entitlement crisis coming that we have to deal with,'' they have been saying it behind these microphones for 30 years. Well, it is here. The peak of the baby boom, I think, today, is about 62 years old. There are 74 million of us who are baby boomers, who will be moving into our benefits, and we don't have the resources to cover our promises, the way things are structured today.

Yet if you look at the Pew poll from a couple of years ago, only 15 percent of Republicans believe there is an entitlement crisis coming, but only 5 percent of Democrats believe it. So this is one of the great difficulties in this body where you often hear us saying: Speak truth to power. Well, how about math to power?

Well, what about our own constituents when they don't believe us because maybe there has been crying wolf or because it has been easier to say things like: Well, the problem is waste and fraud. There are problems with waste and fraud, but the numbers are tiny compared to what is about to happen.

So, some baseline math. When I was born, 1962, there were five workers for every one retiree. Today--and let's actually do 12 years from now, because that is when it gets dramatic. Twelve years from now, there will only be two. You and your spouse will be covering one retiree. So, in just my lifetime, we have gone from five workers for one retiree to two.

The math is brutal. So think about this. Over the last decade--so from 2008 to 2018--if you actually look at the growth in the size of spending in the government, 72 percent of it was just Social Security and Medicare. So if you actually look at the growth of the Federal spending, do understand, over the last 10 years, 72 percent of that growth were just those two programs: Social Security and Medicare.

Over the next 10 years, just the growth will be about $1.3 trillion. That is, functionally, just the growth in Social Security and Medicare will be two full Defense Departments. It is important to get our head around telling the truth, because if we are going to save these earned entitlements, we need to have that moment of reflection that comes off of a calculator instead of what happens so often behind these microphones where we try to make public policy by feelings.

So, first board I have up here, this is from the latest CBO report, which I actually have in here, which I am trying to keep from falling off the podium here, and there is actually some good news here. And, that is, because of what is going on the last couple of quarters, this last year, substantially, I believe, because of what is happening through growth-oriented policies, whether it be the tax reform, whether it be what is happening in the regulatory environment, you are actually seeing revenue into the trust funds go up a bit.

It is still a crisis, but if you actually look at SSDI, which is Social Security Disability Insurance, I think it was maybe 1\1/2\, 2 years ago I got behind this microphone, and there were only like 4 years left in the trust fund, and it went to zero.

Well, we gained almost 3 additional years. Now, some of that is because of policy, some of it is because of revenues because we have so many more people working right now. If you actually also take a look at some of the money going into Social Security, some of the money going into Medicare part A, that is the trust fund portion, we are actually picking up a couple of years--1 year here, 2 years there--in additional actuarial soundness of the trust funds.

Think of this as an opportunity. If we are going to have to make policy--and as I stand behind this microphone, I am looking for a unified theory. It is not just entitlement reform because, let's face it, that is the third rail. People go nuts. They run attack ads on you. It is more complicated. We need to do those things in our society that help people be employed, do tax regulatory policies, training policies, opportunity policies, because the more of our brothers and sisters who are working--how do we go from 63 percent labor force participation, which is a wonderful number from where we thought we would be 10 years ago till now, how do we get it to go further?

How do we get more of our brothers and sisters to move from being the long-term unemployed, the discouraged workers, and get them to move into the opportunities that are out there right now because we have, apparently, millions of jobs that are looking for workers, but it also does powerful things to these numbers?

We are also going to have to be honest about mechanisms within immigration. We have a birthrate crisis in this country. The last few years, if you actually look at the number of babies we are having, our numbers have substantially collapsed.

Well, remember, today's child is tomorrow's worker; and if in today's world, when you turn 65 and begin some of your benefits, the math is, you will spend about one-third of your adult life in retirement, but we don't have enough young people because these programs are pay-as-you-go programs. That is really important as we sort of walk through the math.

So if you are looking for that unified theory, it even adds in things like trade. If we are going to be a country that is very slow on our birthrate and immigration, we have designed a talent-based immigration system that also does some rewards for younger demographics, but we are also going to have to have trade with countries that also have positive demographics so we actually have customers.

There are lots of these things that all have to be thought of together. And something I am not going to do tonight, but I have done other evenings and we will do in a month or so, is a fixation on technology and how technology also can provide amazing opportunity in everything from changing the healthcare curve to actually allowing more of our brothers and sisters to participate in the workforce, even those with certain difficulties in life or even those who may be older but choose to work. Instead of being scared of technology, I think it may be our solution, depending on some of these cost curves.

So what is important here is, as you look at this chart, just take a look at this first number here. That is the Social Security trust fund. Now, as you know, our general fund has taken that money and borrowed it, and then we replace it with sort of special Social Security IOUs.

Now, if I remember correctly, last year we were paying the Social Security trust fund like 3.1 percent interest for those borrowed moneys. So when you see some of the future slides here, or boards, you will actually see, here is the trust fund balance; but, also, here it is with some of the interest revenue that we also pay ourselves back.

So think of this craziness. Functionally, as a society, we borrow money to pay back the borrowed money because that cash that we took out of those trust funds has long since been spent. But on this board, in 10 years, the Social Security trust fund is cut in half. In just a few years, the Disability Insurance Trust Fund is empty, and if you actually can see it, the hospital, the Medicare part A, which is the only part really with the trust fund, in a few years, it is also down to zero.

So just getting our heads around, this is reality, this is math, but it is better than it was a year or so ago, but it is still a crisis. And these, I am going to put up two of these boards that is just going to show--do you see this sort of flat inflection here? That is actually part of the good news because where you see--last year, it would have been a constant curve downward that we were depleting the funds. As you know, they have gone negative this year, meaning that the revenues coming out of Social Security is actually greater than the revenues coming in, except for, since the tax reform and some of the economic expansion, all of a sudden we have hit a bit of a plateau.

CBO actually had it looking like it was going to last for a couple of years. I am actually much more optimistic than some of their baseline numbers, but that is that actual mathematical reprieve. You also see the two lines there. The variance in those is what we are also paying ourselves back as a spiff in interest.

So this one is Social Security, Old-Age Survivors Insurance Trust Fund. But then when we actually move over to the hospital fund--and important, you will see this in future slides. Social Security, in many ways, isn't my crisis--isn't our crisis, because it is a defined benefit. Fixing it, the math is actually fairly easy.

It is Medicare that becomes so incredibly difficult. And Medicare, as you are going to see in a couple of future slides, is a much larger financial issue in our near future.

So you actually just see sort of the same thing in that even the hospital trust fund now is moving negative, meaning we are taking more money out of it than is going in. Yet, you do see the little bit of the plateau we are getting because of the current payroll tax.

Just a point of reference on that. If you actually looked at the Tax Foundation's numbers when the tax reform was coming out, they actually had, I think it was, just shy of $300 billion over the next 10 years in new payroll tax, FICA revenues, and that actually reaches into this area.

This is a chart that I have never seen on the floor before, but is a really interesting one, because I think a lot of us don't really have our head around where does the money in Medicare come from? And, I am sorry, I know this is a little hard to see, but if you see this, this is the entire Medicare.

This 45 percent up here, that is actually general revenue. We are reaching into the General Fund and paying it out to hospitals and doctors and durable medical equipment.

The 36 percent there, that is actually the tax revenue. That is the payroll tax. That is within our FICA.

Then we also have some taxes on higher income earners and Social Security benefits, and it comes into here. And then you see this 3 percent down there. That is actually revenue that we pay ourselves. So we borrowed the money, gave it to the General Fund, spent it, but we paid ourselves last year what was the 3.1 percent interest. Well, that is what that 3 percent is down there.

So if you actually add it up, about half of this, half of what we spend in Medicare is General Fund, half is coming in through the payroll tax.

So if you look at part A, the hospital trust fund, okay, that is almost all payroll taxes. But if you start looking at part B and part D, you see the orange there, 75 and 78 percent respectively, that is all coming out of the General Fund.

On occasion, when I have actually done some of these presentations at home, you will get the hand that goes up and people think that it is all paid for by the payroll taxes. That actually creates sort of this weird misunderstanding of it is not all within the trust fund. Almost half of what we spend in Medicare actually is coming out of the General Fund. And there is actually where, as we see the substantial growth, you see General Fund spending growing, and why a substantial portion of that General Fund growing is actually part of this.

A couple of the other slides, just to understand, as we have 74 million of our brothers and sisters who are baby boomers moving into retirement right now--what is it, about 10,000, 10,300 every single day--it actually has a little bit of a steepening curve over the next 3 or 4 years.

Now, the headline on this is really important: Social Security, Health Entitlements, and Interest Costs. So you have to put in the paying interest on all of the money we have borrowed as a society. Driving 91 percent of the 2008 to 2028 spending hikes.

Remember my number before, that if we just do Social Security and Medicare over the last 10 years, 72 percent of the increased spending we had as a government, in the Federal Government, was just the growth in Social Security and Medicare. Okay. But if you add in also interest on top of it, it goes from 72 now to 91 percent. So understand, those are the levers that are going to squeeze out so many of the other things that are happening, but also the greatest fragility to being safe here.

Let's actually go onto the next board because I think it helps actually sort of show where we are going. But what is also important here is, as you look at these, those on the bottom, you will actually see things like defense and discretionary spending all being fairly flatlined, even with the most recent budget appropriations bill. If you actually look at it over the next decade or over the next three decades, almost all of the growth in spending comes from the two programs and covering interest costs.

This one is really noisy, and we will put these up, or put them out. Over the next 30 years--this one actually goes from 1960, but when you get here, look at the growth. You are heading towards a time, 2047. It seems like a lifetime from now, but you are in 2018 right now. So reach out 20 years from now, reach out 30 years from now.

Defense is 2.7 percent of spending equal to the size of the economy, so this is a per GDP slide. But the explosion, you see that red area, in that time when I am hopefully well into my retirement, 15.6 percent of the entire size of the economy. So we are going to reach in and take--say the economy is this big--we are going to take 15.6 percent of that, and that is just going to be Social Security and Medicare. And another 6.2 percent will be covering the interest costs.

It is unsustainable, when you start to realize you will be approaching 30 percent of the entire gross domestic product of this country in Federal spending. It is not defense, it is not nondefense discretionary, it is actually not even some of the other entitlements, even though sometimes that is easier to talk about behind these microphones. It really is where we are demographically as a society.

And look, demographics is our destiny. We can't pretend it is not happening. We are all getting older. It is the nature of life. And understand also, these numbers are assuming no wars, no recessions, no disasters. These are just baseline numbers, and that should make this really, really scary.

So how do I convince our voters and my fellow Members that we have a little bit of reprieve right now because we are in a time of terrific economic expansion, terrific employment, and good numbers coming in on the FICA tax? How do we use this as a moment to actually say, let's be adults, let's come up with something much more elegant than just entitlement reform? But there is actually ways where we can keep our promises to our seniors, keep our promises to those who are heading into their retirement, but also have it so we are not all here 15 years from now saying we have hit a deficit crisis: we can't sell our bonds, our interest rates are exploding, everyone is going to be taking huge cuts. Let's attack it today.

Because I believe if we do things that maximize economic growth, things that actually help our Nation's demographics, if we adopt a very aggressive adoption of technology, particularly in the healthcare space, and also provide some options within the entitlements, it is all stuff we should have done 10 years ago, but we have been given a little bit of reprieve right now because of what is happening in the economic growth.

So here is something to get our heads around. If you actually look at the numbers, you see the first two bar charts, that is Social Security. It turns out the average American will put in about $543,000 over their working life. And this is someone who would be retiring right now. And they are going to get out $616,000. So, okay, a little variance. Now, the problem is we have obviously already spent all of that money that was in the trust fund and we put IOUs in it, but still, it is a fair deal.

Medicare is our crisis. Apparently, someone who is retiring today will have put in about $140,000 in Medicare taxes. But the person who retires today is taking out about $422,000. So $140,000 in, $422,000 out. Now multiply that by just 74 million of us who are baby boomers and you start to understand the size and the scale of where the gap is coming from. It is math.

I desperately wish there was a way to blind the political rage and just say, it is math, and the math will always win. And if we would step up and be less political and more like accountants for a moment-- and I am sorry, I know as Republicans that is often our problem, is we sound more like accountants--but the violence, the cruelty we are going to do to our society if we continue to avoid the reality of the math, in a decade or decade and a half from now when the crisis is upon us, our ability to fix it will be very, very difficult. It is going to be difficult right now, but it is doable. There are approaches to make these numbers work.

This is also, for those folks who are now deficit hawks or newfound deficit hawks, a time for a moment of honesty and reality. Over the next 30 years--and this is not inflation adjusted, so for those of you who like to do constant dollars, you would probably reduce the number by about a third--but this is over the next 30 years. So if you plan to be alive for the next 30 years, this is what you are facing today: $82 trillion in cash shortfall; $78 trillion of that is just Social Security, Medicare, and the interest on that shortfall.

So all of the other things that we talk about: Oh, it is defense spending. No, it is not.

Oh, it is other nondefense discretionary. No, it is not.

It is other entitlement programs. A little bit, but not really.

It is the two programs that are earned entitlements that we, as Congress, in its wisdom over the last few decades, didn't make the math actuarially sound. And just pretending it is not there doesn't fix it.

So one more time, think about this. Over the next 30 years, the Social Security deficit, $18.9 trillion; the Medicare deficit, $39.7 trillion; and then the interest we are going to spend on those shortfalls is another $23.4 trillion. That is $78 trillion.

Now, if you want to use inflation adjusted, just reduce it by a third.

This is the greatest threat to our society. Because do you see at the very end, do you see the little blue, the rest of the budget actually is in balance over the next 30 years. And that is actually using the CBO scores, which I think sort of underestimate current growth. But that is just the math. This isn't Republican or Democrat; it is math.

Yet, it is the greatest threat to our society. And yet, when I stand in front of my constituents and we will have a meeting and we will discuss what is the greatest threat to society, the hands go up and it becomes all sorts of things, because this is really hard, it is really big, it is really difficult, and it is really, really, really important.

So as we walk through these, I need to do--and forgive my stacks of paper, but sometimes when you are trying to do the math, this is one of those where you lay out the Excel spreadsheet and it goes on and on and on and on.

Think of this. In 9 years, Social Security and Medicare, without the interest, will be 10.3 percent of the entire economy. So the United States Government will say: Hey, the economy is today what the GDP is, $21 trillion, $22 trillion, $23 trillion. Hopefully, 10 years from now, it is substantially larger. But 10 years from now, it is going to be over 10 percent is just being reached in and spent on Medicare and Social Security. It is the math.

But actually, over the next decade, it gets up into the 12s, and then a little while after that it goes up further. But that is of spending equal to the entire size of the economy. That is why it becomes so incredibly important that part of that holistic solution of how we save these programs is also that we maximize economic expansion.

So when we get into the discussion that has happened around here a lot lately, where we talk about the tax reform and the jobs and opportunity it is creating, I have had this running conversation, and I saw it on the floor here I think yesterday, where someone is pounding: Well, tax reform is not paying for itself, tax cuts never pay for themselves. That is partially true. Certain parts don't.

Certain parts are political-societal decisions to allow families to keep more, but there was an interesting little set of numbers. This often happens when you have your spreadsheets and everything laying out in front of you and you are going over them.

So in December, the Joint Committee on Taxation, which, as you know, was our scorekeeper when we did tax reform, actually said: Hey, here is what we think the tax reform costs in the static; here is what we think some of the dynamic growth is going to be.

But they were in two different reports.

I took the business numbers, just the business portion, to see what it was doing growthwise. I thought you would all find this interesting, or maybe I am the only one.

So it turns out that the business tax reform, I think the title II portion of our reform bill from December, said, hey, businesses, $653 billion in less taxes, revenues to us as a government over the next 10 years, but the international business portion of the book, we are actually going to take in another $324 billion.

So $653 billion, if you are here, but because we are bringing those moneys, the repatriation of those moneys back in and actually encouraging companies to actually come back to the United States and work here, we actually gain $324 billion.

All right. So I am still negative $329 billion over the 10 years on those C corps, the big corporations, but then on the next Joint Tax report, they talked about the dynamic scoring, what they saw as the growth estimates.

Not to bore everyone with it, but we have already seen the CBO has actually lifted up the growth estimates from even December, so there are good things happening there. So, hopefully, these numbers would actually expand from that.

But if you actually put the growth back in, they were estimating $384 billion of growth in new revenues because of the bigger economy, more business spending, more jobs, more opportunity. Now, most of that is from what was happening in those corporations.

So it turns out the business portion on the tax reform bill, in the Joint Tax's own numbers, actually is about $55 billion to the upside in their own modeling over the 10 years. I partially put this up because I was embarrassed I didn't see it in their math sooner, but that is what it is.

So I guess, ultimately, Mr. Speaker, I have a couple messages here. I understand we are sort of in a time of very difficult politics, but we need to sort of grow up and deal with the reality.

We are getting older as a society. We have made lots and lots of promises. We need to keep those promises. There are ways to do it, but every single day we don't step up and deal with the reality of math, we make it that much more difficult for all of us.

I am 56 years old. My wife, I probably shouldn't say this, but she is exactly my age. We are incredibly blessed. We have a 2\1/2\-year-old that is the best little girl ever. I have a mug that says so. She actually was with us here on the floor of the House last week. Maybe it is partially because of my little girl that I am going to double down on my efforts here.

How do I get our friends on the left and our friends in the majority and say maybe it is time we do the most difficult thing any of us would ever do in our elected career, and that is actually take on the biggest issue of our times, and that is the unfunded liabilities and the promises we have made?

Do we do a BRAC commission, not to close things, but to actually look at everything because is a little bit of the solution reforming how we deliver healthcare and Medicare?

Is a little bit of the solution a different type of immigration system that maximizes economic expansion and benefits and demographics?

Is it everything all together? Is it maximizing economic expansion so payroll taxes become much more robust?

Is it actually creating a path for those who have been disaffected or are on certain types of income-based social entitlement programs that move them back into our workforce because there is opportunity?

The answer is we need to do it all at the same time.

But how do you get this body, with all the noise that is around us constantly, all the people banging on us constantly, the chaos that is today's media, which is an entertainment medium, get a number of people to pull out a calculator, pull out some great econometrics, understand the demographics, and do what is necessary to deal with the greatest threat to this country? And that greatest threat is not military. It is actually debt and promises we have made.

As you have already seen on the slides, everything else is pretty much in balance over the next 30 years. What blows us up is the promises we have made in Social Security and Medicare. It is fixable, but we cannot continue to wait.

The last thing I want to share, and I know I am backtracking a bit, there continues to be more good news that comes in from the tax reform and the positive things that are happening within the economy; but there was a great article today about what is also happening at our State and local levels, and this sort of fits into that unified theory of, if you are going to start to step up and do what is difficult, do it in a time when you have economic expansion. It turns out revenues to our States look like they are taking quite a pop upward.

Also, another article, it turns out that the International Monetary Fund did a calculation and fairly stepped up world growth for the next couple years and actually gave half the credit for that growth to the U.S. tax reform, meaning what we did here in the United States actually made a poor family on the other side of the world's opportunities better.

If you actually start to look at all the things that are going on around us, even in a time of turbulent politics, we have some good things happening.

Now let's step up and do the really hard things, because the hard things are how we are going to be judged in our future when all of us as elected Members leave here. Will we have saved the country from its greatest threat, which is the debt that is going to come crashing down on us very, very soon?

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