Americans Are Poorer Than They Were 2 Years Ago

Floor Speech

BREAK IN TRANSCRIPT

Mr. SCHWEIKERT. Mr. Speaker, we are going to do a couple different things tonight. I am going to spend some time talking about growth. I am one of those who believes growth is moral. If you listen to my brothers and sisters on the left or many of us on the right, we are talking about how much poorer America is today.

The fact of the matter is, working men and women in this country today are poorer than they were 2 years ago. From the day Joe Biden was elected to today, if you are in my district--I have one of the highest, if not the highest, inflation in America. I have the Phoenix-Scottsdale area--you are about 6 percent poorer because inflation has been this high, your wage growth is here.

It is always amusing to me when our brothers and sisters on the left talk about income inequality, working men and women, and then the very policies that are advocated basically make us poorer.

Another thing I have to say is--and I have to say this over and over and over--in 2011, Standard and Poor's put out a paper and they downgraded the United States' debt, and their downgrade was a tick. We were AAA, and we went to AA+, but if anyone would bother to read it-- because if I hear one more person from the press go, well, in 2011 when they had the debt ceiling fight, they got downgraded. That isn't what S&P said. Read the damn thing.

It is very simple: We got downgraded as a country because we were not doing anything about debt. It makes it very clear. I went over this a couple of weeks ago here on the floor, I read part of it. It basically says the United States Congress is not taking the debt seriously. It was not about the debt fight. It was about the solution that came to negotiate to raise the debt ceiling, didn't actually have enough teeth and mechanisms.

Mr. Speaker, I must tell you, the demographics are dramatically worse today than they were in 2011. I have been here multiple times to the floor with different economic boards, but the Democrats' Orwellian- named Inflation Reduction Act, if you actually look at the spending, there were $271 billion of functionally grant handouts to clean energy companies.

Even the latest CBO score that we just got because of the negotiations, the mechanisms, the piece of legislation put together to raise the debt ceiling and cut out many of these things, actually came back and said, well, we may have missed the number by about $300 billion. In other words, our own Congressional Budget Office basically missed it by 100 percent.

Now, Goldman Sachs said it was 1.2 trillion in spending, but CBO, at least, now has updated their numbers. This is the sort of thing that if you think about those levels of spending and then you call something the Inflation Reduction Act and then you wonder why inflation continues and one of the really disturbing things even on last month's numbers is the core number. The core inflation in the United States is staying pretty solid.

The danger in that is, everyone gets a little bit giddy, fuel prices, food prices go down, but they also go up. Those are actually numbers that move up and down an awful lot, but the problem is the core gets built into everything and the effect that it is going to have on your pension, on your family's ability to ever buy a house, on the Social Security pension system.

You do realize we lost an entire year of actuarial soundness. Now, the Social Security Trust Fund is functionally gone in about 9 years, 8\1/2\ years. At that moment, if you are on Social Security, you will be taking a 23 percent reduction if we do not find a way to fix it.

Almost every bit of that loss of a whole year from the previous actuary report was the inflation COLA. We must understand how devastating the policies of this place were when the Democrats controlled the House, the Senate, the White House what they have done to you and your family.

I don't care if you don't love Republicans, but do understand that your country is poorer today than it was a couple of years ago.

One of the other things we need to talk about is the Congressional Budget Office--they did this about 3 weeks ago--basically has been updating economic growth projections.

For 2024, we were at 1.6. That was our projection. That is what we were building the budget on. That is what we were projecting for future revenues. This will make sense here in a moment.

They came back and said, no, we don't even think we are going to hit 1.6. Now, understand, there was a time 1.6 would have been embarrassing. Long-run GDP growth in the United States in the last 50 years--about 3 percent. So, we have halved that, and now, we have actually got it down to 1.2.

Do understand, when you have this level of anemic growth, how much it hurts, how much it hurts you, how much it hurts tax receipts, how much it hurts your ability to retire, for your kids to have a future.

This is the world we have been handed. This is substantially because of losses of productivity, the amounts of debt. Remember, the United States is consuming so much of the capital of the world just to finance our debt. This is a real problem.

What would you do if I came to you and said, ``Growth is moral''? We saw through the 2017 tax reform the economic growth. Income inequality shrank more than it had at any time in modern history. Food insecurity shrank more than at any time in modern history.

The populations that had just years of brutality and trying to get some economic momentum shot up, and then COVID hit--actually, thank heaven we had that economic vitality going into COVID. Could you imagine if we had this sort of GDP when COVID happened? How miserable.

Remember, the United States still came out of it much faster, much stronger than almost any other place in the industrialized world.

As we start to talk about what we do, what is moral but what also produces some growth--I have spent the last few months coming here every week and walking through how devastatingly ugly the demographics and the debt. Last week, I did demographics. I don't know if anyone was crazy enough to watch it, but it is important.

In 18 years, the United States has more deaths than births. Half the States in America today have more deaths than births. That is not Republican. That is not Democrat. That is just fertility.

You have to understand, if you are going to have a vital country, if there is going to be another American century, you need growth.

What policies are we getting from the left? Just piling on dramatically more debt and then saying to just keep raising the limit on the credit card.

Let's walk through a couple of things we could do immediately. I have been complaining about the debt, demographics, and some of the bad decisions, so let's just do some of the things we know that have worked.

If I came to you right now--and part of this is going to get me in trouble because I am going to say things that don't really fit the pop culture of this place.

The fourth quarter of 2017, tax reform--there was this thing called expensing, this concept of you are a business and you buy a piece of capital equipment so you can make more stuff, make it better, faster, cheaper.

Remember your high school economics class? There are functionally two things that drive up wages. Inflation--but when your wages go up because of inflation, do you really get anything? Your purchasing power, you are often behind. It is not just getting back up to even.

The second thing that raises wages is productivity. You get wealthier. The country gets wealthier. Society gets healthier when we get more productive.

It turns out that in the 2017 tax reform--and you can actually sort of see some of it because most people don't realize the tax reform kicked in in 2018, but we actually had a backward looking for anyone that made those capital expenditures in that fourth quarter of 2017.

You can see it right on the chart. All of a sudden, these capital expenditures--businesses, organizations going out and saying they are going to buy that new piece of equipment. They are going to buy those new trucks so they have more capacity.

You can actually see it, and that did this remarkable thing--growing the economy.

Now, here is where I am going to get myself in trouble, but the math is the math, and the math always wins.

If you actually look at the 100 percent bonus depreciation that we did and compare it to the individual tax cuts--we all love our individual tax cuts.

Remember, the tax reform for 2017, something I over and over tried to share with my friends on the left because they have this crazy folklore that it was a giveaway to the rich--except the 2017 tax reform was more progressive, meaning the wealthier were paying a higher percentage of the Federal income tax burden than the previous one.

Remember, under the tax reform, half of society doesn't pay Federal income taxes. They pay FICA, Social Security, Medicare, unemployment, but income taxes, half of society doesn't pay.

The tax reform became more progressive but with lower rates and the ability for businesses to become productive. A crazy thing we found in the data set--and this is just a chart trying to say for every billion in your immediate lost revenues and the tax reform, if you do it on individuals, you get about 0.1 percent, a little over that, in GDP growth.

When you do it in expensing--and there is a punch line coming here-- you actually get over 0.6 percent growth, which in an economy our size is massive.

It turns out that if you actually really think about this--and this is one that is going to be a little hard, and so this is the moment, anyone watching, if you don't like accounting, please, you may want to go find something on Netflix.

If you buy that piece of capital equipment so you can be more productive, and because you have gotten more productive and your efficiencies, you can pay your workers more, and your workers actually are doing better in life.

You have this thing called depreciation. I am going to take that over 7 years, and each year I get to take a little bit of it.

If you actually read how the tax code works--I am going to show you some slides--you end up paying taxes on revenues you haven't produced yet because of the way depreciation works.

If you get to take it all at one time, you speed up the capital cycle, meaning I bought this piece of equipment, and we got this much more productive. It is 3 years later, and I can buy the next one and expense it then and get that much more productive. You could actually see what they call the productivity cycle.

The tax receipts are a timing effect, so you get this depreciation-- well, it actually would look more like a curve going this way, over 7 years, or you take it in 1 year. The basic depreciation you get is the same. It is a timing effect.

The reason you will see the CBO score says that this costs money is because we are always doing things in a 10-year window. Then, you often don't get the dynamic score. What happens when you have that productivity step up, and what does that produce in tax receipts, and then the new one and the new one.

This is always very hard, particularly for those of us who get elected. Everybody loves their individual tax cuts, but if you want to grow the economy, ideas like expensing, that immediate depreciation to make society more productive, that is where you get your bang for your buck.

This was my attempt--and we sort of stole this from--I am not even sure where we got this slide, but this is sort of walking through the depreciation cycle. If you had $100, you get to depreciate $88 of it. There is $11 of that piece of capital equipment that you don't get to depreciate.

By the time it is done, you actually are paying more taxes because of the timing effect and that portion of it you didn't get to depreciate. You don't actually get the full value of the depreciation the way the tax code is written.

So, the basic argument I am making here is, as we are starting to think about what things we could do, where I am hoping the White House, the folks down the Hall we call the Senate, and maybe even the Democrats on this side, what are the things they could do if they actually really cared about the fact that Americans are poorer today?

What I need is wage growth going up faster than inflation. We know, over and over, permanent 100 percent bonus depreciation, which that is expensing, is the fastest way to step up that productivity because it is instant. It is particularly important during a time of inflation.

I am going to bear with everyone because I have never actually tried explaining this behind a microphone. It has always been in my head, but I am going to try to explain this.

A piece of equipment costs $100 today. You go, and it is a piece of equipment that you have to depreciate because the tax code now says you have to depreciate it over time. You get ready to buy it, and tomorrow it is no longer $100. It is $120.

The fact matter of is, as it goes up, the value of that depreciation over time, compared to the productivity you get from it, is lost. In expensing, if inflation goes up, if it is $100, $120, you get to take 100 percent of it immediately.

The argument is, what is happening right now, in this year, because in part of the tax reform from 2017, today, you no longer get to take 100 percent. You get to take 80 percent of it and expense it. Next year, it will be 60 percent and expense it.

You see what is happening. As you can only take less and less of the cost of that piece of equipment, the price is moving up, the gap expands, and all of a sudden now, I have to cover that bigger gap because of inflation.

If I have to depreciate it, it is much harder to get your value back. If it is expensing, even with inflation, you at least get the value back immediately.

There is an argument from a bunch of the tax experts that basically says if you want growth in the economy without inflation, if you want wage growth in the economy without inflation, going back to 100 percent expensing is the most powerful tool we have.

I know that may be a little geeky, but it is worth thinking about because the fact of the matter is, things like expensing, you go, oh, that is a Republican thing. I think Barack Obama was one of the biggest advocates for it.

Understand, it is just good economics. Look, I have all sorts of charts that actually talk about the baseline effect, what happens when you have inflation. The fact of the matter is, in a time of inflation, it is one of the most efficient things you can do to get growth without inflation.

The fact of the matter is, if you had 4 percent baseline inflation and you went back and had 100 percent expensing, it is like 94,000 additional jobs in this society, which is actually part of the wage pressure, raising wages.

Part of my argument here is, if you wanted something that is very simple, that Congress could do almost immediately, we would fix the fact that, under current tax law, that ability to take that bonus depreciation is fading away. We would fix that right now.

We know full expensing, in the long run, has a substantial effect on longer run economic growth, a thing we call capital stock.

In a country where, functionally, we borrow $45,000 a second, and it is going to double, functionally, in 10 years, you need policies that grow in a way where the capital stock, when the available capital to basically be loaned for businesses, for people to start ventures, to take risk--we actually also see just the expensing, the immediate depreciation. Even in the basic scores we get from CBO and the Tax Foundation, it grows wages.

Now, if I have got 1.2 percent growth in wages from this--I am going to show a couple boards here that you get about a point-and-a-half from R&D expensing and what it does in the economy. You can almost start to make up, with just the clean-up of a couple of the tax provisions, the amount of lost wages Americans have because inflation has been higher than wage growth. We can fix much of the damage that the left has done to this economy by just cleaning up some things in the tax code.

I know this is thick, but it is important. This is just good economics, and it is simple. I often come here and talk about things, like if we would adopt certain policies and bring in new technologies. This is stuff we could do in an afternoon. This is just cleaning up some of the tax code.

If I come to you right now, did you realize that in 2022, last year, if your business is a drug company, an engineering company, a biotech company, a chip manufacturer, whatever it is, and you have been spending money on research and development, now you have to amortize that research and development. That cost you cannot take immediately; you have to amortize it out. This is a real problem.

Last week, I came and walked some folks through this. Part of it was from an article from The Economist last week, if anyone wants to geek out. It talks about the United States is still the most dynamic, big economy in the world. We have almost double the wages of people in Western Europe. I think we are like 20 or 25 percent higher than Japan. A lot of that was because of this velocity in the economy, the risk- taking, research and development, and bringing in new products.

What happens when that research and development really slows up because it doesn't make sense to make those capital expenditures because now you have spent all this money, now you have got to depreciate it out?

All of a sudden you are functionally paying taxes today on money you don't have. That is what is happening.

Well, you start to take a look at the stuff, and you start to realize that in the United States now, it is not like it was back in the 1970s where government was the primary funder of research and development. It hasn't been that way in like 40 years.

You look where we are today. This orange line is business, and you start to see the cycle over here. We were doing amazing things with the breakthroughs that were coming.

We are actually starting to track now that this is starting flatline because the tax code has changed. Fix it. Research and development, make it 100 percent expensing instead of what has fallen back. We have gone back to the old, old tax code. We have lost the expensing.

Research and development. You say you want a dynamic economy. To my friends on the left who keep wanting to talk about clean energy, bless you. How would you like to actually keep having the research that actually creates the next breakthrough, the next super battery, or for those of us who have an absolute fixation that one of most moral things we can do in society is curing diseases?

I am going to circle back. Yes, I am going to talk a little bit about diabetes and research and development expensing. They do tie together. The single most expensive thing in our society right now is diabetes. Thirty-three percent of all healthcare is diabetes. Thirty-one percent of all Medicare is diabetes.

What would happen if you could actually disrupt prediabetic populations?

Heaven forbid, in the future--because we know it is in phase 1 right now--we have an actual cure.

Those are things that good tax policy brings venture capital in to help finance. It is moral. It would be one of the most powerful things you could do to close income inequality and crash the debt. But we seem to not be able to think out of a paper bag.

You look at the gain. If you actually look, business R&D grew faster after the Tax Cuts and Jobs Act because you turned it substantially into 100 percent expensing. You take a look at these huge step-ups where the United States was the innovator in the world, bringing on new products faster, better, and you could actually see this in wage growth.

There are certain things you and I can do in the tax code that in many ways are minimally expensive and incredibly productive in wages and growing the size of the economy.

Remember the first slide? We are living in a country where the CBO is telling us next year we are down to 1.2 percent economic growth. We have got to find a way to grow.

If you actually look at what is happening right now, the private R&D investment was growing and growing and growing, and now it has begun to flatline out. This is a real problem.

If you want to live in a country that is dynamic, that is providing opportunity, that is curing the disease a family member has, the new piece of technology that changes our lives, that makes our living so much better and healthier, believe it or not, the path to that is fixing parts of the tax code.

Mr. Speaker, the only argument I am trying to make here is, I often come behind this microphone with absolutely dour, nightmarish discussions. The one I have gotten the most complaints about is I have been bringing the charts the last couple of months showing in 9 budget years, in 9 years, you can get rid of every dime of defense and all of what we call discretionary spending--no FBI, no Park Service, no FDA, no Congress, no White House, no Supreme Court--it is all gone, and you still have to borrow a couple hundred billion dollars. It may actually be worse than that because I haven't bothered to calculate in the fact that the Social Security trust fund is gone a year earlier. But we know if you backfill the Social Security trust fund, it is not a couple hundred billion; it is like $700 billion and there is no government.

We are functionally an insurance company with an Army. I say that over and over because that seems to click in some people's heads. If I get one more individual who has functionally been lied to over the decades by the political class: We can get rid of waste and fraud or by taxing the rich people more or if we got rid of foreign aid, we will be fine.

I have one woman who insists on texting me that if we should just get rid of Members of Congress' pensions and salaries. I did the math for her while she was on the phone with me. I took an entire year of borrowing and added up every dime that goes into Members of Congress and the Senate, their salaries and pensions, and I think we came up with 18 minutes' worth of borrowing for an entire year.

Come on, people. Buy a calculator. Stop living in a fantasy world. There are solutions here. We just need to embrace them and move forward.

BREAK IN TRANSCRIPT

Source