The Borrowing Problem

Floor Speech

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Mr. SCHWEIKERT. Mr. Speaker, for the gentleman from Pennsylvania, a bit of reference, in the old days when we were put in the chair, particularly when we were freshman, it is because we had been annoying to the Speaker. I don't know if anyone remembers that.

I love the clerk staff, I appreciate them, and I am sorry to say we are about to do a whole bunch of math and a lot of numbers really fast, but it is where we are at.

Mr. Speaker, one of the things I am going to try to do today is basically sell two ideas. One is--and I want to be honest and careful in this because my goal is not to be sarcastic, not to be a jerk, but walk through the scale--just the scale--of the borrowing, the debt problem of our demographics, what is really going on.

Mr. Speaker, I am going to walk through just a couple of examples of solutions we get from our wonderful, brilliant constituents and sort of explain there are probably things we should do, but they are tiny rounding errors.

People don't understand. Annually, I think we expect to borrow about $7 billion a day. I think, so far this fiscal year, we are borrowing about $10 billion a day.

The second thing is incredibly important. If there is a staffer out there or a freshman Member of Congress, burn what we are going to talk about into their consciousness. In the United States, what is the greatest at least economic threat I think we have for this government, in many ways, for the country? Interest. We are what is called interest fragile.

I am going to show you some charts where tiny movements on U.S. sovereign debt become trillions and trillions of dollars. Our model basically says we are going to refinance almost $10 trillion this year and add another--what?--$2 trillion, $2-1/3 trillion of virgin or new borrowing, small bits of interest.

When you hear someone talk about things like the debt ceiling, you have to understand that you are weaving a needle while jogging because you have to deal with it in a way where you communicate and do actual policy that communicates to the world's debt markets that the United States is taking its debt seriously and understands the scale of the problem and then also while extending that debt ceiling in a way that also doesn't blow you up.

Some of my brothers and sisters will go: Just don't raise it. Okay, great. Do you think you are ever getting a mortgage again? Do you ever think you are getting a car loan again? Do you understand what would happen to the world economy going boom and interest rates exploding when all of a sudden the United States is no longer credit worthy? That is what it means.

Remember one of my predictions for this year. There are three big rating agencies, S&P, Fitch, and Moody's. Moody's is the only one that has not downgraded U.S. debt yet. I predict to you that, before this year is over, Moody's or all three will have downgraded U.S. sovereign debt.

My other prediction is, before the spring is over, the United States will cross over to 5 percent interest. If it holds there, I am going to show you how devastating that math absolutely is.

The clown show has to come to an end. People need to understand that if you are a Member of Congress, you are the board of the biggest economy in the world. You have to start learning your math because, at the end of the day, the math will always win.

Let's do some basic things. The reason I am doing this is because I want to make the moral argument of doing the really hard thing in reconciliation. It is also the best economics. If you give a darn about your retirement, my 2\1/2\-year-old boy's economic future, the country, you have to do the hard thing.

CBO and then my Joint Economic Committee economists actually worked through some math saying what would happen because we have all these expiring provisions of TCJA, the 2017 tax reform. If you extend them all--the individual, the passthroughs, the small businesses, the subchapter S's, the partnerships--if you extend those tax provisions over 10 years, it is about $4.6 trillion of revenue that would have come in because of the increased taxes because of the expired provisions.

What is this body able to do to find policies to offset that spending? It turns out CBO, and I know this chart is a little hard to read, but the punch line on it is, if you functionally extend the tax policy but you pay for it, through the decade, you actually get more economic growth. The economy actually grows.

People say, oh, but you reached in and pulled money out to pay for the offset. The idea is, by doing that, you haven't deficit-financed it where you are paying interest, where you are making the debt markets more fragile, and you are also pulling $4.6 trillion additional capital out of the debt markets that could have gone into you buying a new car or the business buying new plants and equipment.

This is hard because, around here, talking about modernizing how we deliver healthcare, modernizing public agencies, reduce spending by doing it better, faster, and cheaper, there is an army of lobbyists outside in the hallway here who are paid to protect their current business models.

How many folks do we meet from the agencies and the public employee unions that get all upset, particularly at me when I am doing these presentations of, here, we can use technology, we can use AI, these other things to reduce the size and cost and make government much more responsive? Then, they send nasty letters and those things into your district and complain about you. We don't have a choice.

Let's walk through. The facts are on our side. Those folks that run around here and say we need to extend tax policy, protect the border, actually do all these things, you can't create an additional fiscal rathole and expect you are going to throw this back onto the world debt markets.

The reason I want you to think about this is I am going to show you a couple of charts in a little while where interest rates were on U.S. sovereigns way back when. Let's go back to December, a few weeks ago.

Yesterday, the 20-year U.S. bond actually crossed over 5 percent for a while. If 5 percent--anyone with gray hair, you understand 5 percent is actually lower than the historical average of the previous few decades. If we would just go to 5 percent, you are going to see that is almost just shy of an additional $9 trillion in debt, double of everything we are talking about doing in reconciliation.

Just do this and communicate to the debt markets that we are serious about what is going on because the uncomfortable truth is that--and I am going to show it again, and it seems to hurt people's feelings-- almost 100 percent of the debt for the next 10 years is interest and Medicare.

We got older. Baby boomers are moving into their earned benefits. We didn't have enough children to backfill. Starting in 1990, fertility rates started to roll over. Healthcare got much more expensive. We are almost terrified to basically say almost every dime of debt from today through the next 30 years is interest and demographics.

The political class, the press, the dopamine hits on cable television, this and that, telling true math doesn't make you popular. It does make you honest.

Let's walk through a couple of examples. Once again, I have to be careful. These are not meant to be snarky. They are basically a thought experiment of what you hear Members walking behind these microphones and saying that things are great, wonderful, maybe we should do them, but they have tiny effects on the survival of this Republic.

Let's walk through and explain what I am talking about. Let's walk through the impact of borrowing where we are using this fiscal year, what we have been borrowing per day, per hour, per minute, per second. We are going to walk through, and I am using the clock thing. These are 12-hour clocks. You have to picture two clock faces. I am trying to make some way where you make things with lots of zeros understandable.

This is one of my favorite ones. Back in December, we did send out some things, and we got members of our communities to throw back ideas.

One of the favorite ones was to get rid of congressional salaries. Okay. In my heart of heart, I think we are overpaid for the quality of our work product. Maybe that is what we should do. Get rid of every congressional salary--that is, the Senate and here. Just get rid of all of it. Over a fiscal year, it is about $1.9 billion. That is a lot of money.

For an entire year's borrowing, for the entire year, it would cover 6.4 hours. Yay, we made a big impact. We covered 6.4 hours of an entire year's worth of borrowing.

That is sort of silly, but that is one of the key responses we got. I think it may say more about what they think about me.

Let's do another one that came back to us from our constituent survey. Emergency services for undocumented migrants, this is basically ObamaCare subsidies, healthcare spending for those who are here undocumented. They are illegal. Most of this turns out, we believe, to be ObamaCare subsidies. You will hear Member after Member and people on television, the talking hosts, on conservative talk radio, if we just didn't spend that money. Okay, we actually did this thing called research where we looked up the actual facts of the math. It is about $2.7 billion for the entire year. We get rid of it, and we probably should, but it is 9 hours of borrowing for an entire year. Yet, how many times will you hear people say this in front of microphones? Stopping healthcare subsidies for those who are here undocumented, here illegally, is 9 hours of borrowing for an entire year.

There is our problem. We have people doing theater over honest math.

Let's do another one, one of my particular favorites. Let's get rid of the Department of Education. Actually, I am a big fan because if you believe in the 10th Amendment of the Constitution, why is this here at the Federal Government? A big portion of their 4,500 employees is actually debt management, but that can be done by other agencies we have that have high-skilled folks to manage receivables and those things.

If you got rid of all those 4,500 employees from the Department of Education, great. It turns out to be about $2.75 billion over an entire year you just covered. Functionally, that is 9 hours of borrowing.

How many people have you heard come behind these microphones or on conservative talk radio or other things that are saying that we are going to get rid of the Department of Education? Great. Then, the conversation moves on to something else because they act like they have covered the debt. There is this lack of understanding. We are borrowing about $70,000 a second.

Let's go on and do another one we can get rid of. Let's get rid of the U.N. I have done this a couple of times. When I did it before, the total spend on the United Nations was $18.1 billion, but that was in the 2023 fiscal year, but that had a bunch of the new construction. For the 2024 fiscal year, which has ended already, we spent $12.9 billion on the U.N., or maybe it is in this fiscal year that is what we have appropriated. $12.9 billion is a lot of money. Let's just get rid of it.

I am not going to even give you the other chart that shows you how much all of these foreign diplomats and stuff pay into taxes, into the things they buy, the rent, those things in New York City. Who cares?

That $12.9 billion gets me 43 hours, so basically a day and three- quarters of borrowing.

My point, as I am trying to walk through, is that we are probably going to have to do lots and lots of these things. Start demanding from the people who are standing up in front of you saying, ``Here is what I care about, and we are going to take on the debt and deficits,'' have them understand their math.

How about Ukraine aid? I think this is for this fiscal year. The appropriation lineup is $21.8 billion. That gets us 3 days of borrowing. You hear these crazy numbers being thrown out. It turns out now this is both humanitarian and, I think, actually the other term--it is things that provide equipment. Often, it is equipment we depreciated out and we are going to get rid of it. We send it on to them.

This is both categories in that number of the 21.8, but it is 3 days. Let's actually even add a little bit. Let's go grander. Let's go much more bigly. I think that is a pop culture term these days. Let's just get rid of all foreign aid.

I cannot tell you how many times I run into folks back home who say: ``David, I am so concerned about the debt and deficit. We can balance everything if we just get rid of foreign aid.''

Okay. Interesting math.

We did the math. Here is the 57.25 that is going to foreign aid. It is a week of borrowing. Does anyone see the point I am trying to make? You start to add up all of these, and I think in all of those, we have got ourselves to what, a week and a half? We added up all the ideas that came into our office, and I think we got up to 3 weeks of borrowing.

There seems to be this lack of understanding. Every dime a Member of Congress votes on is borrowed money. Every dime of defense is borrowed, every dime of nondefense discretionary, and this year--I am doing this off the top of my head, which is always dangerous--I think it is $400 billion of what we call earned benefits, mandatory spending, is borrowed money.

I am trying to just demonstrate--there is this term we do called ``on-budget receipts.'' You get your paycheck. You look at your paycheck. Here is what went to FICA. That is the Social Security contribution, a little bit of your Medicare part A contribution, maybe a little bit of unemployment disability. That is sort of considered off-budget tax contributions. That is coming from your FICA tax.

The other part is your income tax, capital gains tax, all the other things. That is this blue here. To give you an idea, this is the net interest this fiscal year, the interest we pay back to the people who have been kind enough to buy our bonds.

Remember, China is not the number one owner of bonds. I think now it is Japan. China has been actually rolling off its bonds for 3 or 4 years. I think they are somewhere now in the $900 billion range of the $36 trillion in debt we have. Remember, about $28 trillion, $29 trillion of that is what we sell off to the market. The other we borrow internally. We borrow from the Social Security trust fund, and we borrow other moneys internally, but we still have to pay interest.

Remember, we are one of the only countries in the world that engages in this scam of saying it is only the publicly borrowed money. No. You are not going to pay your interest back to Social Security? Of course you are.

The point of this chart is trying to say accounting accounts for 24 percent of all those tax receipts we take in that aren't Social Security, aren't part of those payroll taxes, 24 percent, is just going to pay interest, and that is this year.

The crazy thing is that these numbers were scored when we thought the mean interest on U.S. sovereign debt was going to be somewhere around 3 to 3.25 percent.

Have you seen what has happened in the last 3 weeks? Did I mention a moment ago that the 20-year bond yesterday went over 5 percent?

This number is about to explode on us. It is called interest fragility. Yet, how many idiots like me have come behind the microphone and said: Do you understand how dangerous it is if we make the debt markets nervous because we are incompetent?

Let's do one more of these just to make the point.

This is tax receipts for fiscal year 2024. It is a fixed number. That is the last fiscal year. The red here, that is the Social Security taxes, Medicare part A, et cetera. This was everything else. Even in that case, it is still basically 24 percent of all--it is still 24 here. I just did this chart so you can see, when you hear someone talk about total tax receipts, this is obligated to earned benefits.

Oddly enough, this number isn't big enough to cover the earned benefits. That is why every month Social Security has to present its special T bills to Treasury, cash in. Remember, Social Security does not add to the debt. Cashing in their special T bills and the Treasury having to finance it and give the money back to Social Security does add to the debt. Remember, there are two steps in there.

Back to the oldie but goodie. Everything in red, that is on autopilot. If you remember, Congress doesn't vote on it. What is in blue, nondefense and defense, is all borrowed along with a whole wedge of this over here.

You have to understand the scale. It is hard to see 12 zeros in your head, but it is just a trillion. We are probably going to borrow $2-\1/ 3\ trillion this year.

We have these debates and discussions about we are going to have reconciliation. Yes, of course we are. We still don't have 60 votes in the Senate. If we are going to move policy, of course we are.

Understand the fiscal implications. If we don't do it right, do the debt markets demand a premium? Because you see what is going on around the world. What happened in Great Britain this summer? What did they do to the gilt? What happened in France a couple weeks ago? What is happening in Germany right now? What is happening in Canada? What happened in South Korea?

All over the world, you see governments falling. One of the primary reasons they are falling is they actually tried to engage in some fiscal constraint.

Are we going to be elegant enough to do it in a way where we can explain to the American people that if we do something smart today, we do not get crushed tomorrow?

Small movements in interest rates start to consume everything in this government. Here is an example. I told you the 20-year yesterday went over 5 percent. If anyone is a real geek, if you take a look at the futures market on the 10-year sovereign, some of the futures market between now and through spring actually expect a 5 percent interest rate. Remember, that is still a point, point and a quarter lower than the historic average when you get rid of the previous decade, which was sort of fake interest rates. If we were to go to 5 percent of U.S. debt, that is actually fairly normal and that gets built in. Remember, we bring about $10 trillion to refinance.

Let's look at 5 percent. We go from a $13 trillion, almost $14 trillion debt expectation at current interest rates over the next 10 years to $22.7. It is almost $9 trillion additional from where interest rates were in December to where it looks like interest rates are going to be this spring. You just added $9 trillion in additional interest. That is called interest rate fragility. That is double. Just the interest rate exposure going back to even something that is below a historic norm is double everything we are talking about doing in tax reform, of extending the TCJA 2017 tax policy. It is double.

This should be scaring the crap out of people around here. Why am I the only idiot running around with charts saying: Are you paying attention to this? Are you watching what is happening in world debt markets right now? Does this make anybody nervous?

Some of the articles are basically saying bond markets around the world are getting nervous loaning to sovereigns because they keep borrowing like crazy. What is going on in China where they are borrowing like crazy? We are borrowing like crazy. There is only so much borrowable money in the world, and we are chewing it up.

The point of this one was if we were to ignore the law and just extend our spending policies we have today, in functionally 9 budget years, 9.2 percent of the entire economy is just interest.

We expect almost 7 percent of this year to be borrowing, but the concept of just--let me rephrase it, because I just screwed that up. 9.2 percent of the entire economy will be debt, not interest. It will be debt.

A couple of our economists basically say we are going to borrow about 7 percent of the entire economy this year. If we don't start to stabilize that and roll it down, you hit this interest spiral into the ground.

I am going to show you a couple of charts here, that should scare the crap out of you, of how much of the taxes we take in from hardworking people is just paying interest.

Let's make that a little more understandable.

Mr. Speaker, some of us with gray hair remember--as Mr. Green laughs at me. There is this thing called the seventies, eighties, nineties, even the 2000s before the Great Recession, and the mean interest rate on U.S. debt was about 6.

This is just an example of what it means when you are carrying $36 trillion in debt. Understand, we are adding another trillion of debt about every 125 days. Let me say that again. Every 125 days, we basically tack on another trillion dollars of borrowing.

If we went to a historic average of 6 percent, it would be 11 percent of GDP in a decade. What if we went up to 9 percent, which we had back in the seventies and eighties? You are at 18 percent.

We are playing really dangerous games here. We have almost made the decision to make the world debt markets the ones in charge of America.

Every second, we are borrowing about $70,000. Do you not think the retired couple, the foreign government, the big business, the rich people who are buying U.S. savings bonds--are you pretending they don't actually care about what we do here and that we are going to make sure they get their money back, or is it all just magic money?

Understand what that 6 percent--this is sort of the punch line of what I am trying to communicate here. By 2034, 9 budget years from now, debt servicing at 6 percent, so back even below the historic average rates, interest would consume 45 percent of all tax receipts.

Let's do that again. Imagine a world where 45 percent of all tax receipts that come into the government are just for paying interest.

Take this seriously.

I have a 9-year-old. And my wife and I, who is exactly my age, we also adopted another little boy from the same birth mom. He is 2\1/2\ years old and the cutest kid you ever met. Our little girl is brilliant and very loud.

The math basically says my kids and your kids will be part of the first generation of Americans to actually be poor. To give you an idea how that math works, when little Matthew, who is 2\1/2\ right now, is 23 or 24, if you wanted to maintain baseline services in America as they are today, every U.S. tax rate, tariff, corporate, individual, everything, has to double, a 100 percent increase. It is not pretend. It is called math.

These are little things. You punch it, and you can put batteries in them. Hell, Mr. Speaker, you probably have one in your phone.

It is math, but we are terrified to tell our voters the truth because people raise their eyebrows and get upset when you say: Look, we got old as a society. We didn't have as many children, we made lots of promises, and we never set aside enough money for them. However, we can disrupt the cost if we are willing to adopt modernization. You can cut stunning amounts of money from delivery of healthcare not by cutting services but by adopting technology. Except, once again, the lobbyists are in the hallway to stop you from doing that because it would make them change their bureaucracies and the business models.

A number like this should make us all pucker, that if we just went back to normal interest rates, in 9 years, 45 percent of all of our tax receipts go into just interest. That is called interest fragility. The single thing that scares me the most in the society is that we are no longer in charge. We basically made the decision that the debt markets are.

So let's actually get a little more dystopian, and part of this is to make an impact.

What if we went to 9 percent interest?

It has happened.

What would happen?

Mr. Speaker, can anyone read this number?

Eighty-three percent of all tax receipts would go just to interest.

Here is the reality of today: For every dollar we take in in tax receipts, we spend $1.39.

Yet, what we call discretionary, military has been substantially flat, all other nondefense discretionary is basically flat, almost all the growth is two things: in healthcare and in interest.

We can't do anything about interest. The deal is the deal is the deal when we sell a bond. As far as healthcare, once again, there is an army of lobbyists, once again, outside these walls, who will beat the absolutely living blank out of us when we ask them to modernize and actually use technology.

Even our brothers and sisters here are often defending not the last decade, but the business models from the decade before that within healthcare.

We don't have a choice. Open up your brain, Mr. Speaker, hire a computer brain. Hire some kid who is a data analyst scientist and start walking through the facts of what is going on. Then we have to do hard things. We will have to do a revolution.

Have you seen the numbers coming out of Medicare Advantage?

Has anyone taken a look at those Wall Street Journal articles from last year of the billions and billions and billions that they are documenting that are functionally fraud and abuse?

Are we going to be honest about it?

There are ways elegantly to fix it without beating the crap out of everyone. We just need to recognize our own problems.

Once again, for every dollar the United States takes in in tax receipts, we spend $1.39.

Right now, I need to go back to an oldie but a goodie. I have done entire floor presentations repeatedly on this. You take all the tax hike proposals of our brothers and sisters on the left, Mr. Speaker, and score them for their economic specs, it will produce about 1\1/2\ points of GDP of new tax receipts. You take for our side, Mr. Speaker, all the cuts we have talked about, almost all of them being in nondefense discretionary, it is about one point of GDP. Add those two together and that is what, 2\1/2\. Congratulations.

So everything the talking heads do behind these microphones is 2\1/2\ percent. We are borrowing 7 percent this year of the entire economy, and here is your crisis: The solutions sound really good in a television commercial and maybe an interview on cable television, and they are crap math. They don't get us anywhere close to what is necessary because it turns out the actual scale of the math is so far beyond just raising people's taxes and just slash and burn this. You need a revolution on how we deliver on our commitments.

Why is that harder?

I still can't get my head around why that is harder. Once again, the single chart that makes people most angry, and it is already 1 year out of date, the numbers right now are much worse, CBO predicts that deficits of $115 trillion over 2024 to 2054, Social Security, Medicare, $124 trillion deficit, the rest of the budget has a $9 trillion surplus.

Do you see, Mr. Speaker?

The spending and the interest covered, the spending and the interest covered, remember, Mr. Speaker, Social Security has about 9 more years and the trust fund is empty.

Are we going to fix it?

Are we allowed to talk about it?

If we talk about it, then the Democrats will run nasty ads about you. So somehow, they are comfortable with the immorality that in 9 years we are going to double senior poverty in America, because that is what is happening. However, Mr. Speaker, you are not allowed to talk about it because they will attack you.

They spent about a couple of a million dollars beating the crap out of me because I care about saving Social Security, and I care about not doubling senior poverty.

Somehow lying about it is the political tactic of this place?

They care so much more about power than saving our brothers and sisters?

We already have a crisis right now of baby boomers, inflation pushing them out of their housing. I think it was last year I saw the statistic on baby boomers' doubling of homelessness, because they are being priced out of their homes because of inflation. That is the morality of this place because we do crap economics. It is because we make public policy by our feelings instead of math.

The reality of it, Mr. Speaker, if you look at the CBO projection, now this is 1 year, 1\1/2\ years ago, so inflation has trimmed off a bit from their numbers, interest rates are substantially higher, these numbers are going to pop when they redo them because of the higher interest rates.

I was trying to do it, it is dangerous when I try to do these things off the top of my head, but I was coming in about $133, $136 trillion of borrowing over 30 years because of the higher interest rates, and it could be substantially higher if we are actually truly at a five or six.

The point is, debate after debate after debate after debate, we stand here and we argue about the nondefense discretionary, which is like 13 percent of the spending, and even in this projection it actually grows slower than tax receipts.

So we are going to head towards doing reconciliation. We are going to try to do policy. We have a new President coming in who has a vision of growth for the country.

Are we, as the board of directors, as the Founding Fathers designed it, going to step up and do our job and actually save the future?

Are we going to avoid the hardest thing we do, and that is telling the truth to our voters, and maybe even telling the truth to each other?

There is still hope.

One of our economists actually has this chart he has been working on and he has been saying you may only have 3 or 4 more years if interest rates keep moving up where it is almost too late. You can't work yourself out of the higher interest rate cycle because the additional debt, the interest rate, the additional debt, the interest rate--and I think it was 1 year ago when we actually had a couple of months, 3 or 4 months, where we had to borrow money to cover our borrowing.

Mr. Speaker, there is hope. There is a way to make the math work. There is a way to do it in a moral fashion. It has been said that when you have a complex problem, it turns out the solutions are complex.

Is the modern Congress capable of doing complexity?

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