A Real Math Problem

Floor Speech

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Mr. SCHWEIKERT. Mr. Speaker, have you ever had the time here where you basically are having to take on two things that push against each other, that create a real math problem, and that telling the truth about it--how do you say it?--oh, yeah, gets the crap kicked out of you? Let's have at it, though.

President Trump stood there just a couple days ago, and within his speech, when you talk about some of the policy to help our brothers and sisters in this country, there was the discussion of no tax on tips, no tax on overtime, these things, and the pushing to get us in Congress, the Senate included, to move the extension of the 2017 tax cuts. I am going to show you why that is so important.

However, at the same time, within almost the same breath, the President looked out at us and said he also wants a balanced budget.

Okay. Now we need to deal with the reality of how hard that math is, but there is a way to do it. I just don't know if intellectually, when you think about the things you heard behind these microphones this last week, how many of our brothers and sisters here, how many of the public, how many of the armies of lobbyists that are in the hallways here lined up saying they want more spending, more money, more regulation on their competition understand this. Let's go through some of the basic math facts, and then let's have a brutally honest conversation of how we stabilize and how far we can actually go.

All right. An oldie but a goodie, and the numbers are actually worse, but I didn't want to print another chart, so we have been using the same one from last year.

Do you see all the red in the chart? That is what we call mandatory. It is automatic. It is earned benefits. It is, you served in the military, your pensions, those things. Interest is automatic. You have to pay it.

Do you see the blue? That is military and what we call nondefense discretionary. A Member of Congress, other than in a reconciliation opportunity--we are going to come back to why it is so important--only votes on this blue. Every dime a Member of Congress votes on, other than that moment of reconciliation, is borrowed. It is all borrowed money. Last year, for every dollar we took in in tax receipts, we borrowed $1.39.

Look, the number of times I have come before these mikes, and I have done the charts and shown, in times when we have had very high marginal tax rates, we take in about 17, 18 percent of GDP in taxes. When we have had very low marginal tax rates, we take in about 17, 18 percent of GDP. It is the seesaw of lower marginal tax rates, the economy grows; higher marginal tax rates, the economy shrinks. We are getting basically the same percentage of the economy in tax receipts.

There is an article on the Manhattan Institute's website that does an aggregation of a lot of studies, many of them from leftwing groups, showing that if you raised every tax that functionally the Dems have offered that has gotten scored, and then you adjust it for its economic effects, you get about a 1.5 percent of GDP in taxes, additional taxes.

The cuts we had been talking about were now actually getting much broader, but let's go back to that point and a half. We are going to borrow 7.25 percent of the entire U.S. economy this year, so when the President turned to us and said he really wants a balanced budget, that is a tough one.

Now, his Treasury Secretary has talked about if we could get down to 3 percent stability. Ray Dalio, who is talking about a book he is giving away, talks about his incredible fear of the squeeze that is happening around the world because the countries in the world are bingeing on debt and that there may be a shortage of borrowable capital, which will cause us, as he says, a heart attack. He says it would be good if we could get back to 3 percent of the size of the economy.

Okay, maybe that should be our goal, but, once again, remember your government is functionally an insurance company with an army because the vast majority of our spending, the vast majority are things like Social Security, Medicare, and other benefits you get either because you hit a certain age, you worked a certain number of quarters, you fell below a certain income, or you are part of a certain Tribal group, but they are automatic. The one time we get an honest opportunity to really look at them is when there is this reconciliation. You are able to open up and look at the formula spendings.

Let's actually walk through this for someone like myself, who basically is intellectually whipsawing, just beating the crap out of myself.

Mr. Speaker, I do not want and believe it would be a horrible thing to allow taxes to go up at the end of this year, particularly on small businesses and the working population.

This is the average. Understand that I represent the Phoenix and Scottsdale area. For my folks, our math is $3,300, almost $3,400 a year for my average family in tax hikes. For the country, it is $2,850.

That is the tax hike that is already in the law. That is already what is coming at us. That is what the Democrats have been arguing, saying we shouldn't extend these tax cuts, and then they give these beautiful speeches about defending the working class.

This is coming to us. This is part of the battle. Understand those tax hikes aren't just going on rich people. Mr. Speaker, 62 percent of the tax-paying population actually see their taxes go up. I am going to show some distributional charts later.

After 2017, remember we actually made the tax code in the United States more progressive, meaning with a higher income, we are paying a higher percentage of the Federal income tax. What we also did was we functionally took half of our brothers and sisters who make much more moderate wages and pulled them off the tax system. They are still paying payroll tax, which is Social Security, Medicare, unemployment, and disability, paying into those as sort of a retirement account. Think of it that way. They pay almost no income tax.

We are going to focus on these charts about the income tax side. Once again, remember this is coming at us at the end of the year. This is what the budget reconciliation ultimately is about.

For some of us, we are stressing about: How do I not let the taxes go up? How do I not play the scam of, ``Here, we are going to extend the tax cuts,'' and, ``Here, give me a credit card so I can charge it to you''? That is the scam.

Mr. Speaker, is it really economically honest? We have a great set of data that shows if we borrow the money at the end of the decade, it actually costs those working families more because we have slowed down the economy and raised interest rates, those things, instead of saying I extended your tax cuts but because I charged it to you, your retirement account, your kids' future--understand that borrowing money is a tax. It is just not collected right now. It is collected in the future with interest on it.

Let's actually walk through a chart that has upset a number of my fellow Republicans, but the math is honest. The day we were elected this November, we publicly borrowed--let's do a quick explanation. When we hear someone say our total debt is $37 trillion or 36-point whatever, a portion of that we borrow internally. We reach into the Social Security trust fund and borrow that money.

We pay interest. The Treasury gives them special T bills. We pay interest on it. In some years, the interest we were paying to the different trust funds we have borrowed money from was actually a pretty good interest rate. That is internal borrowing.

Then, there is the public borrowing. These are the options. This is the note, T bill, or bond that is in a retirement account. Another country may buy it to hold in their version of their Federal Reserve.

Remember, China is not our number one buyer of our debt. As a matter of fact, China has been rolling off its debt for years, the holdings of U.S. sovereigns. They are actually somewhere under $900 billion now. It should make us a little nervous that certain foreign governments are no longer bingeing on U.S. debt because we would love to get their money. Most of the debt we sell to the retirement, to the business, to the bank, and other things.

The day we were elected, publicly borrowed debt was about $28 trillion. Let's do a math experiment. Baseline borrowing for the next 10 years is $22 trillion. If we were to do the tax extensions--and this is going to make sense. When we hear people running around here saying let's just use current policy, let's just pretend our spending stays the same, our tax policy all stays the same, and we don't have to pay attention to the actual law, that would be $5.5 trillion plus another $1.3 trillion on top of that in interest.

Then, let's add in some of the President's priorities: no tax on tips; no tax on overtime if we could find the mechanics, which is a little harder because we can't actually do it in reconciliation; no tax on Social Security. If we add those all up, it would mean, at the end of 2035, the amount of debt that has been borrowed from the public--one of the reasons the public number is higher is, in 2033, the Social Security trust fund is empty. We don't get to reach over there and keep using that as a piggy bank, even though we pay it back every month because the tax receipts from FICA taxes don't match the checks going out the door.

Here is the punch line. It took us 240 years to get to that $28 trillion. We are basically talking about doubling it in 10 years. The publicly held debt is not exact, but it is close. It is math I can do in my head. We are talking about almost doubling the publicly held debt in the next 10 years.

When we hear those coming behind the microphone and saying DOGE is horrible and evil. Really? Federal spending this year will be about $7 trillion, but we are only going to take in $5 trillion, so we are going to borrow about $2 trillion or $2.3 trillion. If I came to a business and said they are bleeding, for every dollar of revenue they are taking in, they are spending $1.36, $1.39, wouldn't that business turn around and try to find some ways to reduce spending and to modernize on how they do business?

Think of this, if we are going to spend 7, could we find 15 percent savings? Maybe. It would be really hard. People would complain. It will screw up some people's business models. Some of the public employee unions will be cranky. If we can find 15 percent, that would be $1 trillion a year.

It still doesn't get us to 3 percent of the GDP borrowing because, remember, again, 7\1/4\ percent of the entire economy will be consumed by this government in borrowing this year.

When idiots like me hold up charts like this and I get complaints that I am hurting people's feelings, the fact of the matter is this is why we have to thread this needle and do really hard things. How do we extend the tax cuts, the tax reforms, the tax benefits, and the baseline economic growth of what we accomplished in 2017 but find ways to offset as much of it as we possibly can?

Once again, even CBO and some of the outside studies made it very clear: If we offset the spending so that money stays in the economy, instead of being borrowed by government here, by it staying in the economy, we maximize economic growth because it gets lent to this business, lent to this new construction project.

When we take it out of the economy--remember, our baseline, we are already borrowing $22 trillion over the next 10 years. How many more trillions should we stack on top of that? If we don't find offsets, it means we doubled U.S. publicly held debt in 10 years. It took us 240 years, and then we double it again in 10.

This is how insane the chart looks from the people running around this place and saying just use current policy because it is easy and so I don't have to say no to the army of people sitting in my office and wanting money for whatever their cause is.

Mr. Speaker, you do realize when you start looking at this stuff, you are talking about 140, 150-plus percent of debt to GDP. It goes from a 100 today to almost a 50 percent increase in the next 10 years. It is uncomfortable. The primary driver of U.S. sovereign debt is interest and healthcare costs.

The people who run around here and just want to pretend the law doesn't exist and that if we were already doing it, we should just pretend and look the other way and just keep doing it. If we do that, that means in 9 budget years, just the interest--and this was assuming the interest rates from last December--we spend over $2 trillion a year in interest.

When we hear members from the different committees around here talk about how hard this is, how difficult it is, when the Democrats are saying how dare we talk about these benefits, help us. Where is the creativity? Where is the modernization? Where is the use of technology to disrupt the cost but make it better, faster, and cheaper? Help us.

That doesn't give us the dopamine hits and the hope to win back the next election to take the majority because winning around here is more important than doing what is moral, right, and economically rational.

This is important. Are we ready as a country? My math for this year is we are going to spend about $1.2 trillion in interest. Dear Lord, please don't let interest rates move against us.

Also, just an economic concept I need everyone to process is to think of a seesaw. When we see interest rates going down, yay, except the problem is that it typically means the economy is slowing down. There is less demand for debt in the markets, and the economy is slowing down.

What happens, Mr. Speaker? What happens to the U.S. Treasury? It means tax receipts are going down. They may not go down immediately. We often don't see the lag for three quarters, sometimes a year. We can see it in the growth calculations that interest rates are falling, the economy is slowing down, and we are going to take in less tax receipts.

Oh, good, the economy is growing. Interest rates go up. We are now paying it because this year or in the next 12 months we have to refinance $9 trillion of U.S. sovereign debt, plus probably add another couple trillion on top of that of what we call new issuances.

We are going to take in higher tax receipts because the economy is doing well, but it all gets consumed by the higher interest rates.

The center of this seesaw--it is a technical economic term--we are screwed. There is no free option anymore. When we walk around with $37 trillion of debt, when our baseline adds another 22, and that is with none of these policy discussions, why aren't more people around here just terrified?

Is it that our constituents are so desperate for more money from the Federal Government that explaining that we are not giving them something free, that we are putting it on their credit card, that they will pay this back in some fashion will deflate the value of the dollar so their savings crashes and raise the cost of goods, or that, at some point, we are going to brutalize their kids, their grandkids, and their retirement? It doesn't have to be that way.

God knows that, over the last couple of years, I have showed how we can crash the price of healthcare by using technology. Then, the lobbyists are in our offices, saying that would mean they have to change their business model.

Yesterday, on CNBC, Eric Cantor was, in many ways, almost mocking us. He is a former majority leader here. Now, he is on Wall Street. He said: Do we really think the bond market isn't going to notice if we just do this pretend thing and say let's call this thing current policy, so we will keep the current tax regime. Yes, it means financing another $5.5 trillion, plus another $1.3 trillion of interest on top of it, and the bond market won't even notice that.

We have the greatest fragility right now to this country. We are on the cusp of putting the bond market in charge of this country, not President Trump, not Congress. If we borrow about $60,000 or $70,000 a second every day, what happens when we pull up the next bond option and not enough people show up for it? It would create chaos around the world.

It is a dangerous, dangerous game we are playing around here, but we go home and talk to voters. They want things. They need our help.

Please understand this is a dangerous, dangerous game we are playing.

I was just trying to make the point that if we do all these things without financing, we are basically over 150 percent of debt to the GDP.

Let's actually do something difficult. The Treasury Secretary, Ray Dalio, these other people who are sort of economic experts--they are a lot smarter than I am or anyone else here--keep saying if we get to 3 percent of debt every year, it is actually somewhat equivalent to the growth of tax receipts.

To get to 3 percent, it functionally requires a couple of trillion dollars of reduction in spending every year--think about that, with where we are going growth-wise.

How many of you see Members of Congress come behind these microphones and say that we should work on this, let's get to $2 trillion a year. That is actually how screwed up these numbers are.

When you get into the out-years, when you get to 2034, it is not $2 trillion you would have to move to. It is over $3 trillion.

The current policy budget deficit is in the billions. If you want to be at 3 percent, you have got to cut 2 this year, 2 the next year, and it grows and grows and grows. I don't think there is an understanding.

This is a sequitur. These tie together. The United States in 7\1/2\ years now will have more deaths than births. We have a shortage of young people. Yet, you want to live in a fantasy world of, oh, we are going to grow at 3 percent. Great. Tell me how, unless you are willing to do talent-based immigration, adoption of AI, or promotion of synthetic biology to do things better, faster, cheaper.

There are ways I can get you there. I am blessed. I am chairman of the Joint Economic Committee. We have a handful of Ph.D. economists, freaky smart. We have a model to do it.

What is my chance, Mr. Speaker, of getting this body to say--the President talked about doing talent-based immigration 2 nights ago, talked about modernizing, using technology.

When you call the IRS--their own auditor says only 31 percent of the phone calls get answered. Why wouldn't you jump up immediately and say we are going to use the latest version of an AI chat that sounds like a person, that knows everything about the tax code, will stay on the phone with you, will help you fill out your forms, maybe even send you a YouTube video of how to fill out the form, maybe a PDF of the form, and it will stay on the phone with you all night long and will always pick up the phone. You get the union that goes: No, you can't use technology.

That is part of the discussion going on here. Do you want to keep living and existing in a model that is decades out of date and isn't working and is burying your future in debt? Actually you're currently in debt. Functionally, we are borrowing about $6 billion a day.

I was doing a little math standing in the back, off the top of my head. If you had 70,000 Federal employees accept early retirement, and they make $135,000 with benefits, you are cutting less than 2 days of borrowing. You need to do it. Do not take that comment and say: Oh, you see, it isn't enough.

Just the opposite. It is just the beginning. The lack of understanding of how much trouble we are in is the problem. Stop pretending and saying these little things aren't big enough. That is why you have got to do dozens and dozens and dozens and dozens of them.

But it might affect my business model; it might affect my--look, do you care about the future?

I have a 2\1/2\ year old we have adopted. My wife is my age. When my little boy becomes--I think my math was 24 years old--so 22 years from now, every tax in the United States has to have doubled just to maintain baseline services because that is our burn rate. This place is absolutely immoral.

Let's actually add to it. In 8 years, so 2033, the Social Security trust fund is empty. Yet, I will see my Democrat colleagues come behind saying we should expand the benefit. Great. Tell me how to finance it.

If the first year where the Social Security trust fund is completely empty--our rough math is it is over a $600 billion a year shortfall. I think that is the entire corporate income tax.

There is this lack of understanding of the scale. We are in trouble. What is wrong with this place?

Is it so much easier to go home and just lie?

On cable television tonight, how many of them are going to do-- whether it be the left or the right cable--hold up charts and say: Here is the reality of the demographics and math and how much trouble we are in?

For those folks who come up here and say, I care about poor people; I care about this, do you have any idea how much danger you are putting our future in?

I personally believe prosperity is moral. Design a tax code, design a regulatory code, design the adoption of technology to maximize prosperity. Somehow, I am the idiot who keeps getting up behind this microphone and trying to get people--saying let's try to do things hard, maybe think about how we deliver healthcare services.

We are doing modeling with our economists on silly things. How many billions and billions and billions do we spend every year in just Medicare with duplicative MRI scans, x-ray scans, and ultrasounds? If you take that scan and attach it to someone's phone, then it becomes portable. Now, our original number--I am having trouble believing it because it needs more vetting--was like $20 billion to $25 billion a year. What if it is a quarter trillion over 10 years? Is that a cut in services, or is that using technology to make it more modern, portable, faster to use, easier to use, more accessible?

There will be lobbyists in my office tomorrow because I said this, saying: David, you don't understand. Those duplicate scans are our profit model.

Help us. If you are on the left, or even a couple of my Republicans, and you don't like the discussions of we are trying to do reforms, then bring us ideas.

There are freaky smart people in this country. You have a supercomputer in your pocket right now. The concept of what this thing can do--15 years ago, did you think you would have the world's knowledge and AI on it?

Save us. Save yourself. Save your retirement. Save your kids. Save your grandkids. You have got to do it by thinking.

The idiots I get--sorry, Mr. Speaker. I want to retract that.

I will get people who say if we just didn't have foreign aid--and you send them the charts saying it is 5 days of borrowing. This isn't easy, but it is math.

For my friends on the left that keep saying: Make the tax code more progressive. Okay. You have already seen your own studies from the progressive groups that say you might get another 1\1/2\ percent if you blow up everything, you maximize every tax policy you have ever promoted. You are borrowing 7\1/4\ this year.

Remember, today, half the taxpayers--97 percent of the Federal income tax is paid by the top half, meaning the bottom half of those who are out there working their hearts out but don't make a great income pay almost no Federal income tax. They may pay FICA tax, Social Security, Medicare, those things.

Taxes now have become incredibly progressive. Maybe you need to make it more progressive, but don't pretend it actually makes that much difference in the debt model. It doesn't produce nearly the revenues.

I am going to bang through some of these real quick.

The Federal tax code remains incredibly progressive. It is more progressive today than it was prior to the 2017 tax reform.

Today, right now, if you actually take a look at the top earners, they are still paying the vast majority. What happens when your top 20 percent of income-earners are paying, I think a little shy of 70, 80 percent of all Federal income taxes?

Instead of an idiot standing here giving you percentages of GDP and numbers, I thought we would do it as time. Let's use it as a calendar. For some people, it is easier to see. How Washington finances 366 days of spending in 2024. Remember, it was a leap year. There was an extra day.

The top 20 percent of earners covered 201 days of Federal spending. The next 20 percent covered 41 days. The middle earners covered 17 days of government spending. The bottom 40 percent altogether covered 4 days.

If you take the folks below the 40 percent, we spent 103 days. We sent them money. We didn't tax them. We sent them money on the Federal income tax side.

Yet, when the intellectual vacuists say to just raise taxes, tell me how to get beyond the 17 percent GDP conundrum. The only model that really does, which is why much of the rest of the world uses it, is a value-added tax, where every separate production, you stack a tax on. Fine. Maybe that is what we are going to have to do in 10 years. Understand, that crushes the poor and crushes the middle class because their consumption is so much higher than those at the higher income.

Upper-income taxpayers overwhelmingly finance the Federal Government. Yay. The punch line here, get to the bottom 20 percent, we actually pay them. Take the bottom 40 percent, it is actually less than 5\1/2\ percent of the total Federal income tax. I don't know how much more progressive you can make the tax system.

If you want to do a super progressivity, great. When the people keep lying about the budget resolution--please, understand. I do not believe there was enough spending offsets in it. I want to make that perfectly clear. I actually felt incredibly let down. We spent months and months and months and months running around here trying to show people how you can modernize the delivery of services and lower the price of government. That scared too many people. So we got a budget resolution where functionally the baseline is $1.2 trillion in cuts and another half trillion in shock absorbers. Yet, it is a $4.5 trillion authorization. Meaning you would end up borrowing 3.3--$1.7 trillion is discretionary, completely unenforceable, and another $2.6 trillion of income is magic, thinking that somehow the GDP is going to grow 40 percent over baseline because we are so good looking.

In that sentence I just gave you, I just made a whole bunch of people angry, but it is math.

Find me a credible economist that is a truth teller and say somehow magically in a time where the United States has a shortage of young people--remember, in 7\1/2\ years, we have more deaths than births--and somehow magically we are going to start growing at this freakishly incredible rate while pulling stimulus out of the economy, which we have to do.

There is a way to make this work, but unless you are willing to do hard things--and then an army of people will show up and say: David, I really want to balance the budget, but I need more spending because that is how I get elected. I bring the bacon home.

That bacon is put on your own credit cards.

The highest-earning 20 percent of taxpayers pay 90 percent of all Federal income taxes.

Let's try it one more time. The highest-earning 20 percent of taxpayers pay 90 percent of all Federal income taxes.

It is math. It is not comfortable. It doesn't fit almost any of the speeches you hear from the left behind the microphone.

That is a tax cut for billionaires and rich people. That is not what the math says. Because when it comes to math, we are able to lie about it all the time because it is big and it is hard. A trillion, 12 zeros, no one can see that, so you just make crap up around here.

Let's actually go to, one more time, the chart that gets me the most complaints, it upsets the most people, and yet it happens to be absolutely truthful.

The next 30 years, this is the CBO using current law, not make- believe of let's just continue to pretend we can extend policy, and it has no cost because the bond markets aren't going to pay any attention when we are bringing trillions and trillions of dollars to the bond market. The world is happy to just keep giving us all of their capital.

One more time, 100 percent of the next 30 years of borrowing is Medicare and its financing costs, and Social Security, because, remember, 8 years from now, the Social Security trust fund is empty. We doubled senior poverty. Good job, guys. We doubled senior poverty in 8 years because the average recipient is getting something like a 20 percent cut.

How many people speechifying around here have been talking about how to stabilize Social Security? It is hard. They will run television ads saying mean things about you because you mentioned the word ``Social Security''--the absolute immorality of modern politics and how little the public understands.

Well, they stole the money. No, no one stole the money. The average family with their 40 quarters actually gets about a $72,000 spiff out of Social Security. It is a crap rate of return. It is a horrible rate of return.

Many of you are the ones that went to war 25 years ago when President Bush said: Could we take a little tiny piece and put it into the markets? Today, you would have dramatically greater wealth. That decision was made. The public spoke--actually, the leftist unions spoke and scared the crap out of people.

The real battle is that we are almost to the point of, for every dollar you put into Medicare and that payroll tax, you are almost taking out, well, $7. That right there is the primary driver of U.S. debt.

Do you cut things? No. My argument is modernize, change it. My little example of the duplicative MRIs and scans and those things, why are we so terrified to modernize how we deliver Medicare? How many of you went to Blockbuster Video last night? The fact of the matter is technology changed because you now go home and hit a button, there are all your movies. Oh, well, that made my life more convenient.

You are telling me that the thing you can blow into, the thing you can wear on your body, the technology on this, you couldn't also use it to keep yourself healthy when obesity is the single biggest expenditure in this government. Think about that. We modeled last year that obesity will add another $9 trillion of additional spending, $9.1 trillion on the top end of spending over the next 10 years.

Maybe the revolution is the way you stabilize U.S. debt is to stop being fearful of technology, be willing to actually modernize and cut spending where it is not working for the American people, and help our brothers and sisters get healthier.

That means taking on farm bills, nutrition policy, how we deliver healthcare. Maybe things like Medicare Advantage and these things should be rewarded for making their populations healthier instead of running around scoring them as sicker. There are solutions here.

We have known this chart for decades, that this is coming. Why the hell can't this place have an honest conversation? ``Oh, David, that is hard.''

The President stood there just a couple of days ago, gave us a list of things he wanted to help the middle class. He also asked us to find a way to balance the budget. I am not sure I can make that happen, but I think I can get us to 3 percent, which is what the Treasury Secretary asked for.

Mr. Speaker, my question is, who is willing to join us? I handed out my binders with research for months and months. I footnote everything, and you guys just beat the crap out of me for trying to tell the truth and trying to save us. Screw me. I am an idiot who runs for this job. You have kids. How many of you have grandkids? How many of you would like your retirement? How many of you are prepared for a 20 percent cut in your Social Security in 8 years? Help us. This Republic is worth saving. Maybe we should actually buy calculators.

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