The Math

Floor Speech

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Mr. SCHWEIKERT. Mr. Speaker, I could almost hear the joy from my staff saying: Hey, it is only 30 minutes this time, not an hour.

Mr. Speaker, I want to do just a handful of things. One of these days we are going to have not enough noise about the facts, the numbers, the data, the debt, those things that we can come in and sort of do our boards, our charts, on things that actually reduce spending and modernize.

I do want to sort of start with this. We have spent time since last summer working on pieces of legislation. The Wall Street Journal series and the ProPublica series came out about the scale of bad acts that were happening in what we call Medicare part C, which is Medicare Advantage for most of us, which is now I think about 55 percent of the Medicare population. We have been working on that to sort of modernize it, and so for all the lobbyists who are making money trying to beat us up for trying to actually fix it, I will warn you that the legislation is almost done. We now have to work with the economists and others to score it. We have been stunned though that it continues. Even last Thursday, I think, there was another whole set of investigations or indictments announced.

Let's get on to some of the math here. Mr. Speaker, I have come behind the microphone many times and talked about the scale of debt. We borrow about $72,000 per second. Our math next year, that goes up to about $82,000 borrowing per second. If you are a country that needs to borrow about $6 billion a day, we borrow about $6 billion a day, what happens in a world where you actually--the liquidity of the debt markets.

I grabbed an article that was in one of my--I think it was in one of my bond publications because I have some weird reading habits. ``Japan prepared to use its role as America's largest creditor as leverage in Trump's trade talks.'' The point I want to make by reading that headline to everyone is: Japan now is our largest individual creditor country. When you have a country that has $900 billion, maybe a trillion dollars of U.S. sovereign debt, and you walk in the door and say: We want to renegotiate some of our trade pact with you or we want to build an actual trade pact with you, they look at you and say: But we right now take those dollars that you send us because you have been buying our stuff, and we are buying your debt.

The fact of the matter is if you are a country that is borrowing $6 billion a day, does anyone understand the fragility, and I am going use that fancy word a couple of times, because also interest--we are actually seeing some indications that when we get out of extraordinary measures--for everyone who doesn't understand, we hit the debt ceiling a couple months ago. Right now, the Treasury every day for that $6 billion shortfall is juggling money internally and borrowing it out of the military retirement accounts or our thrift savings accounts, the cash accounts, and those things. We are doing internal borrowing. All that has to be paid back, and it all has to be paid back with interest.

We are still working on the rough calculation. Treasury put out a number, but I don't like their number because I don't think it was real, and we had all the visibility. We worked on the dataset saying: When we finally raise the debt ceiling, let's say a month or two from now, Treasury is going to need to pay back those dollars plus the interest. They are going to come to market with $400 billion, $500 billion, $600 billion of borrowing. Just be prepared for what is really going on in the interest rate markets, the debt markets, and will we be beyond some of the discussions of trade where countries like Japan aren't leaking stories that they are going to use our debt as leverage against us.

I used this board a couple of times now, but I want it to make sense. This is the estimate for net interest as a share of revenues in 2035, so that is 9 budget years from now. The chart here and the bar here I want people to pay attention to is Moody's, who has this whole thing where they do analytics on debt and spending. Mr. Speaker, their estimate is in 9 years, 30 percent of U.S. tax collections, that is everything, corporate, individual, estate, the tariffs, everything, they estimate in 9 years, 30 percent of all those tax receipts that come into the Federal Government will just pay interest. This is based on sort of today's interest rate projections.

I showed some charts a couple weeks ago that showed an estimate that if U.S. debt went up 1 percent in interest--selling our bonds, if interest rates went up 1 percent on us, in that 9 budget years, it is not 30 percent of tax receipts that go to just interest, it is 45 percent.

Are you prepared to have a world where here is $1 of taxes I am paying, and 30 cents of that just pays interest; or God forbid, interest rates go up, and 45 cents of that dollar just pays interest on the bonds?

There is also a chart where we actually went back to the early 2000s when we were kissing up against 6 percent, and it was just like devastating, the amount of tax collections that get consumed by interest.

Remember, when we finish this fiscal year, the CBO estimate is U.S. sovereign debt, all of it, the gross debt, will be at $37.2 trillion. The thing we are not supposed to tell people because it hurts their feelings, gets them upset, but it is called math, is over the next 10 years, the vast majority of debt is interest and healthcare costs, mostly Medicare.

Unless you are willing to have honest conversations about debt deficits and demographics, the demographics is the driver of U.S. sovereign debt. We have a shortage of young people in America. We have foreigners come and get educated here, and we send them home because we are so brilliant.

Healthcare costs: We do all this game playing around here where our healthcare discussions are about healthcare finance, not about changing the cost of healthcare.

The thing about this, the ACA, many of you know it as ObamaCare, it is a financing bill. It is a financing bill. It is who gets subsidized and who has to pay. The Republican alternative was a financing bill. Medicare for All is a financing bill.

We don't have the discussion of how to revolutionize this either through technology, a healthier society, taking on obesity, the things that drive the cost of healthcare--how about this concept of we build a healthier society, and we use technology.

I am wearing one of these Oura rings. We are doing experiments in our office with other wearables trying to build data. Is that Republican or Democrat? It is just data. I don't know why we haven't been able to build a love connection here or a policy connection or whatever the hell we are supposed to call it between the left and right saying: What would happen if we engage in policies that change the price of healthcare? Instead, we do these debates because everything in Washington is about the money.

The people marching up and down our hallways here are not coming to our office to say: David, adopt technology. Lower the price of living. Lower the price of healthcare.

It is: We want more money, or we want you to build a barrier to entry to our competition.

We call it rent-seeking, if you remember your high school economics class.

Let's take a look here. I need you to understand how rough our position is in the world right now. Global 10-year borrowing rates. I brought the charts before. We have been bouncing between the 13th position--I think we fell to the 12th position, then the 14th position--where other countries are able to sell their bonds cheaper. Yet, the one that just enrages me, here is Greece. Greece can sell a 10-year bond cheaper than the United States today.

When you run around thinking that the United States is the gold standard, we are also screwing up our extraordinary privilege of having the world reserve currency, and the dollar is coming back to us because you start to see some slowdown in buying U.S. sovereign debt.

Mr. Speaker, we don't know the real numbers because we are in extraordinary measures. We are not coming to market with new debt. Yet, think about this. Here are the countries that can sell a 10-year bond cheaper than the United States: Italy, Greece, France, Canada, Germany, China, and Japan all can sell a 10-year bond cheaper than the United States with lower interest rates. Does that make anyone concerned?

I think I have a chart that shows that the United States will consume 30 to 40 percent of all of the world capital that is going to sovereign debt in the next decade. Yet, we are not supposed to talk about that. Then, the absurdity from the left: Well, we tax rich people more.

Okay, at best, you might get 1 percent, 1.5 percent of GDP. For all of the things we talk about cutting, we get about 1 percent. So the 2.5 percent--Mr. Speaker, this year, we are on pace to borrow 7.3 percent of the entire economy. That is just this year.

One of our charts--and I think this one comes straight from CBO--says that with that little change in interest rates, in 2035, we may be well over 9 percent of the entire economy that year in borrowed money. It doesn't have to be this way.

We are doing these reconciliation negotiations, all of those things, and the inability of groups that come into the office and demand more money to come in with an idea, saying: Maybe we shouldn't be spending billions and billions of dollars on duplicative MRI scans or the things we just waste money on because it turns out that that waste--some people who come behind these microphones call it fraud--turns out to be the profit model of many of the bureaucracies and many of the business models. It doesn't have to be this way.

Start to take a look at the actual data. Last year, the gross interest--that is what we sold publicly and had to pay interest out internally. When we borrow money from the Social Security trust fund or these other things, which all that money has already been borrowed, we have to pay interest back. When Social Security redeems its bonds, we pay them back the money they need for that next month's checks to come out because, remember, Social Security is running about a little less than a structural 25 percent shortfall from tax collections to checks out the door. We also pay them interest.

Last year, we spent $1.133 trillion in interest. Our best estimate right now is your government will spend just a little shy probably of about $1.3 trillion in interest this year. Why that is important: Realize that is more than defense. Let's take a look at this. Think about that.

Starting at about 2022, our interest became more than the Department of Defense budget. How many of the public understand that interest, if you actually calculate the gross interest, is now the second biggest spend in the United States? Social Security comes in at about $1.480 trillion. Interest this year will probably come in at, what, $1.2 trillion, $1.3 trillion?

Interest now is No. 2. Defense right now is actually coming in around No. 4--Social Security, interest, Medicare, defense.

How many times do you hear people come behind these microphones who actually at least know their basic math or want to tell the truth to the voters? Once again, is this Republican or Democrat? It is just math. It is an obligation that we have to pay.

We are going to do what about it? We are going to squeeze out our ability to do the things that we believe are important for protecting the Constitution and the society because, God forbid--the bond markets forbid--that we all of a sudden start to have a spike in interest rates.

You start to understand that many of our brothers and sisters who come behind these microphones--I show the chart all the time saying: Here is the pie chart of all of our spending. Today, about 75 percent is on autopilot. Mr. Speaker, you and I get to vote on 25 percent of the spending. About half of that is defense; about half of that is nondiscretionary. Every dime that a Member of Congress votes on today is borrowed.

Think about that. Other than when you are in reconciliation where Members actually get to have a vote or try to work on mandatory spending, which is formulaic, all defense and all nondefense discretionary is borrowed.

My colleagues have heard a number of Members come behind the microphone and talk about how much nondefense discretionary has gone up, and it has. We have lied repeatedly when we did sequestration.

Paygo, how many times--paygo, I actually think was a Democratic proposal from years ago that, if we are going to add new spending beyond the 5-year window, there needs to be an offset. Members saw a number of bills that expired just before the fifth year so that they don't set off the paygo, or like we did back in January when we owed approximately $1.2 trillion in cuts to meet the paygo--pay as you go-- rules.

Now we just waive it, just like we have done with sequestration and all these other things. We tell people that we are going to be fiscally disciplined. As soon as it is uncomfortable, then we will just waive it.

Why this is important is we will say that there is a 45 percent increase in discretionary spending since 2019, and it is. Yet, when my colleagues actually look at it, it is a lot of money.

Did I mention that we are borrowing $6 billion a day? We went from $662 billion--this is nondefense discretionary, this is the Park Service, this is the IRS, this is the State Department, all of the things we think of as the government--it went up to $960 billion.

Yet, why this is important to understand--I would vote to roll that back to the 2019 budget. Yet, if you see it as a percentage of GDP, the size of the economy, we are spending, which is the proper way to do big-boy math on budgets.

In 2019, nondefense discretionary was 3.1 percent of the economy. Last year, it was 3.3 percent of the economy. It went up, but the economy got bigger. It turns out that, if you are borrowing 7.3 percent of the economy this year, you could get rid of all of what you think of as government, nondefense discretionary, and you could get rid of all of defense, and my math on the top of my head--I probably should have calculated this before coming behind the microphone--you would still need about another $400 billion to cover borrowing that covers Medicare. Think about that.

There are those who say: David, balance the budget today.

I can do it. Of course, you are not going to have a military, you are not going to have what you think of as government, and I need to find $400 billion in the mandatory space.

There is this lack of understanding of the scale. Getting old, when it is healthcare and interest, that is the primary driver. No one wants to hear that. That doesn't set off the dopamine receptors. It doesn't make people mad. It doesn't get you on television.

If you tell the truth about the drivers of U.S. sovereign debt, you will never end up on MSNBC or FOX News or any of those because no one wants to hear the actual math. We want things that anger people. It turns out that good accounting isn't really that exciting, but it is math.

Mr. Speaker, here is the punch line which worries me and why I beg my brothers and sisters: For those of us in the House, we have a reconciliation budget. We are trying not to let the expiring provisions raise people's taxes. We have a reconciliation budget in the House that, if we do everything right, we get a couple trillion dollars of savings over 10 years. We are going to spend over $68 trillion in the next 10 years.

How many Members of Congress have had protesters outside of their offices saying that they can't cut things. We are talking about a total of $2 billion or $2 trillion in savings over 10 years when we are spending $68 billion. Have we lost our minds?

Yet, if we were to do the Senate's reconciliation budget, which has almost no cuts in spending in it, we will borrow approximately--I am conflating publicly sold debt with the debt we would create in the next 10 years. What took us 240 years to build, we will double in 10 years, or come close to doubling in 10 years.

Does this body, the lobbyists in the hallways, the groups in the hallways demanding more spending, or any of the staffers who might not have a life so they are watching this really think that the bond markets aren't going to go: They are doubling U.S. debt, maybe we should ask for a little premium, which is called term premium, on U.S. sovereign debt, but I just showed you and told you what happens if we go up 1 percent.

Just that 1 percentage point is $3 trillion of additional interest. It is more than everything we are talking about trying to cut.

Here is your balance: How do you communicate to the people we borrow money from that we are a good credit risk? We are going to pay you back. We are going to pay you back appropriately. We are not going to say crazy things: Maybe we should force you to go longer on the bonds, or maybe we should ask you to do this or that. You can't do that. You don't screw with your bankers.

Just as in the article, we are already up against the leverage of Japan in this one, but I don't know why it is not about other countries using the fact that we have used them and we have needed them to finance our debt. Then we intend to leverage them?

Okay. They need trade with us. Let's use that leverage, but let's also be respectful of the fact that they are one of our bankers.

Understand the fact, Mr. Speaker, that if we don't get our act together, the United States is on track to double its borrowing over the next 10 years. If that becomes the perception in the world debt markets, we are going to pay a penalty for it, and that penalty is really expensive.

Mr. Speaker, I am going to go back to the office and have more coffee. I appreciate the Speaker's tolerance, and I yield back the balance of my time.

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