Debt, Deficits, and Demographics

Floor Speech

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Mr. SCHWEIKERT. Mr. Speaker, shall we have some fun with math and economics? It is something we just don't hear a lot of here on the floor of the House. Remember, this is my therapy because I often sit in the back of the room and stew when I hear people say things when it is obvious they didn't pull their calculator out.

I am going to try two things tonight, and if you are actually interested in budgets and economics, have fun with me. If you are not, go watch Netflix. We are going to actually try a couple concepts, where the money is going and within that, the scale of our debt and deficits. The fact of the matter is, we are at what is called interest fragility that--think about what happened over the last couple days in the discussions coming from the White House, from us. The bond market actually bounced up about 30 basis points. We were just playing on the back of napkins, the math, and if that had held for an entire year, just those 30 basis points would have been $33 billion of additional interest.

I will try to actually explain that and then actually talk about something that is really interesting. The economy from a GDP calculation standpoint, and this is just the economists looking at the vitality in the economy, is remarkably good. We are running over a 5 percent GDP, which if you go back and look at the economic projections, it is double what many of our smartest economists in the country thought we would be at a year ago, but our spending--because of interest and healthcare and the reality that we are going to have to deal with is debt, deficits, and demographics.

Once again, remember, we functionally have the same number of 18 year olds today as we had 20 years ago, but we have double the number of 65 and up. It is just what we are. Don't get mad. It is not Republican or Democrat. It is just demographics and understanding when our brothers and sisters move into their earned benefit years, what it costs.

The fact of the matter is, this Congress refuses to do the hard things because in 6\1/2\ years, the Social Security trust fund is empty and you get a 24 percent cut in your check and we double senior poverty. We double the number of baby boomers who will live on the street.

In 6\1/2\, 7 years, the Medicare trust fund is empty and your hospital gets an 11 percent cut and much of the financing things like Medicare Advantage and those actually just become, let's just say, difficult.

Let's walk through some of this. I pulled up this chart because I haven't used it in a few months and I am realizing there are not enough folks, particularly the staff--remember, I often do these because I am talking to a thousand televisions around the campus. The room looks empty, but we are on televisions. Hopefully, there are some staffers who are working on policy who will understand how important these numbers are.

Do you see the blue portion of that chart, Mr. Speaker? That is discretionary. That is all you and I get to vote on. As Members of Congress, we only vote on the discretionary portion, and this was a 2025 chart. Today, it is probably only 25 percent, not 26 percent, of the total spending. Every dime of that is borrowed.

Mr. Speaker, the math for last year, for every dollar we took in, in tax receipts, we spent $1.43.

We were just in the back. I was talking with one of my Joint Economic economists. We think it is lower this year but we are still not-- because we are having to make the adjustments on the student loans and those sorts of things, it could be down to $1.37 or $1.40 this year. Think about that. Last year, for every dollar that came in, we spent $1.43.

Realize all this in the red is on autopilot, and a portion of it is actually on borrowed money. If you just do the hierarchy, every dime of defense is borrowed. Every dime of nondefense discretionary is borrowed. That is only about $2 trillion. A wedge of the mandatory also ends up being borrowed.

There is one other thing I want to point out in the chart. If you actually take a look at the hierarchy of spending, Social Security is number one. It is $1.5 trillion.

Guess what is number two if you do the total interest paid. It is interest. Here is interest to the public who bought our bonds, whether it be your pension plan as an individual or another country, or the interest we have to pay back to the trust funds when we reach into the Social Security trust fund, the Medicare trust fund, the railroad retirement trust fund, and those things. We borrow the money. We owe them interest.

Total interest last year was about $1.2 trillion, making interest the second biggest expenditure in this government. Medicare is number three. Medicaid and healthcare subsidies are number four. Defense is actually number five.

I always love it--I often have these conversations back home when I have a Democrat who says: Well, if you cut defense.

Then they look at me in horror when I ask them if they realize that in the hierarchy of spending, defense is actually the fifth biggest expenditure in Government.

This one is actually good news of some of what is happening. This is actually one of my favorite charts because it actually demonstrates here is our tax receipts as a percentage of the economy.

We were basically getting about 17.1 percent of the economy. We have some new math right now. It says we are probably peaking over 18 percent, maybe even higher, of the economy coming in, in tax receipts. That is wonderful except for one really yucky thing.

Remember last year, when we were up, getting 17.1 percent of the economy in taxes, we functionally were spending 23.4 percent. That delta is the deficit. What happens when your tax receipts are going up as a percentage of the size of the economy and the economy is growing but healthcare and interest are going up faster? Are we going to tell the truth about that?

Here are basic factoids. I did this last week, but I want to say it again because it doesn't seem to be sinking in. In about 33 or 36 months, half of every dime that the Federal Government spends, 50 percent of all of our spending will go to those 65 and up. Moody's Analytics has in 2035--what is that--8 or 9 budget years from now--30 percent of all tax receipts going just to interest.

There was an interesting economic paper. It was actually an economic paper demonstrating that Italy actually was more fiscally sound in the long term than the United States.

When you see that headline, you sit down and read it, within there was a factoid. If you use a 6 percent generational discount rate, which is reasonable--it could be slightly high--for a child born today, you need 104 percent of their lifetime earnings just to pay Federal pension obligations. Those are Social Security, Medicare, military, and Federal requirement.

Mr. Speaker, think of that. For a child born today, you need every dime they will ever make in their entire life, plus another 4 percent, to pay pension obligations. Does anyone see the immorality going on? But we can't talk about that because that would be hard.

I believe the American people are a hell of a lot smarter than we are. They are ready for us to tell them the truth about math. One of the first things we as the political class have to do is stop lying about math.

Let's actually walk through some of this, and I will blast through these because I am trying to make a point.

Also, before I go much further, if someone actually wants to bathe in the truth in math and what the future looks like and how we can fix it, go to the Joint Economic Committee Republicans. We publish some amazing things.

Every weekday, we do a text message to a few thousand people we call the Daily Debt. It shows how much came in and how much we spent. We give you a 12-month window so it fixes ups and downs. We will also give you the fiscal year as it sits.

Mr. Speaker, I just got my Daily Debt text message. We are borrowing over $71,000 every second. That is the 12-month calculation. It makes up all the highs and lows and averages out. You have got to understand that this ain't a game because that $71,000 a second, we need to have buyers of our bonds. We make our buyers of our bonds cranky. It gets really expensive.

This chart here is just trying to make a point of what is going on in our debt and deficits. Remember that discretionary spending, the blue on the pie chart I just showed you, is flat. It is not growing. Yes, there is waste and fraud in it. We need to eliminate that. We actually believe technology would eliminate that, except I can't believe how the bureaucracies are terrified of the technology that can find the waste and fraud.

Our growth is in the mandatory spending. It is the promises we have made that we have got to keep but we have got to figure out a way to finance it.

What this chart is showing is we see this slightly darker color here. That is the primary deficit. That is actually programs that we are spending more money than we have coming in. All of this lighter purple is the interest we owe.

The point we are making is this. If we have a $2 trillion deficit this year but interest is $1.2 trillion, interest now is the primary driver. Number two is healthcare costs. We just have this problem of telling the truth about healthcare costs are out of control. In many States, the government is the primary--is the majority of money spent in healthcare.

Let's have some fun here. I know we are all interested in bonds and how they refinance. Remember, if you have $38.5 trillion of debt out there, over $30 trillion of that is sold. That is what they call publicly held debt. About one-third of that--and I was going to show the charts of all the papers and the notes and the bonds. I realized no one cares.

About one-third of that--let's call it $10 billion--has to be refinanced this year. Much of that is coming off of lower bond prices from a couple of years ago.

On average, we are picking up one point of interest, 1.5 points, some 2. There is your problem. The chart here--I am just trying to show you--is we have to constantly refinance. We are refinancing at higher interest rates because we are making the markets cranky. We are not telling the bond markets that we are serious about taking on our debt and deficit.

Mr. Speaker, have you ever heard the term ``bond vigilantes''? It happened to the United States in the 1990s where, suddenly, we were making the bond markets cranky. They were starting to demand premiums. Our debt was a fraction of a fraction of a fraction of what it is today.

We are on the cusp of putting the bond market in charge of this country, not us. It is a really dangerous game we are playing. One of the ways we mitigate that is we tell the bond market: We are adults. We are being serious. We understand we have a demographic. We have a healthcare spending problem. We are going to take it on. We are going to adopt technologies. We are going to adopt other ways to make our brothers and sisters healthy. We are going to telegraph to the markets we are stable. We are America. We are the incredible investment.

If you think I am engaging in hyperbole, look at the price of gold. If the price of gold isn't telegraphing something to you, go back to your basic economics class. There is something really wrong out there. We are making markets nervous.

It is estimated that, from fiscal year 2025 to fiscal year 2026, we are going to have to borrow--this is what we call virgin borrowing; it is new issuances--about $470 billion a quarter. That is less than $2 trillion, but it is pretty darn close.

That is on top of what we have to refinance. When you start to get a sense of what we are bringing to the bond markets, it is more than just the borrowing. It is the refinance. We are subject to the interest rates.

We need to be understanding. Convince the people who are loaning us money, whether it be your personal pension, your savings account, Japan, whoever is buying our debt, that we are stable, that we are adults, and that we understand. We have a demographic problem, but we are going to engage in adult-like technology and borrowing policy, things to manage our debt, and minimize it.

Mr. Speaker, this chart is substantially unreadable, but I wanted to actually just show it for the fun of it. This is one of the things that we use in our economic shop, where we try to actually say: Okay, here is 1 year. If it went up \1/2\ percent, that 1 year costs $206 billion over 10 years. It is basically a table that says that if interest rates pop up this much, and it only lasts for 1 year or 2 years, here is what it will cost us over the 10-year window.

The whole point of this chart is to start to demonstrate so many of the things we talked about here. We are going to save $1 billion. That is a lot of money. We believe, annualized, we are going to borrow over $6 billion a day. In the first quarter of the fiscal year, we are borrowing over $8 billion a day.

The arguments here and the debates we will have here, often to save money, which are wonderful, we will have borrowed more money during the debate than whatever the item being debated would have ever saved, because: How do you talk about the drivers of debt?

The other thing we also have to deal with is when we get our policies wrong, when we make the bond markets nervous, when they don't see that we are fixated on debt management, fiscal reality, and interest rates go up on U.S. sovereigns. They raise everything. It is more than just the money we spend.

Mr. Speaker, we had months last year when we had to borrow money to pay for our borrowing. That is partially because the tax collection cycle goes up and down, but we raise your credit card. We raise your car. We raise everything. When we screw up U.S. sovereigns, we make bond markets nervous. They go up 30 basis points. You have to understand that just raised every cost for borrowing up and down through the economy.

It is more than just when I sit here and spout about saying that we are going to pay this much in interest. Think about what we did to the American families, businesses, small businesses, and farmers. We somehow seem detached from the reality of the math.

Let's actually talk about where some of the money is going and why we have to do such borrowing. CBO, 2025, Medicare accuracy, they actually did okay, but okay when talking $1 trillion is, hey, they only missed it by around 7 percent. That turns out to be around $70 billion of spending.

Medicare, 2025 outlays increased by $77 billion, 8 percent. CBO was projecting only $51 billion. From this scale of accounting, it is pretty accurate, but you have to understand that we are looking at an environment right now where we expect Medicare spending to double, to go from $1 trillion to $2 trillion over the next 7 years.

So far, every healthcare chart I have where we are looking at what the closing numbers for the 2025 fiscal year, they are all in excess of what we projected. If you start to have a world where you are sitting at 7 percent medical inflation, even if you have tax receipts going up 3 percent or 4 percent, we are borrowing more money.

Let's actually take another look at one of these. Major healthcare programs were up $150 billion over the previous year, and the major healthcare programs came in at a 9-percent increase from the previous years.

Does anyone see a math problem? You have an economy right now that is growing at 5 percent. It is amazing. Yet, our spending, when you tack in the interest rates, the healthcare spending--if healthcare spending is over 9 percent, you have a math problem.

Then, the argument we have from our Democrats is: But we need to subsidize more.

We have turned healthcare into financial engineering instead of helping our brothers and sisters be healthier. Legalize the technology. Legalize the processes.

Do you realize that so many things where you could crash the price of healthcare, this body actually keeps illegal?

We are going to do a number of healthcare bills. Every single one of them is wonderful, except for one small problem: There are rounding errors.

I love, love, love price transparency. I don't believe you can have functioning markets without price transparency. Every academic paper I have in my office says it is only about \1/2\ percent of price improvement. Yet, major healthcare programs, there is a 9-percent increase in spending. You get \1/2\ percent, and in a single year, I have 9-percent growth in spending.

Does anyone see a mismatch? Great policy, great rhetoric, sounds great on the campaign trail, and it doesn't save us.

Now, for those folks who know--how do I say this nicely? I like Medicare Advantage. It is called Medicare part C if you are geeky. The majority of our brothers and sisters on Medicare actually are on Medicare Advantage. It is functionally supposed to be a managed care optionality for your healthcare. So, you get a network. You know what your benefits are.

We have a problem. We have these things called MedPAC reports. I have a stack of them on my desk. On my desk, if you open them up, which I am sure every Member of Congress opens them up and goes through them, it will tell you that Medicare Advantage right now is costing 120 percent of fee-for-service.

Medicare Advantage, which came into effect in 2005, is supposed to come in at 95 percent of fee-for-service. That is a 25 percent delta. We have been looking at charts and data and trying to say: Hey, we want to protect Medicare Advantage. That is what seniors have chosen. They like it. Can we actually get rid of the risk scoring and some of the games being played with the star ratings, where they are milking the system, because think of that?

MedPAC reports basically say that there is almost $2 trillion of misalignment and fraud over 10 years. That is actually the biggest in government. I know some people have problems with the difference between millions, billions, and trillions. A trillion is really big.

Look at this chart here: Overpayment Per MA Beneficiary. This is done by the MedPAC report, so this wasn't even done by my economists. This is done by a room full of people who just specialize in Medicare Advantage.

Mr. Speaker, in 2025, 14--actually, I think that comes out to $1.25 trillion, but this also comes to $200 billion, I believe, of misspending. Am I reading that correctly? Yes.

When you see $1.4 trillion, and over $200 billion is in the MedPAC report as being bad payments, misalignments, abuse, taking advantage of the system, waste and fraud, Mr. Speaker, if we are going to do a second reconciliation, I would propose that one of the most moral and rational economic things that we can do is let's just fix Medicare Advantage and put it back to how it is supposed to work.

I know we have armies of lobbyists in our hallways here trying to stop us. Can you imagine why? If there is a couple of hundred billion dollars in play, they are going to absolutely knife us to stop us from doing the reforms.

Are we tough enough to do what is right for the American people for the next generation?

Think of this, Mr. Speaker: I have a 3-year-old. Yes, my wife is my age. We adopted a little boy--same birth mom as our little girl. When my 3-year-old is about 23 years old, every tax in the United States has to be doubled just to maintain baseline spending.

Is that moral? Mr. Speaker, you have kids. Is this the America where the next generation always gets to prosper more? That is not the model now. The next generation is going to be poorer, and it doesn't have to be.

We are on the cusp of amazing technologies--synthetic biology, cures for diseases, things we can do that can make this another American century. We just need to tell the truth about the math and policy instead of the theatrics that go on in this place.

Mr. Speaker, I appreciate the six or seven people who have been willing to listen to me.

There is a way to make this work. It just turns out that it is really hard. Are we ready to do hard things for the country and then go home to try to explain it to our voters that we are doing the right thing for them?

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