Congressional Record, Volume 162 Issue 24 (Wednesday, February 10, 2016)

[Congressional Record Volume 162, Number 24 (Wednesday, February 10, 2016)]
[House]
[Pages H700-H707]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

AMERICA'S MANDATORY AND DISCRETIONARY SPENDING

The SPEAKER pro tempore. Under the Speaker's announced policy of
January 6, 2015, the gentleman from Arizona (Mr. Schweikert) is
recognized for 60 minutes as the designee of the majority leader.
Mr. SCHWEIKERT. Mr. Speaker, we are actually doing something a little
different tonight. We have brought about 15 to 20--what we will call--
boards. If we were in a more electronic age, they would be PowerPoints.
We will have a couple of our brothers and sisters here, hopefully,
from the Republican side to help us walk through some of these numbers
and what they actually mean. We want to talk about what is really going
on fiscally, mathwise. I am sure it was riveting reading for Members of
this body;

[[Page H701]]

but 3 weeks ago, on a Wednesday--so 3 weeks ago today--the CBO issued a
new report. When you go through the numbers of the reality of what is
going on, it is devastating.
The reality is that, unless this body engages in activities and
policy and we have a President who is willing to work with us who
dramatically improves economic growth and not just for a year but for
the next couple of decades, there is not enough revenue to cover the
entitlement promises we have made. I know that is sort of inflammatory
to say, but we are going to actually walk through a series of the
boards and sort of explain what is really going on.
For someone who is actually out there who may have an interest in
understanding what is happening, this is the CBO report from 3 weeks
ago. What makes this one so different from any other report that has
happened is that we have two major entitlement programs that run out of
money--that go bankrupt--within the 10-year window.
For years, you would see people walk up to these microphones and say:
A decade or two from now, such and such is going to happen--30 years,
25 years from now. It is no longer decades. It is now. We are going to
show you a couple of portions of the data where, in 20 months, Social
Security itself goes negative, meaning the interest income that we pay
ourselves--and we pay ourselves 3.1 percent in interest income from the
money that the general fund has reached over and taken out of the
Social Security trust fund, and the tax revenues from Social Security
do not cover the money going out the door. This was not supposed to
happen.
When I first got here 5 years ago, it was a decade away. Then, in
some of the reports, it was 5 years. Now it is 20 months away.
We need to understand, when we talk about the desperate need for
economic growth, it is jobs; it is people's futures; it is their
retirements; it is also the ability to support and pay for and finance
the promises this government has made--the earned benefits and--let's
face it--some of the unearned benefits that are out there and our
ability to pay for them. So let's actually walk through some of the
boards and sort of explain where we are. This is really, really
important, and you are going to hear me say that over and over as we do
this.
This is the 2016 budget as we have it today. Do you see what is in
blue--that bluish purple? That is what we call mandatory spending. That
is Medicare, Medicaid, Social Security, interest on the debt, veterans'
benefits, ObamaCare--the new healthcare law--and a handful of other
poverty support programs, but it is mandatory. It is all formula
driven. You will notice it is 70 percent of our spending in the fiscal
year we are in--this year. The red--that 30 percent--is what we call
discretionary. That is what we get to vote on around here. Half of that
discretionary is defense. When you hear politicians or public policy
analysts or budget analysts talk, if they are not talking about the
mandatory spending, they are missing, basically, three-quarters of our
spending. Understand its rate of growth is squeezing out everything
else.
If you are someone out there who cares about healthcare research or
education or the parks, the resources for those activities in this
government are shrinking and shrinking and getting squeezed and getting
squeezed, and it is because of the movement of mandatory spending.
We have this thing called baby boomers. The fact of the matter is
that baby boomers began to retire about 3 years ago, and there are
about--what?--76 million of them who will retire in an 18-year period,
and they do consume tremendous amounts of resources that we have failed
to set aside for their futures.
Mr. Speaker, I just changed the boards. As we continue, the board
that is up right now, for those folks who would be interested, is
actually where the money is going today. My friend from Pennsylvania
and I are going to talk through some of the mechanics here; but Social
Security today is 22 percent of the spending; Medicare is 17; Medicaid
is nine; other spending--that would be Section 8, SNAP, and other
things that are mandatory spending that are in the formula--is another
17 percent.
Mr. PERRY. Will the gentleman yield?
Mr. SCHWEIKERT. I yield to the gentleman from Pennsylvania.
Mr. PERRY. Mr. Speaker, I want to thank my good friend from Arizona.
When I start my townhall meetings, I always start with our fiscal
situation because people ask me--and I imagine it is the same in your
district--what is wrong with you people in Washington? Why can't you
get along? What is all the bickering about? That slide is instructive
because I explain to them that nearly 70 percent of the budget we don't
discuss at all, and it keeps getting smaller--the things that they kind
of associate with the Federal Government--because, in their minds,
these other things, the things you talked about--Medicare, Medicaid,
Social Security, care for our veterans, the ACA--all just happens
automatically, and they think about--oh, I don't know--the IRS, the
Park Service, the military. I keep telling them that it gets smaller,
and so we squabble more over this diminishing pie.
I just need you to clarify something. So you say it is formula
driven. That makes sense to you, and it makes sense to me.

Mr. SCHWEIKERT. Yes.
Mr. PERRY. But can you make that easy for a layman?
Mr. SCHWEIKERT. You and I have both had this experience because we
talked about it earlier. You get asked at our townhalls and at other
gatherings: Why do you fight with each other? It is like other
families--it is about the money.
When I stand here and say it is formula driven, what happens is, when
you turn 65, you are eligible for certain earned benefits. When you
turn 67, there are certain earned benefits. If you fall below a certain
income, there are certain things you can receive. They are based on a
formula whether it be your age, whether it be your income, whether it
be your military service. That formula becomes sort of sacrosanct
around here, and there is an inability to say, if we do these tweaks,
we can preserve this benefit for future generations or even, as you are
going to see in some of these numbers--and I don't know if you have had
this experience in your townhalls where the political class before us
used to say, ``This is for your grandkids.'' Then, after a few years,
it was for your kids--and now?
Mr. PERRY. It is for my mother, who is already on Social Security,
and it is definitely for me and for anybody who thinks he may collect
Social Security, understanding that, when we say ``entitlements,'' that
is not meant to be you are entitled to it. Do you know why you are
entitled to it?--because the government forced you to pay into it. They
forced you to invest when it comes to Social Security, right? They
forced you to invest. It might not be a good investment, but you must
invest. It is important, and I think you are going to talk about this a
little bit in the future of how that investment is going.
Mr. SCHWEIKERT. As we do this, we probably should make the
distinction between an earned benefit and an entitlement and those,
but, for right now, we are going to somewhat refer to them as
``mandatory spending.''
Mr. PERRY. Sure.
Mr. SCHWEIKERT. We could actually break down all of the programs, but
this is already a little geeky as it is because we are going to be
talking about numbers that are in the billions and trillions, and
people's eyes glaze over when you talk about that. It means zeros. Yet
what is really, really important here is understanding the pattern of
what is going on and how quickly these numbers are eroding.
One of the reasons for this board here is, as we talk about this
Congressional Budget Office report, some of the erosion in our fiscal
situation is because of our lack of economic growth and of our failure
to reform, repair, preserve a lot of these very programs we are talking
about.
There is this slide here. This is 2026. Understand, in 9 years,
mandatory spending, earned benefits, and other types of entitlements
are going to have increased over those 9 years 83 percent in spending.
What you and I get to vote on of military and other discretionary--the
Park Service, the EPA, education, health, medical research--that will
have grown 22 percent. That

[[Page H702]]

is over 10 years. So think of this. What we would consider
discretionary will grow about what we expect inflation to be, and that
is how it has been budgeted. It is meant to basically be flat on
purchasing power but where the entitlements grow dramatically.
Mr. PERRY. Because of the formula.
Mr. SCHWEIKERT. Formula and--we have to be brutally honest--
demographics.
Mr. PERRY. Right, and the population growth for those people who will
be receiving benefits.
Mr. SCHWEIKERT. Yes.
Look, this isn't a sinister plot. I can remember, back in 1981 or in
1982, sitting in a statistics class, and the professor at that time was
actually showing how much money had to be set aside because the baby
boomers eventually were going to turn 65. Though, as you have found
here in Congress, it is almost as if we have just recently discovered
that.
Mr. PERRY. We have a tendency in Congress--quite honestly, we have a
tendency as Americans--with our domestic and foreign policy, to just
pretend that these things aren't happening.
Mr. SCHWEIKERT. Yes.
There are a number of times you and I have folks who come to our
offices or to our townhalls who have great ideas, and they desperately
want some more resources for this research project or for this activity
or for this infrastructure or for this and that. You try to explain--
okay--this board here talks about the next 9 years; so from this budget
year--where we are right now working on the 2017 budget--for the next 9
years. I know that seems like a long time, but the average over that
time--76 percent of all of the spending, three-quarters of all of the
spending--is going to be in those mandatory: the formula, the
entitlements, the earned benefits. Only 24 percent of the spending is
going to be in the military or in other activities of government.
As we go back to make that circle again, why do we fuss with each
other around here? It is about the money when you have someone standing
in front of you and he is not talking about the need to do two things.
Now, they are big things. One is to dramatically adopt policy that
grows the economy. We are not going to make it under this current
growth rate. This Obama economy is just killing us. Number two, we are
going to have to be honest about the benefits that we provide and the
formulas underlying them. There may be some creative things we can do,
but as the political class, we have got to stop being terrified to talk
about it.
Mr. PERRY. What are the consequences of not doing that?
Mr. SCHWEIKERT. Oh, we are going to get to that slide.
Do you plan to live more than 9 years?
Mr. PERRY. I sure hope so. My kids hope so.
Mr. SCHWEIKERT. You are incredibly fit. Understand, I am going to
show you some slides under the new projections by the CBO, the
Congressional Budget Office, that came out 3 weeks ago.

{time} 1845

Mr. Speaker, Social Security, the trust fund has about 14 years, but
Medicare part A is gone in about 9 years. You are going to see Social
Security disability may have only about 58 months, and that trust fund
is gone again. So understand how fast these things are eroding.
Look, we are going through a lot of data and a lot of slides. I know
you and I and a couple of other Members, we are going to be putting
this deck of slides on our Web sites. For anyone that is actually
interested in the fiscal sanity and health of this country, this is the
ability to take a look at them, analyze them, give us suggestions, and
give us creativity.
This one right here, so, in 2026, think of this: only 22 percent of
the spending will be in what you and I get to vote on. Half of that is
going to be defense; half of that is going to be nondefense.
Oh, and by the way, the one good thing I can tell you about we are
getting from the slow-growth economy right now is we have reprojected
our interest rate. Because if I had shown this slide a few months ago,
we were expecting trillion-dollars-plus interest. Now, we only expect a
much lower mean interest rate 9 years from now. So only 12 percent of
our spending will be interest coverage.
Think of that. Interest will be greater than defense in 9 years.
Interest will be greater than all discretionary spending in 9 years--
and substantially so. So the growth you are going to see here is
functionally in Social Security, Medicare, Medicaid, interest on the
debt, and some of the other programs. This is where we are at.
You try having a conversation with our constituents and say these are
big numbers, they are huge programs. You have got to move away from
some of the political folklore.
We should actually, as we go through these--because I have a couple
of spots. How many times have you been at your townhall meeting and
someone raises their hand? Some of the suggestions they have to save
money are wonderful, but they are tiny.
I yield to the gentleman from Pennsylvania.
Mr. PERRY. They want to cut something.
Why do you spend money on--I don't know. They call them Obama funds.
Or why do you spend money on foreign aid? If we just cut that, we don't
have to pay for people to hate us. They will hate us for free. It all
sounds all well and good, except you can cut all that completely and--I
think you will show at some point--it won't make a dent. It won't even
begin to make a dent.
Mr. SCHWEIKERT. Mr. Speaker, those of us on the right who are more
conservative--we have our folks who are guilty of this, and, heaven
knows, I see it from our friends on the left--where we hold up a shiny
object and pretend like this would take care of this fiscal cliff that
is no longer very far in the future. It is here. We say, oh, if we
would just adjust this on foreign aid, we would be fine. Anyone who
says something like that, they don't own a calculator.
So the slide next to us right now--and the gentleman and I were
working on this earlier today. I thank the gentleman and his staff for
their willingness to sit there and, shall we say, geek out with
calculators, budgets, and actuarial tables.
One of the things that has happened--about every 3 months, I do one
of these presentations. If someone were ever to go back a few years
when we did the very first one, parts of these numbers have actually
gotten much worse. Even though we are supposedly out of the recession
and we are supposed to be in a healthier economy, as we keep being told
from the other side, the fiscal, the financial shape of the country is
worse.
How is that possible?
Mr. Speaker, I am going to make the argument that when we do examine
what we were telling folks our financial situation was in the future,
it is actually much worse. In 2011 we said, hey, when we finally get to
that year 2016, we are going to have 3.3 percent GDP. Then we had a
couple of crazy ones that said, in 2012 and '13, you are going to be at
4\1/2\ or 4.4 percent GDP growth. You are going to be blowing the
wheels off.
Then in 2014, it started to come down. Well, you are going to be at
3.4 percent GDP growth. The problem is that the latest update on our
numbers, we are down to 2.3 percent GDP growth. So we are half of what
we were telling the public we were going to have just a couple of years
ago.
I yield to the gentleman from Pennsylvania.
Mr. PERRY. More importantly, for this illustration, it is as
important that we were telling the public--because the CBO projection
told us that it was going to be 4.5, 4.4, but we were basing all our
estimates on those numbers. We are basing our estimates on those
numbers, and those numbers turned out to be true to the point that it
is not even 2.3. It is more like 2.1, currently. It is even less than
that.
Mr. SCHWEIKERT. As you know, the first quarter of this budget year--
because budget years aren't the same as calendar years--came in at 0.7.
So we didn't even make a full percentage point of gross domestic
product growth.
Once again, this is geeky and people's eyes are glazing over. Why
this is important is because that economic growth is what helps create
the jobs and the trade and the velocity in the economy, and that
velocity ends up creating the tax revenues and the revenues that get
paid into Medicare, get

[[Page H703]]

paid into Social Security, help us pay and cover our promises.
What happens if you keep saying the check is out the door but you
don't have the revenues? That is why it is important to pay attention
to what we do in tax policy over this coming year, what we do in
regulatory policy over this coming year, when we start to take on those
factors that grow the economy.
I would think this would be both our friends from the left, who
thought somehow we could regulate ourselves into prosperity, would see
the folly of their policies and see it in the numbers and be willing to
come our direction. Because do they care about saving Social Security?
Do they care about saving Medicare? Do they care about saving Social
Security disability? If they truly care, we have got to do something
about economic growth.
I want to switch up a couple of the boards and just sort of walk
through some of the different numbers here and have this make more
sense. Do you have the table that actually shows the change from 2022
to 2018?
Remember, the last board I was showing you that was talking about,
hey, here is what happens when we miss all these GDP numbers? This is
why, on occasion, I desperately wish more of our brothers and sisters
around this body would grab a CBO like this and actually read it and
highlight it and pull out their calculators and look at it again. Yes,
you are going to fall asleep two or three times when you do it, but you
will understand how incredibly important some of the policy sets are we
are making here.
This was just from when the trust funds' actuaries did their report
this last summer. We will just go down to the bottom line because that
is the punch line.
I yield to the gentleman from Pennsylvania.
Mr. PERRY. Mr. Speaker, would the gentleman from Arizona confirm for
the audience or explain what OASI and DI mean?

Mr. SCHWEIKERT. When you see something that says OASI, that means
``Old Age, Survivors Insurance.'' That is Social Security. That is
Social Security.
DI, think of it is as Social Security disability.
I yield to the gentleman from Pennsylvania.
Mr. PERRY. You lose your job from unemployment, but you get hurt and
you can't work?
Mr. SCHWEIKERT. A permanent injury that changes your ability to
support yourself.
As you know, this last fall, fall of 2015, it was to be out of money
right now.
We bailed it out, but we bailed it out in a fairly dodgy fashion.
Let's be brutally honest. We reached over into big Social Security,
took $114 billion and handed it over here. All we bought was 5 years of
fiscal survivability.
I yield to the gentleman from Pennsylvania.
Mr. PERRY. So you took $114 billion out of OASI, which is the big
Social Security?
We took it out of that and put it into disability insurance because
disability was going to be bankrupt while we stand here today?
Mr. SCHWEIKERT. Right. Right now.
My calculations are we shortened the life of Social Security's trust
fund by about 13 months when we did that. I don't think you voted for
it. I don't think I did. I know I didn't. Now we have to deal with the
realities of what that meant.
As we were looking before, what happens when you are not achieving
the economic growth that is required? All of a sudden, you see numbers
like this. And this is stunning. When you are talking about a huge
trust fund, this should not be happening.
This is to give you a sense of how dramatic the problem is out there
in this economy. I know we are happy talking. It is an election year
and President Obama needs to sort of tell a story of how wonderful it
is, but it isn't showing up on the map.
So this last August, the trustees of Medicare, Medicaid, Social
Security--they all do their individual reports. The Social Security
trustee said interest income and tax revenues would cover the payments
going out the door on Social Security until 2022, except for the small
problem of, somehow between August and 3 weeks ago when we got this new
updated report, it is down to 2018. Now, all of a sudden, Social
Security goes negative, meaning it doesn't have enough revenues to
cover its obligations.
So the way we were doing the math is, in 20 to 22 months, Social
Security is going to have to start reaching over and cash in some of
its bonds. We pay ourselves 3.1 percent interest in the washing machine
where the general fund has reached over to the Social Security trust
fund, taken the money, and loaned it to our debt.
This is devastating. If any of you have ever been in business or
finance, when you start to use up principal, you are in real trouble.
I yield to the gentleman from Pennsylvania.
Mr. PERRY. So we lost 4 years. What caused losing 4 years?
Mr. SCHWEIKERT. It is a combination of economy, growth rate, reaching
over and taking $114 billion out to shore up Social Security
disability, and our recalculation of what future GDP is.
Just for the fun of it, can I talk my friend from South Carolina into
joining us, A, because it is always entertaining when you get behind a
microphone, and, B, you have no hesitation to correct me when I get
math wrong.
I yield to the gentleman from South Carolina.
Mr. MULVANEY. Well, anything for fun, Mr. Schweikert.
Mr. SCHWEIKERT. Mr. Speaker, the gentleman from South Carolina and I
have talked about these charts before, and the reality of this should
terrify people how fast these numbers are eroding. Where is the
conversation? Why isn't it a headline? Why isn't it on business news
every night?
If I came to you and said you just lost 4 years of actuarial
soundness on a trust fund that today is $2.8 trillion, you have got to
understand the scale we are talking about.
I yield to the gentleman from South Carolina.
Mr. MULVANEY. The real frustrating thing about it, Mr. Schweikert, is
that the demographic group that you would hope would be engaged in this
topic isn't. When you go home and you and I and Mr. Perry talk to our
folks back home, who is most interested in Social Security? The folks
who are already at or near retirement.
You have got another graph, by the way, that shows who really should
be interested in this because you have got the first year outgoing
exceeds income, including interest. On another graph, you show when the
trust fund goes to zero for Social Security.
The last time I had the CBO run the numbers, it was roughly 2032. In
fact, it was July of 2032. Why do I remember this? It is the month that
I turn 65 years old. It should be our generation. It should be the
people in their thirties, forties, and fifties who are demanding that
we make this a topic of conversation, and they don't.
They are not demanding it right now in the Presidential election.
They are not demanding it in their congressional elections. They are
more concerned about other things that I get the importance, as Mr.
Perry does, of national defense and immigration. I get all that.
Mr. SCHWEIKERT. How do you and I and Mr. Perry help the public
understand these numbers in the background are driving much of our
policy here, much of the fussing here, but yet it is not part of the
Presidential campaign, and this is no longer about your grandkids? This
no longer about your kids. It is about you retire--you turn 65 in what
year?
I yield to the gentleman from South Carolina.
Mr. MULVANEY. 2032.
Mr. SCHWEIKERT. You will be happy to know that my math is Social
Security will have been emptied out 2 years before you retire. I mean,
it is 14 years from now. So these are just critical.
I yield to the gentleman from South Carolina.
Mr. MULVANEY. Yet it is not our generation. It is Mr. Buck's
generation, the gentleman from Colorado, the older generation, the next
generation who is paying closer attention to it.
Mr. SCHWEIKERT. Mr. Speaker, I am not going there.
Let's walk through a couple of the other trust funds because I know
this is

[[Page H704]]

really exciting, but this is important. This is the 10,000-pound
gorilla in the room. So often those of us, as Members of Congress, we
get behind these microphones and we do the shiny object type of
discussion.
This is it. This is going to decide what our military capability is
because it is what we can afford. This is going to decide what money we
have for medical research and education. This is it. These numbers are
incredibly important. If this doesn't drive us this year to start
moving forward on tax reform, on regulatory reform, things that will
start to kick-start economic growth, these numbers are devastating.

{time} 1900

Let's do a little quick discussion about Medicare part A. If I came
to you right now and said: ``Hey, what was so devastating in this
Congressional Budget Office report? What should have scared you out of
your mind?'', in here it basically for the very first time said one of
the major trust funds is out of money in the 10-year window.
Mr. PERRY. Ten years.
Mr. SCHWEIKERT. Look at this. If you plan to be around 9 years from
now, Medicare part A, what covers your hospital, those types of section
in Medicare, it is gone. The trust fund is gone.
So all of a sudden now are we willing to do what Speaker Ryan has
talked about for years, premium support, some way to reform the way we
price and cost and the benefits we receive and how we allocate them and
price theory, you know, sort of thinking like an economist, but things
that make sure you get your earned benefit, but we also make it
sustainable?
It is no longer a theoretical conversation for decades from now. It
is in 9 years. So if you plan to live for 9 more years, understand,
Medicare part A, the trust fund, is gone.
In our calculations in our office, it could be 30 percent cut in what
is able to be paid out. How many medical professionals are willing to
see you when you come in and say that you need your cataract done, you
need a heart valve, you need this and, oh, by the way, the hospital is
only going to be paid 30 percent less what it gets today? Are they
still going to see you? Do you understand the wall we are going to be
putting our seniors in? This happens in 9 years.
How many Presidential candidates have you seen or heard talk about
this?
Mr. PERRY. I haven't seen any talk about that.
Mr. SCHWEIKERT. So now let's talk about the other trust fund that was
in the Congressional Budget Office report, something we shored up this
last fall. You remember how we did it? We reached over and grabbed $114
billion out of Social Security, old-age survivors, and moved it over to
Social Security disability.
In the discussions around here, people were happy. They were
applauding. I thought we had fixed it for years. Remember there were
going to be some reforms and some of these things? Well, these numbers
are with the reforms and with the money, and it is gone in 58 months.
Mick, I am going to make you stand up again because you were one of
the most articulate in talking about the scale of reforms we had. Both
were just, in the modern economy, were there ways we could help our
brothers and sisters who are on Social Security disability move back
into at least some economic participation and not have them hit a cliff
where all of a sudden their benefits are cut off.
It might cost us a little bit for a couple years, but in the future
it would become more sustainable. We didn't do it. Now we are back on
the treadmill again.
Mr. MULVANEY. I have got a question for you. While we are preparing
that question, if the young man could put up the previous graph below,
that one that shows the status of the Medicare trust fund.
Mr. SCHWEIKERT. It is stunning to think, in 9 years, Social Security
disability----
Mr. MULVANEY. Put them so we can see both of them at the same time,
please.
That is stunning. So between 2021 and 2025, we are going to have the
Social Security disability fund go broke----
Mr. SCHWEIKERT. Yes.
Mr. MULVANEY. And Medicare part A go broke.
Mr. SCHWEIKERT. Correct.
Mr. MULVANEY. Last time we fixed the Social Security disability--I am
making the air quotations when I say fixed disability--by robbing from
old-age retirement.
Where are we going to rob from the next time when we have both
Medicare and Social Security disability going bust within a couple of
months of each other?
Mr. SCHWEIKERT. Look, the ultimate driver for all of these trust
funds, for everything around us, would be incredibly robust economic
growth. Math problem.
Mr. MULVANEY. What are the assumptions on this, by the way?
Mr. SCHWEIKERT. Oh, no. We are working on those tables because it
turns out to be much more complicated. A couple years ago, when we were
pretending we would hit 2016 and be at 4\1/2\ percent GDP growth, if
you hit that number and could hold it, we were going to be okay.
Mr. MULVANEY. How many times, Mr. Schweikert, have we held 4\1/2\
percent growth for, say, a decade?
Mr. SCHWEIKERT. I don't think it has ever been done, ever.
Mr. MULVANEY. I think that is a fair assumption.
Mr. SCHWEIKERT. In this environment, in the fourth quarter of last
year, which is the first quarter of our fiscal year, we were at, what,
0.7?
Mr. MULVANEY. As this year stands, it looks like now, when they
revise the last quarter's numbers, which they will do here shortly,
2015 will be the tenth year in a row without 3 percent growth in the
American economy.
If that turns out to be the case and we go 10 years without 3 percent
growth during any of that decade, it will be the first time in the
history of the Nation that that has happened.
Mr. SCHWEIKERT. And then you try to have the conversation with our
friends from the left saying: You don't think the regulatory state
affects us? You don't think raising taxes has slowed down the economy?
There is some actual great literature--and we are working on it for a
future presentation--that says, for the tax hikes that the President
demanded a couple years ago that this body did, for every dollar of new
revenues that came in, a dollar was lost in economic growth.
It got us nothing. It basically slowed down our economic growth into
the future, ultimately costing us billions. In a couple of these
programs, if you really lay it out over 30 years, it could be in the
trillions.
Mr. MULVANEY. Mr. Schweikert, I see you brought up the graph for the
Social Security trust fund. Have you explained what the nature of the
trust fund is?
Mr. SCHWEIKERT. No, I haven't. I may let you do that. Let me just
pitch what this one means.
In 2011, when I first got here and I started this project in our
office, we actually set up a little team in our office we call the
ideas shop. We actually grind out these numbers all the time, and we
watch them like a hawk.
We actually do something fun. When the trustee reports come out, we
sit there with our yellow highlighters and read them as a group. The
amazing thing is I have almost no staff turnover, which I can't figure
out why they stay.
I hear some of my staff laughing in the background.
Mr. MULVANEY. No. That is us, actually.
Mr. SCHWEIKERT. In 2011, this was the chart. I just want you to look.
What is the direction? The trust fund was supposed to grow and grow and
grow up until 2021.
There was going to be more money there every year. This is what we
were telling ourselves, telling the public, telling the financial
markets just 5 years ago.
Now take a look when we look at the new budget projection. And
understand we went from saying these trust funds are going to grow.

So when you and I first got here, I think the Social Security trust
fund was supposed to survive to 2038, and now we have taken 8 or 9
years off that. This is the new number that just came out in the
report, that, in 22 months, it starts to go negative and we start to
dip into the principal balance.
In 14 years--and you will see that in the next chart because in the
next one

[[Page H705]]

I take it beyond the 10-year projection because we had to do our own
calculations for the final 4 because they only give you 10 years when
they do the projections--in 14 years, the trust fund is gone.
Look, I know you have talked about how the trust fund works.
Mr. MULVANEY. Yeah. The trust fund is actually fairly simple. A lot
of people think that it doesn't exist. They think it is a myth. It is
real.
What it represents is the accumulated excess collections that Social
Security has made over the years. I tell people that the last time we
really had a major overhaul of Social Security was back in the 1980s.
Ever since then, we have taken more money in every month in Social
Security taxes, FICA, than we have paid out in benefits.
So if you take $100 in in a particular month and only spend $80, you
have $20 left over. That is the money that goes into the trust fund. It
is essentially a savings account.
Now, when people say, oh, it doesn't really exist, you have stolen
money from it, and it is not there, that is not true. You can't keep
$20, real paper money, in an account someplace, in a desk. That would
be foolish.
What we do is we invest in the only thing the Social Security
Administration is allowed to invest in, which is U.S. treasuries. There
is actually in excess of $2 trillion in the trust fund.
The trust fund exists. It is in a drawer in West Virginia in a
building named after Senator Byrd, as most of the buildings are in West
Virginia. It is full of treasuries.
Mr. SCHWEIKERT. Actually, General Perry and I were talking about
that. You don't mind me calling you that, do you?
Mr. PERRY. Carry on.
Mr. SCHWEIKERT. Our official military expert. It was helicopters,
wasn't it?
Mr. PERRY. Indeed.
Mr. SCHWEIKERT. We were talking about earlier that my calculations
are that, as of right now today, it is a little under $2.8 trillion of
special Treasury notes that have been given from the Treasury to the
Social Security trust fund because that cash has been moved over here.
And the revenues that go into Social Security are a combination of
the FICA taxes. And would you believe we pay ourselves 3.1 percent
interest?
Mr. MULVANEY. Wow.
Mr. SCHWEIKERT. It took us a while to find that number.
Mr. MULVANEY. Do we actually pay that or we assume that?
Mr. SCHWEIKERT. No. No. Technically, we are paying ourselves. So that
is part of the revenue into Social Security right now and the Medicare
trust fund and all the three big trust funds. We are paying ourselves
3.1 percent, which is actually greater than a 10-year T-bill
substantially.
Mr. MULVANEY. That is a great investment right now. Yeah.
Mr. SCHWEIKERT. So we are actually paying ourselves a SPIF, and we
are still burning through our cash. That is why this board is up, to
show you how devastatingly different the number is from just this last
August, how fast the numbers have moved.
But even if we go back to 2011, when we were doing these floor
presentations, we thought we were talking 2038. You would have been 65-
plus for a few years.
Mr. MULVANEY. Could have been at Mr. Buck's age.
Mr. SCHWEIKERT. Yeah. I am not going there.
Sorry to the Speaker. We don't mean to be teasing you. Well,
actually, we do. We are just afraid of it.
But this is really important. So if there is someone out there,
whether you are on the right or the left, and you actually care about
getting your earned benefits, you need to start demanding your elected
officials to take it seriously.
Number one is: What are you going to do to get this economy to grow?
Because that becomes the most powerful thing to fix these numbers.
These numbers are rotten and horrible because now we are projecting
long-term GDP around 2.2, 2.5. When you start looking at numbers in
there, it doesn't work. The math just doesn't work for us.
Mr. MULVANEY. Mr. Schweikert, there is an ad campaign on television
right now that speaks to this. I think it was on during the Super Bowl.
It shows a very dramatic bridge scene and the bridge slowly fades
into decay, and it says: This is what will happen to our economy. This
is what will happen to our infrastructure because of entitlement
spending.
Some folks don't like that term, but we use it here for Medicare,
Medicaid, Social Security, and so forth.
It says: Demand of the Presidential candidates what their plan is to
solve this problem. Call or write your Member of Congress and demand
what their plan is.
I have gotten one call. Have you gotten any?
Mr. SCHWEIKERT. Oh, it is amazing.
Mr. MULVANEY. How many people have called your office to say: Mr.
Schweikert, what is your plan for fixing this?
Mr. SCHWEIKERT. I think it is zero. And I have actually had this
experience and I think Mr. Perry, my friend from Pennsylvania, had this
experience where we have held budget townhalls and we have held well
over a hundred in our district over the last couple years.
We walk through the numbers and then have a discussion about it. I
have had an individual go to the microphone and basically use a curse
word and then say: I don't care about my grandkids. I want every dime.
Part of the audience laughed. Part of the audience was terrified.
Maybe that was a more interesting discussion when it really was about
your great-grandkids or your grandkids or your kids.
You have to understand that the erosion of these numbers,
substantially because of the growth of participation, utilization of
the benefits, and the horrible economic growth, is no longer future
generations. This is us, particularly you. I didn't realize you were so
old.
Mr. MULVANEY. It happens.
Mr. SCHWEIKERT. Can you see that date on this particular slide? I
know you have eagle eyes from flying those helicopters. Our number is
2030, 2031. Right in there the Social Security trust fund is gone.
Mr. MULVANEY. And so what happens on that date?
Mr. PERRY. The only thing you have left to pay is from incoming
revenues from taxes. So your benefits are decreased by that whatever
that amount is at that time. So it probably fluctuates probably
somewhere between 25 and 30 percent.
Mr. SCHWEIKERT. In some ways, it is actually more complicated, which
I wasn't going to go there, but let's do it for the fun of it.
The Social Security revenues will be subject to the whims of the
economy. So you might have 1 month where you are able to pay out more
and the next month you are paying out less because of the whims.
You also no longer have the interest revenue. If I handed you $2.8
trillion today and paid you 3.1 percent, that is what is going into the
trust fund today. That is all gone. The interest revenues are gone.

{time} 1915

This is a double whammy we are talking about. That is why you never,
ever, ever want to get anywhere near these numbers. You fix it long
before. Because every day we wait, it gets harder to deal with.
Remember, my calculations are that in about 22 months we start to move
into principal balance. We start eating our seed corn. And then, every
day, the calculations get more difficult.
Mr. MULVANEY. You talked about how every day we wait, it gets harder
to do. I remember giving a presentation similar to this at a retirement
community in my neighborhood. It was back during one of the first Ryan
budgets when we had actually talked about raising the benefit age
slowly by a couple of months.
There was a gentleman there who was in his late fifties. He said:
Look, I don't want to work another 2 or 3 years. I said: Sir, we are
not asking you to do that. He said: What are you asking me? I said: I
am asking you to work an extra month. I am asking me to work an extra
year. I am asking my triplets to work an extra 2, but I am only asking
you to work an extra month. Can't you do that? He said: Of course, I
can do that. Will that fix things? I said: That will go a long way
towards fixing things.

[[Page H706]]

He got angry that it was that easy and nobody had explained it to
him. I said: You are going to get even angrier. If we had done it 20
years ago, it would be a week. If we wait another 20 years, you can
never fix it.
Mr. SCHWEIKERT. You no longer can say 20 years or a couple of
decades. It is 14 years now.
I am the proud father of an infant. If you do the calculations, when
she reaches her peak earning years, her tax rates will be double what I
pay. And that is already done. We have already done that to our
children.
You have got to understand the scale of what we have done. Doesn't
she have the right to participate in some of the same earned benefits
that we should have earned and hopefully will be there because we are
going to find a way to fix them?
It is not like the left gets behind television cameras and screams at
us or puts up television commercials of a Paul Ryan look-alike pushing
grandma off the cliff. That is political rhetoric. They are basically
pulling a scam on you. This is math.
I know we get folks in--I don't you know if you have ever had them at
your townhalls--saying: It doesn't feel right. But I don't have a
feelings button on my calculator. I have said that over and over to try
to make the point that if you want us to protect your retirement
future, you have got to demand that we step up and do it. It can be
done by a series of little things.
The reality is that Social Security is easy to fix. You can create a
little smorgasbord of policy. Some might be aged, some might be folks
with certain assets and opting out. There are a whole series of
creative things to do. You give some optionality to young people.
Because those who now are going to live in sort of the ``gig'' economy
have the ability to put in 50 cents every time they have a transaction
or by using the technology of these supercomputers we all carry in our
pocket.
Mr. PERRY. Many of your constituents hear, from time to time, whether
it is the President, people on the other side--and, frankly, people on
our side--say that we are reducing the deficits. They hear this.
If they don't come to your townhall meeting, they say: Well, the
deficit is smaller, right? So that is good. What is all this hara-kiri
about Social Security and debt. What is all the histrionics?
Mr. SCHWEIKERT. We are going to get to that in a second, because you
have to understand how much the deficit has gone up this year. We have
a slide somewhere here that is going to tell us that.
May I ask the Speaker how much time I have remaining?
The SPEAKER pro tempore (Mr. Buck). The gentleman from Arizona has 12
minutes remaining.
Mr. SCHWEIKERT. Let's actually run through these. Let's use our last
12 minutes and get exactly to your point of where we are at and what
has been going on.
I put this one up specially for my friends who had fussed and wailed
and complained about this thing called sequestration and how it was the
end of the world. Basically, western civilization was going to be
collapsed to its knees.
What you see is that the red is sequestration and the green is
discretionary spending without sequestration. If you see the blue bars
there, that is mandatory spending. That is Social Security, Medicare,
Medicaid, the new healthcare law, interest on the debt, and other
transfer programs. It explodes off the charts.
If our friends who complained about sequestration so much cared, they
would have talked about mandatory spending: the entitlements. But if
you look at the differential between that red and green, it is tiny.
The fact of the matter is, this year and next year it is actually gone.
Mr. PERRY. I don't think you can completely explain the green part of
sequestration. As you can see, it moves above the red line on occasion
about 2017.
Mr. SCHWEIKERT. Basically, let's look at 2016 and 2017. There is no
sequestration. We increased our spending. We blew up the sequestration
caps this last fall and last year.
Mr. PERRY. We wanted to spend more money.
Mr. SCHWEIKERT. So the one thing that was holding us back on
discretionary spending is gone, but under the law, it actually comes
back in 2018. So that little tiny differential you see on that chart
between the red and the green is sequestration.
Mr. MULVANEY. Mr. Schweikert, would you like to wager a guess as to
the likelihood of that reduction staying in law is?
Mr. SCHWEIKERT. It has got to enrage us that if you really cared
about the country, you would have the two conversations we are
demanding: one, your willingness to change the Tax Code and the
regulatory code--the things that help grow the economy--and; two, how
are you going to deal with the mandatory spending--the entitlements--
that are blowing off the charts?
Mr. PERRY. But the bigger point of this slide, if you will, is that
even with sequestration, you can see that, first of all, it is not
different from the normal program spending. It has absolutely nothing
to do with the huge portion of spending which is mandatory that
eclipses everything we do, regardless.
Mr. SCHWEIKERT. Mr. Mulvaney and I have been having a running
conversation about how we put together a budget for this coming year.
One of the discussions that we have been trying to calculate is, okay,
they blew up some of the spending caps last year. It is what it is. But
if they had paid for that increased spending with reforms in
entitlements, that is something that goes on and on and on and
multiplies out into the future.
Actually, it does a little bit to help our future and save the
entitlements. It has sort of a multiplier effect because it lives in
perpetuity. It is fascinating, because some of us are trying to pitch
that idea of give us a few things that we know actually have a
multiplier effect in the future as a way to start to deal with these
numbers.
I put this chart up. This is last year. We are going to do this real
quickly. I will have it on the Web site, and I will ask both of you if
you are willing to do it, too.
You are at your town hall. You have a group walking into your office
demanding more money. You have got to understand that happens all day
long. Every 15 minutes, there is another meeting of another group that
wants more money.
I will get groups that will come in and say: We want more money. If
you would just get rid of foreign aid, we will be just fine. Then you
pull this board out and say, Okay, you see the little red line there?
That is every dime of the State Department's budget. That is military
foreign aid, foreign aid to Israel, humanitarian foreign aid, food aid,
and all the embassies and their staff, and this and that.
It doesn't do anything. It is great rhetoric. It is a shiny object.
It does not do anything, unless you are talking about Social Security,
Medicare, Medicaid, other welfare programs, ObamaCare, interest on the
debt.
Understand that we are incredibly lucky. Interest on the debt this
year was supposed to be somewhere in the $600 billion range. Our
projection for the 2016 budget is maybe about $260 billion. We have
been really lucky.
Mr. PERRY. It is the only benefit of a weak economy.
Mr. MULVANEY. It is also the benefit of a totally accommodating
Federal Reserve, who sets the price of interest through things like
quantitative easing, which is nothing more than printing money. They
have unnaturally depressed rates.
Depressed interest rates is nothing more than the cost of money. One
of the direct beneficiaries of that has been this body. It has been
much easier for us to run of these huge deficits--which is the annual
debt--and the overall debt, simply because it is essentially been free
money for the last 6 or 7 years.
Mr. SCHWEIKERT. Mr. Mulvaney, would you agree that the cheap money,
the artificial liquidity, has kept Congress from doing what it knew it
had to do in reforming the entitlement programs?
Mr. MULVANEY. There is no question. At $16 trillion of debt, roughly,
which is the public debt now, you are talking about interest rates
below 2 percent.
Mr. SCHWEIKERT. If you really want to get geeky, it is getting
shorter because they are going shorter on what they call the weighted
daily average.
Mr. MULVANEY. The 40-year rolling average is about 6 percent. That is

[[Page H707]]

what money ordinarily costs the United States of America. It is about 6
percent if you look at it over a generational length of time.
If we simply regress to the mean and end up with money costing us
about 6 percent, you are talking about more than $1 trillion a year in
just interest payments.
Mr. SCHWEIKERT. It is coming.
This goes back to what my friend from Pennsylvania was commenting on.
What do we look like in the year we are in right now? Functionally, we
are going to be borrowing about $545 billion this year. This was
supposed to be one of the good years. Understand that the inflection
doesn't happen until 2018, when the debt starts to explode. This was
one of the good years.
Do you understand what $545 billion is? No one does. That is a lot of
zeroes. It is $1.493 billion a day. It is $62 million a hour. But,
think of this. My favorite one is that it is $1 million a minute. It is
$17,000 a second. And understand this goes up in 9 years. It basically
triples. This triples in 9 years. So, we are borrowing $17,000 a
second, and that number triples in 9 years. I threw these together
because I figured we would have a little bit of fun here.
So, we are holding a townhall. We get some of the groups that come in
and fuss at us and say: Well, I saw somewhere on some news article that
said you should get rid of subsidies for fossil fuels.
First off, it is depreciation, just like every business has, but
let's say you took away that depreciation from the production of
natural gas and oil. You took it all away.
If we are borrowing, functionally, $1.5 billion every single day, and
you took it all away, it would buy you 12 minutes and 41 seconds of
borrowing coverage a day. There are 1,440 minutes in a day, and you
just came up with a way to cover 13 minutes. It shows you how fake many
of these rhetorical things are that we hear from the political class,
particularly the left.
Let's actually take the next step. What about green energy? Did you
know green energy has three times the subsidies of fossil fuels?
Let's say you took every dime of the $36.7 million day that green
energy gets. That buys you almost 35 minutes a day. There are 1,440
minutes in a day. We took care of 12 minutes by getting rid of the tax
deductions and depreciation for fossil fuels. You got rid of 35 minutes
and 24 seconds if you got rid of it all for renewables.
My point is, much of the rhetorical things we hear from the
President, from our friends on the left, are completely frauds,
mathematically. We have to understand something very, very simple. We
are borrowing more than half a trillion dollars this year. In 20
months, the debt starts to explode.

{time} 1930

Mr. Mulvaney, when you have actually been in front of some of your
audiences in South Carolina, have you ever shown them the chart that
this year and next year were supposed to be the good years? It was
supposed to be fairly flat, and then it explodes.
Mr. MULVANEY. Actually, I have been showing them that chart since you
and I arrived in 2011 because the number has not changed significantly.
When you and I arrived and served on the Budget Committee together in
2011, we could have told people roughly what the deficit would have
been this year. The projections have not changed.
Mr. SCHWEIKERT. And what happened between last August and now that
all of a sudden--remember, last year, the deficit was about $150
billion lower than this, than we are going to run this year. Multiple
things happened:
We didn't come close to the economic growth we had built and modeled.
The movement of our citizens into certain programs has been greater
than expected, and fewer velocity.
We say unemployment is this, but when we actually look at the actual
tax revenues coming from it, there is a disconnect. There is something
horribly wrong there. So there is something wrong in economic growth.
And then we blew up many of the sequestration caps last year.
Well, ultimately, we went from, I think we had a $420 billion, $430
billion deficit last year, which was still stunning, and now we are
going to be $545 billion.
Look, these are big numbers. It makes your brain hurt. They are
uncomfortable. But what you have to appreciate, it is stunning, and it
gets dramatically worse in 20 months. We hit what was called the
inflection.
I remember reading about this a decade or two decades ago. It is when
the baby boom population has been moved in to retirement. And the
spiking years are moving in, and they are starting to receive their
earned benefits. Then we start adding a couple of hundred billion
dollars every year in new borrowing, and it blows off the chart.
Mr. Speaker, I yield back the balance of my time.

____________________