Pending Economic Disaster

Floor Speech

Date: June 23, 2022
Location: Washington, DC


Mr. SCHWEIKERT. Mr. Speaker, just because we are doing some organization and because we are all up against the tyranny of the clock, I yield to the gentleman from West Virginia (Mr. Mooney). Rugby World Cup


Mr. SCHWEIKERT. Mr. Speaker, I am going to try something tonight because I am very, very concerned this place isn't paying attention to the numbers and how much trouble I believe we are in. My argument and my thesis is very simple: If I am wrong, I am wrong; but if I am right and this place didn't prepare because of the numbers we are seeing, then we will damage the people, we will damage the economics, we will damage the country, and we will damage our future. We are not taking it seriously enough on how the numbers are eroding and how fast--how fast--the numbers are eroding around us economically.

Now, originally, this was going to be a 1-hour presentation. Now it looks like I have 22 minutes because of the tyranny of the clock, so I will try not go too fast, and I promise I will dispose of some of the boards. As always, wave at me if I start rambling at high rates of speed.

This is our baseline. The problem is this chart is now a year and a half old and the numbers are much worse. The reality, 29 years from now, CBO--this isn't some off group; this is our Congressional Budget Office-- functionally says we have $112 trillion. My back of the napkin now says $120 trillion of publicly borrowed debt in today's dollars, not inflated dollars.

Functionally, 75 percent of that debt is Medicare. Twenty-five percent is Social Security. The rest of the budget is in balance.

Well, what happens to Medicare particularly when you start having inflation like we do?

And I represent a district that has had over 11 percent inflation. I represent the district with the highest inflation in America.

Let's actually start to walk through what many of the experts are saying. And remember, I am trying to make a very simple point here. I am worried about my country. I am worried about our debt and the ability to pay, and it is skyrocketing; and then the cascade effect of how many people are getting poorer.

Remember, in the first 15 months of Democrat control here, Americans are dramatically poorer today than they were a year ago.

So let's actually walk through this. When Larry Summers--when I am coming to the floor using quotes for Larry Summers--you have got Larry Summers. In order to do what is necessary to stop inflation, the Fed is going to raise interest rates enough that the economy will slip into recession. That is one of the Democrats, at least up until he had heresy of telling the truth on Democrats' $1.9 trillion spending last year, and then you put him on the outs. But up till that moment he was Democrats' favorite economist.

But now he is basically telling us we have structurally built in so much inflation, we are going to have to have the Federal Reserve force us into recession.

Do you know what happens to people, what happens to poor people, the working middle class, the working poor when you are in a recessionary cycle, and how many years it takes for the public to get their lives back?

The economy is heading for a hard landing when we are now starting to see over and over and over the very economists that, a month ago, were saying we might be able to negotiate a soft landing. Oh, we may just tip a little bit of growth and unemployment and come back.

And now those same economists, a month later, are saying, no, we are heading toward a hard landing. We are going into recession.

By the love of the Dear Lord, I hope they are wrong. But if they are right, have you seen a single thing this body has done to prepare?

The U.S. economy is heading for a hard landing, and this one is important. We have got to understand. We are starting to see numbers now that--and we had a Member of the majority here, I think a couple of days ago, come and somewhere they threw out, oh, but there is all this excess money in the people's savings accounts. That isn't true anymore.

You do understand, the personal savings rate has plummeted from 26.6 percent a year ago, functionally, a year ago, to 4.4 in April, and it continues to vault. And understand, that personal savings rate of 4.4 is below where we were before the pandemic.

If we start to hit recession right now, our brothers and sisters out there don't have that cash reserve in their bank accounts.

Do you understand the concept of fragility?

And now we actually start to see the other thing that really genuinely terrifies me, and we are going to do a couple of slides on this. And I know I am going fast but we are up against the clock here. We have a mandatory shutdown in about 20 minutes.

Treasury yields are really starting to decline. And you have got to understand, we basically had budget projections, Congressional Budget Office and others, who had been basically building analysis of what will the debt look like? And they were using remarkably historically low interest rates.

A year ago we had expert after expert coming in front of the Ways and Means Committee and other places, Joint Economic Committee, oh, we are going to be in historically low interest rates because we are getting sold as a society. We have all these people saving. We are going to be more like Japan. Turns out they are wrong.

Remember the previous slide? The savings rate from the largesse of the giveaways, just structurally we are getting demographically older. We should be retaining. It is gone. The savings are gone.

And now we are going into an interest rate cycle where they are having to start to raise interest rates on Treasuries and everything else to attract capital from around the world. If you have been watching the U.S. dollar, you understand what is going on with this.

What happens when U.S. sovereign debt--if interest rates are 2 points historically--so we go a 30-year run, and if we are just 2 percent higher than what CBO modeled last year, 2 points, in about 25 years, I believe the math is, every dollar of tax receipts, tax revenues, goes just to pay interest. There is no more government. We are just covering our debt.

Do you understand the fragility we have done to ourselves with this inflationary cycle?

The average interest rate being paid on Federal debt--and this, I know this board is a little hard to read and hard to see. But historically, go back to the 1960s, 1970s, 1980s, the period that we have modeled is way down here. This was not normal.

God forbid, if we go back to normality in U.S. sovereign interest rates, and then we are functionally running $30 trillion of debt, do you understand how much of--the left wants to spend money on these things. The right, we want to defend the military. There is no money.

And you saw the first board that basically said the massive, massive shortfall in Medicare. Remember, Medicare is mostly a general fund expenditure. It is like only 20 percent of it really is a part A trust fund, and that is gone in 5 years. And it has begun. It has begun.

And the other thing, it is more than what we borrow today. It is the amount of U.S. sovereign debt. And I didn't bring that board, and I probably should have, that has to be refinanced every month. So you may borrow $1 trillion this year, but you had to refinance 5 or 6 or $7 trillion, and every dime of that now is reset at the new interest rates.

And the higher interest costs--and I am going to do a couple of variations of this. But this is functionally, 9 budget years from now. If it is going where we think it is going, publicly held debt--you are now in the 126 percent of GDP. And most of this movement here, when you start to see this movement, it is the financing costs. It is the financing costs of this government. Because the real explosion of our demographic spending, you know, the fact that in 7 years, 22 percent of our country is 65 and older, that explosion of the baby boomers costs-- it really starts--it has already begun, but it really, that curve really starts to take off at the end of the decade; at the very time we are already pushing 126 percent of debt to GDP.

Does anyone understand the level of fragility? It is this inflationary cycle. Democrats did something horrible March last year. They didn't listen to their own economists because they were so busy living in this fantasy world of free money. Give it away. People will love us. Don't require them to participate in the economy. Now we are paying the price.

If you are trying to save for retirement; if you are a young couple trying to get ready to buy your first house, there is a technical form for it in economics. You are screwed. Because every single day that savings you have is worth less.

If you are a saver, your savings today is functionally about 7 percent less valuable than it was a year ago.

I mean, those of you who intend to retire one day, have you actually started to think about that the value of the savings you had, if you put it in safe things like bonds or savings accounts, is substantially less valuable today. Its purchasing power is less today than it was a year ago.

If this continues for a couple years, do you understand how many more years you really need to work? Do you understand how much more savings you have to have? Do you have an understanding of how much you are going to have to help your kids buy that first house? This is not a game.

Two weeks ago, I came here, and we tried to do some of the math on the board of how many seniors. If the current inflation cycle lasts for about 24 months, we basically were trying to do the math of, okay, here is what happens to seniors' savings. It falls, the value of it. It is functionally transferred to government.

What happens to the COLA? Well, the COLA and Social Security never gets close to keeping up to the actual inflation rate because of the lag problem.

That 20 percent copay you have on your healthcare, and if healthcare inflation is almost double the CPI rate, and you've got to pay that 20 percent, we were looking at math that said you could potentially double the number of seniors in poverty in a decade.

Has anyone here actually wanted to dig into that math and start to understand? This is not a game.

I know there is a desperate attempt by the administration and my Democrat colleagues, oh, this is inflation because of a war in Ukraine. This is greedy oil companies.

No, it is not. You believed in modern monetary policy, and it blew up.

Remember, much of this inflation was structurally built in before the war in Ukraine. You see it in these sorts of numbers.

By the end of 2021--and remember, that is before Russia's invasion, right?--credit card debt climbed to $856 billion. It is a 28 percent annualized increase in the fourth quarter of last year.

It had already begun. People were already borrowing on their credit cards because prices were going up so fast. So the way they were supplementing their consumption is they were building up debt.

I have showed you the board before. Savings rates have collapsed. We are now seeing credit card debt explode. When those hit up the wall-- you see what happened 3 weeks ago--consumer sentiment collapsed.

It is because all of a sudden I can't keep financing my lifestyle by using up my savings and chewing up credit card debt.

This is going on right now. Where is the concern? Does anyone here care about people and what is going on to them economically out there, outside the walls of this building?

The U.S. economy is heading for a hard landing, and this is just functionally that same thing, once again, by other sources talking about the growth of credit card debt--or, excuse me, the collapse of savings rates.

Credit card balances, once again, really, really--from other sources, saying the growth. This is a real problem.

If we were in a time of prosperity--a couple minutes ago, I was in the back room. I saw the spokesperson for the White House. These are fine economic times. Have they lost their minds? Do they own, like, a subscription to any economic journal?

To say things are fine at the same time you can see the aggregated data of savings collapsing, credit card debt exploding, interest rates going up, interest rates and sovereign debt, and now start to understand what that is going to mean in the financing of this government.

Now you have got to deal with the Democrats' policy set. The fact of the matter is, thank God, the Senate has a couple Democrats that actually may have saved the country--it is hard to say that--by stopping the Build Back Better and the just stunning amount of debt the left wanted to build on.

When you start seeing numbers saying that if the Democrats' package had passed, we functionally would have gone from about $17 trillion of publicly-held borrowing before the pandemic to $44 trillion by the end of the decade. This is if the Democrats' spending plans and borrowing plans had passed.

An absolute, absolute lie, and we have shown it over and over, oh, it is all paid for; except it wasn't. It wasn't even close.

I think in the Build Back Better, the best estimate we were able to come--and we used their math--was they were covering about 30 percent of the expenditures, and they were covering it in a way where they were going to raise certain taxes that would have actually slowed down the economic growth that we are desperate for.

Now you start to see my fear for the country. When we start to model what happens to the projected Federal debt under various interest rate scenarios--and I know I am sounding like a highly caffeinated accountant on steroids, but this is the stuff we are paid to read and understand.

We are not paid to stand behind these microphones and virtue signal. But, God, that seems to be what we do here. We do policy by virtue signaling.

Let's come here for just one moment. Here is functionally where we are at. If you start to say, okay, the mean of U.S. sovereign debt, the 30 years, the 10 years, the 20s, you know, up and down, CBO's baseline basically says we are at 202 percent of debt to GDP.

With a small increase going back to almost normality, with the historic average over the last 30 years, we are starting to hit numbers close to 300.

If we actually were slightly above historic normal, you are at 357 percent of debt to GDP. Does anyone believe this economy doesn't collapse long before that?

People run from the U.S. dollar. They dispose of U.S. debt. Can you imagine what the chaos, what the misery, what the dystopian nature of economics would be in this country if you start to run up these levels of debt.

You already saw in a previous chart we are heading toward 126 percent of debt functionally at the end of the decade. Debt to GDP. That is publicly held borrowed money.

At the same time, you are going to be up against the Social Security trust fund running out of money. Social Security recipients are heading toward a 25 to 27 percent cut. The Medicare trust fund will have already been gone for 5 years, so we still haven't figured out what is going to happen to the payments to doctors and hospitals within that.

This is not a game, and it is in front of us. If we get here a couple years from now, and all this is blowing up on us, and this place pretends they didn't know, maybe I could sit them in front of the hours I have spent behind this microphone going over the math. The math is in those binders that are sent to us two times a year.

Here is one of the things that truly terrifies me, as you start to get into the new interest rate scenarios. This isn't long term. This is basically, yeah, we start to think of what mean rates mean, and you start to add in just a 2 percent change.

That 2 percent--and this is within the current 10-year window--you start to basically add $13.4 trillion additional--well, debt, and this marginal here is just the marginal increase because you start to chase your tail.

I have a chart, and I need to actually have it graphically made so it is easier to see. We will be financing the debt that we are financing. We will be chasing our tail, and that is where we are heading.

Now the cruelty.

Mr. Speaker pro tem, may I ask, because I am looking at the clock above. Can you tell me how many minutes I have?


Mr. SCHWEIKERT. I promise you, I am going to use all 5 minutes.

This is the cruelty now to poor people, to the working poor, to that hardworking middle class, to those retirees. When you come to them and say, all right, let's take a look here.

Forgive the colors, but the green would have been if we had hit the 2 percent sort of Federal Reserve benchmark inflation goal. This here is where we seem to be annualizing right now, and this is some of the newest projection for the next couple years. It is about 7.4.

But when you see this bar come down, it basically means the $100 you had in 2022, if you get to 2032, so a decade, that $100 you have, if we stay at this sort of inflation rate, functionally, you have lost half of its purchasing value.

So you have saved and saved and saved and saved and saved, and if you start running--if the current interest or current inflation environment were to hang around for a decade, at the end of that decade, half the value is gone. You have lost half of your savings.

This is what is going on. What if it is just for 2 years? You start just doing it for 2 years, and you start to realize you have lost almost a quarter. Then you compound that out to you want to retire one day. You want to finance your kids' school. You want to do these things.

Do you understand how the difference of your earning power has to change just to make up for the loss of the value? I represent a community that is going through 11 percent inflation rates.

Then the last one in the last how many seconds I have. Please. Please. Someone hire an economist to talk to the White House. A gas tax holiday? I mean, you can hear the economists rolling on their backs laughing right now.

Mr. Speaker pro tem, thank you for your tolerance tonight. I yield back the balance of my time.