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Unfunded Liabilities

Floor Speech

BREAK IN TRANSCRIPT

Mr. SCHWEIKERT. Thank you, Mr. Shimkus.

Mr. Speaker, a couple of weeks ago, I came to the floor and did a bit of a presentation of some of the numbers we were seeing on what was actually happening in our debt, in our future economic growth, why we were so stagnant in today's economy, and the overhang that was, I believe, the very thing that was slowing down future economic growth.

I had a number of phone calls and a number of emails and a few comments on Facebook asking for a little more definition, a little more presentation. So I thought I would come to the floor this evening, take some of this leadership hour, and walk through some of the numbers.

I have to apologize to everyone right now, I am going to throw out a lot of math, a lot of numbers, but you are going to see a theme here of what is coming at us, and it is coming at us very, very fast.

After we do this, I want to do a little talking about a piece of legislation that I have that has made it through committee, and I am hoping, over the next couple of months, we will come to the floor and what that piece of legislation, I believe, means to sort of transparency here in our government with the EPA and hopefully as just sort of the future of how we deal with data in this Federal Government.

The chart alongside me--and I know there are lots of lines in it and it is hard to read, but it has a very, very, very simple theme--I am going to show variations of this on a couple of different boards.

The red you see down at the bottom is what we call discretionary spending. That is what we substantially get to come down and vote on.

That discretionary spending, if you look at the next decade on this chart, basically stays the same. So the military, the Park Service, the FBI, education, and these things that are programatic that we come down and vote for on the discretionary side of the budget are pretty much staying even for the next 10 years.

Do you see the blue lines? They are just slightly shy of doubling. They basically double over the next 10 years. That is mandatory spending. That is Medicare, Medicaid, Social Security, interest on the debt, veterans' benefits, and now ObamaCare, things that are built in by formula. And they grow and grow and grow and grow, and they consume everything in their path.

That is what is going on here.

When I do meetings back home in Arizona, in the district, you often get this question: Why do you all fight with each other? Why do you all fuss with each other? And my answer is: It is about the money. And you get this look.

You must understand, we come to this floor and we are fighting over, fussing over, in many ways, a shrinking pot of resources, even though today we have actually the highest revenues this Federal Government has ever received.

So where is the money going? It is going to that mandatory spending. We need to deal with the reality that the mandatory spending--the entitlements--are consuming our future. So that is what this chart is basically saying.

We are going to the next chart. The reason I am going to put this one up is this is from 2013. So we actually know it has happened. It is a closed book.

If you look at the blue areas, that is mandatory spending. You will see Social Security, Medicare, Medicaid. You will see other income. You have supplemental programs like food stamps, WIC, and some of those types of programs. You will see veterans' benefits down here. And about 6 percent of our budget last year--our money, our spending--went to interest. Thirty-two percent last year is what we, as Members of Congress, got to come down here and do policy on.

Understand that in 9 budget years--and I am going to show you that pie chart in a moment. That is 32 percent. In 9 budget years, that goes from 32 percent of our spending and collapses down to 22 percent. That 22 percent has your military, the FBI, the education, health research. All those types of things are in that remaining portion of the pie.

This was something that I picked up several months ago, and I was shocked it did not get more discussion here on the floor of the House or around here in Washington. Last September, we had the Chief of Staff of the United States Army in discussion before Congress talking about the future of the Army and what was actually going on. In his quote, he basically says that 46 percent of the Army spending today is personnel costs, like salaries, pensions, health care. By 2023, 9 years from now, it is going to be 80 percent.

So get your head around this: 80 percent of the Army's spending in 9 years will be personnel costs. It will not be equipment. It will not be things that fly fast and go kaboom or make our soldiers safer. It will be personnel costs. In 9 years, 80 percent of that Army's budget will be personnel costs.

You have got to understand the demographic bubble our country is in. The fact of the matter is these costs are consuming us. We can have a debate of, well, it's uncomfortable to talk about, it's not politically correct, when you talk about Medicare and Social Security you can get yourself unelected, but if you care about these programs, if you care about the social contract we as Members of Congress have with our constituents, you need to step up and understand the underlying math so you can save them--because it is math.

Think about if I came to you and told you that 9 years from now, for a branch of our service, 80 percent of their money is not equipment, is not things that keep the soldiers safe, but it is just going to be salaries, health care, and retirement. You need to understand that the very thing we are discussing on our overall Federal budget is now also hitting Federal employees and our military.

I am going to rotate to the next board. Remember, this one shows 32 percent of all of our spending was discretionary.

This is 9 budget years from now, so it is 2024. Nine budget years from now, that discretionary portion falls to 22 percent of our spending. And this is still the military; this is still the FBI; it is still health research; it is still education.

So what is happening here? Well, on the previous pie chart, interest was 6 percent of our budget, 6 percent of our spending. In 9 years, we predict it to be around 14 percent. That is assuming that we stay with historic norms on interest rates. If interest rates spike, if we have 1979, 1980, 1981, or 1982 all over again, our interest exposure consumes huge portions of what is left in the discretionary budget.

You must understand what we have done with the explosion of our deficits
in this country. We have actually made this country rather fragile to interest rate exposure, and something you need to understand is we now become more and more subject to the world's interest rate markets and our ability to constantly sell more and more of our debt.

There was something I found sort of amusing, and I didn't bring the actual numbers with me, but 2 days ago this administration was announcing how happy they were with that the deficit numbers and where they were at. The problem was the deficit numbers weren't that different from last year, and they were substantially higher than they were predicting last September, one more time demonstrating here in Washington you can spin almost anything. And if you have a compliant press, complicit press--whatever you want to use--you can make it sound like happy talk.

The numbers are not getting better.

So in 9 budget years, 24 percent of our spending is going to be Social Security.

On occasion, I will have someone on the left who will show up at one of our discussion groups, our working groups, or our town halls and demand a discussion about Social Security, saying Social Security is fully funded. They have all those IOUs in it.

Here is the basic math on Social Security.

Social Security is holding about $2.3 trillion of special Treasury notes from the Treasury Department. Obviously, the Treasury Department, if they were to pay those back--which they will--they have to go borrow the money, because they have already spent the money. That is the asset in Social Security. Understand, Social Security is sitting on about a $24 trillion unfunded liability. So they are holding about $2.3 trillion in special Treasury notes, and they have $24 trillion in unfunded liabilities.

And this is where it ties in. We talked about this a couple of weeks ago.

At the very beginning of the year, George Mason University did a study and put together some data of what would happen if you took the U.S. debt, the U.S. liabilities, and put them on GAAP accounting, just like your business, my business, just like everyone else where you are doing a large public statement and you would have to put them on GAAP accounting--what are your liabilities, what are your assets, and if you offset them.

What would you guess the United States shortfall is? On occasion, I will hear many of my brothers and sisters even here in this body sort of quote the number that you can see at the bottom of the U.S. debt clock on the Web site as it is spinning, and they will say things like: Oh, it's a $120 trillion shortfall.

The study at George Mason University came in at $205 trillion, which is our honest debt, our honest unfunded liabilities, if you actually use GAAP accounting.

Go to the Internet now and take a look at what many predict, estimate, guess is the entire wealth of the world. You are going to find out what we owe, what we are going to owe, what we have promised is greater than the current wealth of the entire world--every asset in the world.

I will make you the argument that even with the chaos we have right now through so many things in this country and so many things I actually hold this administration responsible for, the President's failure to step up and say, This is the systemic risk to my country, to your country, to our country, not dealing with the explosion of the future entitlements consumes our future. And it is in front of us.

We knew baby boomers were going to turn 65 for how long? I remember sitting in a statistics class in 1981 where the professor was putting things up on the board and talking about how much money we would have to have set aside in assets as we started to move into the baby boom retirements.

We are now into year three, and my understanding is a typical baby boomer will have put in around $100,000, $120,000 into Medicare in their lifetime, and they are going to take out $330,000. So they will put in about $110,000 and take out about $330,000. Now, multiply that shortfall times 76 million brothers and sisters. And we are into year three of it now.

We have known this was coming. We have known this was coming for 65 years, but it was politically dangerous to talk about. It was uncomfortable. It is easier, as you watch the debates here on the floor, to talk about today's chaos, today's spending.

Being able to cover these promises, these social entitlements, these social contracts into our future, if you love your kids, if you love your grandkids, if you love your great-grandkids that may not even be here yet, this is the question I beg of you to ask candidates who are running around this country: What are your plans to deal with the crushing future debt, the crushing future promises that we have made that there is no money for?

There is this almost pathologic attitude around here of: We will get to it one day when we have a Senate that is willing to step up and do work. We will get to it one day when we have a President that is willing to be honest about the math. We will get to it one day.

The problem is that every single day that ticks away, the math gets worse. A good example of that is 2 days ago, the Congressional Budget Office came out with their annual data.

Remember, you have heard over and over on the media that things are getting better, the job situation is better, our numbers are getting better. Well, if they are getting better, how did the fiscal scenarios get worse?

Go pull the Congressional Budget Office's numbers that they just put out. Our Congressional Budget Office does two scenarios. One is the standard and one is called an alternative.

The standard is basically based on the concept of: this is the law as it is today. Here are the numbers that it projects. Of course, you have got to understand that the law as it is today has things in it like the common vernacular ``doc fix.'' We refer to it as the SGR. It is this concept that, in a dozen or so years, doctors are going to take 73 percent less money--73 percent less compensation--to see a Medicare patient. It is implausible. It is not going to happen. Yet here is how the scam works here in Washington.

It is the current law that doctors are going to be compensated this much less over the next dozen years, so we are going to calculate that as savings all up and down our future budget projections, our future debt projections. We have things that are woven into those numbers that are fantasy. Go read the last three pages of the Medicare-Social Security actuarial report. The head actuary, whom I have never met but who I hear is just a standup person, basically says, ``Oh, by the way, these numbers are implausible,'' but they are based on current law. You will hear debates here on the floor, saying, ``No, the number is this. The number is this.'' The number often, if they are using the standard projections, is a fraud.

Then there is the alternative scenario, which may overshoot a number on the negative side because it basically makes a projection of: What if GDP isn't what we hope it to be? which, as it has turned out over the last couple of years, is true. We will be blessed if we can break through that 2 percent this year because of what happened in the first quarter.

The alternative scenario is that we hit 100 percent of debt to GDP in 14 years. How many of you remember what you were doing 14 years ago? To help you put it in sort of a perspective, when you get ready to take out that 30-year mortgage, understand that less than halfway through it your government, your country, is going to be at 100 percent debt to GDP. Theoretically, that is when your sovereign debt becomes much more risky, and this net interest figure potentially starts to explode on you because getting sovereign nations, getting individuals and getting investors from around the world to buy our sovereign debt becomes harder and harder because we start to look riskier and riskier. If you say, ``David, I don't want you to use the alternative number. I want you to use the standard number,'' okay. Add 8 years. Add 8 years so that, in 2036, we hit 100 percent of debt to GDP.

We can fix this, and we can fix it in a way that is not terrifying. It will be a little uncomfortable, but you will save the future. If you are a person of the left and if there are programs you care so deeply about, those programs are on the discretionary side of this budget. If you are a person of the right or a person who cares a lot about the military, that is in this discretionary budget. Every time you talk about those programs, you need to stand behind that microphone and talk about mandatory spending--Social Security, Medicare, Medicaid, interest on the debt, veterans' benefits, and now ObamaCare--because they are all on autopilot, and they are consuming everything in their path.

That is, hopefully, a little more detail of some of the numbers I put up a couple of weeks ago. We traditionally will put these slides up on our Facebook page and on our Web site so that you can analyze them. If you want all of this data and a lot more--I mean, a presentation could go on for hours--it is on the Congressional Budget Office's data sets. This is the issue of our time. It is that we have made as a government, as a people, lots and lots of promises, and we haven't built the mechanisms to pay for them.

With that, I want to move on to one other little thing. Let's take these boards down.

Now, as we get ready to talk about the ``Secret Science'' piece of legislation, I show you all of these debt projections and unfunded liability numbers, and I am actually more optimistic today than I have been at any time in my 3 years here in Congress. Why? If I had gone to anyone out there 10, 12 years ago and had said, ``Hey, in 2015, the United States is going to become a natural gas exporting country,'' you would have laughed at me. Ten or 12 years ago, you couldn't pick up the newspaper--you couldn't pick up The Wall Street Journal, Barron's, financial news--and not hear discussions here on the floor about this thing called ``peak oil.'' The world was running out of energy, do you remember? It wasn't that long ago. The world is running out of energy. Tomorrow, the next incremental barrel of oil and the next incremental unit of fossil fuels that we extract will be less than the day before. You all know the problem with that. It was absolutely wrong. As of today, we have more known fossil fuel supplies than any time in human history, and if we use this the right way, that is one of the legs on the stool that is going to support us as we stand up and start to meet these obligations that we have made.

The second thing is much more ethereal, a little more difficult to talk about, and that is what is happening all around us. There is this hyperefficient economy that is breaking out. How many of you have ever ridden Uber? How many of you have ever done SideCar? How many of you have ever used that handheld computer you call a phone to buy something, to sell something, and to use it in a fashion to do something that is so hyperefficient that you couldn't have done it a couple of years ago? Please understand. The incumbents, as they are often referred to--and it is not competitive businesses. It is competitive businesses and incumbent tax systems. If you have a Web site that allows you to rent someone's townhouse for the week, that becomes a great transaction for you and for that person who owns the townhouse, but the municipality and the hotel are not happy. The municipality is not getting its bed tax, and the hotel with its capital expenditures is not happy, but the fact of the matter is that this is an economic transaction that is efficient.

Over the next couple of years, I believe, in State legislatures, city councils, county councils, and here in Congress, we are going to see the fight over: Do we regulate the new alternatives you have as a citizen to engage in this hyperefficient economy? Do we regulate them out of existence? Do we create some concept of, well, we need them to have additional tort liability shields or we need to have them engage in this part of the tax scheme? A bit of economic chaos is normal. That is how you renew yourself. That is how you create the next generation of economic growth. We need to embrace it because, if we cannot reach escape velocity in the energy renaissance and in the economic renaissance, I do not know, mathematically, how we keep our promises to so many people in this country.

A few months ago, I introduced a piece of legislation, and it has been through the Science Committee. We gave it the title of ``Secret Science.'' I am not sure if I am thrilled with the title, but it is a very, very simple concept. The concept underlying it is: Do you make public policy and not make the underlying public data available? It is a simple concept--public data for public policy. Should your government be keeping the data--the underlying data--secret and then create a bunch of rules and regulations on top of you?

It is almost absurd to think we have to create a piece of legislation to get the EPA to take its data sets and make them public. There is this intense arrogance out there in the world right now, particularly at our agencies, of saying, ``David, you have got to understand. Only real scientists, researchers who we deem qualified should ever see this data. Well, you don't want the unwashed masses to have an opportunity to see how we are developing our science and our regulations.'' It is absurd. It almost borders on Orwellian as to what is going on in our bureaucracies today. They are going to create rule sets that cost hundreds and hundreds of billions of dollars and that are going to affect how we live in future decades. Yet there is the arrogance of saying the young man who is a statistics major, the left-wing group, the right-wing research group, the industry group, the activist group--just someone who is nutty enough to have a great stats package on his home computer, who wants to take the data sets and play with them and model them and see what is out in the tails and maybe match them up to other data sets that someone hadn't thought about--is not worthy. They are not worthy?

Now, it is a personal fixation, but I actually believe that transparency is the ultimate regulator in our society. Could you imagine if we had gone into 2008 and if we had had transparency on that MBS, the mortgage-secured bonds, and had known what the impairment was and had known what was actually going on? Would you have had an implosion on a single day, or would you have had a couple of years of, hey, these are having trouble, these are having trouble; we need to mark down the prices? Transparency is the ultimate regulator, the ultimate vetter, but it is also the ultimate exposure to bad acts.

This hit my desk last week. It is a TIME magazine. On the cover it says, ``Eat Butter. Scientists Labeled Fat the New Enemy. Why They Were Wrong.''

Now, how many times have you heard the people at your gym, your wife, or others saying, ``David, you need to be eating less saturated fats. You can't eat that butter. We need to go buy some of that artificial stuff''? Now I am looking at TIME magazine's saying, ``Hey, we screwed up on the data.'' How many times in our lives do we come here and say, ``We knew it except for the small problem that we got it wrong''? Remember, we all knew the world was running out of energy. ``Well, we got that wrong.'' We all knew eating butter was bad for you until we knew the data was different. There are dozens and dozens and dozens of examples like this around us, but we were so arrogant that we thought we understood the data. We thought we understood the methodology. We were so brilliant except for the fact that we weren't. We got it wrong over and over and over.

The fact of the matter is--and go back to my energy example of a dozen years ago and beyond that--our military policy, our foreign policy, our environmental policy, our tax policy was all based on this concept that the world was running out of energy, except we weren't. How much of our health policy is based on things like this: ``David, you can't eat butter''?

I saw a presentation a few years ago that the government was spending this astronomical amount of money to try to keep people from using salt. The researcher was presenting salt as only a problem for you if you have hypertension, but that is different than the folklore out there. How many things have we developed in our folklore that we make policy?

That is why H.R. 4012--it is called the ``Secret Science'' bill--is, I believe, so needed. When the EPA takes data, whether it be from industry, whether it be from a research group, an activist group, a right, a left, an internal--any group--and when they use that data to make a policy, to make a rule, that underlying data belongs to all of us. It is public policy by public data, and we all as Americans deserve the right, if you are so inclined, if you so choose, to sit there, see it, touch it, calculate it, crunch it, compare it, understand it. Who knows? You may be the researcher who comes out, looks at the data, matches it up against other things, and tells me I can eat butter.

I promise that in a couple of weeks, maybe a month, I am going to come back to this microphone, because I have collected an entire binder of example after example of what we were absolutely positive about--what we absolutely knew--and we got wrong, and how so many of those things we made public policy on, and we got it wrong.

My good friend from Iowa (Mr. King) has a couple of other things in sort of that same vein that he wants to share, and he may be the best person I have ever seen behind these microphones.

With that, Mr. Speaker, I yield back the balance of my time.


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