Mr. Speaker, I yield to the gentlewoman from Ohio (Ms. Kaptur), who has always treated me very kindly. NAFTA Negotiations Mr. Speaker, this is one of those things I partially do, I think, as therapy.…
Mr. Speaker, I yield to the gentlewoman from Ohio (Ms. Kaptur), who has always treated me very kindly.
NAFTA Negotiations
Mr. Speaker, this is one of those things I partially do, I think, as therapy. About once every other month, I ask for a block of time to try to take a bunch of very complex numbers and try to find ways to put them on boards and demonstrate them.
I am going to take a little divergence just for a moment or two, in response to some of the things I have heard today. We are actually going to focus on debt and deficit and what is actually demographically driving them, what is really happening in this country, and what is going to drive all public policy in our life.
You have had a handful of things said about the ACA--many people know it as ObamaCare--and our replacement. I know some of the things that the Senate is working on.
There is a math problem--and it is very simple--in the individual market. So if you hear someone turn to you and say, This is about healthcare for everyone or this is employer-based, or Medicare, it is not.
In my congressional district, less than 2 percent of my population actually purchased in the individual market. So you have to start putting this in perspective.
Here is your math problem. Because the prices kept moving up and the deductibles kept becoming larger and larger, half of our population-- that 50 percent that only uses 3 percent of healthcare dollars--stopped buying.
I came across a number earlier this week--I haven't had a chance to vet it, but it was in a publication--saying that, of the 18- to 30- year-old population that would be in the individual purchasing market, only about 17 percent of them were actually buying the insurance.
So those of you who do math, you start to understand what happens in a world where half the population that really uses very little healthcare services doesn't buy a product and those who are purchasing it are those who are the high users of it.
Remember, 50 percent of all healthcare dollars are used by 5 percent of the population. So you start to see it is this hockey stick curve that shoots up. That is the math problem that is trying to be fixed.
In the last 3 years, if you are from Arizona, you have had a 190 percent price hike in the mean plan and you have a single choice. So if we are going to be intellectually honest, should we hold our brothers and sisters around here to their own words and their own promises? You remember the promises a few years ago about keep your doctor, $2,500 discount, lots of choices, lots of options, well, in Arizona, your prices have skyrocketed, you didn't get to keep your doctor, and you now have a single choice.
That is the reality of the math. Sometimes it is just so hard sitting here when you hear people just pulling things out of the air, and then you go to the bill and say: But I can't find that.
And you get these weird logic trains that if this happened and a meteor hit here and this and that. At some point we need to be honest with the American people saying it is a math problem. This is not about removing costs from the healthcare system. It is actually moving around, how you fairly distribute the cost of it.
This summer now we are starting to work on it, just like we voted on about an hour ago a piece of legislation that starts to remove cost out of the system. It is these future pieces of legislation, like the tort liability bill that was just passed out of the House here, that will actually start to drive down costs.
Remember a really important conceptual idea: in 1986, there was a law passed here, signed by President Reagan, that said you cannot deny an American health services if they show up at the emergency room, if they show up at the hospital.
So if you actually look at the number of procedures in society in the last 30, 31 years, pre-ACA, after the ACA came into effect, what we see in the future, we haven't removed procedures and costs. We have just moved the money around.
All right. So what is happening in our country? Do you remember when the President introduced his budget, what, about 6 weeks ago, 2 months ago, and the gnashing of teeth and the wailing and the crying?
We have a math problem, and it is based on demographics. We are going to see this multiple times in these slides. I am one of them. I am at the very tail end. I am a baby boomer. There are 76 million of us who are baby boomers, who are heading towards retirement. That demographic curve is changing the cost structure of government.
On the slide you see next to me, this is 9 years from now. Remember, we are
working on, what, the 2018 budget? So actually less than that. This is what the world will look like in 2026.
Do you see the Social Security being 24 percent of all spending? Do you see Medicare being 19 percent of all spending? Do you see interest on the debt?
If you start to add up everything, you have to understand the world we are in is we are heading toward a time where three-quarters of spending--actually, even more than that are what we call mandatory. They are formulas. You get this benefit because you turned a certain age. You get this benefit because you fell under a certain income. You get this benefit because you served in the military.
But what so many of us talk about as being government is becoming tiny. In 2026, which is not that long from now, 11 percent of the budget is going to be defense; 11 percent of the budget will be nondefense. So that is your parks, that is your medical research, that is your education. That is this branch of government. That is all the branches of government. So 22 percent will be what we call discretionary. It is what I get to come down here and vote on because everything else is run by a formula.
So if you are someone who comes to me and says: I really think we should be going to Mars. I really think we should be doing this type of healthcare research. I really think we need this money in education.
Okay. I agree they are all incredibly important in our society. Are you going to help me find a way to reform what we call mandatory spending, entitlements?
Entitlements--because of the aging of our population--is the primary driver, are consuming every incremental dollar.
In a decade, this government will be spending $1 trillion more, and every dime of that will functionally have gone into entitlements. We will have gone 10 years where what we call discretionary spending--you know, these little two parts here--has stayed flat for a decade.
This huge growth in government is actually in Medicare, Medicaid, Social Security. Certain other entitlements are things you get because you fell below a certain income, and interest on the debt. Until we are actually honest about this--because it is so dangerous for a political person to even say the words ``Medicare''--we have to look at the numbers and understand the trust funds are bleeding.
If you really want to protect our brothers and sisters and protect retirees, some of these are things we should have done a decade ago. And we keep avoiding them because so often Washington cares more about the political up side of attacking each side from even mentioning what is going on demographically and in these numbers.
We are going to try to run through a bunch of these slides. Some of them, I apologize, when you blow them up on the big printer, they are going to get a little fuzzy, but we are going to just try to walk through these numbers. Hopefully, they will make some sense.
Why is this slide up?
This one is really important.
When you get down to the very last bar chart, do you happen to notice something? You notice how they basically touch each other.
That is 2027.
How many years from now--how many budget years from now?
So about 9 budget years from now.
Do you see the lighter blue?
Okay. That is Social Security. The gray is the Medicare. Then the Medicaid. Then you get up to net interest. Then you see the green at the very top, and that is other mandatory.
Oh, heaven. Do you understand what that slide is telling you?
That is saying, in 9 years, just the mandatory spending consumes all revenues, meaning defense will be on borrowed money, meaning almost everything you think of as government--once again, the Park Service, medical research, education--will be on borrowed money.
At that point we are going to be borrowing probably a little over $1 trillion a year every year, and it gets worse and worse.
I am incredibly blessed. I have a 20-month-old, and since the blessing of her coming into my life and my wife's life, I think constantly: In the time I am spending here in Congress, what am I handing to her?
Because right now the game is we spend it today, we consume it today, and we are going to let our kids and our grandkids pay it back.
How does this become ethical?
Yet if you listen to the speeches that happened on this floor today, it was speech after speech of: We want more money for something.
At the same time--this is important--do you know how much we are going to borrow today?
We are going to borrow over $1.6 billion today.
I have 1 hour to speak here to you. Hopefully, if we are all blessed, I won't go that long.
Okay. So $1.6 billion divided by 24. Sixty-six million dollars an hour.
Start to divide that and just think about that is just the borrowing side of spending, because we are going to spend about $11 billion today on a $4 trillion-plus budget. So just understand that this is where we are going. This is already baked into the cake. This is the math.
It is time for almost revolutionary thoughts on we need to look at the budget holistically. That means no longer having this little silo over here of this is discretionary, this is mandatory; and if you even talk about mandatory, you lose your political office.
In many ways, this one is sort of doing the same thing but letting you see what is happening on the debt side.
Now, why is the debt side so incredibly important to also focus on?
We have to pay interest on it. We are borrowing money from your retirement, from the Union retirement, from the State retirement, but we are also borrowing money from a thrifty family in China, and we owe interest on it. We also make ourselves, as a nation, much more fragile to the world markets.
We have been incredibly lucky the last few years of these stunningly low interest rates.
How many of you actually believe the interest rates when you look at a 10-year instrument today that I think was at 2.2 and believe that is normal?
If we actually just moved back to nominal interest rates, our interest would grow very quickly in the next couple of years to be greater than our entire defense budget.
As you look at this slide, look out to 2026, many years from now, except it is not that long from now. Do you see the green bar up there?
That is total debt. That total debt is starting to crash in on $30 trillion.
A bit of trivia. You often hear the differential people say: Well, there is public debt and there is publicly issued debt, and then there is debt where we borrow from the trust funds. Okay. And many of the economists really only score debt that is sold in the open markets.
Okay. Fine. I understand that is the practice, but there is something that is intellectually lazy, because we still owe the money back to the Medicare trust fund, to the Social Security trust fund. It has been a while since I checked this, but I think last year I checked, and we were paying a 3.1 percent interest spiff. So we pay a higher interest rate for borrowing those moneys out of those trust funds.
Do we have an obligation to pay that back?
Of course we do. But for the intellectually lazy, it is just so much more comforting to say: Well, let's just not look at that because, if we look at that, we are already over 100 percent of debt-to-GDP when we put in those dollars we have loaned to the general fund. Let's just call it that.
Let's move on to the next one. If you look at this slide, you notice there is starting to be a theme here. I am trying desperately to get my brothers and sisters in this body to understand the greatest threat to our society is the money we are spending that we actually don't have a way to pay for. If you actually look at demographics and where this debt curves, it just blows off the charts.
This is an interesting little slide. This is a CBO slide for 2027. When you actually look at it saying: Okay. What does the world look like if mandatory-- Okay. Do you see the blue?
That is mandatory and defense spending. Because many people say: Look, we are going to spend on defense.
We will be down to only--11 percent of this budget will be things you think of as government. Everything else will be entitlements or defense.
Just as a perspective, we did this slide just so you could sort of see. I hear candidates running for office say: We are going to take care of waste and fraud, and that will balance the budget.
Really? When only 11 percent of the budget in just a few years will be everything that isn't mandatory or isn't defense?
You have got to understand the scale.
This one is a little hard to read. I am going to reach over to it and play with my pen.
When you actually look at this, what I am begging of you also to understand is--I think this is the 2016 year--we spent actually a bit over $3.9 trillion, but we only took in $3.3 trillion.
You see the nature of the differential?
And when you start to look at, first off, the beige there in the upper, we have been really blessed with incredibly low interest rates. So at a time where we should have actually been having an interest bill that would have been approaching a few hundred billion, we had less than $250 billion.
Now, the dear Lord and the interest markets have been very, very kind to us. When you actually look at the curve, so much of the spending, once again, is what we call mandatory. But if you actually look at--we will call it the rust over there, something most people don't understand. I am going to reach over and point to what is the individual income tax portion. What most people don't understand is the individual income tax is the majority of the income to this country that is not intended for one of the trust funds.
If you actually look at the corporate income tax, it has been going up, but it is still a fairly small sliver. Now, why did that change? And so often I will get people that bring me charts and say: ``David, 25, 30 years ago, the corporations paid so much more.'' Well, also, 25, 30 years ago, there was this new concept of pass-throughs: LLCs and partnerships.
So what happened is many things that used to be corporations in the fifties, sixties, seventies, up and through the eighties, at the end of the eighties there was this revolution where States all over said: Hey, why don't we create these pass-through entities; they're more tax efficient.
How many of you actually have had an LLC? Well, that is a pass- through entity. But that is where you actually see the shift of corporate taxes going down and individual taxes going up. It is not that corporations all of a sudden start escaping taxes. It is their taxes now were actually booked as individual income. Just to understand, so when you see those charts, you have got to be able to sort of process and think that through.
This is sort of important to understand where the taxes are. But, do you see that circle there, that 40 percent of the entire curve? That is payroll taxes. That is the income that goes into your unemployment, your Social Security disability, your Social Security, your Medicare. Those are revenues that are specifically for either your retirement future, if you have a break in your employment, or, God forbid, you become permanently or temporarily disabled, with Social Security disability having its definition of what temporarily disabled is.
Just to understand, those are our revenue sources.
Then you will see the little slivers on the bottom, and some of that is tariffs and some of the other fees that come in, partially through trade.
I know, sometimes these slides are a little hard to see, so we actually blew a couple of them up. The idea here was just so you could actually see the total revenues.
Now, this is for 2017, so this is our projection of what is going on this year.
And my wife, right about now is when she would typically start texting me and saying I am putting everybody to sleep. But I am married to an accountant, so that could explain why we have no friends.
That is the payroll taxes.
Do you see the far side? Let's call it turquoise. That is the individual income tax. That is why those of us on the Ways and Means Committee, when we are actually working on tax reform, many of us believe we have to sort of do an organic, a unified budget or a tax reform proposal that actually does everything from what you see here, corporate, which actually is much of our job engine, over to the individual, which is also now a huge portion of our job engine.
Do not let someone just talk about lowering rates and not also understand that what you see on the individual side may be what you pay as a worker, but also, if you are an employer but you are organized as an LLC or partnership or pass-through, you are also on that side, just to know it is out there.
Now we get to some of the more fun stuff.
You were just looking at some of our revenues. We already know that this year, if you use the President's budget--or Office of Budget and Management--we are about $600 billion short. If we use that of the Congressional Budget Office, we are, let's just call it, $550 billion short, meaning we are spending that much more money than we are taking in.
But, once again, let's actually just look at where we are spending the money. So the turquoise, Social Security, Medicare, and other health programs, so Medicare and Medicaid. National defense is this. Then come over here. This is everything else, and this is interest.
So, last year, we spent about $245 billion in interest. This year, we are still blessed with incredibly low interest rates. We are only expecting about $266 billion in interest. Still stunning amounts of money. But the little white area is what most people will think of as government.
So if you look at last year--and the nice thing about using this one is it is booked. We know what it is. We took in $3.3 trillion; we spent $3.9 trillion. You already start to see the structural difference.
So, if you actually start to come over here, now this is much better than it was a few years ago. The problem is, in this fairly strong economy, it is closed, and now, demographically, it is about to start to move away from us. This is the line you always have to constantly think about.
If that is my revenues and I drop my line down, you have to start understanding that everything beyond that line is borrowed money. Just visually, I have always found this easiest when you actually start to show different groups saying: ``Look, this is just where we are at.'' And then you will stand up and say: ``Hey, why don't we do this? Tell me what I can cut because you want a balanced budget this year.''
All right. Understand the math. If we are going to borrow $600 billion, that is most of defense.
Okay. How about the other side, everything else we call discretionary? We could actually eliminate all of it and, believe it or not, you still don't have enough money to cover the borrowing. So, if you are borrowing $600 billion this year, I believe that is greater than all of the nondefense spending in the government this year.
So let's actually start going through a little bit more where we are at and what is actually about to happen. The frustrating thing here is we have a number of charts that we have worked on about why we have been so off on our economic growth projections. If you go back a couple of years ago, we had these fairly rosy pictures where we were going to be, yet the country has not grown nearly fast enough.
We are hoping this year, with the new administration, you are actually starting to see economic growth that will take care of a lot of these sins. I think GDP now, as of a couple of days ago, the Atlanta Fed's calculator was at about 2.9 percent of GDP. You would like to be substantially higher, but if we could hold 2.9 through the rest of the year, we will take it because it is so much healthier than where we have been the last few years.
Why this is important is, I just want to show, the Congressional Budget Office's baseline for 2017, $559 billion more spending than we are taking in. But I am going to reach way over here and say, hey, what does the world look like 10 years from now? Ten years from now it is saying the annual shortfall, the annual borrowing, will be 1.4-- actually, let's be accurate--$1.408 trillion.
So just the borrowing in 9 budget years will be greater than all of the discretionary spending of this year.
And it is growth in entitlements; it is growth in mandatory spending.
Why isn't that what you hear behind these microphones all day long? I have to believe that those of us who get behind those microphones, we love our kids and we love our grandkids, but this is absolute decimation of the future.
And do not blame the parts of the government that we vote for, the discretionary, because the math doesn't show that. When you actually take a look at this, you see the darker and the lighter. The darker is defense, the lighter is nondefense.
One more time, I know this is sort of geeky. But if you actually look from 1996 to 2001, yes, we have had certain economic upheavals; we have had an attack on our country. But if you actually look at the percentages of gross domestic product, which is how so many economists sort of look at our spending and say, ``Hey, you are spending 3 percent over here of your GDP on defense,'' it is pretty much identical where we were last year as to where we were 10 years or 20 years earlier.
So, once again, what is exploding on us? Well, if you want to break it down, if you actually look at the different categories--and we are only going to do this slide for a second--the different categories will have stayed almost flat in the discretionary area for 10 years.
So what is happening in our society? We are getting older. Something I thought was just fascinating because I have a great interest in the reality: We knew people were going to be turning 65. We knew baby boomers were going to be turning 65 for how many years? This body knew we had 76 million of our brothers and sisters who were born in an 18- year period that would be moving into their time with their earned benefits, and we did what to prepare for it? So we are now about our fifth year into the baby boomers retiring, and we are now beyond the inflection point.
If you went to school many years ago and you sat in a demographics class, they talked about, oh, in the 2000s, there is going to be this time where you are coming up against this inflection where the spending is going to explode.
You are going to see a couple of slides in a moment where I am going to show you what has happened now where, when I was a child, for every $4 spent for children, $1 was spent for seniors. Today, that is reversed. There is some math difference in there and there is some population difference, but that is where we are at.
This is an interesting slide. You do understand, as a nation, we functionally have zero population growth without immigration. In about 25 or 30 years, the country of Nigeria will have more population than the United States. So when you hear someone talk, saying, ``Well, I am uncomfortable with trade,'' they have got to understand, if we need consumers for our products, we need to be finding these countries that are going to have lots of young people, and they are our future markets.
We in the United States are moving down. I think our average age this year is 37.2, and that will continue to go up for about the next 25 years.
I just put this up because it is fascinating seeing where the young people are going to be in the world, and we need to start thinking about, if we are getting older as a society, how do we still use our intellectual prowess, our creativity, our manufacturing prowess to make things that are desirable to growing populations, and let's make sure we have built a world and environment here where we can sell things to them.
Because if we don't, we don't have the market ourselves. We are not going to have enough young consumers. So you have got to take that into reality.
Once again, this one is a tough chart. It is on here just basically to understand what is happening in the world. What is incredibly fascinating is many Americans see China as our primary competitor, and in many products they are.
On high-value products, countries like Germany, actually, are more of a competitor. But do you see this line here, this collapse? That is the Chinese demographics. If you understand that line, you understand a lot of things that China is doing around the world in trying to buy assets that produce income so they will actually have an income stream to start paying for their senior population.
The United States is this dark here, and you will see--here is where we are at. We are sliding. But look at how many of our trading partners also are in the same demographic curve. It is just worth understanding that when you see many of us who lean towards being free traders, we are looking for where there are populations in the world that we can go sell things to. I am an American; I want to sell you something.
Now, within the Nation, just fascination, if year 2000 the average age in the United States was 35.3, 16 years later, we are 37.9, that is a huge shift. I know that may not seem like a big difference when you start talking about two-and-a-half some points. That is a big shift in 16 years on average age.
But also what is fascinating is for those of us out in the West, we will actually be somewhat younger than the middle of the country and back East. I am blessed to be from Maricopa County, Arizona, the fastest growing county in the country. Come visit us. But it is also to understand that this aging of America also is going to require different societal needs, and different States are going to have very different approaches.
If you actually look at a State like Utah, it remains fairly young. Some of our States back East actually get quite old and are going to actually have very different societal needs.
This is the mandatory spending chart. I actually wanted to spend just a moment over here on some of the percentages. This one I know is really hard to read, but if you actually start to look at the second part over here, ``discretionary,'' do you see all of those little tiny percentages? This is where a lot of our discussions get very disingenuous around here.
We will have people coming behind these microphones almost acting like their hair is on fire because some dollars have been removed from this agency, or dollars are going to be removed from this spending program, and the unwillingness to understand the scale that we are talking about. It is just real simple.
If that is every dollar of discretionary spending plus defense, and every dollar of mandatory, the mandatory is what, two-and-a-half times bigger? So if you are going to have a discussion of spending priorities, are we going to be a mature enough group to actually deal with the reality where the dollars are at? I promise, we are down to the last couple of these.
So the share of the budget outlays, and this one is more--I am not being judgemental on this. It is just more of a thought experiment. This is actually from the Urban Institute, which it is always interesting to see a Republican using charts from the Urban Institute. This is a couple of years old, and the chart now is actually more aggressive. I just couldn't get the newest one printed.
Do you see this little edge right here? This is sort of the Federal spending. Ten percent is going to children. Forty-one percent of the spending goes to seniors. It is just a thought experiment. We want to honor and keep our commitments to the earned entitlements, but the reality of the demographics keep moving up, and as we keep those commitments, the pressure on everything else is going to get much more cantankerous, much more cranky, much more difficult.
We have a saying in our office: It is always about the money. Some of the disharmony you hear around here is going to get louder because, as you have already seen, the trillion-dollar engine over the next few years that consumes the next trillion dollars is all mandatory spending, is all demographics. So that is just another thought experiment.
Every once in while we will get the people who come to us and say: Hey, David, why don't you remove this program or that program? One more time, we are borrowing--so much for my writing--$1.6 billion every single day. And that is just the borrowing side, and we are spending close to $11 billion every single day.
So on occasion, you will get a group that comes in and says: David, we want you to get rid of all foreign aid, but we want to make sure you still protect
Israel, and we still want to help the countries that are trying to help us deal with narcotics.
And you start to get down and say: Okay, so you want us to cut half of the foreign aid budget?
Okay, great. Well, that would be about 14 days of borrowing--not spending, borrowing. Because remember, we are borrowing $1.6 billion every day. And there becomes the intellectual problem where you will get an individual who comes in and says: David, just take care of the waste and fraud. And there is waste and fraud out there, and we are going to have to do it. And we are going to have to be much more disciplined in the adoption and the use of technology.
But a lot of that language is gimmickry until you have someone who is willing to step up and actually just talk about the demographics that are our Nation.
So think about this: I will have stood behind this microphone--let's just pretend it is an hour. Do you feel like you got $66 million worth of speechifying? Because we are borrowing $66 million a minute, $1.6 billion a day, and it is just not that.
One of the reasons this is such a powerful chart--and this is from a private organization that does the U.S. debt clock. You do realize, the majority of debt in this country is borrowed.
There was an article in Politico a couple of years ago that did this brilliant job. If you actually think about this, all of the student loans, all of the mortgages that have Fannie Mae, Freddie Mac, Ginnie Mae, SBA, all of these things, it was somewhere around 63 or 64 percent of all debt in the United States, you and I as taxpayers guarantee.
The unfunded liabilities in Medicare itself over the 75 years, many actuaries have over $100 trillion. So when you see us fussing with each other down here, it is almost always about the money. And until we are willing to start talking about these numbers that are spinning out of control, the fussing is just going to get more and more angry until we step up and deal with the reality of what is driving our future, and that is demographics.
Mr. Speaker, with that I yield back the balance of my time.
