PRIMARY DRIVER OF U.S. DEBT AND INTEREST FRAGILITY

PRIMARY DRIVER OF U.S. DEBT AND INTEREST FRAGILITY

Congressional Record, Volume 171 Issue 7 (Tuesday, January 14, 2025) [Congressional Record Volume 171, Number 7 (Tuesday, January 14, 2025)] [House] [Pages H142-H146] From the Congressional Record Online through the Government Publishing Office [ www.gpo.gov ] PRIMARY DRIVER OF U.S. DEBT AND INTEREST FRAGILITY The SPEAKER pro tempore. Under the Speaker's announced policy of January 3, 2025, the gentleman from Arizona (Mr. Schweikert) is recognized for 60 minutes as the designee of the majority leader. Mr. SCHWEIKERT. Madam Speaker, I think we are going to try to do a bit of a continuation of what we were doing last week. If you don't like math or economics, please turn off C-SPAN. There are a couple of things that we have to walk through. Last Thursday, I think I took 38 minutes here, and the two concepts I was trying to walk through were, one, the demographics of the United States being the primary driver of U.S. debt--it is not that complicated, but it seems to really bother people--and the second thing was this concept called interest fragility. That is a big word. What it basically means is that when you have $36 trillion in debt, $28 trillion to $29 trillion publicly financed, and when, over a year, you are going to refinance almost $10 trillion, bring maybe $2 trillion to $2.3 trillion new issuances to market, that little movement in interest rates could be a boatload of cash. What happened last Friday? We got a knockout jobs report. [[Page H143]] Here is the irony that people need to understand: The United States and a few other governments, such as China, are bingeing on so much debt that they have a ravenous appetite to grab people's savings and borrow it around the world. When the bond markets see that the U.S. economy is actually doing okay, which means more individuals and more businesses will be in the market to consume debt, we are going to raise interest rates. The United States gets its head kicked in when our interest rates go up. I think I was trying to show a chart the other day. It doesn't completely work this way because you have to refinance into it, but if we went to a 5 percent handle on U.S. sovereigns--that means, from the short term to the 30 years, you had a 5 percent interest rate that was our mean interest rate on U.S. debt--it is almost $9 trillion of additional borrowing, spending, and interest over that next 10 years. Functionally, going to 5 percent is double everything we are pretty much talking about in the extension of the tax reform. There is this lack of understanding. We are on the cusp of the bond market, the debt markets, actually being the number one influencer on U.S. policy, not Congress. When you borrow $70,000 a second--and I have charts, which I didn't bring this time, but I have done it in the past. Where we are in 9 years, it is no longer $70,000 a second, but it is almost doubled. How many of you understand we borrow $70,000 a second? The math will tell you almost 100 percent of that borrowing from today through the next decade is interest and healthcare, but we don't want to tell people that. Of the $2.3 trillion that my math says we are going to borrow this year--and CBO is going to publish something in the next day or so, and we will see how close my math got to what their prediction is--half of it is interest. Even when we do all sorts of things to reduce spending, to modernize on how we deliver services, to change the costs, we have this interest monster because we have $36 trillion and, basically every 125 days, Madam Speaker, we click off another trillion dollars. {time} 1515 To the poor Clerk staff, I am so sorry. You have to be so tired of hearing idiots like me--well, me--getting up and saying some of these things over and over, but it doesn't seem to sink in around here. Look, one of the reasons I am here today is I am trying to sell a concept. This is a chart and it is almost unreadable. I accept that, but what it was saying is, we are up against a series of tax expirations at the end of this year. $3.7 trillion of it is individual. Your individual taxes are going up at the end of this year, but then we have estate taxes and passthroughs and LLCs and partnerships, all those other things. I think the Treasury Department a couple days ago scored it not at 4.6; they scored it at 5.5, which is a timing effect because it is a different year and higher interest rates. There was an economic study done by CBO and a couple outside groups saying, if Congress can find a way to offset it--and that is hard. You are talking $400 billion a year we would have to find in modernization and changing spending. If Congress could step up and pay for it, you not only maintain current tax policies so our brothers and sisters, all of our taxes don't go up but you get additional growth in the economy because you didn't just pull that much more money out of the economy and then have interest pile up on it. I think it was a year or so ago or 2 years ago, we had, I think, 3 months where we had to borrow money to pay for our borrowing. When we go home and talk to our voters, how many of them will look back at us and understand the scale? You get these responses, well, if you just cut this or that--I am going to show a couple of those charts again, and they are rounding errors. Sometimes they are just a few hours of borrowing from an entire year, but that is what we speechify because it is easy to understand, it is a great sound bite on talk radio, and it is crap math. Once again, the basic premise of this chart--and it was reconfirmed by the Joint Economic Committee and the baseline math was also done by CBO. It said, if you want to maximize economic prosperity in the United States, extend current tax policy, fix depreciation--we call it spensing; research and development expensing because that is actually where you get the productivity curve because God knows you will hear the Democrats come behind the mike and talk about look how good the job market is. Many Americans are actually poorer today than they were 4 years ago. They may be employed, but they are poorer, and that is because inflation went up faster than their wages. I represent a district in the Phoenix-Scottsdale area that had, I believe, 27 percent inflation over the last 4 years. So unless your wages are up 27 percent, you are poorer today. How do you raise wages? How do you raise purchasing power? Two things: Wages go up with inflation. That just means you are treading water. Productivity. There are things we could do in the tax policy that is coming to fix the things that create the productivity boost, the things we can do in regulatory reform, in modernization, the adoption of technology as a regulator. You get people here that go around saying, oh, we are going to deregulate. Fine, but how about doing smart regulation. We are all walking around with these supercomputers in our pockets. The idea is that you could crowdsource certain data, crash the size of the bureaucracy, make them less intrusive, and yet air quality, water quality, and all these other things can be much safer. It costs a fraction of what we do today, but you just have to be willing to think like a scientist, a data person, and deal with the army of lobbyists that are outside in the hallway who are upset that you are making them change their business model or their unionized bureaucracies, they show up here angry at you saying, what do you mean you want to use technology at the IRS? Remember, Madam Speaker, the IRS is the second largest unionized workforce in the Federal Government. I believe the VA is the first one. Every time we try to add modernization to do it better, faster, cheaper, and fairer, can you believe they get cranky? The math is the math. If you want to maximize economic vitality for this country, do your very best to offset as much as you can of the tax policy extension. The other thing I have to give you that is going to make me sound a little cranky is when you hear a Member of Congress, particularly a couple of our Senators, running around here and saying, we are just extending baseline. Huh? It is a whole made up term now. The law is the law. The law says the tax cuts for individuals, passthroughs, estate, and alternative minimum tax, all those things, expire at the end of 2025. We have made up a term around here saying we are just going to extend current policy. I heard someone this morning say we are going to extend current law. Current law says it expires. Take a look at all your CBO and your debt projections. It has the expirations in there. You take it away, fine. Be honest about what it means. It is another few trillion dollars of debt over the next 10 years that we have to pay interest on. Here is the fragility, and we are going to do this on a chart or two here. When you do that, you are going to go home and tell your voters, I extended your tax cuts. Great. I don't want to raise taxes on anyone, but if you do it without paying for it, when the interest rates go up and that family's credit cards, car debt, mortgage, and everything else gets more expensive, when the economy slows down because interest rates are up, it is because you have made the bond market nervous. Oh, but David, that would require thinking like an economist. I am going to get re-elected by telling people I just extended their tax benefits from the 2017 TCJA. Great. How do we explain to people that there are no free options anymore? We have the moral obligation to not make the world debt markets nervous. You have got to understand--and I need to double check my math because Great Britain, you saw what they did. They were doing all sorts of tax policy this [[Page H144]] summer and the pound crashed and their interest rates exploded, but most of the industrialized world actually has lower interest on their 10-year bond than the United States. Greece today can sell a 10-year bond almost a full percentage point cheaper than the United States. Let me