Growing the Gdp

Floor Speech

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Mr. SCHWEIKERT. Madam Speaker, as a mercy to the poor staff here, I am not going to use the whole half an hour. I am just going to try to run through a couple of concepts.

I did a little tripping up of some details last week, where we were trying to explain some of the things we see going on in the math. I want to walk through a concept.

We actually, right now, as a country, are remarkably blessed. The GDP growth, the economic growth, is actually well beyond almost any of what even my economists were predicting over the last year.

We are seeing some data right now--if you actually look at the Atlanta Fed, GDPNow, nowcasts, some of these--we could hit a five- handle this quarter, which is remarkable.

Looking at some of the data from the third quarter of 2025, it looks like the number of a 4.3 percent GDP growth is going to hold up.

These numbers are actually remarkable, and I want to make a point here for the annualized 2025 GDP number. I know this is geeky. There is a point I am going to come to, and that is the irony that tax collections don't look as robust as the economy. We are going to try to explain what is going on. This is why getting policy right is going to become so critical.

The first quarter of last year, so 1 year ago this quarter, we actually had negative GDP. The first quarter, when the Trump administration started, when our new Congress started, we actually had to go through 3 months of slower growth. Then, it wasn't until the second quarter, third quarter, and now we believe the fourth quarter-- we don't have that final number in yet--we finally hit the acceleration pedal.

What is going on out there? We had this irony happening where we have really actually stable and much broader economic growth than we expected. We are actually seeing some odd things.

Actually, the labor force participation is pretty flat. We had a small tick up in some of the last unemployment data. Also, if you look at this chart here, we are trying to explain the difference. Here is the number of folks who are entering the labor force. They are working. Here is the number of folks who are available for work.

When we start to get to 4 percent or 4.6 percent unemployment, we are actually, if we look at our historic average, even the last 25 years, that is almost full employment.

Do you see this curve here? It is basically starting to demonstrate the demographics of America. It is also sort of the demographics of the entire industrialized world. You have a situation where today we functionally have the same number of 18-year-olds as we had 20 years ago. Today, we also have almost double the number of our brothers and sisters who are 65 and up than 25 years ago. That is creating an interesting irony.

We actually take a look here at what we call tax receipts. Most people like to call them tax collections. If you are on Ways and Means, they are tax receipts. Look at this interesting spike here. That is actually tax receipts. That is good.

Almost every dime we see on this chart of the real growth is actually capital gains. It is those who have had assets. It is those who have sold real estate. It is those who have sold stocks.

The tax receipts really coming in from labor are good. They are stable, but they are not growing nearly in sympathy--if you can play economist words--in sympathy to the GDP growth. This is an important part of what I wanted to share. I am trying--I hate this term--to socialize the concept.

What happens when you are producing growth because we have a lot of growth policies that are right? Last summer, earlier in the year, where investment is going into plant, equipment, data centers, AI, and all of these things are happening, wage growth is actually okay. It is actually outpacing inflation now, finally, thank Heaven. Yet the real GDP growth is coming from that capital spend and not from wage and new employment and the demand for labor.

Understand why this is a problem. We are an income-tax-base country. There are income taxes on businesses, but mostly the income tax base is on working--and also FICA, Social Security tax, Medicare tax, and unemployment tax; those are taxed on your wages.

We are starting to see this irony where we are actually doing some data where we ask what happens when you hit this type of GDP growth and, at the same time, the amount of borrowing and debt in the country is still going to stay remarkably high.

We still have a model that we think will be a bit less, but we could still be approaching $2 trillion of borrowing this year. I hope we are wrong, but you have to understand that the first quarter of this fiscal year, I think we were borrowing about $90,000 a second.

So far this fiscal year--so we are, what, 3 months and 10 or 11 days into it--I think we have now borrowed $800 billion. Sometime. Maybe before this month is over, we are going to have borrowed another $1 trillion. This time, it wasn't 3 months. It might be coming in at 4 months. We shouldn't be seeing those types of borrowing with this type of economic growth.

The point I am going to make is: Why is the borrowing going up? Look at the spending data. I didn't bring all of those charts because they are exhausting, but if you take a look at interest, remember that we have to refinance $10 trillion or maybe $11 trillion this year. That means that the bonds that were sold in the past have to come back to market, refinance, and they are being refinanced, for many of them, at much higher interest rates.

The other thing is healthcare, but it is healthcare, Medicare. We have a model that says that now, in less than 6\1/2\ to 7 years, Medicare will go from $1 trillion to $2 trillion. Also, in 7 years, Medicare is gone.

Excuse me. Let me rephrase that. The Medicare trust fund is gone, and that will result in around an 11 percent cut, particularly to hospitals.

It is demographics. Baby boomers are moving into their peak utilization years of these benefits. We are functioning, I think in the last 3 years or 4 years of baby boomers moving into the age of 65 and getting their earned benefits, so you see the shift in the labor market.

What happens if the formulas that I had come behind these microphones for years and said: That if we could grow another point of GDP, it is this many hundreds of billions of dollars of tax receipts, and now it isn't.

I know this is geeky, but it is really, really important because it means many of the budget documents that the brain trust around here talk about, we may be getting wrong--many of the solutions we have had for taking on debt and deficits.

There is a piece of legislation. I am absolutely elated. I am trying to get on it. It basically says: Look, let's do a debt and deficit commission, like we did BRAC many, many years ago to close excess military bases, and let's go for 3 percent of GDP growth.

Madam Speaker, there is a problem with that number. Just our interest coverage is over 3 percent of our economy. So we are going to take spending and get it down to 3 percent. Great. So we are going to stop borrowing so much, except just the interest we pay is bigger than that.

Does anyone see the math problem? So this is actually the punch line I have been trying to head toward. This is a chart that sort of shows labor as a percentage of income.

I am sorry, but this is actually really important when you are trying to design how you finance your government. We are hitting a time way down here. This is 2024 because that is the last sort of good data point that I have. We actually believe it has actually fallen further. For years, 64 percent, and there may have been times when we crossed over to 66 percent of our income basically came from labor that financed the government.

Today, we are down to touching--actually, we may be as low as 53 percent. That is a huge difference, and it is going to force us--those who care about the economics, those of us on the Ways and Means Committee who actually have to do tax policy, those who actually are paying attention to our bonds and our promise to pay back $30 trillion- plus of publicly sold debt, and another $8.5 trillion that we have borrowed internally. How do we pay it back?

We are going to have to start thinking about the taxation on labor. It is going to become a problem. I want to bounce around a little bit because, a couple of days ago, we got some of the inflation data, but with that also came some of the State and localized inflation data. I thought this one was interesting. I am going to be a little caustic on it, but I haven't had as much coffee today, so I am not wound up as tight, so at least I am not speaking like a machine gun.

We thought this was interesting. Increase in monthly costs in Arizona, and we thought we would do a snapshot. I am blessed that I represent the Phoenix, Scottsdale area. So between January 2021 to September 2021, so we are actually doing the same snapshot of time, if you lived in the Phoenix area, you functionally lost $1,597 to inflation. That is for the average family.

Now we come here to 2025. It is still not as good as we demand that we get it to, but it is now $944, a $653 savings.

That is 1 year of the success of Republicans lowering inflation. We have to get it further, but we actually see how bad it was before because this was the inflation that was handed to this country during Biden's first year, and then we start to take a look at the progress. We are making progress. It is not as good as I want, but understand this is the reality of the math.

Madam Speaker, I have a fixation that we tell the truth and sort of get an understanding of some of the math. One of the most difficult things is that we have been trying to figure out how do we make sure we preserve our promises.

We owe a promise for Medicare. We owe a promise for Social Security. We have to deal with the reality that, in less than 3 years, over half of everything that this Congress will spend--so over half of everything that the Federal Government will spend--will go to people who are 65 and up.

Why that is just an amazing thing to think about. In the 1970s, for every dollar that went to those who were 65 and up, there were $6 to $7 spent for those who were 18 and younger. Today, that is flipped.

It is just demographics. It is not some evil plot. It is a combination of the baby boomers, a big population bubble, and healthcare got dramatically more expensive.

Last week, I did a presentation here and basically showed where Democrats are turning healthcare into financial engineering instead of the incentives to do it better, faster, and cheaper.

We have turned healthcare into--remember the whole debate here on subsidies on top of subsidies? When you turn healthcare into financing instead of helping people be healthier, you have screwed up the economics and the incentives, and we start to look at charts like this.

Now, this is Medicare Advantage. I am actually a big fan of what you call Medicare part C, Medicare Advantage. The chart is a little bit distorted because it doesn't really give you the population statistics, but we believe that this year, 55 percent of the population of this country that are in Medicare is going to choose a Medicare Advantage plan.

Okay. But we aren't telling the truth about the math. There is this thing that is called the MedPAC reports. They are big orange reports like this, hundreds and hundreds of pages. If we go through them, there will be this section in there that says that it turns out Medicare Advantage is coming in, according to the MedPAC report--and this is the roomful of people that specialize in this and, I hate to say, my own joint economic economist, the CMS data and HHS data, and The Wall Street Journal, everyone else looks into this--it is coming in at 120 percent of fee for service.

Why this is a big deal is when Medicare Advantage was designed--it really came into effect in 2005--Senator Frist, who is a doctor--they put together a plan with this idea that we are going to do managed care. The insurance companies, which are going to be basically the gatekeeper, are going to make profit by helping our brothers and sisters on the program be healthier. The model was it was going to come in at 95 percent of fee for service.

Today, it comes in at 120 percent of fee for service. That 25 percent, Madam Speaker, over 10 years is $2 trillion. When we show a chart like this of the transition that has been happening for traditional fee for service Medicare to now Medicare Advantage, fine, but we are going to have to have the honest discussion of how do we get the incentives lined up.

I saw what Senator Grassley published yesterday--and I was going to bring the report out here and use it as a prop and show it to you, but it is like this. It basically talks about hundreds and hundreds and hundreds of billions of dollars.

Look, the report, I am only a third through it, but it is example after example of Medicare Advantage insurers signing either having companies or their own folks go out and knock on grandma's door and score them as sicker and, therefore, getting bonuses for having a sicker population.

The Wall Street Journal almost 2 years ago did a major expose on a person. I think they were in Sun City, Arizona, and the insurance company had scored them I think as having HIV, except the problem is this person didn't have that. They had never been tested for it. However, the insurance company was getting a bonus for that. It is called risk scoring.

We are going to have to consider moving to a model that says we are not going to let you go and score people differently. We want to create a model where it is put in the initial pricing of the program, and then you make money by helping the senior population be healthier.

There are so many miracles right now, the technology can be worn, the ways you can keep track, the ways of telehealth, digital health, all these other things. We want a system that incentivizes investing in people's health instead of profiting from claiming they are sicker.

People have got to understand, there is actually a piece of legislation to do this. Preliminary scores, $1.84 trillion of savings. We are going to fight, knife fight, complain, cry, and fuss at each other over things that are absolutely tiny.

We have been told this piece of legislation actually is the biggest savings bill in U.S. history. I beg of anyone that actually cares about these subjects of taking on debt and deficits, help us. Help us explain it to our brothers and sisters. Help us take on what will be, let's be honest, a barrage of hate from the brokers, from the insurance companies that don't want a system that lines up the incentives properly.

These were the incentives of the original design of Medicare Advantage, and it got perverse by ObamaCare. They changed parts of the quality ratings that created another bonus system that could be manipulated.

Congress can fix things like this, but are we allowed to actually say: We are going to fix something on Medicare. So often, that sets off fear.

Did I mention in the beginning here, you have got less than 7 years and the Medicare trust fund is gone. If we are going to preserve these earned entitlements--these are earned programs. You worked for years. You earned this. This was part of the societal contract. People like me here, we have got to figure out how to finance this, keep it going. Yet it is almost a sin around here to talk about the problems, the fact we are hemorrhaging cash, we are borrowing. This year, for every dollar we take in in tax receipts, we are going to spend $1.43. The Moody's model says in 8 years interest will consume 30 percent of all of our tax receipts.

This isn't a game. We have got to stop the juvenile discussions we have around here and start facing the really big, difficult things ahead of us.

This is us. It may look like a chart with a handful of different blues on it, but this is actually us as a people. What this chart is telling us is that in less than 3 years, over half of all of our spending in this government will go to our brothers and sisters who are 65 and up.

If that is the societal deal we made, we made it; but we have an obligation as Members of Congress to make it work. If we know there is hundreds of billions of dollars--let's not use the word ``fraud''-- being misallocated--let's get fancy on the language, we will call it misallocated--why wouldn't everyone line up with us?

I would argue the army of lobbyists outside our doors here who lose their mind every time I talk about this, who scare the crap out of us, we have still got to do the right thing. Someone running for the United States Senate today, in your first term--if you are blessed enough to win--you are going to have to deal with the fact the Social Security trust fund is gone, the Medicare trust fund is gone. Our preliminary math says in 2033, the first year that those trust funds are gone, it is $638 billion just to make up that shortfall.

This isn't a game. These are numbers that should terrify you. Yet for anyone who is crazy enough to be watching C-SPAN, how many times have you seen this week, last week, the week before that Members come behind these mikes and talk to you about the real issues that will change this Republic, or have we just decided we are going to let the bond market basically run this country, and we are going to just keep pretending we can keep spending like this?

Much of that spending is not Democrat policy, Republican policy. Look, I think much of the Democrat policy is absolutely absurd, but much of it is demographics. In the early 1990s, and even going back further, we have had dramatically fewer children.

Remember, Madam Speaker pro tempore, we model--the United States will be close to almost zero population growth this year. If you have a Pay- As-You-Go system, it is really hard to make that math work. Do you still let the scams, the misalignments, the taking advantage of these systems, the fraud go on? It means we are going to have to talk about it. We are going to have to dive into it. We are going to have to take on an army of lobbyists. They are probably going to run nasty ads against all of us because it is so much money.

Let's step up and do the hard things. Let's step up and do the right things.

Madam Speaker, I yield back the balance of my time.

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