David Schweikert

Mr. SCHWEIKERT

Mr. SCHWEIKERT. Mr. Speaker, this is something we try to do out of my office every few months, where we try to update a number of the budget numbers we're seeing coming from particularly the President and try to put them in some perspective. I thought this would be one of those opportunities--because we're about to work on the budget for the rest of this week--to stand here and help everyone understand some really scary things that are out there in the numbers and some things we've been talking about for the last year and the fact that they're getting worse. Mr. Speaker, you also, being my friend from Arizona, you've actually heard me tell this story. A year ago, we stood here and did this presentation. When I got back to the office, my phone was ringing. I reached down and picked it up, and it was a gentleman from my district who was nice enough but kept telling me over and over that he didn't believe me, that the numbers didn't feel right. After about a half an hour of discussing it with him, I probably was a little too harsh. I said: I don't know where the feelings key is on my calculator. I think at that point he hung up on me. Look, the numbers are real. It doesn't feel warm and fuzzy, but it's real. I'm actually going to break one of the congressional rules in communication where we're often supposed to talk at a 30,000-foot level. I'm going to drive down into some of the weeds here, but it's important. This is the future of our country. This is our destiny, unless we make some substantial changes. The first slide up here--and all of these are going to be up on our Web site within the next week, the congressional Web site--is just trying to demonstrate how unrealistic many of these numbers coming from the White House are. The year 2008 was the peak of revenues into the Federal Government. We'll give you an idea. The President is saying in 5 years that revenues are going to be up 50 percent from that peak in 2008. So we're going to have this dramatic rise in revenues over the next 5 years, and that's where their deficit projections are coming from. Guess what? On the slides I'm going to show you, we still use the President's numbers. What I want you to understand is that they are based on, I think, substantial fantasy when you start to understand the White House's use of what they are predicting as revenues and GDP growth. As we go through these--and I'm going to throw a lot of slides here. The next two slides are the easiest to understand and hopefully tell the greatest part of the story. This is 2011. Sixty-three percent of all of our spending is Medicare, Medicaid, Social Security, interest on the debt, veterans benefits. We'll call those the mandatory spending. Many people call them the entitlements. This year, 37 percent of our spending is what we'll call discretionary, military, and the line of alphabet agencies that we all think of. It's foreign aid, veterans, all discretionary over here. It's 37 percent of the spending. This is this year. Do you see, 63, 37? What happens a year from now? In 2017, basically 5 budget years from now, you notice a little difference. We went from 63 percent to 75 percent which is now in Medicare, Medicaid, Social Security, interest on the debt, and veterans benefits. Five years from now, 75 percent of our budget is in mandatory entitlement spending, and the discretionary keeps getting smaller and smaller and smaller in real dollars. I'm going to show you some slides in a little bit that are going to demonstrate that even the military goes down in real dollars. No more of this discussion of, well, you guys are just slowing down the growth. No, it actually goes down in real dollars. This is our future. Understand, the mandatory and entitlement side is growing so fast that in about 10 or 11 years, if you held everything even, it would consume every dollar of the budget. There's no more military; there's no more discretionary. Everything is Medicare, Medicaid, Social Security, interest on the debt, and veterans benefits. This is our future. We need to tell the truth. Look, Washington, D.C., has had a bad habit of avoiding a lot of these hard decisions that are ahead of us, and it's almost like they forgot there were going to be baby boomers. We knew people were going to turn 65 for how many years? Sixty-five years. We're now into year one of the baby boomers retiring at the end of the next 17 years. At the end of the 18-year cycle of baby boomers, about 36 percent, 37 percent of our population will be on Social Security. You have to understand that's about 76, 78 million of our friends and neighbors who will be over 65. This should have been decades of planning for that retirement, for that baby boom, and Washington, D.C., did not do it. Now Members of this House--and I'm one of the freshmen here; I've been here 15 months--need to step up and tell the truth to the American people that this is our future. If we don't deal with it today, we're going to deal with devastating consequences a couple of years from now. In the next couple of slides, I'm going to try to demonstrate the numbers and how they break down. And I'm sorry. I know I'm throwing lots of slides, but one more time, this is important. This is our future. This is 2011. Everything you see in the blue is the mandatory spending we were just talking about. So you get some sort of sense of what it is. Here's Social Security. Here's what we'll call the welfare programs. Medicare, Medicaid, interest on the debt. We are one of the luckiest people to ever live, when you think about this year. We expect to spend only about $229 billion on interest on our debt. Well, understand, our debt now is what, $15.5 trillion. About $11 trillion plus of that is what we call publicly-held debt. This is important to understand. A big chunk of our debt we borrow internally. We reach into Social Security, into the Medicare part A trust fund, and other places. But the $11 trillion-plus that we have to go out on open markets and sell, that's our great risk because we are beholden to what interest rate the market's willing to buy our debt for. This year, with these incredibly low interest rates, I mean, what, a 10-year bond today is what, 2.25? We're only going to spend about $229 billion this year is our projection for that $11 trillion of publicly- held debt. But what happens when we go to normal interest rates? And at the same time, just like this last year where we borrowed what, another $1.4 trillion, you've got to understand, here it becomes one of our Achilles' heels. We go from, in 2011, that $229 billion in interest, to in 2017, we expect interest to be $565 billion. Understand, that's basically, in 2017, what defense is. Our interest on the debt will equal what defense is. And as we walk through these numbers, please understand, it's Medicare, Medicaid, Social Security, interest on the debt, veterans benefits that are exploding because of the demographic issues. It's math. And this is our future. And you'll notice, as we were showing in the previous chart, discretionary now is down to 25 percent of all spending; 75 percent is those mandatory--what we like to call entitlements. And this is our future. As I was just trying to share, and this is important because I got this question at a town hall this last Saturday. Well, when you say that defense is going to be taking all sorts of cuts, you mean just cuts in the growth. No, I mean in real dollars. We expect, the way the budgets are being laid out right now, the way the President's numbers are, by 2017, actual, real dollars, not adjusted for inflation, not the projection or a portion of growth, real dollars are going to be substantially less than they are today. Our projected 2012 budget about $709 billion. In 2017, $582 billion. What are the Federal Government's constitutional obligations? Protection of the country? Defense? And you'll notice, in real dollars, it's going down. So what will even be the purchasing power of that money 5 years from now? And you'll start to understand the reality of what's going on. And please understand, it's being driven, why? Because the mandatory spending, the entitlements are continuing to explode, so everything else in government will shrink and be crushed. We thought we would try to find even a little more detail. These are brand new slides for us, and these will all be up on our Web site hopefully some time this week, and sort of helping put percentages on the numbers. You saw the big graph of, hey, in 5 years, 75 percent of all of our spending is Medicare, Medicaid, Social Security, interest on the debt, veterans benefits. But we thought we'd show--here are the current percentages so you can see what's going on there. This is 2011. Defense is 18.8. In 5 years defense will be 12.4 percent of the budget. Department of Health and Human Services, which is substantially Medicare and Medicaid, this year is 24.7 percent of the spending. In 5 years, it's 26.8. But where else is the explosion? Department of Treasury, which is substantially debt, paying interest on our debt, will go from 14.9 percent of the total budget in 5 years to 20.5 percent. What I'm trying to demonstrate here is we're being consumed by our own interest, having to finance our own debt. We're being consumed by the basic demographics of our Nation because Washington, D.C., did not tell us the truth, did not set aside the resources that were absolutely necessary to deal with the baby boomer population, and we're going to have 76 million of our brothers and sisters in this baby boom cycle over this 18 years. Remember, when it's done, it's 36, 37 percent of the population on Social Security. I'm fearful, unless we step up and make the policy changes that are absolutely necessary--and thank heaven for Paul Ryan and many of the hardworking Budget members here in the House that are laying out the truth. They're laying out what is absolutely necessary to keep this Republic operating and to tell the truth about the budget and the numbers. So one of the things we got this last weekend back home, I had a couple come up to me pointing their finger saying, well, if you would just do things like the Buffett Rule, if you would do things like that, you would solve the problems. One of the things we love to do in our office is, how do you make big numbers understandable, because, let's face it, when I stand here and talk about $15.5 trillion in debt, or talk about this, talk about that, it often is overwhelming numberwise. So we came up with this idea of a clock, and we've done this for a number of different things. Now, here's the good news and the bad news. We're borrowing a lot less money right now than we were borrowing a year ago. That's the good news. The bad news is we're still borrowing $3.5 billion every single day, and we project for the next 365 days $3.5 billion every single day. But when you hear the President, when you hear many of my friends on the left say, well, if we just had something like the Buffett Rule, where these rich people have to pay all these extra taxes because they're escaping, what does it actually pay? What does it actually mean? If you use the President's own model and don't pretend that there is going to be certain tax avoidance and smart lawyers finding ways around it, and that it doesn't slow down the economy and doesn't change people's behaviors and all the other things that happen when you raise a tax and live in math fantasy, so every dime comes into the Federal Government, what does it actually buy us? Well, we did the math on it, and we figured out it would pay for 3 minutes and 30 seconds of that daily borrowing. So when you see Members walk up to these microphones and talk about things like well, if we just had the Buffett Rule, we would be fine, they're not telling you the truth. Or it's back to that story before--they found a feelings button on their calculator, and it makes them feel better, but it's not real math. The entire Buffett Rule would pay for 3 minutes and 30 seconds of borrowing a day, at the current rate of borrowing, which is $3.5 billion a day. Mr. Speaker, I know this is a lot of math. I know these are a lot of numbers to throw out, but it's our future. When you see what's happened in Europe, when you realize people in Greece and so many other countries lived in a fantasy, and a lot of it was perpetuated by their own governments not telling them the truth--well, I'm telling you the truth, and I'm using the President's own numbers to get there. It's why the decisions that are going to be made here this week, as we start to set out our budget documents, it's why we desperately need the Senate to step up and tell the truth to the American people, that if you want to save this Republic, we've got to deal with the reality of our math, because our math is the single most dangerous thing to this Republic right now. Mr. Speaker, I yield back the balance of time.

Mr. SCHWEIKERT

Mr. SCHWEIKERT. Reclaiming my time, actually, where I think it's a really interesting part of the discussion is, all right, if I do believe the SEC actually has this authority, but at the same time, I also believe you and I and all of us in this body are responsible for the ultimate policy, that this policy should be coming back before us, particularly those in the Financial Services Committee, because we're going to also see it as it ties into this whole package of legislation, but also other moving parts out there. Substantially, for that reason, I must tell you I preferred the amendment we just adopted over the one you've offered because it does say that provision, if it comes back before us, yes, the SEC may have this authority; but we're also going to be the ones also touching it and saying, yes, but it needs to be in context. With that, I reserve the balance of my time.

Mr. SCHWEIKERT. Madam Chair, I have an amendment at the desk.

Mr. SCHWEIKERT. Madam Chairman, I rise to claim the time in opposition, though I do not oppose the underlying amendment.

Mr. SCHWEIKERT. Madam Chair, this is one of those occasions where Mr. Miller and his staff--I extend an appreciation. We've gone back and forth in discussion over the last year, you know, what should the number be. We all came to a collective agreement that 500 was far too small for capital formation. Was 2,000 appropriate? Well, should be it 2,000 accredited? Well, what should be the unaccredited portion for that? I think this is what we'll call an appropriate compromise, and I thank Mr. Miller for bringing this to us and helping us get there. What this ultimately does is allow an organization to have investors, up to 2,000. Five hundred of those can be unaccredited. The other 1,500 have to fill out the form; have to have net assets over $1 million, exclusive of their home; a couple hundred thousand dollars a year income, $300,000 if they're a married couple. So at that point, we've made the decision that this somewhat more sophisticated population gets to participate, but they have to opt in. And yet, we still do not lock out those who are, shall we say, working their way to becoming that next sophisticated population. So, Madam Chairwoman, we support this amendment. I yield back the balance of my time.

Mr. SCHWEIKERT. Madam Chairman, we'll call this amendment a study amendment, but we've had repeated discussions on the difference between shareholders of record and beneficial interests. So think of this: we have just raised the number of shareholders that an organization can have. Okay. Well, what if you're a broker-dealer? Do you count as one? Do you count as many? And does it actually make any difference in investor protection? So, in this amendment, we basically say, All right, SEC, we believe you already have this authority. Please, for the first 120 days look into this, see if it causes any harm. If it doesn't, make that decision. We felt this would be a rational way to approach the question because it was a repeated discussion within committee, and just simply say, All right, if it's a problem, SEC, you have the authority. If not, let's move forward. But it's a good example of us not legislating something that, at this point, may be just folklore. Madam Chairman, I reserve the balance of my time.

Mr. SCHWEIKERT. Madam Chairman, I am prepared to close.

Mr. SCHWEIKERT. May I request the time available?

Mr. SCHWEIKERT. Well, hopefully, I won't take 4 minutes here. Madam Chairman, this amendment is actually very, very simple. We're basically reaching out to the SEC saying, Look, come back, make your determination, and let us know within 120 days if you see this is an actual issue. The language in here--``not later than 120 days after the enactment of this act transmit its recommendations to Congress''--this is actually, I believe, a good, workable, rational answer to much of the discussion that happened in the Financial Services Committee. It also has the SEC stand up and say yes, they have the authority, or no, they don't, and then transmit that back to us in the committee. With that, Madam Chairman, I yield back the balance of my time.

Mr. SCHWEIKERT. Madam Chairman, I claim the time in opposition.

Mr. SCHWEIKERT. I appreciate our friend from Massachusetts. I do believe, though, that we are about to be somewhat duplicative to the amendment that we just did. I accept that there is a little bit more here that is a bit more specific, but it is, I hate to say, not necessary. We just passed an amendment that I believe accomplishes where the gentleman from Massachusetts wishes to go, and therefore, I don't see this amendment as actually being necessary. I reserve the balance of my time.

Mr. SCHWEIKERT. I yield myself the remainder of my time. I appreciate the part of the argument here, but in the amendment we just passed, we basically, I believe, did what the Congress is supposed to do. We asked the SEC to come back to us within that 120 days, say all right, here's your authority. Do this, do that. Here's where we see a problem. Here's where we don't see a problem. Actually, I think that's actually where those questions come from.

Mr. SCHWEIKERT. I do yield.

Mr. SCHWEIKERT. Reclaiming my time, I actually do.

Mr. SCHWEIKERT. Would the gentleman restate the question?

Mr. SCHWEIKERT. Madam Chairman, may I request the time remaining.

Mr. SCHWEIKERT. Madam Chairman, I appreciate the discussion, and I know we may be bordering on that line of being esoteric. I actually believe that we took care of much of this concern in the previous amendment. If you are with us and agree, we're literally looking at two tracks here. The SEC does hold authority. At the same time, we also want this brought back to us if the SEC does see an issue. That's the proper venue. It is the proper venue that we passed in the previous amendment, therefore making this amendment somewhat duplicative. I yield back the balance of my time.

Mr. SCHWEIKERT

Mr. SCHWEIKERT. Mr. Chairman, this is also one of those--my understanding is the way the amendment is drafted is this would basically say that an emerging growth company could not, would be prohibited from communicating with accredited investors. Okay. Do we all know, I think, the current definition of accredited investor is $1 million net worth not counting your residence, $200,000 income for, I think, 3 years running. And now we're telling an emerging growth company that that is the population that you're not allowed to talk to? I appreciate investor protection and protecting the little guy; but at some point when someone is holding $1 million in equity outside their house and they've demonstrated they have $200,000 a year income, I actually think those are the very people I want to be having communications with a growth company, that give-and-take, that information flow. And that's why actually this is a bad amendment, and we need to stand up and oppose it.

Mr. SCHWEIKERT. To my good friend from Texas, thank you. I actually feel somewhat blessed being able to stand here today. I am blessed because I have multiple pieces of legislation that are rolled into this jobs bill as well as multiple amendments. So, first, let me make sure that I have said my proper thank yous. I also want to make sure that the chairman of the Financial Services Committee, Spencer Bachus, has my appreciation for allowing me to work on these over the last year. But I also need to reach across the aisle to Mr. Himes and many of the others who made me defend some of the ideas, who argued with me and helped me make these better pieces of legislation through the last year as we vetted the process. I wanted to touch on two of the pieces of legislation that are in here and help folks understand why these are actually really important to capital formation for small businesses. The first one we refer to is H.R. 1070, the Small Capital Formation Act. Many people will refer to it as Regulation A--Reg A. Well, in today's world, if you wanted to go public in this streamlined, simplified process, you could only go public with a capitalization of $5 million. Well, no one is going to the stock market for $5 million. This will raise it to 50. Why is 50 so important? Fifty is the minimum threshold to be traded on the big exchanges, on the public exchanges. This allows an organization to find a path, a less expensive path, to become publicly traded and be publicly traded on those exchanges, where it can be viewed and vetted and hopefully grow and grow jobs. The second bill I have in here that I'm very proud of is one that--we realized capital formation is changing in the world. And for many, many, many, many years, if you were an organization and you got the 500 shareholders, you had to stop, because at 501 you had to go to the SEC and do a public filing. Well, what if you were a high-tech company or a biotech company and you were giving shares, bits of ownership of the company, to your employees?

Mr. SCHWEIKERT. This will give those employees an exemption, so a company that's growing, that's actually in some ways, to use a term that's often used around here, ``spreading the wealth'' inside that organization and encouraging folks to vest their time and their talents in what are often speculative ventures as the company is growing--this lifts that cap, but it also raises it to 1,000 shareholders. There may be an amendment to come that raises that up to 2,000, and that is something I will support. That last thing here is, in committee we also heard discussion last year of why should community banks, why should we raise their shareholder limit to 2,000? We actually had some community banks come to us and say, look, we've been around here many, many, many, many years. We have legacy stockholders in the company. We're at that 500 share, but because of our long history, we can no longer raise the capital, the equity capital that's necessary. And that's why that concept is so important, raising that to 2,000 shareholders.

Mr. SCHWEIKERT. I thank the gentleman from Texas. First off, I actually think I have the letter here from the Chamber of Commerce, and I'm trying to find what has been discussed here. I thought I saw something come across where after 3 years they were willing to look at it. That would be an interesting one to find. This is a classic case of an amendment that I believe the law of unintended consequences is potentially just devastating. How many times around here--particularly in the Financial Services Committee--do we have the discussion of what's the best regulator? It's information and yet you're running an amendment here that basically will destroy information because of the liability. That liability will make it so you're not going to do the research, you're not going to cover the stock. If you read the amendment, I fear it may be too broad. Does it cover someone that does a detailed investment newsletter? What level does it ultimately cover? Mr. Chairman, I believe the law of unintended consequences here is very dangerous.

Mr. SCHWEIKERT

Mr. SCHWEIKERT. First, I want to thank my good friend from Texas. I appreciate him yielding me 4 minutes. Mr. Speaker, I rise in support of the rule and also the underlying bill, and I may have somewhat of a unique perspective here. Being on the Financial Services Committee, we actually started building and moving these bills and working on them, I think, as early as a year ago, last March. So almost everything that's in here has been well vetted, well understood, even down to the amendments and the concepts and the discussion from the last year. And why is it important, doing this JOBS Act and bringing it together, in many ways, as a single piece of legislation? Because conceptually, they all link together. It is about capital formation. It is about those small-growth companies that create the next wave of employment. Let's face it, this truly is about jobs. It is about economic growth. The creativity we need in our economy that creates that next generation of excitement and employment comes from the types of business that need access to capital, and these are the very ones that this bill moves forward. There's also another point that I hope sort of moves universally from right to left here. I'm one of the believers that capital formation is going to look very different in the future. You know, the old days of you go find an angel investor, and then you go find VC capital, and then you go public, are going to look different. Some of this is because of Dodd-Frank. Some of this is because of what's happened in the regulatory environment. And the beauty of this legislation is going to provide opportunity and options, particularly for those growing employers, those small companies that want to grow, want to employ in my home district in Arizona.

Mr. SCHWEIKERT

Mr. SCHWEIKERT. Madam Speaker, this is going to be one of those weeks where I believe we can be proud here in the House. We're going to be moving forward with a jobs bill we've monikered Jumpstart Our Business Startups. I just had in my office a coalition from high-tech companies from Arizona, and they unanimously had a story to tell, and that was a story of the difficulty in finding capital for moving small companies, small organizations, these organizations that are creating jobs. I'm particularly blessed this week to have multiple bills in the package. One is the Small Company Capital Formation bill, a Private Company Flexibility and Growth Act of the six bills that are coming. I'm proud of the House. I look forward to these bills moving forward.

Mr. SCHWEIKERT

Mr. SCHWEIKERT. Mr. Speaker, I will introduce this week the following resolution to recognize Arizona on her Centennial birthday. For almost 50 years, Arizona has been my home, and today I could not be more excited to celebrate her 100th birthday. While Arizonans celebrate her Centennial, we also remember the pioneers who went before us to settle our beautiful state, and those since who have made her the Masterpiece of the West. Our state motto is ``Ditat Deus,'' or ``God Enriches.'' The truth of that phrase can never be clearer each time I travel across our painted deserts, peaks, valleys, and canyons or see a red sunset. It is not only the beauty of our landscape, but the character of our people that make Arizona a great place to live and raise our families. Here's to another 100 years for our Grand Canyon State. Resolution Celebrating the Arizona centennial Whereas on February 14, 1912, after nearly 49 years as a United States territory and thousands of years as a sacred home to indigenous peoples, Arizona became the 48th State and the last of the contiguous states to enter the Union of the United States; Whereas in 2008, in order to commemorate its centennial and to properly celebrate the history of its people, the Arizona Centennial Commission was established to develop a comprehensive plan to specially mark such an auspicous occasion; Whereas Arizona has been home to some of the most influential citizens in United States history including Barry Goldwater, William Rehnquist, Carl Hayden, Mo Udall, Sandra Day O'Connor, and Pat Tillman; Whereas after being explored by Europeans in the 1500s, first by Spanish Franciscan Marcos de Niza and later by the Spanish explorer Coronado, Arizona is now known around the world as the Grand Canyon State for its breathtaking natural formations and unique beauty; Whereas Arizona, among all the States, has the largest percentage of its land set aside and designated as Indian lands; Whereas Arizona is the home of the Salt River Pima, Gila River, Fort McDowell, Pasena Yaqui, and many other indigenous communities; Whereas Arizona is home to Oraibi, the oldest Indian settlement in the United States, which was founded by the Hopi Indian Tribe; Whereas the Navajo Code talkers helped safeguard United States mlitary secrets during the Second World War; Whereas in 2001, the Arizona Diamondbacks defeated the New York Yankees 4 games to 3 in the World Series, becoming the youngest expansion franchise to win the World Series; Whereas Arizona's State flag consists of 13 rays of red and yellow to symbolize its picturesque sunsets and the 13 original colonies, a copper star to represent the copper mining industry, and a blue background to represent liberty; Whereas Arizona's centennial engenders a sense of unity and pride in the diverse nature of Arizona's people, and reminds Arizonans of the need to leave a lasting legacy for generations to come; and Whereas the sun shines in Arizona more than 85 percent of the time: Now, therefore, be it Resolved, That the House of Representatives honors and commends the State of Arizona and its people on Arizona's centennial.

Mr. SCHWEIKERT

Mr. SCHWEIKERT. Mr. Speaker, as many of you know, today is Arizona's 100th birthday. Think of this: 100 years ago there were only about 200,000 people in Arizona. Today there are about 6\1/2\ million. One of the reasons I wanted to come behind the microphone today is, if you've been watching our Senators and some of my fellow members of our delegation, we've all gotten behind microphones and talked about the wonderful leaders, the Carl Haydens, the Morris Udalls, the Barry Goldwaters that have come from Arizona. But I actually want to say something special about the people of Arizona. Think of this. In our hundred years, 6\1/2\ million have chosen to make it their home. And I believe it's both because of the wonderful lifestyle of Arizona, but also the people themselves. It's a unique population. Think of this. You have a State full of people who have chosen to pick up their homes in California and the Midwest and back East and venture into a new life, and actually, that type of entrepreneurial spirit, that type of unique personality, I think, is actually what makes Arizona so special.