Power Props! Government is power and it's been corrupt. Nobody knew in total how much we spend because we never even talk about it. first goal of this Republican budget reconciliation should be don't add to the deficit. I voted for President
Because I wanted him to defeat the deep state. You don't defeat the deep state by continuing to fund it at Biden's levels. Our base is going to go, why didn't we elect you guys? You're really no better than Democrats. I don't think President Trump is not focused on reducing spending. This is our one and right now we're blowing. And I'm gonna do everything I can to make sure we don't blow it. I can't be pressured by President Trump. He's willing to sit down
Look at the numbers, acknowledge them, working for a reasonable plan forward. That's the only way you can get my support. So everyone has assumed that the House passage of the reconciliation bill is going to go to the Senate with some minor changes and then make its way to President Trump's desk for signing.
But that may not be the case. There are several hardliners in the US Senate who have made it very clear that the budget and the fiscal deficit problems that arise from this bill are insurmountable and they're going to take a very hard stance on voting no on this bill.
Taking the lead on that point of view is Senator Johnson from Wisconsin, who's going to join us today for an emergency pod to talk about what's next with the Senate review of the reconciliation bill, what his thoughts are, what's the future of the republic, and what's ahead. We're really excited for this emergency pod. Thank you for joining us. Senator, thanks for joining Chamathin for this conversation this morning. Good morning, guys, and thanks for having me on.
And just by way of background, Senator, you were elected to the U.S. Senate in 2010. You've had two re-elections since then. More recently, we've taken notice, and I gave a shout out to you for your comments. on the scaling of the deficit and the U.S. federal debt. And as a Republican against the stated intention of getting this bill passed and through the Senate, As is, and we'd love to kind of hear from you today about your points of view.
on the bill that was passed in the house this week the reconciliation bill and then take a step back and talk a little bit about the fiscal picture for the united states and where things are headed so thanks for that and thanks for joining us maybe we could just start a little bit with
A very basic primer for our audience, something that we don't talk about very much on the show. Can you just tell us what a reconciliation bill is and how it's used so folks can understand a little bit about the process that the House just undertook and what's ahead? Sure. Let me start. You talked about when I first ran for election in 2010. I just ran out of the Tea Party.
Never been involved in politics whatsoever. And didn't even decide to run until the end of April. And Alston May started campaigning during the summer, did all those parades. What I would shout during the parades was, this is a fight for freedom. We're mortgaging our children's future. It's wrong. It's immoral. It has to stop.
That was my campaign theme in 2010. I still feel myself more Tea Party than Republican Party. We have a lot of big spenders in the Republican Party as well. And I ran, again, because of Obamacare, which I knew would not. work and it's not working that's by the way that's the problem medicaid right now is obamacare is now called medicaid expansion but to answer your question uh budget reconciliation was set up by the in the budget act i think it's 1974 Um,
It doesn't work in terms of controlling spending. By the way, nothing ever has. We'll get into that in terms of we've never had a process for actually controlling spending. But it allows us to pass a budget and then to reconcile the budget. You're able to pass a budget that's not in law, but you pass this budget with just 50 votes, 51 votes, majority. And then you can reconcile to that budget, also avoiding the Senate filibuster. So that's the main component.
What's weird about it is you pass this budget, but you can only, through budget reconciliation, address mandatory spending. You can't touch the discretionary spending accounts, which is about 25% of our budget. That's one of the ways the budget has gotten completely out of control is we put so many things into the mandatory category. You know, initially it was entitled Social Security, Medicare, Medicaid, but we have, I would say, divously slid.
all kinds of discretionary spending into other mandatory that really exploded during COVID where I think other mandatory hit well over $2 trillion. Last fiscal year is about $1.3 trillion. This year will be over a trillion. So it went from $642 billion in 2019, other mandatory, again, not Social Security, Medicare, even Medicaid.
went for 642 to last year 1.3 this year it's going to be over a trillion dollars it's going to keep you know pretty much at that level as far as the eye can see so again That's a trillion dollars of other non entitlement spending that we never looked at. And that's the whole point about mandatory spending. It's never looked at. So anyway, so we can address.
mandatory spending, not Social Security, through this reconciliation process, change programs, do whatever we want to do, as long as it has a primarily budgetary impact, not changing policy. It can change policy as long as it has a budgetary impact. I know that's reasonably complex, but it's an insane system and it doesn't work. What is the alternative?
Well, right now we don't really have them. Again, let's just go through why we've never had a process to control spending. We don't have a balanced budget requirement like states do. And we have the capability of printing money, which we're doing. incurring this enormous debt. So we don't have a balanced and budget requirement. I didn't realize this until just recently. The appropriation committees were literally set up because the authorized committees were big spenders.
So they set up appropriation committees to control spending. That didn't work. The Budget Act didn't work. Simpson-Bowles didn't work. The Budget Control Act didn't work. It did restrain discretionary spending for a couple years until we wheezed our way around. So again, we've never had a process to control spending. And one of the things I've been arguing in some Wall Street Journal columns is let's use the example of Doge.
I come with the private sector. We probably spent more time reviewing my line-by-line budget for my business And I think other private central businesses spend more time analyzing what they're going to spend than Congress spends over the entire federal budget. So we've got to develop a process. Don't just show us how to do it. Go contract by contract. Expose the grotesque waste, fraud, and abuse.
but we got to do that through thousands of lines to try to budget but nobody's willing to do it nobody's willing to take the time to do the work to do it they they're doing what they've always done they accept low spending They look at a couple of programs, they try and tweak them, try and get a big score out of CBO so they can say, hey, look, we saved $1.5 trillion, and yet that's completely divorced from reality.
$1.5 billion sounds like a lot, but over 10 years, it's $150 billion against a $7,000 billion a year budget that only six years ago was $4,400 billion. If I've got one complaint in terms of the process in the house, It's basically a void of reality. We're not talking about the numbers we should be talking about, which is a 10-year deficit projected by CBO of $22 trillion.
Average 2.2 trillion dollars a year. We were talking about so we focused on 1.5 trillion and then they're patting themselves in the back. I just want to make sure, Senator, then that we're on the same page with respect to the math. If this bill passes as is, Can the general public take the 33 or 34 trillion that we have in debt? Should we add 22 and say we'll be at 58 trillion by 2035? Is that the right math or the wrong math? That understands.
Now, they'll talk about dynamic scoring. I believe in dynamic scoring as well. But in this case, if you take a look at the tax cuts that President Trump is proposing, they're not going to generate growth. They're just going to reduce the CBO. Projection I'm looking at assumes we're going to gain another $4 trillion from increasing tax.
So again, we may not May not get that four trillion dollars, but no matter what the CBO projection right now that is adding another 22 trillion dollars to our debt It certainly would add at least that. I would argue probably add another $3 or $4 trillion. So it's not going to be $59 trillion. It's going to be more like $62, $63 trillion. And the CBO scores? Assume the interest rate on the federal debt, I believe, is an average of 3.6%. And now we're seeing the 30-year trading above 5%.
Meaning that if we trade up to 5% for the cost of debt for the federal government, we're probably going to add another $5 trillion of incremental interest expense over the period, another half trillion a year on average over the next 10 years. And I would agree the current CBL projection, that's what I'm talking about here. you know going from 37 to 59 trillion dollars in debt is a rosy is you know the rosy scenario that that's as good as we're going to do so we're simply we're simply
This is not me in the moment in terms of what we have to do. Senator, let me just ask. I think one point of clarification on your earlier comment, which I think would be important for the audience. What has been put under mandatory that should be discretionary? It covers the entire gamut of federal spending. Education, welfare, food stamps, veterans benefits. Again, they've just transferred that into mandatory spending, so it's completely
When it sits in discretionary, maybe just help folks understand what does it mean if it sits in discretionary? Does that mean that then the administration under the president has the authority to spend up to that amount?
to administer the law to administer the statute but doesn't necessarily have to and the mandatory demands that the capital goes out just help us understand for the audience what the difference is well discretionary is actually supposedly passed each year through an appropriation process which is completely broken we don't pass individual appropriation bills we generally at best uh which is awful mini buses or omnibuses now these are these multi-thousand page
bills that get dropped on our desk and we have to vote on them literally within 24 to 48 hours. Nobody reads them. Nobody knows what's in them. That process is pretty broken down. Right now, we are operating for this fiscal year under a continued resolution. which tweaks a few things, but is basically spending at last year's levels on all those appropriated accounts.
So again, that's about 25% of our budget. Then 75% is in the mandatory accounts, the entitlements, and just other mandatory spending. So the arithmetic indicates we're entering into a debt-death spiral in the United States with the interest rates climbing, the deficit climbing, and we then need to spend more money to pay our interest on the existing debt that increases the deficit we need to borrow more the debt spirals up interest rates climb and this becomes an insurmountable hill to climb
As you have the conversation with members of the Republican Party, what's the point of view? What is the motivating factor for business as usual? Why is it so difficult to get folks to see the basic arithmetic in front of them? Well, let me give you an example from about three years ago. This was after COVID and, you know, on bipartisan basis, run a massive spending spree in 2020, but then the Biden administration just continued that. So we were in omnibus spending debate.
And for the first time, even though the Republican Senate conference, we have a resolution against earmarks. McConnell is negotiating an omnibus spending bill. members are sucking down earmarks. So I asked my colleagues at that time, I said, hey, anybody know how much in total we spent last year in the federal government?
The room was dead silent. I went out to watch the press bar, asked the same question. Anybody know how much we spent last year? One report says it was over a trillion dollars. No, that's just discretion spent.
the answer was something like 6.3 trillion dollars because we had gone from 4.4 trillion in 2019 up to 6.5 and we've never looked back right and then now is just no family if they had an illness borrowed fifty thousand dollars pay medical bills if they got well the next year they wouldn't keep borrowing fifty thousand dollars to spend that level but that's exactly what we've done but the point of my story was nobody knew in total how much we spend because we never even talk about
So that's out of sight, out of mind. So it's completely out of control. I mean, I am the guy, you know, starting with my Wall Street Journal column January 1st about returning to a pre-pandemic pre-pandemic global spending. I mean, I've been hammering.
the senate republican conference on a weekly basis and just you know and nazi quite honestly but what's the pushback what do they say they just throw they've thrown the towel it's too hard i mean that's unrealistic you just can't do it even though i lay out well these are so let me just tell you how i laid out my pre-pandemic level suspending
this is during between christmas and new years i'm trying to say how can i communicate this you know how can i justify this what kind of control can we put on things so i i literally went back in history i went back to clinton in 1998 Obama in 2014 and Trump 2019 and i exempted social security medicare and interest you know spend what you need to spend
But all other actual outlets in those three years, I increase them by inflation and population. No reasonable control, right? It's what we should have. We don't have a balanced budget amendment. At least we should have some reasonable control over outlets. population growth inflation would make sense. Senator, if we take your math and say that we are headed to
Let's take the midpoint, $65 trillion of debt by 2035. I think it's fair to say that the bond market will have a negative reaction to that and what Dave just talked about which is a five percent borrowing rate for America could be on the low side. And that's the spiral that he's talking about. On Friday, Secretary Besant tried to get in front of this and his commentary was, we will grow our way out.
Can you talk to us about what he means by that and what the boundary conditions need to be to grow our way out? First of all, by my calculation, our average interest rate over the last 50 years On government debt is about 5.8%. so that's 50 years and we're down here about three somewhere around three percent um those are not exact calculations uh listen that is the hope of all of us i mean i i will absolutely agree that the number one component of a solution to our
enormous debt and deficit problem is economic growth we have to grow the economy but here's the problem is when the government is sucking out of the private sector We're the ones borrowing the money, so there's not a whole lot of money left for businesses in the private sector. Not enough capital there. Now, you can print more money. But then that sparks inflation.
And that, of course, erodes everybody's balance sheet. It also makes our debt less expensive as well. But because we're sowing debt, that drives up the interest rates. And again, it ends up being a death and debt spiral.
so nobody can predict this but i mean that's just the the wishful thinking of people putting forward a policy a one big beautiful bill that doesn't live up to its name but actually actually exacerbates the problem What are the tools then in your toolbox so you get back in the next week or two? And you talk to your colleagues and now it's on your desk. How do you start getting your arms around this? What do you do starting on Monday or next Monday?
So I try to lay out the basic numbers. That's what I was talking about. You know, my pre-pandemic loss of spending, Clinton, if you use that process, go from 1.7 to 5.5 trillion. That's how you plus up there. Obama would be 6.2, Trump's 2019 6.5. So now you've got a baseline budget. You've always heard these Republican members of Congress running for office saying, we're going to go to zero base budget.
They're not even willing to go to 5.5 to 6.5 level baseline of budget. So again, what is the process that just might work? that was just kind of showing to us you know line by line you have to scrutinize all this it takes a lot of work it takes a lot of time and that's why i've always argued for a multiple approach here multiple steps provide the border funding i would just extend current tax law
i mean i would have voted for that if we have been smart enough to use current policy back then we wouldn't be even having this conversation extend current tax law takes an automatic massive tax increase off the table increase the debt ceiling enough for a year
to keep pressure on the process to do the work to go line by line expose spending i've got to believe when you've gone from 4 400 billion to 7 000 billion dollars worth of spending if you start scrutinizing that line by line there would literally be hundreds of billions of dollars The public wouldn't even know!
We're not spending. The only people who would know would be the grifters who are sucking down the park. So when you say the folks in the Republican Party that aren't willing to do the hard work, it's just so obvious. how big of a crisis we are in and everyone's kind of being blind to it so i'm just trying to understand what is it that's keeping the blindfold on is it that there are donors, that there are constituents. I'll give you an example. A couple years ago, I went in for the farm bill.
review with the Senate Ag Committee 2012, so a long time ago. And we started talking about one of the agencies in the USDA, and they have 10,000 employees and said, you know, why does this make sense in a digital age? And the answer was it doesn't. It's like, well, why is the agency still running and employing all these people? Well, because the senators don't want to lose the jobs in their state.
Because that's 10,000 jobs split amongst roughly seven states. And it's really important to those seven states to keep those jobs. Is that the motivation that there's economic dollars flowing into the states that keeps the representatives and the senators from making the tough decisions? Is it that they're getting donor dollars? What's the real motivation here that's keeping everyone from tackling reality?
Again, as I pointed out, Most don't even recognize the full reality that they don't they don't know the number I've heard it said in here, McConnell say it personally, but I've heard him say, show me a member of Congress who ever lost the election because they spent too much money. So there's no public pressure not to spend.
you know people love tax cuts people love the free money you know we collectively as a society are whistling by the graveyard nobody wants to say that this is unsustainable because
is painful. You are going to have to reduce spending and then you're very open to the political accusations as you know coming in we're trying to slash medicaid for disabled children now we're trying to preserve it for disabled children try and get the able-bodied childless working age adults back to work and on private sector health care.
But again, that's a more difficult argument to make. So it's just the way that the process just plows on. We've never, as I said, there's never been a process to actually control spending. So this way we've always done it. You come up to these.
You put everything into one big bill. You give people things that you have to vote for. You don't want to default on the debt. You don't want to increase taxes. So those elements you bundle up with a bunch of crap and you twist people's arms to pay for it. having and keeping them basically ignorant because you never talk about the massive numbers, the massive problem that we're really in. I mean, people kind of know it.
But as long as the press isn't reporting out, as long as the press isn't connecting the dots, the massive deficit spending is why you can't afford things. Why your dollar you're held in 2019 is only worth 80 cents versus the buck it should be. By the way, a dollar you held in 1998 is worth 51 cents. Okay, so again, we don't teach people. There's no public pressure.
in terms of reducing spending or reducing deficit there's just virtually none you know from conservatives right now i'm getting it all the time but make sure that you make no tax on tips permanent make sure you make no tax on overtime permanent so well first of all we probably shouldn't be doing either of those i'm by the way i'm off for no tax on pass tip No, we can't-
can't collect it anyway so don't even try now i'm all for that but you've got to recognize these other tax cuts they're not going to grow the economy they're not going to focus on the one component that bessen's talking about that I actually am very supportive of the no tax on tips, no tax on overtime.
The monetary cost of those things are relatively not that meaningful. And so it has a broad-based positive impact with a lower cost is actually the reason why we should do it. The thing that I was sort of like, puzzled by when 50 people or 60 people are constructing something you get this bill
that comes out of the house which has the things that the president asked for but with all of these other Christmas tree ornaments hanging from it and it's impossible to figure out what's actually going on. I don't think it's even 50 and 60 people constructing this. I think it's a much smaller group of people, and then you maybe have 50 or 60 chiming in on one issue or another. Let me push back on overtime with you, though. I ran a plastics operation, continuous shift.
If you're going to have your work 24-7, you need four chefs. So part of the problem with no tax on overtime, first of all, no tax on some overtime. So I was going to add to the regulatory burden. I wouldn't want to be the accounting clerk having to keep track of that. But yeah, I know if computers, it's easier to do so. But in public service employee units, they refuse to go to four shifts.
because they like the overtime they should be forced to go to four shifts because they burn out pay them more but from my standpoint having run a continuous shift operation i think there's enough incentive paying time and a half or double time on sunday for people to work
Income is income. I don't want to segregate. I don't want to socially or economically engineer through the tax code. And that's just part of that economic engineering through the tax code. I love the fact we're focusing on working men and women. Great. but i would rather simplify the tax code for them and and overall lower their tax burden again lower the rates brown the base
But we're not doing that. We lowered the rates and we made it more complex. So we did not simplify the tax code in 2017. One of the reasons I actually wanted a two step process. I'm too simplified and rationalized attached on. Can we talk about other things that didn't make it in that we thought were going to get in there? Another way to generate revenue would have been to close the carried interest loophole. I don't know if you have any points of view on that.
Well, I've talked to numerous people who benefit from period interest. I always ask them, can you explain to me why that's not ordinary income? And they can't. It is ordinary income. Speaking of other ones, they're pretty big into it.
They do make a pretty powerful case that all these deals, all these structures, all these business arrangements are already structured that way. You can eliminate that break and it's really not going to raise any revenue. They make a reasonably convincing case there too. That's kind of where we at on that. which is sort of like at an impasse. Yeah, my guess is just not gonna happen. Right.
And kind of going over time, it's just not that big a revenue generator one way or the other. Might make you feel good, could screw up the way deals are made. That's really worth messing with. One of the things that Elon has been talking about recently is that we could be on the precipice of an energy deficit starting next year where we need every form of power possible to be generating as many electrons as possible. And so solar, wind, not gas, nuclear.
There was a bunch of provisions here that changed the tax incentives. What's your thoughts on all of those that may change the landscape of electron availability? I think it's insane that we've been shutting down coal-fired electrical generation. We need a lot of it. I would really focus on nuclear myself. I think that is, you know, if you're concerned about climate change, yeah, I'm not, we'll adapt. But nuclear would be the thing we ought to be pushing. I really don't want to subsidize.
Energy production. I don't want to subsidize anything again. I want a simple and rational tax. So my approach would always be to simplify those things. And I don't want to pull the rug out from under people. I mean, if we've subsidized things and people made investment based on certain things, kind of respect that. The comment that I made to my colleagues is FERC came out with a report. It said 81% of the incremental energy that was generated in the United States
were backed by some form of tax credits. This is not to judge, it's just meant to say that financial actors go to where the incentives are. And if we change them and we take 81% of this incremental energy offline, And you can't get a nat gas turbine. You know, for example, I'm going to announce on Monday we're building a one gigawatt data center that I'm funding in Arizona. I can't get a nat gas turbine until 2032.
I can get nuclear from the state of Arizona, but that's not broadly available everywhere. And so there's these practical investment decisions that the financial community wants to make to keep America at the forefront. It's a little murkier today. Unless the Senate understands these nuances and helps us because if we can't make these investments, then we're just not going to do it.
I said, Congress in general doesn't understand what you're talking about. I said, I don't want to pull the rug out from other people. I understand investment because I was in business. But again, I want to move towards a more simple system. And again, it's insane what government... Yeah, all the green new energy thing. It missed outcast capital. Look at what's happening in Europe and Germany and stuff. They're artificially driving up the cost of power for what?
Okay, I mean, it's a fantasy. It's a self-inflicted wound. It's like five or six trillion dollars worldwide on climate change then whether you believe it or not we haven't bent the needle that's just five or six trillion dollars basically wasted so again i recognize the fact we've wasted a lot of money we've incentivized people for a certain type of power the solution would be quit doing it
long term and let the marketplace provide as much energy as cheap as possible. Again, protect the environment. I don't want pollution, but the whole climate change thing is I care about electron. surplus and having an infinite supply of electrons, which is effectively the threshold issue between us and
whatever form of abundance we're going to find with robots, with going to Mars, with building AGI. The threshold issue is just do we have enough energy to do it all? And if as long as we have that, we're going to win. And if we don't, China's going to win. Where it comes from, I really don't care. But the reality with nuclear is, you know, we can't wait till 2035 for electrons to turn on. That's just a non-starter. So as much as
We have to pay for the sins of the past, and the sins of the past is we turned all that stuff off idiotically, to your point, because of some, you know, crying child. But now we have to pay for the conditions on the ground. I have a different question, which is I want to go back to Dave's question on Doge.
Senator, which is there was a nine billion dollar rescission bill that went to the House and unfortunately it didn't make a lot of progress. What is the future of Doge as you see it? First of all, It was beneficial for no other reason than it exposed how oblivious and ignorant Congress was of all this waste, fraud and abuse.
Okay, I mean, that has value right there. It should have embarrassed every member of Congress, all these departments has, that this kind of spending, this kind of crap was going on, and that they weren't doing oversight on it, they weren't taking a look at it, and... And I tried getting Elon's attention quite honestly about, you know, can give me somebody in Doge.
that i can work with so as soon as you identify the spending we can connect it to an appropriation account we can connect it to a mandatory spending account so we can actually codify he doesn't seem to have the time and quite honestly in a personal conversation he said well we don't have to do that well we do have to do that And so we've been hammering Russ Vogt, you know, send us a rescission package. You know, finally he bundles up $9 billion.
I think the last time I looked at Doge's website, they were up to 165, and it's higher than that now. They have fallen short of the goal, and I'm not criticizing. than that for that at all. But the fact of the matter is it has to be codified. Just putting it on a website is valuable, but we've got to bank the savings.
And so anything that's mandatory has got to be done through reconciliation, otherwise it's got to be done from rescission. You've got to get the public support for this. I don't know why they haven't done it. So can you just explain that to us, like what we see on the website? Is that not saved? There's a question. They've stopped contracts. They're no longer spending money that way, but... The question is whether the president on his own can impound those funds.
So they may not be spent, but they're just going to be sitting out there as unallocated spending to be spent sometime in the future. Unless you rescind them. Again, that's the beauty of rescission and reconciliation. We don't need Democrats to... Help us there. We can do that with simple majorities, both the House of the Senate.
And again, it'll be pretty depressing. President Trump in his first administration sent up a $15 billion decision package and has voted down the Senate to Republican senators vote against it. And my guess is they pay no political price for doing that. Any Republican that would vote against the rescission package ought to pay a pretty huge political price.
in voting that thing down. It's going to take presidential leadership. He's got to be focusing on that. And I'm sorry, I don't think President Trump, he's doing all kinds of great things. He's not focused on reducing spending. For what do you think that is? Have you talked with his staff or him directly about it? Was this not as apparent to him and his staff as it is to you?
I just think they are overwhelmed. I mean, you see all the activity and this just hasn't hit his radar yet. It's going to hit his radar here the next few weeks. So again, he liked the concept, the slogan of one beautiful bill. I don't think he was overly concerned or understanding what the details were. I'm going to force him to take a look at the details. I'm going to force the discussion on spending.
It feels like we're about to enter some form of papal conclave where you and your Senate colleagues are going to go into a room. There's either going to be white smoke or black smoke. So can you... can you walk us through like what what is the mechanics now like what will it be like when you when senator thune brings you together you all caucus or how does this work now for you so we've been in finance committee we've been working on these things but again we're all it's all about scores right
I've got to point this out. You hear these scores, right? But they're divorced from, they're not tied to anything. It's like, okay, I got a score of 65. Well, good. I mean, it's good if you're golfing. It's awful if you're bowling. So you get all these scores. They're divorced from reality. So again, the process is complete.
It's by and large a charade. Okay. Somebody else is going to write this thing. That's going to be shoved down people's strokes. So what I intend to do is I intend to open it up and bring this to the light of day. I've been doing this since January 1st. Running back. Giving, you know, three pre-pandemic levels, you know, three options on pre-pandemic levels of spending. Next column, here's the process, a line-by-line, deep dive, forensic audit.
I'd love to take the Doge team right now and just bring them over. Let's focus on this. Let's spend months.
doing this but we'll need time we'll need a two-step process you know and then you know literally my last column just kind of put it all together the big numbers and that's why you have to do it but but again you you're following the debate in the house did you ever hear 2.2 trillion dollar average deficit being projected 22 billion dollars you know 59 trillion dollars in debt no but it's just 1.5 trillion oh like that's a lot i mean it's it's it's it's almost meaningless it's a rounding error
So I'm going to force this debate. That's why I'm on your show here today. That's why I'm going to be doing Jake Tapper tomorrow. I'm going to bring the numbers to the fore. Senator, is there a hard line that you'll have that if we don't... get this deficit level to x because that's the focus that's the objective that's the primary objective rather at this point in time in this republic
that you'll say I'm a no vote? And have you been that declarative about your position on this? I've been pretty upfront. The first goal of this Republican budget reconciliation should be don't add to the deficit. Could that be the first goal? Beyond that, what I've always said is I want a commitment to return to a reasonable pre-pandemic level spending and a process.
to achieve and maintain it. I'm reasonably open. I recognize we have to get the vote so i say i don't have a hard number but what i've done is i've laid out these options and right now the hard number accepted by and expected by a lot of senators enough to not pass this until we achieve it is $6.5 trillion in spending in 2026.
And I can walk through how you get to that point. But that's kind of the number. Right now we're expecting to spend about $7.3 trillion next year. So that implies about $808 trillion. investment reduction rather than 1.5 trillion that the house has in their meager house reconciliation bill.
It's also pretty big delta. What scoring do you go off of? Is that the CBO scoring that you would use to make that estimate? Some of the conversation that we've heard is that The revenue effects of some of the new programs are not taken into account fully, that there may be revenue coming in from tariffs or maybe revenue coming in from the sale of the Trump immigration card at five million a pop. And there's a limited effect.
of the tax cuts on GDP growth, etc. So there's a lot of arguments to be made to make the line seem a little more blurry than perhaps the scoring might indicate. That's why I try to simplify things. I'm focusing on spending. We went from 4.4 to 7.3 next year. Let's bring it down to a reasonable pre-pandemic level 6.5. Spending, spending, spending. I voted for President Trump because I wanted him to defeat the deep state. You don't defeat the deep state by continuing to fund it at Biden's level.
So the minute you start bringing in revenue, nobody can project that. Nobody knows exactly what the impact is going to be. now so that starts you know muddying the water so i focus on spending uh i don't really want to fund the deep state Okay, I would like to bring certainty to the economy. I'd like the trade wars to end so we can bring that level of stability. I don't want to increase taxes. So again, my approach would be multiple steps.
Border defense, bank the savings, take whatever good work the house did, bank that. Extend current tax law is often as complex as it is to extend that. Increase the debt ceiling for a year to put pressure on us to come back and do the work on the spending. And then we can bring up President Trump's taxes as well. I mean, I would keep this as simple as possible, get it passed, and start doing the work. Do you think that there's any...
upside or legislative resolve to think about monetizing assets. So, for example, Secretary Lutnik has talked about the vast resources, Secretary Burgum has talked about as well, the vast resources that America has. Whether we should consider thinking about monetizing some of those things, selling federal lands, selling drilling rights, selling royalty rights. What do you think about that as an incremental way of softening the landing here?
I would say the only reason I'm not in a full-fledged panic is because people like Art Laffer do point out we have vast Well, I mean, so our debt to GDP ratio is probably not the most relevant, is relevant for inflation, that type of thing. But, you know, debt to total assets.
is probably the more relevant so we literally we can't afford this level of debt but you have to you do have to compare to the income as well and our ability to service the debt and the death spiral so again this all ends up being a lot of different factors coming into what's going to make it possible for people to live and again
Inflation is probably the one metric that we need to avoid. And I think that's the thing that I'm most concerned about in terms of deficit spending. I'm not concerned about America going bankrupt because we have this vast wealth. I'm concerned about it. being insolvent and sparking massive inflation and just wiping out people's savings, making it very impossible for them to live and retire. What do you think is the future through these next 16 months of bills and the impact, to your point?
There's a lot of people that came together in a coalition to vote for accountability, to defund and to starve the deep state. And if we continue to feed it, It seems like a traditionalist default. We're going back to the way things work. Can you talk to us about that and what your thoughts are about that? Well, I'm highly concerned about just the conservative movement. I think Trump is completely unique clinical figure. I think he definitely did drive turnout. He's expanded certainly our base.
Which, by the way, is one of the reasons I am sympathetic to what you're talking about in terms of the tax custody's proposed. I mean, we need to focus on the working men and women of this country. That's really the Trump coalition. But I'm concerned about how effective Democrats are.
the coalition they have made up of the media primarily social media companies that type of thing their relentlessness of letting all these undocumented people in this country who are voting i mean we're starting to see that type of fraud They are trying to cheat. I think they do cheat in voting. I think we don't have a real feeling in terms of the order of magnitude of their cheating.
But a quick example of, we have that important Supreme Court race here. Elon Musk came in here, did some pretty innovative things, spent a lot of money here. The liberal candidate got 78% of Kamala Harris' vote. The conservative candidate got 62% of Donald Trump's vote. Even though we were all out there saying how important this is. If you don't want to see President Trump impeached by a Democrat-controlled Congress in the next Congress, you've got to get out and support President Trump.
That didn't resonate. Again, 78% of Democrats came out, 62% of Republicans. do you think there's a risk that maga becomes a version of you know tea party 2.0 where it starts with energy but then there's just a gravitational pull of the establishment is just too strong for the rebels to fight off? No, I think the greatest danger of MAGA is it's really tied toward one individual. Now, the Tea Party movement was tied toward the vision of America, freedom.
debt and desolate, not mortgage or a kid's future. I think that survived. I mean, they did a pretty good job of marginalizing Tea Party, but we're alive and well. We are the House Freedom Caucus. We're the people that are going to stop this until we just get a much better bill. So we're still alive and well, but in terms of voters, the Tea Party pretty well merged with the Republican Party. I'm not sure how to make them.
The mega voters are just disgusted by the whole process, as am I. And they're much more likely to sit on the couch unless their guy is on the ballot. Do you think that our model of representative democracy is broken and has the same sort of inevitable outcome that others?
have had in the past that ultimately people realize they can vote themselves all the money and they do and the system breaks i mean like like if you were to go back and be a founding father what would you have done differently here and or am i off on this no i'm not sure you uh You are off at all. And I think we may have already passed that hinge point. That's my concern. You're optimistic. No, I'm not.
I'm looking around. That is the death knell of a democracy or a Republican. A majority of voters realize, hey, I can vote myself benefits. Don't worry about the debt and deficit. We can print money. No, that's what brings down... I mean, this is what I've noticed is Democrats, Republicans, populists or elitists whatever side of the spectrum on whatever dimensional category you want to assess an individual or representative on
At the end of the day, they're just trying to use the government to deploy capital to their constituents as best they can. I mean, that's the mechanism of the electorate at this point. And just hearing your words resonates with me because I've made a number of visits to DC in the last couple of months since the inauguration.
And there was a lot of proclaim about Doge and it's a new day in Washington. And I felt a degree of optimism and hope that things were changing in D.C. but every member of congress i sat down with was a disappointing conversation that reflects the views that you just shared that they don't really understand what's going on and they don't really care it's not a priority
to solve the physical crisis that we're in and they're not willing to admit it. It's like a stage four terminal patient not willing to admit that they're sick and they need to take some therapy. The data that backs us up. is, and I wrote this in my Wall Street Journal column, 1930, the federal government spent about 3.5% of our GDP.
3.5. State of all governments were about 9.1. That was the foundational premise of America. Government calls the government where it's more effective, more efficient, more accountable. Now we're spending close to 24% at the federal level. States are probably somewhere at 12 to 15. We haven't looked that recently. And as Lord Acton pointed out, you know, power corrupt. Government is power. That is really the definition of government is power.
So it gets corrupted, and it's been corrupted. And I don't know where, you know, I fear we're passing 0.0 return. Why did I run again for a third term? It's disgusting as I am in this process. A, I couldn't turn my back on this country. I can't give up on it. I'm not overly optimistic. And again, it's not just that as government grows, your freedom recedes. As government grows, you get more and more people dependent on it.
Well, that's right. They're not doing things productive. You don't have a vibrant economy. That's right. All in all, it's destructive of society. To the point about your numbers, Senator, you know and i've talked about this on our show or i've tried to estimate what percent of americans gain their employment through a government paycheck servicing the government or a government contractor and i think it's probably at 50 today so 50 of americans are either working for a public agency
federal, state or local, or working for the contractor of a government agency. And that's where you pass the tipping point where it's no longer possible to bring down the spending. Because at that point, everyone in a representative democracy has every incentive to keep it up. Otherwise, they will individually lose, not just have something individually to gain. That's where I worry we're at. I guess the hardliners like yourself.
Maybe the last line of defense here, but that's where I was really curious to hear how far are you willing to take this in this particular reconciliation bill process that's about to hit your desk. in the next couple of weeks. And who else is shoulder to shoulder with you with the same point of view in the Senate? I think Rand Paul is pretty much a hard no regardless.
I don't think he could get a good enough bill where he'd vote yes. My other allies for sure in this thing are Mike Lee and Rick Scott. Each one of us has our own thoughts. We may accept something different than the others. I'm pretty well dug in, but I'm reasonable. You give me something that Like I say, commits to getting to a pre-pandemic global spending.
and a process to achieve and maintain it, I'll work with you. Now, one of the things I did, and we had it pinned to my top of my X page, I think it's further on down now. But I put together a video about a minute 30 starting with President Trump at State of the Union saying he was going to balance the federal budget and then the vice president and everybody on down some version of we don't have a revenue problem, we have a spending problem.
at the very end of the video i i asked so are we willing to fix it you know right now Doesn't appear we are, but I tend to insist that we do. So I'm going to dig my heels in. There's nothing that President Trump can do to pressure me. other than other than start work with me and not acknowledge the numbers now i'm texting they're probably annoyed with me investment and has it and restaurant all the time so here's here's my viewpoint What am I not getting right? So they know exactly what I'm...
They know exactly my concerns. They know exactly the numbers. I had a nice lunch with Scott Besson in the Treasury Department. I gave him my charts and graphs and all that kind of stuff. He asked for the electronic version of those so he could distribute those to the Treasury Department. So none of this should come as any surprise to anybody. And again, the ace I hold is I am going to force the numbers.
that we have to look at out in the public because to this point we haven't stressed it and a number from your perspective if you had to create a hierarchy just in your messaging Is the number we should take away is that we're about to tune the debt to 60 to 70, so call it 65 at the midpoint. Is that the number that we should be focused on? I first focus on spending.
Okay. 89.3 trillion. Again, that represents government, right? That represents that power that's been corrupted. That represents the just unprecedented, other than World War II, increase in spending from 2019 at 58% to 60%. so if you can't deal with that in my column i pointed out you know our forefathers the greatest generation responsible leadership you know entered world war ii spending about 11.7 percent
Ramped that up to 41% during the war. By 1948, they were down to 11.4%. So it's entirely possible, but you need leadership. I need the President of the United States. By the way, I've been in the White House with him. I've shown him my trust and grasp. He goes, I love this. i love this the house ought to love this has this been presented so no mr president let's go to the house let's present this he didn't do that we need president trump to embrace
The reality that we are spending way too much money. He was elected to defeat the D-State. You don't defeat it, spending it by his levels. He needs to see the detail. Again, I think To be charitable, I think he's been so busy doing so many other wonderful things that I support. He hasn't focused on this. I'm going to force him to focus on this. This will be the moment you think.
And so when you speak with Besant, does he think he can get the president there as well? I mean, I always think back to Bill Clinton with his balanced budget, economic. poster boards that he put up right like here's the simple charts let me explain it to you and every american could watch that on television and understand what he was talking about
nodded their head and Congress and the entire populace went along with it. Do we need that? Do we get that moment, do you think? Yeah, I don't think the numbers are that complicated. yeah sign them out you know 22 trillion dollars of additional deficit spending that's a rosy scenario that's 2.2 trillion dollars per year Obama, he averaged about $900 billion in your deficit. Trump, before the pandemic, was about $800 billion. Biden's up to almost $1.9 trillion in average deficit.
and clearly unsustainable we got to get back to a reasonable level and by the way if we do i think the bond margins were bond markets would rejoice we wouldn't be looking at a ramping up of interest costs We can talk about, you know. debt to wealth as opposed to debt to GDP because we've got that monkey off our back. You said something interesting I just want to come back to which is you said
When the government absorbs all the dollars in the system, there's fewer and fewer dollars left for private industry. Just to build on this, one of the things that I brought up at the beginning of this year, I said the most important thing that you need is tail insurance.
The tail risk needs to get managed at the beginning of this year and there's a very important market that is a gauge of that towards private industry, which is called credit default, which is what is the risk of private industry not being able to pay back their obligations. Unfortunately, through the course of this year, we've seen the cost of that insurance ramp.
But at the beginning of Liberation Day, there was some relief there because people saw a path out of this. And unfortunately, we're back to almost near highs. And it is the market signaling that first will go private industry.
And then the second will be the repricing of the risk for the U.S. government. And I think that if people can really understand that that's the cascade, to your point, that first card has unfortunately been turned over. Now, we haven't seen the implications on Main Street of that. but that's what we need to avoid we need to get these markets to understand the bigger picture but we need to show them something and we also have to focus on economic growth through the private sector
Not fueled by government deficit spending. I don't know what percent of our actual growth came from $2 trillion a year deficits. I think a pretty good chunk. So have we really had real private sector growth? I think we have, but not as much as I think the headline numbers because so much of it has been fueled by the government. By the way, that's also true in terms of revenue coming from the government. It is true that we beat the CBO estimate.
But that's because of trillions of dollars of deficit spending starting the pandemic years followed through with Biden. Prior to the pandemic, we really weren't matching even the CBOs. downgrade of revenue coming in after the TCGA. We weren't hitting.
But then he had COVID hit and again, trillions of dollars in deficit spending that also boosted revenue. So again, all these people saying, oh, we're going to, you know, that tax increase is going to be dynamically scored and it's going to pay for itself. Listen, I'm all for dynamic scoring, but let's be realistic. And again, I'll point out the CBO projection I'm dealing with $22 trillion. That assumes we go from 17.1% to 18% of GDP in terms of revenue.
So, you know, if we don't canceled the tax increase. And there's a dynamic scoring effect. It just means we don't hit 18.1 and that number is still lower. Talk to us about the setup for 2026 and maybe if you want your thoughts about where the country goes into 2028. One of the things that Dave talks about a lot is moments that galvanized some form of populist socialism. This idea, as he said very articulately,
I can just vote myself the money. So who is going to just give me the most money? Can you just walk us through some political forecasting for us? That's why I'm not an optimist. But, you know, I've heard people rationalize this. I mean, important people rationalize. You know, just go along with this. I mean, this is what we have to do to win the majority, maintain the majority in the House in 2027, right?
What good is the majority if you literally don't solve the problems that you're aware of? Oh, oh, oh, so... When we have the majority in 2027, then we're going to actually turn the spending curve down. We're going to return to pre-pandemic level spending. I don't buy it. This is our one opportunity. And right now we're blowing it. And I'm going to do everything I can to make sure we don't blow it. But again, that is the reality. Listen, I don't discount the fat.
that we may lose the House, we may lose the Senate. But I would say we do that because we're not solving these problems. We're going to be looked at as unserious. Our base is going to go, why did we elect you guys? You didn't take the bull by the horn. to solve this problem you're really no better than democrats i think we have to be concerned about that if this reconciliation bill gets done
Senator, in the next couple of weeks, what bill would you hope to see next to get to that North Star of fiscal responsibility? Is there a rescission bill that you'd be looking for? Do we need to actually have a sit down and talk about building a budget? What's the right next step here in creating a North Star that creates stability for the Republic? It's developing a process.
that will achieve and maintain a pre-pandemic level spending you know just a lower spending level it's a it is i come from manufacturing base right you can't have a good product without a good process and we've just never had that process so the only one i can think of is what Doge has demonstrated, does work in terms of getting the public supporting
us in terms of eliminating just awful spending so you got to expose it you got to go line by line again there there are thousands of lines just top lines in the federal budget hundreds thousands of lines under each one of those as well So you have to do the work. And again, I would love to take that Doge team, you know, those geniuses with all their AI and their computer skills. and get 100, 200 forensic auditors and just go through this line by line. And my proposal was,
having this budget review panel, senators, House members, members of the administration, OMB, then you basically set up the process just like you do in a business. Here's your budget review sheet. Then you bring the department heads and their financial gurus in front of this budget review panel.
Just justify spending. But again, I would be comparing it to outlays under Clinton plus stuff, outlays under Obama plus stuff, outlays under Trump plus stuff. Go through every line and go, first of all, why are you spending more than even Trump? Why are you spending more than Obama or Clinton? Plus, why are you spending any money at all on this? But you have to go through the work, so you need the time.
I've been proposing this now for months. Nobody's put in the effort. OMB said we don't have enough time. I realize they're busy. The House said we've been working on this for a year. We're satisfied with our numbers. We don't have the time. The Senate, really, Senate leadership's the only one that's been fully behind what I'm trying to do here, but we can't do it alone. I mean, I can't do it. I don't have the budget expertise. So it literally is. It's getting the commitment of the president.
that he he is determined to not keep funding the deep state of buying levels return to a reasonable pre-pandemic level spending and then get his omb fully behind this effort This has got to be the biggest effort on budget ever. and then set everything up, show it works, and then hopefully maintain it over the years. I can't think of anything else. We've tried all this other stuff. It never worked. Well, look, I hope you find a path towards that goal, Senator. I think it's a critical time.
And speaking as an American, appreciate. your resiliency in the face of what i'm sure is a lot of political pressure and tension right now in trying to make sure that the right thing is done here for the long term of American prosperity. So thank you for your service. Thank you for the work you do. We appreciate it. I appreciate you having me on. I will say one thing that is different about me than others. I'd rather go home
That's a significant difference. I'd rather return to my private sector life than keep serving here in this total dysfunction. That is what, again, I can't be pressured by President Trump. I can't. I mean, she's not going to flip me just by the force of his argument or any kind of political pressure. There's no pressure he can apply to me.
He's willing to sit down with me, look at the numbers, acknowledge them, working for a reasonable plan forward. That's the only way he's going to get my support. Well, I hope that there are others that get into the same mindset as you. I've always Found it off-putting that folks choose to be politicians as a career rather than rotating in and out of doing this as a service.
and then going back into the private sector where I think that a lot of the misalignments and conditioning can be avoided so yeah i appreciate that mindset and and thank you thank you senator for your candor thank you i mean my conclusion today is similar to how i finished the pod yesterday which is
concerned that the bond market is not going to take this well. I do think that that puts a lot of pressure on America and I think it's going to put pressure on private industry and what will happen as a result. It's not necessarily that we go bankrupt or whatever.
But there is no clear dividing line between public and private industry. And I don't think that that's a great outcome. Not to mention the value of everyone's assets. They go to zero. They go to zero. But as the senator made the point, A dollar in 2019 is worth 80 cents today because of the inflation we've experienced from the rampant spending since COVID.
And if that continues, which is the steady state that we've now assumed, as we're now assuming to continue emergency spending as if it's the kind of standard. then that same level of decline in value of a dollar or decline in value of any American asset will continue and it will only accelerate. And I think the worry is that in 10 years,
You know, a dollar is worth 30 cents. And that makes it harder for everyone to prosper in America, the ability to buy a home, the ability to have greater wealth, The ability to improve your conditions and your livelihood are significantly diminished. That's the biggest consequence that we've seen many times over the last couple of centuries as countries have gone through the same cycle that the American republic now finds itself in. This is kind of one of those last stands.
of the alamo if you will because the arithmetic gets to the point that it becomes unstoppable. This train is gone. So anyway, I thought it was great to have some time with the senator to talk about it today. Again, when we have these conversations, Chamath, obviously we're not. fully endorsing all the views and points of view it's good to hear from people it's good to understand their point of view let them speak
and have the conversation. There are things that we'll agree with, things that we don't agree with. But I think on the fiscal condition of the United States, I've been pretty clear, pretty vocal on my point of view on this. And on this particular point, I think the senator is a very important voice. I think it's really important for America to let private citizens have agency and do
the things that they think they should be doing. And I think that if you move to a place where we become fiscally crippled and reliant on the government, that's a horrible outcome. Yeah, absolutely. Okay, well, I'm glad we did this. I know it was a push to get it done on a Saturday. But I thought it was really worthwhile to give the senators.
i already i already made love to net twice this morning so i'm from all the boxes i've been checked what did you do after those six minutes did you play with the kids played with the kids for an hour yeah so i've done everything i need to walk the dogs good yeah