1 00:00:04,760 --> 00:00:07,200 Speaker 1: On this episode of Newts World. I think one of 2 00:00:07,240 --> 00:00:10,040 Speaker 1: the most important things we have in our agenda as 3 00:00:10,080 --> 00:00:13,440 Speaker 1: a country is to balance the federal budget and pay 4 00:00:13,480 --> 00:00:16,800 Speaker 1: down the national debt. The national debt is nearly thirty 5 00:00:16,840 --> 00:00:20,239 Speaker 1: seven trillion dollars right now, and it's going up. I 6 00:00:20,280 --> 00:00:22,279 Speaker 1: think we owe it to our children and grandchildren to 7 00:00:22,280 --> 00:00:26,159 Speaker 1: balance the budget and bring fiscal responsibility back to the 8 00:00:26,160 --> 00:00:29,280 Speaker 1: federal government. As Speaker of the House in the nineteen nineties, 9 00:00:29,640 --> 00:00:32,520 Speaker 1: I led the only effort in the last hundred years 10 00:00:32,880 --> 00:00:35,479 Speaker 1: to balance the budget for four straight years. So I 11 00:00:35,560 --> 00:00:38,400 Speaker 1: know it can be done because we did it. We 12 00:00:38,400 --> 00:00:41,720 Speaker 1: were successful then, and we can be successful again if 13 00:00:41,760 --> 00:00:46,000 Speaker 1: we do what it takes. My guest today is the founder, 14 00:00:46,240 --> 00:00:49,800 Speaker 1: managing partner and chief Investment Officer of the Bonson Group, 15 00:00:50,320 --> 00:00:55,200 Speaker 1: David Bonce, overseeing the management of seven billion dollars in 16 00:00:55,240 --> 00:00:59,040 Speaker 1: client assets. Prior to launching the Bonson Group, he spent 17 00:00:59,160 --> 00:01:02,880 Speaker 1: eight years as a managing director of Morgan Stanley and 18 00:01:03,040 --> 00:01:07,040 Speaker 1: six years as vice president of UBS. He is consistently 19 00:01:07,120 --> 00:01:12,000 Speaker 1: named one of the top financial advisors in America by Barons, Forbes, 20 00:01:12,240 --> 00:01:15,679 Speaker 1: and The Financial Times. He's the editor of the Dividend 21 00:01:15,720 --> 00:01:33,720 Speaker 1: Cafe newsletter. David, it's a great honor to have you 22 00:01:33,760 --> 00:01:36,160 Speaker 1: with us, and given the scale of your knowledge, thank 23 00:01:36,200 --> 00:01:38,160 Speaker 1: you for joining me again on news World. 24 00:01:38,480 --> 00:01:40,480 Speaker 2: Well, thank you so much for having me, mister speaker. 25 00:01:41,200 --> 00:01:45,000 Speaker 1: Let's start with the FED and then go to tariffs. 26 00:01:45,360 --> 00:01:47,559 Speaker 1: What do you make of the whole argument right now 27 00:01:47,840 --> 00:01:51,440 Speaker 1: about what the appropriate rates should be and what the 28 00:01:51,520 --> 00:01:54,040 Speaker 1: chairman of the FED is trying to accomplish. 29 00:01:54,120 --> 00:01:58,480 Speaker 2: Well, as I find is often the case these days, 30 00:01:58,520 --> 00:02:02,560 Speaker 2: my views require nuance, and nuance is sort of out 31 00:02:02,560 --> 00:02:06,640 Speaker 2: of style. Most people are expected to sort of emphatically 32 00:02:06,680 --> 00:02:11,480 Speaker 2: be on one particular side or another. I believe, first 33 00:02:11,560 --> 00:02:14,120 Speaker 2: of all, that there is no need for a central 34 00:02:14,160 --> 00:02:17,640 Speaker 2: bank to set the price of money. I do believe 35 00:02:17,680 --> 00:02:20,440 Speaker 2: in having a FED, so I'm not in the camp 36 00:02:20,520 --> 00:02:25,000 Speaker 2: that some of my friends are of no FED whatsoever. 37 00:02:25,120 --> 00:02:27,720 Speaker 2: But I don't believe we need the FED to set 38 00:02:27,760 --> 00:02:30,720 Speaker 2: interest rates. I believe they can serve as a lender 39 00:02:30,760 --> 00:02:35,560 Speaker 2: of last resort that provides a sort of Hamiltonian function 40 00:02:35,880 --> 00:02:38,200 Speaker 2: in the economy and avoid some of the things we 41 00:02:38,200 --> 00:02:40,240 Speaker 2: were afraid of that happened at the end of the 42 00:02:40,320 --> 00:02:43,799 Speaker 2: nineteenth century and beginning of the twentieth century. And yet them. 43 00:02:43,840 --> 00:02:47,800 Speaker 2: Setting an interest rate that banks will charge overnight to 44 00:02:47,880 --> 00:02:50,640 Speaker 2: be a reference rate for how all money is priced 45 00:02:50,639 --> 00:02:55,280 Speaker 2: throughout the economy is I believe, very intrusive and unnecessary. 46 00:02:55,760 --> 00:02:58,120 Speaker 2: But with that said, I am not going to win 47 00:02:58,160 --> 00:03:01,640 Speaker 2: that argument anytime soon. And we do have a Federal 48 00:03:01,639 --> 00:03:05,480 Speaker 2: Open Market Committee that sets the interest rate as a 49 00:03:05,520 --> 00:03:09,480 Speaker 2: policy tool to affect monetary policy in this country, whether 50 00:03:09,520 --> 00:03:12,480 Speaker 2: I like it or not. And I happen to believe 51 00:03:12,560 --> 00:03:16,680 Speaker 2: all at once that A the President is wrong to 52 00:03:16,880 --> 00:03:20,040 Speaker 2: job bone Chairman Powell about what the rate should be, 53 00:03:20,639 --> 00:03:24,560 Speaker 2: and b the Chairman is wrong to not be cutting rates. 54 00:03:25,120 --> 00:03:28,560 Speaker 2: I believe President Trump is right that the rate is 55 00:03:28,600 --> 00:03:33,000 Speaker 2: too high and that it is unnecessarily restrictive. But then 56 00:03:33,120 --> 00:03:36,720 Speaker 2: when he goes on to say, mister speaker, well, the 57 00:03:36,800 --> 00:03:39,840 Speaker 2: rate should be one percent or less because it would 58 00:03:39,920 --> 00:03:44,120 Speaker 2: save us money, I simply can't accept that argument. So 59 00:03:44,240 --> 00:03:47,800 Speaker 2: I think Chairman Powell has dug his heels in to 60 00:03:47,960 --> 00:03:51,160 Speaker 2: avoid looking like he's giving in to the President, which 61 00:03:51,200 --> 00:03:54,880 Speaker 2: I think is extremely unfortunate. But I believe that the 62 00:03:55,000 --> 00:03:58,720 Speaker 2: rate right now is unnecessarily restrictive and should be coming 63 00:03:58,760 --> 00:04:02,080 Speaker 2: down based on all the criteria that the Central Bank 64 00:04:02,160 --> 00:04:04,080 Speaker 2: is given to effect monetary policy. 65 00:04:04,840 --> 00:04:07,080 Speaker 1: If you think about it for a minute, there are 66 00:04:07,120 --> 00:04:08,800 Speaker 1: two parts of this. I mean, in terms of the 67 00:04:09,080 --> 00:04:12,520 Speaker 1: huge amount that we're now paying an interest on the 68 00:04:12,520 --> 00:04:15,760 Speaker 1: federal debt, that's really set in the long run, not 69 00:04:15,840 --> 00:04:19,040 Speaker 1: by the FED but by the bond holders. I mean, 70 00:04:19,040 --> 00:04:21,440 Speaker 1: the FED could artificially lower the rate, but if people 71 00:04:21,480 --> 00:04:24,520 Speaker 1: won't show up to buy the bonds, then the rate 72 00:04:24,560 --> 00:04:26,760 Speaker 1: for the bonds has to go up in order to 73 00:04:26,760 --> 00:04:28,279 Speaker 1: get enough people in the market. I mean, what am 74 00:04:28,320 --> 00:04:28,760 Speaker 1: I missing? 75 00:04:30,080 --> 00:04:33,719 Speaker 2: Well, that is definitely true, but the problem is that 76 00:04:33,839 --> 00:04:39,040 Speaker 2: it is heavily manipulated, influenced by the FED. Because, first 77 00:04:39,080 --> 00:04:43,440 Speaker 2: of all, the term structure of our debt is extremely 78 00:04:43,560 --> 00:04:48,159 Speaker 2: short term. Much like a mortgage holder when they get 79 00:04:48,160 --> 00:04:51,279 Speaker 2: an interest only loan that's really cheap for like let's say, 80 00:04:51,279 --> 00:04:54,880 Speaker 2: a three year period versus a thirty year fixed and 81 00:04:54,920 --> 00:04:58,679 Speaker 2: they can't really afford the house with the longer term 82 00:04:58,920 --> 00:05:02,360 Speaker 2: mortgage fix, they go to the shorter term. Our government 83 00:05:02,400 --> 00:05:05,520 Speaker 2: has done that for a long time, and most states 84 00:05:05,600 --> 00:05:09,080 Speaker 2: do that in their municipal borrowings too, So we have 85 00:05:09,120 --> 00:05:12,520 Speaker 2: a very short term structure of the debt, shorter than ever, 86 00:05:12,720 --> 00:05:15,880 Speaker 2: much shorter, by the way than when Bob Rubin was 87 00:05:15,920 --> 00:05:19,679 Speaker 2: Treasury Secretary and you were succeeding in balancing the budget 88 00:05:19,680 --> 00:05:23,200 Speaker 2: in the nineties. I think that when the long term 89 00:05:23,279 --> 00:05:26,440 Speaker 2: rates were around one and a half two percent a 90 00:05:26,480 --> 00:05:30,280 Speaker 2: few years ago, that Secretary Minuchin had a chance to 91 00:05:30,400 --> 00:05:33,279 Speaker 2: try to lock the debt, but he wasn't able to 92 00:05:33,360 --> 00:05:36,600 Speaker 2: do it. And so there is a big influence of 93 00:05:36,680 --> 00:05:39,560 Speaker 2: the short term rate on the cost of borrowing. But 94 00:05:39,600 --> 00:05:42,040 Speaker 2: then others will say, well, but still people have to 95 00:05:42,040 --> 00:05:44,039 Speaker 2: show up to buy it, and at the United States 96 00:05:44,080 --> 00:05:48,120 Speaker 2: became credit unworthy, then people wouldn't show up and it 97 00:05:48,120 --> 00:05:51,640 Speaker 2: would bid the rates higher, not as theoretically true, but 98 00:05:52,080 --> 00:05:57,200 Speaker 2: as the world's reserve currency and as the best house 99 00:05:57,279 --> 00:06:00,680 Speaker 2: in a bad neighborhood. There is no synario that we've 100 00:06:00,680 --> 00:06:04,279 Speaker 2: ever experienced where nobody showed up to buy our debt. 101 00:06:04,640 --> 00:06:07,880 Speaker 2: The buyers have changed. There's been periods of time where 102 00:06:07,880 --> 00:06:13,320 Speaker 2: it was insurance companies, banks, retirees, investors, other times where 103 00:06:13,320 --> 00:06:17,320 Speaker 2: it's been sovereign countries, foreign investors. They own about seven 104 00:06:17,440 --> 00:06:21,040 Speaker 2: trillion of our thirty trillion a bond debt. And then 105 00:06:21,080 --> 00:06:24,360 Speaker 2: of course after the financial crisis, the Fed themselves became 106 00:06:24,400 --> 00:06:28,320 Speaker 2: a buyer, buying about eighteen percent of our debt sits 107 00:06:28,360 --> 00:06:30,440 Speaker 2: on the balance sheet of the FED through what was 108 00:06:30,480 --> 00:06:34,880 Speaker 2: called quantitative easing. Now that's low compared to other countries. 109 00:06:35,080 --> 00:06:38,880 Speaker 2: Bank of Japan owns almost their entire bond market. Our 110 00:06:39,000 --> 00:06:42,080 Speaker 2: central bank is a buyer at private investors are a buyer. 111 00:06:42,480 --> 00:06:45,760 Speaker 2: And so you're right that the rate will ultimately get set. 112 00:06:46,120 --> 00:06:48,799 Speaker 2: But when it's a short term rate and the FED 113 00:06:48,880 --> 00:06:51,480 Speaker 2: is setting the short term cost of money, the FED 114 00:06:51,480 --> 00:06:54,799 Speaker 2: has incredible ability to manipulate that price of money. 115 00:06:55,440 --> 00:06:59,200 Speaker 1: I tend to agree with you that the inflation level 116 00:06:59,240 --> 00:07:03,359 Speaker 1: does not just the current interest rate set by the FED. 117 00:07:03,839 --> 00:07:05,960 Speaker 1: But as a practical matter of you get into a 118 00:07:06,000 --> 00:07:08,440 Speaker 1: circular argument that, on the one hand, you don't want 119 00:07:08,480 --> 00:07:12,880 Speaker 1: the president making monetary policy political. On the other hand, 120 00:07:12,920 --> 00:07:16,280 Speaker 1: if the Fed's doing something that weakens the entire economy, 121 00:07:17,120 --> 00:07:20,240 Speaker 1: the leader of the country has some obligation to at 122 00:07:20,320 --> 00:07:22,920 Speaker 1: least speak out. And how do you balance those two. 123 00:07:24,160 --> 00:07:27,800 Speaker 2: Well, it's tricky. There's a historical precedent that some of 124 00:07:27,840 --> 00:07:31,840 Speaker 2: that effort was done privately. You were a speaker at 125 00:07:31,880 --> 00:07:35,920 Speaker 2: the time, as I recall, when Alan Greenspan famously spiked 126 00:07:36,040 --> 00:07:40,160 Speaker 2: rates very violently, very dramatically in nineteen ninety four and 127 00:07:40,280 --> 00:07:43,680 Speaker 2: surprise the heck out of markets. It actually is what 128 00:07:43,760 --> 00:07:47,800 Speaker 2: put Orange County, California into bankruptcy because it caught them 129 00:07:47,840 --> 00:07:51,200 Speaker 2: off sides with what they expected would be happening in 130 00:07:51,240 --> 00:07:55,600 Speaker 2: their portfolio. And at the time President Clinton didn't publicly 131 00:07:55,760 --> 00:07:59,400 Speaker 2: job Oone Chairman Greenspan about it, but Vice President Gore 132 00:08:00,040 --> 00:08:03,600 Speaker 2: had some very stern talks in private with the Secretary. 133 00:08:04,160 --> 00:08:07,680 Speaker 2: So I guess I'm appealing to my fondness for conservative 134 00:08:07,840 --> 00:08:11,920 Speaker 2: norms here that if there's going to be conversation, as 135 00:08:12,040 --> 00:08:16,880 Speaker 2: Secretary Baker had with Paul Volker and as Nixon famously 136 00:08:16,920 --> 00:08:19,800 Speaker 2: had with Arthur Burns, I prefer they'd be done privately 137 00:08:19,840 --> 00:08:22,320 Speaker 2: and not out in the public eye to maintain our 138 00:08:22,400 --> 00:08:26,920 Speaker 2: credibility in global markets. If the Central Bank loses some 139 00:08:26,960 --> 00:08:29,560 Speaker 2: of that credibility, and I'm not suggesting it has one 140 00:08:29,640 --> 00:08:32,440 Speaker 2: hundred percent of it, but it has enough of it 141 00:08:33,000 --> 00:08:37,160 Speaker 2: to keep financial markets in a certain realm of seriousness, 142 00:08:37,559 --> 00:08:40,600 Speaker 2: and I think undermining that independence is just on the 143 00:08:40,640 --> 00:08:41,800 Speaker 2: margin problematic. 144 00:08:42,640 --> 00:08:45,560 Speaker 1: I can't resist. You mentioned green Span. You may remember 145 00:08:45,559 --> 00:08:49,000 Speaker 1: that about the time I left the speakership, green Span 146 00:08:49,120 --> 00:08:52,559 Speaker 1: testified to the Senate that they were projecting that we 147 00:08:52,600 --> 00:08:55,400 Speaker 1: would have paid off the national debt by two thousand 148 00:08:55,400 --> 00:08:57,880 Speaker 1: and nine and had a working group trying to figure 149 00:08:57,920 --> 00:09:00,600 Speaker 1: out how you manage the money supply if there's no debt. 150 00:09:00,760 --> 00:09:02,480 Speaker 1: That's one of the prouder moments of my career. 151 00:09:02,520 --> 00:09:06,040 Speaker 2: Frankly, well, and along those lines, you recall that in 152 00:09:06,080 --> 00:09:10,640 Speaker 2: the two thousand presidential debates between candidate Bush and candidate Gore, 153 00:09:11,000 --> 00:09:13,520 Speaker 2: one of the questions was what they planned to do 154 00:09:13,640 --> 00:09:16,840 Speaker 2: about all his surplus money. And then think about that 155 00:09:16,920 --> 00:09:18,360 Speaker 2: question being asked now. 156 00:09:19,080 --> 00:09:22,240 Speaker 1: That's exactly what Although I'm trying to work with the 157 00:09:22,360 --> 00:09:24,840 Speaker 1: two budget committees in the House and Senate to launch 158 00:09:24,840 --> 00:09:28,200 Speaker 1: a serious effort to sort of do once again what 159 00:09:28,280 --> 00:09:30,360 Speaker 1: we did in the nineties and balance the budget, which 160 00:09:30,400 --> 00:09:33,679 Speaker 1: is a bigger job now, it doesn't strike me that 161 00:09:33,720 --> 00:09:36,840 Speaker 1: they are likely to raise rates enough to push us 162 00:09:36,840 --> 00:09:40,640 Speaker 1: into a recession next year. That there's somewhere between stability 163 00:09:40,640 --> 00:09:41,920 Speaker 1: and very slight reduction. 164 00:09:43,080 --> 00:09:45,000 Speaker 2: Yeah, well, that is correct. If we were to tip 165 00:09:45,040 --> 00:09:48,720 Speaker 2: into recession, it would not be driven by monetary policy, 166 00:09:49,120 --> 00:09:52,240 Speaker 2: and what would happen is that they would then overcompensate, 167 00:09:52,320 --> 00:09:55,640 Speaker 2: as they always do, and the drunken peasant would fall 168 00:09:55,640 --> 00:09:58,360 Speaker 2: off on the other side of the horse. This is 169 00:09:58,400 --> 00:10:02,880 Speaker 2: the great argument of against it highly interventionist FED, is 170 00:10:02,880 --> 00:10:06,040 Speaker 2: that they're constantly playing catch up. They go too tight 171 00:10:06,120 --> 00:10:08,480 Speaker 2: too long, and then it makes them go too easy 172 00:10:08,640 --> 00:10:11,400 Speaker 2: for too long. I don't believe they're going to be 173 00:10:11,559 --> 00:10:13,720 Speaker 2: hiking rates at all. I think that they will end 174 00:10:13,800 --> 00:10:17,800 Speaker 2: up cutting in the September meeting, particularly in the aftermath. 175 00:10:17,880 --> 00:10:21,120 Speaker 2: Now Chairman Palell has cover to sort of save face 176 00:10:21,920 --> 00:10:24,640 Speaker 2: to cut now because of the jobs report that came 177 00:10:24,679 --> 00:10:29,120 Speaker 2: out a few days ago. But ultimately the problem here 178 00:10:30,040 --> 00:10:33,640 Speaker 2: is that they are restrictive, and it isn't just the 179 00:10:33,640 --> 00:10:36,640 Speaker 2: inflation level. There's a lot of people that have been 180 00:10:36,640 --> 00:10:40,840 Speaker 2: programmed to believing that the FED controls inflation and the 181 00:10:40,880 --> 00:10:44,600 Speaker 2: FED can affect inflation. I'm a Milton Friedman guy through 182 00:10:44,640 --> 00:10:48,280 Speaker 2: and through that inflation is always, in forever a monetary phenomena. 183 00:10:48,960 --> 00:10:52,720 Speaker 2: But see what he said. We always quote only half 184 00:10:52,760 --> 00:10:55,760 Speaker 2: of what he said, that it is too much money, 185 00:10:56,720 --> 00:11:01,880 Speaker 2: we forget chasing too few goods. And Ronald Reagan never 186 00:11:02,200 --> 00:11:06,200 Speaker 2: gets the credit he deserves for killing inflation. We talk 187 00:11:06,280 --> 00:11:09,160 Speaker 2: as if it were only vulgar spiking rates that did 188 00:11:09,200 --> 00:11:14,400 Speaker 2: it in the eighties, the supply side revolution produced more 189 00:11:14,480 --> 00:11:19,880 Speaker 2: goods and services that soaked up excess money supply. So 190 00:11:19,960 --> 00:11:22,120 Speaker 2: what we need is very similar to what you were 191 00:11:22,120 --> 00:11:25,120 Speaker 2: so successful with in the nineties and balancing the budget. 192 00:11:25,400 --> 00:11:30,160 Speaker 2: It was not merely cost discipline, which is courses entirely 193 00:11:30,280 --> 00:11:33,800 Speaker 2: lacking in the Congress now, but it was growth. We 194 00:11:33,920 --> 00:11:40,120 Speaker 2: needed revenue, and that is both anti inflationary and anti debt. 195 00:11:40,200 --> 00:11:41,320 Speaker 2: It is pro growth. 196 00:11:57,160 --> 00:12:00,880 Speaker 1: I was part of the Merry Band in eighteen seventies 197 00:12:01,280 --> 00:12:05,560 Speaker 1: with Jack kempan others, trying to really win the debate. Well, 198 00:12:05,800 --> 00:12:09,080 Speaker 1: you could have a supply side solution, which at the 199 00:12:09,080 --> 00:12:12,760 Speaker 1: time was considered radical until Reagan adopted it and then 200 00:12:12,800 --> 00:12:15,680 Speaker 1: got it done. I'm a very big believer that you 201 00:12:15,800 --> 00:12:20,120 Speaker 1: defeat inflation with more goods and services, not with more pain. 202 00:12:20,559 --> 00:12:24,600 Speaker 1: But let me shift gears now. Probably the greatest Trump 203 00:12:24,760 --> 00:12:30,280 Speaker 1: revolution so far has been breaking up the world trading 204 00:12:30,320 --> 00:12:34,760 Speaker 1: system that had existed and beginning to replace it with 205 00:12:34,920 --> 00:12:39,440 Speaker 1: a much more bilateral system that uses tariffs. But I 206 00:12:39,600 --> 00:12:43,080 Speaker 1: think the story is not just about tariffs. He uses 207 00:12:43,200 --> 00:12:47,680 Speaker 1: tariffs for the purpose of forcing negotiations which often range 208 00:12:47,720 --> 00:12:52,040 Speaker 1: way beyond tariffs and get US into investments and sales 209 00:12:52,120 --> 00:12:55,040 Speaker 1: and all sorts of things. And it's based on a 210 00:12:55,040 --> 00:12:57,720 Speaker 1: simple model in his head that we are the largest 211 00:12:57,760 --> 00:13:00,480 Speaker 1: economy in the world, so you want to be here 212 00:13:00,880 --> 00:13:03,080 Speaker 1: more than we want to be where you are, and 213 00:13:03,120 --> 00:13:06,200 Speaker 1: therefore we can charge you a fair amount for you 214 00:13:06,280 --> 00:13:09,760 Speaker 1: to be here. And so far, at least on the surface, 215 00:13:10,240 --> 00:13:13,680 Speaker 1: it seems to have led to very dramatic changes. But 216 00:13:13,760 --> 00:13:16,680 Speaker 1: what's your take on this whole tariff process. 217 00:13:17,600 --> 00:13:20,520 Speaker 2: I'm apologized in advanced mister speaker, that this is an 218 00:13:20,559 --> 00:13:24,119 Speaker 2: area where I do disagree, and I recognize the nuances. 219 00:13:24,280 --> 00:13:26,800 Speaker 2: And what I will say about what the work Secretary 220 00:13:26,800 --> 00:13:29,480 Speaker 2: of BACENT has done and where I think the President 221 00:13:29,600 --> 00:13:32,680 Speaker 2: stands that I'm excited for is if some of the 222 00:13:33,440 --> 00:13:36,320 Speaker 2: byproduct of this effort is to open up new markets. 223 00:13:36,679 --> 00:13:40,120 Speaker 2: In other words, I'm saying something sort of paradoxical. I 224 00:13:40,160 --> 00:13:43,640 Speaker 2: will celebrate it if it creates more trade, But I 225 00:13:43,720 --> 00:13:48,120 Speaker 2: do not believe that the notion of the President and 226 00:13:48,160 --> 00:13:52,640 Speaker 2: the White House and politicians in Washington, DC sort of 227 00:13:52,679 --> 00:13:58,160 Speaker 2: setting the rules of commerce is something that conservatives should celebrate, 228 00:13:58,320 --> 00:14:00,720 Speaker 2: and the notion that we are a store and that 229 00:14:00,800 --> 00:14:03,720 Speaker 2: they will set the prices of it I think is 230 00:14:03,760 --> 00:14:08,080 Speaker 2: a very anti market notion. Now, I understand that to 231 00:14:08,120 --> 00:14:11,360 Speaker 2: the extent some countries have charged higher tariffs and we 232 00:14:11,400 --> 00:14:15,360 Speaker 2: want to fight for reciprocity. I've always believed that if 233 00:14:15,360 --> 00:14:18,440 Speaker 2: a country wants to hurt its own importers and its 234 00:14:18,480 --> 00:14:24,040 Speaker 2: own domestic consumers by charging higher tariffs, we don't hurt 235 00:14:24,120 --> 00:14:28,360 Speaker 2: them by trying to reciprocate by hurting our own importers 236 00:14:28,480 --> 00:14:32,320 Speaker 2: and our own consumers. But that at least has a 237 00:14:32,440 --> 00:14:38,000 Speaker 2: ring to it reciprocal charges. However, what we're really seeing 238 00:14:38,040 --> 00:14:41,120 Speaker 2: here is a lot of non reciprocity, moving the total 239 00:14:41,200 --> 00:14:44,920 Speaker 2: rates higher, not lower. But the ideal tariff rate i'd 240 00:14:44,920 --> 00:14:48,400 Speaker 2: love to see is every country charging each other is zero. 241 00:14:49,320 --> 00:14:52,160 Speaker 2: But to the extent of the net effect here is 242 00:14:52,200 --> 00:14:56,800 Speaker 2: going to increase the total cost to American business. Best 243 00:14:56,880 --> 00:14:59,280 Speaker 2: case right now looks like it's going to end up settling, 244 00:14:59,360 --> 00:15:01,840 Speaker 2: assuming we'd you end up getting a deal with India 245 00:15:02,480 --> 00:15:05,840 Speaker 2: and some of the holdout countries. Brazil looks to be 246 00:15:05,880 --> 00:15:08,680 Speaker 2: the one that's going to be hardest. About four hundred 247 00:15:08,760 --> 00:15:11,680 Speaker 2: billion best case and six hundred billion, I think is 248 00:15:11,800 --> 00:15:15,440 Speaker 2: very realistic, and it disturbs me a little to hear 249 00:15:15,720 --> 00:15:19,040 Speaker 2: us refer to that as us making that money, bringing 250 00:15:19,080 --> 00:15:22,360 Speaker 2: that money in to our country. That is money that 251 00:15:22,560 --> 00:15:26,800 Speaker 2: goes out of our businesses, and it is a cost 252 00:15:27,240 --> 00:15:30,120 Speaker 2: to the economy. It is a cost that goes from 253 00:15:30,160 --> 00:15:33,840 Speaker 2: the balance sheet of the private economy to the balance 254 00:15:33,840 --> 00:15:37,840 Speaker 2: sheet of the governmental economy, which is a reduction in productivity. 255 00:15:38,360 --> 00:15:43,600 Speaker 2: So I'm fearful, but cautiously optimistic that if we can 256 00:15:43,840 --> 00:15:49,280 Speaker 2: get better markets opened and ultimately negotiate better deals, if 257 00:15:49,320 --> 00:15:53,720 Speaker 2: total trade collapses, regardless of what happens with the trade deficit, 258 00:15:53,760 --> 00:15:57,800 Speaker 2: if total trade drops, then capital flows will drop. And 259 00:15:57,920 --> 00:16:01,760 Speaker 2: the basic algebra of this is that our total investment 260 00:16:01,880 --> 00:16:06,280 Speaker 2: is equal to total savings, and total savings includes foreign capital. 261 00:16:06,400 --> 00:16:09,320 Speaker 2: People want to put money in our country for a 262 00:16:09,320 --> 00:16:13,360 Speaker 2: good reason, and if we lose some of that foreign 263 00:16:13,440 --> 00:16:18,200 Speaker 2: capital on the margin, then I believe it will impact productivity, 264 00:16:18,360 --> 00:16:22,640 Speaker 2: impact labor, and ultimately impact economic growth. So I recognize 265 00:16:22,680 --> 00:16:26,280 Speaker 2: my opinions a little outside the consensus right now. 266 00:16:26,320 --> 00:16:29,480 Speaker 1: But we wanted your opinion. You're here to provide your 267 00:16:29,560 --> 00:16:32,480 Speaker 1: version of reality, and I respect that. One of the 268 00:16:32,480 --> 00:16:35,800 Speaker 1: things which has surprised me is and I first noticed 269 00:16:35,840 --> 00:16:41,160 Speaker 1: that in Trump's swaying through the Persian Gulf. He kept 270 00:16:41,160 --> 00:16:44,560 Speaker 1: coming up with like four hundred billion dollars and purchases 271 00:16:44,600 --> 00:16:48,200 Speaker 1: for Boeing and then four hundred billion dollars of investments 272 00:16:48,280 --> 00:16:50,560 Speaker 1: in the US. That was a sauty version, and it 273 00:16:50,600 --> 00:16:53,320 Speaker 1: was sort of matched by the other two countries he visited. 274 00:16:53,640 --> 00:16:56,960 Speaker 1: He was coming home with almost two trillion dollars in commitments. 275 00:16:57,520 --> 00:17:01,320 Speaker 1: How do you measure the impact on the American economy 276 00:17:01,720 --> 00:17:03,120 Speaker 1: of those kind of commitments. 277 00:17:03,560 --> 00:17:06,879 Speaker 2: Well, the commitments have no impact on the economy, but 278 00:17:07,000 --> 00:17:11,200 Speaker 2: the actual activity will have a measurable impact. And that's 279 00:17:11,280 --> 00:17:16,119 Speaker 2: why I hope I have the integrity and objectivity because 280 00:17:16,200 --> 00:17:19,720 Speaker 2: I'm not a flaming partisan who wants to criticize everything 281 00:17:19,760 --> 00:17:22,600 Speaker 2: the president does, nor am I trying to say this 282 00:17:22,680 --> 00:17:25,159 Speaker 2: is going to be the most messianic thing ever done. 283 00:17:25,560 --> 00:17:28,399 Speaker 2: We will objectively be able to measure the success of 284 00:17:28,440 --> 00:17:31,119 Speaker 2: some of these things by the two metrics I just 285 00:17:31,160 --> 00:17:36,480 Speaker 2: said a moment ago, which is total trade and capital flows. Look, 286 00:17:36,520 --> 00:17:39,359 Speaker 2: the optimistic version is exactly what you said, that they 287 00:17:39,400 --> 00:17:42,480 Speaker 2: will order things that they worked in order before and 288 00:17:42,520 --> 00:17:46,320 Speaker 2: it will result in more FDI foreign direct investment. And 289 00:17:46,359 --> 00:17:48,160 Speaker 2: in case it isn't clear how big of a fan, 290 00:17:48,200 --> 00:17:51,199 Speaker 2: I am a secretary of descent. This is exactly what 291 00:17:51,320 --> 00:17:54,959 Speaker 2: he's now been saying, which is categorically different than what 292 00:17:54,960 --> 00:17:59,040 Speaker 2: Pete Navarro had been saying before. The agenda for tariffs 293 00:17:59,440 --> 00:18:06,080 Speaker 2: had been as protective tariffs to try to boost domestic manufacturers. 294 00:18:06,480 --> 00:18:09,600 Speaker 2: Secretary Vestant is talking the same way you just talked 295 00:18:09,600 --> 00:18:13,600 Speaker 2: about opening up new markets getting new foreign orders. The 296 00:18:13,680 --> 00:18:16,159 Speaker 2: problem is that there's a lot of ambiguity as to 297 00:18:16,200 --> 00:18:20,040 Speaker 2: what it means. I'm not totally comfortable with those tweets 298 00:18:20,040 --> 00:18:22,760 Speaker 2: where they will say the president alone is going to 299 00:18:22,800 --> 00:18:27,000 Speaker 2: dictate how to direct this investment. I don't want President Trump, 300 00:18:27,160 --> 00:18:31,000 Speaker 2: or the ghost of President Reagan, or President Obama, or 301 00:18:31,040 --> 00:18:35,480 Speaker 2: even Speaker Gingridge for that matter, dictating what businesses are 302 00:18:35,480 --> 00:18:38,600 Speaker 2: buying and selling from one another. But I love foreign 303 00:18:38,840 --> 00:18:42,760 Speaker 2: capital coming into our country. SoftBank made a five hundred 304 00:18:42,760 --> 00:18:46,600 Speaker 2: billion dollar pledge and created a consortium with others after 305 00:18:46,600 --> 00:18:50,040 Speaker 2: the election, and they have so far spent zero dollars. 306 00:18:50,760 --> 00:18:53,240 Speaker 2: Now I believe they will spend more, and I think 307 00:18:53,280 --> 00:18:55,399 Speaker 2: a lot of the money is money that would not 308 00:18:55,480 --> 00:18:58,360 Speaker 2: have been spent otherwise. So I will give credit where 309 00:18:58,359 --> 00:19:01,000 Speaker 2: it's due. But I'm just trying to be politically honest 310 00:19:01,000 --> 00:19:04,080 Speaker 2: that it's going to take time to see, and if 311 00:19:04,119 --> 00:19:07,280 Speaker 2: there is some double counting, then we have to call 312 00:19:07,359 --> 00:19:09,320 Speaker 2: that out. There is a lot of this that was 313 00:19:09,359 --> 00:19:12,040 Speaker 2: going to happen anyways, but I want to measure it 314 00:19:12,119 --> 00:19:15,400 Speaker 2: by the marginal addition to you to total investment. 315 00:19:15,720 --> 00:19:19,439 Speaker 1: You remind me, in a sense of Reagan's appropriation of 316 00:19:19,480 --> 00:19:25,040 Speaker 1: a Russian saying, trust but verify. Connie Mack once taught 317 00:19:25,080 --> 00:19:27,960 Speaker 1: me he'd been a bank president before he was a congressman. 318 00:19:28,280 --> 00:19:31,200 Speaker 1: He'd gone to a course on running banks, and they 319 00:19:31,240 --> 00:19:33,679 Speaker 1: taught him that you give what you inspect, now what 320 00:19:33,760 --> 00:19:36,159 Speaker 1: you expect. And I think there's going to be a 321 00:19:36,160 --> 00:19:39,000 Speaker 1: lot of inspecting here to see whether or not these 322 00:19:39,080 --> 00:19:43,200 Speaker 1: nice press releases become real policy. But having said that, 323 00:19:43,240 --> 00:19:45,160 Speaker 1: the other part of that in the One Big Beautiful 324 00:19:45,160 --> 00:19:49,000 Speaker 1: Bill was this one hundred percent expensing for new factories 325 00:19:49,560 --> 00:19:51,960 Speaker 1: as compared to I think it was a thirty nine 326 00:19:52,000 --> 00:19:55,879 Speaker 1: and a half year depreciation. Isn't that kind of a 327 00:19:55,960 --> 00:19:58,920 Speaker 1: staggering incentive to investment. 328 00:19:59,520 --> 00:20:01,480 Speaker 2: And it's not the only one. So you have the 329 00:20:01,520 --> 00:20:06,800 Speaker 2: bonus appreciation on property put into productive use, and you 330 00:20:06,840 --> 00:20:10,600 Speaker 2: have one hundred percent business expensing for capital investment. So 331 00:20:10,720 --> 00:20:14,680 Speaker 2: think of inventories, not just real estate put to work 332 00:20:14,760 --> 00:20:18,199 Speaker 2: like building a factory, but machinery bought to put in 333 00:20:18,280 --> 00:20:23,159 Speaker 2: a factory. And you also have a better deductibility for 334 00:20:23,400 --> 00:20:27,680 Speaker 2: R and D research and developments quote unquote soft capex, 335 00:20:28,200 --> 00:20:31,560 Speaker 2: which is great for our pharmaceutical sector and technology sector. 336 00:20:32,200 --> 00:20:36,399 Speaker 2: And you have greater deductibility of debt companies that borrow 337 00:20:36,480 --> 00:20:38,960 Speaker 2: money how to limit in what they could deduct and 338 00:20:39,000 --> 00:20:41,240 Speaker 2: that helps a lot in the private equity space and 339 00:20:41,320 --> 00:20:44,960 Speaker 2: middle markets. So there is some very pro growth in 340 00:20:45,000 --> 00:20:48,560 Speaker 2: supply side parts in the corporate changes. In the Big 341 00:20:48,600 --> 00:20:52,919 Speaker 2: Beautiful Bill. The CBO scored that those things would be 342 00:20:53,080 --> 00:20:57,040 Speaker 2: worth about three hundred billion. Some could say two hundred billion, 343 00:20:57,119 --> 00:21:00,040 Speaker 2: some could say a little more. My point would be 344 00:21:00,160 --> 00:21:02,960 Speaker 2: that the tariff cost is going to be higher than that. 345 00:21:03,520 --> 00:21:05,439 Speaker 2: So I think that we have one side of the 346 00:21:05,480 --> 00:21:08,399 Speaker 2: pool adding water and the other side of the pool 347 00:21:08,480 --> 00:21:10,920 Speaker 2: making it out a little. I would have loved to 348 00:21:11,080 --> 00:21:13,600 Speaker 2: see all those things in the Big Beautiful Bill happen 349 00:21:13,720 --> 00:21:17,720 Speaker 2: without the offsetting cost of the tariffs. But those things 350 00:21:17,720 --> 00:21:20,840 Speaker 2: are my favorite parts of the Big Beautiful Bill. And 351 00:21:20,880 --> 00:21:22,760 Speaker 2: by the way, speaker, because you and I are both 352 00:21:22,760 --> 00:21:26,040 Speaker 2: here to talk about budget impact. Those things do not 353 00:21:26,760 --> 00:21:31,320 Speaker 2: add to the deficit. They are cleanly pro growth that 354 00:21:31,400 --> 00:21:33,600 Speaker 2: pay for themselves with added revenue. 355 00:21:34,240 --> 00:21:38,280 Speaker 1: It seems to me that the combination of this one big, 356 00:21:38,320 --> 00:21:41,560 Speaker 1: beautiful bill and all of its various tax provisions, and 357 00:21:41,600 --> 00:21:46,280 Speaker 1: its regulatory provisions, and the number of people making commitments 358 00:21:46,640 --> 00:21:48,480 Speaker 1: to invest in the US, even if you only got 359 00:21:48,800 --> 00:21:52,160 Speaker 1: half of those commitments, that there should be by next 360 00:21:52,200 --> 00:21:55,640 Speaker 1: summer a fairly strong economy. But I'm curious what's your view. 361 00:21:56,760 --> 00:21:59,080 Speaker 2: My view is that this is one of the hardest 362 00:21:59,119 --> 00:22:02,879 Speaker 2: periods I've seen to forecasts because of the push pull 363 00:22:03,000 --> 00:22:06,400 Speaker 2: factors that we're up against. I think the labor markets 364 00:22:06,520 --> 00:22:10,359 Speaker 2: have weakened far more than we have realized, and the 365 00:22:10,400 --> 00:22:14,200 Speaker 2: base effect is always a big factor when forecasting out 366 00:22:14,320 --> 00:22:17,959 Speaker 2: one year of economic growth. What are you growing off of? 367 00:22:18,200 --> 00:22:21,840 Speaker 2: And if you're growing off of strong momentum in labor markets, 368 00:22:22,280 --> 00:22:26,000 Speaker 2: that's a wonderful tailwind. But if you're growing off of 369 00:22:26,280 --> 00:22:30,720 Speaker 2: impairment in labor markets, then there's a headwind there. I 370 00:22:30,760 --> 00:22:35,360 Speaker 2: think that there's been several months of uncertainty that has 371 00:22:35,400 --> 00:22:40,800 Speaker 2: really not affected large multinational companies so called S and 372 00:22:40,840 --> 00:22:43,800 Speaker 2: P five hundred types but I do think that there's 373 00:22:43,800 --> 00:22:46,760 Speaker 2: some issues we're going to have to overcome at the 374 00:22:46,800 --> 00:22:49,840 Speaker 2: small business level, which is where the vast majority of 375 00:22:49,920 --> 00:22:53,360 Speaker 2: new hiring is taking place. Most job postings right now 376 00:22:53,359 --> 00:22:57,760 Speaker 2: are companies with less than fifty employees, andfib's data has 377 00:22:57,800 --> 00:23:02,280 Speaker 2: not been great lately. So I'm internal optimists too. And yet, 378 00:23:02,320 --> 00:23:04,480 Speaker 2: if I were trying to be objective about what the 379 00:23:04,640 --> 00:23:08,000 Speaker 2: various factors are, if in a year from now, economic 380 00:23:08,040 --> 00:23:11,159 Speaker 2: growth has stayed muted, I believe that will be the 381 00:23:11,200 --> 00:23:14,760 Speaker 2: reason that the small business side economy that has been 382 00:23:14,800 --> 00:23:19,760 Speaker 2: disproportionately impacted by tariffs. The larger companies that have access 383 00:23:19,800 --> 00:23:24,000 Speaker 2: to capital markets, that have lobbyists and accountants and lawyers 384 00:23:24,040 --> 00:23:27,199 Speaker 2: and exceptions and waivers, and also just the ability to 385 00:23:27,280 --> 00:23:31,680 Speaker 2: plan better around it, they may not be affected as much. 386 00:23:31,720 --> 00:23:33,640 Speaker 2: But I think the small business side I'm a little 387 00:23:33,640 --> 00:23:34,399 Speaker 2: more worried about. 388 00:23:35,119 --> 00:23:38,720 Speaker 1: So you write the Dividend Cafe. Tell us about the 389 00:23:38,720 --> 00:23:39,560 Speaker 1: Dividend Cafe. 390 00:23:40,560 --> 00:23:45,400 Speaker 2: Well, it's my weekly market commentary, economic perspective. Anybody who 391 00:23:45,400 --> 00:23:47,800 Speaker 2: reads it would be able to tell pretty quickly where 392 00:23:47,840 --> 00:23:51,639 Speaker 2: I come from economically and politically and what my belief 393 00:23:51,680 --> 00:23:54,480 Speaker 2: system is. But I really write it to try to 394 00:23:54,520 --> 00:23:59,480 Speaker 2: provide objective advice for investors and economic actors. I began 395 00:23:59,600 --> 00:24:02,600 Speaker 2: writing it in the aftermath of the Lehman Brothers bankruptcy 396 00:24:02,640 --> 00:24:05,000 Speaker 2: in two thousand and eight. I was a managing director 397 00:24:05,000 --> 00:24:07,960 Speaker 2: of Morgan Stanley at the time, and every single day 398 00:24:08,000 --> 00:24:11,440 Speaker 2: a New Wall Street firm was going under or merging 399 00:24:11,600 --> 00:24:14,720 Speaker 2: or dealing with the drama. And I began writing into 400 00:24:14,720 --> 00:24:17,239 Speaker 2: that time and then I just never stopped, And so 401 00:24:17,920 --> 00:24:20,159 Speaker 2: it's something we put out for free. Originally I was 402 00:24:20,160 --> 00:24:23,440 Speaker 2: doing it for our few hundred clients, but we're now 403 00:24:23,480 --> 00:24:27,240 Speaker 2: managing over eight billion dollars. Hundreds of clients read it, 404 00:24:27,320 --> 00:24:30,440 Speaker 2: but so do tens of thousands of non clients, and 405 00:24:30,480 --> 00:24:33,840 Speaker 2: so I just figure, if it isn't broken, why fix it. 406 00:24:33,920 --> 00:24:36,720 Speaker 2: And even though something of the drama level of financial 407 00:24:36,720 --> 00:24:40,280 Speaker 2: crisis hasn't happened, since the news has kept me busy, 408 00:24:40,400 --> 00:24:43,399 Speaker 2: I never find myself lacking a topic to write about 409 00:24:43,400 --> 00:24:44,000 Speaker 2: every week. 410 00:24:44,520 --> 00:24:48,159 Speaker 1: I think when you take what's happening on the world market, 411 00:24:48,200 --> 00:24:50,680 Speaker 1: you take what Trump is doing, you take the rise 412 00:24:50,720 --> 00:24:54,440 Speaker 1: of artificial intelligence and other breakthroughs, the impact of modular 413 00:24:54,560 --> 00:25:00,280 Speaker 1: nuclear in suddenly empowering all sorts of computer centers, little 414 00:25:00,320 --> 00:25:02,560 Speaker 1: scale of change we're going to go through, I think 415 00:25:02,680 --> 00:25:06,040 Speaker 1: is going to resemble the period eighteen seventy to nineteen twenty. 416 00:25:06,119 --> 00:25:09,000 Speaker 1: And having people like you who are smart, who are 417 00:25:09,200 --> 00:25:12,399 Speaker 1: trying to wrestle with what is all this and what 418 00:25:12,440 --> 00:25:16,159 Speaker 1: does it mean? I find really helpful for somebody like 419 00:25:16,200 --> 00:25:19,120 Speaker 1: me to be able to sort of try to get 420 00:25:19,160 --> 00:25:22,080 Speaker 1: inside your thinking and then is frankly steal as much 421 00:25:22,119 --> 00:25:22,760 Speaker 1: of it as I can. 422 00:25:23,840 --> 00:25:26,119 Speaker 2: Well, I appreciate you saying that, I think that the 423 00:25:26,160 --> 00:25:28,320 Speaker 2: optimism that we both share for a lot of these 424 00:25:28,359 --> 00:25:32,240 Speaker 2: opportunities in the economy is real. And I will say, 425 00:25:32,320 --> 00:25:35,280 Speaker 2: back to the subject of the balanced budget work that 426 00:25:35,320 --> 00:25:39,719 Speaker 2: you did in the nineties, the Internet happening at the 427 00:25:39,800 --> 00:25:44,080 Speaker 2: same time that that level of fiscal responsibility had come 428 00:25:44,160 --> 00:25:49,360 Speaker 2: in was a dual impact. We can't change the fact 429 00:25:49,400 --> 00:25:51,159 Speaker 2: that right now there's a lot of things happening that 430 00:25:51,200 --> 00:25:55,479 Speaker 2: are very opportunistic for forward growth. But they are going 431 00:25:55,560 --> 00:25:58,320 Speaker 2: to be happening with an economy that's currently at one 432 00:25:58,400 --> 00:26:01,560 Speaker 2: hundred percent public debt to GDP and one hundred and 433 00:26:01,600 --> 00:26:05,159 Speaker 2: twenty three percent total debt to GDP. And when you 434 00:26:05,280 --> 00:26:08,800 Speaker 2: were Speaker and President Clinton was president, over those three 435 00:26:09,000 --> 00:26:12,520 Speaker 2: years of balanced budgets, we were running about fifty percent 436 00:26:12,640 --> 00:26:17,719 Speaker 2: debt to GDP, so those ratios take away from future growth. 437 00:26:17,840 --> 00:26:22,040 Speaker 2: We have sort of prepaid bonuses, and that is the 438 00:26:22,119 --> 00:26:25,680 Speaker 2: problem why it has to be solved sooner than later, 439 00:26:26,040 --> 00:26:28,680 Speaker 2: because we're taking from our kids and grandkids what could 440 00:26:28,680 --> 00:26:33,240 Speaker 2: be even better opportunities. I remain optimistic, but unfortunately my 441 00:26:33,320 --> 00:26:36,359 Speaker 2: optimism now has one hundred percent debt to GDP to 442 00:26:36,400 --> 00:26:36,879 Speaker 2: contend with. 443 00:26:53,760 --> 00:26:56,000 Speaker 1: In a little bit and argubout some of my fellow 444 00:26:56,040 --> 00:27:00,040 Speaker 1: supply siders who think, oh, growth will solve everything. The 445 00:27:00,040 --> 00:27:03,879 Speaker 1: truth is a Congress that's not under public pressure to 446 00:27:03,920 --> 00:27:06,920 Speaker 1: get to a balanced budget will simply spend the additional revenue. 447 00:27:07,720 --> 00:27:10,119 Speaker 1: And I don't think anybody's been able to make vivid 448 00:27:10,240 --> 00:27:14,480 Speaker 1: enough the sheer amount of money we're now spending to 449 00:27:14,520 --> 00:27:18,560 Speaker 1: pay interest on the debt. It's larger than the defense budget. 450 00:27:19,240 --> 00:27:21,159 Speaker 2: It's become larger than the defence budget. I think with 451 00:27:21,240 --> 00:27:24,280 Speaker 2: what big Beautiful Bill did to increase a little defense spending, 452 00:27:24,480 --> 00:27:27,280 Speaker 2: that may go down a little, and if interest rates 453 00:27:27,320 --> 00:27:30,280 Speaker 2: come down, then that debt interest costs may drop a little. 454 00:27:30,520 --> 00:27:33,080 Speaker 2: But it's gotten to be very problematic. But the other 455 00:27:33,200 --> 00:27:36,560 Speaker 2: factor that if I remember correctly at least in ninety 456 00:27:36,840 --> 00:27:40,720 Speaker 2: nine when you had the second year of balanced budgets. 457 00:27:40,840 --> 00:27:46,640 Speaker 2: I believe the mandatory spending was thirty percent, discretionary was seventy, 458 00:27:46,680 --> 00:27:48,960 Speaker 2: and we've now turned that on its head. It's now 459 00:27:49,040 --> 00:27:52,080 Speaker 2: seventy thirty the other way. One of my other examples 460 00:27:52,119 --> 00:27:55,199 Speaker 2: of a criticism with President Trump that I'm sorry, we 461 00:27:55,200 --> 00:27:59,359 Speaker 2: can't address this without entitlement reform. We can't and we won't. 462 00:27:59,480 --> 00:28:03,680 Speaker 2: We will have to have grown up conversations about Medicare, Medicaid, 463 00:28:03,720 --> 00:28:07,360 Speaker 2: social security. There are solutions out there, but every year 464 00:28:07,359 --> 00:28:10,840 Speaker 2: they've gotten to be harder. When the Democrats were demonizing 465 00:28:10,920 --> 00:28:15,560 Speaker 2: Paul Ryan with the granny off a wheelchair nonsense, it 466 00:28:15,680 --> 00:28:18,200 Speaker 2: was a much more fixable problem. And what I believe 467 00:28:18,280 --> 00:28:21,760 Speaker 2: was then twenty ten or twenty eleven when President Obama 468 00:28:21,960 --> 00:28:25,800 Speaker 2: pointed his own Simpson Bulls Commission, which came out with 469 00:28:25,840 --> 00:28:28,199 Speaker 2: a lot of sensible solutions. I did not agree with 470 00:28:28,280 --> 00:28:30,840 Speaker 2: all of them, but I agreed with a handful. It 471 00:28:30,920 --> 00:28:35,080 Speaker 2: was a much more fixable solution. Every year that goes by, 472 00:28:35,119 --> 00:28:37,360 Speaker 2: it gets harder and harder. And the cliche about when 473 00:28:37,359 --> 00:28:40,000 Speaker 2: you're in a ditch doot digging I wish somebody would 474 00:28:40,080 --> 00:28:41,400 Speaker 2: listen to that. Well. 475 00:28:41,440 --> 00:28:45,360 Speaker 1: I think that from my side, I separate them out. 476 00:28:45,680 --> 00:28:50,200 Speaker 1: I think social security can only be dealt with on 477 00:28:50,240 --> 00:28:54,760 Speaker 1: a totally nonpartisan basis, which is different than bipartisan, and 478 00:28:54,880 --> 00:28:59,440 Speaker 1: only when the American people have concluded that there's an 479 00:28:59,480 --> 00:29:03,600 Speaker 1: improvement rather than destruction. And that's a huge task and 480 00:29:03,760 --> 00:29:07,360 Speaker 1: is frankly the entitlement I would approach last. For that reason. 481 00:29:07,400 --> 00:29:09,960 Speaker 1: I just think it's very hard, very complicated. On the 482 00:29:09,960 --> 00:29:12,520 Speaker 1: other hand, you may remember that part of our getting 483 00:29:12,560 --> 00:29:16,840 Speaker 1: to a balanced budget, we invented a medicare advantage in 484 00:29:16,920 --> 00:29:20,800 Speaker 1: nineteen ninety six during a presidential campaign, and we had 485 00:29:20,880 --> 00:29:25,640 Speaker 1: worked with people enough that, in fact, we were able 486 00:29:26,160 --> 00:29:30,200 Speaker 1: to carry what normal would be democratic groups in supporting 487 00:29:30,200 --> 00:29:33,880 Speaker 1: what we were doing against Bill Clinton. And it's because 488 00:29:33,920 --> 00:29:36,000 Speaker 1: they concluded that it was real and that we were serious. 489 00:29:36,480 --> 00:29:39,160 Speaker 1: You can methodically change things. 490 00:29:39,160 --> 00:29:39,360 Speaker 2: Now. 491 00:29:39,800 --> 00:29:41,440 Speaker 1: One of the things I'd be curious about it is 492 00:29:42,520 --> 00:29:45,440 Speaker 1: I thought what they did on Medicaid this time was 493 00:29:45,560 --> 00:29:50,239 Speaker 1: reasonably responsible and defendable. Of course, it was disdemonized by 494 00:29:50,240 --> 00:29:52,200 Speaker 1: the left, but that's okay. I mean, that's just part 495 00:29:52,200 --> 00:29:53,200 Speaker 1: of the business. 496 00:29:53,600 --> 00:29:56,959 Speaker 2: Yeah, it's part of the business. I always wish we 497 00:29:57,040 --> 00:29:59,960 Speaker 2: did a better job. You talked about winning the argument, 498 00:30:00,040 --> 00:30:02,400 Speaker 2: which is what you guys did in the early innings 499 00:30:02,400 --> 00:30:05,400 Speaker 2: of the supply side movement with Kemp in the late seventies. 500 00:30:05,880 --> 00:30:08,400 Speaker 2: I wish that the Republicans would try harder to win 501 00:30:08,440 --> 00:30:12,600 Speaker 2: the argument, because the Democrats have not just demonized, but 502 00:30:12,680 --> 00:30:16,360 Speaker 2: they have boldface lied about what we've done with Medicaid. 503 00:30:16,600 --> 00:30:19,920 Speaker 2: And what I found to be effective with clients with friends, 504 00:30:19,960 --> 00:30:24,000 Speaker 2: with conversations of both left leaning, centrist and right leaning 505 00:30:24,040 --> 00:30:26,880 Speaker 2: people is when they talk about Medicaid cuts. I said, 506 00:30:27,160 --> 00:30:29,240 Speaker 2: if I tell you that we were going to spend 507 00:30:29,760 --> 00:30:32,400 Speaker 2: X this year and we're going to spend more than 508 00:30:32,600 --> 00:30:37,520 Speaker 2: X next year, would you call that a cut? Nobody 509 00:30:37,560 --> 00:30:40,920 Speaker 2: says yes. But somehow they've gotten away with saying we're 510 00:30:40,960 --> 00:30:44,120 Speaker 2: cutting a trillion dollars from something that we're increasing spending 511 00:30:44,200 --> 00:30:45,240 Speaker 2: in every single year. 512 00:30:45,680 --> 00:30:48,600 Speaker 1: One of the great frustrations of my lifetime effort in 513 00:30:48,640 --> 00:30:53,480 Speaker 1: the Republican Party is the willful refusal of Republicans to 514 00:30:53,560 --> 00:30:56,560 Speaker 1: learn how to communicate. I mean, it's no accident that 515 00:30:56,680 --> 00:30:59,960 Speaker 1: Reagan was a former Democrat, Phil Graham's a former Democrat, 516 00:31:00,400 --> 00:31:04,800 Speaker 1: Donald Trump's a former Democrat. They communicate dramatically better than 517 00:31:04,840 --> 00:31:07,400 Speaker 1: people who grew up inside the Republican Party. It's an 518 00:31:07,440 --> 00:31:08,959 Speaker 1: amazing cultural phenomenon. 519 00:31:10,080 --> 00:31:12,520 Speaker 2: Well, it's so true. And I would even add beyond 520 00:31:12,520 --> 00:31:16,840 Speaker 2: the messaging and the marketing benefits and persuasive powers, but 521 00:31:17,000 --> 00:31:19,880 Speaker 2: as a man of faith that it refuses to abandon 522 00:31:19,920 --> 00:31:23,400 Speaker 2: my moral convictions. The welfare reform you passed in the 523 00:31:23,400 --> 00:31:27,440 Speaker 2: mid nineties I thought was most potent when it focused 524 00:31:27,480 --> 00:31:29,800 Speaker 2: on not how it was more fair to all of 525 00:31:29,880 --> 00:31:32,240 Speaker 2: us who were paying our bills, but how it was 526 00:31:32,320 --> 00:31:35,520 Speaker 2: better for the humanity and dignity of the people. A 527 00:31:35,600 --> 00:31:40,520 Speaker 2: workfare requirement was better for their souls, their dignity, their empowerment. 528 00:31:40,880 --> 00:31:43,360 Speaker 2: It was a very Jack Kemp argument. As you know, 529 00:31:44,000 --> 00:31:47,920 Speaker 2: this medicaid issue, beyond the fact that it's unfair, it 530 00:31:48,200 --> 00:31:52,280 Speaker 2: veered under President Obama so dramatically from what the intent 531 00:31:52,480 --> 00:31:57,360 Speaker 2: of medicaid is. The reality is that it is unfair 532 00:31:57,440 --> 00:32:01,840 Speaker 2: to these people to have their dignity taken away by 533 00:32:01,920 --> 00:32:06,480 Speaker 2: basically giving another transfer payment to them, as opposed to 534 00:32:07,040 --> 00:32:10,640 Speaker 2: a Medicaid that is truly there to help impoverished people. 535 00:32:11,240 --> 00:32:14,040 Speaker 2: And I don't hear Republicans making this argument. I just 536 00:32:14,080 --> 00:32:15,040 Speaker 2: don't And we need to. 537 00:32:15,600 --> 00:32:18,120 Speaker 1: It's one of my great frustrations. Let me ask you, though, 538 00:32:18,280 --> 00:32:21,360 Speaker 1: in a Fox News up ed, you said, quote New 539 00:32:21,480 --> 00:32:25,160 Speaker 1: York City's shocking socialist victory is a dire warning for 540 00:32:25,200 --> 00:32:30,280 Speaker 1: the right, and you framed Zorund Mumdani's victory as a 541 00:32:30,320 --> 00:32:33,920 Speaker 1: warning for conservatives. Why do you think Mamdani won. 542 00:32:34,760 --> 00:32:38,760 Speaker 2: Well on a political basis? The truth is that one 543 00:32:39,040 --> 00:32:44,840 Speaker 2: because the opponent was terrible and Governor Cuomo is attached 544 00:32:44,880 --> 00:32:48,760 Speaker 2: to so much unlikeability that he became a very weak candidate. 545 00:32:49,440 --> 00:32:52,520 Speaker 2: We talk like name recognition is always a positive. I 546 00:32:52,560 --> 00:32:55,600 Speaker 2: thought Hillary Clinton taught us that name recognition could be 547 00:32:55,640 --> 00:32:59,800 Speaker 2: a negative too. So he wouldn't win if there weren't 548 00:32:59,800 --> 00:33:03,440 Speaker 2: three opponents in the general. If he were running Mono 549 00:33:03,560 --> 00:33:06,800 Speaker 2: Imano against any one of the other three, whether it's 550 00:33:06,880 --> 00:33:11,040 Speaker 2: Curtis or Eric Adams or Andrew Como, he would lose. 551 00:33:11,440 --> 00:33:14,880 Speaker 2: But he will likely win because the baby is split 552 00:33:14,960 --> 00:33:17,280 Speaker 2: the other way. But how is he even in a 553 00:33:17,320 --> 00:33:20,840 Speaker 2: position to win and even obtain a forty forty five 554 00:33:20,920 --> 00:33:26,360 Speaker 2: percent plurality because his message sells When we accept the 555 00:33:26,400 --> 00:33:32,080 Speaker 2: premise the populism is an acceptable way of communicating about 556 00:33:32,120 --> 00:33:35,920 Speaker 2: the public good that because something is popular, free bread, 557 00:33:36,000 --> 00:33:41,760 Speaker 2: free groceries, government runs stores. The impracticality of these things, 558 00:33:41,800 --> 00:33:45,800 Speaker 2: the unaffordability, the ineffectiveness. We can say all that all 559 00:33:45,840 --> 00:33:49,040 Speaker 2: we want, but I believe that we have to reject 560 00:33:49,080 --> 00:33:52,400 Speaker 2: any form of populism that acts like it is good 561 00:33:52,480 --> 00:33:56,720 Speaker 2: public policy just because some people like it. And the 562 00:33:56,720 --> 00:34:00,400 Speaker 2: aocs of the left don't play by those rules. And 563 00:34:00,440 --> 00:34:03,120 Speaker 2: my fear is that the right sometimes is trying to 564 00:34:03,160 --> 00:34:05,360 Speaker 2: beat them by joining them, and I don't think we 565 00:34:05,400 --> 00:34:05,840 Speaker 2: can do that. 566 00:34:06,640 --> 00:34:10,480 Speaker 1: We did a set of questions a couple months ago 567 00:34:11,120 --> 00:34:17,759 Speaker 1: on the difference between socialism by itself and big government socialism, 568 00:34:18,400 --> 00:34:21,560 Speaker 1: and it may surprise you had to head by fifty 569 00:34:21,600 --> 00:34:26,640 Speaker 1: to twenty two, voters prefer capitalism over socialism, by fifty 570 00:34:26,719 --> 00:34:30,719 Speaker 1: nine to twelve. They prefer free market capitalism over big 571 00:34:30,760 --> 00:34:34,399 Speaker 1: government socialism. So if you set the frame, he's not 572 00:34:34,440 --> 00:34:38,160 Speaker 1: just a socialist, but he's a big government socialist that 573 00:34:38,360 --> 00:34:42,960 Speaker 1: term because a lot of people vaguely perceive socialism as 574 00:34:43,000 --> 00:34:46,560 Speaker 1: caring for the poor, being concerned, et cetera. It's important 575 00:34:46,560 --> 00:34:49,279 Speaker 1: remember Bernie Sanders got forty three percent of the vote 576 00:34:49,280 --> 00:34:49,960 Speaker 1: against Hillery. 577 00:34:50,640 --> 00:34:52,839 Speaker 2: That's right, and he would have got more if they 578 00:34:52,840 --> 00:34:56,560 Speaker 2: hadn't rigged it against him in the Democratic Party. You know, 579 00:34:56,640 --> 00:35:00,160 Speaker 2: I've been hearing for years, mister speaker, that young peopleeople 580 00:35:00,320 --> 00:35:04,600 Speaker 2: like socialism, and I've done so much analytics on this 581 00:35:04,760 --> 00:35:06,719 Speaker 2: as an economist, and i will tell you that it 582 00:35:06,840 --> 00:35:10,120 Speaker 2: just isn't true. But they do not like what they 583 00:35:10,160 --> 00:35:15,000 Speaker 2: have been told. Capitalism is. This is the great moral 584 00:35:15,120 --> 00:35:18,400 Speaker 2: duty we have in front of us post financial crisis. 585 00:35:19,280 --> 00:35:25,239 Speaker 2: A Randian secularist defense of markets will not sell, nor 586 00:35:25,280 --> 00:35:31,000 Speaker 2: should it. A morally rooted defense of free markets that 587 00:35:31,440 --> 00:35:37,279 Speaker 2: attacks cronyism. When young people think that capitalism means the 588 00:35:37,320 --> 00:35:41,560 Speaker 2: power of government attached to big business, they're not going 589 00:35:41,600 --> 00:35:44,160 Speaker 2: to like it. Nor should they, because I don't like 590 00:35:44,239 --> 00:35:50,120 Speaker 2: it when we defend free enterprise, free exchange, mutual cooperation, 591 00:35:50,680 --> 00:35:55,680 Speaker 2: division of labor, and an aspirational society. The language has 592 00:35:55,800 --> 00:35:58,239 Speaker 2: changed a bit since Jack Kemp in the late seventies, 593 00:35:58,280 --> 00:36:01,120 Speaker 2: but I was a very young person. I read him, 594 00:36:01,560 --> 00:36:03,920 Speaker 2: I would read you. In the nineties. I would read 595 00:36:03,960 --> 00:36:07,160 Speaker 2: my friend Larry Cuddlo a little later. I found it inspiring. 596 00:36:07,640 --> 00:36:11,200 Speaker 2: The moral defensive market sells to young people. 597 00:36:11,120 --> 00:36:14,239 Speaker 1: And it's essentially a moral defensive freedom. The notion that 598 00:36:14,960 --> 00:36:17,719 Speaker 1: we claim in the document we're going to celebrate the 599 00:36:17,719 --> 00:36:20,799 Speaker 1: two hundred and fiftieth birthday next year. We claim that 600 00:36:20,880 --> 00:36:25,160 Speaker 1: we are endowed by our creator with certain available rights 601 00:36:25,160 --> 00:36:28,080 Speaker 1: along with your life, liberty and the pursuit of happiness, which, 602 00:36:28,120 --> 00:36:31,239 Speaker 1: by the way, in the Scottish Enlightenment meant virtue and 603 00:36:31,280 --> 00:36:34,040 Speaker 1: wisdom did not mean getting drunk and hanging out on 604 00:36:34,239 --> 00:36:37,120 Speaker 1: Miami Beach. But if you think about it, in order 605 00:36:37,120 --> 00:36:39,719 Speaker 1: to have the right to pursue happiness, you have to 606 00:36:39,760 --> 00:36:40,320 Speaker 1: have freedom. 607 00:36:41,040 --> 00:36:44,200 Speaker 2: This was the whole fusionist argument that came out of 608 00:36:44,320 --> 00:36:47,920 Speaker 2: National Review in the sixties and seventies, and from Russell 609 00:36:48,000 --> 00:36:51,600 Speaker 2: Kirk to Frank Meyer to Bill Buckley. You have to 610 00:36:51,640 --> 00:36:54,600 Speaker 2: have freedom, and you want to channel that freedom into 611 00:36:54,680 --> 00:36:57,520 Speaker 2: virtuous activity, and it makes for a very good and 612 00:36:57,560 --> 00:36:58,880 Speaker 2: fulfilling life. 613 00:36:58,800 --> 00:37:01,120 Speaker 1: Which, by the way, if you read link enough you 614 00:37:01,200 --> 00:37:05,080 Speaker 1: get exactly the same pattern. He understood it, he'd lived it. 615 00:37:05,080 --> 00:37:07,800 Speaker 1: It was his own personal life, and he was passionate 616 00:37:07,800 --> 00:37:11,040 Speaker 1: and willing to fight a four year war to defend it. 617 00:37:11,360 --> 00:37:14,040 Speaker 1: But I want to thank you. I always find it 618 00:37:14,280 --> 00:37:17,800 Speaker 1: very invigorating to talk with you. If you're very smart, 619 00:37:18,080 --> 00:37:21,200 Speaker 1: you have very clear ideas and values, and we are 620 00:37:21,239 --> 00:37:23,279 Speaker 1: going to let all of our listeners know that they 621 00:37:23,320 --> 00:37:26,560 Speaker 1: can sign up to get the Dividend Cafe by visiting 622 00:37:26,600 --> 00:37:31,560 Speaker 1: your website at the Bonsengroup dot com slash Dividendcafe. And 623 00:37:31,640 --> 00:37:33,359 Speaker 1: if you'd like to find out more about what David 624 00:37:33,480 --> 00:37:36,640 Speaker 1: is doing, you can visit his personal website at Bonsen 625 00:37:37,000 --> 00:37:40,200 Speaker 1: dot com. This has been great fun, David, Thank you 626 00:37:40,360 --> 00:37:41,040 Speaker 1: very very much. 627 00:37:41,560 --> 00:37:43,440 Speaker 2: It's been an honor. Thank you, mister speaker. 628 00:37:46,640 --> 00:37:49,319 Speaker 1: Thank you to my guest David Bonsen. You can learn 629 00:37:49,320 --> 00:37:52,600 Speaker 1: more about his company, the Bonson Group on our show 630 00:37:52,640 --> 00:37:56,560 Speaker 1: page at newtsworld dot com. Newtsworld is produced by Gingrich 631 00:37:56,560 --> 00:38:00,960 Speaker 1: three sixty and iHeartMedia. Our executive producer is Guarnsey Sloan. 632 00:38:01,480 --> 00:38:05,240 Speaker 1: Our researcher is Rachel Peterson. The artwork for the show 633 00:38:05,680 --> 00:38:08,600 Speaker 1: was created by Steve Penley. Special thanks to the team 634 00:38:08,640 --> 00:38:11,799 Speaker 1: at Ganglishtree sixty. If you've been enjoying Newts World, I 635 00:38:11,880 --> 00:38:14,480 Speaker 1: hope you'll go to Apple Podcast and both rate us 636 00:38:14,480 --> 00:38:17,319 Speaker 1: with five stars and give us a review so others 637 00:38:17,360 --> 00:38:20,279 Speaker 1: can learn what it's all about. Right now, listeners of 638 00:38:20,360 --> 00:38:24,120 Speaker 1: news World can sign up for my three freeweekly columns 639 00:38:24,239 --> 00:38:28,320 Speaker 1: at Ganishtree sixty dot com slash newsletter, I'm new gingrich. 640 00:38:28,719 --> 00:38:29,640 Speaker 1: This is newsworld.