March 31, 2025 • 26 mins
Newt talks with David Bahnsen, Founder and Chief Investment Officer of The Bahnsen Group about his career, economic policies, and the current political climate. Bahnsen shares insights on the Trump administration's trade and tariffs strategies, the importance of tax cuts and regulatory reforms, and the potential for economic growth. He emphasizes the need for energy independence and the impact of housing costs on inflation. Their conversation also touches on the cultural and spiritual aspects necessary for America's long-term prosperity. Bahnsen highlights the significance of understanding market dynamics and the role of faith in shaping the nation's future.
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Episode Transcript
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Speaker 1 (00:04):
On this episode of News World. David Bonson is the founder,
managing partner and chief Investment Officer of the Bonson Group,
overseeing the manager of seven billion dollars in client assets.
Prior to launching the Bonson Group, he spent eight years
as a managing director at Morgan Stanley and six years
as vice president of UBS. He is consistently named one
(00:27):
of the top financial advisors in America by Barons, Forbes,
and The Financial Times. He is the editor of the
Dividend Cafe newsletter and a new sponsor of Mark Halprin's
The Morning Meeting on two Way Dot TV, which I
recommend very very highly. David, welcome and thank you for
(01:00):
anyway the newts World.
Speaker 2 (01:01):
Well, thank you so much for having me.
Speaker 1 (01:03):
Now, before we get into the Syria stuff, I have
to ask you a couple of things here, bio says quote.
David's true passions include anything related to usc football, the
financial markets, politics, and Chinese food. So what is your
favorite Chinese food?
Speaker 2 (01:22):
In terms of restaurants, Manhattan.
Speaker 3 (01:24):
Just is the place in America to get Chinese food,
no question, But I will admit it's kind of a
guilty pleasure sometimes I like the more take out greasy
places even than the real, nice, fine dining. But I
do love Chinese food.
Speaker 1 (01:37):
What led you to Chinese food?
Speaker 3 (01:39):
Well, you know, I think that it was just sort
of a guilty pleasure when I was younger. My dad
loved Chinese food. You know, he and I were so close.
He passed away pretty young. I have such fond memories
as a kid of eating Chinese food with my dad.
I imagine it's not just the culinary side, but a
little nostalgia as well.
Speaker 1 (01:56):
Oh that's great, So we're div into more Serria stuff.
As you know, the Trump administration stance on trade and
tariffs has been a defining feature of their economic policy.
From your perspective, how do you see their approach to
trade compared to previous administrations, particularly in terms of tariffs
(02:18):
international negotiations.
Speaker 3 (02:20):
Well, mister speaker, it puts me in a tough position
because I maintain a certain traditionalist, kind of Reaganite Milton
Friedman classical conservatism on the matter. And yet I'm not
sure that I would put President Trump squarely in a
protectionist box either. There are definitely times that he talks
(02:41):
that way, and it isn't my favorite part of his
economic agenda. But at the same time, I think that
there has been a posture so far to use tariffs
for negotiation, and someone like me who wants to see
more total trade and let it be a boost to
American economic interest, American workers, American economic growth, I believe
(03:04):
that there's a possibility of using tariffs to negotiate for
better arrangements. The confusion over the last six weeks has
been I'm not sure that there's a great deal of
clarity for economic actors as to what is about fentanyl,
what is about border security, what is about fairness? And
then what is about some sort of protectionist idea. Of
(03:28):
all the different agendas out there, the one I'm most
comfortable with are all of the above, besides the protectionist one.
Speaker 2 (03:35):
I do ultimately believe that using.
Speaker 3 (03:38):
Tariffs to try to protect one economic actor against another
American economic actor, I think is problematic overall.
Speaker 1 (03:48):
I mean, you've watched the opening couple of months. Have
you been surprised at the number of large investment announcements.
Speaker 2 (03:57):
I'm not surprised.
Speaker 3 (03:59):
I've been watching with a lot of attention a couple
of early on ones from soft Bank, and then this
sort of VC group they want to put together with
open AI and then even the Apple one. They grab
my attention a little less even though they had bigger numbers,
because they were intent to do something. They hoped to
go raise the money to then do a lot of
(04:21):
this large investment. And I think those are beneficial headlines
for the president. They're certainly a great way to curry
the favor of the administration, and so they're positive in
that sense. But a smaller announcement that is a bigger
deal to me is things like Hyundai this week. Twenty
billion doesn't sound like as big of a number as
five hundred billion, but this is twenty billion real dollars
(04:44):
versus five hundred billion potential dollars. And so I do
think that gaining investment in the United States is a
good thing, and I do believe the best way to
bring capital to our country is to be a place
worthy of other capital, with better environment, better regulatory environment,
rule of law, and all the things we believe in.
Speaker 1 (05:05):
In that context, how important is the development of the
tax cut and Regulatory Reform bill sometime early this year.
Speaker 2 (05:17):
It's incredibly important.
Speaker 3 (05:18):
I was just at the Treasury Department last week having
meetings to this exact effect. I believe that what people
have to understand right now versus the first administration is
in twenty seventeen, his first year of Trump one point
zero that was the largest corporate tax reform bill in history.
(05:39):
They thought optimistically they may repatriate one trillion US dollars
and it ended up being one point eight trillion. It
is a massive factor as to how the economy held
up so well through the Biden administration and.
Speaker 2 (05:54):
Post COVID period.
Speaker 3 (05:56):
Not only the reduction of a corporate tax rate that
was highly known on competitive at thirty five percent coming
down to twenty one percent, elimination of a lot of
loopholes and crony deductions, but there was just a regulatory
and tax reform apparatus that was highly supply side friendly,
in other words, incentivizing the production of the American economy
(06:18):
that we desperately needed. The tariffs came in twenty eighteen.
In the second year, you had one of the best
years you could imagine for the stock market. In twenty seventeen,
you got great real GDP growth.
Speaker 2 (06:30):
And you signed that tax bill into law.
Speaker 3 (06:33):
Then we went through a kind of choppy year trying
to find our footing around what was going to happen
or not happen with tariffs this time. By going in
the reverse order, I think they risk not having some
of the economic, not to mention, political capital in place.
If there's going to be a period of uncertainty, chaos,
(06:54):
challenge around tariff announcements.
Speaker 2 (06:56):
I would rather the TCGA be.
Speaker 3 (06:58):
Made permanent first, and that a lot of the benefits
of deregulation and doge.
Speaker 2 (07:03):
Sink in first.
Speaker 3 (07:05):
What has happened is sometimes you feel like maybe the
administration's lost focus on that issue. I don't think the
President has, and I definitely do not believe Secretary Beson has,
but I think markets have questioned are we going to
get this tax reform or not? Particularly for those of us,
mister Speaker, who know how complex it's going to be
to get the tax reform done with this budget reconciliation process,
(07:28):
People's eyes glaze over when you talk to them about
what has to happen procedurally to get it through. But
it matters a great deal, and we still don't have
a policy baseline in place as to what they're going
to base the budget reconciliation off of. There's a few
trillion dollars on the line there in terms of tax cuts.
Speaker 1 (07:47):
I've been impressed partly because Speaker Johnson, with his very
tiny majority, has just firmly and steadily said we got
to get this done early. We're going to get this
done early, has to be bill and gradually. I think
he has convinced the Senate that that's the right strategy,
and I'm now moderately optimistic that they'll get a bill
(08:08):
done in May or very early June.
Speaker 3 (08:11):
Yeah, it's come up a great deal in the probability,
and I'm with you there. The Speaker has been phenomenal,
and I have to say President Trump has had his back.
He's worked the phones behind the scenes where they had
no margin of error to get that budget across the
finish line.
Speaker 2 (08:25):
So I'm very hopeful.
Speaker 1 (08:27):
To what extent does cutting spending and getting spending back
under control also create lower interest rates in a better
environment in which to imagine economic investment and growth.
Speaker 3 (08:42):
It is probably the single lowest hanging fruit imaginable to
not only control the long end of the yield curve,
move interest rates lower and stimulate capital investment, but then
it also stops digging the ditch that is the whole
that is most impeding us, which is a debt to
GDP ratio is climbed from a post war average of
(09:02):
about seventeen percent to near twenty five percent. The thirty
six trillion of debt gets all the attention because it's
a huge number, and it's sensational and it's obviously problematic,
But the debt to GDP number is the number that
we should be most concerned with, the ratio of debt
growing faster than economic productivity is growing. By getting spending
(09:27):
under control and allowing the private sector to do what
it does and economic growth to move faster than debt
is growing, then we have a chance of saving this.
Speaker 2 (09:38):
The only thing I would say.
Speaker 3 (09:39):
Versus what you all were heroically doing in the late
seventies and early eighties is we've dug the whole thirty
six times bigger since then.
Speaker 1 (09:48):
I'm very proud of the fact that while we were
the first majority in forty years, we actually balanced the
budget for four three years, which is the only time
in the last century, which is sort of a bad
comment on how profligate we've been as a country. As
I left the speakership, Alan Greenspan, who was the Chairman
of the Federal Reserve at the time was giving a
speech that they were estimating we would pay off the
(10:11):
national debt by two thousand and nine, and they weren't
sure at the Fed how they were going to manage
the money supply if there was no debt. Of course,
it didn't turn out that way, but at the moment
it seemed awfully good. Now, from your perspective, with all
the turmoil we're describing here, big spending cuts, tariffs of
some kind, a tax cut bill will eventually get done,
(10:31):
but it's not done yet. How does all that weave
together in terms of the chance of us dipping into
a recession this summer.
Speaker 3 (10:39):
I think if we were to have a recession this summer,
we likely wouldn't know about it until the fall, and
it would be caused by some contraction in capital goods, investment,
in productivity, industrial production that.
Speaker 2 (10:53):
Right now is not necessarily in the cards.
Speaker 3 (10:56):
But President Trump had the highest small business optimism reading
that they've had since the NFIB started doing the data
in the month after the election, and then last month
the small business uncertainty index was the highest it had
ever been. So that's a difficult thing to wrap my
(11:16):
arms around. But I do believe it's a byproduct to
some of the things you're referring to, just a little
bit of uncertainty as to what exactly is going to happen.
Speaker 2 (11:24):
My own read on it, and I'm not, by.
Speaker 3 (11:26):
Any means a political insider, but I think the messaging
I hear from Treasury gives a little more clarity than
the messaging I hear from commerce, and that's part of
the issue.
Speaker 2 (11:36):
And we'll see what happens on April second.
Speaker 3 (11:38):
But I do believe markets and not just financial markets
and risk assets. A lot of people think I'm always
talking about the stock market.
Speaker 2 (11:46):
That's not what we're really referring to here.
Speaker 3 (11:48):
It's businesses being able to invest in a new factory,
new R and D, new hiring plans.
Speaker 2 (11:55):
It's tough to do that when uncertainty is high.
Speaker 3 (11:57):
And I think that the biggest risk to recession is
if I'm certain to get so high in April May
that in June July we tip over.
Speaker 1 (12:21):
I think with small businesses, they don't quite know what
the effect of the tariffs is going to be on
the products that they have to buy. I think that
really the sort of thing you have to look at
and worry about in a serious kind of way.
Speaker 3 (12:34):
Can I add to that also what they have to
sell that many of these companies are exporters, and if
they face retaliatory tariffs, there ends up being a knock
on effect there as well.
Speaker 1 (12:45):
Yeah, if you're a small manufacturer, it could have a
devastating potential impact, or at least something that you have
to adjust to and take into account. I noticed that
the former Treasury Secretary Larry Summers did say that he
thought there was about a fifty percent chance of a recession.
Do you think that he's overly pessimistic or does that
(13:06):
seem about reasonable?
Speaker 2 (13:07):
I never like those things.
Speaker 3 (13:09):
Wall Street firms do it all the time too, where
they'll say, oh, it was thirty percent and now we
think it's forty percent, and I think that it's a
little bit arbitrary. Do I think that whatever the chances
are of a recession are higher now than they were
two months ago? Yes, fifty percent seems a bit high,
But again I believe that the more important piece is
(13:31):
that we could get subpar growth. That's the thing that
I never understood in the eight years of the Bomb administration.
We did not have a recession after we came out
of the financial crisis, and yet we had eight consecutive
years of subpar growth. I no more want subpar growth
than I want a recession. All of it is bad
(13:51):
for our children and grandchildren, and so we want to
be operating at an optimal full capacity scale. And I
do think that right now they're there are some animal
spirits on the corporate side that are being held in.
Speaker 1 (14:04):
I kind of wonder if Trump once everything stabilizes, if
it's clear what the tariff policy will be, and we
actually pass the tax cut and regulation reform bill by
mid June, I wonder if you don't see a similar
explosion people finally saying Okay, I get it, I can
understand this, I can work in this operation.
Speaker 3 (14:26):
There is a great pent up possibility of a lot
of those things. The other piece that you and I
both would add to the optimistic mix is energy independence,
the ability to combine with a tax and regulatory portfolio,
a real commitment that I think is not ambiguous. There's
a lot of areas for administration. I give them an
(14:47):
eight out of ten, and there's the one area we
talked about.
Speaker 2 (14:50):
With trade that I have a lower score.
Speaker 3 (14:51):
But energy is one from Chris Wright at the Energy
Department and Secretary Bergham and Interior to Trump one point
zero and now two point zero legacy that I score
a ten out of ten, and that.
Speaker 2 (15:03):
Supply side growth as well.
Speaker 3 (15:05):
That's permitting approval, removing impediments for what is a growth
industry not just environmentally better, not just geopolitically better, but
it's a growth opportunity for good paying wages that do
not require college degrees, to a.
Speaker 2 (15:21):
Working class segment of American economy.
Speaker 3 (15:23):
I think it's a tremendous aspect of this overall economic story.
Speaker 1 (15:27):
It may fit in geopolitically too, because if we go
back to really accelerating liquefied natural gas exports to help
the Europeans wean themselves off of Russian gas, it becomes
a double win for.
Speaker 3 (15:39):
US, that's right, and Asian and European customers that are
able to ramp up their intake capacity while the Biden
administration shut.
Speaker 2 (15:48):
Off our out take capacity.
Speaker 3 (15:49):
It was really a surreal policy decision that was made
late in his administration.
Speaker 1 (15:54):
I don't want to get off on the politics of it,
but it does strike me that there were an amazing
number of ways in which they did not understand markets
and they didn't understand economies. The opposite of recession, of course,
(16:21):
is the whole inflation problem. It seems to me that
it's been harder to bring it down than people thought
it would be.
Speaker 3 (16:28):
Well, and I think a lot of this, mister speaker,
has to do with what I refer to as the
political problem of inflation. That it doesn't do me any
good to talk about economics or Milton Friedman or monetary
phenomena when someone says egg prices just went up one
hundred percent. Egg prices did not go higher because of inflation.
Inflation is an economic term for the whole price level
(16:51):
going higher. And we have a problem of political inflation
because we have three areas of economy that, for twenty
five years in a reasonably disinflationary period, three areas went
higher and higher and higher above wage growth and above
the price level growth. And that is housing, healthcare, and
(17:13):
higher education, the only three areas of the American economy
subsidized by Washington d C. So I think the political
story with inflation goods. Inflation year over year has been
zero percent two years in a row. The monetary inflation
we faced in the immediate aftermath of the COVID excesses
and the supply shutdowns.
Speaker 2 (17:35):
Has largely been corrected.
Speaker 3 (17:37):
One off issues around eggs because of bird flu issue
with chickens. You know, there's no FED governor or president
that can do anything immediately about that. But I think
that housing is where Americans feel inflation. Housing is where
young people are spending fifty percent of their paycheck on
their rent or It's incredible.
Speaker 1 (17:58):
But isn't the overhang of housing now likely to lead
to a pretty substantial declining cost.
Speaker 3 (18:05):
Well, we are not yet out of place of an
overhang in terms of national supply. I mean, there's more
inventory available than there was last year, but we're still
very tight compared to historical norms, and transactions are at
a thirty year low. There's a sort of seller's strike
right now. They have three percent mortgages. They're ready to
(18:26):
upgrade to a bigger, better home, but they don't want
to go take a seven percent mortgage. So artificially low
interest rates become a problem later in a period of
more normalized rates. The FED wants to clear the market.
They're not going to get it back down to three,
but perhaps around five versus seven, you start.
Speaker 2 (18:45):
Moving that a bit.
Speaker 3 (18:47):
But no, I believe that housing represents the biggest inflation
threat that we have.
Speaker 1 (18:52):
And so that's leading to a lot more multifamily apartments
and condos and things, because young people have to go somewhere.
Speaker 2 (19:02):
That's right, And it isn't like those who have gotten
to either.
Speaker 3 (19:05):
You know, rents are still a very high multi family product.
Speaker 2 (19:09):
We did build a lot of new inventory for a
number of years, but then that stopped.
Speaker 3 (19:14):
Over the last couple of years, permits really came to
a halt. Higher interest rates and higher insurance costs made
multi family construction less economical. Cities that were booming, like
Austin and Phoenix and Nashville and many Florida cities, they
saw a lot of new multifamily inventory come online. But
(19:35):
we're substantially underbuilt as a country in single family residents.
Speaker 1 (19:40):
And you don't think that'll change until you get down
to much lower mortgage rates.
Speaker 2 (19:45):
Much lower mortgage rates.
Speaker 3 (19:46):
And again, the federalist in me has to always point
out that Washington, DC can't do everything states like California
and New York. You know, I sort of jokingly, except
for I was being serious, said to our friend Mark
Halprin the this morning on Tue.
Speaker 2 (20:01):
Apparently we know the blueprint for what.
Speaker 3 (20:03):
To do about getting more supply in blue states, because
I heard the Governor of California say it on Meet
the Press the week or two after the fires. He said,
what they're going to have to do to rebuild is suspend,
seek a give zoning relief, permitting relief, regulatory relief. And
I thought, I agree with everything he just said, except
for I didn't need the fires to know that that
(20:25):
would work.
Speaker 1 (20:26):
And we'll see if you can get the California legislature
to do it.
Speaker 2 (20:29):
What's your reaction to the whole.
Speaker 1 (20:32):
Department of Efficiency, the DOGE effort, and the way they've
moved forward.
Speaker 3 (20:37):
Well, I am mostly very supportive and sympathetic. A concept
of it I liked a lot. I think the personality
of it changed publicly with Viv stepping aside to go
pursue his Ohio race. He has a certain eloquence and
skill is a messenger that I think would have been beneficial.
(21:00):
Mitch Daniels said something about DOJ a couple weeks ago
that stuck with me that his advice would be for
them to basically do what they're doing, but to talk
less and do more. And part of me wonders if
we didn't hear anything about it for six months, no tweets,
no videos, no website update, and just in six months
(21:23):
they called a press conference and gave us the list
of everything they had done. I think it would have
ninety five percent approval with the public. But this kind
of day by day stuff, putting stuff on the website,
having to take it back, there's mistakes made, There's a
lot of messaging chaos that could be a reflection of
my personality as a more traditionalist that I'm a kind
(21:44):
of measure twice cut once kind of guy, And this
lends itself to a certain degree of chaos that I
understand is unavoidable. But I think that the public's approval
of it dropping twenty percent is largely stylistic, and part
of me thinks the substance of it is still going
to be very popular.
Speaker 1 (22:02):
When you look at all this and you just close
your eyes, we get politics, et cetera. You know Trump
talks about a golden age. Do you think ten years
from now America is likely to be dramatically better off,
a little better off, or still sort of in the doldrums.
Speaker 3 (22:18):
For us to be in a better place than ten years,
America cannot be as secular as a country as it
is now. It is going to have to re embrace
and there are signs that it is doing so, that
gen Z is a bit more open to church and
to Synagogue into embracing some of the Jeneo Christian principles
of our nation than jen Why was but in ten
(22:39):
years to come out of the doldrums, It's not going.
Speaker 2 (22:41):
To be because of egg prices.
Speaker 3 (22:43):
It's not going to because GDP came up from two
point four to two point eight. There is a spirit
around the country that is not in a good place.
And there's a lot that can be done on a
policy front, and there's a lot that needs stapen economically.
Speaker 2 (22:57):
But I still believe the largest.
Speaker 3 (22:59):
Things that plays are cultural and that sort of restoration
of a Tokvillian vision of the country with strong communities.
Speaker 2 (23:07):
It's going to be very hard for that to be
back in ten years.
Speaker 3 (23:10):
The nineteen sixties radicalism that undid it didn't work in
ten years. It took thirty or forty. We're going to
need more than ten to get back.
Speaker 1 (23:18):
This is why I think the twenty twenty six election
is so important. You have to keep the House, you
have to keep the momentum. You have to win the
election of twenty eight for a president, Senate, and House.
And if you can get three terms in a row Trump,
and then two terms for the next president, you probably
by then will have locked into place patterns and trends
which will have ended the Roosevelt era and move us
(23:40):
towards a more decentralized, more voluntarism and more faith based
society than we've been in the last thirty or forty years.
Speaker 3 (23:49):
I think that there's a lot of merit to that,
and that for us to conscientiously do that. It also
provides the political capital and do some of the big
difficult things that will have to be done entitlement reform
and so forth. So there's a lot of wood to chop,
but one election at a time, and in the meantime.
Speaker 2 (24:09):
I still believe, as much as all of us.
Speaker 3 (24:11):
Are oftentimes stuck in the political sphere and the economic
sphere policy, so much of this will come down to
our own efforts with our families and communities and churches
as well.
Speaker 1 (24:21):
David, this has been a lot of fun I've been
reading your ads with Alprin, so when told me that
you were available on going to join us, I was
really thrilled and it's certainly lived up to all of
my hopes. I hope someday in six months or so,
you'll come back and give us another view of how
the world's evolving. I want to thank you for joining me.
I want to let our listeners know they can sign
up to get your newsletter Dividend Cafe by visiting your
(24:45):
website at the Bonsgroup dot com slash Dividendcafe. And if
you're in stued in politics like we both are, you
can sign up to watch the morning meeting sponsored by
the Bonson Group at two way dot tv. Thank you very.
Speaker 2 (24:59):
Much, Thank you so much for having me. It's been
a privilege.
Speaker 1 (25:06):
Thank you to my guest, David Bonsen. You can learn
more about his company, the Bonsen Group on our show
page at newtsworld dot com. Newtsworld is produced by Gainglishtree
sixty and iHeartMedia. Our executive producer is Guarnsey Sloan. Our
researcher is Rachel Peterson. The artwork for the show was
created by Steve Penley. Special thanks to the team at
(25:28):
Ginglishtree sixty. If you're been enjoying Newtsworld, I hope you'll
go to Apple Podcasts and both rate us with five
stars and give us a review so others can learn
what it's all about. Right now, listeners of Newtsworld consigning
for my three free weekly columns at Gainglistree sixty dot
com slash newsletter. I'm Newt Gingrich.
Speaker 2 (25:47):
This is Newtsworld
On this episode of News World. David Bonson is the founder,
managing partner and chief Investment Officer of the Bonson Group,
overseeing the manager of seven billion dollars in client assets.
Prior to launching the Bonson Group, he spent eight years
as a managing director at Morgan Stanley and six years
as vice president of UBS. He is consistently named one
(00:27):
of the top financial advisors in America by Barons, Forbes,
and The Financial Times. He is the editor of the
Dividend Cafe newsletter and a new sponsor of Mark Halprin's
The Morning Meeting on two Way Dot TV, which I
recommend very very highly. David, welcome and thank you for
(01:00):
anyway the newts World.
Speaker 2 (01:01):
Well, thank you so much for having me.
Speaker 1 (01:03):
Now, before we get into the Syria stuff, I have
to ask you a couple of things here, bio says quote.
David's true passions include anything related to usc football, the
financial markets, politics, and Chinese food. So what is your
favorite Chinese food?
Speaker 2 (01:22):
In terms of restaurants, Manhattan.
Speaker 3 (01:24):
Just is the place in America to get Chinese food,
no question, But I will admit it's kind of a
guilty pleasure sometimes I like the more take out greasy
places even than the real, nice, fine dining. But I
do love Chinese food.
Speaker 1 (01:37):
What led you to Chinese food?
Speaker 3 (01:39):
Well, you know, I think that it was just sort
of a guilty pleasure when I was younger. My dad
loved Chinese food. You know, he and I were so close.
He passed away pretty young. I have such fond memories
as a kid of eating Chinese food with my dad.
I imagine it's not just the culinary side, but a
little nostalgia as well.
Speaker 1 (01:56):
Oh that's great, So we're div into more Serria stuff.
As you know, the Trump administration stance on trade and
tariffs has been a defining feature of their economic policy.
From your perspective, how do you see their approach to
trade compared to previous administrations, particularly in terms of tariffs
(02:18):
international negotiations.
Speaker 3 (02:20):
Well, mister speaker, it puts me in a tough position
because I maintain a certain traditionalist, kind of Reaganite Milton
Friedman classical conservatism on the matter. And yet I'm not
sure that I would put President Trump squarely in a
protectionist box either. There are definitely times that he talks
(02:41):
that way, and it isn't my favorite part of his
economic agenda. But at the same time, I think that
there has been a posture so far to use tariffs
for negotiation, and someone like me who wants to see
more total trade and let it be a boost to
American economic interest, American workers, American economic growth, I believe
(03:04):
that there's a possibility of using tariffs to negotiate for
better arrangements. The confusion over the last six weeks has
been I'm not sure that there's a great deal of
clarity for economic actors as to what is about fentanyl,
what is about border security, what is about fairness? And
then what is about some sort of protectionist idea. Of
(03:28):
all the different agendas out there, the one I'm most
comfortable with are all of the above, besides the protectionist one.
Speaker 2 (03:35):
I do ultimately believe that using.
Speaker 3 (03:38):
Tariffs to try to protect one economic actor against another
American economic actor, I think is problematic overall.
Speaker 1 (03:48):
I mean, you've watched the opening couple of months. Have
you been surprised at the number of large investment announcements.
Speaker 2 (03:57):
I'm not surprised.
Speaker 3 (03:59):
I've been watching with a lot of attention a couple
of early on ones from soft Bank, and then this
sort of VC group they want to put together with
open AI and then even the Apple one. They grab
my attention a little less even though they had bigger numbers,
because they were intent to do something. They hoped to
go raise the money to then do a lot of
(04:21):
this large investment. And I think those are beneficial headlines
for the president. They're certainly a great way to curry
the favor of the administration, and so they're positive in
that sense. But a smaller announcement that is a bigger
deal to me is things like Hyundai this week. Twenty
billion doesn't sound like as big of a number as
five hundred billion, but this is twenty billion real dollars
(04:44):
versus five hundred billion potential dollars. And so I do
think that gaining investment in the United States is a
good thing, and I do believe the best way to
bring capital to our country is to be a place
worthy of other capital, with better environment, better regulatory environment,
rule of law, and all the things we believe in.
Speaker 1 (05:05):
In that context, how important is the development of the
tax cut and Regulatory Reform bill sometime early this year.
Speaker 2 (05:17):
It's incredibly important.
Speaker 3 (05:18):
I was just at the Treasury Department last week having
meetings to this exact effect. I believe that what people
have to understand right now versus the first administration is
in twenty seventeen, his first year of Trump one point
zero that was the largest corporate tax reform bill in history.
(05:39):
They thought optimistically they may repatriate one trillion US dollars
and it ended up being one point eight trillion. It
is a massive factor as to how the economy held
up so well through the Biden administration and.
Speaker 2 (05:54):
Post COVID period.
Speaker 3 (05:56):
Not only the reduction of a corporate tax rate that
was highly known on competitive at thirty five percent coming
down to twenty one percent, elimination of a lot of
loopholes and crony deductions, but there was just a regulatory
and tax reform apparatus that was highly supply side friendly,
in other words, incentivizing the production of the American economy
(06:18):
that we desperately needed. The tariffs came in twenty eighteen.
In the second year, you had one of the best
years you could imagine for the stock market. In twenty seventeen,
you got great real GDP growth.
Speaker 2 (06:30):
And you signed that tax bill into law.
Speaker 3 (06:33):
Then we went through a kind of choppy year trying
to find our footing around what was going to happen
or not happen with tariffs this time. By going in
the reverse order, I think they risk not having some
of the economic, not to mention, political capital in place.
If there's going to be a period of uncertainty, chaos,
(06:54):
challenge around tariff announcements.
Speaker 2 (06:56):
I would rather the TCGA be.
Speaker 3 (06:58):
Made permanent first, and that a lot of the benefits
of deregulation and doge.
Speaker 2 (07:03):
Sink in first.
Speaker 3 (07:05):
What has happened is sometimes you feel like maybe the
administration's lost focus on that issue. I don't think the
President has, and I definitely do not believe Secretary Beson has,
but I think markets have questioned are we going to
get this tax reform or not? Particularly for those of us,
mister Speaker, who know how complex it's going to be
to get the tax reform done with this budget reconciliation process,
(07:28):
People's eyes glaze over when you talk to them about
what has to happen procedurally to get it through. But
it matters a great deal, and we still don't have
a policy baseline in place as to what they're going
to base the budget reconciliation off of. There's a few
trillion dollars on the line there in terms of tax cuts.
Speaker 1 (07:47):
I've been impressed partly because Speaker Johnson, with his very
tiny majority, has just firmly and steadily said we got
to get this done early. We're going to get this
done early, has to be bill and gradually. I think
he has convinced the Senate that that's the right strategy,
and I'm now moderately optimistic that they'll get a bill
(08:08):
done in May or very early June.
Speaker 3 (08:11):
Yeah, it's come up a great deal in the probability,
and I'm with you there. The Speaker has been phenomenal,
and I have to say President Trump has had his back.
He's worked the phones behind the scenes where they had
no margin of error to get that budget across the
finish line.
Speaker 2 (08:25):
So I'm very hopeful.
Speaker 1 (08:27):
To what extent does cutting spending and getting spending back
under control also create lower interest rates in a better
environment in which to imagine economic investment and growth.
Speaker 3 (08:42):
It is probably the single lowest hanging fruit imaginable to
not only control the long end of the yield curve,
move interest rates lower and stimulate capital investment, but then
it also stops digging the ditch that is the whole
that is most impeding us, which is a debt to
GDP ratio is climbed from a post war average of
(09:02):
about seventeen percent to near twenty five percent. The thirty
six trillion of debt gets all the attention because it's
a huge number, and it's sensational and it's obviously problematic,
But the debt to GDP number is the number that
we should be most concerned with, the ratio of debt
growing faster than economic productivity is growing. By getting spending
(09:27):
under control and allowing the private sector to do what
it does and economic growth to move faster than debt
is growing, then we have a chance of saving this.
Speaker 2 (09:38):
The only thing I would say.
Speaker 3 (09:39):
Versus what you all were heroically doing in the late
seventies and early eighties is we've dug the whole thirty
six times bigger since then.
Speaker 1 (09:48):
I'm very proud of the fact that while we were
the first majority in forty years, we actually balanced the
budget for four three years, which is the only time
in the last century, which is sort of a bad
comment on how profligate we've been as a country. As
I left the speakership, Alan Greenspan, who was the Chairman
of the Federal Reserve at the time was giving a
speech that they were estimating we would pay off the
(10:11):
national debt by two thousand and nine, and they weren't
sure at the Fed how they were going to manage
the money supply if there was no debt. Of course,
it didn't turn out that way, but at the moment
it seemed awfully good. Now, from your perspective, with all
the turmoil we're describing here, big spending cuts, tariffs of
some kind, a tax cut bill will eventually get done,
(10:31):
but it's not done yet. How does all that weave
together in terms of the chance of us dipping into
a recession this summer.
Speaker 3 (10:39):
I think if we were to have a recession this summer,
we likely wouldn't know about it until the fall, and
it would be caused by some contraction in capital goods, investment,
in productivity, industrial production that.
Speaker 2 (10:53):
Right now is not necessarily in the cards.
Speaker 3 (10:56):
But President Trump had the highest small business optimism reading
that they've had since the NFIB started doing the data
in the month after the election, and then last month
the small business uncertainty index was the highest it had
ever been. So that's a difficult thing to wrap my
(11:16):
arms around. But I do believe it's a byproduct to
some of the things you're referring to, just a little
bit of uncertainty as to what exactly is going to happen.
Speaker 2 (11:24):
My own read on it, and I'm not, by.
Speaker 3 (11:26):
Any means a political insider, but I think the messaging
I hear from Treasury gives a little more clarity than
the messaging I hear from commerce, and that's part of
the issue.
Speaker 2 (11:36):
And we'll see what happens on April second.
Speaker 3 (11:38):
But I do believe markets and not just financial markets
and risk assets. A lot of people think I'm always
talking about the stock market.
Speaker 2 (11:46):
That's not what we're really referring to here.
Speaker 3 (11:48):
It's businesses being able to invest in a new factory,
new R and D, new hiring plans.
Speaker 2 (11:55):
It's tough to do that when uncertainty is high.
Speaker 3 (11:57):
And I think that the biggest risk to recession is
if I'm certain to get so high in April May
that in June July we tip over.
Speaker 1 (12:21):
I think with small businesses, they don't quite know what
the effect of the tariffs is going to be on
the products that they have to buy. I think that
really the sort of thing you have to look at
and worry about in a serious kind of way.
Speaker 3 (12:34):
Can I add to that also what they have to
sell that many of these companies are exporters, and if
they face retaliatory tariffs, there ends up being a knock
on effect there as well.
Speaker 1 (12:45):
Yeah, if you're a small manufacturer, it could have a
devastating potential impact, or at least something that you have
to adjust to and take into account. I noticed that
the former Treasury Secretary Larry Summers did say that he
thought there was about a fifty percent chance of a recession.
Do you think that he's overly pessimistic or does that
(13:06):
seem about reasonable?
Speaker 2 (13:07):
I never like those things.
Speaker 3 (13:09):
Wall Street firms do it all the time too, where
they'll say, oh, it was thirty percent and now we
think it's forty percent, and I think that it's a
little bit arbitrary. Do I think that whatever the chances
are of a recession are higher now than they were
two months ago? Yes, fifty percent seems a bit high,
But again I believe that the more important piece is
(13:31):
that we could get subpar growth. That's the thing that
I never understood in the eight years of the Bomb administration.
We did not have a recession after we came out
of the financial crisis, and yet we had eight consecutive
years of subpar growth. I no more want subpar growth
than I want a recession. All of it is bad
(13:51):
for our children and grandchildren, and so we want to
be operating at an optimal full capacity scale. And I
do think that right now they're there are some animal
spirits on the corporate side that are being held in.
Speaker 1 (14:04):
I kind of wonder if Trump once everything stabilizes, if
it's clear what the tariff policy will be, and we
actually pass the tax cut and regulation reform bill by
mid June, I wonder if you don't see a similar
explosion people finally saying Okay, I get it, I can
understand this, I can work in this operation.
Speaker 3 (14:26):
There is a great pent up possibility of a lot
of those things. The other piece that you and I
both would add to the optimistic mix is energy independence,
the ability to combine with a tax and regulatory portfolio,
a real commitment that I think is not ambiguous. There's
a lot of areas for administration. I give them an
(14:47):
eight out of ten, and there's the one area we
talked about.
Speaker 2 (14:50):
With trade that I have a lower score.
Speaker 3 (14:51):
But energy is one from Chris Wright at the Energy
Department and Secretary Bergham and Interior to Trump one point
zero and now two point zero legacy that I score
a ten out of ten, and that.
Speaker 2 (15:03):
Supply side growth as well.
Speaker 3 (15:05):
That's permitting approval, removing impediments for what is a growth
industry not just environmentally better, not just geopolitically better, but
it's a growth opportunity for good paying wages that do
not require college degrees, to a.
Speaker 2 (15:21):
Working class segment of American economy.
Speaker 3 (15:23):
I think it's a tremendous aspect of this overall economic story.
Speaker 1 (15:27):
It may fit in geopolitically too, because if we go
back to really accelerating liquefied natural gas exports to help
the Europeans wean themselves off of Russian gas, it becomes
a double win for.
Speaker 3 (15:39):
US, that's right, and Asian and European customers that are
able to ramp up their intake capacity while the Biden
administration shut.
Speaker 2 (15:48):
Off our out take capacity.
Speaker 3 (15:49):
It was really a surreal policy decision that was made
late in his administration.
Speaker 1 (15:54):
I don't want to get off on the politics of it,
but it does strike me that there were an amazing
number of ways in which they did not understand markets
and they didn't understand economies. The opposite of recession, of course,
(16:21):
is the whole inflation problem. It seems to me that
it's been harder to bring it down than people thought
it would be.
Speaker 3 (16:28):
Well, and I think a lot of this, mister speaker,
has to do with what I refer to as the
political problem of inflation. That it doesn't do me any
good to talk about economics or Milton Friedman or monetary
phenomena when someone says egg prices just went up one
hundred percent. Egg prices did not go higher because of inflation.
Inflation is an economic term for the whole price level
(16:51):
going higher. And we have a problem of political inflation
because we have three areas of economy that, for twenty
five years in a reasonably disinflationary period, three areas went
higher and higher and higher above wage growth and above
the price level growth. And that is housing, healthcare, and
(17:13):
higher education, the only three areas of the American economy
subsidized by Washington d C. So I think the political
story with inflation goods. Inflation year over year has been
zero percent two years in a row. The monetary inflation
we faced in the immediate aftermath of the COVID excesses
and the supply shutdowns.
Speaker 2 (17:35):
Has largely been corrected.
Speaker 3 (17:37):
One off issues around eggs because of bird flu issue
with chickens. You know, there's no FED governor or president
that can do anything immediately about that. But I think
that housing is where Americans feel inflation. Housing is where
young people are spending fifty percent of their paycheck on
their rent or It's incredible.
Speaker 1 (17:58):
But isn't the overhang of housing now likely to lead
to a pretty substantial declining cost.
Speaker 3 (18:05):
Well, we are not yet out of place of an
overhang in terms of national supply. I mean, there's more
inventory available than there was last year, but we're still
very tight compared to historical norms, and transactions are at
a thirty year low. There's a sort of seller's strike
right now. They have three percent mortgages. They're ready to
(18:26):
upgrade to a bigger, better home, but they don't want
to go take a seven percent mortgage. So artificially low
interest rates become a problem later in a period of
more normalized rates. The FED wants to clear the market.
They're not going to get it back down to three,
but perhaps around five versus seven, you start.
Speaker 2 (18:45):
Moving that a bit.
Speaker 3 (18:47):
But no, I believe that housing represents the biggest inflation
threat that we have.
Speaker 1 (18:52):
And so that's leading to a lot more multifamily apartments
and condos and things, because young people have to go somewhere.
Speaker 2 (19:02):
That's right, And it isn't like those who have gotten
to either.
Speaker 3 (19:05):
You know, rents are still a very high multi family product.
Speaker 2 (19:09):
We did build a lot of new inventory for a
number of years, but then that stopped.
Speaker 3 (19:14):
Over the last couple of years, permits really came to
a halt. Higher interest rates and higher insurance costs made
multi family construction less economical. Cities that were booming, like
Austin and Phoenix and Nashville and many Florida cities, they
saw a lot of new multifamily inventory come online. But
(19:35):
we're substantially underbuilt as a country in single family residents.
Speaker 1 (19:40):
And you don't think that'll change until you get down
to much lower mortgage rates.
Speaker 2 (19:45):
Much lower mortgage rates.
Speaker 3 (19:46):
And again, the federalist in me has to always point
out that Washington, DC can't do everything states like California
and New York. You know, I sort of jokingly, except
for I was being serious, said to our friend Mark
Halprin the this morning on Tue.
Speaker 2 (20:01):
Apparently we know the blueprint for what.
Speaker 3 (20:03):
To do about getting more supply in blue states, because
I heard the Governor of California say it on Meet
the Press the week or two after the fires. He said,
what they're going to have to do to rebuild is suspend,
seek a give zoning relief, permitting relief, regulatory relief. And
I thought, I agree with everything he just said, except
for I didn't need the fires to know that that
(20:25):
would work.
Speaker 1 (20:26):
And we'll see if you can get the California legislature
to do it.
Speaker 2 (20:29):
What's your reaction to the whole.
Speaker 1 (20:32):
Department of Efficiency, the DOGE effort, and the way they've
moved forward.
Speaker 3 (20:37):
Well, I am mostly very supportive and sympathetic. A concept
of it I liked a lot. I think the personality
of it changed publicly with Viv stepping aside to go
pursue his Ohio race. He has a certain eloquence and
skill is a messenger that I think would have been beneficial.
(21:00):
Mitch Daniels said something about DOJ a couple weeks ago
that stuck with me that his advice would be for
them to basically do what they're doing, but to talk
less and do more. And part of me wonders if
we didn't hear anything about it for six months, no tweets,
no videos, no website update, and just in six months
(21:23):
they called a press conference and gave us the list
of everything they had done. I think it would have
ninety five percent approval with the public. But this kind
of day by day stuff, putting stuff on the website,
having to take it back, there's mistakes made, There's a
lot of messaging chaos that could be a reflection of
my personality as a more traditionalist that I'm a kind
(21:44):
of measure twice cut once kind of guy, And this
lends itself to a certain degree of chaos that I
understand is unavoidable. But I think that the public's approval
of it dropping twenty percent is largely stylistic, and part
of me thinks the substance of it is still going
to be very popular.
Speaker 1 (22:02):
When you look at all this and you just close
your eyes, we get politics, et cetera. You know Trump
talks about a golden age. Do you think ten years
from now America is likely to be dramatically better off,
a little better off, or still sort of in the doldrums.
Speaker 3 (22:18):
For us to be in a better place than ten years,
America cannot be as secular as a country as it
is now. It is going to have to re embrace
and there are signs that it is doing so, that
gen Z is a bit more open to church and
to Synagogue into embracing some of the Jeneo Christian principles
of our nation than jen Why was but in ten
(22:39):
years to come out of the doldrums, It's not going.
Speaker 2 (22:41):
To be because of egg prices.
Speaker 3 (22:43):
It's not going to because GDP came up from two
point four to two point eight. There is a spirit
around the country that is not in a good place.
And there's a lot that can be done on a
policy front, and there's a lot that needs stapen economically.
Speaker 2 (22:57):
But I still believe the largest.
Speaker 3 (22:59):
Things that plays are cultural and that sort of restoration
of a Tokvillian vision of the country with strong communities.
Speaker 2 (23:07):
It's going to be very hard for that to be
back in ten years.
Speaker 3 (23:10):
The nineteen sixties radicalism that undid it didn't work in
ten years. It took thirty or forty. We're going to
need more than ten to get back.
Speaker 1 (23:18):
This is why I think the twenty twenty six election
is so important. You have to keep the House, you
have to keep the momentum. You have to win the
election of twenty eight for a president, Senate, and House.
And if you can get three terms in a row Trump,
and then two terms for the next president, you probably
by then will have locked into place patterns and trends
which will have ended the Roosevelt era and move us
(23:40):
towards a more decentralized, more voluntarism and more faith based
society than we've been in the last thirty or forty years.
Speaker 3 (23:49):
I think that there's a lot of merit to that,
and that for us to conscientiously do that. It also
provides the political capital and do some of the big
difficult things that will have to be done entitlement reform
and so forth. So there's a lot of wood to chop,
but one election at a time, and in the meantime.
Speaker 2 (24:09):
I still believe, as much as all of us.
Speaker 3 (24:11):
Are oftentimes stuck in the political sphere and the economic
sphere policy, so much of this will come down to
our own efforts with our families and communities and churches
as well.
Speaker 1 (24:21):
David, this has been a lot of fun I've been
reading your ads with Alprin, so when told me that
you were available on going to join us, I was
really thrilled and it's certainly lived up to all of
my hopes. I hope someday in six months or so,
you'll come back and give us another view of how
the world's evolving. I want to thank you for joining me.
I want to let our listeners know they can sign
up to get your newsletter Dividend Cafe by visiting your
(24:45):
website at the Bonsgroup dot com slash Dividendcafe. And if
you're in stued in politics like we both are, you
can sign up to watch the morning meeting sponsored by
the Bonson Group at two way dot tv. Thank you very.
Speaker 2 (24:59):
Much, Thank you so much for having me. It's been
a privilege.
Speaker 1 (25:06):
Thank you to my guest, David Bonsen. You can learn
more about his company, the Bonsen Group on our show
page at newtsworld dot com. Newtsworld is produced by Gainglishtree
sixty and iHeartMedia. Our executive producer is Guarnsey Sloan. Our
researcher is Rachel Peterson. The artwork for the show was
created by Steve Penley. Special thanks to the team at
(25:28):
Ginglishtree sixty. If you're been enjoying Newtsworld, I hope you'll
go to Apple Podcasts and both rate us with five
stars and give us a review so others can learn
what it's all about. Right now, listeners of Newtsworld consigning
for my three free weekly columns at Gainglistree sixty dot
com slash newsletter. I'm Newt Gingrich.
Speaker 2 (25:47):
This is Newtsworld
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