August 7, 2025 • 38 mins
Newt talks with David Bahnsen, founder and chief investment officer of The Bahnsen Group, about the importance of balancing the federal budget and addressing the national debt, which is nearly $37 trillion. He reflects on his past success in balancing the budget as Speaker of the House in the 1990s and emphasizes the need for fiscal responsibility. Bahnsen shares his nuanced views on the Federal Reserve's role in setting interest rates, arguing against the need for a Central Bank to set the price of money. Bahnsen critiques the current monetary policy and the impact of tariffs on the economy, expressing concerns about the effects on small businesses and advocating for pro-growth policies. Their conversation also touches on the challenges of entitlement reform, the impact of foreign investment, and the need for effective communication in political discourse. Bahnsen's Dividend Café newsletter offers insights into market trends and economic perspectives, aiming to provide objective advice for investors.
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Episode Transcript
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Speaker 1 (00:04):
On this episode of Newts World. I think one of
the most important things we have in our agenda as
a country is to balance the federal budget and pay
down the national debt. The national debt is nearly thirty
seven trillion dollars right now, and it's going up. I
think we owe it to our children and grandchildren to
balance the budget and bring fiscal responsibility back to the
(00:26):
federal government. As Speaker of the House in the nineteen nineties,
I led the only effort in the last hundred years
to balance the budget for four straight years. So I
know it can be done because we did it. We
were successful then, and we can be successful again if
we do what it takes. My guest today is the founder,
(00:46):
managing partner and chief Investment Officer of the Bonson Group,
David Bonce, overseeing the management of seven billion dollars in
client assets. Prior to launching the Bonson Group, he spent
eight years as a managing director of Morgan Stanley and
six years as vice president of UBS. He is consistently
(01:07):
named one of the top financial advisors in America by Barons, Forbes,
and The Financial Times. He's the editor of the Dividend
Cafe newsletter. David, it's a great honor to have you
(01:33):
with us, and given the scale of your knowledge, thank
you for joining me again on news World.
Speaker 2 (01:38):
Well, thank you so much for having me, mister speaker.
Speaker 1 (01:41):
Let's start with the FED and then go to tariffs.
What do you make of the whole argument right now
about what the appropriate rates should be and what the
chairman of the FED is trying to accomplish.
Speaker 2 (01:54):
Well, as I find is often the case these days,
my views require nuance, and nuance is sort of out
of style. Most people are expected to sort of emphatically
be on one particular side or another. I believe, first
of all, that there is no need for a central
(02:14):
bank to set the price of money. I do believe
in having a FED, so I'm not in the camp
that some of my friends are of no FED whatsoever.
But I don't believe we need the FED to set
interest rates. I believe they can serve as a lender
of last resort that provides a sort of Hamiltonian function
(02:35):
in the economy and avoid some of the things we
were afraid of that happened at the end of the
nineteenth century and beginning of the twentieth century. And yet them.
Setting an interest rate that banks will charge overnight to
be a reference rate for how all money is priced
throughout the economy is I believe, very intrusive and unnecessary.
But with that said, I am not going to win
(02:58):
that argument anytime soon. And we do have a Federal
Open Market Committee that sets the interest rate as a
policy tool to affect monetary policy in this country, whether
I like it or not. And I happen to believe
all at once that A the President is wrong to
job bone Chairman Powell about what the rate should be,
(03:20):
and b the Chairman is wrong to not be cutting rates.
I believe President Trump is right that the rate is
too high and that it is unnecessarily restrictive. But then
when he goes on to say, mister speaker, well, the
rate should be one percent or less because it would
save us money, I simply can't accept that argument. So
(03:44):
I think Chairman Powell has dug his heels in to
avoid looking like he's giving in to the President, which
I think is extremely unfortunate. But I believe that the
rate right now is unnecessarily restrictive and should be coming
down based on all the criteria that the Central Bank
is given to effect monetary policy.
Speaker 1 (04:04):
If you think about it for a minute, there are
two parts of this. I mean, in terms of the
huge amount that we're now paying an interest on the
federal debt, that's really set in the long run, not
by the FED but by the bond holders. I mean,
the FED could artificially lower the rate, but if people
won't show up to buy the bonds, then the rate
for the bonds has to go up in order to
(04:26):
get enough people in the market. I mean, what am
I missing?
Speaker 2 (04:30):
Well, that is definitely true, but the problem is that
it is heavily manipulated, influenced by the FED. Because, first
of all, the term structure of our debt is extremely
short term. Much like a mortgage holder when they get
an interest only loan that's really cheap for like let's say,
(04:51):
a three year period versus a thirty year fixed and
they can't really afford the house with the longer term
mortgage fix, they go to the shorter term. Our government
has done that for a long time, and most states
do that in their municipal borrowings too, So we have
a very short term structure of the debt, shorter than ever,
(05:12):
much shorter, by the way than when Bob Rubin was
Treasury Secretary and you were succeeding in balancing the budget
in the nineties. I think that when the long term
rates were around one and a half two percent a
few years ago, that Secretary Minuchin had a chance to
try to lock the debt, but he wasn't able to
(05:33):
do it. And so there is a big influence of
the short term rate on the cost of borrowing. But
then others will say, well, but still people have to
show up to buy it, and at the United States
became credit unworthy, then people wouldn't show up and it
would bid the rates higher, not as theoretically true, but
as the world's reserve currency and as the best house
(05:57):
in a bad neighborhood. There is no synario that we've
ever experienced where nobody showed up to buy our debt.
The buyers have changed. There's been periods of time where
it was insurance companies, banks, retirees, investors, other times where
it's been sovereign countries, foreign investors. They own about seven
(06:17):
trillion of our thirty trillion a bond debt. And then
of course after the financial crisis, the Fed themselves became
a buyer, buying about eighteen percent of our debt sits
on the balance sheet of the FED through what was
called quantitative easing. Now that's low compared to other countries.
Bank of Japan owns almost their entire bond market. Our
(06:39):
central bank is a buyer at private investors are a buyer.
And so you're right that the rate will ultimately get set.
But when it's a short term rate and the FED
is setting the short term cost of money, the FED
has incredible ability to manipulate that price of money.
Speaker 1 (06:55):
I tend to agree with you that the inflation level
does not just the current interest rate set by the FED.
But as a practical matter of you get into a
circular argument that, on the one hand, you don't want
the president making monetary policy political. On the other hand,
if the Fed's doing something that weakens the entire economy,
(07:17):
the leader of the country has some obligation to at
least speak out. And how do you balance those two.
Speaker 2 (07:24):
Well, it's tricky. There's a historical precedent that some of
that effort was done privately. You were a speaker at
the time, as I recall, when Alan Greenspan famously spiked
rates very violently, very dramatically in nineteen ninety four and
surprise the heck out of markets. It actually is what
put Orange County, California into bankruptcy because it caught them
(07:47):
off sides with what they expected would be happening in
their portfolio. And at the time President Clinton didn't publicly
job Oone Chairman Greenspan about it, but Vice President Gore
had some very stern talks in private with the Secretary.
So I guess I'm appealing to my fondness for conservative
norms here that if there's going to be conversation, as
(08:12):
Secretary Baker had with Paul Volker and as Nixon famously
had with Arthur Burns, I prefer they'd be done privately
and not out in the public eye to maintain our
credibility in global markets. If the Central Bank loses some
of that credibility, and I'm not suggesting it has one
hundred percent of it, but it has enough of it
(08:33):
to keep financial markets in a certain realm of seriousness,
and I think undermining that independence is just on the
margin problematic.
Speaker 1 (08:42):
I can't resist. You mentioned green Span. You may remember
that about the time I left the speakership, green Span
testified to the Senate that they were projecting that we
would have paid off the national debt by two thousand
and nine and had a working group trying to figure
out how you manage the money supply if there's no debt.
That's one of the prouder moments of my career.
Speaker 2 (09:02):
Frankly, well, and along those lines, you recall that in
the two thousand presidential debates between candidate Bush and candidate Gore,
one of the questions was what they planned to do
about all his surplus money. And then think about that
question being asked now.
Speaker 1 (09:19):
That's exactly what Although I'm trying to work with the
two budget committees in the House and Senate to launch
a serious effort to sort of do once again what
we did in the nineties and balance the budget, which
is a bigger job now, it doesn't strike me that
they are likely to raise rates enough to push us
into a recession next year. That there's somewhere between stability
(09:40):
and very slight reduction.
Speaker 2 (09:43):
Yeah, well, that is correct. If we were to tip
into recession, it would not be driven by monetary policy,
and what would happen is that they would then overcompensate,
as they always do, and the drunken peasant would fall
off on the other side of the horse. This is
the great argument of against it highly interventionist FED, is
that they're constantly playing catch up. They go too tight
(10:06):
too long, and then it makes them go too easy
for too long. I don't believe they're going to be
hiking rates at all. I think that they will end
up cutting in the September meeting, particularly in the aftermath.
Now Chairman Palell has cover to sort of save face
to cut now because of the jobs report that came
out a few days ago. But ultimately the problem here
(10:30):
is that they are restrictive, and it isn't just the
inflation level. There's a lot of people that have been
programmed to believing that the FED controls inflation and the
FED can affect inflation. I'm a Milton Friedman guy through
and through that inflation is always, in forever a monetary phenomena.
But see what he said. We always quote only half
(10:52):
of what he said, that it is too much money,
we forget chasing too few goods. And Ronald Reagan never
gets the credit he deserves for killing inflation. We talk
as if it were only vulgar spiking rates that did
it in the eighties, the supply side revolution produced more
(11:14):
goods and services that soaked up excess money supply. So
what we need is very similar to what you were
so successful with in the nineties and balancing the budget.
It was not merely cost discipline, which is courses entirely
lacking in the Congress now, but it was growth. We
needed revenue, and that is both anti inflationary and anti debt.
(11:40):
It is pro growth.
Speaker 1 (11:57):
I was part of the Merry Band in eighteen seventies
with Jack kempan others, trying to really win the debate. Well,
you could have a supply side solution, which at the
time was considered radical until Reagan adopted it and then
got it done. I'm a very big believer that you
defeat inflation with more goods and services, not with more pain.
(12:20):
But let me shift gears now. Probably the greatest Trump
revolution so far has been breaking up the world trading
system that had existed and beginning to replace it with
a much more bilateral system that uses tariffs. But I
think the story is not just about tariffs. He uses
(12:43):
tariffs for the purpose of forcing negotiations which often range
way beyond tariffs and get US into investments and sales
and all sorts of things. And it's based on a
simple model in his head that we are the largest
economy in the world, so you want to be here
more than we want to be where you are, and
therefore we can charge you a fair amount for you
(13:06):
to be here. And so far, at least on the surface,
it seems to have led to very dramatic changes. But
what's your take on this whole tariff process.
Speaker 2 (13:17):
I'm apologized in advanced mister speaker, that this is an
area where I do disagree, and I recognize the nuances.
And what I will say about what the work Secretary
of BACENT has done and where I think the President
stands that I'm excited for is if some of the
byproduct of this effort is to open up new markets.
In other words, I'm saying something sort of paradoxical. I
(13:40):
will celebrate it if it creates more trade, But I
do not believe that the notion of the President and
the White House and politicians in Washington, DC sort of
setting the rules of commerce is something that conservatives should celebrate,
and the notion that we are a store and that
(14:00):
they will set the prices of it I think is
a very anti market notion. Now, I understand that to
the extent some countries have charged higher tariffs and we
want to fight for reciprocity. I've always believed that if
a country wants to hurt its own importers and its
own domestic consumers by charging higher tariffs, we don't hurt
(14:24):
them by trying to reciprocate by hurting our own importers
and our own consumers. But that at least has a
ring to it reciprocal charges. However, what we're really seeing
here is a lot of non reciprocity, moving the total
rates higher, not lower. But the ideal tariff rate i'd
(14:44):
love to see is every country charging each other is zero.
But to the extent of the net effect here is
going to increase the total cost to American business. Best
case right now looks like it's going to end up settling,
assuming we'd you end up getting a deal with India
and some of the holdout countries. Brazil looks to be
(15:05):
the one that's going to be hardest. About four hundred
billion best case and six hundred billion, I think is
very realistic, and it disturbs me a little to hear
us refer to that as us making that money, bringing
that money in to our country. That is money that
goes out of our businesses, and it is a cost
(15:27):
to the economy. It is a cost that goes from
the balance sheet of the private economy to the balance
sheet of the governmental economy, which is a reduction in productivity.
So I'm fearful, but cautiously optimistic that if we can
get better markets opened and ultimately negotiate better deals, if
(15:49):
total trade collapses, regardless of what happens with the trade deficit,
if total trade drops, then capital flows will drop. And
the basic algebra of this is that our total investment
is equal to total savings, and total savings includes foreign capital.
People want to put money in our country for a
good reason, and if we lose some of that foreign
(16:13):
capital on the margin, then I believe it will impact productivity,
impact labor, and ultimately impact economic growth. So I recognize
my opinions a little outside the consensus right now.
Speaker 1 (16:26):
But we wanted your opinion. You're here to provide your
version of reality, and I respect that. One of the
things which has surprised me is and I first noticed
that in Trump's swaying through the Persian Gulf. He kept
coming up with like four hundred billion dollars and purchases
for Boeing and then four hundred billion dollars of investments
(16:48):
in the US. That was a sauty version, and it
was sort of matched by the other two countries he visited.
He was coming home with almost two trillion dollars in commitments.
How do you measure the impact on the American economy
of those kind of commitments.
Speaker 2 (17:03):
Well, the commitments have no impact on the economy, but
the actual activity will have a measurable impact. And that's
why I hope I have the integrity and objectivity because
I'm not a flaming partisan who wants to criticize everything
the president does, nor am I trying to say this
is going to be the most messianic thing ever done.
(17:25):
We will objectively be able to measure the success of
some of these things by the two metrics I just
said a moment ago, which is total trade and capital flows. Look,
the optimistic version is exactly what you said, that they
will order things that they worked in order before and
it will result in more FDI foreign direct investment. And
(17:46):
in case it isn't clear how big of a fan,
I am a secretary of descent. This is exactly what
he's now been saying, which is categorically different than what
Pete Navarro had been saying before. The agenda for tariffs
had been as protective tariffs to try to boost domestic manufacturers.
(18:06):
Secretary Vestant is talking the same way you just talked
about opening up new markets getting new foreign orders. The
problem is that there's a lot of ambiguity as to
what it means. I'm not totally comfortable with those tweets
where they will say the president alone is going to
dictate how to direct this investment. I don't want President Trump,
(18:27):
or the ghost of President Reagan, or President Obama, or
even Speaker Gingridge for that matter, dictating what businesses are
buying and selling from one another. But I love foreign
capital coming into our country. SoftBank made a five hundred
billion dollar pledge and created a consortium with others after
the election, and they have so far spent zero dollars.
(18:50):
Now I believe they will spend more, and I think
a lot of the money is money that would not
have been spent otherwise. So I will give credit where
it's due. But I'm just trying to be politically honest
that it's going to take time to see, and if
there is some double counting, then we have to call
that out. There is a lot of this that was
going to happen anyways, but I want to measure it
(19:12):
by the marginal addition to you to total investment.
Speaker 1 (19:15):
You remind me, in a sense of Reagan's appropriation of
a Russian saying, trust but verify. Connie Mack once taught
me he'd been a bank president before he was a congressman.
He'd gone to a course on running banks, and they
taught him that you give what you inspect, now what
you expect. And I think there's going to be a
(19:36):
lot of inspecting here to see whether or not these
nice press releases become real policy. But having said that,
the other part of that in the One Big Beautiful
Bill was this one hundred percent expensing for new factories
as compared to I think it was a thirty nine
and a half year depreciation. Isn't that kind of a
staggering incentive to investment.
Speaker 2 (19:59):
And it's not the only one. So you have the
bonus appreciation on property put into productive use, and you
have one hundred percent business expensing for capital investment. So
think of inventories, not just real estate put to work
like building a factory, but machinery bought to put in
a factory. And you also have a better deductibility for
(20:23):
R and D research and developments quote unquote soft capex,
which is great for our pharmaceutical sector and technology sector.
And you have greater deductibility of debt companies that borrow
money how to limit in what they could deduct and
that helps a lot in the private equity space and
middle markets. So there is some very pro growth in
(20:45):
supply side parts in the corporate changes. In the Big
Beautiful Bill. The CBO scored that those things would be
worth about three hundred billion. Some could say two hundred billion,
some could say a little more. My point would be
that the tariff cost is going to be higher than that.
So I think that we have one side of the
(21:05):
pool adding water and the other side of the pool
making it out a little. I would have loved to
see all those things in the Big Beautiful Bill happen
without the offsetting cost of the tariffs. But those things
are my favorite parts of the Big Beautiful Bill. And
by the way, speaker, because you and I are both
here to talk about budget impact. Those things do not
(21:26):
add to the deficit. They are cleanly pro growth that
pay for themselves with added revenue.
Speaker 1 (21:34):
It seems to me that the combination of this one big,
beautiful bill and all of its various tax provisions, and
its regulatory provisions, and the number of people making commitments
to invest in the US, even if you only got
half of those commitments, that there should be by next
summer a fairly strong economy. But I'm curious what's your view.
Speaker 2 (21:56):
My view is that this is one of the hardest
periods I've seen to forecasts because of the push pull
factors that we're up against. I think the labor markets
have weakened far more than we have realized, and the
base effect is always a big factor when forecasting out
one year of economic growth. What are you growing off of?
(22:18):
And if you're growing off of strong momentum in labor markets,
that's a wonderful tailwind. But if you're growing off of
impairment in labor markets, then there's a headwind there. I
think that there's been several months of uncertainty that has
really not affected large multinational companies so called S and
(22:40):
P five hundred types but I do think that there's
some issues we're going to have to overcome at the
small business level, which is where the vast majority of
new hiring is taking place. Most job postings right now
are companies with less than fifty employees, andfib's data has
not been great lately. So I'm internal optimists too. And yet,
(23:02):
if I were trying to be objective about what the
various factors are, if in a year from now, economic
growth has stayed muted, I believe that will be the
reason that the small business side economy that has been
disproportionately impacted by tariffs. The larger companies that have access
to capital markets, that have lobbyists and accountants and lawyers
(23:24):
and exceptions and waivers, and also just the ability to
plan better around it, they may not be affected as much.
But I think the small business side I'm a little
more worried about.
Speaker 1 (23:35):
So you write the Dividend Cafe. Tell us about the
Dividend Cafe.
Speaker 2 (23:40):
Well, it's my weekly market commentary, economic perspective. Anybody who
reads it would be able to tell pretty quickly where
I come from economically and politically and what my belief
system is. But I really write it to try to
provide objective advice for investors and economic actors. I began
writing it in the aftermath of the Lehman Brothers bankruptcy
(24:02):
in two thousand and eight. I was a managing director
of Morgan Stanley at the time, and every single day
a New Wall Street firm was going under or merging
or dealing with the drama. And I began writing into
that time and then I just never stopped, And so
it's something we put out for free. Originally I was
doing it for our few hundred clients, but we're now
(24:23):
managing over eight billion dollars. Hundreds of clients read it,
but so do tens of thousands of non clients, and
so I just figure, if it isn't broken, why fix it.
And even though something of the drama level of financial
crisis hasn't happened, since the news has kept me busy,
I never find myself lacking a topic to write about
every week.
Speaker 1 (24:44):
I think when you take what's happening on the world market,
you take what Trump is doing, you take the rise
of artificial intelligence and other breakthroughs, the impact of modular
nuclear in suddenly empowering all sorts of computer centers, little
scale of change we're going to go through, I think
is going to resemble the period eighteen seventy to nineteen twenty.
(25:06):
And having people like you who are smart, who are
trying to wrestle with what is all this and what
does it mean? I find really helpful for somebody like
me to be able to sort of try to get
inside your thinking and then is frankly steal as much
of it as I can.
Speaker 2 (25:23):
Well, I appreciate you saying that, I think that the
optimism that we both share for a lot of these
opportunities in the economy is real. And I will say,
back to the subject of the balanced budget work that
you did in the nineties, the Internet happening at the
same time that that level of fiscal responsibility had come
(25:44):
in was a dual impact. We can't change the fact
that right now there's a lot of things happening that
are very opportunistic for forward growth. But they are going
to be happening with an economy that's currently at one
hundred percent public debt to GDP and one hundred and
twenty three percent total debt to GDP. And when you
(26:05):
were Speaker and President Clinton was president, over those three
years of balanced budgets, we were running about fifty percent
debt to GDP, so those ratios take away from future growth.
We have sort of prepaid bonuses, and that is the
problem why it has to be solved sooner than later,
(26:26):
because we're taking from our kids and grandkids what could
be even better opportunities. I remain optimistic, but unfortunately my
optimism now has one hundred percent debt to GDP to
contend with.
Speaker 1 (26:53):
In a little bit and argubout some of my fellow
supply siders who think, oh, growth will solve everything. The
truth is a Congress that's not under public pressure to
get to a balanced budget will simply spend the additional revenue.
And I don't think anybody's been able to make vivid
enough the sheer amount of money we're now spending to
(27:14):
pay interest on the debt. It's larger than the defense budget.
Speaker 2 (27:19):
It's become larger than the defence budget. I think with
what big Beautiful Bill did to increase a little defense spending,
that may go down a little, and if interest rates
come down, then that debt interest costs may drop a little.
But it's gotten to be very problematic. But the other
factor that if I remember correctly at least in ninety
nine when you had the second year of balanced budgets.
(27:40):
I believe the mandatory spending was thirty percent, discretionary was seventy,
and we've now turned that on its head. It's now
seventy thirty the other way. One of my other examples
of a criticism with President Trump that I'm sorry, we
can't address this without entitlement reform. We can't and we won't.
We will have to have grown up conversations about Medicare, Medicaid,
(28:03):
social security. There are solutions out there, but every year
they've gotten to be harder. When the Democrats were demonizing
Paul Ryan with the granny off a wheelchair nonsense, it
was a much more fixable problem. And what I believe
was then twenty ten or twenty eleven when President Obama
pointed his own Simpson Bulls Commission, which came out with
(28:25):
a lot of sensible solutions. I did not agree with
all of them, but I agreed with a handful. It
was a much more fixable solution. Every year that goes by,
it gets harder and harder. And the cliche about when
you're in a ditch doot digging I wish somebody would
listen to that. Well.
Speaker 1 (28:41):
I think that from my side, I separate them out.
I think social security can only be dealt with on
a totally nonpartisan basis, which is different than bipartisan, and
only when the American people have concluded that there's an
improvement rather than destruction. And that's a huge task and
(29:03):
is frankly the entitlement I would approach last. For that reason.
I just think it's very hard, very complicated. On the
other hand, you may remember that part of our getting
to a balanced budget, we invented a medicare advantage in
nineteen ninety six during a presidential campaign, and we had
worked with people enough that, in fact, we were able
(29:26):
to carry what normal would be democratic groups in supporting
what we were doing against Bill Clinton. And it's because
they concluded that it was real and that we were serious.
You can methodically change things.
Speaker 2 (29:39):
Now.
Speaker 1 (29:39):
One of the things I'd be curious about it is
I thought what they did on Medicaid this time was
reasonably responsible and defendable. Of course, it was disdemonized by
the left, but that's okay. I mean, that's just part
of the business.
Speaker 2 (29:53):
Yeah, it's part of the business. I always wish we
did a better job. You talked about winning the argument,
which is what you guys did in the early innings
of the supply side movement with Kemp in the late seventies.
I wish that the Republicans would try harder to win
the argument, because the Democrats have not just demonized, but
they have boldface lied about what we've done with Medicaid.
(30:16):
And what I found to be effective with clients with friends,
with conversations of both left leaning, centrist and right leaning
people is when they talk about Medicaid cuts. I said,
if I tell you that we were going to spend
X this year and we're going to spend more than
X next year, would you call that a cut? Nobody
(30:37):
says yes. But somehow they've gotten away with saying we're
cutting a trillion dollars from something that we're increasing spending
in every single year.
Speaker 1 (30:45):
One of the great frustrations of my lifetime effort in
the Republican Party is the willful refusal of Republicans to
learn how to communicate. I mean, it's no accident that
Reagan was a former Democrat, Phil Graham's a former Democrat,
Donald Trump's a former Democrat. They communicate dramatically better than
people who grew up inside the Republican Party. It's an
(31:07):
amazing cultural phenomenon.
Speaker 2 (31:10):
Well, it's so true. And I would even add beyond
the messaging and the marketing benefits and persuasive powers, but
as a man of faith that it refuses to abandon
my moral convictions. The welfare reform you passed in the
mid nineties I thought was most potent when it focused
on not how it was more fair to all of
us who were paying our bills, but how it was
(31:32):
better for the humanity and dignity of the people. A
workfare requirement was better for their souls, their dignity, their empowerment.
It was a very Jack Kemp argument. As you know,
this medicaid issue, beyond the fact that it's unfair, it
veered under President Obama so dramatically from what the intent
(31:52):
of medicaid is. The reality is that it is unfair
to these people to have their dignity taken away by
basically giving another transfer payment to them, as opposed to
a Medicaid that is truly there to help impoverished people.
And I don't hear Republicans making this argument. I just
(32:14):
don't And we need to.
Speaker 1 (32:15):
It's one of my great frustrations. Let me ask you, though,
in a Fox News up ed, you said, quote New
York City's shocking socialist victory is a dire warning for
the right, and you framed Zorund Mumdani's victory as a
warning for conservatives. Why do you think Mamdani won.
Speaker 2 (32:34):
Well on a political basis? The truth is that one
because the opponent was terrible and Governor Cuomo is attached
to so much unlikeability that he became a very weak candidate.
We talk like name recognition is always a positive. I
thought Hillary Clinton taught us that name recognition could be
(32:55):
a negative too. So he wouldn't win if there weren't
three opponents in the general. If he were running Mono
Imano against any one of the other three, whether it's
Curtis or Eric Adams or Andrew Como, he would lose.
But he will likely win because the baby is split
the other way. But how is he even in a
(33:17):
position to win and even obtain a forty forty five
percent plurality because his message sells When we accept the
premise the populism is an acceptable way of communicating about
the public good that because something is popular, free bread,
free groceries, government runs stores. The impracticality of these things,
(33:41):
the unaffordability, the ineffectiveness. We can say all that all
we want, but I believe that we have to reject
any form of populism that acts like it is good
public policy just because some people like it. And the
aocs of the left don't play by those rules. And
my fear is that the right sometimes is trying to
(34:03):
beat them by joining them, and I don't think we
can do that.
Speaker 1 (34:06):
We did a set of questions a couple months ago
on the difference between socialism by itself and big government socialism,
and it may surprise you had to head by fifty
to twenty two, voters prefer capitalism over socialism, by fifty
(34:26):
nine to twelve. They prefer free market capitalism over big
government socialism. So if you set the frame, he's not
just a socialist, but he's a big government socialist that
term because a lot of people vaguely perceive socialism as
caring for the poor, being concerned, et cetera. It's important
remember Bernie Sanders got forty three percent of the vote
(34:49):
against Hillery.
Speaker 2 (34:50):
That's right, and he would have got more if they
hadn't rigged it against him in the Democratic Party. You know,
I've been hearing for years, mister speaker, that young peopleeople
like socialism, and I've done so much analytics on this
as an economist, and i will tell you that it
just isn't true. But they do not like what they
have been told. Capitalism is. This is the great moral
(35:15):
duty we have in front of us post financial crisis.
A Randian secularist defense of markets will not sell, nor
should it. A morally rooted defense of free markets that
attacks cronyism. When young people think that capitalism means the
(35:37):
power of government attached to big business, they're not going
to like it. Nor should they, because I don't like
it when we defend free enterprise, free exchange, mutual cooperation,
division of labor, and an aspirational society. The language has
changed a bit since Jack Kemp in the late seventies,
(35:58):
but I was a very young person. I read him,
I would read you. In the nineties. I would read
my friend Larry Cuddlo a little later. I found it inspiring.
The moral defensive market sells to young people.
Speaker 1 (36:11):
And it's essentially a moral defensive freedom. The notion that
we claim in the document we're going to celebrate the
two hundred and fiftieth birthday next year. We claim that
we are endowed by our creator with certain available rights
along with your life, liberty and the pursuit of happiness, which,
by the way, in the Scottish Enlightenment meant virtue and
(36:31):
wisdom did not mean getting drunk and hanging out on
Miami Beach. But if you think about it, in order
to have the right to pursue happiness, you have to
have freedom.
Speaker 2 (36:41):
This was the whole fusionist argument that came out of
National Review in the sixties and seventies, and from Russell
Kirk to Frank Meyer to Bill Buckley. You have to
have freedom, and you want to channel that freedom into
virtuous activity, and it makes for a very good and
fulfilling life.
Speaker 1 (36:58):
Which, by the way, if you read link enough you
get exactly the same pattern. He understood it, he'd lived it.
It was his own personal life, and he was passionate
and willing to fight a four year war to defend it.
But I want to thank you. I always find it
very invigorating to talk with you. If you're very smart,
you have very clear ideas and values, and we are
(37:21):
going to let all of our listeners know that they
can sign up to get the Dividend Cafe by visiting
your website at the Bonsengroup dot com slash Dividendcafe. And
if you'd like to find out more about what David
is doing, you can visit his personal website at Bonsen
dot com. This has been great fun, David, Thank you
very very much.
Speaker 2 (37:41):
It's been an honor. Thank you, mister speaker.
Speaker 1 (37:46):
Thank you to my guest David Bonsen. You can learn
more about his company, the Bonson Group on our show
page at newtsworld dot com. Newtsworld is produced by Gingrich
three 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
(38:08):
at Ganglishtree sixty. If you've been enjoying Newts World, I
hope you'll go to Apple Podcast 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
news World can sign up for my three freeweekly columns
at Ganishtree sixty dot com slash newsletter, I'm new gingrich.
(38:28):
This is newsworld.
On this episode of Newts World. I think one of
the most important things we have in our agenda as
a country is to balance the federal budget and pay
down the national debt. The national debt is nearly thirty
seven trillion dollars right now, and it's going up. I
think we owe it to our children and grandchildren to
balance the budget and bring fiscal responsibility back to the
(00:26):
federal government. As Speaker of the House in the nineteen nineties,
I led the only effort in the last hundred years
to balance the budget for four straight years. So I
know it can be done because we did it. We
were successful then, and we can be successful again if
we do what it takes. My guest today is the founder,
(00:46):
managing partner and chief Investment Officer of the Bonson Group,
David Bonce, overseeing the management of seven billion dollars in
client assets. Prior to launching the Bonson Group, he spent
eight years as a managing director of Morgan Stanley and
six years as vice president of UBS. He is consistently
(01:07):
named one of the top financial advisors in America by Barons, Forbes,
and The Financial Times. He's the editor of the Dividend
Cafe newsletter. David, it's a great honor to have you
(01:33):
with us, and given the scale of your knowledge, thank
you for joining me again on news World.
Speaker 2 (01:38):
Well, thank you so much for having me, mister speaker.
Speaker 1 (01:41):
Let's start with the FED and then go to tariffs.
What do you make of the whole argument right now
about what the appropriate rates should be and what the
chairman of the FED is trying to accomplish.
Speaker 2 (01:54):
Well, as I find is often the case these days,
my views require nuance, and nuance is sort of out
of style. Most people are expected to sort of emphatically
be on one particular side or another. I believe, first
of all, that there is no need for a central
(02:14):
bank to set the price of money. I do believe
in having a FED, so I'm not in the camp
that some of my friends are of no FED whatsoever.
But I don't believe we need the FED to set
interest rates. I believe they can serve as a lender
of last resort that provides a sort of Hamiltonian function
(02:35):
in the economy and avoid some of the things we
were afraid of that happened at the end of the
nineteenth century and beginning of the twentieth century. And yet them.
Setting an interest rate that banks will charge overnight to
be a reference rate for how all money is priced
throughout the economy is I believe, very intrusive and unnecessary.
But with that said, I am not going to win
(02:58):
that argument anytime soon. And we do have a Federal
Open Market Committee that sets the interest rate as a
policy tool to affect monetary policy in this country, whether
I like it or not. And I happen to believe
all at once that A the President is wrong to
job bone Chairman Powell about what the rate should be,
(03:20):
and b the Chairman is wrong to not be cutting rates.
I believe President Trump is right that the rate is
too high and that it is unnecessarily restrictive. But then
when he goes on to say, mister speaker, well, the
rate should be one percent or less because it would
save us money, I simply can't accept that argument. So
(03:44):
I think Chairman Powell has dug his heels in to
avoid looking like he's giving in to the President, which
I think is extremely unfortunate. But I believe that the
rate right now is unnecessarily restrictive and should be coming
down based on all the criteria that the Central Bank
is given to effect monetary policy.
Speaker 1 (04:04):
If you think about it for a minute, there are
two parts of this. I mean, in terms of the
huge amount that we're now paying an interest on the
federal debt, that's really set in the long run, not
by the FED but by the bond holders. I mean,
the FED could artificially lower the rate, but if people
won't show up to buy the bonds, then the rate
for the bonds has to go up in order to
(04:26):
get enough people in the market. I mean, what am
I missing?
Speaker 2 (04:30):
Well, that is definitely true, but the problem is that
it is heavily manipulated, influenced by the FED. Because, first
of all, the term structure of our debt is extremely
short term. Much like a mortgage holder when they get
an interest only loan that's really cheap for like let's say,
(04:51):
a three year period versus a thirty year fixed and
they can't really afford the house with the longer term
mortgage fix, they go to the shorter term. Our government
has done that for a long time, and most states
do that in their municipal borrowings too, So we have
a very short term structure of the debt, shorter than ever,
(05:12):
much shorter, by the way than when Bob Rubin was
Treasury Secretary and you were succeeding in balancing the budget
in the nineties. I think that when the long term
rates were around one and a half two percent a
few years ago, that Secretary Minuchin had a chance to
try to lock the debt, but he wasn't able to
(05:33):
do it. And so there is a big influence of
the short term rate on the cost of borrowing. But
then others will say, well, but still people have to
show up to buy it, and at the United States
became credit unworthy, then people wouldn't show up and it
would bid the rates higher, not as theoretically true, but
as the world's reserve currency and as the best house
(05:57):
in a bad neighborhood. There is no synario that we've
ever experienced where nobody showed up to buy our debt.
The buyers have changed. There's been periods of time where
it was insurance companies, banks, retirees, investors, other times where
it's been sovereign countries, foreign investors. They own about seven
(06:17):
trillion of our thirty trillion a bond debt. And then
of course after the financial crisis, the Fed themselves became
a buyer, buying about eighteen percent of our debt sits
on the balance sheet of the FED through what was
called quantitative easing. Now that's low compared to other countries.
Bank of Japan owns almost their entire bond market. Our
(06:39):
central bank is a buyer at private investors are a buyer.
And so you're right that the rate will ultimately get set.
But when it's a short term rate and the FED
is setting the short term cost of money, the FED
has incredible ability to manipulate that price of money.
Speaker 1 (06:55):
I tend to agree with you that the inflation level
does not just the current interest rate set by the FED.
But as a practical matter of you get into a
circular argument that, on the one hand, you don't want
the president making monetary policy political. On the other hand,
if the Fed's doing something that weakens the entire economy,
(07:17):
the leader of the country has some obligation to at
least speak out. And how do you balance those two.
Speaker 2 (07:24):
Well, it's tricky. There's a historical precedent that some of
that effort was done privately. You were a speaker at
the time, as I recall, when Alan Greenspan famously spiked
rates very violently, very dramatically in nineteen ninety four and
surprise the heck out of markets. It actually is what
put Orange County, California into bankruptcy because it caught them
(07:47):
off sides with what they expected would be happening in
their portfolio. And at the time President Clinton didn't publicly
job Oone Chairman Greenspan about it, but Vice President Gore
had some very stern talks in private with the Secretary.
So I guess I'm appealing to my fondness for conservative
norms here that if there's going to be conversation, as
(08:12):
Secretary Baker had with Paul Volker and as Nixon famously
had with Arthur Burns, I prefer they'd be done privately
and not out in the public eye to maintain our
credibility in global markets. If the Central Bank loses some
of that credibility, and I'm not suggesting it has one
hundred percent of it, but it has enough of it
(08:33):
to keep financial markets in a certain realm of seriousness,
and I think undermining that independence is just on the
margin problematic.
Speaker 1 (08:42):
I can't resist. You mentioned green Span. You may remember
that about the time I left the speakership, green Span
testified to the Senate that they were projecting that we
would have paid off the national debt by two thousand
and nine and had a working group trying to figure
out how you manage the money supply if there's no debt.
That's one of the prouder moments of my career.
Speaker 2 (09:02):
Frankly, well, and along those lines, you recall that in
the two thousand presidential debates between candidate Bush and candidate Gore,
one of the questions was what they planned to do
about all his surplus money. And then think about that
question being asked now.
Speaker 1 (09:19):
That's exactly what Although I'm trying to work with the
two budget committees in the House and Senate to launch
a serious effort to sort of do once again what
we did in the nineties and balance the budget, which
is a bigger job now, it doesn't strike me that
they are likely to raise rates enough to push us
into a recession next year. That there's somewhere between stability
(09:40):
and very slight reduction.
Speaker 2 (09:43):
Yeah, well, that is correct. If we were to tip
into recession, it would not be driven by monetary policy,
and what would happen is that they would then overcompensate,
as they always do, and the drunken peasant would fall
off on the other side of the horse. This is
the great argument of against it highly interventionist FED, is
that they're constantly playing catch up. They go too tight
(10:06):
too long, and then it makes them go too easy
for too long. I don't believe they're going to be
hiking rates at all. I think that they will end
up cutting in the September meeting, particularly in the aftermath.
Now Chairman Palell has cover to sort of save face
to cut now because of the jobs report that came
out a few days ago. But ultimately the problem here
(10:30):
is that they are restrictive, and it isn't just the
inflation level. There's a lot of people that have been
programmed to believing that the FED controls inflation and the
FED can affect inflation. I'm a Milton Friedman guy through
and through that inflation is always, in forever a monetary phenomena.
But see what he said. We always quote only half
(10:52):
of what he said, that it is too much money,
we forget chasing too few goods. And Ronald Reagan never
gets the credit he deserves for killing inflation. We talk
as if it were only vulgar spiking rates that did
it in the eighties, the supply side revolution produced more
(11:14):
goods and services that soaked up excess money supply. So
what we need is very similar to what you were
so successful with in the nineties and balancing the budget.
It was not merely cost discipline, which is courses entirely
lacking in the Congress now, but it was growth. We
needed revenue, and that is both anti inflationary and anti debt.
(11:40):
It is pro growth.
Speaker 1 (11:57):
I was part of the Merry Band in eighteen seventies
with Jack kempan others, trying to really win the debate. Well,
you could have a supply side solution, which at the
time was considered radical until Reagan adopted it and then
got it done. I'm a very big believer that you
defeat inflation with more goods and services, not with more pain.
(12:20):
But let me shift gears now. Probably the greatest Trump
revolution so far has been breaking up the world trading
system that had existed and beginning to replace it with
a much more bilateral system that uses tariffs. But I
think the story is not just about tariffs. He uses
(12:43):
tariffs for the purpose of forcing negotiations which often range
way beyond tariffs and get US into investments and sales
and all sorts of things. And it's based on a
simple model in his head that we are the largest
economy in the world, so you want to be here
more than we want to be where you are, and
therefore we can charge you a fair amount for you
(13:06):
to be here. And so far, at least on the surface,
it seems to have led to very dramatic changes. But
what's your take on this whole tariff process.
Speaker 2 (13:17):
I'm apologized in advanced mister speaker, that this is an
area where I do disagree, and I recognize the nuances.
And what I will say about what the work Secretary
of BACENT has done and where I think the President
stands that I'm excited for is if some of the
byproduct of this effort is to open up new markets.
In other words, I'm saying something sort of paradoxical. I
(13:40):
will celebrate it if it creates more trade, But I
do not believe that the notion of the President and
the White House and politicians in Washington, DC sort of
setting the rules of commerce is something that conservatives should celebrate,
and the notion that we are a store and that
(14:00):
they will set the prices of it I think is
a very anti market notion. Now, I understand that to
the extent some countries have charged higher tariffs and we
want to fight for reciprocity. I've always believed that if
a country wants to hurt its own importers and its
own domestic consumers by charging higher tariffs, we don't hurt
(14:24):
them by trying to reciprocate by hurting our own importers
and our own consumers. But that at least has a
ring to it reciprocal charges. However, what we're really seeing
here is a lot of non reciprocity, moving the total
rates higher, not lower. But the ideal tariff rate i'd
(14:44):
love to see is every country charging each other is zero.
But to the extent of the net effect here is
going to increase the total cost to American business. Best
case right now looks like it's going to end up settling,
assuming we'd you end up getting a deal with India
and some of the holdout countries. Brazil looks to be
(15:05):
the one that's going to be hardest. About four hundred
billion best case and six hundred billion, I think is
very realistic, and it disturbs me a little to hear
us refer to that as us making that money, bringing
that money in to our country. That is money that
goes out of our businesses, and it is a cost
(15:27):
to the economy. It is a cost that goes from
the balance sheet of the private economy to the balance
sheet of the governmental economy, which is a reduction in productivity.
So I'm fearful, but cautiously optimistic that if we can
get better markets opened and ultimately negotiate better deals, if
(15:49):
total trade collapses, regardless of what happens with the trade deficit,
if total trade drops, then capital flows will drop. And
the basic algebra of this is that our total investment
is equal to total savings, and total savings includes foreign capital.
People want to put money in our country for a
good reason, and if we lose some of that foreign
(16:13):
capital on the margin, then I believe it will impact productivity,
impact labor, and ultimately impact economic growth. So I recognize
my opinions a little outside the consensus right now.
Speaker 1 (16:26):
But we wanted your opinion. You're here to provide your
version of reality, and I respect that. One of the
things which has surprised me is and I first noticed
that in Trump's swaying through the Persian Gulf. He kept
coming up with like four hundred billion dollars and purchases
for Boeing and then four hundred billion dollars of investments
(16:48):
in the US. That was a sauty version, and it
was sort of matched by the other two countries he visited.
He was coming home with almost two trillion dollars in commitments.
How do you measure the impact on the American economy
of those kind of commitments.
Speaker 2 (17:03):
Well, the commitments have no impact on the economy, but
the actual activity will have a measurable impact. And that's
why I hope I have the integrity and objectivity because
I'm not a flaming partisan who wants to criticize everything
the president does, nor am I trying to say this
is going to be the most messianic thing ever done.
(17:25):
We will objectively be able to measure the success of
some of these things by the two metrics I just
said a moment ago, which is total trade and capital flows. Look,
the optimistic version is exactly what you said, that they
will order things that they worked in order before and
it will result in more FDI foreign direct investment. And
(17:46):
in case it isn't clear how big of a fan,
I am a secretary of descent. This is exactly what
he's now been saying, which is categorically different than what
Pete Navarro had been saying before. The agenda for tariffs
had been as protective tariffs to try to boost domestic manufacturers.
(18:06):
Secretary Vestant is talking the same way you just talked
about opening up new markets getting new foreign orders. The
problem is that there's a lot of ambiguity as to
what it means. I'm not totally comfortable with those tweets
where they will say the president alone is going to
dictate how to direct this investment. I don't want President Trump,
(18:27):
or the ghost of President Reagan, or President Obama, or
even Speaker Gingridge for that matter, dictating what businesses are
buying and selling from one another. But I love foreign
capital coming into our country. SoftBank made a five hundred
billion dollar pledge and created a consortium with others after
the election, and they have so far spent zero dollars.
(18:50):
Now I believe they will spend more, and I think
a lot of the money is money that would not
have been spent otherwise. So I will give credit where
it's due. But I'm just trying to be politically honest
that it's going to take time to see, and if
there is some double counting, then we have to call
that out. There is a lot of this that was
going to happen anyways, but I want to measure it
(19:12):
by the marginal addition to you to total investment.
Speaker 1 (19:15):
You remind me, in a sense of Reagan's appropriation of
a Russian saying, trust but verify. Connie Mack once taught
me he'd been a bank president before he was a congressman.
He'd gone to a course on running banks, and they
taught him that you give what you inspect, now what
you expect. And I think there's going to be a
(19:36):
lot of inspecting here to see whether or not these
nice press releases become real policy. But having said that,
the other part of that in the One Big Beautiful
Bill was this one hundred percent expensing for new factories
as compared to I think it was a thirty nine
and a half year depreciation. Isn't that kind of a
staggering incentive to investment.
Speaker 2 (19:59):
And it's not the only one. So you have the
bonus appreciation on property put into productive use, and you
have one hundred percent business expensing for capital investment. So
think of inventories, not just real estate put to work
like building a factory, but machinery bought to put in
a factory. And you also have a better deductibility for
(20:23):
R and D research and developments quote unquote soft capex,
which is great for our pharmaceutical sector and technology sector.
And you have greater deductibility of debt companies that borrow
money how to limit in what they could deduct and
that helps a lot in the private equity space and
middle markets. So there is some very pro growth in
(20:45):
supply side parts in the corporate changes. In the Big
Beautiful Bill. The CBO scored that those things would be
worth about three hundred billion. Some could say two hundred billion,
some could say a little more. My point would be
that the tariff cost is going to be higher than that.
So I think that we have one side of the
(21:05):
pool adding water and the other side of the pool
making it out a little. I would have loved to
see all those things in the Big Beautiful Bill happen
without the offsetting cost of the tariffs. But those things
are my favorite parts of the Big Beautiful Bill. And
by the way, speaker, because you and I are both
here to talk about budget impact. Those things do not
(21:26):
add to the deficit. They are cleanly pro growth that
pay for themselves with added revenue.
Speaker 1 (21:34):
It seems to me that the combination of this one big,
beautiful bill and all of its various tax provisions, and
its regulatory provisions, and the number of people making commitments
to invest in the US, even if you only got
half of those commitments, that there should be by next
summer a fairly strong economy. But I'm curious what's your view.
Speaker 2 (21:56):
My view is that this is one of the hardest
periods I've seen to forecasts because of the push pull
factors that we're up against. I think the labor markets
have weakened far more than we have realized, and the
base effect is always a big factor when forecasting out
one year of economic growth. What are you growing off of?
(22:18):
And if you're growing off of strong momentum in labor markets,
that's a wonderful tailwind. But if you're growing off of
impairment in labor markets, then there's a headwind there. I
think that there's been several months of uncertainty that has
really not affected large multinational companies so called S and
(22:40):
P five hundred types but I do think that there's
some issues we're going to have to overcome at the
small business level, which is where the vast majority of
new hiring is taking place. Most job postings right now
are companies with less than fifty employees, andfib's data has
not been great lately. So I'm internal optimists too. And yet,
(23:02):
if I were trying to be objective about what the
various factors are, if in a year from now, economic
growth has stayed muted, I believe that will be the
reason that the small business side economy that has been
disproportionately impacted by tariffs. The larger companies that have access
to capital markets, that have lobbyists and accountants and lawyers
(23:24):
and exceptions and waivers, and also just the ability to
plan better around it, they may not be affected as much.
But I think the small business side I'm a little
more worried about.
Speaker 1 (23:35):
So you write the Dividend Cafe. Tell us about the
Dividend Cafe.
Speaker 2 (23:40):
Well, it's my weekly market commentary, economic perspective. Anybody who
reads it would be able to tell pretty quickly where
I come from economically and politically and what my belief
system is. But I really write it to try to
provide objective advice for investors and economic actors. I began
writing it in the aftermath of the Lehman Brothers bankruptcy
(24:02):
in two thousand and eight. I was a managing director
of Morgan Stanley at the time, and every single day
a New Wall Street firm was going under or merging
or dealing with the drama. And I began writing into
that time and then I just never stopped, And so
it's something we put out for free. Originally I was
doing it for our few hundred clients, but we're now
(24:23):
managing over eight billion dollars. Hundreds of clients read it,
but so do tens of thousands of non clients, and
so I just figure, if it isn't broken, why fix it.
And even though something of the drama level of financial
crisis hasn't happened, since the news has kept me busy,
I never find myself lacking a topic to write about
every week.
Speaker 1 (24:44):
I think when you take what's happening on the world market,
you take what Trump is doing, you take the rise
of artificial intelligence and other breakthroughs, the impact of modular
nuclear in suddenly empowering all sorts of computer centers, little
scale of change we're going to go through, I think
is going to resemble the period eighteen seventy to nineteen twenty.
(25:06):
And having people like you who are smart, who are
trying to wrestle with what is all this and what
does it mean? I find really helpful for somebody like
me to be able to sort of try to get
inside your thinking and then is frankly steal as much
of it as I can.
Speaker 2 (25:23):
Well, I appreciate you saying that, I think that the
optimism that we both share for a lot of these
opportunities in the economy is real. And I will say,
back to the subject of the balanced budget work that
you did in the nineties, the Internet happening at the
same time that that level of fiscal responsibility had come
(25:44):
in was a dual impact. We can't change the fact
that right now there's a lot of things happening that
are very opportunistic for forward growth. But they are going
to be happening with an economy that's currently at one
hundred percent public debt to GDP and one hundred and
twenty three percent total debt to GDP. And when you
(26:05):
were Speaker and President Clinton was president, over those three
years of balanced budgets, we were running about fifty percent
debt to GDP, so those ratios take away from future growth.
We have sort of prepaid bonuses, and that is the
problem why it has to be solved sooner than later,
(26:26):
because we're taking from our kids and grandkids what could
be even better opportunities. I remain optimistic, but unfortunately my
optimism now has one hundred percent debt to GDP to
contend with.
Speaker 1 (26:53):
In a little bit and argubout some of my fellow
supply siders who think, oh, growth will solve everything. The
truth is a Congress that's not under public pressure to
get to a balanced budget will simply spend the additional revenue.
And I don't think anybody's been able to make vivid
enough the sheer amount of money we're now spending to
(27:14):
pay interest on the debt. It's larger than the defense budget.
Speaker 2 (27:19):
It's become larger than the defence budget. I think with
what big Beautiful Bill did to increase a little defense spending,
that may go down a little, and if interest rates
come down, then that debt interest costs may drop a little.
But it's gotten to be very problematic. But the other
factor that if I remember correctly at least in ninety
nine when you had the second year of balanced budgets.
(27:40):
I believe the mandatory spending was thirty percent, discretionary was seventy,
and we've now turned that on its head. It's now
seventy thirty the other way. One of my other examples
of a criticism with President Trump that I'm sorry, we
can't address this without entitlement reform. We can't and we won't.
We will have to have grown up conversations about Medicare, Medicaid,
(28:03):
social security. There are solutions out there, but every year
they've gotten to be harder. When the Democrats were demonizing
Paul Ryan with the granny off a wheelchair nonsense, it
was a much more fixable problem. And what I believe
was then twenty ten or twenty eleven when President Obama
pointed his own Simpson Bulls Commission, which came out with
(28:25):
a lot of sensible solutions. I did not agree with
all of them, but I agreed with a handful. It
was a much more fixable solution. Every year that goes by,
it gets harder and harder. And the cliche about when
you're in a ditch doot digging I wish somebody would
listen to that. Well.
Speaker 1 (28:41):
I think that from my side, I separate them out.
I think social security can only be dealt with on
a totally nonpartisan basis, which is different than bipartisan, and
only when the American people have concluded that there's an
improvement rather than destruction. And that's a huge task and
(29:03):
is frankly the entitlement I would approach last. For that reason.
I just think it's very hard, very complicated. On the
other hand, you may remember that part of our getting
to a balanced budget, we invented a medicare advantage in
nineteen ninety six during a presidential campaign, and we had
worked with people enough that, in fact, we were able
(29:26):
to carry what normal would be democratic groups in supporting
what we were doing against Bill Clinton. And it's because
they concluded that it was real and that we were serious.
You can methodically change things.
Speaker 2 (29:39):
Now.
Speaker 1 (29:39):
One of the things I'd be curious about it is
I thought what they did on Medicaid this time was
reasonably responsible and defendable. Of course, it was disdemonized by
the left, but that's okay. I mean, that's just part
of the business.
Speaker 2 (29:53):
Yeah, it's part of the business. I always wish we
did a better job. You talked about winning the argument,
which is what you guys did in the early innings
of the supply side movement with Kemp in the late seventies.
I wish that the Republicans would try harder to win
the argument, because the Democrats have not just demonized, but
they have boldface lied about what we've done with Medicaid.
(30:16):
And what I found to be effective with clients with friends,
with conversations of both left leaning, centrist and right leaning
people is when they talk about Medicaid cuts. I said,
if I tell you that we were going to spend
X this year and we're going to spend more than
X next year, would you call that a cut? Nobody
(30:37):
says yes. But somehow they've gotten away with saying we're
cutting a trillion dollars from something that we're increasing spending
in every single year.
Speaker 1 (30:45):
One of the great frustrations of my lifetime effort in
the Republican Party is the willful refusal of Republicans to
learn how to communicate. I mean, it's no accident that
Reagan was a former Democrat, Phil Graham's a former Democrat,
Donald Trump's a former Democrat. They communicate dramatically better than
people who grew up inside the Republican Party. It's an
(31:07):
amazing cultural phenomenon.
Speaker 2 (31:10):
Well, it's so true. And I would even add beyond
the messaging and the marketing benefits and persuasive powers, but
as a man of faith that it refuses to abandon
my moral convictions. The welfare reform you passed in the
mid nineties I thought was most potent when it focused
on not how it was more fair to all of
us who were paying our bills, but how it was
(31:32):
better for the humanity and dignity of the people. A
workfare requirement was better for their souls, their dignity, their empowerment.
It was a very Jack Kemp argument. As you know,
this medicaid issue, beyond the fact that it's unfair, it
veered under President Obama so dramatically from what the intent
(31:52):
of medicaid is. The reality is that it is unfair
to these people to have their dignity taken away by
basically giving another transfer payment to them, as opposed to
a Medicaid that is truly there to help impoverished people.
And I don't hear Republicans making this argument. I just
(32:14):
don't And we need to.
Speaker 1 (32:15):
It's one of my great frustrations. Let me ask you, though,
in a Fox News up ed, you said, quote New
York City's shocking socialist victory is a dire warning for
the right, and you framed Zorund Mumdani's victory as a
warning for conservatives. Why do you think Mamdani won.
Speaker 2 (32:34):
Well on a political basis? The truth is that one
because the opponent was terrible and Governor Cuomo is attached
to so much unlikeability that he became a very weak candidate.
We talk like name recognition is always a positive. I
thought Hillary Clinton taught us that name recognition could be
(32:55):
a negative too. So he wouldn't win if there weren't
three opponents in the general. If he were running Mono
Imano against any one of the other three, whether it's
Curtis or Eric Adams or Andrew Como, he would lose.
But he will likely win because the baby is split
the other way. But how is he even in a
(33:17):
position to win and even obtain a forty forty five
percent plurality because his message sells When we accept the
premise the populism is an acceptable way of communicating about
the public good that because something is popular, free bread,
free groceries, government runs stores. The impracticality of these things,
(33:41):
the unaffordability, the ineffectiveness. We can say all that all
we want, but I believe that we have to reject
any form of populism that acts like it is good
public policy just because some people like it. And the
aocs of the left don't play by those rules. And
my fear is that the right sometimes is trying to
(34:03):
beat them by joining them, and I don't think we
can do that.
Speaker 1 (34:06):
We did a set of questions a couple months ago
on the difference between socialism by itself and big government socialism,
and it may surprise you had to head by fifty
to twenty two, voters prefer capitalism over socialism, by fifty
(34:26):
nine to twelve. They prefer free market capitalism over big
government socialism. So if you set the frame, he's not
just a socialist, but he's a big government socialist that
term because a lot of people vaguely perceive socialism as
caring for the poor, being concerned, et cetera. It's important
remember Bernie Sanders got forty three percent of the vote
(34:49):
against Hillery.
Speaker 2 (34:50):
That's right, and he would have got more if they
hadn't rigged it against him in the Democratic Party. You know,
I've been hearing for years, mister speaker, that young peopleeople
like socialism, and I've done so much analytics on this
as an economist, and i will tell you that it
just isn't true. But they do not like what they
have been told. Capitalism is. This is the great moral
(35:15):
duty we have in front of us post financial crisis.
A Randian secularist defense of markets will not sell, nor
should it. A morally rooted defense of free markets that
attacks cronyism. When young people think that capitalism means the
(35:37):
power of government attached to big business, they're not going
to like it. Nor should they, because I don't like
it when we defend free enterprise, free exchange, mutual cooperation,
division of labor, and an aspirational society. The language has
changed a bit since Jack Kemp in the late seventies,
(35:58):
but I was a very young person. I read him,
I would read you. In the nineties. I would read
my friend Larry Cuddlo a little later. I found it inspiring.
The moral defensive market sells to young people.
Speaker 1 (36:11):
And it's essentially a moral defensive freedom. The notion that
we claim in the document we're going to celebrate the
two hundred and fiftieth birthday next year. We claim that
we are endowed by our creator with certain available rights
along with your life, liberty and the pursuit of happiness, which,
by the way, in the Scottish Enlightenment meant virtue and
(36:31):
wisdom did not mean getting drunk and hanging out on
Miami Beach. But if you think about it, in order
to have the right to pursue happiness, you have to
have freedom.
Speaker 2 (36:41):
This was the whole fusionist argument that came out of
National Review in the sixties and seventies, and from Russell
Kirk to Frank Meyer to Bill Buckley. You have to
have freedom, and you want to channel that freedom into
virtuous activity, and it makes for a very good and
fulfilling life.
Speaker 1 (36:58):
Which, by the way, if you read link enough you
get exactly the same pattern. He understood it, he'd lived it.
It was his own personal life, and he was passionate
and willing to fight a four year war to defend it.
But I want to thank you. I always find it
very invigorating to talk with you. If you're very smart,
you have very clear ideas and values, and we are
(37:21):
going to let all of our listeners know that they
can sign up to get the Dividend Cafe by visiting
your website at the Bonsengroup dot com slash Dividendcafe. And
if you'd like to find out more about what David
is doing, you can visit his personal website at Bonsen
dot com. This has been great fun, David, Thank you
very very much.
Speaker 2 (37:41):
It's been an honor. Thank you, mister speaker.
Speaker 1 (37:46):
Thank you to my guest David Bonsen. You can learn
more about his company, the Bonson Group on our show
page at newtsworld dot com. Newtsworld is produced by Gingrich
three 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
(38:08):
at Ganglishtree sixty. If you've been enjoying Newts World, I
hope you'll go to Apple Podcast 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
news World can sign up for my three freeweekly columns
at Ganishtree sixty dot com slash newsletter, I'm new gingrich.
(38:28):
This is newsworld.
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